Mrs. Anagha Promod Patwardhan, Pune V. Income-tax Officer,

ITA 502/PUN/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6053 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-12-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 23-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S V DESHPANDE; KHIRE
• Keywords: Sale consideration of property below Jantri Value; Tangible material; Difference of opinion; Valuation report; Reason to believe; Change of opinion; Reassessment proceedings; Capital Gains
• Section: 143(3); 50C; 147; 148; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.502/PUN/2016 / ASSESSMENT YEAR : 2007-08 MRS. ANAGHA PROMOD PATWARDHAN, 1264/1, SHIVAJI NAGAR, NEXT TO: HOTEL PATHIK, PUNE. PAN : AQEPP4327F ....... / APPELLANT / V/S. ITO, WARD- 3(1), PUNE. / RESPONDENT ASSESSEE BY : SHRI M. S. KHIRE & SHRI S. V. DESHPANDE REVENUE BY : SHRI YOGESH KAMAT, ADDL. CIT / DATE OF HEARING : 17.12.2018 / DATE OF PRONOUNCEMENT : 04.01.2019 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-3, PUNE DATED 23.12.2015 FOR THE ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISMISSING THE GROUND NUMBER ONE WHICH SPECIFICALLY STATED THAT THE AO HAD ERRED IN FINALIZING THE REASSESSMENT PROCEEDINGS WITHOUT INITIALLY DEALING WITH THE OBJECTIONS RAISED BY THE ASSESSEE AND PASSING A SEPARATE ORDER TO THAT EFFECT AND THUS RENDERED THE REASSESSMENT PROCEEDINGS TOTALLY INVALID IN THE EYES OF LAW. 2. WHILE CONFIRMING THE REASSESSMENT PROCEEDINGS, THE LEARNED CIT(APPEALS) FURTHER ERRED IN TOTALLY IGNORING THE DIRECTIONS LAID DOWN BY THE BOMBAY HIGH COURT IN ASIAN PAINTS LTD. VS. DY. CIT (296 ITR 90). 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN NOT PROPERLY APPRECIATING THE SUBMISSIONS AS REGARDS 2 ITA NO.502/PUN/2016 CHANGE OF OPINION SO FAR AS THE REASSESSMENT PROCEEDINGS ARE CONCERNED. 4. THE LEARNED CIT(APPEALS) FURTHER ERRED IN TREATING THE ASSESSMENT ORDER IN THE CASE OF SMT. ARUNA A. KHADILKAR AS A FRESH MATERIAL WHEN IN FACT THE REGISTERED SALE DEED, DATED 06/07/2006 WAS THE ONLY DOCUMENT THAT TRIGGERED THE PROVISIONS OF SECTION 50C AND WHICH WAS VERY MUCH ON RECORD AT THE TIME OF ORIGINAL ASSESSMENT. 5. THE LEARNED CIT(A) FURTHER ERRED IN RELYING ONLY ON THE APPELLATE ORDER PASSED BY THE HONBLE ITAT IN THE CASE OF SMT. ARUNA A. KHADILKAR WHEN IN THE SAID CASE THE BASIC FACTS AS REGARDS THE OWNERSHIP OF THE PROPERTY WERE NOT AT ALL BROUGHT BEFORE ANY OF THE AUTHORITIES INCLUDING THE HONBLE ITAT. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DRAWING AN INFERENCE THAT APPELLANT AND HER SISTER HAD BEEN DECREED AS THE ABSOLUTE OWNERS OF THE PROPERTY TO THE EXTENT OF 25% WHEN THE DOCUMENTS FILED AT BOTH THE ASSESSMENT AND APPELLATE STAGE PROVED BEYOND DOUBT THAT THE APPELLANT AND HER SISTER HAD ONLY A RIGHT OF EARNING INCOME TO THE EXTENT OF 12.50% EACH FROM THE CONCERNED PROPERTY. 