AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 382
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....e of Prahalad Nagar. Total amount of Rs. 66,50,000/- received during the year. Total area including road comes at 6141 Sq. Yards and assessee purchased the above piece of land on 19/04/1977, the land measuring 4.33 bighas for Rs. 32,000/- and other expenditure including stamp was Rs. 3705/-. Thus total cost comes at Rs. 35,705/- and share of cost for Khasra no.309/2 is Rs. 4120/-, the Proportionate cost of acquisition of 6141 Sq. yards used during the year out of 14873 Sq. yards (10vishwa) at Rs. 1890/-. This amount of cost of acquisition as on 19/04/1977 is taken as cost of acquisition on 01/04/1981. Assessee has converted his land to stock in trade during the financial year 2009-10. After indexing (1890x563/100) cost of the agriculture land converted into stock in trade as on 01/04/2009 comes at Rs. 10,641/-. Assessee has claimed expense of Rs. 4,00,300/- for development of colony etc. Thus reducing total amount of Rs. 4,10,941/- (10641+400300) from sale receipts of Rs. 66,50,000/-, net business income being adventure in the nature of trade was determined at Rs. 62,39,059/- (66,50,000-4,10,941). In view of the facts discussed above the amount of Rs. 62,39,059/- is added to income....
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....969 square yards, out of which 24 plots, having a total area of 5765 square yards including land used for development of roads etc. were sold during the year under consideration. The total land area of about 14873 square yards in village Patna, Hapur was purchased by the assessee in the year 1977 for Rs. 40,000/-. The cost of acquisition in the year 1977 was about Rs. 2.70 per square yard. The land was away from the road side, and was used by the assessee for the purpose of Brick-kiln. The above said land is highly degraded due to indiscriminate excavation. In respect of earth-filling the assessee has claimed expenses on account of development at Rs. 4,00,300/-, separately in the working of business income on sale of plots after conversion. Thus, he observed that the cost of acquisition as on 01.04.1981 adopted by the Ld. AO @ Rs. 160/- per square yard on the basis of Valuation Report is unrealistic and made without consideration of the nature and location of the land which should have been questioned by the Assessing Officer. Further, he observed that no comparable sale deed was brought on record by the valuer of the assessee. The circle rate of Rs. 160 per sq. yard adopted by the....
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....f natural justice and further erred in observing that the order passed by AO on 24-12-2018 suffers from technical/legal glitches as well as factual errors as mentioned in para 4(i) to 4(xiii) page 3-5 of the impugned order and further erred in observing that direction of Hon'ble Tribunal has not complied with. 2. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in setting aside the order passed by the assessing officer u/s 143(3)/254 dated 24-12-2018 and directing the AO to refer the valuation of land to DVO and to assess the market value of land in accordance with law and compute the capital gain u/s 45(2) and business income from the said transaction and that too by recording incorrect facts and findings and without observing the principles of natural justice. 3. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in passing the impugned order u/s 263 and that too without providing the opportunity of being heard and in violation of principles of natural justice." 8. At the time of hearing, Ld. AR brought to notice page 35 of the paper book, which is the computat....
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.... and the decision of Supreme Court was not applicable. Further submitted that Ld. PCIT in the order u/s 263 has held that Cost of Acquisition in the year 1977 was Rs 2.70 per sq yard and the land was away from the roadside and was used for the purpose of Brick kiln which was highly degraded due to excavation and this Cost Of Acquisition as on 1/4/1981 adopted by A.O at Rs 160 per sq yard was unrealistic and was made without consideration of nature and the location of the land which should have been questioned by A.O and that no comparable sale deed has been brought on record and the circle rate of Rs. 160 per sq yard adopted by the Registered Valuer was in respect of developed residential land and assessee's land as on 1/4/1981 was undeveloped and was being used for Brick kiln and that the assessee in AY 2011-12 had himself taken the Cost of Acquisition of land as on 01/04/1981 at Rs 25per sq yard and therefore, A.O should have referred the matter to the valuation cell of the tax department for ascertaining the actual cost as on 01/04/1981. In the setting of the above, assessee's submissions are as under: First submission of Assessee is that the matter was set aside by t....
