MONA MALANI, MUMBAI V. ASST CIT CIR 16(2), MUMBAI

CO 191/MUM/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 8044 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 13-09-2012
• Assessment Year: misc
• Appeal Filed On: 14-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RONAK G DOSHI
• Keywords: Sale consideration of property below Jantri Value; Fair market value
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 6960/MUM/2011 (ASSESSMENT YEAR: 2008-09) A C I T - 16(2) SMT. MONA MALANI MATRU MANDIR, TARDEO ROAD 13/2, NANIK NIVAS, WARDEN ROAD MUMBAI 400007 VS. MUMBAI 400026 PAN - AAHPM 6775 D APPELLANT RESPONDENT ITA NO. 6961/MUM/2011 (ASSESSMENT YEAR: 2008-09) A C I T - 16(2) SMT. MAYA L. MALKANI MATRU MANDIR, TARDEO ROAD 13/2, NANIK NIVAS, WARDEN ROAD MUMBAI 400007 VS. MUMBAI 400026 PAN - AAGPM 5599 L APPELLANT RESPONDENT CO NO. 191/MUM/2012 (ASSESSMENT YEAR: 2008-09) SMT. MONA MALANI A C I T - 16(2) 13/2, NANIK NIVAS, WARDEN ROAD MATRU MANDIR, TARDEO ROAD MUMBAI 400026 VS. MUMBAI 400007 PAN - AAHPM 6775 D CROSS OBJECTOR APPELLANT IN APPEAL CO NO. 192/MUM/2012 (ASSESSMENT YEAR: 2008-09) SMT. MAYA L. MALKANI A C I T - 16(2) 13/2, NANIK NIVAS, WARDEN ROAD MATRU MANDIR, TARDEO ROAD MUMBAI 400026 VS. MUMBAI 400007 PAN - AAGPM 5599 L CROSS OBJECTOR APPELLANT IN APPEAL REVENUE BY: SHRI MOHIT JAIN ASSESSEE BY: SHRI RONAK G.DOSHI DATE OF HEARING: 13.09.2012 DATE OF PRONOUNCEMENT: 03.10.2012 ITA NO. 6960 & 6901/COS/MUM/2011 SMT. MONA & MAYA MALANIS 2 O R D E R PER D. MANMOHAN, V.P. THESE CROSS APPEALS ARE DIRECTED AGAINST SEPARATE B UT IDENTICAL ORDERS PASSED BY THE CIT(A) 27, MUMBAI DATED 14.07.2011 AN D THEY INVOLVE A COMMON ISSUE. WE THEREFORE PROCEED TO DISPOSE OF TH ESE APPEALS BY A COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEES ARE JOINT OWNERS OF THE PLOT SITUATED AT VILLAGE TUNGAVE, TALUKA KURLA, MUMBAI SUBURBAN DISTRICT AT VIDYAVI HAR ROAD ANDHERI. EACH OF THESE ASSESSEES ARE HAVING 17% SHARE IN THE SAID PROPERTY. THE PROPERTY WAS A VERY OLD PROPERTY CONSTRUCTED IN THE YEAR 1966-67 HAVING NUMBER OF GALAS, JOINING EACH OTHER, MAINLY OF GROU ND FLOOR WITH MEZZANINE FLOOR. AT THE TIME OF SALE, MANY OF THE GALAS WERE IN A DILAPIDATED STATE AND WERE OCCUPIED BY TENANTS SINCE 1969. HOWEVER, THE A SSESSEES HEREIN ALONGWITH OTHER CO-OWNERS, SOLD THE PROPERTY TO M/S . RIVER ROSE DEVELOPERS PVT. LTD. ON AS IS WHERE IS CONDITION. IN OTHER W ORDS, THE SALE WAS SUBJECT TO OCCUPANCY/TENANCY RIGHT AND FOR A LUMP SUM CONSI DERATION OF ` 15,13,50,000/-. HOWEVER, AS THE STAMP DUTY AUTHORIT Y VALUED THE SAID PROPERTY AT ` 22,26,92,200/-, THE SAID PROPERTY WAS REGISTERED AC CORDINGLY. EACH OF THE ASSESSEES HEREIN DECLARED 17% OF THE NE T SALE CONSIDERATION WHILE COMPUTING THE INCOME UNDER THE HEAD LONG TER M CAPITAL GAINS. 3. THE AO INVOKED PROVISIONS OF SECTION 50C OF THE ACT WHEREBY, IF THE VALUE COMPUTED BY THE STAMP DUTY AUTHORITY IS HIGHE R THAN THE SALE CONSIDERATION, THE AO CAN ASSUME THE VALUE ADOPTED BY THE STAMP DUTY AUTHORITY AS THE CORRECT VALUE FOR WHICH THE PROPER TY WAS SOLD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEES SUBM ITTED THAT BOTH WERE SENIOR CITIZENS AND THEY WERE NOT IN A POSITION TO NEGOTIATE OR DEAL WITH THE TENANTS/OCCUPANTS OF THE SAID PROPERTY. SINCE THE P URCHASER AGREED TO PURCHASE THE PROPERTY WITH ENCUMBRANCES, IT WAS SOL D FOR A LUMP SUM CONSIDERATION OF ` 15.13 CRORES. SINCE THE PROPERTY IS IN A DILAPIDATE D CONDITION WITH ENCUMBRANCES THEREON, THE FAIR MARKE T VALUE AS PER THE ASSESSEES REGISTERED VALUER WAS ` 13.75 CRORES AND THE SELLERS HAVING BARGAINED FOR HIGHER FAIR MARKET VALUE IT WAS AGREE D TO SELL FOR A CONSIDERATION OF ` 15.13 CRORES. IT WAS THUS CONTENDED THAT IN THE LIG HT OF THE ITA NO. 6960 & 6901/COS/MUM/2011 SMT. MONA & MAYA MALANIS 3 REGISTERED VALUERS CERTIFICATE THE VALUE ADOPTED B Y THE STAMP DUTY AUTHORITY SHOULD NOT BE TAKEN AS A BASIS TO MAKE THE IMPUGNED ADDITION. IT WAS SPECIFICALLY POINTED OUT THAT THE STAMP DUTY AUTHOR ITY HAS NOT PROPERLY APPRECIATED THE FOLLOWING FACTORS WHILE VALUING THE PROPERTY: - (A) THE PROPERTY IS IN A DILAPIDATED CONDITION; (B) IT WAS INCAPABLE TO BEING USED INDEPENDENTLY DUE TO ENCUMBRANCES OF THE EXISTING INDUSTRIAL STRUCTURE I N HAPHAZARD MANNER; AND (C) DUE TO OCCUPANCY OF EXISTING TENANTS IT IS NOT EASY TO DEVELOP THE PROPERTY. THESE VITAL FACTORS WERE IGNORED BY THE STAMP DUTY AUTHORITY. 4. THE AO, HOWEVER, PROCEEDED ON THE FOOTING THAT AS P ER PROVISIONS OF SECTION 50C OF THE ACT THE VALUE ADOPTED BY THE STA MP DUTY AUTHORITY HAS TO BE TAKEN AS THE FAIR MARKET VALUE AND PROCEEDED TO RECOMPUTE THE CONSIDERATION IN THE CASE OF BOTH THE ASSESSEES. 5. AGGRIEVED, IT WAS CONTENDED BEFORE THE CIT(A) THAT THE AO IS DUTY BOUND TO REFER THE MATTER TO THE DEPARTMENTAL VALUA TION AUTHORITY IF AN OBJECTION IS RAISED BY THE ASSESSEE WITH REGARD TO VALUATION OF THE STAMP DUTY AUTHORITY. IN THE INSTANT CASE THE ASSESSEES H EREIN NOT ONLY FURNISHED THE REPORT OF THE REGISTERED VALUER BUT ALSO PUT ON RECORD THE OBJECTIONS TO HIGHLIGHT THAT THE STAMP DUTY AUTHORITY HAS NOT COR RECTLY APPRECIATED THE SHORTCOMINGS IN THE PROPERTY. WHEN SUCH AN OBJECTIO N IS RAISED, THE AO HAS TO REFER THE MATTER TO THE DVO OR HE SHOULD ACCEPT THE REGISTERED VALUERS REPORT. SINCE NO REFERENCE WAS MADE TO THE DVO THE