7. WHILE DISMISSING GROUNDS NO.3 AND 4, THE LEARNED CIT(A) FURTHER FAILED TO APPRECIATE THAT EVEN AS PER THE PROVISIONS OF SECTION 50C, IF THE VALUATION DETERMINED BY THE VALUATION OFFICER IS MORE THAN THE STAMP DUTY VALUATION, THEN THE VALUE DETERMINED BY THE VALUATION OFFICER IS TO BE IGNORED. 8. THE REASONS ADDUCED BY THE LEARNED CIT(A) FOR CONFIRMING THE REASSESSMENT PROCEEDINGS ARE WRONG, INSUFFICIENT AND CONTRARY TO THE PROVISIONS OF LAW AND FACTS ON RECORD. 9. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY AND/OR DELETE ANY OF THE GROUNDS OF APPEAL. 3. REFERRING TO THE ABOVE GROUNDS, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GROUNDS NO.1 TO 3 RELATE TO THE LEGAL ISSUE I.E. THE VALIDITY OF THE ASSESSMENT ORDER UNDER CONSIDERATION. OTHER GROUNDS RELATE TO MERITS OF ADDITION AND ARE ARGUMENTATIVE. IT IS ARGUED IN THE GROUNDS THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED BY THE ASSESSING OFFICER INVALIDLY BASED ON THE CHANGE OF OPINION ALREADY TAKEN BY THE ASSESSING OFFICER DURING THE REGULAR ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. ON THE SAID LEGAL ISSUE, LD. COUNSEL SUBMITTED THAT THIS IS THE CASE WHERE THE REGULAR ASSESSMENT WAS ALREADY COMPLETED BY THE ASSESSING OFFICER ON 18.12.2009 U/S 143(3) OF THE ACT AFTER EXAMINING THE ISSUE OF TAXATION OF THE CAPITAL GAINS EARNED BY THE 3 ITA NO.502/PUN/2016 ASSESSEE IN THE CONTEXT OF THE TRANSACTION OF SALE OF A PROPERTY JOINTLY OWNED BY SMT. ARUNA A. KHADILKAR AND THE ASSESSEE. AFTER COMPLETION OF THE ORIGINAL ASSESSMENT U/S 143(3) OF THE ACT MADE BY THE ASSESSING OFFICER IN THE CASE OF SMT. ARUNA A. KHADILKAR READ WITH THE REPORT OF THE DVO DATED 12.08.2009, WHICH IS RECEIVED ON 21.12.2009 AFTER COMPLETION OF THE REGULAR ASSESSMENT ON 18.12.2009 IN THE CASE OF THE ASSESSEE, THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING THE ASSESSMENT AND COMPLETED THE REASSESSMENT PROCEEDINGS U/S 148 OF THE ACT DATED 21.03.2013 BY MAKING LONG TERM CAPITAL GAINS FROM THE ANCESTRAL PROPERTY. REASONS INCLUDE THE TAXATION OF THE CAPITAL GAINS. THE ASSESSING OFFICER MADE ADDITION OF RS.96,59,441/- IN THE REASSESSMENT. FROM THE REASSESSMENT ORDER, IT IS AN ADMITTED POSITION THAT THE ISSUE OF TAXATION ON LONG TERM CAPITAL GAINS ACCRUED IN CONNECTION WITH THE TRANSFER OF THE ANCESTRAL PROPERTY WAS PRECISELY THE MATTER FOR SCRUTINY BEFORE REGULAR ASSESSMENT PROCEEDINGS. THE ONLY DIFFERENCE IS THE REPORT OF THE DVO RECEIVED BY HIM ON 21.12.2009. IT WAS NOT AVAILABLE TO ASSESSING OFFICER AT THE TIME OF REGULAR ASSESSMENT. THIS ISSUE WAS AGITATED BEFORE THE FIRST APPELLATE AUTHORITY VIDE GROUND NO.1 AND 2 OF THE APPEAL. THE CIT(A) DISMISSED THE SAID ARGUMENTS/GROUND NO.1 AND 