2023 (3) TMI 759 - AT - Income Tax

Validity of reopening of assessment u/s 147 - non-serving of notice u/s. 148 - HELD THAT - 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 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. 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. 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. Thus 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. Additions made on account of computation of capital gain by adopting full value consideration in terms of provisions of section 50C(1) - 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 AO 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. Appeal filed by the assessee is partly allowed for statistical purposes.

Issues Involved:
1. Validity of reopening of assessment under section 147.
2. Validity of service of notice under section 148.
3. Whether the reassessment was barred by limitation.
4. Whether the reassessment was made without complying with statutory requirements.
5. Whether the reopening was based on a mere change of opinion.
6. Computation of capital gains under section 50C.
7. Non-referral to the Valuation Officer under section 50C(2).
8. Levy of interest under sections 234B and 234C.

Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147:
The assessee argued that the reopening of the assessment was invalid as it was based on a mere change of opinion and lacked fresh tangible material. The Tribunal rejected this argument, stating that the Assessing Officer (AO) had new material to form a reasonable belief of escapement of income, thus justifying the reopening of the assessment.

2. Validity of Service of Notice under Section 148:
The assessee contended that the notice under section 148 was not served within the stipulated time. The Tribunal found that the notice dated 31.03.2013 was dispatched on the same day and served within a reasonable time, as evidenced by the Postal Department acknowledgment. Therefore, the Tribunal upheld the validity of the service of notice.

3. Whether the Reassessment was Barred by Limitation:
The assessee argued that the reassessment was barred by limitation. The Tribunal referred to the High Court of Punjab and Haryana's judgment in V.R.A. Cotton Mills (P) Ltd. vs. Union of India, which clarified that the date of issue of notice is relevant for determining the limitation period, not the date of receipt. Since the notice was issued within the limitation period, the reassessment was not barred by limitation.

4. Whether the Reassessment was Made Without Complying with Statutory Requirements:
The Tribunal noted that the AO had complied with the statutory requirements by issuing and serving the notice under section 148 within the stipulated time. The Tribunal also found that the satisfaction recorded by the CIT for granting approval for the issue of notice was valid.

5. Whether the Reopening was Based on a Mere Change of Opinion:
The Tribunal rejected the assessee's argument that the reopening was based on a mere change of opinion. The Tribunal noted that the AO had not examined the applicability of section 50C during the original assessment proceedings, and therefore, the question of change of opinion did not arise.

6. Computation of Capital Gains under Section 50C:
The AO computed the capital gains by adopting the full value of consideration as per the provisions of section 50C, which was higher than the actual consideration received by the assessee. The Tribunal upheld the AO's computation, noting that the value assessed by the Stamp Valuation Authority is deemed to be the full value of consideration received or accruing as a result of the transfer of the capital asset.

7. Non-referral to the Valuation Officer under Section 50C(2):
The assessee argued that the AO should have referred the matter to the Valuation Officer under section 50C(2) to determine the fair market value of the property. The Tribunal found merit in this argument, noting that once the assessee objects to the adoption of the full value of consideration and requests a reference to the Valuation Officer, it is the duty of the AO to comply. The Tribunal set aside the issue to the AO for fresh verification and directed the AO to refer the matter to the Valuation Officer.

8. Levy of Interest under Sections 234B and 234C:
The Tribunal did not specifically address the issue of the levy of interest under sections 234B and 234C in detail, as the primary focus was on the validity of the reopening and the computation of capital gains.

Conclusion:
The Tribunal upheld the reopening of the assessment and the computation of capital gains by the AO. However, it directed the AO to refer the matter to the Valuation Officer for determining the fair market value of the property as on the date of sale. The appeal filed by the assessee was partly allowed for statistical purposes.

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