2018 (7) TMI 133 - AT - Income Tax

Adoption of value of property at the circle rates of the State Government as against value of sale consideration disclosed by the assessee - invoking Section 50C - absence of the DVO report - non reference of matter to DVO - Applicability of provisions of Section 153C - peririod of limitation - Held that - The courts time and again held that reference u/s 153C(2) is mandatory and the AO having failed to follow the provisions of the Act, he should not be given one more chance to refer the matter to the DVO. In the case of Manish Maheshwari vs. ACIT and Anr. (2007 (2) TMI 148 - SUPREME COURT OF INDIA), the provisions of Section 153C deserves that if the AO not recorded a satisfaction for the issue of notice 153C of the Act, the proceeding deserves to be quashed rather than giving the AO another chance to record proper reasons, when the AO not followed the procedure in law, the addition made deserves to be deleted. The lower authorities passed the order in summary manner without going into the merits of the case and analyzing the legal issue involved, the applicability of Section 50C(2) (a) of the Act, in a particular. AO has not found any adverse material evidence to indicate that assessee has received any excess money over and above the sale consideration, in the return of income. In the light of the peculiar facts of this case and in the absence of the DVO report, we are of the considered opinion that the assessee cannot put to travel up facing virtual trial to appear before the AO after three years to prove that the sale price declared by him was reasonable. Addition to be deleted - decided in favour of assessee

Summary

Issues:
1. Dispute over the fair market value of property sold by the assessee.
2. Application of Section 50C and adoption of circle rates by the Assessing Officer.
3. Failure of Assessing Officer to refer valuation to the Valuation Officer.
4. Legal obligation of Assessing Officer to follow Section 50C(2)(a) of the Act.
5. Consideration of fair market value and statutory duties of the Assessing Officer.

Issue 1: Dispute over Fair Market Value:
The appeal contested the adoption of the property's value at circle rates by the Assessing Officer instead of the actual sale consideration declared by the assessee. The appellant argued that the fair market value was misrepresented, leading to a higher valuation. The appellant's objection to the valuation was not adequately addressed, resulting in a discrepancy between the declared sale price and the assessed value.

Issue 2: Application of Section 50C and Circle Rates:
The Assessing Officer invoked Section 50C based on the circle rates, disregarding the actual sale consideration provided by the assessee. The appellant emphasized that the AO failed to refer the valuation to the Valuation Officer despite the appellant's request, as mandated by Section 50C(2)(a) of the Act. The dispute centered on the mandatory nature of such references when the valuation is contested.

Issue 3: Failure to Refer Valuation to Valuation Officer:
The appellant's objection to the valuation was not addressed adequately, and the AO did not refer the matter to the Valuation Officer as requested by the appellant. The failure to follow this procedure raised concerns about the fairness and accuracy of the valuation process.

Issue 4: Legal Obligation of Assessing Officer:
The appellant argued that the Assessing Officer was legally bound to refer the valuation to the Valuation Officer upon objection by the assessee, citing relevant case law. The failure to do so was considered a breach of statutory duty, impacting the fairness of the assessment process.

Issue 5: Fair Market Value and Statutory Duties:
The judgment highlighted the importance of considering the fair market value accurately and the statutory duties of the Assessing Officer in determining property valuations. The Assessing Officer's failure to obtain a valuation report from the DVO as required by law was deemed a critical deficiency that could not be rectified by granting a second opportunity.

In conclusion, the judgment favored the appellant, ruling that the Assessing Officer's adoption of circle rates without referring the valuation to the Valuation Officer was unjust. The failure to follow statutory provisions and consider the fair market value adequately led to the deletion of the addition. The judgment emphasized the importance of upholding legal obligations and ensuring a fair valuation process in tax assessments.