Shri Munir Madhukar Thakore, Ahmedabad V. The Income tax Officer,Ward-1(2), Ahmedabad

CO 153/AHD/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8431 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-02-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 17-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Cost of acquisition; Fair market value; Futures and options; Speculative transactions
• Section: 143(3); 50C; 54

Judgement Text

ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, A HMEDABAD (BEFORE SHRI D. K. TYAGI JM & SHRI ANIL CHATURVEDI A.M.) I.T.A. NO.1640 AND 2137/AHD/2012 (ASSESSMENT YEAR: 2004-05) INCOME TAX OFFICER, WARD 1(2), AHMEDABAD. (APPELLANT) VS. MUNIR MADHUKAR THAKORE 18, AMRASHIRISH BUNGALOWS, NEAR AUDA GARDEN, AHMEDABAD (RESPONDENT) C.O. NO.153/AHD/2012 (ARISING OUT OF 1640 OF 2012 FOR ASSESSMENT YEAR: 2 004-05) MUNIR MADHUKAR THAKORE 18, AMRASHIRISH BUNGALOWS, NEAR AUDA GARDEN, AHMEDABAD (APPELLANT) VS. INCOME TAX OFFICER, WARD 1(2), AHMEDABAD. (RESPONDENT) PAN: ABDPT7477L APPELLANT BY : SHRI PRADIP KUMAR MAJUMDA R RESPONDENT BY : SHRI S.M. SOPARKAR AND PARIN SHAH ( )/ ORDER DATE OF HEARING : 13-2-2013 DATE OF PRONOUNCEMENT : 14 -5-2013 ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 2 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A)-VI, AHMEDABAD DATED 2.5.2012. ITA NO.:- 1640/AHD/201 2. THE FACTS AS CULLED FROM THE ORDER OF LOWER AUTH ORITIES ARE AS UNDER: 3. ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM SAL ARY, HOUSE PROPERTY AND CAPITAL GAINS. HE FILED HIS RETURN OF INCOME FO R THE ASSESSMENT YEAR 2004-05 ON 30.10.2004 DECLARING TOTAL INCOME OF RS 3,170/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESS MENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 21.12.2006 AND THE TOTAL IN COME WAS DETERMINED AT RS.33,69,054/-. AGGRIEVED BY THE ORDER OF AO, A SSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 2.5.2 012 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF C IT(A), REVENUE IS NOW IN APPEAL BEFORE US AND THE ASSESSEE HAS ALSO RAISED C ROSS OBJECTIONS. THE GROUNDS RAISED BY REVENUE READS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE DEDUCTION U/S 54 OF THE ACT DESPITE THE FACT THAT T HE ASSESSEE HAD CONSTRUCTED THE NEW RESIDENTIAL PROPERTY BEFORE THE DATE OF SALE TRANSACTION. 2. THE LD. CIT(A) OUGHT TO HAVE TREATED THE NEW RES IDENTIAL PROPERTY AS CONSTRUCTED BY THE ASSESSEE INSTEAD OF CONSIDERING IT AS AN OUTRIGHT PURCHASE. ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER TO EXTENT MENTIONED ABOVE SINCE THE ASSESSE E HAS FAILED TO DISCLOSED HIS TRUE INCOME/BOOK PROFIT. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSIN G OFFICER BE RESTORED TO THE ABOVE EXTENT. THE APPELLANT CRAV ES, TO LEAVE, TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WH ICH MAY BE NECESSARY. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAD SOLD A RESIDENTIAL BUNGLOW (ALONGWITH LAND) FOR TOTAL CONSIDERATION OF RS. 47,80,001/-. ON THE BASIS OF S TAMP DUTY OF RS. 9,02,093/- PAID BY THE ASSESSEE, THE VALUE OF PROP ERTY WAS DETERMINED AT RS. 80,38,372/- AO WAS OF THE VIEW THAT AS PER THE PROVISIONS OF SECTION 50C, THE FULL VALUE OF CONSIDERATION AS DETERMINED BY THE AUTHORITY OF THE STATE GOVERNMENT FOR THE PURPOSE OF STAMP DUTY IS T O BE ADOPTED FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN. HE, AC CORDINGLY, CONSIDERED RS.32,58,371 (RS. 80,38,372 LESS RS. 47,80,001/-) A S ON MONEY RECEIVED BY THE