2019 (12) TMI 443 - AT - Income Tax

Validity of assessment - assessment order passed under section 143(3) - period of limitation - provision u/s 153(1) for extension of time limit to cover the time taken for obtaining the valuation report u/s 50C(2) - reference has been made under section 55A - HELD THAT - Assessment has to be completed within two years from the end of the assessment year in which the income was first assessable or one year from the end of the financial year in which return or revised return related to the assessment year commencing on first day of April, 1980 or any earlier assessment year is filed under sub- section (4) or sub-section (5) of section 139 whichever is later. Explanation 1 sub-clause (iv) of section 153 provides an extension from the above two years where the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of section 142A and does not talk about the extension of time if the reference is made under section 55A or section 50C of the Act. Therefore, in the present case the assessment order was to be passed on or before March 31, 2016 whereas the same has been passed on May 19, 2016 and therefore, the assessment order is barred by limitation and hence, the grounds of appeal of the assessee are accepted. In a nutshell the appeal of the assessee is allowed.

Summary

Issues Involved:
1. Whether the assessment order dated May 19, 2016, was barred by limitation.
2. Whether the references to the Valuation Officer were made under the correct sections of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Limitation of the Assessment Order:
The primary issue raised by the assessee was that the assessment order dated May 19, 2016, was barred by limitation as per section 153(1) of the Income-tax Act, 1961. The assessee argued that the assessment should have been completed by March 31, 2016. The Assessing Officer referred the matter to the valuation cell twice—first on December 31, 2015, and second on March 16, 2016. The valuation reports were received on March 4, 2016, and March 21, 2016, respectively. The learned authorized representative contended that there is no provision under section 153(1) for extending the time limit for obtaining valuation reports under sections 50C(2) and 55A. Therefore, the assessment order passed on May 19, 2016, was beyond the prescribed period and should be quashed.

2. Correctness of References to the Valuation Officer:
The assessee argued that the references to the Valuation Officer should have been made under sections 55A and 50C(2) of the Income-tax Act, 1961, and not under section 142A. The first reference was for estimating the fair market value as on April 1, 1981, and the second reference was for the valuation as on the date of transfer. The learned authorized representative asserted that section 153(1) does not provide for an extension of time for references made under sections 55A and 50C(2), unlike section 142A. The learned Departmental representative, however, contended that both references were made under section 142A, and the period to be excluded should be counted from the date of receipt of the valuation report, making the assessment order within the prescribed time.

Tribunal's Findings:
The Tribunal examined the provisions of sections 55A, 50C(2), and 142A, and the facts of the case. It found that the first reference was indeed made under section 55A for ascertaining the fair market value as on April 1, 1981, and the second reference was made under section 50C(2) for valuation as on the date of transfer. The Tribunal noted that the assessment order itself recorded these references. The Tribunal concluded that none of the references were made under section 142A, and therefore, the assessment order should have been passed by March 31, 2016. Since the order was passed on May 19, 2016, it was barred by limitation.

Conclusion:
The Tribunal quashed the assessment order dated May 19, 2016, as it was barred by limitation. It held that the learned Commissioner of Income-tax (Appeals) erred in treating the references as made under section 142A. The appeal of the assessee was allowed, and the stay application was dismissed as infructuous.

Order Pronounced:
The order was pronounced in the open court on October 25, 2019.