2018 (5) TMI 2025 - AT - Income Tax

Tribunal allows appeal on assessment order for AY 2011-12 despite notice absence

Shri B.S. Sanjay [HUF] Versus The Income Tax Officer, Ward –3 (4), Bangalore.

The Tribunal allowed the appeal against the order of the ld. CIT(A)-4, Bangalore for Assessment Year 2011-12. The Tribunal held that the assessment was ... Capital gain computation - addition of AO by invoking the provisions of section 50C - HELD THAT:- In the present case, the sale consideration as per sale deed is ₹ 59.40 Lakhs and the value adopted by DVO u/s. 50C (2) and therefore, the difference between these two values is of ₹ 4,70,400/- which is less about 8% of the sale consideration shown by the assessee. Respectfully following the Tribunal order cited by ld. AR of assessee having been rendered in the case of M/s. John Fowler (India) Pvt. Ltd. Vs. DCIT [2017 (1) TMI 1682 - ITAT MUMBAI] and also other two Tribunal orders followed by the Tribunal in that case being Tribunal order rendered in the case of Smt. Sita Bai Khetan Vs. ITO [2016 (11) TMI 955 - ITAT JAIPUR] and Rahul Constructions [2012 (1) TMI 229 - ITAT PUNE] hold that in the facts of the present case, no addition is justified and therefore, delete the same. No merit of the case, the technical and legal issue raised by assessee as per ground nos. 2 and 3 becomes of academic interest and hence, I hold that no adjudication is called for on that aspect. ISSUES PRESENTED AND CONSIDERED 1. Whether an addition under section 50C based on the valuation adopted by the Departmental Valuation Officer (DVO) can be sustained where the DVO value exceeds the declared sale consideration by a small percentage (approximately 7-10% in the present facts). 2. Whether the assessment order is void ab initio for want of issuance of notice under section 143(2) in respect of a valid revised return and, relatedly, whether the assessee's participation in assessment proceedings can cure any jurisdictional or procedural infirmity arising from non-issuance of such notice (grounds on revised return and non-issuance of notice). 3. Incidental (raised but not adjudicated): Whether interest under section 234B was chargeable and whether its calculation was legally coherent. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of addition under section 50C where DVO value exceeds declared sale consideration by a small percentage Legal framework: Section 50C (and related provisions) permits adoption of the value determined for stamp duty purposes (or value determined by the DVO under statutory provisions) as deemed sale consideration for computing capital gains when the registered sale consideration is less than such value. The Assessing Officer may make additions where the value adopted under section 50C(2) exceeds the actual sale consideration declared in the sale deed. Precedent treatment: The Tribunal expressly followed earlier Tribunal decisions holding that where the difference between stamp duty valuation/DVO value and declared sale consideration is small (the Tribunal relied on authorities applying a tolerance threshold-referenced decisions applied a 15% benchmark and related decisions), making an addition solely on account of the marginal difference was not justified. Interpretation and reasoning: The Tribunal compared the declared sale consideration (Rs. 59.40 lakhs) with the DVO valuation (Rs. 64.10,400), finding the absolute difference to be Rs. 4,70,400, which constituted roughly 8% of the declared sale consideration. Relying on the line of Tribunal precedents cited by the assessee, the Tribunal held that when the excess of DVO valuation over declared consideration is within the small-percentage range recognized in those precedents (here below the 15% benchmark relied upon), the Assessing Officer should not make an addition under section 50C. The Tribunal therefore deleted the addition made by the Assessing Officer. Ratio vs. Obiter: The holding that no addition was justified on the facts because the DVO valuation exceeded the declared sale consideration by only about 8% is ratio decidendi for the present appeal: it is the operative legal conclusion binding the result. The Tribunal's reliance on prior Tribunal decisions (treating marginal differences as insufficient to sustain additions) is applied as controlling precedent. Conclusions: The addition under section 50C amounting to Rs. 4,70,400 was deleted. The Tribunal treated the marginal (˜8%) difference as insufficient to uphold an addition, following prior Tribunal authority that tolerates small variances between stamp duty valuation and declared sale consideration. Issue 2 - Validity of assessment when no notice under section 143(2) was issued on a revised return; effect of assessee's participation Legal framework: The law distinguishes assessments completed after issue of statutory notices from assessments finalized without issuance where a valid revised return exists; issuance of notice under section 143(2) is a procedural requirement for valid assessment proceedings in certain circumstances. The question whether failure to issue a notice on a revised return renders the entire assessment void involves determination of jurisdictional/curative effect of procedural lapses and the consequences of taxpayer conduct (e.g., participation). Precedent treatment: The Tribunal did not undertake fresh precedent analysis on this point in the present order; instead it identified the issue as raised and acknowledged its legal significance. Interpretation and reasoning: Having decided the substantive dispute in favour of the assessee on the merits (deletion under section 50C), the Tribunal considered the procedural challenge concerning non-issuance of notice under section 143(2) to be of academic character in the light of the merits outcome. Therefore, the Tribunal declined to adjudicate the procedural contention and did not resolve whether participation in assessment proceedings cures the alleged jurisdictional defect. Ratio vs. Obiter: The Tribunal's refusal to decide the procedural issue is obiter in the sense that no authoritative ratio on that procedural question is laid down. The Tribunal explicitly treated the question as academic given the merits decision and therefore did not express a binding view on whether non-issuance of notice on a revised return voids the assessment or whether participation cures the defect. Conclusions: The Tribunal did not adjudicate the validity of the assessment vis-à-vis the non-issuance of notice under section 143(2) on the revised return; that issue remains unresolved by the present order and is expressly treated as academic in view of the deletion on merits. Any contention that mere participation cures procedural invalidity was not decided. Issue 3 - Chargeability and calculation of interest under section 234B (incidental and not decided) Legal framework: Section 234B prescribes interest for default in payment of advance tax where tax on returned income exceeds advance tax paid. Proper calculation requires ascertainable rate, period, and taxable amount. Precedent treatment and reasoning: The ground challenging section 234B interest was raised, but the Tribunal's order does not contain analysis or adjudication on this head. There is no finding on whether interest was chargeable or whether the calculation was legally sound. Ratio vs. Obiter: No ratio is established as the Tribunal did not decide this issue. Conclusions: The question of chargeability and correct calculation of interest under section 234B was not determined and remains unaddressed in this order. Cross-references and final disposition The Tribunal expressly followed prior Tribunal decisions (including authorities adopting a benchmark for tolerable variance between stamp duty/DVO values and declared sale consideration) in reaching the substantive conclusion on section 50C; that conclusion formed the operative basis for allowing the appeal. Because of that substantive allowance, the procedural challenge regarding non-issuance of notice under section 143(2) on a revised return and the objection regarding interest under section 234B were not adjudicated and were held to be academic or left open.