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.... report. On the other hand, the opinion of the registered valuer, as would appear from the report, was that he had taken into consideration the value of the shop as Rs. 1525/- per sq. ft.(Para 81) A duty may be enjoined on the assessee to make a correct disclosure of income but if such disclosure is based on the opinion of an expert, who is otherwise also a registered valuer having been appointed in terms of a statutory scheme, only because his opinion is not accepted or some other expert gives another opinion, the same by itself may not be sufficient for arriving at a conclusion that the assessee has furnished inaccurate particulars. There is no end to inquiries as held in 47 CCH 309 (Mum), 57 CCH 473 (Del). 9.3 Further he submitted that next contention of PCIT that assessed income cannot be less than the returned income, first of all it was a second round of assessment and that too, to give effect the direction of ITAT and second there is no such law as held in the following judicial decisions Appeal to Appellate Tribunal- Power to set aside assessment and direct assessment afresh - Not power to place restrictions on power of Assessing Officer to determine income - Direc....
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....rt, demanded rigorous scrutiny. The material facts diverge is to obtain an independent departmental valuation officer's assessment. Section 222B of the IT Act defines FMV as the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date. The assessee's valuation lacking comparable transaction evidence and ignoring the land's undeveloped, non-road-touching, brick-kiln-business character, was not credible without independent verification. Further, she brought to our notice page 15 of 263 Order: There is no comparable sale deed referred to by the valuer for arriving at the value of Rs. 160 per sq. yard. The assessee's claim was accepted without (a) examining the purchase deed of 1977 showing cost of only Rs. 2.70 per sq. yard, (b) evaluating the land's industrial use and non-developed status as on 01.04.1981, or (c) cross-checking against circle rates with adjustments for undeveloped/non-road-touching property. Further, she submitted that ITAT's Direction did not Preclude Inquiry; It Mandated In Accordance with Law. She submitted that the appellant misreads the ITAT direction. The ITAT said examine in accordance wi....
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....ad) "While framing the assessment under section 143(3), it is expected from the AO that he will make a detailed inquiry to find out correct income of the assessee and not blindly rely upon the facts placed by the assessee on their face value." The AO here violated this principle directly by blindly relying on assessee's revised claim. ARGUMENT 3: GOETZE PRINCIPLE STILL APPLIES Appellant's Argument: The Goetze India Limited v. CIT (2006) 284 ITR 323 SC principle (disallowing revised claims without revised return) applies only in ordinary assessment, not when AO acts under ITAT directions. Revenue's Rebuttal: This distinction is unsound. Goetze establishes a procedural principle, not an exception. The Supreme Court held that assessee cannot file revised claims in written explanation during assessment without a formally filed revised return under s.139(2). This principle is independent of context (ordinary assessment or set-aside assessment), The Supreme Court's language in Goetze (cited in 263 Order, page 5) is absolute: The decision does not in any way relate to the power of the assessing officer to entertain a claim for d....
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....es 11-12): For village Patna, Hapur on 01.04.1981: * Rs. 220-330/sq. yard for road-touching land * Rs. 90-160/sq, yard for non-road-touching land The assessee's land was non-road-touching and undeveloped. Even within the circle rate range, the rate should have been at the lower end, not at the maximum (Rs. 160). DVO's Validation: The departmental valuation officer, after independent inspection and applying standard valuation principles, arrived at Rs. 9.82 per sq. meter on 01.04.1981 (approximately Rs. 1,14,678 for total land). Using standard conversion (1 pakka bigha = 980 sq. meters), this translates to approximately Rs. 25 per sq. yard, completely vindicating the original AO's position and proving the assessee's claim of Rs. 160/sq. yard was grossly inflated. ARGUMENT 6: BROUGHT-FORWARD LOSS ALLOWANCE UNAUTHORIZED Factual Record: The AO's set-aside order allowed brought-forward business loss of Rs. 2,29,920/- from AY 2010-11. However, * The assessee's ITR for AY 2011-12 did not claim any brought-forward loss * The assessment for AY 2010-11 (completed 22.06.2014) did not determine any ....
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.... 3. Pr. CIT's consideration: All assessee arguments were summarized & addressed (263 Order, pages 6-12) 4. Reasoned order: 263 Order (pages 4-16) contains detailed findings rebutting each assessee argument Content of Assessee's Replies: (Summarized in 263 Order) The assessee advanced: * of FMV calculation and circle rate basis * Argument that AO acted in compliance with ITAT directions * Reliance on multiple ITAT precedents (Progressive Services, Shri Ram Development, etc.) * Argument that assessment below returned income is not per se erroneous Pr. CIT's Engagement with Arguments: The Pr. CIT systematically addressed each plea: * Examined Goetze applicability * Distinguished ITAT direction from suspension of inquiry duty * Cited Malabar Industries and Gee Vee Enterprises for lack-of-inquiry principle * Analyzed the factual realism of Rs. 160/sq. yard valuation * Provided reasons for holding order erroneous This is a thorough, substantive engagement with assessee's case, demonstrating full consideration of arguments. No natural justice violation occurred. ....
