CHANDRA SHEKHAR ARO, TONK V. ITO, TONK

ITA 1020/JPR/2010

• Counselvise Citation: 102023114 RSA 2010
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 12-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Keywords: Sale consideration of property below Jantri Value; Fair market value; Valuation report
• Section: 50C

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.1020/ JP/2010 ASSESSMENT YEAR: 2005-06 PAN: ABFPA 0181 J SHRI CHANDRA SHEKHAR ARORA VS. THE ITO PROP. M/S. ARORA PLASTIC INDL AREA TONK BEHIND DR.GEHLOT HOUSE, MEHANDI BAGH, TONK (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI MAHENDRA GARGIEYA DEPARTMENT BY : MISS. ROSHANTA MEENA ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORD ER OF THE LD. CIT(A), AJMER DATED 12-05-2010 FOR THE ASSESSMENT YEAR 20 05-06. 2.1 BEFORE US, THE LD. AR HAS NOT PRESSED THE SECON D GROUND OF APPEAL IN WHICH THE ASSESSEE IS AGGRIEVED AGAINST REOPENING O F THE ASSESSMENT. SINCE THIS GROUND OF APPEAL HAS NOT BEEN PRESSED, THEREFO RE, THE SAME IS DISMISSED. 3.1 THE FIRST GROUND OF APPEAL IS AGAINST COMPUTATI ON OF LONG TERM CAPITAL GAIN AT RS. 2,68,579/-. 3.2 THE ASSESSEE ALONGWITH HIS BROTHER AND SISTERS AS ASHOK KUMAR ARORA, SMT. MEENA ARORA AND SMT. VIDHYA ARORA SOLD A HOUS E AND ADJOINING OPEN LAND SITUATED AT MEHANDI BAGH, TONK. THE HOUSE AND ADJOINING LAND WERE 2 SOLD ON 12-06-04 AND 27-07-04 THROUGH TWO SEPARATE SALE DEEDS I.E. ONE SALE DEED RELATED TO THE HOUSE AND ANOTHER SALE DEED REL ATED TO OPEN LAND. THE PROPERTY WAS ACQUIRED BY THE FATHER OF THE ASSESSEE FOR A CONSIDERATION OF RS. 7,000/- ON 17-08-1968. AFTER THE DEATH OF THE FATHE R OF THE ASSESSEE, A FAMILY SETTLEMENT WAS EXECUTED ON 17-12-2001 AMONGST THE A SSESSEE AND HIS BROTHER AS WELL AS SISTERS. THE ASSESSEE GOT 1/4 TH SHARE IN A HOUSE AND SHARE IN OPEN LAND. WHILE MAKING THE COMPUTATION OF CAPITAL GAIN, THE ASSESSEE HAS CLAIMED THE EXPENSES INCURRED ON BOUNDARY WALL IN T HE YEAR 1985-86 AND CONSTRUCTION IN THE YEAR 1989-90 AND 2002-03. THE A SSESSEE ADOPTED THE FAIR MARKET VALUE OF THE HOUSE AND OPEN LAND FOR RS. 77, 612/- AND RS. 41,794/-. THE ASSESSEE FILED THE VALUATION CERTIFICATE OF SHR I RASHEED AHMED. SHRI RASHEED AHMED IS NOT AN APPROVED VALUER. THE FAIR M ARKET VALUE ADOPTED ON THE BASIS OF CERTIFICATE OF SHRI RASHEED AHMED WAS HELD AS NOT CORRECT AND GENUINE. THE ASSESSEE WAS AKED TO FILE THE DOCUMENT ARY EVIDENCE REGARDING WORKING OF CAPITAL GAIN. THE AO HAS MENTIONED THAT THE ASSESSEE DID NOT GIVE ANY REPLY FOR JUSTIFICATION OF THE QUERY RAISE D BY THE AO VIDE LETTER DATED 9 TH MAY, 2005 AND ORDER SHEET ENTRY DATED 29 TH AUG. 2008. THE AO ACCORDINGLY COMPUTED THE LONG TERM CAPITAL GAIN AS UNDER:- (I) RESIDENTIAL HOUSE AT MEHANDI BAGH SOLD TO SHR I ROOP CHAND BULANI ON 12.06.2004 FOR A CONSIDERATION OF RS.4,50,000/-AND THE VALUE U/S 50C IS RS.6,21,585/- IN WHICH ASSESSEE IS HAVING SHARE. 3 VALUE U/S 50C RS.6,21,585/- RS.6,21,585/- VALUE OF HOUSE & OPEN LAND AS ON 01.04.1981 IS TAKEN RS. 7,000/- AS DISCUSSED ABOVE LESS (-) RS.33600/- LONG TERM CAPITAL GAIN RS.5,87,985/- THE ASSESSEES SHARE IN THIS LONG TERM CAPITAL G AIN WORKS OUT TO RS.1,46,996/- (587985/4)BEING SHARE. THE DEDUCTION OF OTHER EXP ENSES ASSESSEE FAILED TO PRODUCE EVEN A SINGLE DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM AS DISCUSSED ABOVE. (I) OPEN LAND ADJACENT WITH HOUSE AS MENTIONED ABOVE SO LD TO SHRI MAHESH KUMAR BULANI , TONK ON 27.07.2001 FOR A CONSIDERATION OF RS.2,22,000/- AND THE VALUE U/S 50C IS RS. 2,43,166/- IN WHICH ASSESSEE IS HAVING SHARE . VALUE U/S 50C RS. 2,43,166/- RS.2,43,166/- VALUE OF HOUSE & OPEN LAND AS ON 01.04.1981 IS TAKEN RS. NIL [ SINCE THE VALUE OF OPEN LAND IS INCLUDED IN THE V ALUE OF HOUSE WHICH HAS BEEN CONSIDERED WHILE COMPUTING THE CAPITAL GAIN OF HOUSE AS MENTIO NED ABOVE(I) LESS (-) RS.NIL INDEXING COST RS. NIL LONG TERM CAPITAL GAIN RS.2,43,166/- THE ASSESSEES SHARE IN THIS LONG TERM CAPITAL GAIN WORKS OUT TO RS,1,21,583/- (243166/2)BEING SHARE. THE DEDUCTION OF OTHER EXP ENSES AS CLAIMED BY THE ASSESSEE FAILED TO PRODUCE SINGLE DOCUMENTARY EVIDENCE IN SUPPORT O F HIS CLAIM AS DISCUSSED ABOVE. IN THIS MANNER THE TOTAL LONG TERM CAPITAL GAIN REL ATED TO ASSESSEE IS WORKED OUT AT RS. 2,68,579/- AND IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AND SETOFF OF LOSS RELATED TO 2003/04 IS NOT GIVEN SINCE RETURN OF INCOME WAS NOT FILED IN TIME. 3.3 BEFORE THE LD. CIT(A), IT WAS MENTIONED THAT TH E EXPENSES WERE INCURRED BY FATHER OF THE ASSESSEE. THE FATHER OF T HE ASSESSEE WAS A REGULAR INCOME TAX ASSESSEE TILL DEATH. IT WAS SUBMITTED BE FORE THE AO THAT DEPARTMENT CANNOT STOP THE ASSESSEE TO CHOSE VALUE AS ON 1-4-1981 AS PER HIS CHOICE. IT IS TRUE THAT SHRI RASHEED AHEMAD WAS NOT A REGISTERED VALUER WITH THE INCOME TAX DEPARTMENT BUT HIS QUALIFICATION WAS THE SAME AS REQUIRED FOR 4 VALUER TO BE REGISTERED UNDER INCOME TAX ACT. THE A O HAS NO MATERIAL IN HIS POSSESSION TO SHOW THAT VALUATIONS ARE WRONG. THE L D. AR SUBMITTED THAT THE VALUATION MADE BY THE VALUER IS SIMPLE AND ORDINARY PIECE OF EVIDENCE. IF THE AO WAS NOT SATISFIED WITH THE VALUATION, THEN HE CO ULD HAVE REJECTED THE VALUATION REPORT. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE UPHELD THE ACTION OF THE AO AFTER OBSERVIN G AS UNDER:- 6.3. AS MENTIONED BY AO IN THE ASSESSMENT ORDER T HE PROPERTY IN QUESTION WAS ACQUIRED BY THE APPELLANT ALONG WIT H HIS BROTHERS & SISTERS THROUGH INHERITANCE AFTER DEATH OF HIS FA THER. THIS PROPERTY WAS ACQUIRED BY FATHER OF THE APPELLANT ON 17.08.1968 FOR A CONSIDERATION OF RS.7,000/- . IT IS CLAIMED BY AP PELLANT THAT VARIOUS AMOUNTS WERE SPENT ON CONSTRUCTION OF BOUND ARY WALL AND LEVELING AND CLEANING OF LAND FROM TIME TO TIME, BU T NO EVIDENCE WAS PRODUCED BEFORE AO REGARDING ANY EXPENSES INCUR RED IN RESPECT OF THIS PROPERTY. IN SUCH A SITUATION AND F OR REASONS DISCUSSED IN DETAIL IN THE ASSESSMENT ORDER, AO IS JUSTIFIED IN MAKING ADDITION OF RS.2,68,579/- ON ACCOUNT OF LONG TERM CAPITAL GAIN. THE ADDITION IS CONFIRMED. GROUND NO. 3 OF TH E APPEAL IS THUS DISMISSED. 3.4 THE LD. AR HAS FILED THE WRITTEN SUBMISSION 1. IT IS NOT DENIED THAT TO SUPPORT THE FAIR MARKET V ALUE AS ON 01.04.1981, THE ASSESSEE SUBMITTED A VALUATION CERTIFICATE FROM THE VALUER SHRI RASHEED AHMED . IT IS ALSO NO DENIED THAT HE WAS A BE (CIVIL) AND H E CATEGORICALLY CONFIRMED HAVING PREPARED THE VALUATION EVEN WITHOU T KNOWING THE PURPOSE, AS EVIDENT FROM HIS LETTER DATED 11.09.08 . 5 THE AO IGNORED SUCH VALUATION SIMPLY BECAUSE HE WAS NOT APPROVED BY THE IT DEPARTMENT. BUT THE SUBSTANTIAL FACT REMAIN THAT HE WAS AN EXPERT OF HIS SUBJECT. HE WAS A BE (CIVIL), PRACTICING ENGINEER A ND WAS REGISTERED WITH THE MINISTRY OF EDUCATION AND SOCIAL WELFARE APART FROM BEING ON THE PENAL OF ICICI AND LIC ETC. HE PROVIDED A BASIS TO ARRIVE AT THE F AIR MARKET VALUE (FMV) OF THE HOUSE AT RS. 77,612/- AND OF THE PLOT OF RS. 1,20,2 03/-. THE AO, NOT BEING AN EXPERT COULD NOT HAVE IGNORED SUCH A TECHNICAL REPO RT WITHOUT BRINGING ANY OTHER MATERIAL OF A TECHNICAL EXPERT. HE NEITHER OBTAINED A REPORT FROM THE DEPARTMENTAL VALUATION OFFICER NOR HE GOT THE SAID REPORT VERIFI ED/COMMENTED BY AN EXPERT OF EQUAL/HIGHER STRENGTH. FURTHER NO DEFECT OF ANY NAT URE WAS FOUND NOR THE REPORT WAS REJECTED TECHNICALLY. THUS, A VALID PIECE OF EV IDENCE BINDING UPON THE AO WAS COMPLETELY IGNORED. THE LAW NO WHERE REQUIRE AN ASSESSEE TO SUBMIT VALU ATION REPORT ONLY FROM A VALUER REGISTERED WITH THE IT DEPARTMENT AND ON T HE CONTRARY U/S 55A, THE AO WAS SUPPOSED TO MAKE A REFERENCE TO THE DVO WHICH, HE FAILED. THE LD. CIT(A) HOWEVER, DID NOT APPLY HIS MIND. KINDLY REFER TO: (1) ITO V/S P.C.RAMAKRISHNA (HUF) (2007) 107 TTJ 351 (CHENNAI) (2) R.GOPINATH (HUF) V/S ACIT (2010) 133 TTJ 595 (C HENNAI) (3) MRS.SOSAMMA PAULOSE V/S JCIT (2003) 79 TTJ 573 (COCHIN) IN ANY CASE, IT IS UNBELIEVABLE THAT THE MARKET VAL UE OF THE PROPERTY WOULD HAVE REMAINED THE SAME EVEN AFTER THE LAPS OF 13 YE ARS. IN OTHER WORDS THE MARKET VALUED OF RS. 7,000/- WOULD NOT HAVE INCREASED EVEN A BIT IN 1981. WHEREAS, THE ONE SIDED INCREASE IN THE REAL ESTATE IS A MATTER O F COMMON KNOWLEDGE. THEREFORE, FMV AS DECLARED HAS TO BE ADOPTED. 2. WITH REGARD TO THE INCURRENCE OF COST OF CONSTRUCT ION OF BOUNDARY WALL AND OTHER ON THE PLOT AND HOUSE. THE AUTHORITIES BE LOW COMPLETELY IGNORED THAT IN A LONG PERIOD BETWEEN 1968 THE YEAR OF PURCHASE AND F.Y.04-05, VARIOUS 6 IMPROVEMENTS ARE APPARENT FROM A BARE PERUSAL OF TH E COPY OF THE SITE PLAN ANNEXED WITH THE ORIGINAL PURCHASE DEED DATED 17.08 .1968. COPIES OF THE SITE PLANS ANNEXED WITH THE SALES DEED DATED 25.02.2005 & 22.07.2004. IT CAN BE NOTICED THAT A BOUNDARY WALL WAS CONSTRUCTED COVERI NG THE HOUSE. THERE APART A PART OF THE OPEN LAND WAS SEPARATED IN A PLOT MEASU RING 39.60 X 47.60 AND ACCORDINGLY THE OPEN CHOWK MEASURING 47.6 X 74.9 WAS DIVIDED IN 35.30 X 47.60 AND 39.60 X 47.60. OUT OF THIS, THE LATER P ORTION WAS SOLD (UNDER DISPUTE). THE PLACE OF STORE WAS CONVERTED INTO A KITCHEN. TH E EXISTING LET AND BATH CONVERTED IN STORE. EVEN ASSUMING, THE ASSESSEE COU LD NOT HAVE PRODUCED THE EVIDENCES OF THE CONSTRUCTION EXPENSES. YET HOWEVER , AS A BEST JUDGMENT ASSESSMENT, THE AO WAS BOUND TO HAVE CONSIDERED THE MATERIAL AVAILABLE ON RECORD. HENCE, THE CLAIM OF ASSESSEE PLEASE BE ACCE PTED. 3.5 ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 3.6 WE HAVE HEARD BOTH THE PARTIES. THE PROPERTY UN DER REFERENCE WAS PURCHASED BY SHRI ANAND LAL VIDE SALE DEED DATED 17 -08-1968. THE COPY OF THE SALE DEED IS AVAILABLE AT PAGES 17 TO 34 OF TH E PAPER BOOK. THE AREA OF PLOT MENTIONED IN THE DEED IS 47.5 FT X 74.75 FT. T HE OPEN LAND WAS IN FRONT OF THE HOUSE. THE DETAILS OF THE CONSTRUCTED HOUSE ARE ALSO MENTIONED IN SALE DEED. REFERENCE IS MADE TO PAGE 23 OF THE PAPER BOO K. THERE IS ONE ROOM OF SIZE OF 11 FT X 25.2 FT. SECOND ROOM IS AGAIN OF TH E SAME SIZE. THERE IS A VERANDAH HAVING TIN SHED . THERE IS A GALLERY OF 6. 6 FT WIDE. THERE IS ONE TOILET AND ONE BATH ROOM. ONE PART OF THE PROPERTY HAS BEEN SOLD FOR RS. 4.50 LACS THOUGH THE VALUE FOR STAMP PURPOSES HAS BEEN T AKEN AT RS. 6,21,585/-. 7 BY THIS SALE DEED, THE ASSESSEE ALONGWITH OTHER CO- OWNERS SOLD THE PLOT AS WELL AS HOUSE. IT IS MENTIONED THAT THE HOUSE SO MA DE IN THE PLOT HAS BEEN CONSTRUCTED WITH LIME AND STONE. IT IS ALSO MENTION ED IN THE SALE DEED VIDE PAGE 42 OF THE PAPER BOOK THAT THE HOUSE IS THE SAM E AS WAS PURCHASED IN THE YEAR 1968. WHILE COMPUTING THE CAPITAL GAIN IN RESP ECT OF SUCH PORTION OF THE PROPERTY, THE ASSESSEE HAS CLAIMED INDEXATION I N RESPECT OF CONSTRUCTION DONE IN THE YEAR 1985-86 TO 1989-90. THE DOCUMENTAR Y EVIDENCE CLEARLY SUGGEST THAT THERE HAS BEEN NO CONSTRUCTION DONE AF TER THE HOUSE WAS PURCHASED. HENCE, WE HOLD THAT NO BENEFIT IN RESPE CT OF COST OF IMPROVEMENT IS ALLOWABLE WHILE COMPUTING THE CAPITA L GAIN. PART OF THE PROPERTY HAS BEEN SOLD FOR RS. 2.20 LACS AND THE VA LUE FOR STAMP DUTY HAS BEEN ADOPTED AT RS. 2,43,166/-. THE SALE IS IN RESP ECT OF PLOT. THE