ASSESSEE WHICH WAS NOT REFLECTED IN THE BOOK S OF ACCOUNTS AND ADDED TO THE INCOME. AO WAS ALSO OF THE VIEW THAT T HE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 54 AS THE REQUIRED CONDI TIONS WERE NOT FULFILLED BY THE ASSESSEE. ACCORDING TO AO, ASSESSEE HAD BOOKED THE PLOT OF NEW PROPERTY ON 16.8.2001 AND REACHED AN AGREEMENT FOR CONSTRUCTION THEREON ON 15.9.2001 AND POSSESSION OF THE NEW PROPERTY WAS TAKEN ON 6.6.2003. THE PROPERTY PARAG BUNGLOW WAS SOLD BY THE ASSESS EE VIDE REGISTERED ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 4 SALE DEED DATED 18.8.2003. SINCE, THE ASSESSEE HAD CONSTRUCTED ANOTHER PROPERTY PRIOR TO THE SALE OF PROPERTY, ASSESSEES CLAIM OF DEDUCTION U/S 54 WAS NOT ALLOWABLE AND ACCORDINGLY DISALLOWED THE AS SESSEES CLAIM. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMEN T ORDER, ITATS DIRECTIONS AND APPELLANTS SUBMISSION. ITAT SET ASIDE TWO ISSUES TO THE FILE OF CIT(A)-(I) COMPUTATION OF CAPITAL GAIN UNDER SECTION 50C AND (II) APPELLANTS CLAIM OF DED UCTION UNDER SECTION 54. BOTH THE ISSUES ARE SEPARATELY DEALT WI TH HEREUNDER. AS REGARDS COMPUTATION OF CAPITAL GAIN UNDER SECTIO N 50C, BOTH APPELLANT AND ASSESSING OFFICER SUBMITTED THEIR CAL CULATIONS. AS PER APPELLANT, THE CAPITAL GAINS WAS WORKED OUT AT NIL AND AS PER ASSESSING OFFICER IN REMAND REPORT, IT WAS WORKED O UT AT RS.65,96,842/-. THEREFORE THE COMPUTATION DONE BY B OTH WERE EXAMINED. THE DIFFERENCE WAS COMING ONLY ON TWO ACC OUNTS- FIRST DIFFERENCE IS ON ACCOUNT OF VALUE OF PROPERTY ADOPTED BY STAMP DUTY AUTHORITY IS RS.80,38,372/- WHEREAS ASSE SSING OFFICER CONSIDERED VALUE OF PROPERTY AS PER DVOS R EPORT AT RS.99,89.000. THE SECOND DIFFERENCE IS INDEXED COST OF VALUE OF THE PROPERTY AS ON 1.4.1981. ASSESSING OFFICER ADOP TED THE VALUATION DONE DVO WHEREAS APPELLANT ADOPTED THE VA LUATION BY REGISTERED VALUER WHICH IS QUITE HIGH. APART FRO M THESE TWO DIFFERENCE, THERE IS NO DIFFERENCE IN THE COMPUTATI ON OF APPELLANT AND ASSESSING OFFICER. ON THE ISSUE OF ADOPTION OF VALUE OF PROPERTY BY THE ASSESSING OFFICER HIGHER THAN WHAT WAS VALUED BY STAMP DUTY AUTHORITY, APPELLANT SUBMITTED THAT S ECTION 50 C(3) IS VERY CLEAR ON THIS. IF HIGHER VALUE IS WORKED OUT BY ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 5 DVO, THE VALUE ADOPTED BY STAMP DUTY AUTHORITY IS T O BE TAKEN. SINCE SECTION 50C (3) DOES NOT ALLOW ADOPTION OF VA LUE HIGHER THAN STAMP DUTY AUTHORITY FOR THE PURPOSE OF COMPUTING CAPITAL GAIN, ASSESSING OFFICERS COMPUTATION TO TH IS EXTENT IS NOT CORRECT. ASSESSING OFFICER IS NOT JUSTIFIED IN ADOPTING VALU E OF PROPERTY AT RS.99,89,000 AS AGAINST VALUE ADOPTE D BY STAMP DUTY AUTHORITY AT RS.80,38,372 WHILE COMPUTIN G CAPITAL GAIN UNDER SECTION 50C. REGARDING VALUE AS PROPERTY AS ON 1.4.1981, REGISTE RED VALUER VALUED THE PROPERTY VERY HIGH WHICH CLEAR FROM THE FACT THAT THE COST OF CONSTRUCTION WAS ESTIMATED BY HIM AT RS. 5 LAKHS WHICH IS TAKEN AT LESS THAN RS. 2 LAKHS AFTER 20 YEARS. E VEN IN 1981 THE BUILDING WAS MORE THAN 30 YEARS OLD AND THEREFO RE THE VALUE ADOPTED BY REGISTERED VALUER IS NOT JUSTIFIED AND I T IS ON HIGHER SIDE JUST TO REDUCE THE IMPACT OF CAPITAL GAIN. EVE N OTHERWISE THE VALUATION DONE BY DVO IS CLOSER TO STAMP DUTY A UTHORITY AT THE TIME OF SALE. AS AGAINST THIS THE REGISTERED VA LUER VALUED THE PROPERTY MUCH LOWER THAN THE STAMP DUTY AUTHORITY. THIS CLEARLY SHOWS THAT VALUATION DONE BY REGISTERED VALUER IS M UCH HIGHER WHERE IT IS ADVANTAGEOUS TO ASSESSEE AND