2 RELYING HEAVILY ON THE STRENGTH OF THE DVOS REPORT, WHICH WAS ACTUALLY RELIED BY THE ASSESSING OFFICER OF SMT. ARUNA A. KHADILKAR. THUS, THE INFORMATION BY WAY OF THE SAID REPORT OF THE DVO WAS USED BY THE PRESENT ASSESSING OFFICER FOR TAXING THE CAPITAL GAINS VIDE ORDER U/S 148 OF THE ACT. 4. AGGRIEVED WITH THE SAID ORDER ON THIS LEGAL ISSUE RELATING TO THE VALIDITY OF THE REASSESSMENT PROCEEDINGS, LD. COUNSEL FOR THE ASSESSEE 4 ITA NO.502/PUN/2016 SUBMITTED THAT THE ASSESSEE RAISED THE GROUNDS NO.1 TO 3 AND SUBMITTED THAT THIS IS THE CASE WHERE AN OPINION WAS ALREADY TAKEN BY THE ASSESSING OFFICER PRECISELY ON THE ISSUE OF TAXATION OF CAPITAL GAINS DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. THE REPORT OF THE DVO MERELY AN OPINION OF THE EXPERT OF THE DEPARTMENT RELIED ON BY THE IT AUTHORITY IS NOT GOOD ENOUGH MATERIAL FOR REOPENING THE CONCLUDED ASSESSMENT BY ISSUING OF NOTICE U/S 148 OF THE ACT WITHOUT HAVING THE STRENGTH OF ANY TANGIBLE MATERIAL TO ACT AS THE LIVE-WIRE TO THE ASSESSING OFFICER LEADING TO THE DISCOVERY OF THE CONCEALED INCOME. 5. WITHOUT GOING INTO THE OTHER ISSUES RAISED IN THE GROUNDS OF APPEAL, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE APEX COURT JUDGEMENT IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION COMPANY (CIVIL APPEAL NO.9468 OF 2003, ORDER DATED 16.02.2010) REPORTED IN 328 ITR 515 AND SUBMITTED THAT THE REPORT OF THE DVO CONSTITUTES OF AN OPINION OF THE EXPERT AND THE SAID OPINION OF THE DVO PER SE IS NOT AN INFORMATION ADEQUATE ENOUGH FOR THE PURPOSE OF REOPENING THE ASSESSMENT U/S 147 OF THE ACT IN THE CASE OF ANY CONCLUDED ASSESSMENT U/S 143(3) OF THE ACT PRECISELY WHEN THE ISSUE UNDER CONSIDERATION IS IDENTICAL. 6. PER CONTRA, LD. DR SUBMITTED THAT THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF DHARIYA CONSTRUCTION COMPANY (SUPRA) ALTHOUGH DATED 16.02.2010 IS NOT RELEVANT FOR THE PROVISIONS UNDER CONSIDERATION. FURTHER, HE RELIED ON THE JUDGEMENT OF THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF VIPPY PROCESSORS PVT. LTD. VS. 5 ITA NO.502/PUN/2016 CIT REPORTED IN 249 ITR 7 AND SUBMITTED THAT THE SAID JUDGEMENT SUPPORTS THE CASE OF THE ITO/ASSESSING OFFICER/CIT(A). LEGAL ISSUE VALIDITY OF REOPENING U/S 147 OF THE ACT CHANGE OF OPINION. 7. WE HAVE HEARD BOTH THE PARTIES ON THIS LEGAL ISSUE I.E. WHETHER THE DVOS REPORT RELATING TO THE VALUATION OF A PROPERTY OBTAINED BY THE ASSESSING OFFICER IN THE CASE OF SMT. ARUNA A. KHADILKAR IS RELEVANT INFORMATION AND IF THE SAME IS SUFFICIENT ENOUGH FOR THE PURPOSE OF REOPENING THE ASSESSMENT U/S 147 OF THE ACT IN THE CASE OF THE ASSESSEE. AS SUCH THERE IS NO OTHER INCRIMINATING OR TANGIBLE MATERIAL IN POSSESSION OF THE ASSESSING OFFICER TO SUPPORT THE CLAIM OF CONCEALED INCOME BY THE ASSESSING