Shri Bhavesh Chunibhai Jani, Ahmedabad V. The Income Tax Officer, Ward-2(2)(1), Ahmedabad

ITA 1009/AHD/2017

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The case involves appeals by Shri Bhavesh Chunibhai Jani and Varsha P. Jani against the orders of the Commissioner of Income Tax (Appeals) concerning the assessment year 2012-13. Both appellants had jointly sold a property which was under a legal dispute, affecting its market value. The Assessing Officer had initially assessed the property at a higher value based on the stamp valuation, leading to a significant tax liability under section 50C of the Income Tax Act. The appellants contested this, citing the ongoing dispute and the property's unclear title, which should have resulted in a lower valuation. The Departmental Valuation Officer (DVO) later reassessed the property, but the appellants argued that the civil dispute was not adequately considered in the valuation. The Tribunal, referencing similar cases, decided to remand the matter back to the CIT(A) for a re-evaluation of the property's sale consideration, emphasizing the impact of the ongoing legal dispute on its market value.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131349 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-03-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2017
• Other Referred Cases: Whiterose Holdings India Pvt. Ltd. vs. ITO, D. Anitha Vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Capital Gains
• Section: 54B; 50C; 54F; 64; 22

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Bh avesh Chun ibhai Jan i, 22- Parikh Colon y, B/h. Nav nirman H igh Schoo l, Ranip, Ah medabad -3 82480 PAN: AC QP J372 3M (Appellant) Vs The ITO, Ward-2(2)(1) Ah med abad (Resp ondent) Varsha P. Jan i, L/H of Shri Paras Ch in ubhai Jani, 22 Parikh Co lo ny Society, B/h. Nav nirman H igh Schoo l, Ranip, Ah medabad -3 82480 PAN: AC XPJ904 5M (Appellant) Vs The Dy. Co mmis sioner of Inco me Tax, Circle-5(1), Ah med abad (Resp ondent) Asses see b y : Shri Hardik Vora, A. R. Revenue by : Shri Atul Pandey , S r. D. R. ITA No. 1009/Ahd/2017 Assessment Year 2012-13 ITA No. 1036/Ahd/2018 Assessment Year 2012-13 I.T.A Nos. 1009/Ahd/2017 & 1036/Ahd/2018 A.Y. 2012-13 Page No. Shri Bhavesh Chunibhai Jani vs. ITO & Varsha P Jani Vs. DCIT 2 Date of hearing : 15-03 -2 023 Date of pronouncement : 19-04 -2 023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-4, Ahmedabad, in proceeding u/s. 250 of the Act vide order dated 31/03/2017, passed for the assessment year 2011-12. 2. Since common issues are involved in case of both the assessees (since common property was sold by both the assessees as joint holder), both the cases are being taken up together. 3. The assessee, Shri Bhavesh Ch unibhai Jani, has taken the following grounds of appeal:- “1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming valuation of Capital Asset as made by valuation officer even when property under, consideration is in dispute and the aspects regarding disputed property is not taken into consideration by valuation officer. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming addition made by assessing officer to the extent of Rs. 44,90,000/- under section 50C of the Act. I.T.A Nos. 1009/Ahd/2017 & 1036/Ahd/2018 A.Y. 2012-13 Page No. Shri Bhavesh Chunibhai Jani vs. ITO & Varsha P Jani Vs. DCIT 3 3. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming disallowance of the deduction under section 54F of the Act amounting to Rs. 12,12,196/-. 4. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming disallowance of the deduction under section 54B of the Act of Rs. 23,06,723/-. 5. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming addition of stamp duty charges paid of Rs. 3,09,160/-. 6. On the facts and circumstances of the case as well as law on the subject the learned Commissioner of Income Tax (Appeals) has erred in confirming addition of Rs. 2,00,000/- on account of low household withdrawals. 7. It is therefore prayed that the above addition/disallowance made by the assessing officer and confirmed by CIT(A) may please be deleted. 8. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 4. At the outset, the counsel for the assessee before us submitted that he shall not be pressing for ground nos. 5 and 6 of the appeal. Accordingly, ground no. 5 and 6 of the assessee’s appeal are being dismissed as not pressed. 5. The brief facts of the case are that during the course of assessment proceedings, the Assessing Officer noticed that the assessee had sold an immoveable property held jointly with his relative, for a total consideration I.T.A Nos. 1009/Ahd/2017 & 1036/Ahd/2018 A.Y. 2012-13 Page No. Shri Bhavesh Chunibhai Jani vs. ITO & Varsha P Jani Vs. DCIT 4 of Rs. 2 crores. The property was jointly owned by the assessee and his relative. As per the information received from the Sub-Registrar, Ahmedabad, the value of the property worked out at Rs. 2,99,10,600/- as against the sale consideration of Rs. 2 crores declared in the sale deed by the assessee and his relative. The difference in the value as per sale deed and as per the value determined by the stamp valuation authority was Rs. 99,10,600/- and the assessee’s share out of the same works out to Rs. 49,55,300/- (i.e. 50% Rs. 2,99,10,600/-) as against only Rs. 1 crore shown by the assessee. Before the Assessing Officer, the assessee submitted that the title of the property was not clear and marketable, and hence the property has been sold