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2014 DIGILAW 3756 (MAD)

A. Jesu Rajendran v. Commissioner of Income Tax Chennai

2014-10-10

T.S.SIVAGNANAM

body2014
Judgment 1. The petitioner, who is an individual assessee under the provisions of the Income Tax Act, has filed this writ petition praying for issuance of writ of certiorarified mandamus to quash the order passed by the second respondent under Section 143(3) read with Section 147 of the Income Tax Act, (herein after referred to as 'the Act') 1961, for the assessment year 2007-08. 2. The petitioner/assessee who is a manpower consultant, had sold landed property in Bangalore Rural District for a consideration of Rs.95,00,000/- during the assessment year 2007-08 and as per the sale deed dated 23.01.2007, the guideline value of the property was Rs.3,00,00,000/-. The property which was sold by the petitioner/assessee was purchased by him on 12.10.2004 for a total sale consideration of Rs.79,21,500/-. The petitioner/assessee had not filed any return of income under Section 139(1) of the Act and as he failed to file the return of income, notice under Section 148 of the Act was issued to the petitioner/assessee on 05.03.2013 calling for the return of income. In response to the said notice, the petitioner/assessee filed return of income on 07.02.2014, admitting the gross total income of Rs.1,39,420/- and claiming loss of Rs.2,95,883/-from business and profession. The total income from the sale of land and professional income were shown as Rs.47,00,000/- and Rs.8,64,403/-respectively. Thus, the total receipts in the business income is Rs.55,64,403/-. 3. The Assessing Officer while going through the return of income for the assessment years 2005-06 and 2006-07, pointed out that the assessee has disclosed only income from profession and disclosing income by way of sale of land for the assessment year 2007-08 under the head business is only an after thought of the assessee and the assessee had not at all disclosed any income from real estate. It was further pointed out that the assessee having sold the land for Rs.95,00,000/-, has not disclosed the relevant income in the return of income filed by him. It was further pointed out that the assessee having sold the land for Rs.95,00,000/-, has not disclosed the relevant income in the return of income filed by him. It is to be noted that though the notice under Section 148 of the Act was issued on 05.03.2013, the return of income was not filed immediately and therefore, reminders were sent on 24.06.2013 and 16.08.2013 and thereafter, the petitioner sent a letter on 07.10.2013 stating that due to the pre-occupation with litigation of the property and various court cases associated with the litigation, the petitioner was not able to take care of regular matters and requested the department as to how the short term capital gain estimated at Rs.2,11,20,390/-has been arrived at and relating to which transaction and further sufficient time was requested by the assessee to file the reply. 4. Thereafter, a notice under Section 143(2)(ii) of the Act was issued to the petitioner on 12.02.2014 calling upon the petitioner to appear in the office of the second respondent on 17.02.2014. This was followed by another notice dated 12.02.2014 under Section 142(1) of the Act. Thereafter, the petitioner filed the return of income on 07.02.2014. Even thereafter, the petitioner did not raise any objection as regards valuation of the property and for the first time on 06.03.2014, the petitioner sent a letter stating that he had placed on record his objection for the valuation adopted by the stamp valuation authority as market value by drawing the attention of the Assessing officer to Section 50C(2)(a) of the Act. It is to be noted that the assessment should be completed on or before 31.03.2014 or else the same would be time barred. The Assessing officer while passing the impugned order of assessment, considered the request made by the petitioner, invoking Section 50C of the Act. 5. It was observed that the assessee has not agitated against the value adopted by the Sub Registrar at the time of registration and no appeal was filed against the decision of the Sub Registrar and having accepted the valuation determined by the Sub Registrar at the time of registering the property, agitating before the assessing officer for adopting the value under Section 50C is not proper and fair. Therefore, the Assessing Officer rejected the request of the assessee for referring the matter to the Valuation Officer. Therefore, the Assessing Officer rejected the request of the assessee for referring the matter to the Valuation Officer. Thereafter, the Assessing Officer proceeded to consider the contention regarding the term of capital assets and finalised the statement and assessed the income at Rs.2,40,29,848/-. 6. The petitioner has now challenged the order of assessment not entirely on its merits, but, on the ground that the second respondent ought to have referred the subject matter for valuation to the Valuation Officer and his rights under Section 50C(2) of the Act has been violated. Therefore, it is contended that rejecting the petitioner's request for referring the document to the Valuation Officer for valuation report is illegal and violates the petitioner's rights. 7. In support of his contentions, learned counsel for the petitioner placed reliance on the decision of this Court in the case of N.Meenakshi v. The Assistant Commissioner of Income Tax reported in 2010 326 ITR 229 (Madras). As regards the scope of the power under Section 50C(2) of the Act, learned counsel for the petitioner placed reliance on the decision of Hon'ble Division Bench in the case of S.Muthuraja v. Commissioner of Income Tax reported in. 8. Learned Standing Counsel appearing for respondents submitted that the conduct of the assessee is also very relevant to be noted by this Court, while considering as to whether the petitioner should be directed to agitate this issue before this Court, without exhausting the appeal remedy available to the petitioner under Section 246 of the Act. He further pointed out that the notice under Section 148 of the Act was issued on 05.03.2013 and the assessee did not file the return of income, despite two reminders were sent on 24.06.2013 and 06.08.2013 and he sent a letter on 07.10.2013 stating that due to the pre-occupation with litigation of the property and other cases, he was unable to submit the reply and thereafter, notices were issued under Sections 143(2)(ii) and 142(1) on 12.02.2014 for which the petitioner only gave a letter on 06.03.2014 stating that the valuation of the property has to be obtained under Section 50C(2)(a), fully knowing well that the assessment proceedings have to be completed on or before 31.03.2014. 9. 9. It is further submitted by the learned Standing Counsel for the respondents that the return was filed after lapse of 11 months, after issuance of notice under Section 148 of the Act and even then the petitioner did not admit any capital gain arising out of the sale effected during the financial year 2006-07. Further it is submitted that the property which was sold is a vacant land and there is no building or structure in the land to value the same by the Valuation Officer and therefore, the Assessing Officer rightly rejected the request. Further the property was sold in the year 2007 and the Sub Registrar adopted the market value at Rs.3,00,00,000/-, which was accepted by the petitioner and he did not question the valuation and no appeal was filed. Having accepted the valuation, at the fag end of the assessment proceedings, it is highly improper and unfair on the part of the petitioner now to seek for invoking Section 50C of the Act. Further the learned Standing Counsel submitted that there is no reason for the petitioner to by-pass the appeal remedy and all these issues could be raised before the Appellate Authority under Section 246 of the Act and the Commissioner (Appeals) may be directed to dispose of the matter on further enquiry or may direct the assessing officer to make further enquiry and report the result of the same to the Commissioner of Appeal. Therefore, the Appellate Authority is entitled to examine the issue and all these matters could be easily be agitated in the appeal. 10. Heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the respondent. Perused the materials placed on record. 11. Admittedly, as stated supra by the respondent department, the conduct of the assessee also has to be looked into as to whether the claim made by him was bonafide, fair and reasonable. Since the notice under Section 148 of the Act was issued on 05.03.2013, the assessee did not file the return of income immediately. But, belatedly filed the same after 11 months. In the interregnum period, two reminders were sent for which the assessee sent a letter stating that due to other litigation, he was unable to submit the reply. Since the notice under Section 148 of the Act was issued on 05.03.2013, the assessee did not file the return of income immediately. But, belatedly filed the same after 11 months. In the interregnum period, two reminders were sent for which the assessee sent a letter stating that due to other litigation, he was unable to submit the reply. Thereafter, when the return was filed, the assessee did not admit any capital gain arising out of the sale effected during the financial year 2006-07 and notices were issued under Sections 143(2)(ii) and 142(1) on 12.02.2014 and even thereafter, the assessee did not immediately take any action at the fag end of the year and only on 06.03.2014 for the first time, the assessee disputed the value of the property. In such circumstances, it is to be seen as to whether the second respondent was justified in rejecting the request of the petitioner for referring the matter to the Valuation Officer. 12. After going through the facts, it appears that the petitioner was inspired to claim the relief under Section 50C of the Act based on the decision of this Court in the case of N. Meenakshi v. The Assistant Commissioner of Income Tax reported in 2010 326 ITR 229 (Madras) stated supra and it is to be noted in the said case, the assessing authority proposed to assess the capital gain on the value fixed by the Stamp Authorities and the assessee therein made a request to the Assessing Authority to refer the matter to the valuation officer for determining the market value of the property and the reference was made to the valuation officer. In the course of the assessment proceedings, however, even before the Valuation Officer filed a report, the assessing officer passed the assessment order taking the value of the land as determined by the Registering Authority, which according to the petitioner was against Section 50C(2) of the Act. In the course of the assessment proceedings, however, even before the Valuation Officer filed a report, the assessing officer passed the assessment order taking the value of the land as determined by the Registering Authority, which according to the petitioner was against Section 50C(2) of the Act. Taking note of the said provisions, this Court held that the right of an assessee conferred under Section 50C of the Act is a valuable statutory right available to protect his interest against any arbitrariness which may creep in while fixing the value of the capital gain and that is the safeguard given to the assessee and that the said right is more effective in cases where the parties to the document have not taken any steps to defend or to initiate proceedings under Section 47A of the Indian Stamp Act. 13. On the facts and circumstances of the said case, inasmuch as the purchaser, which was a Government concern, has not taken any steps under Section 47A of the Indian Stamp Act and therefore the only remedy for the petitioner therein was under Section 50C of the Act. As regards the availability of the alternative remedy, this Court held that it is an un-disputed fact that the matter was pending before the valuation officer which had been referred by the assessing officer and without waiting for the valuation report, the assessment was completed and therefore the availability of alternative remedy would not be a bar for the court to exercise its jurisdiction under Section 226 of the Constitution of India. The decision in the case of S. Muthuraja v. Commissioner of Income Tax reported in stated supra arose out of a Tax Case Appeal filed by the assessee and in which the question was answered and the Tax Case Appeal was disposed of and the matter was restored to the files of the Assessing Officer to work out the capital gain invoking 50C(2) of the Act, since the specific objection was made by the assessee to the assessing officer adopting market value under Section 50C(2) of the Act by filing objection immediately. 14. 14. In the light of the above facts, the decision in the case of N. Meenakshi v. The Assistant Commissioner of Income Tax reported in 2010 326 ITR 229 (Madras) stated supra, cannot be directly applicable to the facts and circumstances of the present case, since the factual position was entirely different as unless the purchaser of the property was Government concern and they did not dispute the valuation under the Indian Stamp Act; the petitioner therein was the vendor of the property and the only right available to the petitioner therein was under Section 50C(2). 15. As regards the valuation of the property, the petitioner's request for valuation under Section 50C was rejected by the Assessing Officer and it was held that the petitioner had sold the vacant land and there is no building in the property and the petitioner accepted the actual valuation of the property as Rs.3 crores and even in the return of income the capital gain arising for the financial year 2006-07 and the return itself was filed after the period of 11 months and immediately after the notices under Sections 143(2)(ii) and 142(1) of the Act, the petitioner did not take any action and for the first time on 06.03.2014, the request was made under Section 50C of the Act. In such circumstances, the assessing officer was justified in considering the case along with other issues and passing the order of assessment. The only remedy left to the petitioner is to file an appeal before the Commissioner of Income Tax (Appeals III) under Section 246 of the Act. This Court is not inclined to interfere with the order of Assessing Officer. Accordingly, the writ petition fails and the same is dismissed. Since the writ petition was pending since March 2014, the petitioner is granted 30 days time from the date of receipt of a copy of this order to file appeal before the Commissioner (Appeals) and the Commissioner (Appeals) shall entertain the appeal without rejecting the same on the ground of limitation. 16. After the order was dictated, learned counsel for the petitioner would submit that the Commissioner (Appeals) may be directed to independently consider the matter, while dealing with the appeal. It is needless to state that the Commissioner (Appeals) shall decide the matter based on the contentions raised without in any manner influenced by the observations made in this order. 16. After the order was dictated, learned counsel for the petitioner would submit that the Commissioner (Appeals) may be directed to independently consider the matter, while dealing with the appeal. It is needless to state that the Commissioner (Appeals) shall decide the matter based on the contentions raised without in any manner influenced by the observations made in this order. Consequently, connected M.Ps. are dismissed. No costs.