TMI Blog2010 (10) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... me reasons as recorded for the purpose of initiation of proceedings under section 147 - Theory of imposability on the facts of the present case is applicable for the simple reason that the assessee entered into sale transaction on 12-7-2002 and undisputedly on this date the provisions of section 50C were not on the statute - The Assessing Officer should have referred the matter to the Departmental Valuer if he was not satisfied with the explanation or with the Valuation Report obtained from a Registered Valuer by the assessee - Appeal is allowed by way of remand - 1121 (JP) of 2008 - - - Dated:- 11-10-2010 - R.K. GUPTA, M.L. GUSIA, JJ. Mahendra Gargieya for the Appellant. Sanjay Kumar for the Respondent. ORDER R.K. Gupta, Judicial Member. This is an appeal by assessee against the order of ld. CIT(A) dated 19-5-2008 relating to assessment year 2003-04. 2. The return of income filed on 2-12-2003 at Rs. 5,50,828 was processed under section 143(1) on 28-1-2004. 3. The total income shown by assessee includes an amount of Rs. 5,54,824 on account of long-term capital gain on sale of land and building situated at E-192. RIICO Industrial Area, Jaipur on discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the assessee, which has been reproduced by the Assessing Officer at pages 3, 4, 5 and 6 of his order. It was explained that section 50C(1) has been inserted by Finance Act, 2002 which has been made effective from 1-4-2003 and, therefore, should be treated as applicable on all transactions where transfer took place on or after 1-4-2003. It was also stated that it cannot be said that since the amendment is made effective with effect from 1-4-2003, it shall apply to transactions falling in the previous year 2002-03 relating to assessment year 2003-04. This being substantive amendment affecting the right of a citizen imposing a tax liability has to be treated as prospective only and, therefore, the transfer taking place on or after 1-4-2003 only, can be covered by deeming fiction created through section 50C. Since in the present case, admittedly, the registration of documents were completed on 1/12-7-2002 i.e., prior to the date 1-4-2003, the provisions of section 50C could not be applied. Therefore, no addition can be made by resorting to provisions of section 50C. 8. The reason for selling the plot at the value of Rs. 45,00,000 were also explained. 9. After examining the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escapement of income is not concerned at that stage this is so because the formation of belief is within realm of the subjective satisfaction of Assessing Officer . The ld. CIT(A) further observed that there is limited scope of section 154 and if appellate authorities has held that a particular issue was not to be covered under section 154 such view does not preclude the Assessing Officer to have reason to believe for issuance of notice under section 148 of the Act. In view of these observations, the ld. CIT(A) dismissed the legal ground of the assessee. 12. On merit also, the ld. CIT(A) found that the Assessing Officer was correct in holding that the provisions of section 50C are applicable for assessment year 2003-04 and accordingly the addition made by Assessing Officer was confirmed. 13. Charging of interest under section 234B was also confirmed by the ld. CIT (A). 14. Now the assessee is in appeal here before the Tribunal. 15. The following effective grounds have been taken by the assessee in its appeal :- (1.1) The very action taken under section 147 read with section 148 is bad in law without jurisdiction and being void ab-initio, the same may kindly be quashed. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal filed by the department against the order of ld. CIT(A) who cancelled the order under section 154 as well as deleted the addition on merit vide his order dated 5-4-2006. 18. We have heard rival submissions and considered the relevant material on which our attention was drawn by the respective party. 19. In the appeal filed by assessee many issues/controversies are involved which are required to be dealt with. 20. First controversy is in respect to rectification order passed under section 154 by the Assessing Officer which was appealed before ld. CIT(A) who held that on debatable point of issue rectification order cannot be passed. Accordingly, rectification order was held as null and void. Thereafter, the ld. CIT(A) decided the issue on merit also and held that provisions of section 50C are not applicable on the sale transaction entered into by assessce for the reason that sale transaction entered into by assessee is prior to the date of 1-4-2003 the date on which the provisions of section 50C was brought on statute. Against this order, the department filed appeal before Tribunal taking the following grounds of appeal :- That the ld. ClT(A) has erred in (i) del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be