CIT-III, LUDHIANA V. M/S NEW P. GRAND RESORTS JAGRAON

ITA/877/2010

AI Insights

The case revolves around a dispute concerning the valuation of land and building purchased by M/s New P.Grand Resorts, which was assessed by the Income Tax Department. The Assessing Officer initially valued the property at `2,27,71,730/-, significantly higher than the `44 lacs declared by the assessee, leading to an addition of `1,87,71,730/- under Section 69B of the Income Tax Act. The CIT(A) later deleted this addition, a decision upheld by the Tribunal, which the revenue challenged in the High Court. The core issue was whether the property should be valued at commercial rates, as argued by the revenue, or at the lower agricultural rates used by the assessee.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 720551 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 05-03-2014
• Assessment Year: misc
• Other Referred Cases: CIT v. Smt.Nilofer L.Singh
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAJIV SHARMA
• Assessee Lawyers: RAJESH KATOCH
• Keywords: Agricultural Land; Commercial land; Income Tax; Stamp Duty; Unexplained expenditure; Valuation Officer
• Section: 143(3); 69B; 260A; 142A

Judgement Text

"ITA No.877 of 2010 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.877 of 2010 (O&M) Date of decision: 05.03.2014 Commissioner of Income Tax III, Ludhiana ……Appellant Vs. M/s New P.Grand Resorts, G.T.Road, Jagraon …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MS. JUSTICE ANITA CHAUDHRY Present: Mr. Rajesh Katoch, Advocate for the revenue. Mr. Rajiv Sharma, Advocate for the assessee. Ajay Kumar Mittal,J. CM No.353 CII of 2013 1. Allowed as prayed for. CM stands disposed of. CM No.354 CII of 2013 2. The document Annexure R.1 is taken on record. CM stands disposed of. 3. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 26.11.2009, Annexure 3 passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘A’ Chandigarh (in short, “the Tribunal”) in ITA No.526/CHD/2009, claiming following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT is right in deleting the addition of Singh Gurbax 2014.05.22 11:45 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.877 of 2010 (O&M) 2 ` 187,71,730/- which was rightly made under section 69B of the I.T.Act? ii) Whether on the facts and in the circumstances of the case, the Hon’ble ITAT is right in deleting the addition by relying on the decision of Hon'ble High Court in the case CIT v. Smt.Nilofer L.Singh reported in 14 DTR (Delhi) 18 which is distinguishable on facts from the case under consideration?” 4. A few facts relevant for the decision of the controversy involved, as narrated in the appeal may be noticed. The assessee firm is deriving income from a resort. It filed its return of income on 31.10.2006 declaring loss of ` 24,760/-. During the course of assessment proceedings, the Assessing Officer found that the assessee had made investment in land and building amounting to ` 44 lacs. Therefore, with a view to estimate the value of investment, the Assessing Officer made a reference to the valuation Officer under Section 142A of the Act. The Valuation Officer, determined the value of investment at ` 2,27,71,730/- against ` 44 lacs declared by the assessee. Accordingly, the Assessing Officer made addition of `1,87,71,730/- under Section 69B of the Act and the assessment was completed at net taxable income of ` 1,87,46,970/- vide order dated 31.12.2008, Annexure 1 passed under section 143(3) of the Act. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals)-II, Ludhiana [CIT(A)]. Vide order dated 13.3.2009, Annexure 2, the CIT(A) allowed the appeal deleting the addition of ` 1,87,71,730/- made by the Assessing Officer under Section 69B of the Act. Not satisfied with the order, the revenue filed appeal before the Tribunal. Vide order dated 26.11.2009, Annexure 3, the Tribunal dismissed the appeal of the Singh Gurbax 2014.05.22 11:45 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.877 of 2010 (O&M) 3 revenue and also dismissed the cross objections filed by the assessee. Hence the present appeal by the revenue. 5. Learned counsel for the revenue submitted that since there was no collector rate which was prevalent, therefore,it was necessary to refer the matter to the Departmental Valuation Officer (DVO). It was on the basis of the report of the DVO that the Sub Registrar had determined the fair market value and, therefore, provisions of Section 50C of the Act were applicable. 