Case Law Details
Mr. Jitindar Singh Chadha Vs Pr. CIT (ITAT Delhi)
Conclusion: Where AO was satisfied from the valuation report of the Registered Valuer (approved by the Govt.) for the valuation of property furnished by assessee, he was not mandatory required to refer the matter for valuation of property to DVO.
Held: It is well settled that the provisions of Section 55A provides that AO may refer the matter to DVO for valuation of the property. The use of the word “may” makes it discretionary so it is not mandatory. In the present case, it appeared that AO was satisfied from the valuation of the property, he did not refer the matter to DVO and accepted the valuation report of the Registered Valuer (approved by the Govt.) which was furnished by assessee. Therefore, it could be said that AO had taken one of the possible view in this case, therefore, it could not be said that the assessment order passed was erroneous or prejudicial to the interest of the revenue. Keeping in view the ratio laid down in the case of CIT Vs Greenworld Corporation, it was concluded that AO passed the assessment order after application of mind and considered the revised computation of long term capital gain furnished by assessee was well as the Valuation Report of Government Approved, Registered Valuer, therefore, he had taken a possible view. Thus, CIT was not justified in interfering only on the basis of valuation report obtained for the subsequent assessment year i.e. assessment year 2015-16. Moreover, CIT passed the assessment order himself which he should not have passed in view of the provision of the Income Tax Act which provided that only AO was authorized to pass the assessment order and not CIT.
FULL TEXT OF THE ITAT JUDGMENT
This is an appeal by the assessee against the order dated 31.03.2018 of ld. Pr. CIT-18, New Delhi.
2. Following grounds have been raised in this appeal:
“i) Initiating the proceedings U/s 263 of the Income Tax Act, 1961, as the original order was passed by the AO after her due application of mind.
ii) Appreciating the scale of verification and enquiries as required under law and the same had been done by the AO while passing the order U/s 143(3) of the Act.
iii) Considering the order of the Assessing Officer as erroneous in so far as it is prejudicial to the interest of the revenue merely on the ground that the AO has not formed his opinion as formed by her successor AO i.e. successor AO had referred the matter to Valuation Officer U/s 55A for AY 2015-16.
iv) Violating the settled principle that “where the AO adopted one of the courses permissible in law or where two views are possible and he has taken one view with which the Commissioner does not agree, it cannot be treated that the assessment order is erroneous so as to be prejudicial to the interest of revenue unless the view taken by AO is unsustainable in law.” And thereon influencing the discretionary power given U/s 55A and independent state of mind of AO while taking different opinion and that too solely on the basis of opinion of successor AO.
v) In considering that the order of AO is erroneous, as the AO has not exercised his discretionary powers of referring the matter to valuation officer U/s 55A while ignoring the other factual matrix for the relevant Assessment Year.
vi) Ignoring the valuation report of the registered valuer which is on record of the ACIT.
vii) Upholding the action of the successor AO for AY 2015-16 of accepting the valuation report of DVO in which the Land at Vasant Vihar was compared with the land at Safdarjung Enclave while determining the Fair Market Value as at 01.04.1981.
viii) Enhancing the assessment by making an addition of Rs. 5021603/- to the valuation of land and building for capital gains by valuing land at Rs. 9994471/- and building at Rs. 2843976/- as on 01.04.1981 as against Rs. 13642650/- and Rs. 4217400/- respectively, valued by the Assessee based on a valuation report by a registered valuer.
ix) Applying the Expl. 2 to Section 263 of the Act, 1961 for the relevant Assessment Year, although the same has been effective w.e.f. 01.06.2015.
x) Making an “Assessment Order” in the above said case which power vest only with the Assessing Officer under the Income Tax Act.
xi) Not referring the matter to the Assessing Officer to complete the proceedings in accordance with law after giving assessee an opportunity to appear before him.