IT IS MUCH LOWER IN THE CSE OF SALE CONSIDERATION. THEREFORE VALUATION DONE BY REGISTERED VALUER IS NOT RELIABLE. AS AGAINST THIS THE VALUATION DONE BY DVO IS CLOSER TO REALITY AND THE SAME REPRE SENTS CORRECT MARKET VALUE AS ON 1.4.1981. THE APPELLANT S OBJECTION TO DVOS VALUATION BASED ON JUDICIAL DECISIONS IS T HAT AO CANNOT REFER UNDER SECTION 55A TO DVO WHERE VALUATI ON DONE BY THE ASSESSEE IS HIGHER. HERE, AO DID NOT REFER T HE VALUATION UNDER SECTION 55A AND THEREFORE APPELLANTS OBJECTI ON IS NOT SUSTAINABLE AND THE DECISIONS RELIED UPON BY HIM AR E NOT APPLICABLE. APPELLANT SUBMITTED EXPERT OPINION IN T HE FORM OF REGISTERED VALUERS REPORT AS AGAINST THIS ASSESSIN G OFFICER GOT A REPORT FROM DVO, ANOTHER EXPERT. ON EXAMINING BOTH THE ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 6 REPORTS, I FIND THAT THE VALUE ADOPTED BY DVO IS MO RE APPROPRIATE CONSIDERING THE FACTS DISCUSSED EARLIER . ACCORDINGLY, I AGREE WITH THE ASSESSING OFFICER AND ADOPT THE VALUE COMPUTED BY DVO FOR THE PROPERTY AS ON 1.4.19 81. CAPITAL GAIN AS DIRECTED BY ITAT IS COMPUTED ACCORD INGLY AS UNDER. VALUE OF PROPERTY AS PER VALUATION BY STAMP DUTY AUTHORITY RS.80,38,372 LESS-EXPENSES ON TRANSFER OF PROPERTY ADVERTISEMENT EXPENSES RS.3728 LEGAL FEES RS.70,540 DALALI EXPENSES RS. 63,000 RS.137268 RS.79,01,104 LESS-INDEXED COST OF ACQUISITION COST PRICE AS ON 1.4.1981 IS TAKEN AS PER VALUATION BY DVO 703000 *463 100 32,54,890 CAPITAL GAIN RS.46,46,214 IN VIEW OF THE ABOVE OTHER ISSUE SET-ASIDE BY ITAT REGARDING DEDUCTION UNDER SECTION 54 OF IT ACT, APPELLANT SUB MITTED THAT IT PURCHASED NEW HOUSE IN A BUNGALOW SCHEME ON 5.07.20 03 AND SOLD THE OLD BUNGALOW ON 18.08.2003 THEREFORE HE PU RCHASED NEW HOUSE PROPERTY WITHIN ONE YEAR FROM THE DATE OF TRANSFER OF THE PROPERTY AND THEREFORE ELIGIBLE FOR DEDUCTION U NDER SECTION 54 OF IT ACT ON THE COST OF NEW HOUSE PROPERTY. ASS ESSING OFFICER CONSIDERED THE PURCHASE OF NEW HOUSE PROPER TY AS ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 7 CONSTRUCTION. IN CASE OF CONSTRUCTION OF NEW HOUSE, THE DEDUCTION IS AVAILABLE ONLY IF THE HOUSE IS CONSTRU CTED AFTER THE SALE IS MADE. ACCORDINGLY ASSESSING OFFICER DENIED DEDUCTION UNDER SECTION 54 OF THE APPELLANT. IT IS NOT IN DIS PUTE THAT APPELLANT BOOKED A BUNGALOW IN A SCHEME PROMOTED BY DEVELOPER/BUILDER BY ENTERING INTO TWO AGREEMENTS-O NE AGREEMENT FOR BOOKING OF LAND AND OTHER FOR CONSTRU CTION OF BUNGALOW. I HAVE GONE THROUGH BOTH THE AGREEMENTS. IN PURCHASE OF A BUNGALOW DEVELOPED BY A DEVELOPER, TH ERE IS A USUAL PRACTICE OF ENTERING INTO TWO AGREEMENTS- ONE AGREEMENT FOR BOOKING OF LAND AND OTHER ONE FOR CONSTRUCTION. THESE AGREEMENTS ARE IN NO WAY DIFFERENT THAN BOOKING OF PROPERTY FOR PURCHASE. APPELLANT HAS NOT DONE ANY CONSTRUCTION. NEITHER THE PLOT OF LAND WAS TRANSFERRED TO THE APPELLANT N OR DID APPELLANT DO ANY CONSTRUCTION OF THE SAID PLOT OF L AND. APPELLANT ONLY DID BOOKING FOR PURCHASE OF A BUNGAL OW IN A BUNGALOWS SCHEME FLOATED BY THE DEVELOPER. DEVELOPER/BUILDER ONLY GOT ALL THE PERMISSIONS FOR CONSTRUCTION. DEVELOPER ONLY DID PLANNING, DESIGNIN G AND CONSTRUCTION. AFTER THIS BUNGALOWS WERE READY, DEVE LOPER GOT PERMISSION FROM LOCAL AUTHORITY AND THEN HANDED OVER POSSESSION TO THE APPELLANT ALONG WITH OTHER BUYER S. ALL THESE FACTS AND SEQUENCE OF EVENTS CLEARLY PROVE TH AT APPELLANT DID BOOKING FOR PURCHASE OF BUNGALOW AND GOT THE PO SSESSION OFBUNGALOW FROM THE BUILDER. IT WAS NOT THE CASE OF