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TMI Blog2020 (12) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... authority which has not been vested with the Assessing Officer. In the instant case, the Assessing Officer has rightly invoked the provisions of Section 148 by recording the reasons and by issue of notice to the proper person to which it was intended to. In the present case, there is an in advertent error in the notice issued by the AO reflecting only the PAN column of the notice mentions PAN of the HUF instead of the individual whereas the body of the notice and the address shows that the notice is clearly meant for the assessee himself. The provisions of Section 292B have been further clarified the Circular No. 179 of CBDT dated 30.09.1975 that this provision has been made to provide against purely technical objects without substance coming in the way of validity of the assessment proceedings. On going through the Reasons recorded, the address on the notice, the body of the notice issue of notice, we hold that the notice of the Assessing Officer wherein there is a mistake only in the PAN number, the notice is covered by the provisions of Section 292B. Capital gain - ascertaining the fair market value of a capital asset - Valuation made by the DVO - CIT (A) directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reference to Valuation Officer is dismissed. The process and method of determining the FMV is set aside with directions. - ITA No. 1532/Del/2017 - - - Dated:- 22-12-2020 - Sh. Kuldip Singh And Dr. B. R. R. Kumar JJ. Appellant by : Sh. Prem Lata Bansal, Sr. Adv. Respondent by : Ms. Rakhi Vimal, Sr. DR ORDER Dr. B. R. R. Kumar, J. The present appeal has been filed by the assessee against the order of the ld. CIT(A), Muzaffarnagar, dated 25.01.2017. 2. Following grounds have been raised by the assessee: 1. That the learned CIT(A) has grossly erred both in law and on facts in upholding the reassessment proceedings and confirming the additions so made by the Ld. Assessing Officer by disallowing the capital gains as claimed by the assessee. The addition made therein has been made with preconceived notions and such impugned order is without jurisdiction, liable to be quashed, as such. 2. That the impugned order so passed by the learned CIT(A) is bad in law as it is devoid of the acknowledgment of the fact that no valid notice u/s 148 of the Act was issued to the assessee prior to culmination of the reassessment proceedings and as such, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 3.3. That the Learned CIT(A) has without considering the provisions of section 55A has erred in approving the valuation report of DVO, which was not placed on records upto assessment and without considering the basis of valuation taken by DVO, who has applied the stamp valuation not the fair market value as on 01.04.1981. So the reference and consequential report of DVO is beyond the preview of section 55A. 3.4. That further the learned CIT(A) failed to appre4ciate the ratio laid down in ITO v Padarti Venkata Rama Chandra Rao [2016] 74 Taxmann.Com 195 in differentiating Cost of Acquisition u/s 55(2)(b) of the Act from Fair Market Value . 4. That the Learned CIT(A) has erred on facts that stamp valuation as adopted for capital gain under section 50C is of G.T. Road, Muzaffarnagar , while the fair market value is taken of Rampuri, Muzaffarnagar , so the valuation is considered for the place which is not on G.T. Road, Muzaffarnagar . 4.1. That the Learned CIT(A) has further erred by not appreciating that the value as taken by the assessee is based on valuation of report of Govt. Approved Valuer. 4.2. That the reference to the Valuation Officer can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 148 of the Income Tax Act, 1961 on 18.03.2014. 5. Further, notices u/s 143(2) and 142(1) were issued and duly served on the assessee. On the dates of hearing fixed on 11.12.2014, 17.12.2014, 29.12.2014, 12.01.2015, 15.01.2015, 02.02.2015, 19.02.2015 and 03.03.2015 nobody attended. The assessee has not filed any return incompliance to the notice. Hence, an opportunity was given to the assessee vide notice u/s 144 of the Act dated 13.03.2015. Then, in compliance to the notice issued, the assessee filed the ITR on 16.03.2015 declaring an income of ₹ 5,53,890/-. The assessee filed replies to the queries of the Assessing Officer on 19.03.2015 and on 20.03.2015. Finally, the assessment proceedings have been concluded on 31.03.2015 resulting in passing on an assessment order with the income determined of ₹ 1,41,79,759/- which includes long term capital gain of ₹ 1,40,33,973/- against the return income of ₹ 5,53,890/- which was inclusive of the capital gain of ₹ 4,08,107/- as determined by the assesse. Jurisdictional Issue Notice u/s 148: 6. The ld. AR argued eloquently and also has filed written submissions summing of the arguments alongwith t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) failed to quash the impugned order by overlooking that the Ld. Assessing Officer arbitrarily misused the powers given under the Act by further not providing the reasons recorded to the assessee bearing his PAN and thus, the Ld. Assessing Officer has grossly violated and misused the provisions of the statute and the assessment made thereto should be quashed as such. 12. The Ld. CIT(A) has erred in law and on facts in invoking the provisions of section 292B of the Act for rectifying the defects of the notice u/s 148 of the Act by wrongly interpreting the provisions and not considering the case laws assessee relied upon wherein the facts squarely covered assessee s case. 13. The assessment order-dated 31.03.2015 framed by the Assessing xxxxxxxxxxxxx individual capacity is bad-inlaw as no notice u/s 148 had been issued by the Assessing Officer to the assessee in his individual capacity. 