2017 (4) TMI 233 - AT - Income Tax

Reopening of assessment - reason to believe - sale consideration of property shown lesser than the valuation considered for registration purposes - Held that - The provisions of the section 50C is applicable. As per Explanation 2 to section 147 it is very clear that due to disclose lower sale consideration by the assessee the income chargeable to tax had escaped assessment. The assessee has not produced anything before the Commissioner of Income-tax (Appeals) to show as to how this fact was fully and truly disclosed before the assessing authority and that there was not failure on the part of the assessee especially when provisions of the section 50C is applicable. Hence the Commissioner of Income-tax (Appeals) considered the action of the Assessing Officer is fully covered by the provisions of Explanation 1 to section 147. It is possible that with due diligence the Assessing Officer would have ascertained this fact at the time of original assessment also but in view of the Explanation 1 it does not mean that there was no default on the part of the assessee. Hence reopening under section 147 is held to be valid. The assessee has tried to take shelter under the exception provided by the above stated proviso where an assessment under sub-section (3) of section 143 has been completed no action after the expiry of four years from the end of the assessment year can be taken. But as stated above when the assessee has not disclosed fully and truly the facts necessary for the assessment this proviso will not come to its rescue. Consequently we hold that the entire reassessment proceeding in this case is valid and therefore the action of the Assessing Officer is upheld. The assessee fails on this legal issue. Invoking the provisions of the section 50C - Held that - The main grievance of assessee is that the assessee made a request the Assessing Officer to refer the valuation issue to the valuation cell under section 50C(2) of the Act which was not considered by the Assessing Officer. When this was raised before the learned Commissioner of Income-tax (Appeals) he also rejected it. In our opinion we find merit in the argument of the learned authorised representative. Before considering valuation under section 50C(1) of the Act if the assessee requests for reference to Departmental Valuation Officer (DVO) the Assessing Officer shall refer the matter to the Departmental Valuation Officer and he cannot overlook it. Hence we direct the Assessing Officer to refer the matter to the DVO and thereafter frame the assessment in accordance with law. This ground of assessee is allowed.

Summary

Issues Involved:
1. Reopening of the assessment under section 147 of the Income-tax Act.
2. Invocation of the provisions of section 50C of the Income-tax Act.
3. Levy of interest under sections 234B and 234C of the Income-tax Act.

Detailed Analysis:

1. Reopening of the Assessment under Section 147:

The primary issue in the appeal was the reopening of the assessment under section 147 of the Income-tax Act. The assessee contended that the reopening was based on a mere change of opinion, which is not permissible under the law. The original assessment was completed under section 143(3), and all material facts were disclosed during the assessment proceedings. The assessee relied on the Supreme Court judgment in CIT v. Kelvinator of India Ltd., which held that the Assessing Officer must have "reason to believe" that income has escaped assessment, and mere change of opinion cannot justify reopening.

The Commissioner of Income-tax (Appeals) upheld the reopening, stating that the Assessing Officer had "reason to believe" based on the difference in sale consideration and guideline value under section 50C. The belief must be based on reasonable grounds and not mere suspicion. The Tribunal agreed with the Commissioner, noting that the Assessing Officer had tangible material to form the belief that income had escaped assessment. The Tribunal emphasized that the reopening was justified as the assessee had not disclosed fully and truly all material facts necessary for the assessment.

2. Invocation of the Provisions of Section 50C:

The second issue was the invocation of section 50C, which deals with the adoption of the guideline value for stamp duty purposes as the sale consideration for computing capital gains. The Assessing Officer noticed that the sale consideration declared by the assessee for four flats was significantly lower than the guideline value. The assessee argued that the lower sale consideration was due to adverse economic factors and requested a reference to the Valuation Officer, which the Assessing Officer denied.

The Commissioner of Income-tax (Appeals) upheld the Assessing Officer's decision, stating it was mandatory to adopt the guideline value under section 50C. The Tribunal, however, found merit in the assessee's argument that the Assessing Officer should have referred the matter to the Valuation Officer upon request. The Tribunal directed the Assessing Officer to refer the valuation issue to the Departmental Valuation Officer (DVO) and frame the assessment accordingly.

3. Levy of Interest under Sections 234B and 234C:

The final issue was the levy of interest under sections 234B and 234C. Since the Tribunal remitted the valuation issue to the Assessing Officer, it deemed the ground regarding interest levy as infructuous at this stage.

Conclusion:

The Tribunal partly allowed the appeal for statistical purposes, directing the Assessing Officer to refer the valuation issue to the DVO and frame the assessment in accordance with the law. The reopening of the assessment under section 147 was upheld, but the assessee's request for a valuation reference under section 50C was accepted. The issue of interest levy under sections 234B and 234C was dismissed as infructuous.