As required by the assessee, a reference to the DVO for the proper fair market value is required

Fact and issue of the case

This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-14, Chennai, dated 04.06.2019 and pertains to assessment year 2006-07.

The assessee has raised the following grounds of appeal:

“1. For that the order of the Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case to the extent prejudicial to the interest of the assessee and is opposed to the principles of equity, natural justice and fair play.

2. For that the reopening was bad in law 3. For that the reassessment was barred by limitation

4. For that the reassessment was made without complying with the statutory requirements of law.

5. For that the reopening was made on the basis of a mere change of opinion

6. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer erred in completing the assessment u/s.144

3. The brief facts of the case are that, the assessee is an individual filed his return of income for the assessment year 2006-07 on 19.10.2006, admitting total income of Rs. 1,84,740/-. The case has been subsequently re-opened u/s. 147 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the reasons recorded, as per which income chargeable to tax had been escaped assessment and accordingly, notice u/s. 148 dated 31.03.2013 was issued on the assessee. During the course of assessment proceedings, the assessee raised objection for non-serving of notice u/s. 148, dated 31.03.2013 and objections filed by the assessee has been disposed off by the Assessing Officer with relevant evidence, as per which the notice issued u/s. 148 of the Act dated 31.03.2013 has been served on the assessee, as per the acknowledgment of Postal Department which has been scanned in the assessment order. The AO, completed the assessment u/s. 144 r.w.s. 147 of the Act on 27.03.2014 and determined total income of Rs. 16,45,420/- by making additions of Rs. 13,49,975/- towards computation of capital gains from sale of property by adopting full value of consideration as per the provisions of section 50C of the Act.

Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the Ld. CIT(A), the assessee challenged re-opening of assessment on multiple grounds including non-serving of notice u/s. 148 of the Act dated 31.03.2013. The assessee had also challenged additions made towards computation of capital gains by adopting full value of consideration in terms of section 50C of the Act. The CIT(A), after considering relevant submissions of the assessee and also taken note of various facts brought on record by the AO, including evidence on issue of notice and serving of notice, rejected arguments of the assessee on re-opening of assessment by holding that serving of notice u/s. 148 of the Act is valid in law, because the acknowledgment of the Postal Department clearly indicates that notice has been served on the assessee even though there is no signature and date of receipt in the acknowledgment. The ld. CIT(A), had also rejected arguments of the assessee on the issue of computation of capital gains for transfer of property by adopting provisions of section 50C of the Act, by holding that as per provisions of section 50C(1) of the Act, the value assessed or assessable by the Stamp Valuation Authority is deemed to be full value of consideration received or accruing as a result of transfer of capital asset. Since, guideline value of the property is more than the amount of consideration received for transfer of property, the AO has rightly adopted guideline value and computed capital gains and thus, upheld additions made by the AO. The relevant findings of the CIT(A) are as under:

“4. The first issue raised in the grounds of appeal relates to validity of jurisdiction for reopening the assessment u/ s 14 7. During the course of appeal proceedings the AR of the appellant submitted that the taxability of capital gains arising out of the impugned transfer, which is the reason recorded for reopening of the case, has been enquired into by the Assessing Officer during the course of original assessment proceedings.

Observation by the tribunal

The tribunal has heard both the parties, perused materials available on record and gone through orders of the authorities below. The first and foremost objection raised by the assessee for re-opening of assessment is non-serving of notice u/s. 148 of the Act, dated 31.03.2013. We find no merits in the arguments of the assessee for the simple reason that as per documents available with Assessing Officer, the notice u/s. 148 of the Act dated 31.03.2013 has been dispatched on the very same day and also served on the assessee within the reasonable time, which is evident from the Postal Department acknowledgment. Therefore, we reject the ground raised by the assessee on non-serving of notice within reasonable time. In so far as second argument of the assessee on the ground of no fresh tangible material, we find that from the reasons recorded for re-opening of assessment, there is a live link to form reasonable belief of escapement of income and there is new material in the possession of the AO and thus, the arguments of the Ld. Counsel for the assessee that, there is no fresh tangible material is devoid of merits and thus, we reject argument of the assessee. As regards the third argument of the Ld. Counsel for the assessee, on the satisfaction from the Ld. CIT, we find that the Ld. CIT while granting approval for issue of notice u/s. 148 of the Act, categorically observed ‘I am satisfied and it is a fit case for issue of notice u/s. 148’, on the basis of reasons submitted by the AO and in our considered view, said satisfaction constitute a valid satisfaction as required under law and thus, we reject argument of the assessee. To sum up, we reject arguments of the assessee on the issue of validity of assessment and thus, we uphold the findings recorded by the Ld. CIT(A) to uphold re-opening and consequent re-assessment order.

In so far as merits of the issue, although the Ld. CIT(A) did not adjudicate the issue on merits with regard to the additions made on account of computation of capital gain by adopting full value consideration in terms of provisions of section 50C(1) of the Act, but fact remains that the assessee has raised his objection for adopting full value of consideration in terms of provisions of section 50C(2) of the Act, and requested to refer the matter to the DVO for determination of fair market value of the property as on the date of sale. Although, the assessee has requested to refer the matter to DVO in terms of provisions of section 50C(2) of the Act, but the AO has proceeded with computation of capital gains and adopted full value of consideration in terms of provisions of section 50C(1) of the Act. In our considered view, once the assessee objects for adopting full value of consideration and requests for reference to DVO, it is the duty of the Assessing Officer to refer the matter to the DVO and find out correct fair market value of the property as on the date of sale. Since, the AO has failed to comply with the requirements of law, we are of the considered view that the issue needs to go back to the file of the AO and thus, we set aside the issue to the file of the Assessing Officer and direct the AO to reconsider the issue of computation of capital gains and also refer the matter to the DVO to determine correct fair market value of the property as on the date of sale, and decide the issue in accordance with law.

In the result, appeal filed by the assessee is partly allowed for statistical purposes.

Order pronounced in the court on 15th February, 2023 at Chennai.

Conclusion

In the result, appeal of the assessee is allowed and ruled in favour of the assessee

Read the full order from here