Chakkilam Sudhakar, Hyderabad, Hyderabad V. ITO, Ward-6(1), Hyderabad, Hyderabad

ITA 669/HYD/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4523 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 13-10-2020
• Assessment Year: 2008-2009
• Appeal Filed On: 13-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K N SURESH BABU
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Salary income; Principle of natural justice; Question of law; Cost of acquisition; Set aside; Capital Gains
• Section: 50C; 143(2); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER I.T.A. NO. 669/HYD/2017 ASSESSMENT YEAR: 2008-09 SUDHAKAR CHAKKILAM, HYDERABAD [PAN: AAUPC0462G] VS THE INCOME TAX OFFICER, WARD-6(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P.MURALI MOHANA RAO, AR FOR REVENUE : SHRI K.N.SURESH BABU, DR DATE OF HEARING : 13-10-2020 DATE OF PRONOUNCEMENT : 21-10-2020 O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THIS IS ASSESSEES APPEAL FOR THE AY.2008-09, DIRECT ED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)6, HYDERABAD, DATED 17-01-2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE AY.200 8-09 ON 31- 07-2008, ADMITTING INCOME FROM SALARY, CONSULTANCY BU SINESS AND INCOME FROM HOUSE PROPERTY AT RS.2,08,280/-. THE SAID RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT [ACT] ON 23-06-2009 WITH NIL DEMAND. THEREAFTER, THE ASSESSI NG OFFICER (AO) RECEIVED INFORMATION THAT THE ASSESSEE HAS SOLD A ITA NO. 669/HYD/2017 :- 2 -: PLOT ADMEASURING 900 SQ. YDS., SITUATED IN SURVEY NO.9 2, DEVARAKONDA NAGAR, SHAIKPET VILLAGE FOR A CONSIDERATI ON OF RS.98,00,000/-, BUT THE SAME WAS NOT DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME. SINCE THE LONG TER M CAPITAL GAIN WAS NOT OFFERED TO TAX BY THE ASSESSEE, THE AO RE-O PENED THE ASSESSMENT U/S.147 OF THE ACT BY ISSUANCE OF NOTICE U/S.148 OF THE ACT. THE AO OBTAINED THE COPY OF THE SALE DEED FROM SRO, BANJARA HILLS, HYDERABAD AND OBSERVED THA T THE PROPERTY WAS PURCHASED BY THE ASSESSEE ON 05-06-2003 FOR A CONSIDERATION OF RS.9 LAKHS. ACCORDINGLY, THE INDEXED COST OF ACQUISITION WAS WORKED OUT TO RS.10,71,058/-. THE AO INVOKED THE PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT AN D WORKED OUT THE SALE CONSIDERATION AT RS.3,04,28,942/-. THEREAFTER, AFTER CONSIDERING THE ASSESSEES SUBMISSIO NS AND ON THE REQUEST OF ASSESSEE, THE MATTER WAS REFERRED TO DV O, WHO VALUED THE PROPERTY AT RS.4,05,59,000/-. THE AO O BSERVED THAT SECTION 50C(3) OF THE ACT PROVIDES THAT WHERE THE FAI R MARKET VALUE DETERMINED BY THE DVO IS HIGHER THAN THE VALUATION OR ASSESSMENT OF THE PROPERTY AS PER THE STA MP VALUATION AUTHORITY, THE COMPUTATION OF CAPITAL GAIN IS TO BE DONE WITH REFERENCE TO THE VALUE WHICHEVER IS LOWER. ACCORDINGLY, THE AO ADOPTED RS.3,15,00,000/- AS THE V ALUE OF THE PROPERTY FOR THE PURPOSE OF COMPUTATION OF CAPITAL G AIN AND BROUGHT THE SAME TO TAX. 3. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE BY DIRECTIN G THE AO TO COMPUTE THE LONG TERM CAPITAL GAIN BY ALLOWING THE DEDUCTION FOR INDEXED COST OF ACQUISITION, SINCE THE AO HAD ITA NO. 669/HYD/2017 :- 3 -: ADMITTED THE FULL VALUE OF THE CONSIDERATION AS LONG TE RM CAPITAL GAIN. 4. AGAINST THE SAID ORDER OF THE CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS: 1. THE LD.CIT(A) ERRED BOTH IN LAW AND ON FACTS IN PARTLY ALLOWING THE APPEAL. 2. THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE REOP ENING OF ASSESSMENT U/S 147 OF THE ACT, IS VALID. 3. THE LD.CIT(A) ERRED ILL UPHOLDING THE APPLICATIO N OF THE PROVISIONS OF SEC.50C AND COMPUTING THE CAPITAL GAINS ON THE SALE OF THE IMPUGNED PROPERTY IN THE APPELLANTS CASE. 4. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HOLDS IMPUGNED PROPERTY AS STOCK IN TRADE AND THAT THE PR OVISIONS OF SEC.50C WOULD NOT APPLY ON ITS SALE. 5. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE PURCHASED THE SAID PROPERTY AND SOLD THE SAME AS A STOCK IN TRADE FOR THE YEAR UNDER CONSIDERATION DURING THE COURSE OF I TS REGULAR BUSINESS. 6. THOUGH GROUND NO.4 AND 5 HAVE NOT BEEN TAKEN BEF ORE THE LOWER AUTHORITIES, IT IS NOW TAKEN BEFORE THE HON'BLE ITA T, IN VIEW OF THE SUPREME COURT DECISION IN THE CASE OF NTPC VS. CIT (229 ITR 383) (SC). 7. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE DERIVES INCOME FROM CONSULTANCY BUSINESS. 8. WITHOUT PREJUDICE TO OTHER GROUNDS, THE CIT(A) O UGHT TO HAVE APPRECIATED THAT THE PROPERTY WAS NOT A FREE HOLD O NE AND THAT THE TITLE OF THE SAME WAS UNDER SEVERE LITIGATION HAVIN G LOCATIONAL DISADVANTAGES WHICH MADE THE APPELLANT TO SELL THE SAME AT A LOWER PRICE. ITA NO. 669/HYD/2017 :- 4 -: 4.1. THEREAFTER, THE ASSESSEE HAS RAISED THE FOLLOWIN G ADDITIONAL GROUNDS OF APPEAL, BY FILING AN APPLICATI ON FOR ADMISSION OF THE SAME: 10. AS PER THE RATIO LAID DOWN BY THE HONOURABLE S UPREME COURT OF INDIA IN THE CASE OF NATIONAL THERMAL POWER CO. LTD V. CIT (1998) 229 ITR 383 (SC), THE HON'BLE ITAT HAS JURISDICTION TO EXAMINE THE QUESTION OF LAW WHICH HAS BEEN TAKEN BEFORE THE ITA T FOR THE FIRST TIME THOUGH NOT TAKEN BEFORE THE FIRST APPELLATE AU THORITY. 11. THE LD.CIT(A) OUGHT TO HAVE ANNULLED THE ASSESS MENT PROCEEDINGS ON FAILURE TO ISSUE NOTICE U/S143(2) WITHIN THE TIM E LIMIT PRESCRIBED UNDER THE INCOME TAX ACT, 1961. 12. THE LD.CIT(A) ERRED IN ITS ORDER BY NOT ADHERIN G TO THE PROVISIONS OF SECTION 143(2) OF THE INCOME TAX ACT,1961 WHEREI N THE LAW SPECIFICALLY PROVIDES THAT 'NO NOTICE SHALL BE SERV ED ON THE ASSESSEE AFTER THE EXPIRY OF SIX MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE RETURN IS FURNISHED' 13. THE LD.CIT (A) OUGHT TO HAVE APPRECIATED THAT N OTICE ISSUED UNDER SECTION 148 WAS TO BE PRECEDED BY A SANCTION DULY O BTAINED FROM CHIEF COMMISSIONER / COMMISSIONER AS PER PROVISO TO SECTION 151 (1), WHEREAS SUCH SANCTION HAD BEEN OBTAINED ONLY FROM A DDITIONAL COMMISSIONER IS NOT AS PER LAW AND FAILURE OF SUCH COMPLIANCE SHALL INVALIDATE THE ISSUANCE OF NOTICE U/S148 AND HENCE ULTIMATELY THE ASSESSMENT PROCEEDINGS MADE U/S147 OF THE ACT SHALL BE LIABLE TO BE ANNULLED. 