14. The notice u/s 147 was issued by the Assessing Officer to the assessee in his HUF capacity as it reflected the PAN of assessee HUF as AAAHN8408F. 15. The notice u/s 147 of the Act clearly reflected that the Assessing Officer was requiring the return containing details of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections are not applicable to the facts of the present case. Section 292B is quoted as under: 292B - No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. 24. Section 292B saves only those notices in which there is an inadvertent error or an apparent error. It saves those notices which in substance and effect issued according to the interest and purpose of the Act. In the present case, there is no inadvertent error in the notice issued by the Assessing Officer. It specifically reflects the PAN of HUF. 7. The ld. DR argued that having received information by the Assessing Officer that the assessee has sold immovable property namely Modern Service Station, the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no need to dwell upon the issue of notice u/s 142 or the contents thereof, as the notice u/s 142(1) do not confer any jurisdiction to the Assessing Officer. Hence, taking cognizance of the notice u/s 142(1) or the contents of the notice will only deviate the main issue of invoking the jurisdiction. 10. We have perused the reasons recorded as to whom the escapement of income was attributed and also the notice issued by the AO. The reasons recorded by the AO on 14.03.2014 clearly mentions the name of the assessee as Shri Narendra Kumar Gill. There was no mention of HUF in the reasons. For the sake of ready reference, the scanned version of reasons recorded by the AO for issue of notice u/s 148 is reproduced below: Reason for issuing Notice u/s 148 of the Income Tax Act, 1961 Sh. Narendra Kumr Gill 861, Mangal Bhawan, South Bhopa Road, Muzaffarnagar, A.Y. 2009-10 Dated: 14.03.2014 As per information available with the undersigned, the assessee has sold an immovable property in the joint name of 3 persons situated at Moh. Rampuri, Muzafarnagar area 689.70 sq. mtr. During the financial years A.y. 2008-09 at a sale consideration at ₹ 50,00,000/- whereas stamp du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the instant case is different. Whereas in the instant case, the assessment was rightly reopened and rightly completed in the hands of the assessee for the correct year. 15. CIT Vs. K. Adinarayana Murty (1967) 65 ITR 607 (SC) held that under the scheme of the Income-tax Act the Individual and the 'Hindu undivided family' are treated as separate units of assessment and if a notice under s. 34 of the Act is wrongly issued to the assessee in the status of an 'individual' and not in the correct status of 'Hindu undivided family', the notice is illegal and ultra-vires and without jurisdiction. [391F-G] The Income-tax Officer was therefore justified in ignoring the first notice under s. 34 of the Act and the return filed by the assessee in response to that notice and consequently the assessment made by the Income-tax Officer pursuant to the second notice was a valid assessment. [391H] In this case the Hon ble Supreme Court reversed the judgment of the Hon ble High Court wherein the Hon ble High Court held that In reference, the High Court held that the first of the notices under s. 34 was not invalid in law and consequently the issue of the second notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, 1962, was vague and as such invalid. The vagueness of the said notice did not stand cured because the ITO at a later stage informed the assessee that he was to file his return in the status of HUF. The proceedings following such a vague and invalid notice also stand vitiated. In this view of the matter, it is not necessary for us to go into the various other grounds raised by the learned counsel for the assessee for questioning the validity of the proceedings under Section 147(a) of the I.T. Act, 1961. 17.1 While the above judgment clearly deals with the vagueness, in the case before us, the notice rather specifically mentioned that it is meant for individual . 