C/SCA/6660/2013 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 6660 of 2013 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE BIREN VAISHNAV 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India or any order made thereunder? ANAND BANWARILAL ADUKIA....Petitioner(s) Versus DEPUTY COMMISSIONER OF INCOME TAX....Respondent(s) Appearance: MR MANISH J SHAH, ADVOCATE for Petitioner(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for Respondent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE BIREN VAISHNAV Date : 04/07/2017 Page 1 of 11 HC-NIC Page 1 of 11 Created On Fri Jul 07 09:32:38 IST 2017 C/SCA/6660/2013 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This petition is filed for challenging notice dated 04.12.2012 issued by respondent Assessing Officer to reopen petitioner's assessment for assessment year 2008 09. 2. Brief facts are as under. 3. Petitioner is individual. For assessment year 2008 09, petitioner had filed return of income which was taken in scrutiny by Assessing Officer. Order of assessment under section 143(3) of Income Tax Act, 1961 ('the Act' for short) was passed on 31.12.2010. During period relevant to assessment year 2008 09, petitioner had purchased bungalow at 'Satyagrah Chhavni', Ahmedabad, on 25.07.2007 for sale consideration of Rs.60 lakhs. It appears that while registering sale deed, stamp duty authorities of State Government had demanded and assessee had paid additional stamp duty of Rs.1,34,256/ for said sale. In order of assessment, Assessing Officer made no addition on premise that assessee had invested amount larger than reflected sale consideration of Rs.60 Page 2 of 11 HC-NIC Page 2 of 11 Created On Fri Jul 07 09:32:38 IST 2017 C/SCA/6660/2013 JUDGMENT lakhs. He however, on 29.12.2010 had made reference to District Valuation Officer ('DVO' for short) under section 142A of Act, calling for his opinion on fair market value of property in question. valuer's report was submitted on 16.07.2012 in which, fair market value as on date of sale was estimated at Rs.1,71,94,072/ . 4. After receipt of valuer's report, Assessing Officer issued impugned notice dated 04.12.2012 seeking to reopen assessee's assessment for assessment year 2007 08. For such purpose, he has recorded following reasons: Reasons for re opening assessment: In this case return of income was filed on 31/7/2008 declaring total income Rs.25,14,480/ . case was finalized u/s.143(3) of I.T. Act on 31/12/2010 determining total income of Rs.31,91,750/ . assessee is employee of pantaloon retail (India Ltd.) and deriving income from salary, house property and other sources. It was noticed during course of assessment proceedings that assessee had purchased bungalow No.126, Satyagraha Chhavani, Ramdevnagar, Satellite, Ahmedabad on 25/7/2007 for consideration of Rs.60,00,000/ . investment in said property was examined by then assessing officer to extent of Rs.60,00,000/ but it was observed that value shown in purchase deed seems to be lower side. Hence, copy of purchase deed was obtained from assessee and found that assessee has paid additional stamp duty of Page 3 of 11 HC-NIC Page 3 of 11 Created On Fri Jul 07 09:32:38 IST 2017 C/SCA/6660/2013 JUDGMENT Rs.1,34,256/ to sub registrar Paldi, Ahmedabad over and above stamp duty paid on Rs.60 lacs which means assessee had made unaccounted investment in purchase of property. As such, sale value of property was undervalued by both purchaser and seller. Therefore, then A.O. was in possession of evidence to effect that investment in property was not correctly reported by assessee. Moreover, due to lake of time being time barring assessment, reference was made u/s. 142A to valuation cell on 29/12/2010 for determining fair market value of property in question. On basis of above reference, valuation cell has submitted report on 16/7/2012 determining fair market value of property after taking in to account all items exited/executed in building as on date of inspection. weighted average cost index is based on year wise expenditure details made available by assessee. fair market value determined by valuation cell is Rs.1,71,94,072/ as on 11/5/2007 where as purchase deed was executed by assessee of Rs.60 lacs only. Hence, assessee has undervalued property to extent of Rs.1,11,94,072/ and violated provisions of section 69 of Act. In view of above facts I am satisfied and have reason to believe that income chargeable to tax had escaped assessment to extent of Rs.1,11,94,072/ for which assessee was failed to disclose fully and truly material facts of property. Permission may kindly be accorded to issue notice u/s.148 of I.T. Act. 5. assessee raised objections to reopening of assessment under communication dated Page 4 of 11 HC-NIC Page 4 of 11 Created On Fri Jul 07 09:32:38 IST 2017 C/SCA/6660/2013 JUDGMENT 08.01.2013. Such objections were however rejected by Assessing Officer by order dated 24.01.2013. Hence this petition. 6. Learned counsel Shri J.P.Shah for petitioner submitted that Assessing Officer issued notice for reopening without jurisdictional facts being established. Payment of higher stamp duty would have no effect on purchaser of property considering provisions of section 50C of Act. He further submitted that reference to valuer itself was incompetent as was held by Division Bench of this Court in judgment dated 20.10.2016 in Special Civil Application No.6203 of 2011, in which, this assessee had challenged reference to valuer. 7. On other hand, learned counsel Ms.Mauna Bhatt for Revenue opposed petition contending that notice for reopening has been issued within period of four years from end of relevant assessment year. question of actual investment made by assessee in purchase of said property was not examined by Assessing Officer in original assessment. Even if reference to DVO Page 5 of 11 HC-NIC Page 5 of 11 Created On Fri Jul 07 09:32:38 IST 2017 C/SCA/6660/2013 JUDGMENT was invalid, report can be relied upon for purpose of reopening of assessment. In this context, she relied on judgment of Supreme Court in case of Pooran Mal v. Director of Inspection (Investigation) of Income Tax, New Delhi, reported in (93) ITR 505. She also drew our attention to judgment of Division Bench of this Court in case of Kanaiyalal Dhansukhlal Sopriwala v. District Valuation Officer and another, reported in 391 ITR 56, in which, considering facts of case, reference made by Assessing Officer to DVO for estimation of property sold by assessee came to be upheld. 