CONSTRUCTION OF HOUSE BY THE APPELLANT. ON CANNOT JUST GO BY THE TWO AGREEMENTS ENTERED INTO BY THE APPELLANT FOR BOOKIN G OF LAND AND FOR CONSTRUCTION OF BUNGALOW. IN SUBSTANCE IT WAS A CASE OF PURCHASE OF BUNGALOW AND NOT CONSTRUCTION OF BUN GALOW SINCE THERE WAS NO POSSESSION OF LAND GIVEN TO THE APPELLANT. CONSIDERING THIS IT IS HELD THAT APPELLANT PURCHASE D THE PROPERTY, POSSESSION OF WHICH WAS GIVEN ON 5.07 .2003 WHICH IS WITHIN ONE YEAR FROM THE SALE OF PROPERTY. THE ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 8 DECISIONS RELIED UPON BY THE APPELLANT SUPPORTS HIS CLAIM. ACCORDINGLY IT IS HELD THAT APPELLANT IS ELIGIBLE F OR CLAIM OF DEDUCTION UNDER SECTION 54 OF IT ACT IN RESPECT OF PURCHASE OF NEW BUNGALOW. ASSESSING OFFICER IS DIRECTED TO ALLO W THE CLAIM OF DEDUCTION UNDER SECTION 54 OUT OF LONG-TERM CAPI TAL GAIN COMPUTED IN PREVIOUS PARA IN RESPECT OF COST OF PUR CHASE OF NEW BUNGALOW. IN THE FINAL RESULT, APPEAL IS PARTLY ALLOWED. 5. BEFORE US THE LD. D.R. SUBMITTED THAT ASSESSEE H AD ENTERED INTO TWO AGREEMENTS, ONE FOR BOOKING OF PLOT OF LAND AND OTH ER FOR CONSTRUCTION THEREON. THE POSSESSION OF THE NEW PROPERTY WAS TAK EN ON 6.6.2003 WHEREAS THE OLD PROPERTY WAS SOLD ON 18.8.2003. IN THE CASE OF THE ASSESSEE IT IS A CASE OF PURCHASE OF NEW PROPERTY A ND NOT CONSTRUCTION OF A NEW HOUSE. SINCE, THE ASSESSEE HAD PURCHASED NEW PR OPERTY PRIOR TO TWO YEARS FROM THE SALE OF PROPERTY THE ASSESSEE WAS TH EREFORE NOT ELIGIBLE FOR DEDUCTION. HE THUS SUPPORTED THE ORDER OF AO. 6. ON THE OTHER HAND THE LD. A.R. SUBMITTED THAT IT HAD BOOKED A BUNGLOW IN A SCHEME PROMOTED BY BUILDER BY ENTERING INTO TWO AGREEMENTS NAMELY ONE FOR BOOKING OF LAND AND THE OTHER FOR CO NSTRUCTION OF BUNGLOW. THE BUILDER HAD GOT ALL THE PERMISSIONS FOR CONSTRU CTION AND AFTER THE CONSTRUCTION WAS OVER THE ASSESSEE GOT THE POSSESSI ON OF THE BUNGLOW. THE LD. A.R. FURTHER SUBMITTED THAT THE ASSESSEE HA D ONLY PURCHASED A BUNGLOW AND NOT CONSTRUCTED A HOUSE. HE THUS SUPPOR TED THE ORDER OF CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. CIT(A) AFTER PERUSING THE AGREEMENTS THAT T HAT THE ASSESSEE HAD ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 9 ENTERED FOR PURCHASE OF PLOT AND CONSTRUCTION, HAS GIVEN A FINDING THAT THE ASSESSEE HAD NOT DONE ANY CONSTRUCTION BUT HAD DONE A BOOKING FOR BUNGLOW AND GOT THE POSSESSION AFTER THE SAME WAS C OMPLETED BY THE BUILDER. HE HAS CATEGORICALLY HELD THAT THE ASSESSE E HAS PURCHASED A BUNGLOW AND NOT CONSTRUCTED THE BUNGLOW. NOTHING HA S BEEN BROUGHT ON RECORD BY REVENUE TO CONTROVERT THE FINDINGS OF CIT (A). WE, THEREFORE, FIND NO REASON TO INTERFERE WITH HIS ORDER. THUS, THIS G ROUND OF REVENUE IS DISMISSED AND THUS THE APPEAL OF REVENUE IS DISMISS ED. CO 153/AHD/2012 THE GROUNDS RAISED IN C.O. BY THE ASSESSEE READS AS UNDER: 1. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING COMPUTATION OF CAPITAL GAIN UNDER SECTION 50 C OF T HE ACT ADOPTING SALE VALUE OF THE PROPERTY AS PER STAMP DU TY AUTHORITIES. BOTH THE AUTHORITIES IGNORED SUBMISSIO NS, EVIDENCES AND CASE LAWS RELIED UPON BY THE APPELLANT THAT THE COMPUTATION SUBMITTED AS PER REPORT OF REGISTERED VALUER OUGHT TO BE ADOPTED FOR COMPUTING LONG TERM CAPITAL GAINS ON SA LE OF PROPERTY. 2. LD. CIT(A) ERRED IN LAW AND ON FACTS IN ADOPTING COST OF PROPERTY AS ON 1.4.1981 SUBMITTED BY DVO AGAINST CO ST AS PER GOVT. APPROVED VALUER FOR COMPUTING LONG TERM CAPIT AL GAIN BY HOLDING THE REPORT UNRELIABLE. LD. CIT(A) FURTHER E RRED IN CONFIRMING COST OF ACQUISITION AS PER THE REPORT OF DVO WHEN THE REFERENCE TO DVO ITSELF WAS OUTSIDE THE PURVIEW OF LAW. LD. CIT(A) THUS GRAVELY ERRED IN NOT ADHERING TO SPECIF IC DIRECTIONS OF THE HONBLE ITAT TO COMPUTE LONG TERM CAPITAL GA IN UNDER CORRECT SECTION. ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 10 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, EDIT, DEL ETE, CHANGE OR MODIFY ALL OR ANY OF THE GROUND BEFORE OR AT TH E TIME OF HEARING. 1 ST GROUND WAS NOT PRESSED AND THEREFORE DISMISSED AS NOT PRESSED. 2 ND GROUND IS WITH RESPECT TO ADOPTING COST OF PROPERT Y AS ON 1.4.1981 SUBMITTED BY DVO: FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS U/S 50C, AO IN THE REMAND REPORT WORKED OUT THE CAPITAL GAINS AT RS 65,96,842 /- BY ADOPTING THE VALUE OF PROPERTY (AT RS 99,89,000/-) AS PER DVOS REPORT WHEREAS THE ASSESSEE ADOPTED THE VALUATION BY THE REGISTERED VALUER. ASS ESSEE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 50C(3), IF HIGHER VAL UE IS WORKED OUT BY DVO, THE VALUE ADOPTED BY THE STAMP AUTHORITY IS TO BE T AKEN. IT WAS FURTHER SUBMITTED THAT SECTION 50C(3) DOES NOT ALLOW ADOPTI ON OF VALUE HIGHER THAN STAMP DUTY AUTHORITY FOR THE PURPOSE OF COMPUTING C APITAL GAIN AND THEREFORE AOS COMPUTATION OF TAKING THE VALUE AS P ER DVO REPORT IS NOT CORRECT. IT WAS THUS SUBMITTED THAT AO WAS NOT JUST IFIED IN ADOPTING VALUE OF PROPERTY AT RS 99,89,000/- AS AGAINST THE VALUE ADO PTED BY STAMP AUTHORITY OF RS 80,38,372/- FOR COMPUTING CAPITAL GAIN U/S 50 C. CIT(A) DID NOT ACCEPT THE CONTENTION OF ASSESSEE BY HOLDING AS UNDER: REGARDING VALUE AS PROPERTY AS ON 1.4.1981, REGISTE RED VALUER VALUED THE PROPERTY VERY HIGH WHICH CLEAR FR OM THE FACT THAT THE COST OF CONSTRUCTION WAS ESTIMATED BY HIM AT RS. 5 LAKHS WHICH IS TAKEN AT LESS THAN RS. 2 LAKHS AFTER 20 YEARS. EVEN IN 1981 THE BUILDING WAS MORE THAN 30 YEARS OL D AND THEREFORE THE VALUE ADOPTED BY REGISTERED VALUER IS NOT JUSTIFIED AND IT IS ON HIGHER SIDE JUST TO REDUCE THE IMPACT OF CAPITAL GAIN. EVEN OTHERWISE THE VALUATION DONE BY DVO IS CLOSER TO STAMP ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 11 DUTY AUTHORITY AT THE TIME OF SALE. AS AGAINST THIS THE REGISTERED VALUER VALUED THE PROPERTY MUCH LOWER THAN THE STAM P DUTY AUTHORITY. THIS CLEARLY SHOWS THAT VALUATION DONE B Y REGISTERED VALUER IS MUCH HIGHER WHERE IT IS ADVANTAGEOUS TO A SSESSEE AND IT IS MUCH LOWER IN THE CASE OF SALE CONSIDERAT ION. THEREFORE VALUATION DONE BY REGISTERED VALUER IS NO T RELIABLE. AS AGAINST THIS THE VALUATION DONE BY DVO IS CLOSER TO REALITY AND THE SAME REPRESENTS CORRECT MARKET VALUE AS ON 1.4. 1981. THE APPELLANTS OBJECTION TO DVOS VALUATION BASED ON J UDICIAL DECISIONS IS THAT AO CANNOT REFER UNDER SECTION 55A TO DVO WHERE VALUATION DONE BY THE ASSESSEE IS HIGHER. HER E, AO DID NOT REFER THE VALUATION UNDER SECTION 55A AND THERE FORE APPELLANTS OBJECTION IS NOT SUSTAINABLE AND THE DE CISIONS RELIED UPON BY HIM ARE NOT APPLICABLE. APPELLANT SUBMITTED EXPERT OPINION IN THE FORM OF REGISTERED VALUERS REPORT A S AGAINST THIS ASSESSING OFFICER GOT A REPORT FROM DVO, ANOTHER EX PERT. ON EXAMINING BOTH THE REPORTS, I FIND THAT THE VALUE A DOPTED BY DVO IS MORE APPROPRIATE CONSIDERING THE FACTS DISCU SSED EARLIER. ACCORDINGLY, I AGREE WITH THE ASSESSING OF FICER AND ADOPT THE VALUE COMPUTED BY DVO FOR THE PROPERTY AS ON 1.4.1981. CAPITAL GAIN AS DIRECTED BY ITAT IS COMPU TED ACCORDINGLY AS UNDER. VALUE OF PROPERTY AS PER VALUATION BY STAMP DUTY AUTHORITY RS.80,38,372 LESS-EXPENSES ON TRANSFER OF PROPERTY ADVERTISEMENT EXPENSES RS.3728 LEGAL FEES RS.70,540 DALALI EXPENSES RS. 63,000 RS.137268 RS.79,01,104 ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 12 LESS-INDEXED COST OF ACQUISITION COST PRICE AS ON 1.4.1981 IS TAKEN AS PER VALUATION BY DVO 703000 *463 100 32,54,890 CAPITAL GAIN RS.46,46,214 IN VIEW OF THE ABOVE OTHER ISSUE SET-ASIDE BY ITAT REGARDING DEDUCTION UNDER SECTION 54 OF IT ACT, APPELLANT SUB MITTED THAT IT PURCHASED NEW HOUSE IN A BUNGALOW SCHEME ON 5.07.20 03 AND SOLD THE OLD BUNGALOW ON 18.08.2003 THEREFORE HE PU RCHASED NEW HOUSE PROPERTY WITHIN ONE YEAR FROM THE DATE OF TRANSFER OF THE PROPERTY AND THEREFORE ELIGIBLE FOR DEDUCTION U NDER SECTION 54 OF IT ACT ON THE COST OF NEW HOUSE PROPERTY. ASS ESSING OFFICER CONSIDERED THE PURCHASE OF NEW HOUSE PROPER TY AS CONSTRUCTION. IN CASE OF CONSTRUCTION OF NEW HOUSE, THE DEDUCTION IS AVAILABLE ONLY IF THE HOUSE IS CONSTRU CTED AFTER THE SALE IS MADE. ACCORDINGLY ASSESSING OFFICER DENIED DEDUCTION UNDER SECTION 54 OF THE APPELLANT. IT IS NOT IN DIS PUTE THAT APPELLANT BOOKED A BUNGALOW IN A SCHEME PROMOTED BY DEVELOPER/BUILDER BY ENTERING INTO TWO AGREEMENTS-O NE AGREEMENT FOR BOOKING OF LAND AND OTHER FOR CONSTRU CTION OF BUNGALOW. I HAVE GONE THROUGH BOTH THE AGREEMENTS. IN PURCHASE OF A BUNGALOW DEVELOPED BY A DEVELOPER, TH ERE IS A USUAL PRACTICE OF ENTERING INTO TWO AGREEMENTS- ONE AGREEMENT FOR BOOKING OF LAND AND OTHER ONE FOR CONSTRUCTION. THESE AGREEMENTS ARE IN NO WAY DIFFERENT THAN BOOKING OF PROPERTY FOR PURCHASE. APPELLANT HAS NOT DONE ANY CONSTRUCTION. NEITHER THE PLOT OF LAND WAS TRANSFERRED TO THE APPELLANT N OR DID APPELLANT DO ANY CONSTRUCTION OF THE SAID PLOT OF L AND. APPELLANT ONLY DID BOOKING FOR PURCHASE OF A BUNGAL OW IN A BUNGALOWS SCHEME FLOATED BY THE DEVELOPER. ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 13 DEVELOPER/BUILDER ONLY GOT ALL THE PERMISSIONS FOR CONSTRUCTION. DEVELOPER ONLY DID PLANNING, DESIGNIN G AND CONSTRUCTION. AFTER THIS BUNGALOWS WERE READY, DEVE LOPER GOT PERMISSION FROM LOCAL AUTHORITY AND THEN HANDED OVER POSSESSION TO THE APPELLANT ALONG WITH OTHER BUYER S. ALL THESE FACTS AND SEQUENCE OF EVENTS CLEARLY PROVE TH AT APPELLANT DID BOOKING FOR PURCHASE OF BUNGALOW AND GOT THE PO SSESSION OFBUNGALOW FROM THE BUILDER. IT WAS NOT THE CASE OF CONSTRUCTION OF HOUSE BY THE APPELLANT. ON CANNOT JUST GO BY THE TWO AGREEMENTS ENTERED INTO BY THE APPELLANT FOR BOOKIN G OF LAND AND FOR CONSTRUCTION OF BUNGALOW. IN SUBSTANCE IT WAS A CASE OF PURCHASE OF BUNGALOW AND NOT CONSTRUCTION OF BUN GALOW SINCE THERE WAS NO POSSESSION OF LAND GIVEN TO THE APPELLANT. CONSIDERING THIS IT IS HELD THAT APPELLANT PURCHASE D THE PROPERTY, POSSESSION OF WHICH WAS GIVEN ON 5.07 .2003 WHICH IS WITHIN ONE YEAR FROM THE SALE OF PROPERTY. THE DECISIONS RELIED UPON BY THE APPELLANT SUPPORTS HIS CLAIM. ACCORDINGLY IT IS HELD THAT APPELLANT IS ELIGIBLE F OR CLAIM OF DEDUCTION UNDER SECTION 54 OF IT ACT IN RESPECT OF PURCHASE OF NEW BUNGALOW. ASSESSING OFFICER IS DIRECTED TO ALLO W THE CLAIM OF DEDUCTION UNDER SECTION 54 OUT OF LONG-TERM CAPI TAL GAIN COMPUTED IN PREVIOUS PARA IN RESPECT OF COST OF PUR CHASE OF NEW BUNGALOW. 8. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSE IS NOW BEFORE US. 9. BEFORE US, THE LD. A.R. REITERATED THE SUBMISSIO NS MADE BEFORE CIT(A) AND ALSO RELIED ON THE DECISIONS OF GUJARAT HIGH COURT IN THE CASE OF HIABEN J SHAH VS ITO & ANR. (2009) 310 ITR 31 AND 2 09 ITR 568 AND THE DECISION IN THE CASE OF ITO VS NITIN JAYANTILAL SHA H (2011) 48 SOT 16 (AHD). THE LD. D.R ON THE OTHER HAND RELIED ON THE ORDER O F CIT(A). ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 14 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT IN THE REMAND REPORT AO HAS WORKED OUT THE CAPITAL GAINS BY TAKING THE VALUE AS PER THE DVO REPORT WHE REAS THE ASSESSEE HAS WORKED OUT THE CAPITAL GAINS ON THE BASIS OF REGIST ERED VALUERS REPORT. IN THE CASE OF HIABEN J SHAH (SUPRA), HBLE GUJARAT HIGH COURT HAS HELD AS UNDER: CAPITAL GAINSREFERENCE TO VALUATION OFFICER UNDER S. 55AVALIDITY ESTIMATED VALUE PROPOSED BY THE DVO AS ON 1ST APRIL , 1981 BEING LESS THAN THE FAIR MARKET VALUE SHOWN BY THE ASSESSEE SUPPORT ED BY ESTIMATE OF REGISTERED VALUER, CL. (A) OF S. 55A COULD NOT BE M ADE APPLICABLEAS THE VALUE OF THE PROPERTY SHOWN BY ASSESSEE WAS SUPPORT ED BY ESTIMATE MADE BY REGISTERED VALUER, CL. (B) OF S. 55A ALSO DID NO T APPLY. 11. THE CO-ORDINATE BENCH IN THE CASE OF NITIN SHAH (SUPRA) HAS HELD THAT IN CASE OF IMMOVABLE PROPERTY REFERENCE TO DVO CAN BE MADE ONLY U/S 50C(2) AND NOT U/S 55A. IT WAS FURTHER HELD THAT WH EN FULL VALUE OF CONSIDERATION WAS EQUAL TO VALUATION DONE BY STAMP VALUATION AUTHORITY, REFERENCE TO DVO FOR DETERMINING FAIR MARKET VALUE AS ON DATE OF SALE AND ADOPTION OF FAIR MARKET VALUE IN PLACE OF SALE CONS IDERATION DECLARED BY ASSESSEE WERE NOT LEGALLY PROPER. 12. RESPECTFULLY RELYING ON THE DECISION OF HONBLE HC AND THE DECISION OF CO-ORDINATE BENCH, WE ARE OF THE VIEW THAT THE AO C OULD NOT CONSIDER THE VALUE AS PER THE DVO REPORT FOR THE PURPOSE OF CALC ULATION OF CAPITAL GAINS U/S 50C. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 13. THUS, THE CO OF ASSESSEE IS PARTLY ALLOWED. ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 15 ITA NO. 2137/ 2012 REVENUES APPEAL : 14. IN THIS CASE, ASSESSEE FILED RETURN OF INCOME D ECLARING TOTAL INCOME OF RS 3,170/- AND THE ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 21.12.2006 AND THE TOTAL INCOME WAS DETERMINED AT R S 33,69,054/- BY MAKING ADDITION ON ACCOUNT OF SALE OF PROPERTY U/S 69A, ADDITION ON ACCOUNT OF LOSS OF SHARES AND OTHER DISALLOWANCES. ON THE A FORESAID ADDITIONS, AO VIDE PENALTY ORDER DATED 21.3.2011 LEVIED PENALTY O F RS, 11,10,740/- U/S 271(1)(C). AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 26.7.2012 DE LETED THE PENALTY. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US. 15. BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF AO. ON THE OTHER HAND THE LD A.R. SUBMITTED THAT ALL THE REQUIRED DETAILS WERE FURNISHED WITH THE RETURN OF INCOME AND THE ASSESSEE HAD DISCLOSED FUL L PARTICULARS OF INCOME. HE THUS SUPPORTED THE ORDER OF CIT(A). 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) BY A REASONED ORDER DEL ETED THE PENALTY BY HOLDING AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE; PENALTY O RDER AND APPELLANTS WRITTEN SUBMISSION. ASSESSING OFFICER LEVIED PENALT Y ON ADDITION AN ACCOUNT OF SALE OF PROPERTY U/S 69A RS.32,58,371/-, ADDITION ON ACCOUNT OF LOSS ON SHARES RS.76,173/- ADDITION ON A CCOUNT OF PORTFOLIO MANAGEMENT EXPENSES RS.19,331/- AND EXPENSES FROM O THER ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 16 SOURCES HEAD RS.12,010. APPELLANT SUBMITTED HIS SUB MISSION ON ALL THE ISSUES. AS REGARDS ADDITION UNDER SECTION 69A, THE ADDITION WAS HELD