PRINCIPAL COMMISSIONER OF INCOME TAX V. JIGNESH BHAGWANDAS PATEL

TAXAP/283/2019

AI Insights

The case involves an appeal by the Principal Commissioner of Income Tax against Jignesh Bhagwandas Patel concerning the assessment year 2011-12. The primary issues revolved around the valuation of land for capital gains tax and the procedural validity of notices issued during the assessment. The Revenue challenged the ITAT's decision which upheld the CIT(A)'s directive to the AO to adopt a higher cost of acquisition for the land based on a registered valuer's report. Additionally, the appeal contested the dismissal of the Revenue's appeal by the ITAT without considering the assessee's letter indicating that a notice under section 143(2) was issued. The High Court found no error in the tribunal's findings, affirming that the AO had not properly issued the mandatory notice under section 143(2), thus invalidating the reassessment.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 742799 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 08-07-2019
• Assessment Year: misc
• Other Referred Cases: ACIT & Anr. Vs. Hotel Blue Moon (2010) 321 ITR 362, ITA No.1643/DEL/2008, Nesman Farm Pvt. Ltd. ITAT Delhi, CIT Vs. Salman Khan ITA No.508 of 2010, DCIT Vs. M/s. Silver Line ITA No.1809, 1504, 1505 & 1506/ DEL/2013
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: KALPANAK RAVAL
• Keywords: Cost of acquisition; Income Tax; Land valuation; Notice issuance; Reassessment
• Section: 147; 143(3); 143(2); 260A

