2016 (12) TMI 1280 - HC - Income Tax

Revision u/s 263 - computing the petitioner s capital gain - stamp duty valuation - Held that - No illegality in the order of the Commissioner. Commissioner substantially accepted the grievances of the petitioner. The petitioner s case that the income did not arise during the Assessment Year 2006 2007 but 2005-06 was accepted. As a natural corollary, the income as contended by the petitioner himself had to be accounted in the year 2005 2006. The petitioner had also contended that there could be no nil cost of acquisition, a contention which the Commissioner accepted. It is only on the background of such facts, the Commissioner also provided that the Assessing Officer would obtain a report from the DVO and adopt the valuation in such report for the purpose of computing the petitioner s capital gain. What is prejudicial to the assessee must be examined in the background of the facts of the case. Therefore when the Commissioner accepted the assessee s contention that the income did not pertain to the Assessment Year 2006-2007 but pertained to Assessment Year 2005-2006, he merely accepted the petitioner s ground. His direction, therefore, not to tax the income for the Assessment Year 2006-2007 but could be tax only for the year 2005-2006, therefore, must be seen in light of the petitioner s own contention. The direction to adopt a correct cost of acquisition of the property was also in favour of the petitioner by accepting his contention. The further direction for obtaining DVO s report, in any case, was a passing remark, and as noted, flowed from the provisions contained in Section 50C of the Act. We, therefore, propose no interference in such revisional order. Coming to the validity of the valuation by the DVO, the same obviously cannot be examined in a writ petition jettisoning the appeal provisions contained in the Act. Before deciding to relegate the petitioner to such appellate remedy, we had a cursory glance at such report. Contrary to what the counsel for the petitioner contended before us, the factors of the property being under litigation, there being encumbrances and tenancy was not lost sight of by the DVO. The report elaborately refers to these factors before coming to the final assessment of the valuation. Whether such assessment is correct or not, cannot be a subject matter of a writ petition. We would leave it open to the assessee to avail the appellate remedy. We would, therefore, relegate the petitioner to avail the appellate remedy in which the validity of the report of the DVO would also be the subject matter.

Summary

Issues Involved:
1. Legality of the revisional order passed by the Commissioner.
2. Validity of the notice for re-opening the assessment.
3. Validity of the Departmental Valuation Officer’s (DVO) report.

Issue-wise Detailed Analysis:

1. Legality of the Revisional Order Passed by the Commissioner:

The petitioner challenged the revisional order passed by the Commissioner under Section 264 of the Income Tax Act, 1961. The petitioner contended that the Commissioner’s directions to assess the capital gain for the year 2005-2006 and to adopt the DVO’s valuation were beyond the scope of the revision petition and contrary to Section 50C of the Act.

The court noted that the Commissioner had substantially accepted the petitioner’s grievances, including the contention that the income did not arise during the Assessment Year 2006-2007 but in 2005-2006, and that the cost of acquisition could not be nil. The direction to obtain the DVO’s report was in line with Section 50C, which allows the assessee to dispute the stamp duty valuation and mandates the Assessing Officer to refer the valuation to the DVO. The court held that the Commissioner’s order was not prejudicial to the petitioner and was in consonance with the Act’s provisions. The petitioner’s delayed challenge to the order was also noted, and the court found no illegality in the Commissioner’s order.

2. Validity of the Notice for Re-opening the Assessment:

The petitioner initially challenged the notice for re-opening the assessment but later withdrew this challenge, reserving the right to raise all contentions in the appeal before the Commissioner. The court did not delve into the merits of this issue due to the withdrawal of the challenge by the petitioner.

3. Validity of the Departmental Valuation Officer’s (DVO) Report:

The petitioner argued that the DVO ignored the ground realities, such as the property being heavily encumbered, involved in litigation, and rented to the Border Road Task Force at a nominal rent. The court observed that the DVO’s report did consider these factors before arriving at the final assessment of the property’s valuation. The court held that the validity of the DVO’s report could not be examined in a writ petition and should be addressed through the appellate remedy provided under the Act. The petitioner was relegated to pursue the appellate remedy, including the validity of the re-opening of the assessment.

Conclusion:

The court found no illegality in the Commissioner’s revisional order and upheld the directions given therein. The petitioner’s challenge to the DVO’s report was directed to be pursued through the appellate remedy. The court allowed the petitioner to raise all available grounds, including the validity of the re-opening, in the appeal against the assessment order. Both petitions were disposed of, and the rule was discharged.