A.jesu Rajendran v. The Commissioner Of Income Tax (Appeals Iii), Aayakar Bhavan, 121 Mg Road, Chennai 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED 10.10.2014 CORAM THE HONOURABLE MR.JUSTICE T.S. SIVAGNANAM W.P. No.9988 of 2014 A.Jesu Rajendran.. Petitioner -vs- 1.The Commissioner of Income Tax (Appeals III), Aayakar Bhavan, 121 MG Road, Chennai 600 034 2.The Income Tax Officer,Business Officer XIII(2)Room No.606, New Block, Aayakar Bhavan, No.121 MG Road, Chennai 600 034 ... Respondents Prayer: Petition filed under Article 226 of the Constitution of Indiato issue a writ of certiorarified mandamus calling for the records onthe file of the second respondent contained in its Assessment orderdated 12.03.2014, passed under Section 143(3) read with Section 147of the Income Tax Act, 1961 for the assessment year 2007-08 in PANNo.ACQPJ5627E and to quash the same as violating petitioner'sfundamental and constitutional rights and consequently to direct thesecond respondent or any of its subordinates, agents or any otherpersons to drop any proceeding initiated under Section 271(1)(c) ofthe Income Tax Act, 1961. For Petitioner : Mr.Suhrith Parthasarathy For Respondents: Mr.T.Pramod Kumar Chopda, Standing Counsel The petitioner, who is an individual assessee under theprovisions of the Income Tax Act, has filed this writ petitionpraying for issuance of writ of certiorarified mandamus to quash theorder passed by the second respondent under Section 143(3) read withSection 147 of the Income Tax Act, (herein after referred to as 'theAct') 1961, for the assessment year 2007-08. 2.The petitioner/assessee who is a manpower consultant, had soldlanded property in Bangalore Rural District for a consideration ofRs.95,00,000/- during the assessment year 2007-08 and as per the salehttps://hcservices.ecourts.gov.in/hcservices/ deed dated 23.01.2007, the guideline value of the property wasRs.3,00,00,000/-. The property which was sold by the petitioner/assessee was purchased by him on 12.10.2004 for a total saleconsideration of Rs.79,21,500/-. The petitioner/assessee had notfiled any return of income under Section 139(1) of the Act and as hefailed to file the return of income, notice under Section 148 of theAct was issued to the petitioner/assessee on 05.03.2013 calling forthe return of income. In response to the said notice, thepetitioner/assessee filed return of income on 07.02.2014, admittingthe gross total income of Rs.1,39,420/- and claiming loss ofRs.2,95,883/- from business and profession. The total income from thesale of land and professional income were shown as Rs.47,00,000/- andRs.8,64,403/- respectively. Thus, the total receipts in the businessincome is Rs.55,64,403/-. 3.The Assessing Officer while going through the return of incomefor the assessment years 2005-06 and 2006-07, pointed out that theassessee has disclosed only income from profession and disclosingincome by way of sale of land for the assessment year 2007-08 underthe head business is only an after thought of the assessee and theassessee had not at all disclosed any income from real estate. It wasfurther pointed out that the assessee having sold the land forRs.95,00,000/-, has not disclosed the relevant income in the returnof income filed by him. It is to be noted that though the noticeunder Section 148 of the Act was issued on 05.03.2013, the return ofincome was not filed immediately and therefore, reminders were senton 24.06.2013 and 16.08.2013 and thereafter, the petitioner sent aletter on 07.10.2013 stating that due to the pre-occupation withlitigation of the property and various court cases associated withthe litigation, the petitioner was not able to take care of regularmatters and requested the department as to how the short term capitalgain estimated at Rs.2,11,20,390/- has been arrived at and relatingto which transaction and further sufficient time was requested by theassessee to file the reply. 4.Thereafter, a notice under Section 143(2)(ii) of the Act wasissued to the petitioner on 12.02.2014 calling upon the petitioner toappear in the office of the second respondent on 17.02.2014. This wasfollowed by another notice dated 12.02.2014 under Section 142(1) ofthe Act. Thereafter, the petitioner filed the return of income on07.02.2014. Even thereafter, the petitioner did not raise anyobjection as regards valuation of the property and for the first timeon 06.03.2014, the petitioner sent a letter stating that he hadplaced on record his objection for the valuation adopted by the stampvaluation authority as market value by drawing the attention of theAssessing officer to Section 50C(2)(a) of the Act. It is to be notedthat the assessment should be completed on or before 31.03.2014 orelse the same would be time barred. The Assessing officer whilepassing the impugned order of assessment, considered the request madeby the petitioner, invoking Section 50C of the Act. https://hcservices.ecourts.gov.in/hcservices/ 5.It was observed that the assessee has not agitated against thevalue adopted by the Sub Registrar at the time of registration and noappeal was filed against the decision of the Sub Registrar and havingaccepted the valuation determined by the Sub Registrar at the time ofregistering the property, agitating before the assessing officer foradopting the value under Section 50C is not proper and fair.Therefore, the Assessing Officer rejected the request of the assesseefor referring the matter to the Valuation Officer. Thereafter, theAssessing Officer proceeded to consider the contention regarding theterm of capital assets and finalised the statement and assessed theincome at Rs.2,40,29,848/-. 