14. AS PER THE RATIO LAID DOWN BY THE HONOURABLE SU PREME COURT OF INDIA IN THE CASE OF NATIONAL THERMAL POWER CO. LTD V. CIT (1998) 229 ITR 383 (SC), THE HON'BLE ITAT HAS JURISDICTION TO EXAMINE THE QUESTION OF LAW WHICH HAS BEEN TAKEN BEFORE THE ITA T FOR THE FIRST TIME THOUGH NOT TAKEN BEFORE THE FIRST APPELLATE AU THORITY. 15. THE CIT(A) OUGHT TO HAVE APPRECIATED THE SETTLE D POSITION OF LAW THAT REFERRING TO DVO BY AN ASSESSING AUTHORITY WIT HOUT REJECTING BOOKS OF ACCOUNT IS NOT PERMISSIBLE AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF SARGAM CINEMA IN 197 TAXMAN 20 3 (SC) 16. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION WITHOUT CONSIDERING THE FACT THAT THE REFERENCE TO DVO IS I MPROPER. ITA NO. 669/HYD/2017 :- 5 -: 17. THE LD.CIT(A) OUGHT TO HAVE CONSIDERED THAT THE APPELLATE AUTHORITY IS NOT BINDED BY THE REPORT OBTAINED FROM DVO AND SHOULD HAVE INDEPENDENTLY CONSIDERED THE PLEA OF APPELLANT APPLYING THE PRINCIPLES OF NATURAL JUSTICE. 5. THE CASE WAS TAKEN UP FOR HEARING ON 13-10-2020 THROUGH VIDEO CONFERENCING AND BOTH THE PARTIES WERE HE ARD. 6. SINCE THE ADDITIONAL GROUND OF APPEAL NO.11 IS A LEGAL GROUND ON THE JURISDICTIONAL ISSUE, WE DEEM IT FIT AND PROPER TO ADMIT AND ADJUDICATE THE SAME. 7. IN SUPPORT OF THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE, LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THIS CASE, NOTICE U/S.143(2) OF THE ACT WAS ISSUED ON 23-10 -2013 IN RESPONSE TO WHICH, THE ASSESSEE FILED HIS RETURN OF INCOME ON 25-11-2013. HE SUBMITTED THAT UNDER THE PROVISO TO SECTION 143(2) OF THE ACT, THE NOTICE U/S.143(2) OF THE ACT SHOULD BE ISSUED WITHIN SIX MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE RETURN IS FILED. THEREFOR E, IN THIS CASE, NOTICE U/S.143(2) OF THE ACT SHOULD HAVE BEEN IS SUED ON OR BEFORE 30 TH SEPTEMBER, 2014, WHEREAS THE NOTICE U/S.143(2) OF THE ACT WAS ISSUED ON 24-11-2014. THEREFORE, THE ASSESSMENT ORDER IS NOT VALID. 8. IN REPLY, LD.DR HAS FILED A COPY OF THE NOTICE U/S .143(2) OF THE ACT AND ALSO THE ORDER SHEET ENTRIES FROM THE ASS ESSMENT RECORD. 9. AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE MATERIAL ON RECORD, WE FIND FROM THE ORDER SHEET ENTRY ITA NO. 669/HYD/2017 :- 6 -: DT.10-09-2014, THAT THE ASSESSEE HAS FILED A LETTER ON 25 -11- 2013, REQUESTING THAT THE RETURN FILED ON 11-07-2008 VID E ACKNOWLEDGMENT NO.1611004041 BE TREATED AS THE RETURN F ILED IN RESPONSE TO THE NOTICE ISSUED U/S.148 OF THE ACT. H E HAS FURTHER SOUGHT REASONS FOR REOPENING OF ASSESSMENT U/S .147 OF THE ACT. AS THE ASSESSEE HAS COMPLIED WITH THE NOTICE, B Y REQUESTING THE RETURN FILED EARLIER TO