2014 (12) TMI 466 - AT - Income Tax

Validity of notice u/s 143(2) Assessee contended that return was filed on 31.07.2007 and notice u/s 143(2) was issued on 16.09.2008 therefore it was not within the period prescribed under the Act Held that - Following the decision in Amarjit Singh Tut. Versus Union of India 2013 (2) TMI 173 - Punjab and Haryana High Court - the return was furnished on 31st July 2007 therefore the financial year had ended on 31st March 2008 - The sixth month from the end of the financial year was expiring on 31st September 2008 - However the notice was served u/s. 143(2) on 16.09.2008 therefore the notice was very much within the time prescribed - The old provisions were not applicable wherein it was prescribed that no notice u/s.143(2) shall be served on the assessee after the expiry of 12 months from the end of the month in which the return was furnished - since a procedure has been laid down which was effective from 1st April 2008 therefore it is expected from the Revenue Department to follow the procedure especially the issuance of notice u/s 143(2) of IT Act - Since the AO has rightly followed the procedure by issuing a notice u/s.143(2) within the time prescribed under the proviso to Section 143(2) there is no substance in this additional ground of the assesse Decided against the assesse. Computation of LTCG on sale on land Transfer u/s 2(47) Held that - Revenue rightly contended that because as per Section 2(47) the definition of the word transfer in relation to a capital asset includes sale exchange and relinquishment of the asset. This is a case of a transfer of an immovable property - since the possession was handed over and the sale deed was registered in the Financial Year 2006-07 therefore the correct assessment year ought to be A.Y.2007-08. The AO s action in this regard is hereby affirmed. - Decided against the assessee. Application of section 50C - valuation on the basis of the rates of stamp duty fixed by the sub-registrar. - Held that - on one hand the assessee has claimed that only 50% of the land was transacted but the stamp duty was paid on the entire area of the land but on the other hand the AO s opinion was that the sale consideration in respect of entire land was to be assessed in the hands of the assessee by applying the stamp duty rates which were paid by the assessee at the time of execution of the sale deed. matter is remitted back to the AO for fresh adjudication Decided partly in favour of assesse.

Summary

Issues Involved:
1. Dismissal of the appeal by CIT(A).
2. Computation of Long-Term Capital Gain.
3. Invocation of Section 50C of the Income Tax Act.
4. Non-referral to the DVO under Section 50C(2).
5. Charging of interest under Sections 234B and 234C.
6. Validity of assessment under Section 143(3) due to notice under Section 143(2).
7. Correct assessment year for charging capital gains.

Issue-wise Detailed Analysis:

1. Dismissal of the Appeal by CIT(A):
The appellant challenged the learned CIT(A) for dismissing the appeal. The Tribunal reviewed the grounds raised by the appellant, which included errors in law and facts by the CIT(A) in confirming the AO's order.

2. Computation of Long-Term Capital Gain:
The appellant contended that the AO wrongly computed the Long-Term Capital Gain at Rs. 42,46,132 against the declared Long-Term Capital Loss of Rs. 53,906. The Tribunal noted the facts and submissions regarding the sale of land and the computation method used by the AO.

3. Invocation of Section 50C of the Income Tax Act:
The appellant argued against the CIT(A)'s confirmation of the addition to Long-Term Capital Gain by invoking Section 50C. The Tribunal examined the application of Section 50C, which pertains to the valuation of capital assets for stamp duty purposes.

4. Non-referral to the DVO under Section 50C(2):
The appellant claimed that the CIT(A) erred by not referring the matter to the District Valuation Officer (DVO) as required under Section 50C(2). The Tribunal acknowledged the procedural aspect and the necessity of referral to the DVO for accurate valuation.

5. Charging of Interest under Sections 234B and 234C:
The appellant contested the confirmation of interest charges under Sections 234B and 234C by the CIT(A). The Tribunal reviewed the statutory provisions and the circumstances under which the interest was levied.

6. Validity of Assessment under Section 143(3) due to Notice under Section 143(2):
The appellant raised an additional ground regarding the validity of the assessment framed under Section 143(3) due to the notice under Section 143(2) being issued beyond the prescribed period. The Tribunal referred to the amendment by the Finance Act, 2008, which extended the limitation period for issuing notice under Section 143(2). The Tribunal held that the notice issued on September 16, 2008, was within the extended limitation period and thus valid.

7. Correct Assessment Year for Charging Capital Gains:
The appellant argued that the capital gains should be charged for the year 2006-07 as the contract was performed in the financial year 2005-06. However, the Tribunal found that the sale deed was registered on July 26, 2006, making the relevant assessment year 2007-08. The Tribunal upheld the AO's action in assessing the capital gain for the year 2007-08.

Additional Observations:
The Tribunal also addressed the merits of the computation of capital gains, noting the appellant's contention regarding the government's acquisition of 50% of the land. The Tribunal found that the AO had not thoroughly investigated this claim and remitted the matter for de novo consideration, instructing the AO to verify the facts through spot inspection and further evidence.

Conclusion:
The Tribunal concluded that the notice under Section 143(2) was valid, upheld the assessment of capital gains for the year 2007-08, and remitted the computation of capital gains to the AO for fresh adjudication. The appeal was partly allowed for statistical purposes.