2017 (7) TMI 213 - HC - Income Tax

Reopening of assessment - unaccounted investment in the purchase of the property - reference to the DVO - Payment of higher stamp duty - Held that - Firstly, there is no presumption in law that whenever the Stamp Duty authority collects duty higher than what would be payable on the declared sale consideration, it would automatically mean that the purchaser had paid a sum in excess of the reflected sale consideration. The statutory presumption flowing from section 50C of the Act is in relation to the capital gain to be assessed in the hands of the seller. This presumption is also rebuttable if the assessee disputes the stamp duty valuation. There cannot be an automatic presumption that a purchaser of the property had paid consideration higher than the sale consideration reflected in the sale deed, the moment the stamp valuation authority of the State Government demanded and the parties paid higher stamp duty. This may be one of the factors which may prompt the Assessing Officer to probe further. This leads us to the second reason viz. this information that the assessee had purchased an immovable property for a declared sale consideration of ₹ 60 lakhs and that at the time of registration of the sale deed, he was asked to pay additional stamp duty of ₹ 1,34,256/was very much before the Assessing Officer even during the original assessment as can be seen from the reasons recorded for reopening the assessment. The same information which was noticed by the Assessing Officer, but which did not prompt him to make any addition or make any other attempt to make addition except for calling of DVO s report, by itself cannot be the ground for reopening of the assessment. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice for reopening assessment for AY 2008-09 based on additional stamp duty paid and valuation report.

Analysis:
1. The petitioner challenged a notice issued by the Assessing Officer to reopen the assessment for AY 2008-09. The petitioner had purchased a bungalow at a sale consideration of ?60 lakhs, with additional stamp duty paid. The Assessing Officer referred to the District Valuation Officer (DVO) for the fair market value, which was estimated at ?1,71,94,072. The notice to reopen the assessment was based on the belief that the assessee undervalued the property.

2. The petitioner objected to the reopening, arguing that the jurisdictional facts were not established and the reference to the DVO was incompetent. The Revenue contended that the notice was within the four-year period, and the DVO report could be relied upon for reopening. Citing relevant case laws, the Revenue supported the validity of the notice based on the valuation report.

3. The Court found that the reference to the DVO was held invalid in a previous case, rendering the subsequent valuation report unreliable. The Court emphasized that the report's validity is tied to the validity of the reference itself. The Court distinguished a Supreme Court case on admissibility of seized documents in an illegal search scenario.

4. Regarding the additional stamp duty paid, the Court ruled that it alone cannot justify reopening the assessment. The statutory presumption under section 50C of the Act relates to capital gains for the seller, and higher stamp duty does not automatically imply excess payment by the purchaser. The Court noted that the Assessing Officer had the information during the original assessment but did not act on it, making it insufficient grounds for reopening.

5. Consequently, the Court quashed the notice for reopening the assessment, stating that the reasons provided were not substantial enough. The petition was allowed, and the matter was disposed of, emphasizing the lack of valid grounds for reassessment based on the additional stamp duty paid and the unreliable DVO report.