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2020 (12) TMI 931 - AT - Income TaxReopening of assessment u/s 147 - Notice issued by eligible jurisdictional officer - assessee had challenged the notice u/s 148 issued by the ITO, Ward 2(3), Jaipur while the case of the assessee falls under ITO Ward 2(2), Jaipur - HELD THAT - After going through the records, we are in concurrence with the findings recorded by the ld. CIT(A) as we also noticed that the assessee himself had filed original return of income under ITO Ward-2(3), Jaipur which is apparent from the acknowledgement of return of income filed by the assessee. Therefore, the assessee himself submitted their jurisdiction to ITO Ward-2(3), Jaipur by admitting that ITO Ward-2(3), Jaipur was having jurisdiction over the assessee. As noticed that ITO Ward- 2(3), Jaipur had subsequently transferred the case to ITO Ward-2(2), Jaipur who completed the scrutiny assessment U/s 147/143(3) of the Act and even during the assessment proceedings, the assessee had never challenged the jurisdiction of the A.O. and rather participated in the proceedings. As per the provisions of Section 124(3) of the Act, it has categorically been mentioned that no person shall be entitled to call in question the jurisdiction of an A.O., where he had made a return under Sub-Section (1) of Section 139, after expiry of one month from the date on which he was served with a notice under sub-Section (2) of Section 142 or after completion of assessment whichever is earlier. See BRITISH INDIA CORPORATION LTD. 2001 (1) TMI 914 - ALLAHABAD HIGH COURT Even as per the provisions of Section 124(3) of the Act, the issue of jurisdiction cannot be challenged after completion of assessment and as per the facts of the present case, the assessee himself had filed return of income with ITO Ward -2(3), Jaipur who had recorded the reasons for reopening, therefore, it cannot be held that reasons were recorded by wrong jurisdictional officer. - Decided against assessee. Reasons recorded in the present case was by non-jurisdictional A.O., therefore, the said A.O. had no jurisdiction upon the assessee - We found that the assessee had declared capital gain income in return which clearly shows that there is non-application of mind on the part of the A.O. while recording the reasons as he did not consider the return furnished by the assessee wherein capital gain income has been shown. Thus, non-existing facts/basis does not lead to formation of belief u/s 147 which is a condition precedent U/s 147 of the Act as there is no rational nexus of material/information available with formation of belief. Thus, according to us, no valid belief can be formed on the basis of incorrect/non-existing facts U/s 147 of the Act otherwise it would be then difficult to interpret what weighed with the mind of the A.O. while recording reasons as the reasons recorded cannot be modified or supplemented by further explanation. Therefore, the findings recorded by the ld. CIT(A) supporting the reasons on the ground of sufficiency of reasons, according to us, are misconceived and cannot be sustained. Assumption of jurisdiction U/s 147 of the Act by the A.O. is not tenable. Capital gain computation - Additions u/s 50C - CIT-A taking cognizance of the report of the DVO in considering the valuation made by the DVO in its report - HELD THAT - A.O. passed provisional order of assessment after making reference to the DVO which according to us is not allowed as per the scheme of the Act as there is no provision in the law to pass provisional assessment order subject to receipt of DVO report. Although, the ld DR has submitted that by making reference U/s 50C(2)(b) of the Act while passing the order of assessment, the limitation U/s 153 of the Act has been extended by the A.O. but, we are not inclined to accept the argument of ld. DR as Section 153 specifically does not exclude period of reference u/s 50C of the Act. Thus, we are of the view that what cannot be done directly cannot be done indirectly. Ld DR could not bring on record any contrary decision or position of law to our notice to counter the judgment relied upon by the ld. AR of Hon ble Gujrat High Court in the case of Darshan Buildcon vs ITO 2019 (1) TMI 956 - GUJARAT HIGH COURT therefore we hold that the assessment order passed by the A.O. and upheld by the ld. CIT(A) is liable to be set aside as there cannot be any provisional assessment order under the income tax law. Upholding of addition u/s 50C - DVO had made no attempt except to adopt the stamp valuation as on the date of sale deed. The said DVO report does not determine fair value U/s 50C of the Act. The DVO has merely accepted the stamp value given by the sub-registrar as on the date of sale deed, without considering and disposing the objections of the assessee that properties were disputed and prior agreement of sales were executed by the assessee. No fair value has been determined in DVO report, no comparable sale instances