NARESH JERAMDAS IDNANI ,MUMBAI V. ITO, INT TAX WARD-2(2)(1), MUMBAI

ITA 3787/MUM/2024

AI Insights

The case revolves around an appeal by Naresh Jeramdas Idnani against the rectification order passed by the Income Tax Officer, which was upheld by the CIT(A). The rectification order sought to amend the original assessment order by adopting a lower fair market value for a capital asset, based on a DVO report. The Assessee contested the rectification on grounds of it being time-barred and also objected to the valuation itself. The Tribunal found that the rectification order was indeed time-barred as it was passed beyond the four-year limit prescribed under Section 154(7) of the Income Tax Act, 1961, leading to the allowance of the Assessee's appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473990 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-09-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 29-07-2024
• Other Referred Cases: ITA No. 5830/Mum/2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Capital asset; Revised return; Sale consideration of property below Jantri Value; Fair market value; Cost of acquisition; Capital Gains; Valuation report; Rectification of order
• Section: 143(3); 154; 153; 55A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B\" BENCH, MUMBAI SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No.3787/MUM/2024 (Assessment Year: 2016-2017) Naresh Jeramdas Idnani, Mumbai 101, Ashirwad Raheja Complex, Andheri, Mumbai – 400061, Maharashtra [PAN: AFDPI0010E] …………. Appellant Income Tax Officer International Taxation - 2(2)(1), Mumbai Kautilya Bhavan, BKC, Bandra East, Mumbai-400051, Maharashtra Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Tarang Mehta / Shri Vijay Mehta Shri Ashok Kumar Ambastha Date Conclusion of hearing Pronouncement of order : : 09.09.2024 28.11.2024 O R D E R Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Assessee has challenged the order, dated 27/06/2024, passed by the Ld. Commissioner of Income Tax (Appeals) – 56, [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2016-17, whereby the Ld. CIT(A) had partly allowed the appeal the Assessee against the Assessment Order, dated 28/12/2018, passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The Assessee has, inter alia, raised the following grounds of appeal: “1.1 The Honorable CIT (A) erred in facts and circumstances of the case and in law in upholding rectification order U/s. 154 rws ITA No. 3787/Mum/2024 Assessment Year: 2016-2017 2 143(3) dated 25/07/2023, which rectified the original order U/s. 143(3) dated 28/12/2018. Though, the said rectification Order U/s. 154 rws 143(3) dated 25/07/2023 has been passed after expiry of a period of 4 years and it is time barred. 1.2 As per provision of Section 154(7), the rectification order is to be passed within 4 years from the expiry of financial year in which the order to be amended is passed. In present case the original Order U/s. 143(3) passed on 28/12/2018. So, 4 years' time limit expired on 31/03/2023. 1.3 As present rectification order U/s. 154 r.w.s. 143(3) is dated 25/07/2023 which is after time barring of 4 years. So, the said order is invalid and bad in law is required to be cancelled. 2.1 The Honorable CIT (A) erred in fact and circumstances of the case and in law for not considering my objection against DVO's final report of valuation of flat as on 01/04/1981, though the AO has not spoken single word in his rectification order regarding my objection against final valuation report of DVO 2.2 The observation of the Hon. CIT (A) that the appellant has not objected against DVO's final valuation report before the AO is incorrect. In fact, the appellant has objected before the AO, against DVO's final valuation report. 2.3 The observation of the Honorable CIT (A) that the appellant has not objected before the CIT (A) in appeal proceedings is incorrect as the appellant has objected against the DVO's final valuation report before the Honorable CIT (A) in appeal proceedings in his detailed submission. 2.4 The Ld. AO as well as Honorable CIT (A) erred in facts and circumstances of case and in law ignoring the valuation of flat as on 01/04/1981 at Rs. 6,71,160/- as certified by Registered Valuer, which is based on stamp duty valuation (Ready Reckoner value) as on 01/04/1981. Income Tax Act recognized stamp duty valuation (Ready Reckoner value) for the purpose of valuation of immovable property. 2.5 On merit, the objection of the appellant against DVO's order is to be considered and lower valuation determined by the DVO as on 01/04/1981 of Rs. 2,55,360/- as against valuation of Flat as on 01/04/1981 6,71,160/- as per registered vauer (Shreekant Kadam's valuation report) report dated 07/09/2016. Your appellant pray that the valuation of flat as on 01/04/1981 should be considered Rs. 6,71,160/- as certified by the registered valuer. 