(B) Without prejudice above, the order U/s 263 dated 31.03.2018 was passed in haste as no reasonable opportunity of being heard was given to the Appellant because the Show Cause Notice was received by the Appellant on 26.03.2018 fixing the date of hearing for the matter on 28.03.2018 and the matter has been last adjourned to 29.03.2018 i.e. on gazette holiday at the adjourned application dated 28.03.2018 of the Counsel of the Appellant. The proposal U/s 263 was received by the CIT on 04.01.2018.
(C) The Assessee craves leave to add, Alter or amend the grounds of appeal at or before the hearing.”
3. From the above grounds, it is gathered that the grievance of the assessee relates to the initiation of proceedings u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act) by the Pr. CIT against the original assessment order dated 30.11.2015 passed by the AO.
4. Facts of the case in brief are that the assessee filed his return of income on 30.07.2013 declaring an income ofRs.4,28,18,050/-. Later on, the case was selected for scrutiny. The AO mentioned that the assessee attended from time to time and the case was discussed with the authorized representative of the assessee. During the course of assessment proceedings, the AO noticed that the assessee had entered into a developer agreement with M/s Uppal Housing Finance Pvt. Ltd. for Property No. B8/6, Vasant Vihar, New Delhi and consequently derived long term capital gain. The assessee filed revised computation as follows:
5. The AO did not find merit in the above submissions of the assessee and observed that free hold charges of Rs.8,23,600/- were well known to the assessee, much before the filing of the return of income which was originally filed on 30.07.2013 and the assessee could have included the same in the original return or subsequently in his revised return, however, the assessee failed to do the same. The AO rejected the claim of the assessee and assessed the income at Rs.4,28,18,052/-. Thereafter, the successor AO made a proposal to the ld. Pr. CIT for remedial action u/s 263 of the Act.
6. The ld. Pr. CIT observed that during the assessment proceedings for the assessment year 2015-16, to ascertain the true value of the property, the matter was referred to the District Valuation Officer who submitted the report on 15.12.2017 which provided variance in the valuation of the report submitted by the assessee and on that basis an addition of Rs.12,73,785/- was made for the assessment year 2015-16. The ld. Pr. CIT also observed that the assessee had sold basement and ground floor for Rs.3.50 crores and second floor of Rs.11.90 crores during the period relevant to the assessment year under consideration. He also pointed out that the assessment for the assessment year 2013-14 was completed on 30.11.2015 and the case was not referred to the DVO. Therefore, this fact that the value of property had been taken more than its value, was not available before the AO. Thus, the returned income of the assessee was accepted and in the light of above facts, the AO had referred this case. The ld. Pr. CIT observed that he had considered the material placed before him and had came to the conclusion that the assessment order passed for the assessment year 2013-14 was erroneous so far as it is prejudicial to the interest of the revenue. He asked the assessee to show-cause as to why the order of the AO be not revised as it was erroneous so far as it was prejudicial to the interest of the revenue and that an addition amounting to Rs.50,21,603/- be not made to the returned income of the assessee. The ld. Pr. CIT further observed that the assessee failed to submit any reply/objection to the above said show-cause and asked for the adjournment by his letter dated 27.03.2017, thereafter, no compliance was made by the assessee on the adjourned date i.e. 29.03.2017. The ld. Pr. CIT directed the AO to make an addition of Rs.50,21,603/- and to assess the income at Rs.4,78,39,660/-.