started. It was further submitted that to start another proceeding, the Assessing Officer has to drop the proceeding started earlier. In the present case the proceedings under section 154 were started first and they were not dropped. Against the order under section 154 assessee filed appeal before ld. CIT (A) who quashed the proceedings, under section 154 as well as allowed the issue on merit in favour of the assessee. At this point of time also the department has not stopped as department filed appeal against the order of ld. CIT (A) before this Tribunal quashing the order under section 154 as well as deleting the addition on merit. From this act of the department it is clearly established that department itself was not sure that which proceedings should be started or continued. Department filed appeal before the Tribunal, as well as also initiated proceedings under section 147 which is not permissible at all. The decision of Hon ble Gujarat High Court is not applicable on the facts of the present case. On the other hand this decision helps the assessee. The department has challenged the order under section 154 before the Tribunal and at the same time they have taken action u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned the same before the ld. CIT(A) with the above contentions, which have been accepted by ld. CIT(A) while deciding the appeal in favour of the assessee. Besides the contention that it was a debatable issue, hence section 154 was not applicable, the assessee also contended that the provisions laid down under section 50C have come into effect from 1-4-2003 whereas property in question was sold by the assessee on 12-7-2002. Before coming into effect of section 50C from 1-4-2003 the value of the property was generally being accepted by the department as the amount in consideration between the parties. Under these facts and circumstances, we are of the view that ld. CIT(A) has rightly held that the issue was debatable one hence application of section 154 of the Act by the Assessing Officer to work out the long-term capital gain at Rs. 21,14,059 was not justified. The first appellate order is thus upheld. The grounds are therefore, rejected. From the above finding of the Tribunal, it is very clear that Tribunal has not decided the issue in respect to quashing the order under section 154 only but has confirmed the order of ld. CIT(A) in toto. The Tribunal has taken into consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of present case. The Hon ble Gujarat High Court has stated that proceeding under section 154 is separate and proceeding under section 147 is separate. It has not been stated by Hon ble Gujarat High Court that both the proceedings i.e., under section 154 and under section 147 can be started simultaneously as it has held that both the proceedings are separate. The Assessing Officer has resorted to provisions of section 154 and they have not been dropped as they filed appeal against the order of ld. CIT (A) before the Tribunal. Once they are continuing to pursue the proceedings initiated under section 154, then in our considered view proceedings under section 147 cannot be initiated on the same issue. Undisputedly, the issue for starting proceedings under section 154 is the same on which basis the proceedings under section 147 have been started. Therefore, we hold that proceeding started under section 147 is without any basis and cannot be upheld. 26. We further noted that the decision in case of P. Palaniswami v. CIT [1977] 106 ITR 811 (Mad.) relied upon by ld. A/R is directly on the issue. In this case the facts were that while finalizing the assessment of the assessee for the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Singh [1965] 56 ITR 234. In the present case rather facts are on more stronger footing. Firstly, the Assessing Officer rectified the order in view of provisions of section 50C. Assessee preferred appeal before ld. CIT (A) who cancelled the rectification order holding that on debatable point of view rectification under section 154 cannot be done. On merit also, the ld. CIT (A) held that provisions of section 50C are applicable with effect from 1-4-2003 and not on the date of transaction entered prior to the date 1-4-2003. Department filed appeal against this order of ld. CIT (A) before Tribunal taking two grounds. Ground No. 1 was against holding that issue is debatable, one and Ground No. 2 was against deleting the addition on merit. Tribunal has confirmed this order of ld. CIT (A). No appeal against this order of Tribunal has been filed before Hon ble High Court meaning thereby order of ld. CIT (A) dated 5-4-2006 has reached its finality. Therefore, it was not open to the Assessing Officer start reassessment proceedings under section 147/148. The ratio of the decision decided by Hon ble Madras High Court is directly on the issue. In view of these facts and circumstances, we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has escaped assessment, then he was right to initiate proceedings under section 147. The Hon ble Apex Court has also observed in its order that it is a different matter whether any income was found escaped or not during the reassessment proceedings. However, it has held that re-opening of the assessment cannot be held erroneous. In the present case also the addition may be or may not be sustained on merit but there was a reasonable belief to the mind of the Assessing Officer that in view of the provisions of section 50C the income has escaped assessment. 