VALUE ADOPTED BY THE REGISTERED VALUER OUGHT TO HAVE BEEN TAKEN AS CORRE CT VALUATION IN WHICH EVENT NO ADDITION IS MAINTAINABLE. IT WAS ALSO CONT ENDED THAT THE FIRST APPELLATE AUTHORITY HAS NO RIGHT TO RECONSIDER THE MATTER SINCE THE AO HAS MISSED THE BUS, I.E. BY NOT REFERRING THE MATTER TO THE DVO. 6. THE LEARNED CIT(A) PARTLY AGREED WITH THE VIEW OF T HE ASSESSEES HEREIN. HE OBSERVED THAT SECTION 50C MANDATES REFERENCE TO THE VALUATION OFFICER WHENEVER THE ASSESSEE FILED AN INDEPENDENT VALUERS REPORT AND ALSO OBJECTED, ON VALID GROUND, THE VALUE ADOPTED BY THE STAMP DUTY AUTHORITY. THE EXPRESSION MAY REFER THE VALUATION OF THE CAPI TAL ASSET TO A VALUATION OFFICER, THOUGH APPARENTLY GIVES AN IMPRESSION THA T IT IS AT THE DISCRETION OF ITA NO. 6960 & 6901/COS/MUM/2011 SMT. MONA & MAYA MALANIS 4 THE AO BUT THE FACT REMAINS THAT IN A CASE WHERE TH E ASSESSEE HAS GIVEN VALID REASONS IT IS MANDATORY ON THE PART OF THE AO TO REFER THE MATTER TO THE VALUATION OFFICER. WITH REGARD TO THE CONTENTION OF THE ASSESSEE THAT IN THE ABSENCE OF SUCH REFERENCE THE FAIR MARKET VALUE DEC LARED BY THE ASSESSEE OUGHT TO HAVE BEEN ACCEPTED, WAS NOT ACCEPTED BY TH E LEARNED CIT(A). IN THIS REGARD HE OBSERVED THAT, NO DOUBT, POWER TO MAKE RE FERENCE TO THE VALUATION OFFICER IS VESTED IN THE AO AND NOT WITH THE FIRST APPELLATE AUTHORITY BUT THE FACT REMAINS THAT THE POWERS OF THE CIT(A) ARE CO-T ERMINUS WITH THE AO AND IN SUCH CAPACITY HE IS EMPOWERED TO GIVE ANY DIRECT ION WHICH IS NECESSARY FOR DISPOSING OF THE APPEAL BEFORE HIM. HAVING REGA RD TO THE CIRCUMSTANCES OF THE CASE HE DIRECTED THE AO TO REFER THE MATTER TO THE VALUATION OFFICER AND RECONSIDER THE MATTER IN ACCORDANCE WITH LAW. 7. AGGRIEVED BY THE DIRECTION GIVEN BY THE LEARNED CIT (A) THE REVENUE IS IN APPEAL BEFORE US CONTENDING INTER ALIA THAT THE EXP RESSION MAY USED IN SECTION 50C SPEAKS OF JUDICIAL DISCRETION GIVEN TO THE AO AND IT IS NOT MANDATORY ON THE PART OF THE AO TO REFER EVERY CASE TO THE DVO MERELY BECAUSE THE ASSESSEE OBJECTED TO THE VALUATION MADE BY THE STAMP DUTY AUTHORITY. 8. BY WAY OF CROSS OBJECTIONS ASSESSEES HEREIN CONTEND ED THAT IT IS MANDATORY ON THE PART OF THE AO TO MAKE REFERENCE T O THE DVO WHENEVER AN OBJECTION IS RAISED WITH REGARD TO THE VALUE ADOPTE D BY THE STAMP DUTY AUTHORITY, MORE PARTICULARLY WHEN THERE IS A REGIST ERED VALUERS REPORT AND IN THE EVENT OF NOT REFERRING THE MATTER TO THE VALUAT ION OFFICER, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS NO JURISDI CTION TO DIRECT THE AO TO ASCERTAIN THE VALUE OF THE IMPUGNED PROPERTY BY MAKING REFERENCE TO THE VALUATION OFFICER. 