7. Now the assessee is in appeal. The ld. Counsel for the assessee submitted that the assessee had entered into a collaboration agreement with M/s Uppal Housing Finance Pvt. Ltd. on 25.01.2010 whereby the assessee was to receive Rs.3.5 crores alongwith First, Second and Third Floor while the basement and ground floor would belong to M/s Uppal Housing Pvt. Ltd. It was further submitted that during the year relevant to assessment year 2013-14, the assessee had sold basement and ground floor to M/s Uppal Housing Pvt. Ltd., Second & Third Floor had been sold in assessment year 2014-15 and the First Floor was sold in assessment year 2015-16. It was pointed out that the assessee obtained valuation report of the said property from registered valuer M/s Paramjeet Associates to ascertain the fair market value of the land and structure as on 01.04.1981 for the purpose of Capital Gain Tax. It was also stated that the assessment was framed u/s 143(3) of the Act. Thereafter, the ld. Pr. CIT passed the assessment order on 31.03.2018 and assessed the income at Rs.4,78,39,660/- after making addition of Rs.50,21,603/-. It was submitted that only and only an Assessing Officer has powers to pass the assessment order under the relevant provisions of the Income Tax and to make an assessment or reassessment accordingly. Whereas in the present case, the ld. Pr. CIT had passed the assessment order and assessed the income of the assessee. It was stated that the assessment order passed by the ld. Pr. CIT was a non-jurisdictional assessment order and the department cannot take shelter of Section 292B of the Act, since it was not a mere mistake/defect or omission as the assessment order was not inconformity with or not in accordance to the intent and purpose of the Act. It was contended that the ld. Pr. CIT had treated the original order erroneous and made the assessment on the following basis:
“This fact that the value of property has been taken more than its value, was not available before the AO”.
However, the aforesaid finding was first time stated/recorded in the order of Pr. CIT and was completely absent in the show-cause notice issued u/s 263 of the Act. Therefore, it was clearly an afterthought which should not be acceptable in the eyes of law and further the ld. Pr. CIT was not aware with the actual facts of the matter neither at the time of issuing notice nor at the time of concluding the proceedings u/s 263 of the Act.
8. The ld. Counsel for the assessee stated that the provisions of Section 263 of the Act as on 01.04.2013 provides that the Commissioner may call for and examine the record of any proceeding under this Act but not the Pr. CIT as the powers to Pr. CIT had been given with retrospective effect from 01.06.2013 whereas the case of the assessee was for the assessment year 2013-14 and the ld. Pr. CIT was not an Income Tax Authority u/s 116 of the Act as on 01.04.2013.
9. On merit of the case, the ld. Counsel for the assessee stated that the order passed by the AO u/s 143(3) of the Act was neither erroneous nor prejudicial to the interest of the revenue because the AO had taken a possible view after due application of mind, he examined the issue on merits, correctly appreciated the facts, law and had come to a reasoned opinion that the value of the asset as claimed by the assessee was not at variance with the fair market value and therefore, he had not exercised his discretionary power o referring the valuation of asset to valuation officer u/s 55A of the Act and concluded that no addition was required to be made to the income of the assessee. It was further stated that the AO had carried out the assessment primarily to verify issue of capital gain offered by the assessee as the major income was capital gain income in the ITR/computation of the relevant year and that the due application of mind by the AO could not have been doubted as he on the one hand, rejected the revised computation of income of the assessee and on the other hand, upheld the valuation of the subjected asset after following due procedure and verifying the value of capital asset as given by the registered valuer and therefore, following one of the two course permissible in law, he decided not to refer the matter to the valuation officer u/s 55A of the Act. It was also stated that the assessee had filed detailed reply on the capital