8. From record, it emerges that sole basis for reopening of assessment is belief of Assessing Officer that in purchasing bungalow at 'Satyagrah Chhavni', assessee had made investment in excess of Rs.60,00,000/ which was declared sale consideration. In this context, in reasons recorded, Assessing Officer has referred to two separate factors. First is fact that assessee had paid additional stamp duty of Rs.1,34,256/ for registration of sale deed. According to Assessing Officer, this would mean that assessee Page 6 of 11 HC-NIC Page 6 of 11 Created On Fri Jul 07 09:32:38 IST 2017 C/SCA/6660/2013 JUDGMENT had made unaccounted investment in purchase of property. second factor relied upon by Assessing Officer is that valuer's report dated 16.07.2012, in which, fair market value of property as on date of purchase was estimated at Rs.1,71,94,072/ . 9. We may address second of two facts first. As pointed out by counsel for assessee, reference to DVO by Assessing Officer made on 29.12.2010 came to be challenged by assessee in Special Civil Application No.6203 of 2011. Division Bench by judgment dated 20.10.2016, concluded as under: 13. Upon considering materials on records and contentions raised by respective parties and in view of aforesaid proposition of law laid down by cases which have been referred, we are of opinion that action of making reference is not sustainable in eye of law and therefore, we hereby quash and set aside communication dated 29.12.2010 as also consequent communication dated 10.3.2011 and 26.4.2011 respectively. petition is allowed to aforesaid extent. Rule is made absolute. 10. Thus, very reference to DVO was held to be invalid. We are not required to go into Page 7 of 11 HC-NIC Page 7 of 11 Created On Fri Jul 07 09:32:38 IST 2017 C/SCA/6660/2013 JUDGMENT reasons why Court came to such conclusion since it is not case of Revenue that this judgment has not attained finality. That being position, we must proceed on basis that reference to DVO which eventually led to DVO making his report dated 16.07.2012 itself was found to be invalid. Once reference was found to be invalid, there is thereafter no sanctity of any consequential steps that DVO might have taken in meantime. Merely because by time Court struck down reference to DVO as being incompetent or invalid, DVO in absence of injunction of Court made his assessment and submitted his report, would not mean that such report would have any validity. In plain terms, report of DVO cannot have validity beyond that of reference itself. decision of Supreme Court in case of Pooran Mal (supra) was referred in entirely different set of facts and circumstances. It was case where while considering validity of provisions of section 132 and 132A of Act, pertaining to search and seizure, Court held that information gathered from documents seized, during such seizure, would not Page 8 of 11 HC-NIC Page 8 of 11 Created On Fri Jul 07 09:32:38 IST 2017 C/SCA/6660/2013 JUDGMENT become inadmissible, merely because search itself was declared illegal. 11. We may now revert to first factor relied by Assessing Officer for reopening assessment. In this context, in reasons recorded, he has noted that Assessing Officer during original assessment had found that assessee had purchased said bungalow at 'Satyagrah Chhavni' for consideration of Rs.60 lakhs. He was however of opinion that declared sale consideration was on lower side. Upon obtaining copy of sale deed Assessing Officer noticed that assessee had paid additional stamp duty of Rs.1,34,256/ for registration of sale deed which means that assessee had made unaccounted investment in purchase of property. 12. For two reasons, this information would not permit Assessing Officer to reopen assessment. Firstly, there is no presumption in law that whenever Stamp Duty authority collects duty higher than what would be payable on declared sale consideration, it would automatically mean that Page 9 of 11 HC-NIC Page 9 of 11 Created On Fri Jul 07 09:32:38 IST 2017 C/SCA/6660/2013 JUDGMENT purchaser had paid sum in excess of reflected sale consideration. statutory presumption flowing from section 50C of Act is in relation to capital gain to be assessed in hands of seller. This presumption is also rebuttable if assessee disputes stamp duty valuation. In any case, there cannot be automatic presumption that purchaser of property had paid consideration higher than sale consideration reflected in sale deed, moment stamp valuation authority of State Government demanded and parties paid higher stamp duty. This may be one of factors which may prompt Assessing Officer to probe further. This leads us to second reason viz. this information that assessee had purchased immovable property for declared sale consideration of Rs.60 lakhs and that at time of registration of sale deed, he was asked to pay additional stamp duty of Rs.1,34,256/ was very much before Assessing Officer even during original assessment as can be seen from reasons recorded for reopening assessment. same information which was noticed by Assessing Officer, but which did not Page 10 of 11 HC-NIC Page 10 of 11 Created On Fri Jul 07 09:32:38 IST 2017 C/SCA/6660/2013 JUDGMENT prompt him to make any addition or make any other attempt to make addition except for calling of DVO's report, by itself cannot be ground for reopening of assessment. 13. For such combined reasons, impugned notice is quashed. Petition is allowed and disposed of. (AKIL KURESHI, J.) (BIREN VAISHNAV, J.) ANKIT Page 11 of 11 HC-NIC Page 11 of 11 Created On Fri Jul 07 09:32:38 IST 2017 Anand Banwarilal Adukia v. Deputy Commissioner of Income-tax