2022 (7) TMI 274 - AT - Income Tax

Addition u/s 56(2)(vii)(b) - differential amount between the value as determined by DVO and the purchase price - Mandation of referring matter to DVO for valuing the property - Whether AO has erred and acted illegally in adopting the circle value without invoking the provision of Section 52C(2)(sic.50C(2))? - DR submitted that he has no objection if the matter is restored to the file of A.O. for denovo adjudication of the issue on merits in accordance with law, after referring the matter to DVO, so that additions can be made under section 56(2)(vii)(b) read with Section 50C(2) - HELD THAT - The Hon ble Allahabad High Court in the case of CIT, Allahabad Another v. Sh Chandra Narain Chaudhri ( 2013 (9) TMI 646 - ALLAHABAD HIGH COURT has observed and held that it is incumbent on the A.O, in such a case where the assessee disputes the valuation, to refer the matter to DVO, before additions can be made by AO. CIT(A) has not decided appeal on merits, but, has dismissed the appeal in limine without discussing the issue on merits, which is an infringement of Section 250(6) and hence in any case the appellate order passed by CIT(A) is not sustainable in the eyes of law. The assessee is also equally responsible for its woes, as the assessee has not appeared before Learned CIT(A) despite as many as seven opportunity of hearings being granted to the assessee by CIT(A). Even before Learned A.O. there was no proper compliances made by the assessee. D.R. has fairly submitted before us that the matter can be restored to the file of A.O. for fresh adjudication on merits in accordance with law, after referring the matter by AO to DVO in set aside remand proceedings for valuing the property purchased by the assessee, so that correct and proper assessment can be made. We are of the considered view that the matter can be restored to the file of A.O. for fresh determination of the issue on merits in accordance with law, after referring the matter to DVO by AO in set aside remand proceedings, for submission of valuation report by DVO of the property purchased by the assessee, and accordingly based on the valuation report of DVO, the differential amount between the purchase price and value as determined by the DVO can be brought to tax by AO in set aside remand proceedings, under section 56(2)(vii)(b) - Appeal of the assessee is allowed for statistical purposes.

Issues Involved:

1. Adoption of circle value without invoking Section 50C(2) of the Income-tax Act, 1961.
2. Validity of the assessment order on both facts and law.
3. Condonation of delay in filing the appeal.
4. Non-appearance before the CIT(A) and the ex-parte dismissal of the appeal.
5. Requirement to refer the matter to the DVO for valuation of property.

Detailed Analysis:

1. Adoption of Circle Value Without Invoking Section 50C(2):

The primary issue raised by the assessee was that the Assessing Officer (AO) adopted the circle value for the property without invoking the provisions of Section 50C(2) of the Income-tax Act, 1961. The AO made an addition of Rs. 53,79,000/- to the returned income of the assessee under Section 56(2)(vii)(b) of the Act, as the stamp duty value of the property was significantly higher than the actual sale consideration. The assessee contended that the land in question had no approach road, which justified a lower valuation. The Tribunal noted that the AO did not refer the matter to the District Valuation Officer (DVO) before making the addition, which is required when the stamp duty value is disputed by the assessee.

2. Validity of the Assessment Order:

The assessee argued that the assessment order was invalid both on facts and law. The Tribunal observed that the AO issued statutory notices under Sections 143(2) and 142(1) of the Act, and there was no dispute regarding the issuance and service of these notices. However, the Tribunal found that the AO failed to refer the matter to the DVO for valuation, which was a necessary procedural step under the law.

3. Condonation of Delay in Filing the Appeal:

The appeal filed by the assessee was delayed by 34 days. The assessee provided a medical certificate stating that he fell from the roof and was hospitalized, which caused the delay. The Tribunal considered this a sufficient cause and condoned the delay under Section 253(5) of the Act, emphasizing that technicalities should not impede the delivery of justice.

4. Non-appearance Before the CIT(A) and Ex-parte Dismissal:

The assessee did not appear before the CIT(A) despite being given seven opportunities. Consequently, the CIT(A) dismissed the appeal in limine without discussing the merits of the case, relying on precedents like CIT v. Multiplan India Ltd. and Estate of Late Tukoji Rao Holkar v. CWT. The Tribunal found this approach to be an infringement of Section 250(6) of the Act, which requires the CIT(A) to decide appeals on merits.

5. Requirement to Refer the Matter to the DVO for Valuation:

The Tribunal highlighted that when the assessee disputes the stamp duty valuation, the AO is obligated to refer the matter to the DVO under Section 50C(2) before making additions under Section 56(2)(vii)(b). The Tribunal cited judgments from the Allahabad High Court in CIT v. Sh Chandra Narain Chaudhri and the Calcutta High Court in Sunil Kumar Agarwal v. CIT, which support the necessity of such a referral. The Tribunal decided to set aside the assessment and remand the matter to the AO for fresh adjudication, directing the AO to refer the matter to the DVO for a proper valuation.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, setting aside the assessment order and remanding the matter to the AO for fresh determination. The AO was instructed to refer the property valuation to the DVO and make a new assessment based on the DVO's report, ensuring compliance with the legal provisions under Sections 56(2)(vii)(b) and 50C(2) of the Income-tax Act, 1961.

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