relied upon, no correct method applied to determine fair value, no adequate opportunity of being heard given. The information/documents relied upon by the ld. DVO have not been confronted and/or provided to the assessee. Further the very purpose of reference is defeated if stamp valuation is mechanically applied in valuation proceedings. CIT(A) was not justified by simply resorting to DVO report which does not determine fair value as envisaged under the law. Doubting on existence of agreement to sell is also not justified as no addition can be sustained merely on suspicion. The fact that the assessee received advance payment of ₹ 11.00 lacs in F.Y. 2004-05 and 2005-06 is undisputed. However, merely receipt of advance payment in cash and doubt on reliability of agreement to sell without any valid basis does not justify addition. Receipt of consideration in cash mode and not through cheque - Requirement of receipt of consideration in cheque only was made effective later on by inserting proviso to Section 50C - However, at the time of execution of agreement to sell, there was no such restriction of receiving cash consideration against agreement to sell, thus, having regard to the decision of the Coordinate Bench in the case of Indexone Tradecone (P.) Ltd 2018 (9) TMI 1231 - ITAT JAIPUR the said basis is not a valid basis to deny benefit of taking stamp duty valuation considering DLC rates of FY 2004-05 for the purpose of section 50C of the Act. Therefore, the findings of ld. CIT(A) are set aside
Issues Involved:
1. Validity of the jurisdiction of the Assessing Officer (AO) issuing the notice under Section 148. 2. Validity of the proceedings under Section 147 of the Income Tax Act. 3. Legitimacy of the addition under Section 50C of the Income Tax Act. 4. Consideration of the valuation report by the District Valuation Officer (DVO). 5. Levy of interest under Sections 234A, 234B, and 234C of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Validity of the Jurisdiction of the Assessing Officer (AO) Issuing the Notice Under Section 148: The assessee argued that the notice under Section 148 was issued by ITO Ward 2(3), Jaipur, who had no jurisdiction over the assessee, as the jurisdiction was with ITO Ward 2(2), Jaipur. The Tribunal noted that the assessee had originally filed the return under ITO Ward 2(3), Jaipur, and participated in proceedings without challenging jurisdiction. As per Section 124(3) of the Act, jurisdictional issues cannot be challenged after the completion of the assessment. The Tribunal upheld the CIT(A)’s finding that the notice under Section 148 was validly issued by the jurisdictional officer. 2. Validity of the Proceedings Under Section 147 of the Income Tax Act: The Tribunal examined whether the AO had valid "reasons to believe" for initiating proceedings under Section 147. The AO's reasons were based on the belief that the assessee had not declared capital gains. However, the Tribunal found that the assessee had indeed declared capital gains in the return, indicating non-application of mind by the AO. The Tribunal held that the reasons recorded by the AO were based on incorrect facts and thus invalidated the proceedings under Section 147. The Tribunal quashed the proceedings initiated under Section 147. 3. Legitimacy of the Addition Under Section 50C of the Income Tax Act: The assessee contended that the sale consideration should be based on the agreement to sell executed in FY 2004-05, not the sale deeds executed in FY 2009-10. The Tribunal noted that the AO had made a provisional assessment subject to the DVO’s report, which is not permissible under the law. The Tribunal referred to the Gujarat High Court's decision in Darshan Buildcon vs. ITO, which held that provisional assessments are not allowed. The Tribunal set aside the assessment order and directed the AO to calculate capital gains based on the stamp value prevailing in FY 2004-05. 4. Consideration of the Valuation Report by the District Valuation Officer (DVO): The Tribunal found that the DVO’s report merely adopted the stamp valuation without determining the fair value or considering the objections raised by the assessee. The Tribunal held that the DVO’s report was not appropriate for justifying the addition under Section 50C. The Tribunal directed the AO to consider the stamp value as of FY 2004-05 for calculating capital gains. 5. Levy of Interest Under Sections 234A, 234B, and 234C of the Income Tax Act: The Tribunal noted that the issue of interest under Sections 234A, 234B, and 234C was consequential in nature and did not require separate adjudication. Conclusion: The Tribunal allowed the appeal in part, quashing the proceedings under Section 147 and setting aside the addition under Section 50C. The AO was directed to calculate capital gains based on the stamp value of FY 2004-05. The issue of interest under Sections 234A, 234B, and 234C was deemed consequential.
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