2013 (11) TMI 74 - AT - Income Tax

Tribunal validates notice for assessment, remands for fresh examination

The Tribunal upheld the validity of the notice issued under Section 148(2) for reopening the assessment but set aside the adoption of the cost of ... Determination of FMV as on 1.4.1981 - Value adopted by Valuation officer u/s 50C to be taken or the Valuation adopted in the Wealth tax act be adopted for computation of capital gains under Income Tax Act – Held that:- Report given for the Wealth tax purposes need not be considered for the Income tax purposes, particularly for computation of capital gains - Valuation reports of the department along with the Wealth tax report of Shri Umrigar are to be considered viz-a-viz the report of Shri Ganjawala. The assessee’s objection on adopting report of Shri Umrigar for the purpose of capital gains also required detailed examination of the AO - Since the issue of adoption of value under section 50C was referred to the AO by the CIT(A), this issue also required to be set aside to the file of AO. Therefore, both issue of sale consideration under section 50C(2) and cost of acquisition as on 01.04.81 for computing of capital gains should be examined by AO afresh – Decided in favor of Assessee for statistical purpose. Issues Involved:1. Validity of the notice issued under Section 148(2) for reopening the assessment.2. Adoption of the cost of acquisition as on 01.04.1981 for computing capital gains.Issue-wise Detailed Analysis:1. Validity of the Notice Issued Under Section 148(2):The assessee contended that the notice issued under Section 148(2) was invalid as there were no cogent reasons recorded for reopening the assessment, and no new material was gathered by the Assessing Officer (AO). The assessee argued that since the return was processed under Section 143(1) and accepted, there was no tangible material to justify reopening under Section 147. However, the Tribunal upheld the AO's action, referencing the Supreme Court's decision in Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR 500)(SC), which allows reopening of assessment even if the original return was processed under Section 143(1). The Tribunal found no merit in the assessee's ground and rejected it.2. Adoption of Cost of Acquisition as on 01.04.1981:The primary dispute was the valuation of the property as on 01.04.1981 for computing capital gains. The assessee relied on a valuation report by M/s. H. Ganjawala & Co., which valued the property at Rs.43,10,000/-. The AO, however, adopted a valuation of Rs.29.62 lakhs as reported by the Valuation Officer. The CIT(A) further reduced this value to Rs.8,98,000/- based on an earlier report by Shri P.A. Umrigar, prepared for Wealth Tax purposes using the rent capitalization method.The Tribunal noted that the valuation for Wealth Tax purposes, which did not consider the open land available for future development, should not be used for Income Tax purposes, particularly for calculating capital gains. The Tribunal referenced the case of Indira Bai vs. ITO (42 ITD 397), where it was held that a valuation report prepared for Wealth Tax purposes does not preclude the assessee from contending otherwise for Income Tax purposes. The Tribunal emphasized that the report by Shri Umrigar was not appropriate for determining the cost of acquisition for capital gains.Additionally, the Tribunal considered the assessee's submission of additional evidence, including departmental valuation reports dated 19.04.1990, which valued the property as on 31.03.1987 and 31.03.1988 at Rs.54.82 lakhs and Rs.69.92 lakhs, respectively. These valuations, when adjusted for cost inflation, supported the assessee's valuation.The Tribunal directed the AO to re-examine both the sale consideration under Section 50C(2) and the cost of acquisition as on 01.04.1981, taking into account the orders of the ITAT in other co-owner cases and the principles laid down. The AO was instructed to give the assessee a due opportunity to present their case.Conclusion:The assessee's appeal was partly allowed. The Tribunal upheld the validity of the notice issued under Section 148(2) but set aside the AO's order concerning the adoption of the cost of acquisition as on 01.04.1981. The matter was remanded back to the AO for fresh examination, with instructions to consider additional evidence and provide the assessee an opportunity to be heard.