R.C. Kannan Vs PCIT (Madras High Court)
Conclusion: AO had to therefore refer the valuation of the property viz., capital asset under proviso to sub-clause (vii)(c) to sub-section 2 to Section 56 of the IT Act to the Valuation Officer. Even if, no objections was raised before AO prior to the assessment order being passed, assessee would still be entitled to raise such objections both before the Revisional Authority under Section 264 of the IT Act or before the Appellate Commissioner under Section 246A of the IT Act as these proceedings are continuation of the original assessment proceedings.
Held: Assessee paid a sum of Rs.6,00,000/- towards stamp duty. In the returns of income that were filed by the respective assessees, they had admitted total income of Rs.4,90,390/- (Rs.2,26,820/- + Rs.2,63,570/-) respectively. The case was selected for limited scrutiny under CASS. During the course of the proceedings before AO, copy of the Sale Deed was produced. AO agreed for additions to be made. Thus, an Assessment Orders came to be passed, whereby, the difference between the value adopted by the respective assessees in the Sale Deed and the guideline value was taxed in the hands of the respective assessees by equally dividing the difference. Thus, a sum of Rs.12,84,500/- (Rs. 25,69,000 divided by 2) came to be added to the income of the respective assessees. Details of the additions are as follows: Guideline Value – Rs.97,69,000/- Sale Consideration – Rs.72,00,000/- and Difference – Rs.25,69,000/-. The amount of Rs.97,69,000/- did not include the stamp duty and registration charges of Rs.6,00,000/-. In the Return of Income for the Assessment Year 2015-2016, they had declared the total consideration of Rs.72,00,000/-towards the purchase. AO noticed that there was a difference, as stamp duty was added and eventually assessed the value of the property to Rs.1,03,69,000/-.Under these circumstances, the assessment was completed by AO. By applying Section 56(2)(vii)(b)(ii), AO only added a sum of Rs.12,84,500/- to the income of assessee from other sources in addition to the amount declared in the returns filed by the respective assessees without including the stamp duty of Rs.6,00,000/-. Respondents submitted that the impugned orders did not suffer from any irregularity or illegality warranting interference under Article 226 of the Constitution of India. It was held that the guideline value of the property was more than the value adopted in the Sale Deed dated 30.06.2014, assessees herein would be entitled to take advantage of the first proviso to sub-clause (vii)(c) to sub-section 2 to Section 56 of the IT Act read with Section 50C(2). The first proviso to sub-clause (vii)(c) to sub-section 2 to Section 56 of the IT Act entitled assessee to raise a dispute regarding the valuation of the immovable property as in the case of a seller under subsection 2 to Section 50 of the IT Act, in which case, AO had to refer the valuation of such property viz., capital asset to the Valuation Officer. It was clear that if the valuation was disputed, the conditions stipulated in sub-clause (a) & (b) to sub-section 2 to Section 50C would apply. Therefore, the impugned orders rejecting the request of the respective assessee for revising the orders was unsustainable and therefore, the same warranted interference. AO had to therefore refer the valuation of the property viz., capital asset under proviso to sub-clause (vii)(c) to sub-section 2 to Section 56 of the IT Act to the Valuation Officer. Merely because assessee did not raise any objection before the Assessment Order dated 30.11.2017 was passed, ipso facto would not mean that reference under sub-clause (vii)(c) to sub-section 2 to Section 56 would be barred. Even if, no objections was raised before AO prior to the assessment order being passed, assessee would still be entitled to raise such objections both before the Revisional Authority under Section 264 of the IT Act or before the Appellate Commissioner under Section 246A of the IT Act as these proceedings are continuation of the original assessment proceedings. Under such circumstances, the impugned orders were liable to be quashed and the cases were remitted back to the 2nd respondent to re-do the exercise under first proviso to sub-clause (vii)(c) to sub-section 2 to Section 56.