gain earned vide letter dated 06.07.2015 which also included the valuation report, land allotment documents, transfer and freehold documents alongwith copy of capital gain account with SBI. The same was considered by the AO thoroughly before allowing some part of the claim and disallowing the other. A reference was made to para 2.2 of the assessment order passed u/s 143(3) of the Act. It was contended that the AO had passed the speaking order after applying his mind on the valuation report submitted by the assessee and approved/upheld the same, as the AO had reproduced/mentioned the cost of land and structure in the body of the assessment order which was the same as given in the valuation report of the assessee. A reference was made to para 2.1 of the assessment order. It was contended that the assessment order passed by the AO could not have been treated as erroneous order or prejudicial to the interest of the revenue, when the AO had adopted one of two courses permissible in law. It was stated that even if, it is assumed that there was variation in the value adopted by the assessee for the asset and the fair market value of the asset, even then the law provides the discretionary power on the AO whether to refer the matter to valuation officer or not, depending upon his judgment on the given facts/matter. A reference was made to the provisions contended in Section 55A of the Act. It was contended that the ld. Pr. CIT had issued show-cause notice without appreciating the merits/facts as a whole and without looking/commenting anything on the accuracy of the valuation report obtained u/s 55A of the Act during the assessment year 2015-16 and without speaking on the objections filed by the assessee on the said valuation report and passed the impugned order in haste by not giving reasonable/proper opportunity to the assessee to put forward his submission on the same. Therefore, it is a clear case of substituting the views borrowed from the successor AO without that of the AO and the that the Pr. CIT had not shown that the view taken by the AO was unsustainable in law, he had not made any enquiry/verification to bring any material/other valuationreport (of nearby assets to subjected asset of the assessee) on record to substantiate his inferences. Therefore, the order of ld. Pr. CIT was erroneous as it was passed in gross violation of Principles of natural justice. It was further submitted that the ld. Pr. CIT had completed the proceedings in haste as no reasonable time was given to the assessee to put forth his submission which is evident from the details mentioned below:
| SI. No. | Particulars | Section | Date |
| 1. | Assessment Order; AY 13-14 | 143 (3) | 30.11.2015 |
| 2. | Assessment Order; AY 15-16 | 143 (3) | 24.12.2017 |
| 3. | Show Cause Notice issued | 263 | 25.03.2018 |
| 4. | Show Cause Notice received | 263 | 26.03.2018 |
| 5. | Date Fixed for Hearing in SCN | 263 | 28.03.2018 |
| 6. | Hearing LAST Adjourned on Gazetted Holiday (Mahavir Jayanti) | 263 | 29.03.2018 |
| 7. | Order Passed | 263 | 31.03.2018 |
10. It was stated that the aforesaid events clearly shows the impugned state of mind of the ld. Pr. CIT as he had pre-mind set to pass the order anyhow and started the proceedings very late as prima facie shown from the above stated events. It was further stated that the ld. Pr. CIT completed the proceedings without appreciating the real facts, solely on single aspect i.e. assessment order for the assessment year 2015-16 and majorly without giving sufficient opportunity to the assessee. Therefore, the impugned order passed by the ld. Pr. CIT deserves to be set aside. The reliance was placed on the following case laws:
> Vipul T. Joshi vs. DCIT (50 CCH 0032) [Ahd. Tribl]
> Antala Sanjay Kumar Ravji Bhai vs. CIT (135 ITD 0506) [Rajkot Trib]
> Roshan Lai Vegetable Products (P) Ltd. vs. ITO (51 SOT 0001) [Asr. Trib]
> Malabar Industrial Co. Ltd. vs. CIT (159 CTR 0001) [SC]
> CIT and Another vs. Saravana Developers (289 CTR 0550) [Karl]
> Indus Best Hospitality Realtors (P) Ltd. vs. PCIT (52 CCH 0565) [Mum Trib]
> CIT vs. Sunbeam Auto Ltd. {(2011) 332 ITR 0167)(Del)
> DIT vs. Jyoti Foundation {(2013.) 357 ITR 0388) (Del)
> CIT vs. ASHISH RAJPAL {(2010) 320 ITR 0674) (Del)
> CIT vs. Vikas Polymers {(2012) 341 ITR 0537) (Del)
> CIT vs. ANIL KUMAR SHARMA {(2011) 335 ITR 0083) (Del.)