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....Without inquiry, no plausible view exists. 4. Patel Cotton Co. Ltd. v. ACIT (1979) 64 ITD 273 (Mumbai ITAT) Assessee's Citation: Where two views are possible, mere adoption of one view would not render it erroneous though it might be prejudicial. Revenue's Response: Correct statement of law where AO has exercised discretion between legitimate alternatives after proper inquiry. Non-Application Here: 1. Prerequisite Proper Inquiry: Patel Cotton assumes AO has identified two possible views after inquiry. Here, no inquiry was conducted; only assessee's claim was accepted. 2. Absence of Legitimate Alternative: For two views doctrine to apply, both must be reasonably sustainable. Here: Assessee's view (Rs. 160/sq. yard) is unsustainable: no comparables, ignores undeveloped status, contradicts ITR, later contradicted by DVO. Only assessee's self-serving valuation supports Rs. 160. 3. Explanation 2(a) Combines Two Conditions: Unlike Patel Cotton's prejudice alone insufficient principle, Explanation 2(a) states order is erroneous in so far as it is prejudicial AND passed without making inquiries. Both conditions must be me....
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....ined in prior year further evidence of lack of application of mind." 11. Considered the rival submission and material placed on record. We observed that, in the set aside proceedings to the file of AO the co-ordinate Bench, in its order of ITA No. 3032/Del/2014, remitted the issue back to the file of AO with the direction to complete the assessment by computing capital gains in terms of Section 45(2) of the Act and business income from the transaction, in view of the findings given in the above order. While computing the capital gains, the AO was directed to examine the fair market value of the land in accordance with law. The main issue raised by both the parties is that the Assessing Officer has accepted Rs. 160 per sq. yard based on the valuation report submitted by the Assessee for the cost of acquisition as on 01.04.1981. The Ld. PCIT was of the view that the Assessing Officer should not have accepted the revised rate of Rs. 160 per sq. yard based on valuation report submitted by the assessee and AO should have referred the matter to the DVO. 12. Further, the Ld. PCIT observed that the valuer has not taken into account the nature of the land being under-developed and awa....
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.... the stamp duty value based on the prevailing circle rate existed at that point of time. On page 54 of the paper book, it was brought to the notice of the Ld PCIT that the standard stamp duty rate existed at that point of time was Rs. 220/- to 330/- per sq yard for the lands which touch the road whereas the rates for the lands away from the roads existed were between Rs. 90/- to Rs. 160/-. The registered valuer had considered the above aspect and chose to adopt the value of Rs. 160/-. We observed from the order sheet recorded shows that the AO had applied his mind and accepted the valuation report. Now the Ld PCIT finds that the acceptance of such report is erroneous and expressed his views that the AO should have referred the matter to the DVO, it is more like post view or taking different view which the AO had taken at that point of time. It is observed that the AO had made verification whereas the Ld PCIT is of the view that the AO had not taken the proper view. He may be right now but after application of mind, AO had taken one of the possible views going with the certified valuer. Ld PCIT is of the view that the valuer had not followed certain possible view and not disclosed t....
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....bove decision, it was held that the provisions of Section 55A(a) of the Act cannot be applied and no reference is possible to be made to the DVO for determining the market value of the property at a figure less than that shown by the Assessee. However, in our considered view, in this case also the income declared by the assessee in the original return of income was without the valuation report, in the set aside proceedings, the AO had the convenience to appreciate the actual valuation to determine the actual income under the head's capital gain and business income. There is no possibility to refer to the DVO since the AO had accepted the valuation report moreover, the estimation was made not for the present value, but it is for value as on 01.04.1981. Even the DVO would have estimated based on the value as existed at that point of time and again it is also subject to adoption of estimations. It is evident from the fact that the Assessing Officer in the order giving effects to the proceedings under Section 263 of the Act, it is brought to our notice that the Assessing Officer has obtained the report from the DVO, who assessed the FMV as on 01.04.1981 at Rs. 9.82 per sq. meters (Rs.2....