2022 (2) TMI 817 - AT - Income Tax

Reopening of assessment u/s 147 - return was not filed as per the database of the Department - Assessee has purchased residential property and the same is not verifiable from the return of income filed for the AY 2006-07 and the assessee has not furnished the return of income - HELD THAT - From the above, it is clear that the reopening was made on the ground that the assessee has not filed the return of income and, therefore, the income to the extent has escaped assessment. Since the assessee has already filed the return of income, a fact brought on record by the AO himself in the body of the assessment order itself, therefore, the very reason for which the case of the assessee was reopened is factually incorrect. As held in various decisions that when the AO reopened the case of the assessee on the premise that the return was not filed as per the database of the Department although it was already filed, then, such reassessment proceedings are not in accordance with the law and has to be quashed. We rely on the decision in the case of PCIT vs. RMG Polyvinyal (I) Ltd. 2017 (7) TMI 371 - DELHI HIGH COURT and the Vijay Haishchandra Patel 2017 (12) TMI 865 - GUJARAT HIGH COURT relied on the assessee. The various other decisions relied on by the ld. Counsel on this issue also support his case to the proposition that when reopening was based on the premise that the assessee has not filed his return of income as per database of the Department, but, the assessee has actually filed the return of income, then, such reopening is not in accordance with the law and has to be quashed since such reopening was based on wrong facts. We, therefore, quash the reassessment proceedings initiated by the AO and subsequent proceedings are accordingly quashed. Appeal of assessee allowed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of reassessment proceedings under Section 147.
3. Adoption of deemed purchase consideration based on DVO valuation.
4. Approval under Section 151.
5. Reference to the valuation cell.
6. Merits of the addition made by the AO.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeal:
The assessee filed the appeal with a delay of 20 days, accompanied by a condonation application explaining the reasons for the delay. After reviewing the application and hearing both sides, the delay was condoned, and the appeal was admitted for hearing.

2. Validity of Reassessment Proceedings under Section 147:
The AO reopened the assessment on the grounds that the assessee purchased property worth ?31,50,000, which was not verifiable from the return of income. The AO recorded reasons for reopening, stating that the assessee had not disclosed all material facts. However, it was found that the assessee had filed the original return of income on 31.10.2006, declaring an income of ?10,87,058. The Tribunal noted that the reopening was based on incorrect facts, as the return had indeed been filed. Citing decisions from the Hon'ble Delhi High Court and Gujarat High Court, the Tribunal quashed the reassessment proceedings, stating that reopening based on factually incorrect premises is not sustainable in law.

3. Adoption of Deemed Purchase Consideration Based on DVO Valuation:
The AO adopted the land rate for the property at ?50,214 per sq. mtr. based on the DVO's report, valuing the property at ?1,02,57,600, resulting in an addition of ?70,57,600. The CIT(A) partly allowed the appeal, directing the adoption of the circle rate of ?21,800 per sq. mtr. and allowing a deduction of 29.5% for defects in the location of the property. The assessee contended that the AO did not adhere to the CIT(A)'s directions and that the reference to the DVO was invalid without rejecting the books of account.

4. Approval under Section 151:
The approval under Section 151 for reopening the assessment was challenged as mechanical and without application of mind. The Tribunal, referring to various judicial decisions, noted that the approval was granted on non-existing facts, further supporting the invalidity of the reassessment proceedings.

5. Reference to the Valuation Cell:
The assessee argued that the reference to the DVO was illegal and unwarranted, as the AO did not reject the books of account or find any material to disbelieve the declared consideration. The Tribunal agreed, citing decisions from the Supreme Court and various High Courts, stating that reference to the DVO without rejecting the books of account is invalid.

6. Merits of the Addition Made by the AO:
The Tribunal noted that the assessee purchased the property for ?31,50,000, evidenced by the registered sale deed. The AO's estimation based on the DVO's report was not supported by any adverse material. The Tribunal found that the CIT(A) did not consider various defects in the DVO's report and the location-specific issues affecting the property's value. The Tribunal emphasized that the report of the Government Approved Valuer should be accepted in the absence of any incriminating material.

Conclusion:
The Tribunal quashed the reassessment proceedings initiated by the AO and the subsequent proceedings, allowing the appeal filed by the assessee. The various other grounds challenging the reopening of the assessment and the addition on merit were deemed academic and not adjudicated. The order was pronounced in the open court on 16th February 2022.