> Chroma Business Ltd. vs. DCIT {82 TTJ 0540) [Del]
> CIT vs. Fine Jewellery (India) Ltd. {372 ITR 0303) [Mum]
> CIT vs. Nirma Chemical Works (P) Ltd. {222 CTR 0593) [Guj]
> NARAYAN TATU RANE vs. ITO {(2016) 47 CCH 0309) {ITAT Bombay Tribunal (B))
> CIT vs. Arvind Jewellers {(2003) 259 ITR 0502)( Guj)
> Jagjit Industries ltd. vs. ACIT {(1997) 60 ITD 0295) [Del. Trib]
> CIT vs. Gabriel India Ltd. {(1993) 203 ITR 0108) (Bom)
> Torrent Pharmaceuticals Ltd. vs. DCIT {164/ Ahd/ 2 0 1 8 ) dated 08.08.2018 [Ahd ITAT]
> CIT vs. DLF Ltd. {350 ITR 0555) [Del]
> CIT vs. J.L. Morrison (India) Ltd. {270 CTR 0405) [Kol]
> Sree Alankar vs. Pr. CIT {108/ CTK/ 2 0 1 8 dated 12.09.208) [ITAT Cuttack]
> Braham Dev Gupta vs. Pr. CIT {49 CCH 0383) [Del Trib]
> Ambuja Cements Ltd. vs. CIT {51 CCH 0325) [Mum Trib]
> CIT vs. ASHWANI GUPTA {(2010) 322 ITR 0396) (Del)
> CIT vs. OASIS HOSPITALITIES (P) LTD. {(2011 333 ITR 0119) [Del]
> Kishinchand Chellaram vs. CIT {(1980) 125 ITR 0713) (SC)
> Kannan vs. State of Tamil Nadu {201 ITR 0205) [Chen]
> Fancy Dyeing & Printing Works vs. ITO {64 CTR 0239) [Kol]
> CIT vs. Prem Syndicate {31 CTR 0301) [MP]
> CIT vs. Amitabh Bachchan {286 CTR 0113) [SC]
> Mehtar and another vs. The Collector, Durg and Others {AIR 1975 MP 46) [MP-HC]
> TLG India (P) Ltd. vs. JCIT {W.P 2764/2018)
> SBI vs. ACIT {W.P 271 & 278 of 2018)
> CIT vs. Scindia Steam Navigation Co. Ltd. {42 ITR 0589) [SC]
> Karimtharuvi Tea Estate Ltd. vs. State of Kerala {60 ITR 0262) [SC]
> CIT vs. Indian Motor Transport Co. (P) Ltd. & ANR. {141 ITR 0448) [P & H]
> Pr. CIT vs. JIS Foundation {ITAT 209 of 2016) [Kol]
> ITO vs. DG Housing Projects Ltd. {343 ITR 0329) [Del]
> CIT vs. Greenworld Corporation {314 ITR 0081) [SC]
> CIT vs. Bhagat Shyam & Co. {188 ITR 0608) [All]
> B & A Plantation & Industries Ltd. & Anr. vs. CIT & Ors. {290 ITR 0395) [Gau]
> Sirpur Paper Mill Ltd. vs. CWT {77 ITR 0006) [SC]
> Rajiv Agnihotri vs. CIT {125 TTJ 0428) [Del Trib]
> Paras Theatre vs. ITO {15 TTJ 0144) [Chd Trib]
> CIT vs. Tek Chand Saini {325 ITR 0343) [P & H]
> CIT vs. Late Bhakt Mohan {89 CCH 0045) [All]
> CIT Vs Green world Corporation [314 ITR 0081]
11. In his rival submissions, the ld. CIT DR strongly supported the impugned order passed by the ld. Pr. CIT and submitted that as per the provisions contained in Explanation 2 to Section 263 of the Act inserted by the Finance Act 2015 w.e.f. 01.06.2015. The ld. Pr. CIT may invoke the provisions u/s 263 of the Act if the order was passed without making enquiries or verification which should have been made or the order had not been made in accordance with any order, direction or instruction issued by the CBDT or the order had not been passed in accordance with any decision which was prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. Therefore, the proceedings initiated by the ld. Pr. CIT were valid. The reliance was placed on the following case laws:
> Deniel Merchants Pvt. Ltd. Vs ITO in ITA No. 2396/2017, order dated 29.11.2017 (SC)
> Surva Jyoti Software Pvt. Ltd. Vs PCIT in ITA No. 2158/Del/2017 (ITAT Del.)
> Malabar Industrial Co. Ltd. Vs CIT (2000) 243 ITR 83 (SC)
> Rajmandir Estates (P.) Ltd. Vs PCIT (2016) 386 ITR 162 (Cal.)