3.1 Your appellant pray that while passing Order U/s. 154 rws 143(3) dated 25/07/2023, the Ld. AO has levied interest U/s. 234D of Rs. 1,79,167/- which is required to be deleted.” ITA No. 3787/Mum/2024 Assessment Year: 2016-2017 3 3. The relevant facts in brief are that the Appellant filed revised return of income on 19/09/2016 declaring total income at INR.80,96,060/-. In the return of income, the Appellant had declared Long Term Capital Gain of INR.50,96,000/- arising from sale of a Flat at Khar, Mumbai [hereinafter referred to as ‘the Capital Asset’]. In the computation of Long Term Capital Gain, the appellant claimed Indexed Cost of Acquisition of INR.72,55.240/- by taking Fair Market Value of the Capital Asset as on 01/04/2081 at INR.6,71,160/- on the basis of valuation report obtained from a valuer. The Indexed Cost of Acquisition was computed by the Appellant as under: - FMV as on 01/04/1981 : INR.6,71,160/- - Cost Inflation Index for F.Y. 2015-16 : 1081 - Cost Inflation Index for F.V. 1981-02 : 100 - Indexed Cost of Acquisition : INR.72,55,240/- [INR.6,71,160 X 1081/100] 4. The case of the Appellant was selected for scrutiny assessment. During the course of assessment proceedings, the Assessing Officer formed a view that the Cost of Acquisition, being Fair Market Value of the Capital Asset as on 01/04/1981, adopted by the Appellant was high and therefore, reference was made to the District Valuation Officer (DVO), Mumbai on 13/12/2018 for determining the FMV of the Capital Asset. Thereafter, subject to revision on receipt of DVO's report in a reference made under Section 55A of the Act. Since the report from the DVO could not be received till the time of completion of the assessment, the Assessing Officer proceeded to pass Assessment Order, dated 28/12/2018, under Section 143(3) of the Act assessing total income of the Appellant at INR.1,07,98,450/-. While doing so that Assessing Officer adopted the Cost of Acquisition of Capital Asset at INR72,55,240/- as adopted by the Appellant while offering to tax capital gains income (subject to receipt of the report from DVO) which was reduced by Indexed Cost of Compensation Received amounting to INR.27,02,385/-. The issue of reduction of ITA No. 3787/Mum/2024 Assessment Year: 2016-2017 4 Cost of Acquisition of Capital Asset of INR.72,55,240/- by the Indexed Cost of Compensation Received amounting to INR.27,02,385/-, travelled to the Tribunal and was decided in favour of the Appellant vide order dated 15/05/2023, passed in ITA No. 5830/Mum/2019. 5. Meanwhile, the final valuation report from the DVO was received by the Assessing Officer on 13/08/2019 wherein the FMV of the Capital Asset as on 01/04/1981 was determined at INR.2,55,360/- as against INR.6,71,160/- adopted by the Appellant in the computation of total income. On receipt of the DVO's report, the Assessing Officer issued a notice under Section 154 of the Act on 06/07/2023 proposing to re-compute Long Term Capital Gain adopting the FMV of INR.2,55,360/- (as on 01/04/1981) determined by the DVO. Thereafter, a Rectification Order, dated 25/07/2023, was passed under Section 154 read with Section 143(3) of the Act whereby (a) effect was given to the order, dated 15/05/5023, passed by the Tribunal in ITA. No.5530/Mum/2019, and (b) Long Term Capital Gain adopting the FMV of INR.2,55,360/- (as on 01/04/1981) determined by the DVO. 6. The Appellant preferred appeal before the CIT(A) against the above Rectification Order, dated 25/07/2023 contending inter alia that the same was barred by limitation as the Assessment Order sought to be rectified was passed on 25/07/2023 and since more than 4 years have lapsed since the passing of the assessment order, no rectification order could be passed in view of the provisions contained in Section 154(7) of the Act. However, the CIT(A) dismissed the appeal holding that no time limit was prescribed under the provisions of the Act to give effect to the report of DVO sought by the Assessing Officer under Section 55A of the Act. 7. Being aggrieved, the Appellant has preferred the present appeal ITA No. 3787/Mum/2024 Assessment Year: 2016-2017 5 before the Tribunal. 8. The issue that arises for consideration is whether the Rectification Order, dated 25/07/2023, is barred by limitation. 9. Admittedly, the Assessing Officer has exercised powers under Section 154 of the Act. As per Section 154(7) of the Act, no order of rectification can be passed after the expiry of 4 years from the end of the financial years in which order sought to be rectified has been passed. Unlike Section 153 of the Act, which provides the time limit for completion of assessment, Section 154(7) of the Act does not contain any clauses for exclusion of any time taken for obtaining report in reference made Section 142A/55A of the Act. Section 154(7) of the Act prescribes an outer limit within which rectification order must be passed. In the present case the Assessment Order was passed on 28/12/2018 which falls within the Financial Year 2018-2019. The period of 4 years specified under