Reassessment Order Involving Section 50C Is Time-Barred as Extension Under Section 142A Is Impermissible

Section 153, read with sections 50C and 142A, of the Income

ORDER

M. Balaganesh, Accountant Member. – The appeal in ITA No.9203/Del/2015 for AY 2017-18, arises out of the order of the ld National Faceless Appeal Centre (NFAC) Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 18.11.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 28.09.2021 by the Assessing Officer, NFAC, Delhi (hereinafter referred to as ‘ld. AO’).

2. The Assessee has raised the following grounds of appeal:-

3. We have heard the rival submissions and perused the material available on record. The return of income for AY 2017-18 was filed by the assessee company on 12.10.2017 declaring total income of Rs. 9,24,88,430/-. The case of the assessee was selected for scrutiny. The assessee company is engaged in the business of providing loans and making investments as a non banking financial company. The assessee filed a revised return of income on 23.07.2019 declaring total income of Rs. 9,24,88,434/- under normal provisions of the Act and book profit of Rs. 17,26,238/- u/s 115JB of the Act. The assessee sold a property situated at Nariman Point, Mumbai during the year under consideration and gain from sale of property was duly offered to tax under the head “income from capital gains”. The assessee sold the property for sale consideration of Rs. 2,16,40,000/- and stamp duty was paid on the circle rate of Rs. 2,85,80,744/-. The assessee during the assessment proceedings submitted that the value adopted by the Stamp Valuation Authority is higher than the fair market value. It was submitted that the assessee had sold the property at fair market value. The assessee in support of its contentions placed on record an independent valuation report obtained from a Govt valuer, who valued the property at Rs. 2,13,28,000/-. The ld AO in the course of assessment proceedings made reference to ld Departmental Valuation Officer (DVO) on 11.11.2019. The fact of such reference made to ld DVO was never intimated to the assessee by the ld AO in the assessment proceedings. The ld DVO did not submit the valuation report before the completion of assessment. Hence, the ld AO completed the assessment on 28.09.2021 making an addition of Rs. 69,40,744/- u/s 50C of the Act by adding the differential sale consideration adopted by the Stamp Valuation Authority.

4. The assessee pleaded that the assessment completed u/s 28.09.2021 is barred by limitation in terms of provisions of Section 153(1) of the Act. The assessee submitted that the fact of ld AO making reference to ld DVO was made known to the assessee for the first time only through the assessment order wherein, it was mentioned that case was referred to Valuation Cell by the ld AO vide letter dated 11.11.2019. Further, it was pleaded before the ld CIT(A) that the ld AO should have referred the case to ld DVO as per provisions of Section 50C(2) of the Act, being a specific provision involved for adjudicating the disputed issue and should have passed the assessment order on or before 31.12.2019 as per the outer time limit prescribed in Section 153 of the Act. The ld AO had passed the assessment order on 28.09.2021 by claiming extension of time u/s 153 Explanation (1)(v) of the Act which refers to reference made to Valuation Officer u/s 142A of the Act. It was pleaded that when a specific provision of making reference to Valuation Officer is provided in Section 50C(2) of the Act itself, then there is no requirement of making reference to Valuation Officer under general provisions u/s 142A of the Act. It was submitted that special provision would always override general provision. Further, it was submitted that even if the reference is sought to be made u/s 142A of the Act still admittedly the assessee was not given any opportunity of being heard before the Valuation Officer which is a prerequisite and mandatory conditions as per Section 142A(4) of the Act. Further, it was submitted that even if the reference made by the ld AO is to be treated as a reference made u/s 142A of the Act, then the Valuation Officer ought to have sent the report to AO as well as the assessee within a period of 6 months from the end of the month in which reference is made. Accordingly, in the instant case, as per the assessment order, the reference was made to DVO on 11.11.2019. Hence, the last date of submission of the valuation was 31.05.2020. Admittedly, no such report was submitted by the ld DVO to the assessee. It was also submitted that even if the reference is to be construed as reference made u/s 142A of the Act, once the reference is made to the Valuation Officer, then the ld AO is duty bound to wait for the report from the Valuation Officer before finalizing the assessment. In the instant case, assessment has been framed on 28.09.2021 without waiting for the valuation report from the ld DVO which itself would make the order the ld AO as invalid. Reliance in this regard was placed on the decision of the Hon’ble Madras High Court in the case of N. Meenakshi v. Asstt. CIT [2010] 326 ITR 229 (Mad). In the instant case, no such valuation report was either submitted to the ld AO or to the assessee. Under these circumstances, the ld AO should have relied on the independent valuation report submitted by the assessee which has been obtained from an approved Government valuer who had valued the property for Rs. 2,13,28,000 against the returned sale consideration by the assessee of Rs. 2,16,40,000. Further, having resorted not to wait for the report of the valuation officer, the ld AO could not have got the extended time limit to frame the assessment on 28.09.2021 instead of 31.12.2019, which would make his assessment barred by limitation. The assessee also relied on the provisions of Section 155(15) of the Act which says that assessment should be completed within time without waiting for the valuation report and as and when valuation report is received, the AO would be given the power to amend the assessment order based on the modifications suggested by the Valuation Officer on the value of consideration. This goes to prove that ld AO ought to have framed the assessment on or before 31.12.2019 as per the time limit provided u/s 153(1) of the Act. Further, it was submitted that for making a reference in terms of section 50C(2) of the Act, no extension of time has been granted u/s 153(1) of the Act. It was also submitted that reference to Valuation Cell u/s 142A of the Act could be made for the purpose of determining the fair market value of the investment covered u/s 69, 69A and 69B of the Act and not for the purpose of computation of capital gains u/s 48 of the Act. Reliance in this regard was placed on the coordinate bench decision of the Delhi tribunal in the case of Sumit Khurana v. Asstt. CIT 48 SOT 92 (Delhi) (URO).