6.The petitioner has now challenged the order of assessment notentirely on its merits, but, on the ground that the second respondentought to have referred the subject matter for valuation to theValuation Officer and his rights under Section 50C(2) of the Act hasbeen violated. Therefore, it is contended that rejecting thepetitioner's request for referring the document to the ValuationOfficer for valuation report is illegal and violates the petitioner'srights. 7.In support of his contentions, learned counsel for thepetitioner placed reliance on the decision of this Court in the caseof N.Meenakshi v. The Assistant Commissioner of Income Tax reportedin 2010 326 ITR 229 (Madras). As regards the scope of the power underSection 50C(2) of the Act, learned counsel for the petitioner placedreliance on the decision of Hon'ble Division Bench in the case ofS.Muthuraja v. Commissioner of Income Tax reported inMANU/TN/1350/2013. 8.Learned Standing Counsel appearing for respondents submittedthat the conduct of the assessee is also very relevant to be noted bythis Court, while considering as to whether the petitioner should bedirected to agitate this issue before this Court, without exhaustingthe appeal remedy available to the petitioner under Section 246 ofthe Act. He further pointed out that the notice under Section 148 ofthe Act was issued on 05.03.2013 and the assessee did not file thereturn of income, despite two reminders sent on 24.06.2013 and06.08.2013 and he sent a letter on 07.10.2013 stating that due to thepre-occupation with litigation of the property and other cases, hewas unable to submit the reply and thereafter, notices were issuedunder Sections 143(2)(ii) and 142(1) on 12.02.2014 for which thepetitioner only gave a letter on 06.03.2014 stating that thevaluation of the property has to be obtained under Section 50C(2)(a),fully knowing well that the assessment proceedings have to becompleted on or before 31.03.2014. 9.It is further submitted by the learned Standing Counsel forthe respondents that the return was filed after lapse of 11 months,after issuance of notice under Section 148 of the Act and even thenthe petitioner did not admit any capital gain arising out of the salehttps://hcservices.ecourts.gov.in/hcservices/ effected during the financial year 2006-07. Further it is submittedthat the property which was sold is a vacant land and there is nobuilding or structure in the land to value the same by the ValuationOfficer and therefore, the Assessing Officer rightly rejected therequest. Further the property was sold in the year 2007 and the SubRegistrar adopted the market value at Rs.3,00,00,000/-, which wasaccepted by the petitioner and he did not question the valuation andno appeal was filed. Having accepted the valuation, at the fag end ofthe assessment proceedings, it is highly improper and unfair on thepart of the petitioner now to seek for invoking Section 50C of theAct. Further the learned Standing Counsel submitted that there is noreason for the petitioner to by-pass the appeal remedy and all theseissues could be raised before the Appellate Authority under Section246 of the Act and the Commissioner (Appeals) may be directed todispose of the matter on further enquiry or may direct the assessingofficer to make further enquiry and report the result of the same tothe Commissioner of Appeal. Therefore, the Appellate Authority isentitled to examine the issue and all these matters could be easilybe agitated in the appeal. 10.Heard the learned counsel for the petitioner and the learnedStanding Counsel appearing for the respondent. Perused the materialsplaced on record. 11.Admittedly, as stated supra by the respondent department, theconduct of the assessee also has to be looked into as to whether theclaim made by him was bonafide, fair and reasonable. Since the noticeunder Section 148 of the Act was issued on 05.03.2013, the assesseedid not file the return of income immediately. But, belatedly filedthe same after 11 months. In the interregnum period, two reminderswere sent for which the assessee sent a letter stating that due toother litigation, he was unable to submit the reply. Thereafter, whenthe return was filed, the assessee did not admit any capital gainarising out of the sale effected during the financial year 2006-07and notices were issued under Sections 143(2)(ii) and 142(1) on12.02.2014 and even thereafter, the assessee did not immediately takeany action at the fag end of the year and only on 06.03.2014 for thefirst time, the assessee disputed the value of the property. In suchcircumstances, it is to be seen as to whether the second respondentwas justified in rejecting the request of the petitioner forreferring the matter to the Valuation Officer. 12.After going through the facts, it appears that the petitionerwas inspired to claim the relief under Section 50C of the Act basedon the decision of this Court in the case of N.Meenakshi v. TheAssistant Commissioner of Income Tax reported in 2010 326 ITR 229(Madras) stated supra and it is to be noted in the said case, theassessing authority proposed to assess the capital gain on the valuefixed by the Stamp Authorities and the assessee therein made arequest to the Assessing Authority to refer the matter to thevaluation officer for determining the market value of the propertyhttps://hcservices.ecourts.gov.in/hcservices/ 12.After going through the facts, it appears that the petitionerwas inspired to claim the relief under Section 50C of the Act basedon the decision of this Court in the case of N.Meenakshi v. TheAssistant Commissioner of Income Tax reported in 2010 326 ITR 229(Madras) stated supra and it is to be noted in the said case, theassessing