OFFICER. OTHERWISE, IT IS AN UNDISPUTED FACT THAT THERE IS NO OTHER MATERIAL/INFORMATION WITH ASSESSING OFFICER IN EXISTENCE TO SUPPORT THE NOTICE ISSUED U/S 147 OF THE ACT AND ALLEGATION OF CONCEALED INCOME. THE VALUATION REPORT IN THE CASE OF SMT. ARUNA A. KHADILKAR IS THE ONLY AVAILABLE MATERIAL WITH THE ASSESSING OFFICER. FURTHER, RELEVANT TO THE ARGUMENT OF ASSESSEE RELATING TO CHANGE OF OPINION, THE ASSESSING OFFICER ISSUED A QUESTIONNAIRE DATED 20.10.2009 DURING THE REGULAR ASSESSMENT PROCEEDINGS RAISING THE FOLLOWING ISSUE DURING THE SCRUTINY PROCEEDINGS U/S 143(3) OF THE ACT. THE RELEVANT Q. NO.3 OF THE SAID QUESTIONNAIRE READS AS UNDER :- 3. ON VERIFICATION OF SALE DEED IT IS NOTICED THAT THE MARKET PRICE SHOWN FOR THE PURPOSE OF STAMP DUTY IS RS.2,75,00,000/- AS AGAINST SALE CONSIDERATION OF RS.2,30,00,000/-, WHICH IS MORE THAN THE SALE CONSIDERATION. THEREFORE, I PROPOSE TO ADOPT THE SAME IN VIEW OF PROVISIONS OF SEC.50C OF THE I.T. ACT . IN CASE YOU HAVE CHALLENGED THE SAID VALUATION DOCUMENTARY EVIDENCE IN THAT RESPECT MAY BE FILED. 8. IN RESPONSE TO THE SAID QUESTIONNAIRE, ASSESSEE REPLIED TO ASSESSING OFFICER STATING THAT THE ASSESSEE HAS NO SHARE IN THE SAID 6 ITA NO.502/PUN/2016 PROPERTY AS A PROPERTY BELONGS TO THE OTHERS. AFTER CONSIDERING THE SAID REPLY OF THE ASSESSEE, THE ASSESSING OFFICER COMPLETED THE REGULAR ASSESSMENT WITHOUT MAKING ADDITION ON THIS ISSUE. THE REPLY OF THE ASSESSEE WAS ALSO A PART OF THE ORDER. WE FIND THAT THE ISSUE EXAMINED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT IS IDENTICAL TO THE ONE UNDER CONSIDERATION IN THE REASSESSMENT PROCEEDINGS U/S 147 R.W.S. 143(3) OF THE ACT. 9. FURTHER, BRINGING OUR ATTENTION TO PAGE 17 AND 18 OF THE PAPER BOOK, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REASONS FOR REOPENING AS GIVEN IN ITEM NO.11 OF THAT PAGE IS THE SAME UNDER CONSIDERATION FOR TAXING THE CAPITAL GAINS RELATED TO THE SAID PROPERTY BASED ON THE STRENGTH OF THE VALUATION REPORT OBTAINED IN THE CASE OF SMT. ARUNA A. KHADILKAR (THE CO-OWNER OF THE PROPERTY). THE SAID REASON GIVEN BY THE ASSESSING OFFICER OF HIS REPORT SUBMITTED TO HIS SENIOR I.T. AUTHORITIES FOR APPROVAL IS EXTRACTED HEREUNDER :- REOPENING THE ASSESSMENT U/S. 148 11 REASONS FOR THE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT. : THE ASSESSEE HAS COMPUTED LTCG ON SALE OF PROPERTY OF RS.7,42,881/- HOWEVER THE SAME WAS ASSESSED U/S 143(3) AT RS.8,71,441/-. THE ASSESSEE WAS HAVING 1/4TH SHARE IN THE PROPERTY. THE STAMP DUTY VALUATION OF PROPERTY IS SHOWN AS RS.2.75 CR. THE CONSIDERATION OF PROPERTY WAS RS.2.4 CRORES IN CASH AND ONE THEATRE OF 3000 SQ FT IN KIND. THE VALUATION OF PROPERTY WAS REFERRED TO DEPARTMENT APPROVED VALUER BY ITO WARD 3(2), PUNE IN THE CASE OF SMT. ARUNA ARUN KHADILKAR, ONE OF THE CO-OWNER