2008 (10) TMI 305 - AT - Income Tax

Summary

Issues Involved:

1. Validity of assessment initiated u/s 148 while normal assessment proceedings were pending.
2. Application of fair market value as reported by the DVO.
3. Disallowance of exemption claim u/s 54B based on the definition of "parent".

Summary:

Issue 1: Validity of Assessment Initiated u/s 148

The assessee contended that the CIT(A) erred in upholding the validity of the assessment initiated by assuming jurisdiction u/s 148 while normal assessment proceedings were still pending. The original assessment was completed on 26th March 2004 but was canceled on 8th Sept 2004 u/s 263. Notice u/s 142(1) was served on 11th Feb 2002, and the return was filed on 31st March 2004. Notice u/s 148 was also issued on the same date. The CIT(A) rejected this contention, noting that the original assessment u/s 143(3) was canceled u/s 263, and the order became final as the appeal was dismissed. The Tribunal upheld this view, stating that the assessee waived the right to challenge the reassessment proceedings at the relevant time, and thus, grounds 1 and 2 were rejected.

Issue 2: Application of Fair Market Value

The assessee argued that the CIT(A) erred in not applying the fair market value of Rs. 3,670 per Marla as reported by the DVO, which was binding on the AO. Initially, the AO considered Rs. 4,000 per Marla, but the first assessment accepted Rs. 9,200 per Marla. In proceedings u/s 263, the rate was Rs. 768 per Marla. The AO ignored the DVO's report of Rs. 3,670 per Marla and adopted Rs. 768 per Marla. The Tribunal held that u/s 55A of the IT Act and s. 16A(6) of the WT Act, the AO must complete the assessment in conformity with the DVO's estimate. Thus, the Tribunal directed the AO to adopt the fair market value of Rs. 3,670 per Marla, accepting ground 3.

Issue 3: Disallowance of Exemption Claim u/s 54B

The assessee claimed exemption u/s 54B, arguing that his late uncle, who had no child, should be considered his "parent." The CIT(A) disallowed the claim, stating that the uncle did not adopt the assessee or treat him as a lineal descendant, and the land was not used for agricultural purposes by the parent of the assessee. The Tribunal agreed, noting that the general definition of "parent" does not include an "uncle," and the land was not exploited for agricultural purposes by a parent of the assessee. Thus, the Tribunal upheld the CIT(A)'s order, rejecting ground 4.

Conclusion:

The appeal of the assessee was partly allowed, with the Tribunal directing the AO to adopt the DVO's fair market value but upholding the disallowance of the exemption claim u/s 54B.