2010 (10) TMI 766 - AT - Income Tax

Capital gain - Sale consideration adopted by Stamp Valuation Authority (SVA) - Rectification of error - Income escaping assessment - 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 - Tribunal has mentioned that 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 - If order under section 143(1) is taken into consideration and thereafter if on the reasons recorded for the purpose of issuing notice under section 147 are taken into consideration, then it is clearly seen that the Assessing Officer may have right in initiating proceedings under section 147 - 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 - 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

Summary

Issues Involved:

1. Validity of action under Section 147 read with Section 148.
2. Applicability of Section 50C to the sale transaction.
3. Charging of interest under Section 234B.

Issue-wise Detailed Analysis:

1. Validity of Action under Section 147 read with Section 148:

The assessee challenged the validity of the notice issued under Section 148, arguing that the action was without jurisdiction and void ab initio. The Assessing Officer had initially rectified the intimation under Section 143(1) by invoking Section 154, which was later quashed by the CIT(A) on the grounds that the issue was debatable and not apparent from the record. The Tribunal had previously confirmed the CIT(A)'s order, which had become final. The Tribunal observed that the initiation of proceedings under Section 147 on the same grounds was improper, as the department had already pursued the matter under Section 154. The Tribunal cited the decision of the Hon'ble Madras High Court in P. Palaniswami v. CIT [1977] 106 ITR 811 (Mad.), which held that once an issue has been decided and reached finality, it cannot be reopened under Section 147. Therefore, the reassessment proceedings under Section 147 were quashed.

2. Applicability of Section 50C to the Sale Transaction:

The assessee argued that Section 50C, which was effective from 1-4-2003, should not apply to the sale transaction completed on 12-7-2002. The CIT(A) and the Tribunal had previously held that Section 50C was not applicable to transactions before 1-4-2003. The Tribunal reaffirmed this position, citing the Hon'ble Rajasthan High Court's decision in CIT v. Laxman Singh [1986] 159 ITR 983, which held that amendments affecting substantive rights are prospective unless explicitly stated otherwise. The Tribunal emphasized that the provisions of Section 50C could not be applied retrospectively to a transaction completed before its enactment.

3. Charging of Interest under Section 234B:

The assessee contested the charging of interest under Section 234B. The Tribunal noted that the charging of interest is consequential and directed the Assessing Officer to allow consequential relief based on the final determination of the assessee's income.

Conclusion:

The Tribunal allowed the assessee's appeal, quashing the reassessment proceedings under Section 147 and confirming that Section 50C was not applicable to the sale transaction completed before 1-4-2003. The issue of charging interest under Section 234B was directed to be addressed consequentially.