below the “Jantri rate”. The submission of the assessee was considered by the Assessing Officer but not found acceptable for reasons given in paragraphs 6.6 of the assessment order, which is reproduced for reference:- “(1) When the property was not clear and marketable, the property could not be registered by the concerned authority. (2) Without clearance of the title of the properly the sale and subsequent registration could not have taken place. (3) Section 50C is a special provision for determining the full value of consideration in case of transfer of immovable property, being land or building or both. (4) Section 50C provides that where the consideration declared lo be received or accruing as a result of transfer of land or building or both is less than the value adopted or assessed by the Stamp Valuation Authorities for the purpose of payment, of stamp duty in respect of transfer, then value so adopted or assessed by them shall be deemed to be the fill 1 value of consideration. (5) The assessee has not disputed the stamp duty adopted or assessed by the Stamp Valuation Authorities (for short 'SVA') for the purpose of stamp duty in respect of the property and paid stamp duty as I.T.A Nos. 1009/Ahd/2017 & 1036/Ahd/2018 A.Y. 2012-13 Page No. Shri Bhavesh Chunibhai Jani vs. ITO & Varsha P Jani Vs. DCIT 5 determined by the SVA, if the assessee has not accepted the valuation as determined, by the SVA, the assessee definitely filed appeal before appellate authorities or Court under Stamp Valuation Act. The assessee has not produced any evidence to prove that the assessee has filed appeal before the appellate authorities or Court against the said valuation instead accepted the value adopted by SAV and paid stamp duty accordingly. (6) Insertion of Section 50C is within the legislative competence and is not violative of Article 14 of the Constitution of India, (Rhatia Nagar Premises Co. Op. Society Ltd. V. Union of India (2011) 334 ITR 145/1.97 Taxman 249/(20tO) 6 Taxniann, Com 120 (Born,), KJR. Paianisamy V, Union of India (2008) 306 ITR 61/(2009) 180 Taxman 253 (Mad.).” 6. During the appellate proceedings before ld. CIT(A), the assessee contended that the property under consideration is a disputed property and there is a civil suit going on in respect of the property. The assessee further requested that the issue of valuation of the property should be referred to the valuation officer as per the provisions of section 50C(2) of the Act. Accordingly, the Assessing Officer was requested to refer the matter to Departmental Valuation Officer (DVO) who is the competent authority to decide the correct value of the property under consideration. Thereafter, the DVO completed the valuation of the property and furnished a valuation report dated 19-07-2016 as per which the fair market value of the property was computed at Rs. 2,89,80,000/-. The ld. CIT(A) observed that the aforesaid value was also accepted by the Assessing Officer in para 2.2 of the remand report. Accordingly, keeping in view the above facts, the ld. CIT(A) considered the sale consideration of the property at Rs. 2,89,80,000/- and worked out the assessee’s share at Rs. 1,44,90,000/- (i.e. 50% share). Accordingly, the ld. CIT(A) gave part relief to the assessee and as against I.T.A Nos. 1009/Ahd/2017 & 1036/Ahd/2018 A.Y. 2012-13 Page No. Shri Bhavesh Chunibhai Jani vs. ITO & Varsha P Jani Vs. DCIT 6 the addition of Rs. 49,55,300/- made in the hands of the assessee by the Ld. Assessing Officer, Ld. CIT(A) deleted the amount of Rs. 4,65,300/- and restricted the addition to Rs. 1,44,90,000/- . 7. The assessee is in appeal before us against the aforesaid order passed by the ld. CIT(A) confirming the addition to the extent of Rs. 44,90,000/- in the hands of the assessee for 50% share and a similar amount was also confirmed in the hands of the assessee’s relative with whom he had jointly sold the property. The contention of the counsel for the assessee before us is that the aforesaid property was a disputed property in respect of which a legal dispute was going on at the time the assessee and his relative jointly made the sale of the aforesaid property. The counsel for the assessee submitted that owing to the legal dispute subsisting at the time of sale of the aforesaid property, the same could not fetch market value. However, the DVO to whom the matter was referred to, did not consider this crucial aspect of at the time of preparing the valuation report. The counsel for the assessee drew our attention to pages 10-31 of the paper book and 59-81 of the paper book as evidence to show that the dispute in respect of the aforesaid property is subsisting in the Court of Hon’ble Pr. Senior Civil Judge, Ahmedabad Rural. The counsel for the assessee submitted that the property which was earlier purchased by the assessee, had also been simultaneously sold by the seller to another person and such other person had filed a suit against the assessee and his relative challenging their ownership in respect of the aforesaid property. The counsel for the assessee drew our attention to page 64 of the paper book i.e. the relevant paragraph of the civil suit to elaborate on the nature of the suit which was subsisting at the I.T.A Nos. 1009/Ahd/2017 & 1036/Ahd/2018 A.Y. 2012-13 Page No. Shri Bhavesh Chunibhai Jani vs. ITO & Varsha P Jani Vs. DCIT 7 time the sale was made. The counsel for the assessee submitted that even as on the current date, the civil suit is still subsisting