TO BE NOT PERMISSIBLE UNDER SECTION 69A BY ITAT IN ORDER DATED 21.4.2011. ITAT HAD SET ASIDE THE ISSUE TO THE FILE OF CIT(A) TO CONSIDER PROVISIONS OF SECTION 50C FOR REWORKING THE CAPITAL GAIN. THE ISSUE WAS DECIDED BY CIT(A) BY ORDER DATED 2.5.2012 BY CO MPUTING LONG- TERM CAPITAL GAIN OF RS.46,46,214/-. AFTER ALLOWING DEDUCTION UNDER SECTION 54, VERY SMALL LONG-TERM CAPITAL GAIN WAS T AXED. THEREFORE THE PRESENT STATUS OF THE ADDITION MADE BY AO UNDER SECTION 69A IS VERY SMALL ADDITION ON ACCOUNT OF LONG-TERM CAPITAL GAIN. IN EFFECT THE ADDITION MADE BY THE ASSESSING OFFICE R IS SUBSTANTIALLY DELETED IN APPEAL. SINCE ASSESSING OFFICER LEVIED P ENALTY ON ADDITION MADE UNDER SECTION 69-A, THE SAID ADDITION IS NOT S USTAINED HENCE PENALTY ON THIS ADDITION CANNOT SURVIVE. NOW A SMAL L ADDITION ON ACCOUNT OF LONG-TERM CAPITAL GAIN IS SUSTAINED BY V IRTUE OF SECTION 50C. ISSUE IS WHETHER PENALTY FOR CONCEALMENT CAN BE LEV IED ON ADDITION MADE ON ACCOUNT OF DEEMED CONSIDERATION UN DER SECTION 50C. ITAT AHMEDABAD IN A RECENT DECISION DATED 22.06.2012 IN THE CASE OF SRI CHIMANLAL MANILAL PAT EL. ITA NO. 508/AHD/2010 HELD THAT IN THE CASE WHERE ADDITION H AS BEEN MADE ON THE BASIS OF DEEMING PROVISIONS OF SECTION 50C, ASS ESSEE HAS FURNISHED ALL THE FACTS OF SALE, DOCUMENTS/MATERIAL BEFORE THE A.O. THE AO HAS NOT DOUBTED THE GENUINENESS OF DOCUMENT/ DETAILS FURNISHED BY THE ASSESSEE. THE ADDITION ON THE BASI S OF VALUATION ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 17 MADE BY STAMP VALUATION AUTHORITY CANNOT BE CONCLUS IVE PROOF THAT THE SALE CONSIDERATION AS PER THE SALE AGREEMENT IS INCORRECT OR WRONG. IT WAS HELD THAT PENALTY CANNOT BE LEVIED ON THE BA SIS OF DEEMING PROVISIONS. APPELLANT ALSO RELIED UPON OTHER DECISIONS ON THE ISSUE IN WHICH PENALTY CANNOT BE LEVIED ON ADDI TION MADE UNDER SECTION 50C. RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTIONAL ITAT, THE PENALTY LEVIED ON ADDITION UNDER SECTION 69-A/5 0C IS DELETED. AS REGARDS TREATMENT OF FUTURES AND OPTIONS TRANSAC TIONS AS SPECULATIVE TRANSACTIONS AND NOT ALLOWING LOSS AND MANAGEMENT EXPENSES ON SUCH TRANSACTIONS, APPELLANT SUBMITTED SEVERAL JUDICIAL DECISIONS IN WHICH THE ISSUE WAS DECIDED IN APPELLA NT FAVOUR. THEREFORE THERE EXISTS DECISIONS ON EITHER SIDE AND ACCORDINGLY THE ISSUE IS DEBATABLE. ON SUCH DEBATABLE ISSUE, PENALT Y CANNOT BE LEVIED. ON THE PENALTY LEVIED ON DISALLOWANCE OF EXPENSES A GAINST INCOME FROM OTHER SOURCES, APPELLANT SUBMITTED THAT HE HAS PROVIDED THE DETAILS AND EXPENSES ARE GENERALLY ALLOWABLE. THE D ECISION OF APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS LTD IS APPLICABLE ON THIS ISSUE. DISALLOWANCE OF ANY EXPENSE WILL NOT RESULT IN LEVY OF PENALTY UNLESS THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. SINCE, IT IS THE CASE OF MER E DISALLOWANCE OF EXPENSE, PENALTY CANNOT BE LEVIED ON THE SAME. IN THE FINAL RESULT THE APPEAL IS ALLOWED. ITA NO.1640 & 2137/AHD/2012 (ASSESSMENT YEAR:2004-05) 18 17. BEFORE US, THE REVENUE COULD NOT CONTROVERT THE FINDINGS OF CIT(A) AND, THEREFORE, WE FIND NO REASON TO INTERFERE WITH HIS ORDER. THUS, THIS GROUND OF REVENUE IS DISMISSED. 18. IN THE RESULT THIS APPEAL OF REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 14 -5-2013 SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER AC COUNTANT MEMBER AHMEDABAD. TRUE COPY S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)- 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABA D.