18. P.N. Sasikumar and Others vs CIT (1987) 170 ITR 80 (Ker): In this case, the dispute is whether the notice has to be served on the AOP or an individual when the assessment was meant to be made in the hands of the AOP. The facts are not applicable to the instant case. 19. Dnyaneshwar Govind Kalbhor (HUF) vs ACIT (2016) 74 Taxmann.com 67 (Pune-Trib): In this case, the PAN Number appearing in the Notice under section 148 pertains to individual (Karta) and not the Noticee HUF. He next contended that a bare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice or specifying very clearly to whom the assessment is proposed. The wrong mention of PAN may utmost taken as a mistake but not a defect. There is no defect in exercise of jurisdiction only there is a mistake of typing a wrong PAN. When we examine whether this incorrect mention of PAN can make the entire notice invalid, we are guided by the entire facts and circumstances of the case. We are not persuaded by the arguments of the representative of the assessee to read HUF in the notice when the notice mentions clearly about the individual . In the printed notice, the word has been specifically mentioned in the handwriting by the AO indicates clear application of the mind of the Assessing Officer while issuing the notice. We cannot read into HUF when ि is written on the notice. The reasons recorded were not of HUF but of the assessee in individual capacity. Neither the word HUF nor the PAN of HUF mentioned in the reasons record, hence we cannot assume something which is not on record. 21. In Sardar Harbindersingh Sehgal v CIT, (227 ITR 512 Gau), the Hon ble Court held that the notice to be valid in view of section 292-B of the Act as it conformed to the substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return or notice etc. is invalid or to what extent it is invalid is unnecessary and counterproductive; if in substance and in effect return, notice or assessment is in conformity with or according to intent and purpose of the Act, the mistake defect or omission is to be ignored as per the underlining philosophy of Section 292B. There is a marked difference between want of basic or inherent jurisdiction and exercise of authority which has not been vested with the Assessing Officer. In the instant case, the Assessing Officer has rightly invoked the provisions of Section 148 by recording the reasons and by issue of notice to the proper person to which it was intended to. The Co-ordinate Bench of the Tribunal in ITA No. 3875/Mum/2005 in the case of NASE Asia Fund Ltd. held that 10. On a plain reading of this section, it is observed that the return of income, etc., shall not be considered as invalid merely by defect or omission in such return if it is in substance and effect in conformity with the intent and purpose of this Act. The rationale behind this section is that the return of income, assessment notice, summons or other proceedings should not be held to be invalid due to techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar No. 179 of CBDT dated 30.09.1975 that this provision has been made to provide against purely technical objects without substance coming in the way of validity of the assessment proceedings. In the case of CIT Vs Masonellan India Ltd. 245 ITR 568 (Ker.), the Hon ble Court held that Section 292B can be invoked if the action was in substance and in effect in conformity with the intent and purpose of the Act. The entire proposition arises from the established juris prudence that substance over form is the underlying philosophy of Section 292B. If in substance and in effect the notice is in conformity and with or according to the intent and purpose of the Income Tax Act, the mistake is to be ignored. Quoting a wrong PAN in the presence of numerous evidences to prove the intent and the purpose is a subject matter of Section 292B in the instant case. If the significance of word substance and effect is kept in mind then there is no justification to treat the notice as in valid. In the case of Shrish M. Dalvi 287 ITR 242 (Mum), the Hon ble Court observed that as long as the defect or mistake has not caused prejudice to the assessee, the mistake was protected under the umbrella of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of ₹ 50,00,000/-, share of the assessee being 37,50,000/- though the building of petrol pump and the machinery thereon was not sold by the assessee. The assessee also explained that the property was mortgaged with the bank and therefore, it was a distress sale. Since as a consequence of sale, loss was incurred by the assessee the same was not reflected in the return filed originally. 28. During the assessment proceeding, ITO Ward-1 (2), Muzaffarnagar sought the information regarding commercial rate of the property from Tehsildar Sadar Muzaffarnagar, who vide letter-dated 02.02.2015 stated that in the year 1981, rate of the commercial property were not available though the rate of property situated in Ram Puri Labdawala was ₹ 2000-3000 per sq yd. Tehsildar has also stated that on local inquiry it was informed that the market rate of the aforesaid area was approx 72,000 to 73,000 per sq. yd. Before the Assessing Officer, assessee had furnished valuation report of the registered valuer, reflecting the value of property at ₹ 32,39,000/- as on 01.04.1981, share of the assessee was 24,29,060/-. Registered valuer had taken the value of property at ₹ 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected the Assessing Officer to adopt the valuation as made by the DVO. He directed to take sale consideration at ₹ 24,500/- per sq. mtr. as per stamp duty valuation and to take cost of acquisition as on 01.04.1981 at ₹ 167.50 per sq mtr as taken by DVO and to compute the capital gain accordingly. The report of the DVO has been received during the proceedings before the ld. CIT(A), while the reference has been made during the assessment proceedings. 