9. WE HEARD THE LEARNED D.R. AS WELL AS THE LEARNED CO UNSEL FOR THE ASSESSEE WITH REGARD TO THE ISSUES RAISED BEFORE US . THOUGH THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY CONTENDED THAT TH E CIT(A) WAS NOT JUSTIFIED IN REFERRING THE MATTER TO THE VALUATION OFFICER, A T THE TIME OF HEARING HE WAS KIND ENOUGH TO PLACE BEFORE US CERTAIN ORDERS OF TH E ITAT WHEREIN VARIOUS BENCHES OF ITAT CONSISTENTLY HELD THAT THOUGH REFER ENCE TO THE VALUATION OFFICER IS MANDATORY, IN THE EVENT OF THE AO NOT MA KING A REFERENCE THE CIT(A) CAN DIRECT THE AO TO REFER THE MATTER TO THE DVO. ITA NO. 6960 & 6901/COS/MUM/2011 SMT. MONA & MAYA MALANIS 5 10. THE LEARNED D.R., ON THE OTHER HAND, COULD NOT PLAC E ANY MATERIAL ON RECORD TO SHOW THAT THERE IS NO NEED FOR REFERENCE TO THE DVO. 11. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE FOLLOWING DECISIONS WE ARE OF THE VIEW THAT THE FIR ST APPELLATE AUTHORITY WAS JUSTIFIED IN REMITTING THE MATTER TO THE FILE OF TH E AO WITH THE DIRECTION TO MAKE A REFERENCE TO THE DEPARTMENTAL VALUATION OFFI CER FOR ASCERTAINING THE MARKET VALUE: - 1. B.N. PROPERTIES HOLDINGS (P.) LTD. VS. ACIT [2010] 6 ITR (TRIB) 1(CHENNAI) 2. MANJULA SINGHAL VS. INCOME TAX OFFICER [2011] 46 SO T 149 (JODH) 3. K.K. NAG LTD. VS. ACIT [2012] 52 SOT 381 (PUNE) 12. NOW DOUBT, THE LEARNED COUNSEL FOR THE ASSESSEE PLA CED RELIANCE UPON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIO N THAT UNDER SECTION 16A OF WEALTH TAX ACT IF A REFERENCE IS NOT MADE TO THE VALUATION OFFICER BY THE AO THERE IS NO RIGHT TO MAKE REFERENCE IF THE ASSES SMENT IS COMPLETED, BUT THE FACTS REMAINS THAT THE DECISION CITED HEREIN AR E VIS--VIS THE PROVISIONS OF SECTION 16A OF THE WEALTH TAX ACT WHEREAS THE CH ENNAI BENCH OF THE TRIBUNAL, IN PARA 9 ABOVE, CATEGORICALLY HELD THAT ON A PLAIN READING OF PROVISIONS OF SECTION 50C OF INCOME TAX ACT, A DIRE CTION CAN BE GIVEN BY THE CIT(A) TO REFER THE MATTER TO THE VALUATION OFFICER : - 1. SHANTILAL BHOGILAL JHAVERI VS. FIFTH WEALTH TAX OFF ICER [1991) 187 ITR 395 (BOM). 2. M.V. KIBE VS. COMMISSIONER OF WEALTH TAX [1987] 168 ITR 82 (MP). 13. HAVING REGARD TO THE OVERALL CIRCUMSTANCES OF THE C ASE WE AFFIRM THE ORDERS PASSED BY THE CIT(A) AND DISMISS THE APPEALS FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE RESPECTIVE AS SESSEES. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD OCTOBER, 2012. SD/- SD/- (RAJENDRA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 3 RD OCTOBER, 2012 ITA NO. 6960 & 6901/COS/MUM/2011 SMT. MONA & MAYA MALANIS 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 27, MUMBAI 4. THE CIT 16, MUMBAI CITY 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.