> Shree manjunathesware Packing Products & Camphor Works Vs CIT (19981) 231 ITR 53 (SC)
> CIT Vs Amitabh Bachhan 384 ITR 200
> CIT Vs Ralson Industries Ltd. 288 ITR 322
12. We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is an admitted fact that the ld. Pr. CIT passed the Assessment Order which could have been passed by the Assessing Officer only, since the powers has been given under Sections 143(3), 144, 147, 153A and 153C of the Act to the AO who has been defined u/s 2(7A) of the Act and means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-Section (1) or (2) of Section 120 or any other provision of this Act and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of Sub-section (4) of the said Section but nowhere it is provided that the Pr. Commissioner can pass an assessment order. In the present case, the Id. Pr. CIT-18, New Delhi passed the impugned order as an assessment order which has been mentioned on the front page of the order dated 31.03.2018 passed by the Pr. CIT, therefore, the said order was not a valid order u/s 263 of the Act. Moreover, nowhere the ld. Pr. CIT mentioned in the said order that there was any relevant material before him for the year under consideration to substantiate that the AO had not applied his mind while framing the original assessment u/s 143(3) of the Act rather the ld. Pr. CIT acted only on the basis of the valuation report obtained by the AO for the assessment year 2015-16 on 15.12.2017. Therefore, it cannot be said that the Pr. CIT came to the conclusion on the basis of the relevant record pertaining to the assessment order under consideration i.e. assessment year 2013-14 that the order passed by the AO was prejudicial to the interest of the revenue or it was erroneous. On the contrary, the AO applied his mind and did not accept the revised claim of the assessee and had taken a possible view.
13. On a similar issue, the Hon’ble Supreme Court in the case CIT Vs Greenworld Corporation (2009) 314 ITR 81 held as under:
“The Income-tax Officer, while passing an order of assessment performs a judicial function. A revision application lies before the Commissioner. It is trite that the jurisdiction exercised by the revisional authority pertains to his appellate jurisdiction. The jurisdiction under section 263 can be exercised only when both the following conditions are satisfied (i) the order of the Assessing Officer should be erroneous, and (ii) it should be prejudicial to the interests of the Revenue. These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible.
The Commissioner, or for that matter, any other higher authority, may have supervisory jurisdiction over the Assessing Officer but it difficult to conceive that even the merits of the decision should be discussed and should be rendered by the higher authority, who is a supervisory authority. It is one thing to say that while making the orders of assessment the Assessing Officer should be bound by the statutory circulars issued by the CBDT but it is another thing to say that the assessing authority exercising quasi-judicial functions, keeping in view the scheme contained in the Act, would lose his independence to pass an independent order of assessment. When a statute provides for different hierarchies providing for forums in relation to passing of an order as also appellate or revisional order, by no stretch of imagination can a higher authority interfere with the independence which is the basic feature of any statutory scheme involving adjudicatory process.”
14. It is well settled that the provisions of Section 55A of the Act provides that the AO may refer the matter to DVO for valuation of the property. The use of the word “may” makes it discretionary so it is not mandatory. In this case, it appears that the AO was satisfied from the valuation of the property, he did not refer the matter to the DVO and accepted the valuation report of the Registered Valuer (approved by the Govt.) which was furnished by the assessee. Therefore, it can be said that the AO has taken one of the possible view in this case, therefore, it cannot be said that the assessment order passed was erroneous or prejudicial to the interest of the revenue. We, therefore, by keeping in view the ratio laid down by the Hon’ble Apex court in the aforesaid referred to case of CIT Vs Greenworld Corporation, are of the view that the AO passed the assessment order after application of mind and considered the revised computation of long term capital gain furnished by the assessee was well as the Valuation Report of Government Approved, Registered Valuer, therefore, he has taken a possible view. Therefore, the ld. Pr. CIT was not justified in interfering only on the basis of valuation report obtained for the subsequent assessment year i.e. assessment year 2015-16. Moreover, the ld. Pr. CIT passed the assessment order himself which he should not have passed in view of the provision of the Income Tax Act which provides that only the Assessing Officer is authorized to pass the assessment order and not the Pr. CIT.
15. In view of the above, the impugned order passed by the Pr. CIT is quashed and the assessment order passed by the AO is restored.
16. In the result, the appeal of the assessee is allowed.