Judgement Text

"C/TAXAP/283/2019 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 283 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2 To be referred to the Reporter or not ? NO 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? NO ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX Versus JIGNESH BHAGWANDAS PATEL ========================================================== Appearance: MRS KALPANAK RAVAL(1046) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 08/07/2019 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) Page 1 of 6 C/TAXAP/283/2019 JUDGMENT 1. This tax appeal under Section 260A of the Income Tax Act, 1961 [for short 'the Act, 1961'] is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal in the ITA No.785/AHD/2016/SRT, dated 01/11/2018 for the A.Y 2011­12. 2. The Revenue has proposed the following two questions:­ (i) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was right in upholding the decision of the Ld.CIT(A) directing the AO to work out the cost of acquisition of land at Rs.99/­ per sq.mtr. As on 01.04.1981 even though the registered valuer has not given any comparable case of sale instance? (ii) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was right in dismissing the appeal of the Revenue without considering the assessee's own letter dated 21.04.2014 stating that notice u/s.143(2) was issued to him? 3. With regard to the first question, which has been proposed by the Revenue, the findings recorded by the appellate tribunal are as under:­ 10. Replying to the above, the ld. AR submitted that the ld. CIT(A) after considering entire facts and circumstances of the case has granted relief to the assessee and the unsustainable and baseless addition made by the AO has been dismissed by recording correct and reasonable findings therefore, the same may kindly be upheld and appeal of Revenue may kindly be dismissed. The ld. DR also submitted that drew out attention towards decision part para 6 at Pages 22 to 30 of the first appellate order and submitted that the AO was not right in estimating cost of acquisition of land as on 01.04.1981 Rs.30 per Sq.Mt. without any adjudication on the claim of the assessee based on the report of registered valuer and the AO has no adverse material or evidence to rebut the claim of the assessee then, the AO was duty bound to adopt the cost as estimated by the register valuer. The ld. AR vehemently pointed out that the ld. CIT(A) was right in directing the AO to work out cost of acquisition of land as on Rs.99/­ per sq.mt. as on 01.04.1981 for calculating the LTCG therefore, the conclusion may kindly be upheld by dismissing appeal of Revenue. Page 2 of 6 C/TAXAP/283/2019 JUDGMENT 11. On careful consideration of above rival submissions, we are of the view that from the relevant part of the assessment order, we observe that the AO estimated rate of cost of land as on 01.04.1981 at Rs.30/­ per sq. mt. But without any basis. The assessee submitted report of registered valuer vide dated 23.09.2013 during assessment proceedings and the value adopted by the registered valuer was Rs.99/­ per sq.mt. from the assessment order, it is also discernable that the AO has completely ignore the report of the registered valuer and without any discussion thereon estimated the cost at Rs.30/­ per sq.mt. without any reasonable basis and justified reasoning. We are also in agreement with the conclusion drawn by the ld. CIT(A) that the assessee was not confronted by the AO before estimating the cost of acquisition at Rs.30/­ per sq.mt. and thus, the AO was not right in estimating the cost of land as on 01.04.1981 at Rs.30/­ per sq.mt. without any basis and keeping aside rather ignoring the report of the registered valuer submitted before him during assessment proceedings. 4. In our opinion, the first question is a power question of fact and we do not find any error at the end of the tribunal in taking the aforesaid view. 5. So far as the second question is concerned, the findings recorded by the CIT(Appeal) are as under:­ I have given my careful thoughts to the rival submissions. The assessing officer has not been able to produce any direct evidence of having issued notice u/s.143(2) of the Act. During the assessment proceeding, she has tries to extract elements of evidence from the submissions of the AR of the appellant submitted during the assessment proceedings. As per her there is a self admission by the appellant in the written submissions that notice u/s.143(2) of the Act has been issued. On the other hand in the counter comments the AR of the appellant has submitted that the assessing officer has not been able to adduce evidence in this regard. On the careful analysis of the facts it emerges that notice u/s.143(2) of the Act was never issued by the assessing officer. Issuance of notice is a matter of fact and the evidence in this regard can be the following: a) The office copy of the notice should have been available on the assessment record. b) There should be a mention of the issuance of notice in the assessment order itself. Page 3 of 6 C/TAXAP/283/2019 JUDGMENT c) The order sheet should have contained reference/ description of issuance of notice. d) The dispatch register should have the details of having issued the notice. e) The diary of notice server should have the details of having served or not served the notice. The assessing officer failed to give any reference to any of the above in support of her claim that notice u/s.143(2) of the Act has been issued. On the contrary efforts were made to find references of issuance of notice in the replied submitted by the appellant during the assessing officer. I have gone through the letters of the appellant referred to by the assessing officer in the remand report and is of the opinion that these are of no help to her. I have also gone through the counter comments of the appellant on the remand report of the assessing officer who has reasonably explained that no notice u/s.143(2) of the Act was issued. Moreover,during the assessment proceedings the appellant has clearly brought this fact on record and in the notice of the assessing officer that a notice u/s.143(2) of the Act has not been issued vide letter dtd:27.06.2013 which was duly received in the office of the assessing officer on the same day. The copy of this letter was submitted by the appellant during the assessment proceedings. No reply to this letter has been given by the assessing officer, which clearly shows that no notice u/s.143(2) of the Act was issued by the assessing officer during the period prescribed under the Act. In the circumstances as narrated above, it is established that notice u/s.143(2) of the Act was neither issued not served to the appellant during the assessment proceedings. Non­issuance of notice u/s.143(2) vitiates the conclusion of assessment u/s.147 r.w.s.143(3) of the Act. Hon'ble Supreme Court in the case of ACIT & Anr. Vs. Hotel Blue Moon (2010) 321 ITR 362 has held that it is mandatory for the assessing officer to issue notice u/s.143(2). The issuance and service of notice 143(2) in mandatory and not procedural. If the notice is not issued and served with the prescribed period the assessment order is invalid. In a recent case decided by Hon'ble ITAT Delhi in ITA No.1643/DEL/2008 vide order dt:12.05.2015 in the case of M/s. Staunch Marketing Pvt. Ltd. has held the reassessment concluded u/s.147 r.w.s.143(3) of the Act without issuance and service of notice u/s.143(2) of the Act as void ab initio. In this case, reference has also been made to the following judgments on the issue involved: i) Nesman Farm Pvt. Ltd. ITAT Delhi. ii) ACIT & Anr. Vs. Hotel Blue Moon (2010) 321 ITR 362. Page 4 of 6 C/TAXAP/283/2019 JUDGMENT iii) CIT Vs. Salman Khan ITA No.508 of 2010. iv) DCIT Vs. M/s. Silver Line ITA No.1809, 1504, 1505 & 1506/ DEL/2013. Keeping in view the above decisions as well as the above facts and circumstances of the case, I am of the considered opinion that the present reassessment proceedings are invalid in the eyes of law because the assessing officer has not followed the mandatory procedure of issuing the notice u/s.143(2) of the Act within the time prescribed. Therefore, this ground of appeal of the appellant is allowed. 6. The aforesaid findings came to be affirmed by the tribunal holding as under:­ 7. The ld. CIT(A) admitted the additional ground. The ld. First appellate authority, while deciding ground No.1 held that there was no new facts coming into his possession after completion of assessment u/s.143(1) of the Act. The AO has also stated, in his reasoning statement that in computation of total income, the appellant has shown LTCG. In spite of these facts, no scrutiny assessment was carried out, as required under the law. Therefore, he has no jurisdiction to invoke provisions of s.148/147 of the Act. Thereafter, while deciding addition ground of the assessee, the ld. CIT(A) concluded that the AO admitted that the appellant has filed return of income in response to notice u/s.148 of the Act. The first appellate authority also noted that in the entire reassessment record he could not find copy of a notice u/s.143(2) of the Act and in para 2 of the assessment order, the AO mentioned about the notices dated 02.04.2014, 06.02.2015 & 03.02.2015 and there is no mentioning of issuance of notice u/s.143(2) of the Act therefore, it is crystal clear that the re­ assessment order, which was passed on 24.03.2015 u/s.143(3) r/w.s.147 of the Act, has been made in absence of i.e. without issuing notice u/s.143(2) of the Act therefore, the same is not legal and thus, bad in law. 8. On being asked by the Bench, the DR could not show us any other material or evidence to show that the findings recorded by the ld. CIT(A) are either perverse or incorrect or carries misinterpretation of provisions of the Act or wrong appreciation of the facts. Therefore, we are inclined to hold that the ld. CIT(A) was right in holding that the AO invoked provisions of S.147 of the Act without having valid jurisdiction and thus, the notice u/s.148 of the Act has also to be held as bad in law and not valid. Further, even on verification of reassessment proceedings, the ld. CIT(A) could not find any iota of evidence or document establishing that before framing reassessment order u/s.143(3) r/w. s.147 of the Act, the AO issued mandatory Page 5 of 6 C/TAXAP/283/2019 JUDGMENT statutory notice u/s.143(2) of the Act to the assessee therefore, the reassessment order passed in pursuant to such proceedings without complying with the mandatory provisions of the Act cannot held as valid and sustainable and hence, the ld. CIT(A) was right in holding the same as not valid and unsustainable. Accordingly, grounds No.1 & 2 of Revenue are dismissed. 7. We are of the view that no error, not to speak of any error of law could be said to have been committed by the tribunal in so far as the second question, which has been passed by the revenue is concerned. 8. In short, both the questions proposed are questions of fact. There is no perversity in answering the two questions of fact. 9. In view of the above, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (A. C. RAO, J) aruna Page 6 of 6 "