authority proposed to assess the capital gain on the valuefixed by the Stamp Authorities and the assessee therein made arequest to the Assessing Authority to refer the matter to thevaluation officer for determining the market value of the propertyhttps://hcservices.ecourts.gov.in/hcservices/ and the reference was made to the valuation officer. In the courseof the assessment proceedings, however, even before the ValuationOfficer filed a report, the assessing officer passed the assessmentorder taking the value of the land as determined by the RegisteringAuthority, which according to the petitioner was against Section 50C(2) of the Act. Taking note of the said provisions, this Court heldthat the right of an assessee conferred under Section 50C of the Actis a valuable statutory right available to protect his interestagainst any arbitrariness which may creep in while fixing the valueof the capital gain and that is the safeguard given to the assesseeand that the said right is more effective in cases where the partiesto the document have not taken any steps to defend or to initiateproceedings under Section 47A of the Indian Stamp Act. 13.On the facts and circumstances of the said case, inasmuch asthe purchaser, which was a Government concern, has not taken anysteps under Section 47A of the Indian Stamp Act and therefore theonly remedy for the petitioner therein was under Section 50C of theAct. As regards the availability of the alternative remedy, thisCourt held that it is an un-disputed fact that the matter was pendingbefore the valuation officer which had been referred by the assessingofficer and without waiting for the valuation report, the assessmentwas completed and therefore the availability of alternative remedywould not be a bar for the court to exercise its jurisdiction underSection 226 of the Constitution of India. The decision in the case ofS.Muthuraja v. Commissioner of Income Tax reported in MANU/TN/1350/2013 stated supra arose out of a Tax Case Appeal filed by theassessee and in which the question was answered and the Tax CaseAppeal was disposed of and the matter was restored to the files ofthe Assessing Officer to work out the capital gain invoking 50C(2) ofthe Act, since the specific objection was made by the assessee to theassessing officer adopting market value under Section 50C(2) of theAct by filing objection immediately. 14.In the light of the above facts, the decision in the case ofN.Meenakshi v. The Assistant Commissioner of Income Tax reported in2010 326 ITR 229 (Madras) stated supra, cannot be directly applicableto the facts and circumstances of the present case, since the factualposition was entirely different as unless the purchaser of theproperty was Government concern and they did not dispute thevaluation under the Indian Stamp Act; the petitioner therein was thevendor of the property and the only right available to the petitionertherein was under Section 50C(2). 15.As regards the valuation of the property, the petitioner'srequest for valuation under Section 50C was rejected by the AssessingOfficer and it was held that the petitioner had sold the vacant landand there is no building in the property and the petitioner acceptedthe actual valuation of the property as Rs.3 crores and even in thereturn of income the capital gain arising for the financial year2006-07 and the return itself was filed after the period of 11 months https://hcservices.ecourts.gov.in/hcservices/ 15.As regards the valuation of the property, the petitioner'srequest for valuation under Section 50C was rejected by the AssessingOfficer and it was held that the petitioner had sold the vacant landand there is no building in the property and the petitioner acceptedthe actual valuation of the property as Rs.3 crores and even in thereturn of income the capital gain arising for the financial year2006-07 and the return itself was filed after the period of 11 months https://hcservices.ecourts.gov.in/hcservices/ 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 thefirst time on 06.03.2014, the request was made under Section 50C ofthe Act. In such circumstances, the assessing officer was justifiedin considering the case along with other issues and passing the orderof assessment. The only remedy left to the petitioner is to file anappeal before the Commissioner of Income Tax (Appeals III) underSection 246 of the Act. This Court is not inclined to interfere withthe order of Assessing Officer. Accordingly, the writ petition failsand the same is dismissed. Since the writ petition was pending sinceMarch 2014, the petitioner is granted 30 days time from the date ofreceipt of a copy of this order to file appeal before theCommissioner (Appeals) and the Commissioner (Appeals) shall entertainthe appeal without rejecting the same on the ground of limitation. 16.After the order was dictated, learned counsel for thepetitioner would submit that the Commissioner (Appeals) may bedirected to independently consider the matter, while dealing with theappeal. It is needless to state that the Commissioner (Appeals) shalldecide the matter based on the contentions raised without in anymanner influenced by the observations made in this order.Consequently, connected M.Ps. are dismissed. No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant RegistrarvgaTo 1.The Commissioner of Income Tax (Appeals III), Aayakar Bhavan, 121 MG Road, Chennai 600 0342.The Income Tax Officer,Business Officer XIII(2)Room No.606, New Block, Aayakar Bhavan, No.121 MG Road, Chennai 600 034 1 cc to Mr.T.Pramod Kumar Chopda, ,Advocate, SR.No.48506 1 cc to Mr.Suhrith Parthasarathy ,Advocate, SR.No.48549W.P. No.9988 of 2014 rj(co)pmk,29.10.2014