2022 (12) TMI 1260 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 50C - as argued AO relied only on the information received from third party without having any other material on record - HELD THAT - As submitted that the AO was not having any material other than an information that the assessee has transferred immovable property, hence the reason to believe of the AO for escapement of income was based on borrowed satisfaction. It is pertinent to note that the assessee had not filed the return of income for the year under consideration. Subsequently the AO received an information from the land Revenue authority that assessee has transferred immovable property. Thus, in the absence of the return of income, the AO had no alternate to verify the veracity of the information received from the land revenue authority whether the assessee has disclosed any income on the transfer of the property. Accordingly, we are of the considered opinion that it cannot be said that the reopening proceedings were initiated on borrowed satisfaction. Thus on this count, the assessee fails. No valid service of notice u/s 148 - We note that the notice under section 148 of the Act was issued well in time at the address available on record with the revenue Department. The fact that the assessment proceeding initiated was known to the assessee s father. Merely for the fact that the assessee left home without informing anyone to unknown location the notices issued and duly served on last given address cannot held as illegal/invalid service of notice. See ATULBHAI HIRALAL SHAH 2016 (6) TMI 564 - GUJARAT HIGH COURT . Thus we hold that the service of notice under section 148 of Act and other subsequent notices cannot held as invalid service of notice, for the reason that the revenue has issue notices on last known address of the assessee. Revenue cannot be held guilty for the fact the assessee has left that place without informing anyone for unknown location. Thus on this count also, the assessee fails. Capital gain - We note that the property was transferred by the assessee to his mother by way of sale deed no. 3852 dated 13-04-2006 wherein the consideration on the transfer of the property in dispute was duly recorded. There was nothing mention in the sale deed justifying the stand of the assessee i.e. the transfer was in the nature of the gift or without consideration. Accordingly, we hold that there was a valid transfer of the property in the given facts and circumstances within the meaning of the provisions of section 45 of the Act. See PARAMJIT SINGH VERSUS INCOME-TAX OFFICER 2010 (2) TMI 262 - PUNJAB HARYANA HIGH COURT Thus remain no ambiguity that the impugned property transferred by the assessee to his mother for consideration of Rs. 5 Lakh is liable to be brought under the ambit of capital gain. However, the question arise for determination of sales consideration. As the AO has taken consideration as per section 50C of the Act whereas the AR before us has challenged the value adopted by the AO and subsequently sustained by the learned CIT(A). In the interest of justice and fair play, we set aside the issue to the file of the AO to refer the matter to the DVO to determine the value of the property in pursuance to the provisions of section 50C of the Act. Hence the ground of appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Validity of notice issued under section 148 of the Income Tax Act, 1961.
2. Validity of assessment framed under section 147 of the Act.
3. Addition under section 50C of the Act.
4. Determination of the sale consideration for capital gains tax.

Detailed Analysis:

1. Validity of Notice Issued Under Section 148:
The assessee challenged the validity of the notice issued under section 148 on the grounds that it was based on "borrowed satisfaction" and was not validly served. The Tribunal noted that the assessee had not filed a return of income for the relevant year. The Assessing Officer (AO) had received information from the land revenue authority about the transfer of immovable property by the assessee. Since the AO had no return of income to verify the information, the Tribunal held that the initiation of proceedings was not based on borrowed satisfaction. Regarding the service of notice, the Tribunal found that the notice was issued to the last known address and was known to the assessee's father. The Tribunal concluded that the service of notice was valid, rejecting the assessee's contention.

2. Validity of Assessment Framed Under Section 147:
The Tribunal upheld the assessment framed under section 147, noting that the AO had valid reasons to believe that income had escaped assessment based on the information received about the property transfer. The Tribunal found that the AO had followed due process and issued notices as required.

3. Addition Under Section 50C of the Act:
The assessee argued that the transfer of property was a family arrangement and should not attract capital gains tax. However, the Tribunal observed that the property was transferred through a registered sale deed, with consideration received by cheque and cash. The Tribunal held that such a transfer could not be considered a family arrangement exempt from capital gains tax. The Tribunal relied on the provisions of section 50C, which mandates the adoption of the stamp duty valuation as the sale consideration for capital gains purposes.

4. Determination of the Sale Consideration for Capital Gains Tax:
The Tribunal directed the AO to recompute the capital gains by considering the indexed cost of acquisition. The Tribunal acknowledged the assessee's contention and found merit in allowing the indexed cost of acquisition. The Tribunal instructed the AO to refer the matter to the District Valuation Officer (DVO) to determine the fair market value of the property as per section 50C.

Conclusion:
The Tribunal partly allowed the appeal, upholding the validity of the notice under section 148 and the assessment under section 147. The Tribunal confirmed the applicability of section 50C but directed the AO to refer the valuation issue to the DVO for a fair determination of the sale consideration for capital gains tax. The indexed cost of acquisition was also to be considered in the recomputation of capital gains.

Order Pronounced:
The appeal of the assessee was partly allowed, with directions for recomputation of capital gains by considering the indexed cost of acquisition and referring the valuation to the DVO. The order was pronounced on 16/11/2022 at Ahmedabad.