In the case of Bhatia Propcon Pvt Ltd vs DCIT W.P.(C) 17527/2022 decision dated 14.1.2025,their Lordships were pleased to uphold the validity of notice u/ 148A(b) and the order u/s 148A(d).Facts as found by the hon’ble Court are:

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4. As is manifest from the above, the sole allegation was of the petitioner having received sale consideration in connection with the conveyance of an immovable property at a price below the circle rate as notified by the competent government. In view of the aforesaid, the Assessing Officer4 came to form the prima facie opinion that the provisions of Section 50C of the Act were attracted.

5. Responding to the aforesaid notice, the petitioner firstly explained the circumstances which had constrained it to sell one of the floors of the property under development for a consideration below the circle rate which applied. Before us, quite apart from it being asserted that the AO has failed to adequately engage with and consider the response which was submitted, it was contended that the AO clearly erred in resorting to Section 50C since the presumption which that provision raises is in respect of the transfer of a capital asset. It was contended that the petitioner was a property developer and thus the various floors which were developed by it were in the nature of stock-in-trade and thus Section 50C would not even apply.

6. Reverting back to the proceedings as they unfolded before the AO, we note that after the submission of the objections which had been preferred by the writ petitioner, the AO asserted that the provisions of Section 148 had been rightly proposed to be invoked and rendered the following conclusions:-

“6.2 Assessee in its submission has stated that the property in question is the second floor of Property no. A-247 , New Friends Colony, New Delhi and said that while the basement, ground floor, first floor and third floor were sold at price above circle rate, it could not find any buyer for second floor which was then sold at sale consideration less than circle rate. These grounds of assessee are not found justified since a property cannot be sold a sale consideration less than circle rate by citing non-availability of willing buyers.

6.3 Further assessee’s contention that the entire sale consideration of Rs. 3,70,00,000/- was offered to tax does not rule out the fact that the property has been sold at consideration less than the circle rate.

6.3 Section 50C of the Income tax Act states:

Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building orboth, is less than the value adopted or assessee or assessable by any authority of a State Government (hereafter in this section referred to as the “Stamp Valuation Authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48 , be deemed to the full value of the consideration received or accruing as a result of such transfer.

xxxx xxxx xxxx

8. In view of the above, it emerges that the income to the extent of Rs.71,51,033/- has escaped assessment. Hence, the case of Bhatia Propcon Private Limited PAN AAECB6803B in respect of the, A.Y. 2017-18 is a fit case for issuance of notice u/s 148.”
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Hon’ble Court was pleased to find as follows:

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‘’9. We find merit in the contentions raised by learned counsel for the respondent and find that a combined reading of the provisions of Section 50C read with Section 43CA would lead us to conclude that if the consideration received or accruing to an assessee from the transfer of an asset, in the nature of a capital asset or otherwise, be less than the value ascribed to the said asset as per the circle rate then for the purposes of computation of profit or loss, the value of the asset in question shall be deemed to be the full value of the consideration accruing or received from such a transfer basis the rates prescribed by the competent government.

10. Thus, both provisions contain a ‘deeming provision’ which seeks to impute to the asset so transferred a value ascribable to that asset even if it be sold by the assessee at a value below the circle rate. The AO therefore had sufficient reason to believe that income has escaped assessment when the assessee had shown that the sale consideration received by it for the asset, whether it be a capital asset or not, was below that of the circle rate and a misapprehension of whether the assessee had presumably escaped income under either Section 50C or 43CA would not, in our view, constitute a jurisdictional error so as to render the Section 148 proceedings invalid.

11. Accordingly, and for all the aforesaid reasons, the writ petition fails and shall stand dismissed.’’

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NOTE: citation as per case law published on HC website

ANALYSIS:

1.The finding stretches and strains our understanding respectfully. The presumption is that the invoked section is not part of the essential substratum of s 148 r/w 148A at all.We all know that s 148 is a jurisdictional notice which ENABLES the assumption of jurisdiction at all.It is not like s 143(2).

2.Respectfully,matching colours of two provisions is an exercise in judicial adventurism flying in the face of settled jurisprudence.I borrow from Lord Denning who spoke of ‘’ avoiding ’’ the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another…’’

Likewise ,and respectfully ,and with even more fervour we need to avoid matching the colour of one statute with another.

3.A well settled first principle of law is ‘sublato fundamento cadit opus’ — ‘ foundation being removed, the superstructure falls’.

Is the section invoked not part of the foundation at all?

4.The implications are disconcerting -tommorow the AO invokes s 68 where the actual invokable section is s 69A.Both deal with unexplained credits,one on books and other either in or out of books.Both are rules of evidence and part of anti abuse tax provisions.Then the colour is even more matchable.

4.1 The first rule of natural justice to validate a notice to vary the return of income is that the assessee is told of the precise charge he is supposed to meet.He contests one section only to be told that it was another allegedly in pari materia section which was applicable and the proceedings having been validated since section invoked is of no moment ; he has to meet the charge albeit he does not/need not know the section.The AO may merrily continue investigating the evidentiary requirements of the inapplicable section and then spring the allegedly correct section in the end-or better still ,not even do that ,since the appellate channel shall correct the faux pa anyway by replacing the section with another one- which has varying evidentiary parameters which may not have been met.

5.Finally ,even in matching of colur the comparison falls at the first hurdle.Compare the opening lines of both sections:

43CA: Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both,…….

‘’OTHER THAN A CAPITAL ASSET’’

50C: Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both,………

ÓF A CAPITAL ASSET’’

Is even this not a material consideration? Even when we see that the AO continued to insist that 50C applies ?(page 4 para 6 of the decision).It is not merely a case of a wrong section being referred.It is a question of a considered and sustained belief the AO held and continued to hold.It is a matter of wrong assumption of jurisdiction and amounts to an incurable illegality ,not merely a procedural /descriptive irregularity.To defend the same by a in pari materia invocation of the substance and effect doctrine is a manner of construction of statute which ,respectfully,stuns the legal amour propre.

6.The decision fails the jurisprudence.It needs challenge.

Posted on: January 27th, 2025