Section 154(7) lapsed on 31/03/2023. Since the Rectification Order was passed on 25/07/2023, the same is barred by limitation prescribed in Section 154(7) of the Act. Even if the contention of the contention of the Revenue is accepted that there is no time limit prescribed to give effect to the report received from DVO in a reference made under Section 55A of the Act, there is time limit prescribed in Section 154(7) of the Act to pass a rectification order in terms of Section 154(1) of the Act. Admittedly, the Assessing Officer has exercised powers of rectification to pass order under Section 154(1) of the Act which should have been passed within the time limit of 4 years prescribed under Section 154(1) of the Act. In any case, it is settled law that where no time limit has been prescribed, the order should be passed within a reasonable time. In our view, unless the facts and circumstances of the case provide otherwise, a period of 4 years from the end of relevant previous year in which order sought to be rectified has been passed is a reasonable time. Therefore, we reject ITA No. 3787/Mum/2024 Assessment Year: 2016-2017 6 the contention of the Revenue that the Assessing Officer can pass an order under Section 154 of the Act any time as the Assessing Officer may deem fit since no time limit has been prescribed. We note that Final Report of the DVO was received on 08/08/2019 whereas the rectification order was passed on 25/07/2023. It appears that the Assessing Officer came into action only after receiving the order, dated 15/05/2023, passed by the Tribunal in ITA No. 5830/Mum/2019. 10. We further note that the legislature had, where so desired, had provided for extended period for passing order of Rectification under Section 154 of the Act. Attention in this regard is invited to Section 155 of the Act which contains provisions relating to amendments in respect specified completed assessments. Section 155(15) of the Act reads as under: “Section 155(15) Where in the assessment for any year, a capital gain arising from the transfer of a capital asset, being land or building or both, is computed by taking the full value of the consideration received or accruing as a result of the transfer to be the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in accordance with sub-section (1) of section 50-C, and subsequently such value is revised in any appeal or revision or reference referred to in clause (b) of sub-section (2) of that section, the Assessing Officer shall amend the order of assessment so as to compute the capital gain by taking the full value of the consideration to be the value as so revised in such appeal or revision or reference; and the provisions of section 154 shall, so far as may be, apply thereto, and the period of four years shall be reckoned from the end of the previous year in which the order revising the value was passed in that appeal or revision or reference.]” 11. A perusal of Section 155(15) of the Act shows that the provisions contained therein permit the Assessing Officer to amend an order of assessment for the purpose of computing capital gains in case where the full value of consideration is revised in a reference made under ITA No. 3787/Mum/2024 Assessment Year: 2016-2017 7 Section 50C(2)(b) of the Act. The aforesaid provisions also provide the period of four years for passing the rectification order under Section 154 of the Act shall also be reckoned from the end of the previous year in which the order revising the full value of consideration was passed, inter alia, in the reference made under Section 50C(2)(b) of the Act. However, no corresponding provisions relating to Section 55A of the Act are available either in Section 155 of the Act, or elsewhere in the Act. 12. In view of the above, we reject the contention of the Revenue that that there is no time limit prescribed under the provisions of the Act for passing rectification order under Section 154 of the Act in case of receipt of valuation report in a reference made under Section 55A of the Act. Accordingly, we hold that the rectification order passed on 25/07/2023 after the expiry of four years from the Assessment Order dated 28/12/2018 is barred by limitation of four years as prescribed Section 155(7) of the Act. Accordingly, Ground No.1.1. to 1.3. raised by the Appellant are allowed while all the grounds raised by the Appellant are dismissed as having being rendered infructuous. 13. In result, in term of paragraph 12 above, the appeal preferred by the Assessee is allowed. Order pronounced on 28.11.2024. Sd/- Sd/- (Narendra Kumar Billaiya) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated :. 28.11.2024 Milan, LDC ITA No. 3787/Mum/2024 Assessment Year: 2016-2017 8 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. आयकर आयुƅ/ The CIT 4. Ůधान आयकर आयुƅ / Pr.CIT 5. िवभागीय Ůितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// उप/सहायक पंजीकार /(Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai "