2014 (8) TMI 751 - AT - Income Tax

Admission of additional grounds Held that - The assessee neither at the stage of assessment nor before the CIT(A) has raised any issue with regard to validity of proceeding initiated u/s 147 of the Act - considering the fact that the issue being raised is a purely legal and jurisdictional issue going to the root of the matter and can be decided on the basis of facts available on record, the additional grounds are admitted following the decision in NTPC Vs. CIT 1996 (12) TMI 7 - SUPREME Court . Jurisdiction of AO u/s 147 validity of proceeding u/s 147 - Application of section 50C Held that - The assessee has tried to justify sale consideration mentioned in the sale deed by stating that though the area of land as per the document was 623 sq.yds. but land physically available was only 580 sq.yds. - due to severe vaastu defect area of 125 sq.yds. was not usable for construction purposes and the buyer has also spent an amount of ₹ 30 lakhs towards leveling and construction of retention wall - though the DVO has accepted certain specific issues raised by the assessee in this regard, he has not properly given discount towards the same - the value of the property on the date of sale of comparable cases cannot be applied to the assessee's property, which was sold on 29/09/2006 - assessee's objection is valid. If at all the DVO is to consider comparable sale instances, then, he has to consider the sale instances of the relevant date when the assessee sold property or dates proximate to that date - considering the appreciation in value of the property as per the SRO guide line the discount given by the DVO on backward calculation is not fair - the value determined by the DVO cannot be treated as the fair market value of the property - the sale consideration shown by the assessee in absence of adequate evidence cannot be accepted - As it appears neither any physical verification has been done at any stage to ascertain the exact extent of land nor any conclusive evidence has been brought on record to establish such claim thus, the matter is to be remitted back to the AO for ascertaining the fair market value of the property as on the date of sale Decided partly in favour of Assessee.

Summary

Issues Involved:
1. Validity of reopening the assessment under section 147 of the Income Tax Act.
2. Adoption of fair market value determined by the Departmental Valuation Officer (DVO) for the purpose of computing capital gains under section 50C of the Income Tax Act.
3. Consideration of specific objections raised by the assessee regarding the valuation of the property.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The assessee challenged the reopening of the assessment under section 147, arguing that the Assessing Officer (AO) had no tangible material to form a reason to believe that income had escaped assessment. The AO reopened the assessment based on the sale deed for the property sold at Jubilee Hills, where the sale consideration was Rs. 90,50,000 but the Sub-Registrar Office (SRO) adopted a fair market value of Rs. 1,87,36,000 for stamp duty purposes. The tribunal held that the AO was justified in reopening the assessment as the information about the fair market value adopted by the SRO was new material that came to the AO's possession during the scrutiny assessment for the subsequent assessment year. The tribunal dismissed the assessee's contention, stating that section 50C(1) is a deeming provision and the AO had reason to believe that income had escaped assessment.

2. Adoption of Fair Market Value Determined by the DVO:
The assessee contended that the DVO's methodology for determining the fair market value was contrary to the provisions of section 2(22B) of the Act. The DVO considered comparable instances of sale that took place more than seven months after the date of sale by the assessee. The tribunal observed that the DVO's valuation did not properly account for the specific issues raised by the assessee, such as vaastu defects, leveling of land, and shortage of area. The tribunal concluded that the value determined by the DVO could not be treated as the fair market value of the property. The case was remitted back to the AO to conduct necessary inquiries and find out comparative instances of sale on the relevant date or nearby dates to have a fair estimation of the property's value.

3. Consideration of Specific Objections Raised by the Assessee:
The assessee raised objections regarding the physical availability of land, vaastu defects, and sloping topography, which were not properly considered by the DVO, AO, or CIT(A). The tribunal noted that while the DVO accepted certain issues, he did not give adequate discounts for them. The tribunal directed the AO/DVO to conduct necessary inquiries and consider the assessee's objections regarding the property's valuation. The assessee was allowed to produce necessary documentary evidence to substantiate the sale consideration adopted by him.

Conclusion:
The tribunal partly allowed the appeal for statistical purposes, remitting the matter back to the AO to ascertain the fair market value of the property as on the date of sale, considering the specific objections raised by the assessee and conducting necessary inquiries to find out comparative instances of sale on the relevant date. The AO was instructed to afford a reasonable opportunity of being heard to the assessee and decide the issue based on the facts and materials on record and in accordance with the law.