2022 (10) TMI 1040 - AT - Income Tax

Long Term capital gain - valuation arrived by the Valuation Officer - HELD THAT - Section 142A of the I.T. Act titled as 'Estimate by Valuation Officer in certain cases'. This section prescribes that for the purpose for making an assessment, where an estimate of the value of any investment referred to in sections 69, 69A, 69B are required to be made, the A.O. may require the Valuation Officer to make an estimate of such value and report the same to A.O. Thus the scope of section 142A is limited in its span only to determine the value of investment in respect of certain assets, such as, bullion, jewellery, valuable articles etc. In this section as well there is no power vest with A.O. to seek the help of Valuation Officer in respect of determination of capital gain prescribed u/s 48 of the Act. Similarly Section 50C is titled as 'Special provision for full value of consideration in certain cases'. Meaning thereby this section is not applicable to each and every case of sale but this is to be applied in respect of those sales instances where consideration received is less than the value adopted by the stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer. In that situation, for the purpose of section 48 computation of capital gain, value so adopted by the stamp valuation authority be deemed to be the full value of the consideration received as a result of such transfer. Meaning thereby the substitution of full value of consideration is possible, if the disclosed consideration is less than the value determined for payment of stamp duty. It had also been prescribed that where the assessee claims that the value adopted by the stamp valuation authority exceeds their fair market value or the value so adopted by the stamp valuation authority is not decided by any other Court or High Court, then the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer under section 55A. Therefore the conclusion is that the Act has prescribed that a reference u/s 55A can be made for a limited purpose as prescribed under section 50C. As seen from records and the Paper Books filed in the present case, the Assessing Officer referred the transaction to the Valuation Officer, Sholapur u/s 142A on 09.11.2017 to ascertain the Fair Market Value as on the date of sale. The Valuation Officer determined the value of the property vide his report dated 14.08.2018. Based on the above report, the AO passed the assessment order on 28.09.2018 which is claimed by the assessee as barred by limitation u/s. 153(1) - The assessee s contention that the AO ought to have passed the assessment order under 153(1) on or before 31.12.2017 and then invoking subsection (15) of Section 155 and amend the assessment order within four years thereafter, is found to be justifiable. AO necessarily to pass the assessment order within the time limit as prescribed under section 153(1) of the Act which is in this case namely 31.12.2017. AO has wrongly referred the valuation of the immovable property u/s 142A of the Act which is not provided under the provisions of the Income Tax Act. However after receipt of the Valuation Report from the DVO, the A.O. passed the assessment order on 28.09.2008 which is clearly barred by limitation which is not sustainable in law. Therefore the assessment order is hereby invalid in law. Thus the ground no. 1 raised by the assessee is hereby allowed.

Summary

Issues Involved:
1. Whether the assessment order passed by the Assessing Officer (AO) is time-barred.
2. Whether the valuation of the immovable property for computing Long Term Capital Gain (LTCG) was correctly determined.
3. Justification of initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Time-barred Assessment Order:
The primary issue was whether the assessment order dated 28.09.2018 for the Assessment Year (AY) 2015-16 was time-barred. The assessee argued that the assessment should have been completed by 31.12.2017 as per Section 153(1) of the Income Tax Act. The AO had referred the valuation of the property to the Valuation Officer under Section 142A, which the assessee claimed was not applicable for computing capital gains under Section 48. The Tribunal referred to multiple case laws, including Sumit Khurana vs. ACIT and ITO vs. Chandrakant R. Patel, which clarified that Section 142A is applicable for estimating the value of investments under Sections 69, 69A, and 69B, and not for computing capital gains. The Tribunal concluded that the AO's reference to the Valuation Officer under Section 142A was incorrect, and the assessment order was indeed time-barred, thus invalidating it.

2. Valuation of Immovable Property for LTCG:
The second issue involved the correctness of the valuation of the immovable property sold by the assessee. The AO had adopted the valuation of Rs. 1,80,39,000 as determined by the Valuation Officer under Section 142A, instead of the sale consideration of Rs. 1,50,00,000 declared by the assessee. The Tribunal noted that the valuation under Section 142A was not applicable for computing capital gains and should have been referred under Section 50C, which deals with the valuation of property for stamp duty purposes. Since the assessment order itself was quashed as time-barred, this issue did not require further adjudication.

3. Initiation of Penalty Proceedings under Section 271(1)(c):
The third issue was the initiation of penalty proceedings under Section 271(1)(c) for alleged concealment of income or furnishing inaccurate particulars of income. Given that the primary assessment order was quashed as time-barred, the Tribunal did not find it necessary to adjudicate on the initiation of penalty proceedings, as the basis for such proceedings no longer existed.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, quashing the assessment order as time-barred and invalid. Consequently, the issues regarding the valuation of the property and initiation of penalty proceedings were rendered moot and did not require further adjudication. The order was pronounced in the open court on 19-10-2022.