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2025 (5) TMI 203 - AT - Income TaxValidity of the assessment order in the absence of valid notice u/s 143(2) - LTCG by applying provisions of section 50C - HELD THAT - A notice u/s 148 of the Act dated 15.10.2010 calling upon the assessee to file his return of income was issued. A notice u/s 143(2) of the Act dated 29.12.2011 along with additional ground is placed on record by the assessee. The notice is purported to have been issued calling upon the assessee to attend the assessment proceedings. It is interesting to note that the said notice dated 29.12.2011 referred to the Income Tax Return filed on 29.12.2011. Undisputedly the assessee has filed acknowledgment of ITR which is placed on record is dated 29.12.2011. We failed to understand as what were the circumstances that made the assessee to file the said return at the fag end of the assessment proceedings. As the noted by the assessing authority that the assessment was likely to be barred by time on 31.12.2011. However the assessment order is completely silent about the return filed on 29.12.2011 and notice issued u/s 143(2) of the Act on the same date. The supervisory authority of the Assessing Officer would take note of this fact and take remedial steps in accordance with law. The additional ground as taken by the assessee lacks merits. The assessee grossly failed to explain as to why ITR was not filed in response to notice dated 05.10.2010 issued u/s 148 of the Act. The inaction by the assessee cannot be allowed to be for his advantage. The additional ground is hereby dismissed. Computation of the capital gain by applying provision of Section 50C - The finding of the AO has contradiction in the assessment order. It is not clear as to why the assessing authority having accepted the value shown by the assessee proceeded to compute capital gain as per the stamp valuation value. It is not clear as to why the issue of fair market value was referred to the DVO by the AO. It is therefore presumed that the assessee had objected for adopting the value as per circle rate. As per provisions of section 50C(3) of the Act the value assessed by the DVO was required to be adopted by AO. We therefore hereby set aside the impugned order of the CIT(A) and restore the assessment to the file of the assessing authority for making denovo assessment. It is needless to say that the AO would give adequate opportunity of being heard to the assessee. The AO would be at liberty to call for a valuation report from the DVO. Appeal of the assessee is allowed for statistical purposes.
The core legal questions considered in this appeal are:
1. Whether the addition of Rs. 19,65,685/- under the head Long Term Capital Gains by applying the provisions of Section 50C of the Income Tax Act, 1961 ("the Act") was justified, particularly in light of the valuation of the property and the role of the Valuation Officer (DVO). 2. Whether the Assessing Officer (AO) had jurisdiction to initiate reassessment proceedings under Section 148 of the Act. 3. The legality and validity of the assessment order framed without a valid notice under Section 143(2) of the Act, especially when such notice was issued on the same day as the filing of the return of income. Issue-wise Detailed Analysis: 1. Validity of Addition under Section 50C of the Act Legal Framework and Precedents: Section 50C provides a special provision for determining the full value of consideration in cases where the consideration received or accruing from the transfer of capital asset (land or building) is less than the value adopted or assessed by the stamp valuation authority for stamp duty purposes. The value so adopted is deemed to be the full value of consideration for capital gains computation. The section also contemplates the possibility of the assessee disputing the stamp duty valuation, in which case the AO may refer the matter to a Valuation Officer (DVO) for determining the fair market value. The AO is bound to adopt the valuation ascertained by the DVO if the reference is made. Court's Interpretation and Reasoning: The AO initially noted a discrepancy between the sale consideration declared by the assessee (Rs. 7,00,000/-) and the circle rate value (Rs. 44,00,000/-). The AO issued notice under Section 148 and subsequently referred the valuation matter to the DVO. However, the DVO expressed inability to provide a valuation report due to the assessee's failure to furnish relevant information. Consequently, the AO adopted the circle rate value for computation of capital gains. Interestingly, the AO's order also stated acceptance of the value shown by the assessee in certain parts, creating an internal contradiction. The Commissioner of Income Tax (Appeals) (CIT(A)) upheld the AO's decision, relying on the provisions of Section 50C(1) that the value adopted by the stamp valuation authority must be taken as full value of consideration unless disputed and referred to the DVO. Since the AO had the stamp duty value, the CIT(A) held that the AO was justified in adopting it without awaiting the DVO's report. Key Evidence and Findings: The AO's assessment order, the letter from the DVO expressing inability to value the property, and the sale deed submitted by the assessee. The AO's contradictory acceptance of the assessee's declared value versus the circle rate value is a crucial factual finding. Application of Law to Facts: The Tribunal found the CIT(A)'s reasoning flawed because the AO's order was internally inconsistent and it was unclear why the AO proceeded with the circle rate valuation while simultaneously accepting the assessee's declared value. The AO's referral to the DVO implied that the assessee had disputed the stamp duty valuation, triggering the mandatory valuation procedure under Section 50C(2) and (3). Since the DVO did not furnish a report due to lack of information, the AO should have given the assessee an opportunity to provide the required details before making the addition. The Tribunal held that the matter should be remanded for de novo assessment, allowing the AO to obtain a valuation report from the DVO after giving the assessee adequate opportunity. Treatment of Competing Arguments: The assessee argued that the AO acted without fair opportunity and without proper valuation evidence, while the Department contended that the AO was justified in adopting the circle rate due to the assessee's negligence and failure to cooperate with the DVO. The Tribunal found merit in the assessee's contention that the AO's approach was procedurally defective and that the valuation process under Section 50C was not properly followed. Conclusion: The addition under Section 50C was set aside, and the assessment was restored to the AO for fresh consideration with directions to follow the statutory valuation process and provide the assessee a fair hearing. 2. Jurisdiction of the AO to Initiate Reassessment Proceedings under Section 148 Legal Framework: Section 148 empowers the AO to reopen assessments if there is reason to believe that income has escaped assessment. The issuance of notice under Section 148 must be justified by credible material. Court's Interpretation and Reasoning: The AO reopened the assessment based on the discrepancy between the declared sale consideration and the circle rate value, which constituted credible material to believe that income had escaped assessment. There was no challenge to the jurisdiction of the AO to initiate reassessment on these grounds in the judgment, and the Tribunal did not find any infirmity in the initiation of reassessment proceedings. Conclusion: The AO's jurisdiction to initiate reassessment under Section 148 was upheld implicitly by the Tribunal. 3. Legality of Assessment Order in Absence of Valid Notice under Section 143(2) Legal Framework and Precedents: Section 143(2) requires issuance of a notice to the assessee for scrutiny assessment. The validity of the assessment depends on proper issuance of such notice with due application of mind. The assessee relied on a precedent where issuance of notice under Section 143(2) on the same day as filing the return was held to be invalid, indicating non-application of mind by the AO. Court's Interpretation and Reasoning: The Tribunal distinguished the precedent relied upon by the assessee, noting that the facts were different. In the present case, the notice under Section 148 was issued on 15.10.2010, and the notice under Section 143(2) was dated 29.12.2011, the same day the return was filed. The Tribunal observed that the assessee filed the return belatedly, apparently to avoid time bar, and the assessment order was silent regarding this late filing and notice. The Tribunal also noted that the supervisory authority should take remedial steps if procedural irregularities are found. The Tribunal held that the assessee's claim of invalidity of the assessment order on this ground lacked merit because the assessee failed to explain the delay in filing the return and the AO's inaction could not be used to the assessee's advantage. Conclusion: The additional ground challenging the validity of the assessment order for lack of valid notice under Section 143(2) was dismissed. Significant Holdings: "It is noticed that the AO has taken the sale consideration value on the basis of value adopted or assessed or assessable by the 'stamp valuation authority' for the purpose of payment of stamp duty in respect of transfer: Once the value assessed by the stamp valuation authority is available, the AO cannot refer the valuation to Valuation Officer." However, the Tribunal observed: "Looking to the facts of the present case, we are unable to sustain the finding of the Ld. CIT(A). The finding of the Assessing Officer has contradiction in the assessment order. It is not clear as to why the assessing authority having accepted the value shown by the assessee proceeded to compute capital gain as per the stamp valuation value. Moreover, it is not clear as to why the issue of fair market value was referred to the DVO by the AO. It is therefore, presumed that the assessee had objected for adopting the value as per circle rate. As per provisions of section 50C(3) of the Act, the value assessed by the DVO was required to be adopted by AO." "We, therefore, hereby set aside the impugned order of the Ld. CIT(A) and restore the assessment to the file of the assessing authority for making denovo assessment. It is needless to say that the Assessing Officer would give adequate opportunity of being heard to the assessee. The AO would be at liberty to call for a valuation report from the DVO." Core principles established include:
The final determination was to allow the appeal for statistical purposes, set aside the addition under Section 50C, and remit the matter for fresh assessment after following due procedure and affording the assessee an opportunity of hearing. The additional ground regarding the validity of the notice under Section 143(2) was dismissed. The AO's jurisdiction under Section 148 was implicitly upheld.
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