2014 (11) TMI 525 - AT - Income Tax

Application of section 50C and addition to be made u/s 69C Held that - Both the sections operate independently i.e. to say that section 50C shall bet attracted where there is a transfer of property by the assessee and receives sales consideration - This automatically puts into oblivion the purchase part of the agreement - the argument of the assessee before the CIT(A)was correct that provisions of section 50C do not apply on purchase part of the agreement. The material available with the AO was report of the DVO, and the report of the registered valuer - the remand report does not talk about anything factual but it only says that since the DVO valuation is closer to stamp duty valuation, hence DVO s report is being adopted - there is nothing in the report of the DVO - The only acceptable document is the report of the registered valuer, which has same basis - the observation of the CIT(A) that the AO must have some reasonable material to put the leash on the assessee - But the only material available with the AO was the DVO s estimated report, which is based entirely on comparative transactions in the close vicinity - This, cannot become the basis of adoption of financial valuation - there is no infirmity in the order of the CIT(A) to accept the assessee valuation, which ultimately was more than the registered valuer s valuation. Admission of additional ground under Rule 27 Issue of notice for reopening of assessment u/s 148 Held that - The ground raised pertained to non-issuance of notice u/s 143(2) within 12 months of notice u/s 148 - Though the date of notice u/s 143(2) is not given in the order, but it is apparent that either it would have been issued along with 142(1) or subsequent - In either cases, the notice is barred, because as per the proviso the notice should have been issued within the period of expiry of twelve months from the date of filing of the return - the issue of notice u/s 143(2) beyond the period of 1 year is barred by limitation, which makes the entire proceedings vitiated - the reassessment proceedings and assessment order passed u/s 143(3) read with section 148 is to be set aside Decided against revenue.

Summary

Issues Involved:
1. Addition under section 69B based on valuation report of DVO and invoking section 142A of the I.T. Act.
2. Validity of notice u/s 148 r.w.s. 147.
3. Application of section 50C and section 69B independently.
4. Reassessment proceedings and notice u/s 143(2) within 12 months.

Issue 1: Addition under section 69B based on valuation report of DVO and invoking section 142A of the I.T. Act:
The department appealed against the CIT(A)'s order deleting the addition under section 69B of the I.T. Act. The AO had made an addition of Rs. 30,10,999 based on the valuation report of the DVO, which was contested by the assessee. The CIT(A) found that the provisions of section 50C cannot be extended to section 69B and that the AO lacked evidence to support the addition. The CIT(A) held that the DVO's valuation was an estimate and not conclusive proof, especially since the stamp duty valuation cannot be equated to the purchase price. The CIT(A) ruled in favor of the assessee, stating that the addition under section 69B was not legally tenable, and hence, deleted the addition.

Issue 2: Validity of notice u/s 148 r.w.s. 147:
The assessee challenged the validity of the notice issued under section 148 r.w.s. 147, claiming it was void, illegal, and without jurisdiction. The AO initiated reassessment proceedings based on information regarding the purchase of a property. The CIT(A) examined the notice issuance timeline and found that the notice u/s 143(2) was issued beyond the statutory period of 12 months from the filing of the return, rendering the reassessment proceedings and assessment order bad in law. Consequently, the ITAT quashed the reassessment proceedings, upholding the ground raised by the assessee under Rule 27 of the Income Tax Rules.

Issue 3: Application of section 50C and section 69B independently:
The ITAT differentiated the application of sections 50C and 69B, emphasizing that they operate independently. Section 50C pertains to the transfer of property and sales consideration, while section 69B is invoked when the investment amount exceeds recorded values or explanations are deemed unacceptable. The ITAT noted that the AO relied on the DVO's report and the registered valuer's report, with the latter being the only acceptable document. The ITAT upheld the CIT(A)'s decision to accept the assessee's valuation over the DVO's valuation, as there was no substantial evidence to support the AO's stance.

Issue 4: Reassessment proceedings and notice u/s 143(2) within 12 months:
The ITAT scrutinized the notice issuance timeline under section 143(2) and found it to be beyond the mandated 12-month period from the filing of the return. This violation rendered the reassessment proceedings and assessment order invalid. Consequently, the ITAT upheld the ground raised by the assessee under Rule 27 of the Income Tax Rules, leading to the dismissal of the department's appeal and the quashing of the reassessment proceedings.

In conclusion, the ITAT upheld the CIT(A)'s decision to delete the addition under section 69B, quashed the reassessment proceedings due to the invalid notice issuance timeline, and clarified the independent operation of sections 50C and 69B in the context of the case.