2019 (2) TMI 284 - AT - Income Tax

Reopening of assessment - long term capital gain declared by the assessee by taking indexed cost of acquisition being 98% of the sale consideration was exorbitantly excessive when considered in the light of a much lower indexed cost of acquisition shown by one Sh. Kundanmal Chunilal Khivansara, another co-owner of the same property - Held that - The proceedings arising out of notice u/s.148 dated 30-03-2015 were dropped without going into merits. For all practical purposes, such proceedings ceased to exist on their dropping. While examining the validity or otherwise of the second notice, we cannot take cognizance of the first validly dropped proceedings without entering into the merits of the case. What we need to examine and evaluate is to test the validity of the initiation of re-assessment proceedings on the touchstone of the reasons recorded by the AO on 28-03-2016. Since the assessment order is based on the reasons as recorded pursuant to notice dated 28-03-2016, it would not be right to claim that the AO tried to take some benefit out of his own mistakes. As the notice dated 28-03-2016 was well within the stipulated time and the earlier proceedings u/s.148 had been validly dropped, we hold that there can be no case to argue that the AO initiated re-assessment proceedings in a wrong manner by taking advantage of his own mistakes. This contention is, therefore, repelled. Provisional assessment order - AO recorded that he was adopting FMV of the property as on 01-04- 1981 @ ₹ 400/- per sq.mtr as against the FMV taken by the assessee at ₹ 700/- per sq.mtr and the same was subject to the FMV as on 01-04-1981 to be determined by the DVO - Held that - We are not convinced with the argument tendered on behalf of the assessee. There is no doubt that the AO has recorded in his order that adoption of FMV of the property as on 01-04-1981 @ ₹ 400/- per sq. mtr shall be subject to the FMV as on 01-04-1981 to be determined by the DVO, but the fact of the matter is that the assessment got concluded with the adoption of FMV of the property as on 01-04-1981 @ ₹ 400/- per sq.mtr and the income was determined accordingly. Not only that, the AO also issued demand notice u/s.156. The issuance of demand notice coupled with the passing of assessment order amply proves that it was a final assessment order in all respects. AR fairly admitted that the AO did not revise this assessment order by any other order and further there was nothing to show that any adverse report of the DVO was received or considered. This shows that the assessment order passed by the AO, based on the cost of acquisition, being, FMV as on 01-04-1981 @ ₹ 400/- pre sq.mtr, derived from the same cost of acquisition as declared by another co-seller of the same property, cannot be considered as based on any report of the DVO etc. Reference made to DVO became academic because the AO never took cognizance of any report of the DVO, if at all received at any stage, after the conclusion of the assessment order. Adoption of FMV at ₹ 400/- per sq. mtr being FMV as on 01-04-1981 of the property - Held that - the report of registered valuer is based on no evidence as he has himself admitted that there is no comparable sale instance as on 01-04-1981. When the sole instant report of the Registered valuer is pitted against the Ready reckoner rate, the value adopted by another co-seller of the property at the same time and the value given by the Town Planning Department, there can be no prize for guessing that the value of ₹ 400 per sq.mtr. is more authentic and reliable. We thus hold that the adoption of rate of ₹ 400/-per sq.mtr by the authorities below as cost of acquisition, being, FMV as on 01-04-1981, is proper. Another argument advanced by the AR that the AO could not have validly made a reference to the DVO for determining FMV of the property as cost of acquisition as on 01-04-1981 has paled into insignificance as the AO has not gone with the report of DVO determining cost of acquisition of property as on 01-04- 1981. Rather he took the value declared by another co-seller of the same property itself, based on the Ready reckoner rate. These submissions are, therefore, rejected. Thus we are satisfied that the authorities below were justified in computing capital gains by taking cost of acquisition, being, FMV as on 01-04-1981 at ₹ 400/- per sq.mtr - Decided against assessee.

Summary

Issues Involved:
1. Validity of re-assessment proceedings.
2. Adoption of Fair Market Value (FMV) for property as on 1.4.1981.
3. Provisional nature of the assessment order.

Detailed Analysis:

1. Validity of Re-assessment Proceedings:
The first issue concerns the initiation of re-assessment proceedings. The assessee argued that the second notice under section 148 of the Income-Tax Act, 1961, dated 28.3.2016, was invalid as it was based on the same set of facts as the first notice dated 30.3.2015, which had been dropped by the ITO. The Tribunal noted that the initial re-assessment proceedings were dropped due to typographical mistakes and other infirmities in the first notice. The second notice was issued after recording proper reasons, which indicated that the assessee's indexed cost of acquisition was excessively high compared to another co-owner of the same property. The Tribunal held that the AO was justified in issuing the second notice as the first proceedings were dropped without any decision on the merits, and thus, it did not constitute a change of opinion. The Tribunal relied on precedent cases to support this view, stating that the AO can issue successive re-assessment notices as long as they are within the stipulated time and properly justified.

2. Adoption of Fair Market Value (FMV) for Property as on 1.4.1981:
The second issue involved the adoption of FMV for the property as on 1.4.1981. The assessee had adopted a value of ?700 per sq.mtr based on a Registered Valuer's report, whereas the AO adopted ?400 per sq.mtr, which was the value declared by another co-owner and supported by the Ready Reckoner rate and the Town Planning Department's valuation. The Tribunal found that the Registered Valuer's report was not based on comparable sale instances and was less reliable compared to the Ready Reckoner rate and the value adopted by another co-seller. Therefore, the Tribunal upheld the AO's adoption of ?400 per sq.mtr as the FMV.

3. Provisional Nature of the Assessment Order:
The third issue was whether the assessment order was provisional because the AO mentioned that the FMV adopted was subject to the determination by the DVO. The Tribunal clarified that the assessment was finalized with the adoption of ?400 per sq.mtr and a demand notice was issued. The Tribunal noted that the AO did not revise the assessment order or consider any adverse report from the DVO, making the assessment order final and not provisional. Therefore, this contention was rejected.

Conclusion:
The Tribunal dismissed the appeal, upholding the initiation of re-assessment proceedings, the adoption of ?400 per sq.mtr as the FMV for the property as on 1.4.1981, and rejecting the argument that the assessment order was provisional. The appeal was dismissed in its entirety.