33. The crux of the issue are as under: 1. Area of the property 689.70 sq.mt. 2. Constructed area of the property 82 sq.mt. 3. Sale price of the property ₹ 50,00,000 4. Stamp duty value of the land ₹ 1,68,97,650 5. Value of the machinery and construction ₹ 24,96,000 6. Stamp duty value of the property (land and construction) ₹ 1,93,93,650 7. Stamp duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. There was difference in the description of the property as situated at GT Road, Muzaffarnagar and commercial property which was wrongly mentioned as Rampuri Mohalla, Muzaffarnagar. The valuation of the prices at Rampuri and GT Road varies to a great extent. 6. The ld. AR relied on the judgments in the case of CIT Vs Manjulaben M. Unadkat (2015) 55 Taxmann 62 (Guj.), Mr. Anjali Bharat Kabra Vs ITO, Ward-2(2), Jalgaon (2016) 75 Taxmann 5 (Pune-Trib.), CIT Vs Puja Prints (2014) 224 Taxmann 22/360 (Bom.). 36. The ld. DR relied on the orders of the authorities below which have been duly perused. 37. Heard the arguments of both the parties and perused the material available on record. 38. We deal first with the argument relating to invoking the jurisdiction by the AO u/s 55A. 39. The provisions of Section 55A before 01.07.2012 reads as under: 55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer- (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 20 of the Bill seeks to amend section 55A of the Income- tax Act relating to reference to valuation officer. The existing provisions contained in clause (a) of the aforesaid section 55A provide that an Assessing Officer with a view to ascertain the fair market value of a capital asset may refer the valuation of a capital asset to a Valuation Officer where, in his opinion the value of the asset as claimed by the assessee is less than its fair market value. It is proposed to amend the aforesaid clause so as to provide that reference may be made to the Valuation Officer for ascertaining the fair market value of a capital asset in case such value is at variance with its fair market value instead of making a reference only when such value is less than its fair market value. This amendment will take effect from 1st July, 2012. 43. Reference to a Valuation Officer [Section 55A]: In a case where the capital asset became the property of the tax payer (or of the previous owner) before 1st April, 1981, the tax payer has the option of substituting the cost of acquisition with the fair market value of the asset as on 1st April, 1981. Higher the fair market value adopted by the tax payer as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad, Muzaffarnagar between hospital to Roorkee Chungi. The ld. AR argued that the Assessing Officer has no reason to refer the property for valuation at the first instance. Further, it was argued that the registered valuer has determined the value as on 01.04.1981 @ ₹ 3,600. The Tahsildar Sadar has replied that the rates range from ₹ 20003000 per sq. yd. whereas the AO has taken ₹ 120/- per sq. yd. based on the report of the ADM Finance and the ld. CIT(A) has determined the price @ ₹ 167.50 per sq. mtr. based on the report of the DVO. It was argued that the reference itself is illegal and the valuation process is faulty. 46. The ld. DR relied on the orders of the authorities below. 47. Heard the arguments of both the parties and perused the material available on record. 48. In the preceding paragraph, we have already held that the Assessing Officer has rightly invoked the provisions of Section 55A. To ascertain the value of the capital asset during the assessment proceedings, the authorities need to determine the value by making reference to the Valuation Officer for ascertaining the correct value. The Assessing Officer has to primarily examine the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o built the service station and petrol pump earth filling was required for which no benefit has been given by the DVO. Similarly, it was contended that as there is low out flow of water because of the service station where washing of vehicles takes place and a front nala was required to be constructed. No benefit has been given for the cost of construction of the boundary wall. Similarly, the tube well room of Ht. 3.35 Mt., Size: 11.15 Smt. has been constructed and the benefit of the basic rates has been denied. It was argued that the land rates segment has not been properly applied. 52. We have gone through the valuation report in detail and the objection of the assessee. Further, we have also gone through the reports of Tahsildar Sadar, ADM Finance regarding the circle rates. While the report of the DVO is based on the prices given as per the circle rates notified by the ADM Finance, the value determined by the registered valuer was based on the report of the Tahsildar which was based on the local enquiries. There has been a dispute as to which segment price of Rampuri Mohalla has to be taken into consideration. The benefit of construction has not been adequately allowed. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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