5. The ld CIT(A) categorically held that the reference in the instant case was made u/s 142A of the Act by the ld AO to the ld DVO. The ld CIT(A) held that assessment framed on 28.09.2021 was well within the time in view of the extended provision of 203 days as per Explanation 1(b) to Section 153 of the Act and thereafter followed by relaxation given due to COVID. The ld CIT(A) held that accordingly, the last date for completion of the assessment would be 30.09.2021 and hence the assessment framed on 28.09.2021 was within time. On merits, the ld CIT(A) upheld the addition made u/s 50C of the Act. The ld CIT(A) also held that Section 50C(2) of the Act specify reference to Valuation Officer by stating that AO may refer the valuation of capital asset to the Valuation Officer. The ld CIT(A) held that such reference was not self-contained but operates through the Valuation Machinery of Section 142A of the Act. The ld CIT(A) held that after amendment in Section 142A of the Act by Finance Act 2014, the scope of Section 142A of the Act is wide enough to encompass references made for the purpose of Section 50C(2) of the Act.

6. At the outset, we find that the CIT(A) had categorically given a finding that reference in the instant case has been made by the ld AO to ld DVO only u/s 142A of the Act. Section 142A is a residuary provision and a general provision for valuation of any asset for determining the fair market value, whereas Section 50C(2) of the Act is a special and specific provision for determination of fair value of the capital asset for the purpose of computation of capital gains under section 48 of the Act. It is trite law that general provisions have to pave way for the specific provision in view of overriding nature of the latter. In this regard, the popular legal maxim Generalia specialibus non derogant would apply, which means that when there is conflict between the general and special provision, the latter shall prevail. Section 50C of the Act being a specific provision, is a self contained code in itself which clearly mandates making reference to ld DVO if the value adopted by the Stamp Valuation Authorities is objected by the assessee. It is pertinent to note that the provisions of Section 153(1) of the Act does not extend any time limit when a reference is made to ld DVO in terms of Section 50C(2) of the Act, being is a special provision. Hence, the ld AO ought to have completed the assessment within the time limit prescribed u/s 153(1) of the Act i.e. on or before 31.12.2019 and make suitable amendment to the assessment order after the receipt of ld DVO’s report as provided in Section 155(15) of the Act. This was not done by the ld AO in the instant case. Hence, the assessment framed on 28.09.2021 would be barred by limitation as resort to extended time limit cannot be used by the revenue in the instant case, as the reference could not have been made u/s 142A of the Act itself in the instant case, rather the reference to be construed to have made only in terms of Section 50C(2) of the Act, being a special provision. In any event, till the date of completion of assessment proceedings on 28.09.2021, the ld DVO had not submitted the valuation report. On the other hand, the assessee had furnished an independent valuation report obtained from the approved Government valuer. In that scenario, the ld AO ought to have considered the valuation report submitted by the assessee, which is also not done by him in the instant case.

7. In view of the aforesaid observations, both on law as well as on facts, as on facts, we have no hesitation to hold that the assessment framed u/s 28.09.2021 is barred by limitation and hence the addition made thereon is hereby deleted. The grounds raised by the assessee are allowed.

8. In the result, the appeal of the assessee is allowed.