30. However, in the present case as we have already held that reopening of the assessment was bad in law for the reason that Assessing Officer has resorted to provisions of section 154 on the same reasons as recorded for the purpose of initiation of proceedings under section 147. The proceedings under section 154 were not dropped by the Assessing Officer as they were pursuing before the Tribunal by filing the appeal against the order of ld. CIT (A) as explained in the foregoing paras of this order. Therefore, for this reason we have held that proceedings under section 147 were not valid. In view of these discussions, we hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so there was no capital gain. At the instance of the CIT the aforesaid question has been referred for our opinion as, according to the Tribunal, it is a question of law arising out of its order dated 13th July, 1977. 5. Having heard learned counsel for the Revenue and the assessee, we have reached the conclusion that the finding of the Tribunal that there was no capital gain to the assessee as a result of the sale of gold ornaments and jewellery was right. For the present purpose, we shall accept the finding that the sale of gold ornaments took place prior to 1st April, 1973 which is essentially a finding of fact and being based on consideration of the relevant material and as such cannot be assailed by the Revenue. The sale of the gold ornaments and jewellery had taken place from 29th March, 1972 to 31st March, 1972 as is borne out from the AAC to which he arrived at on the basis of the sale bills and other evidence. The Finance Act of 1972 came into force w.e.f. 1st April, 1973. By virtue of the amendment gold ornaments and jewellery became the capital asset from 1st April, 1973 and not before that sub-section (14) of section 2 of the IT Act (No. XLIII of 1961) ( the Act herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e squarely applicable on the facts of the present case. In the present case also the provisions of section 50C were brought on the statute with effect from 1-4-2003. Though in the Board s circular it has been stated that these provisions are applicable from assessment year 2003-04, but the theory of natural justice and imposability has to be taken into consideration. Theory of imposability on the facts of the present case is applicable for the simple reason that the assessee entered into sale transaction on 12-7-2002 and undisputedly on this date the provisions of section 50C were not on the statute. Therefore, it was impossible task to presume that provisions of section 50C will come and the value adopted by the Stamp Valuation Authority has to be taken into consideration in view of provisions of section 50C. Therefore, for this reason it has to be held that the provisions of section 50C are applicable with effect from 1-4-2003 and not from the date of sale transaction i.e., on 12-7-2002. The findings of Hon ble High Court which are on the similar issue is squarely applicable on the facts of present case. The finding of Hon ble Jurisdictional High Court is applicable on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by which the assessee has a right to challenge the valuation adopted by the Stamp Valuation Authority. It was further added that the Assessing Officer was not an expert on the subject. However, having adopted the valuation taken by the Stamp Valuation Authority without considering the provisions of section 50C(2) which was brought to his knowledge during the reassessment proceedings. Reliance was placed on the decision in the cases of Ravi Kant v. ITO [2007] 110 TTJ (Delhi) 297 and Navneet Kumar Thakkar v. ITO [2007] 112 TTJ (Jodh.)(SMC) 769 . 37. On the other hand, the ld. D/R has stated that provisions of section 50C are very clear and the Assessing Officer has rightly made the addition which has been confirmed by ld. CIT (A) also. Therefore, orders of lower authorities do not suffer from any infirmity. 38. After considering the submissions and perusing the material on record, we find that in view of provisions of section 50C(2) the assessee can challenge the valuation adopted by the Stamp Valuation Authority. In support of the case, the assessee had filed Valuation Report from a Registered Valuer. However, the same was not taken into consideration either by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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