HAVING EQUAL SHARE AS OF ASSESSEE. THE VALUER HAS POINTED OUT THAT THE VALUE OF THE THEATRE IS ASSESSED AS RS.240 LACS IN THE SALE DEED. THE VALUER HAS VALUED THE PROPERTY SHARE OF ARUNA ARUN KHADILKAR SAME AS OF ASSESSEE AT RS.1.47 CRORES. THE PROVISION OF SEC. 50C IS NOT APPLICABLE AS THE CONSIDERATION IN CASH AND KIND EXCEEDED THE STAMP DUTY VALUATION. THUS ADDITION OF RS.87.88 LACS WAS MADE ACCORDINGLY. CONSIDERING ALL THE ABOVE, I HAVE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. 7 ITA NO.502/PUN/2016 10. CONSIDERING THE SAID QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER DURING THE REGULAR ASSESSMENT PROCEEDINGS, THE REPLY SUBMITTED BY THE ASSESSEE IN RESPONSE TO THE SAME, THE DETAILED REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSEE U/S 147 OF THE ACT AS EXTRACTED ABOVE, THE REPORT OF THE DVO, ON EXPERT IN VALUATION MATTERS, ETC, IT IS REASONABLY INFERRED THAT THE ISSUE UNDER CONSIDERATION FOR REOPENING THE ASSESSMENT IS ONE OF THE SAME, WHICH WAS SCRUTINIZED BY THE ASSESSING OFFICER DURING THE REGULAR ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT. THE REGULAR ASSESSMENT WAS COMPLETED ORIGINALLY ON 18.12.2009 AFTER DUE SCRUTINY OF THE SAID ISSUE. 11. FURTHER, WE FIND THAT A SIMILAR ISSUE WAS ADJUDICATED AT THE LEVEL OF THE APEX COURT IN THE CASE OF DHARIYA CONSTRUCTION COMPANY (SUPRA). IN THE SAID JUDGEMENT, THE APEX COURT HELD THAT A REPORT OF THE DVO IS NOT ADEQUATE TO ISSUE NOTICE U/S 147 OF THE ACT FOR REOPENING THE ORIGINAL ASSESSMENT MADE U/S 143(3) OF THE ACT. FOR THE SAKE OF COMPLETENESS, THE HELD PORTION OF THE SAID JUDGMENT IS EXTRACTED HEREUNDER :- HAVING EXAMINED THE RECORD, WE FIND THAT IN THIS CASE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION GIVEN BY THE DVO. OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSES OF REOPENING ASSESSMENT UNDER S. 147 OF THE IT ACT, 1961. THE AO HAS TO APPLY HIS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON. IN THE CIRCUMSTANCES, THERE IS NO MERIT IN THE CIVIL APPEAL. THE DEPARTMENT WAS NOT ENTITLED TO REOPEN THE ASSESSMENT. 12. CONSIDERING THE ABOVE FACTS AS WELL AS LEGAL PROPOSITION, WE ARE OF THE OPINION THAT THE LEGAL ISSUE RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL NO.1 TO 4 IS REQUIRED TO BE ALLOWED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUNDS OF APPEAL NO.1 TO 3 ARE ALLOWED. 8 ITA NO.502/PUN/2016 13. THE OTHER GROUNDS IN THIS APPEAL ARE DISMISSED EITHER AS ACADEMIC OR GENERAL, AS THE CASE MAY BE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 04 TH DAY OF JANUARY, 2019. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 04 TH JANUARY, 2018. SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-3, PUNE. 4. THE PR. CCIT, PUNE. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.