2024 (10) TMI 929 - AT - Income Tax

Addition under Section 56(2)(viia) deleted due to improper DVO valuation and invalid reopening by JAO

Mrs. Indu Pankaj Dhandharia, (Legal heir of Mr. Pankaj Dhandharia) Versus ACIT-22 (1), Mumbai.

Mrs. Indu Pankaj Dhandharia, (Legal heir of Mr. Pankaj Dhandharia) Versus ACIT-22 (1), Mumbai. - TMI Issues Involved:1. Reopening of assessment under Section 147 of the Income Tax Act.2. Validity of the notice issued under Section 148.3. Merits of the addition under Section 56(2)(viia) of the Act.4. Levy of interest under Section 234B.5. Procedural lapses and adherence to natural justice.Detailed Analysis:1. Reopening of Assessment under Section 147:The appellant challenged the reopening of the assessment on the grounds of lack of tangible material and mere change of opinion. The tribunal examined whether the Assessing Officer had new tangible material that justified reopening the case. The tribunal noted that the reopening was based on the difference between the purchase consideration and the stamp duty value, which was considered as tangible material. However, the tribunal found procedural lapses, including the issuance of the notice by the jurisdictional assessing officer instead of the faceless assessing officer, rendering the reopening invalid.2. Validity of the Notice Issued under Section 148:The notice under Section 148 was issued manually, contravening Circular No. 19/2019, which mandates electronic issuance. The tribunal acknowledged this procedural lapse but noted that the issue is pending before the Supreme Court. Furthermore, the notice was issued without proper sanction from the prescribed authority, as required by Section 151. The tribunal referred to the Bombay High Court's decision in Hexaware Technologies Ltd., which invalidated such notices for non-compliance with Section 151A.3. Merits of the Addition under Section 56(2)(viia):The tribunal addressed the addition made due to the difference between the stamp duty value and the purchase consideration. It was argued that the valuation by the District Valuation Officer (DVO) was based on the seller's perspective and did not consider the buyer's improvements. The tribunal found that the DVO's valuation did not account for the buyer's improvements and the market conditions affecting the property's value. The tribunal directed the deletion of the addition, emphasizing that the valuation should consider the buyer's perspective and improvements.4. Levy of Interest under Section 234B:The tribunal noted that the issue of interest under Section 234B was consequential and dismissed it due to lack of arguments. The tribunal did not delve into the merits of this issue, as it was dependent on the outcome of the primary issues.5. Procedural Lapses and Adherence to Natural Justice:The appellant contended that there was a failure to provide an opportunity for a video conference hearing, violating the principles of natural justice. The tribunal noted that the appellant was granted an opportunity to be heard, and no separate arguments were advanced on this point, leading to its dismissal.Conclusion:The tribunal partially allowed the appeal, quashing the reopening of the assessment due to procedural lapses in the issuance of the notice and the lack of a fresh valuation considering the buyer's perspective. The addition under Section 56(2)(viia) was deleted, emphasizing the need for a valuation that accurately reflects the property's market value and improvements made by the buyer. The tribunal's decision underscores the importance of procedural compliance and fair consideration of all relevant factors in tax assessments.