CIT(Appeals) cannot treat the addition made u/s 69C as the addition made u/s 69B: ITAT

The Income Tax Appellate Tribunal (ITAT), in the case of M/s Toffee Agriculture Farms Pvt. Ltd. Vs. Income Tax Officer in its order dated 18.04.2022 sustained that the Assessing Officer was not empowered to refer the matter to DVO, where the assessment was being made u/s 69C of the Income Tax Act, 1961 (The Act).

In this case, the assessee filed its return of income on 29.11.2006, declaring ‘Nil’ income. The case was selected for scrutiny and a notice u/s 143(2) was issued. The Assessing Officer noticed that during the year under consideration the assessee had purchased two tracts of land in the same village for Rs. 22,21,000 and Rs. 15,44,000 respectively, whereas the stamp duty paid on amount of Rs. 34,58,000 and 23,69,000 respectively. Hence the assessee had purchased land below the circle rate. Thereafter, the Assessing Officer referred the issue of valuation of agricultural land in question to the Valuation Officer (DVO). The DVO after considering the facts and circumstances estimated the value of the land less than 10% of the value adopted by the Stamp Valuation Authority. The Assessing Officer, therefore, proceeded to treat the difference of Rs. 14,79,300/- as unexplained expenditure u/s 69C of the Act. Aggrieved against this the assessee preferred appeal before the learned CIT(Appeals).

CIT(A) after considering the submissions, dismissed the appeal filed by the assessee.

Aggrieved by the order passed by CIT(A), the assessee filed the appeal before the ITAT. Ld AR submitted that Assessing officer had made assessment u/s 69C of the Act and referred the matter to DVO u/s of the Act. Ld. AR contented that the reference u/s 142A can be made for the purpose of ascertaining the correct value of investment referred to in section 69 or 69B. However, Section 69C is not mentioned in the proviso. He placed reliance on the judgment of Hon’ble Delhi

High Court rendered in the case of CIT Vs. Aar Pee Apartments (P) Ltd. 319 ITR 276. He further submitted that the learned CIT(Appeals) to fill the legal lacuna, regarding assessment made u/s 69C, arbitrarily replaced Section 69B in place of Section 69C, as mentioned in the assessment order. Therefore, he submitted that the action of the learned CIT(Appeals) tantamount to assess a new source of income not forming part of the assessment order. The learned DR opposed the submissions and supported the orders of the authorities below. He submitted that merely because there was an error in writing Section 69C by the Assessing Officer, would not vitiate the entire proceedings.

The Assessing Officer was dealing in substance with the subject matter relating to the investment made by the assessee in immovable property. He submitted that by mistake the Assessing Officer has stated Section 69C, that has been correctly construed to be Section 69B by the learned CIT(Appeals). ITAT was of the view that there is no dispute with regard to the fact that the Assessing Officer in the assessment order has stated addition regarding unexplained expenditure u/s 69C of the Act. The Revenue has not brought on record that mentioning of Section 69C was on account of any typographical error. It is also clear from the assessment order that the Assessing Officer had referred the issue of market value of the property in question u/s 142A of the Act. However, as per Section 142A such reference can be made to ascertain the value of any investment referred to in Section 69 or Section 69B or the value of any bullion, jewellery or any other valuable article referred to in section 69A or Section 69B of the Act. There is conspicuous exclusion of Section 69C. In the present case, reference u/s 142A was not made regarding ascertaining the correct market value of the investment in property. But, it was in fact for the purpose of ascertaining expenditure which the assessee made on the purchases. Therefore, reference made by the assessing officer to DVO u/s 142A for the purpose of 69C is not valid. ITAT also noted that there is no power conferred upon the CIT(A) to assess a particular item under different provision of the Act what the Assessing Officer had done without giving a specific notice to the assessee regarding such action. Therefore, in the absence of such power, learned CIT(Appeals) could not have treated the addition made u/s 69C as the addition made u/s 69B and the same is contrary to the spirit of the Act. Hence, the addition made u/s 69C on the basis of the report of the DVO by the Assessing Officer deserves to be deleted.

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