BE CONSIDERED A S FILED IN RESPONSE TO NOTICE U/S.148A OF THE ACT, THE COPY OF THE R EASONS RECORDED WERE COMMUNICATED TO THE ASSESSEE ON 10-09-20 14. THUS, AS SEEN FROM THE COPY OF THE NOTICE U/S.143(2) O F THE ACT, IT WAS ISSUED ON 20-11-2014. IT IS THEREFORE TO BE EXAM INED IF IT WAS ISSUED WITHIN THE PRESCRIBED TIME. 9.1. SECTION 143(2) OF THE ACT READS AS UNDER: 143(1). (2) WHERE A RETURN HAS BEEN FURNISHED UNDER SECTION 139, OR IN RESPONSE TO A NOTICE UNDER SUB-SECTION (1) OF SECTION 142, THE ASSESSING OFFICER OR THE PRESCRIBED INCOME-TAX AUTHORITY, AS THE CASE MAY BE, IF, CONSI DERS IT NECESSARY OR EXPEDIENT TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED THE IN COME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDER-PAID THE TAX IN ANY MANNER, SHALL SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM, ON A DATE TO BE SP ECIFIED THEREIN, EITHER TO ATTEND THE OFFICE OF THE ASSESSING OFFICER OR TO PRODUCE, OR CAUSE TO BE PRODUCED BEFORE THE ASSESSING OFFICER ANY EVIDENCE ON WHICH THE ASS ESSEE MAY RELY IN SUPPORT OF THE RETURN: PROVIDED THAT NO NOTICE UNDER THIS SUB-SECTION SHAL L BE SERVED ON THE ASSESSEE AFTER THE EXPIRY OF SIX MONTHS FROM THE END OF THE FINANC IAL YEAR IN WHICH THE RETURN IS FURNISHED. 9.2. IT IS SETTLED LAW THAT EVEN IN THE RE-ASSESSMENT PROCEEDINGS U/S.147 OF THE ACT, THE AO CAN PROCEED ON LY BY ISSUANCE OF NOTICE U/S.143(2) OF THE ACT. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. LAXMAN DAS KHA NDELWAL ITA NO. 669/HYD/2017 :- 7 -: REPORTED IN (2019) 8 TMI 660 (SC) HAS HELD THAT - THE NOTICE U/S.143(2) BEING PREREQUISITE, IN THE ABSENCE OF SU CH NOTICE, THE ENTIRE PROCEEDINGS WOULD BE INVALID . THEREFORE, THE PROVISIONS OF SECTION 143(2) OF THE ACT AND THE PROVISO THEREUNDER WOULD CLEARLY APPLY TO THE CASE BEFORE US. ADMITTEDLY NOTICE U/S.143(2) OF THE ACT WAS GIVEN ON 24-11-2014, WHICH IS BEYOND THE PRESCRIBED PERIOD OF SIX MONTHS FROM THE EN D OF THE FINANCIAL YEAR, IN WHICH THE RETURN WAS FURNISHED BY THE ASSESSEE. IN VIEW OF THE SAME, WE AGREE WITH THE CONT ENTIONS OF THE LD.COUNSEL FOR THE ASSESSEE ON ADDITIONAL GROUNDS NO.11 RAISED BY THE ASSESSEE. IT IS ACCORDINGLY ALLOWED AND THE ASSESSMENT ORDER IS SET ASIDE. SINCE THE ASSESSMENT ORD ER ITSELF IS SET ASIDE, THE OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSEE ON MERITS OF THE ISSUE ARE NOT ADJUDICATED A T THIS STAGE AS IT WOULD ONLY RESULT IN AN ACADEMIC EXERCISE. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCTOBER, 2020 SD/- SD/- ( A. MOHAN ALANKAMONY ) ( P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 21-10-2020 TNMM ITA NO. 669/HYD/2017 :- 8 -: COPY TO : 1.SUDHAKAR CHAKKILAM, HYDERABAD. C/O. P.MURALI & CO ., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2.THE INCOME TAX OFFICER, WARD-6(1), HYDERABAD. 3.CIT(APPEALS)-6, HYDERABAD. 4.PR.CIT-6, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.