2021 (1) TMI 48 - AT - Income Tax

Reopening of assessment u/s 147 - As argued that requirement of section 151(2) of the Act was not complied with before issue of notice u/s.148 - addition made towards differential value of sale consideration by invoking the provisions of section 50C - HELD THAT - Although, the learned CIT(A) has stated in para 5 of his order that necessary sanction as envisaged u/s.151(2) was taken from the competent authority, but he has neither brought on record any evidence available in the assessment records in support of his claim nor stated the date on which the competent authority, if he had granted the approval and recorded his satisfaction in accordance with the requirement of section 151(2) - In the absence of any clear findings from the learned CIT(A) along with date of approval, if any, as required u/s 151(2) of the Act, it is very difficult to concur with the findings recorded by the learned CIT(A) that requirement of section 151(2) of the Act has been complied with before issue of notice. In this case, neither notice issued u/s.148 specifies the requirement of section 151(2) of the Act, nor the learned CIT(A) has brought on record the evidence available on assessment records. In the absence of evidence, the findings of the learned CIT(A) that necessary sanction as envisaged under 151(2) of the Act was taken from the competent authority is perverse and not sustainable in law. Therefore, we are of the considered view that notice issued u/s.148 of the Act, without complying the requirement of section 151(2) of the Act is bad in law and liable to be quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of notice u/s.148 of the Income Tax Act, 1961.
2. Assessment based on Section 50C of the Income Tax Act without reference to Valuation Officer.
3. Escaped income assessment under the head 'long term capital gains'.

Validity of Notice u/s.148:
The appeal challenged the validity of the notice u/s.148, contending that the Assessing Officer (AO) exceeded jurisdiction and did not comply with section 151(2) of the Act. The Commissioner of Income Tax (Appeals) upheld the notice's validity, stating that the necessary sanction was obtained, and the AO had reasonable belief of income escapement. However, the ITAT found the CIT(A)'s findings lacking clear evidence of compliance with section 151(2). Citing a precedent, the ITAT ruled that the notice without proper sanction is bad in law, quashing the reassessment and subsequent assessment.

Assessment based on Section 50C:
The AO recomputed long term capital gains by adopting the stamp duty value under Section 50C, despite the assessee's objections. The CIT(A) upheld this decision, noting the absence of grounds for a valuation officer's reference under Section 50C(2). The ITAT concurred, stating that the AO acted within the law by not referring to a valuation officer. Consequently, the ITAT found no error in the AO's computation of long term capital gains, as mandated by Section 50C.

Escaped Income Assessment - Long Term Capital Gains:
The AO initiated reassessment due to alleged under-valuation of property sale, leading to income escapement. The assessee contested the reassessment, citing prior property agreement details. The AO disagreed, asserting understated sale consideration. The CIT(A) rejected the assessee's arguments, upholding the AO's findings. The ITAT, however, quashed the reassessment due to the invalid notice u/s.148, rendering the assessment on merits moot and allowing the appeal.

In conclusion, the ITAT ruled in favor of the assessee, quashing the reassessment and assessment due to the invalid notice u/s.148. The issues challenging the assessment on merits were deemed academic in light of the notice's invalidity.