2024 (2) TMI 281 - HC - Income Tax

Validity of Re-assessment order - additions to the income disclosed in the return of income - Addition of difference between the purchase value and guideline value of the immovable property - amounts received as rent and contractual receipt - HELD THAT - As it is evident that the AO was fully conscious and aware of the fact that the report of the valuation officer was awaited. In spite of being aware of this fact, he proceeded to add the difference between the consideration specified in the sale deed and the guideline value as additional income and also initiated proceedings in respect of penalty. This approach is clearly unsustainable. Addition on account of rent receipts, the petitioner provided an explanation that rent was received towards a residential house property and that the income was duly disclosed. The petitioner further explained that tax had been wrongly deducted under Section 194IB instead of Section 194C of the Income-tax Act and that the petitioner should not be put to prejudice on that account. Contractual receipt which had been shown as business income. These explanations have been brushed aside as not satisfactory without providing any reasons for such conclusion. For reasons set out above, the impugned order is liable to be and is hereby quashed. As a corollary, the matter is remanded for re-consideration by the AO. AO is directed to await the valuation report before undertaking such reconsideration.

Summary

Issues involved: Challenge to assessment order for Assessment Year 2017-18 based on proposed additions to income - Discrepancy in property purchase price, rent receipts, contractual receipt.

Discrepancy in property purchase price: The petitioner's income tax assessment for the year 2017-18 was based on three proposed additions to the income disclosed in the return. The first addition pertained to the variance between the purchase price and guideline value of an immovable property. Despite the matter being referred to the valuation officer, the assessment order added the difference amount to the petitioner's income. The court found this action unsustainable as the valuation officer's report was still pending, and initiated penalty proceedings for underreporting income.

Rent receipts discrepancy: The petitioner explained that the rent received was for a residential property and was duly disclosed, but tax was wrongly deducted under the wrong section of the Income-tax Act. The court noted that the explanation provided was disregarded without adequate reasons, leading to the conclusion that the addition was not warranted.

Contractual receipt discrepancy: The petitioner also clarified a contractual receipt of Rs. 12,94,735 as business income. However, this explanation was deemed unsatisfactory without proper justification. The court found that these explanations were dismissed without adequate reasoning, indicating a lack of proper consideration by the assessing officer.

Decision: The court quashed the impugned order and remanded the matter for reconsideration by the Assessing Officer. It was directed that the officer should await the valuation report before proceeding with the reassessment. The writ petition was disposed of without any costs, and the connected miscellaneous petitions were closed as a result of the judgment.