6. Learned counsel for the assessee on the other hand, argued that the Deputy Commissioner-cum-Collector, Ludhiana vide order dated 24.2.2010 (Annexure R.1) had recorded that the land in question was not commercial and was surrounded by agricultural land and the parties had rightly got the wasika registered. It was also noticed therein that correct stamp duty had been affixed on the consideration of the sale deed. It was urged that the full value of consideration shown in the sale deed was the correct value of the capital asset. 7. After hearing learned counsel for the parties, we do not find any merit in the appeal. 8. A perusal of the order Annexure R.1 shows that the order passed by the Sub Registrar has since been set aside by the Collector and the valuation of stamp duty as affixed on the sale deed by the assessee was accepted. The relevant portion of the order reads thus:- “In view of the findings above and as per the spot inspection, I am of the view that the nature of the land is not commercial one and the land in question is surrounded by the agricultural land and the parties have rightly got the wasika registered and has already affixed the stamp duty to be paid on the consideration of the land and no penalty or additional stamp duty is required Singh Gurbax 2014.05.22 11:45 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.877 of 2010 (O&M) 4 to be paid by the appellant.” In view of Annexure R.1, the full value of consideration shown in the sale deed was held to be the proper consideration which was received by the assessee. 9. Further, the Tribunal while adjudicating the appeal had recorded as under:- “5. We have heard the rival contentions and perused the records. The assessee before us during the year had purchased land and building for a total consideration of ` 40 lakhs. The assessee had paid stamp duty of ` 3.60 lakhs as determined by the authorities as per approved stamp duty rates and further sum of `0.40 lakhs were paid as court fees. In addition the assessee paid `10 lakhs for the purchase of furniture and fixture, electric installments, equipment and crockery items etc. The building was being used as a marriage palace and is surrounded by agriculture land. There was an audit objection that the stamp duty for the land should have been charged at the commercial rates and not at the rates adopted for agriculture land. The authorities revised the value of property for the levy of stamp duty by applying commercial rates as per the stamp duty tariff, rejecting the contention of the assessee that the land had not been converted by the government into commercial land from agriculture land under change of land use laws. The Assessing Officer made a reference to DVO relying on the revised rates applied by stamp duty collector. The DVO valued the property on the basis of the rates adopted for the purposes of stamp duty for commercial usage. The said valuation was adopted by the Assessing Officer as the cost of the property purchased by the assessee and the difference between the value adopted by the DVO and the purchase price paid by the assessee, was treated as unexplained expenditure not disclosed in the books of account under the provisions of Section 69B of the Act. No material Singh Gurbax 2014.05.22 11:45 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.877 of 2010 (O&M) 5 other than the report of the DVO was brought on record by the Assessing Officer to substantiate the value of land and building adopted for working out the investment in the hands of the assessee.” 10. A perusal of the aforesaid shows that the addition was sought to be made on the basis of the report of the DVO wherein the DVO had valued the property on the basis of the rates adopted for the purpose of stamp duty by treating the property to be for commercial usage whereas the land had not been converted from agricultural land into commercial land by the Government under change of land use. As noticed above, the Deputy Commissioner-cum-Collector vide order dated 24.2.2011, Annexure R.1 has accepted the value of the property as depicted by the assessee in the sale deed to be full value of consideration. Under the circumstances, the Tribunal had rightly not relied upon the report of the DVO. Thus, no error could be found in the order of the Tribunal. 11. Accordingly, the substantial questions of law are answered against the revenue and in favour of the assessee. Consequently, the appeal stands dismissed. (Ajay Kumar Mittal) Judge March 05, 2014 (Anita Chaudhry) ‘gs’ Judge Singh Gurbax 2014.05.22 11:45 I attest to the accuracy and integrity of this document High Court Chandigarh "