between the parties with respect to the title to the aforesaid property. Further, the counsel for the assessee submitted that a specific plea was also raised before ld. CIT(A) on this aspect, however, he omitted to consider the same. Further, the counsel for the assessee drew our attention to paper book filed on 14-10-2022 at page 6 and submitted that vide letter dated 19-03-2016, the counsel for the assessee had also intimated the DVO with respect to the civil dispute pending with respect to the title of the aforesaid property. However, despite the same, the DVO valued the property on the basis of subsisting market value of properties lying adjacent to the aforesaid property which was sold by the assessee and did not take into consideration the fact that the property could not fetch market value owing to the civil dispute as to the clear title of the aforesaid property. 8. In response, the ld. Departmental Representative relied upon the observations made by the CIT(A) and the ld. Assessing Officer in their respective orders. 9. We have heard rival contentions and perused the material on record. We observe that in the instant facts, evidently the DVO did not take into consideration the fact that the title of the property was under dispute and the matter was pending before a civil suit at the time when the assessee and his relative jointly sold the property. Further, we observe that the counsel for the assessee has placed evidence on record before us that the civil suit with respect to the title of properties is still going on even today as on the date of I.T.A Nos. 1009/Ahd/2017 & 1036/Ahd/2018 A.Y. 2012-13 Page No. Shri Bhavesh Chunibhai Jani vs. ITO & Varsha P Jani Vs. DCIT 8 hearing before us. We further observe that the ITA Mumbai in the case of Whiterose Holdings India Pvt. Ltd. vs. ITO in ITA No. 7395/Mum/2017 has held that where in respect of a certain property there are disputes and litigations going on and the property is in the possession of the tenant, the property cannot be valued on the basis of development method by considering that developmental potential and built up area in the nearby locality. Again, the ITAT Hyderabad in the case of D. Anitha Vs. ITO 55 taxman.com 538 (Hyderabad Trib) held that where property held by the assessee was encumbered and thus the assessee was not the absolute owner of the property, while computing the capital gains arising from transfer of such property, value of property taken for the purpose of payment of stamp duty could not be adopted as sale consideration by applying provisions of section 50C of the Act. Therefore, in the light of the facts of the instant case where apparently the DVO has not considered the on-going dispute as to the title of property at the time of sale of property and in the light of observations made by Hyderabad Tribunal on this aspect, in the interest of justice, the matter is being restored to the file of ld. CIT(A) to take appropriate steps for determining the sale consideration as per law taking into consideration the fact that market value of adjacent properties cannot be taken as the benchmark to determine the sale consideration of a property, the title of which itself is under dispute. 9.1 Accordingly, the matter is being restored to the file of ld. CIT(A) with the above observations. Since the matter is being restored to the file of ld. CIT(A), we are not adjudicating on the other grounds of appeal raised by the assessee. I.T.A Nos. 1009/Ahd/2017 & 1036/Ahd/2018 A.Y. 2012-13 Page No. Shri Bhavesh Chunibhai Jani vs. ITO & Varsha P Jani Vs. DCIT 9 10. In the result, the appeal of the assessee is allowed for statistical purposes. 1036/Ahd/2018 A. Y. 2012-13 11. This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ahmedabad, in proceeding u/s. 250 vide order dated 13/11/2017 passed for the assessment year 2011-12. 12. The assessee has taken the following grounds of appeal:- “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has erred in passing order in the name of dead person. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has erred in confirming addition of Rs. 44,90,000/- u/s. 50C of the Act. 3. It is therefore prayed that the above addition/disallowance made by the assessing officer and confirmed by CIT (Appeals) may please be deleted. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 13. We observe that the facts and issues for consideration in ITA 1009/Ahd/2017 in the case of Shri Bhavesh Jani are the same as in the case of Varsha P. Jani in ITA No. 1036/Ahd/2018. Therefore, since the issue involved is determination of the sale consideration of property sold by Shri Bhavesh Jani & Varsha P. Jani as legal heir of Late Shri Chinubhai Jani, the I.T.A Nos. 1009/Ahd/2017 & 1036/Ahd/2018 A.Y. 2012-13 Page No. Shri Bhavesh Chunibhai Jani vs. ITO & Varsha P Jani Vs. DCIT 10 observations made by us in the case of Shri Bhavesh Jani in ITA No. 1009/Ahd/2017 will also apply to the case of Varsha P. Jani as legal heir of Late Shri Chinubhai Jani. Accordingly, the matter is being restored to the file of ld. CIT(A) to determine the market value of property u/s. 50C of the Act as per law. In the result, the appeal of the assessee is allowed for statistical purposes. 14. In the result, both the appeals filed by different assessee’s are allowed for statistical purposes. Order pronounced in the open court on 19-04-2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 19/04/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद