2024 (6) TMI 595 - AT - Income Tax

Reopening of assessment u/s 147 - reopening of reason that he held a bonafide belief that investment made by the assessee towards the purchase of the subject property was sourced from her undisclosed income - HELD THAT - As observed by the AO that the investment in the subject property, as explained by the assessee based on corroborative documentary evidence was sourced from her disclosed sources. A.O. had though neither made any addition as regards the investment that was claimed by the assessee to have been made towards the subject property nor drawn any adverse inferences as regards her claim that the said investment was sourced from her disclosed sources. A.O. had made an independent addition u/s. 56(2)(vii)(b) of the Act., i.e. towards the difference between the value adopted by the Stamp valuation authority/Segment rate and purchase consideration of the subject property. We are of a strong conviction that now when the A.O. had not made any addition as regards the very basis, on which proceedings u/s. 147 of the Act were initiated in the case of the assessee, i.e. the source of the investment in the subject property, therefore, he was divested of his jurisdiction from making an independent addition u/s 56(2)(vii)(b) - difference between the stamp duty value/segment rate of the subject property fixed by the Sub-Registrar, Bilaspur at Rs. 43,03,700/- (supra) and the consideration for which the assessee had purchased the same. As the A.O. had traversed beyond the scope of his jurisdiction and had made an addition u/s. 56(2)(vii)(b) we are unable to concur with the view taken by the lower authorities. Accordingly, the order passed by the A.O u/s. 144 r.w.s. 147 is quashed for want of valid assumption of jurisdiction on his part. Thus, the revised ground of appeal No.2 is allowed..

Summary

Issues Involved:
1. Addition of Rs. 32,29,550/- u/s 56(2)(vii)(b) of the Income-tax Act, 1961.
2. Legality of the reassessment order.
3. Consideration of the value estimated by the Assistant Valuation Officer.

Summary:

1. Addition of Rs. 32,29,550/- u/s 56(2)(vii)(b):
The A.O. observed that the assessee purchased a property for Rs. 10,74,150/-, while the stamp duty value was Rs. 43,03,700/-. The A.O. added the difference of Rs. 32,29,550/- to the assessee's income u/s 56(2)(vii)(b) of the Act. The CIT(A) upheld this addition, rejecting the DVO's valuation of Rs. 15,08,510/- due to technical defects. The Tribunal found that the A.O. had not made any addition regarding the source of investment, which was the basis for reopening the case, thus invalidating the jurisdiction for making the addition u/s 56(2)(vii)(b).

2. Legality of the Reassessment Order:
The reassessment was initiated based on the belief that the assessee's investment in the property was from undisclosed income. However, the A.O. accepted the assessee's explanation that the investment was from disclosed sources. Since no addition was made on the basis of the reasons recorded for reopening, the Tribunal quashed the reassessment order for lack of valid jurisdiction.

3. Consideration of the Value Estimated by the Assistant Valuation Officer:
The CIT(A) did not adopt the DVO's valuation of Rs. 15,08,510/- due to perceived defects in the report. The Tribunal did not address the merits of this valuation, as the reassessment order itself was quashed.

Conclusion:
The Tribunal quashed the reassessment order dated 28.12.2019 for lack of valid jurisdiction, allowing the appeal of the assessee. The grounds of appeal regarding the merits of the case were left open, and the general ground was dismissed as not pressed. The order was pronounced on 28th May, 2024.