ASSESSEE HAS CLAIMED THE COST OF IMPROVEMENT IN RESPECT OF BOUNDARY WALL. SUCH BOUNDARY WALL IS STATED TO HAVE BEEN CONSTRUCTED IN THE FINANCIAL YEAR 1985- 86. IT IS TO BE NOTICED THAT SHRI ANAND LAL EXPIRED ON 24-06-1999. BEFORE THE AO , THE ASSESSEE HAS FILED NO DOCUMENTARY EVIDENCE IN RESPECT OF IMPROVEMENT MADE ON THE PROPERTY. THE SALE DEED DO NOT REFLECT ANY IMPROVEMENT AFTER PURCHASE OF THE PROPERTY. HENCE, IN ABSENCE OF ANY EVIDENCE, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED TO ANY DEDUCTION IN RESPECT OF IMPROVEMENT. THE COPY OF VALUATION CERTIFICATE OF SHRI RASHEED AHMAD 8 IS AVAILABLE AT PAGE 79 OF THE PAPER BOOK. THE SO C ALLED VALUER HAS ADOPTED THE PLINTH AREA RATE OF RS. 2070/- PER SQ. MTR AS O N 1-04-1981 AND THE PLINTH AREA HAS BEEN TAKEN AT 114.54 SQ. MTR. THE VALUE H AS BEEN TAKEN AT RS.64,142/-. IN THE SALE DEED, THE CONSTRUCTED AREA HAS BEEN SHOWN AT 108.25 SQ.FT . THE SO CALLED VALUER HAS TAKEN THE COST OF HOUSE WITHOUT MAKING ADDITION IN THE COST OF WATER SUPPLY, SANITARY AND ELECTRICAL FITTINGS AT RS. 64,142/-. IF THE VALUE IS DIVIDED BY COVERED AREA T HEN THE RATE PER SQ. METER COMES TO RS. 660/- PER SQ. MTR . 21% HAS BEEN ADDED FOR WATER SUPPLY, SANITARY FITTINGS AND ELECTRICAL FITTINGS. THERE WA S ONE BATH ROOM AND LATRINE AND THIS WAS AN OLD HOUSE AND THEREFORE, THE ADDITI ON AT 21% TO THE COST OF THE CONSTRUCTION ON ACCOUNT OF WATER SUPPLY ETC. I S EXCESSIVE. HENCE, THIS VALUATION CERTIFICATE CANNOT BE ACCEPTED ON THE FAC E VALUE. MOREOVER, THE AO WHILE MAKING COMPUTATION OF INCOME HAS TAKEN THE VA LUE OF HOUSE AND OPEN LAND AT RS. 7,000/- AS ON 01-04-1981. THE PROPERTY WAS PURCHASED IN 1968 FOR RS. 7,000/-. ONE CANNOT ACCEPT THAT THERE IS NO APPRECIATION IN THE VALUE OF THE PROPERTY FROM 1968 TO 1981. THE APPRECIATION IN IMMOVABLE PROPERTY IS NORMALLY MORE THAN THE RATE OF INTEREST. LOOKING TO THE PROPERTY FROM 1968 TO 1981, WE FEEL THAT THE VALUE OF HOUSE AND OPEN L AND SHOULD BE ADOPTED AT RS. 70,000/-. THIS WILL INCLUDE THE COST OF BUILDIN G. THE VALUE U/S 50C OF THE ACT IN RESPECT OF BOTH THE PROPERTIES COMBINED TOG ETHER COMES TO RS. 9 8,64,751/-. THE INDEXED COST WILL BE RS. 3.36 LACS. THE DIFFERENCE WILL BE CAPITAL GAIN. THE AO WILL RECOMPUTE THE CAPITAL GAI N BECAUSE THE ASSESSEE IS HAVING 1/4 TH SHARE IN THE RESIDENTIAL HOUSE OF THE LAND AND IS HAVING SHARE IN THE PLOT. ACCORDINGLY THE AO WILL RECOMPUTE THE CAPITAL GAIN. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14-07 -2011. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 14 /07/2011 *MISHRA COPY FORWARDED TO :- 1. SHRI CHANDRA SHEKHAR ARORA, TONK 2. THE ITO, WARD-TONK, TONK 3. THE LD. CIT (A) JAIPUR 4. THE LD. CIT BY ORDER 5. THE LD.DR 6. THE GUARD FILE (ITA NO.1020/JP /10) A.R, ITAT, JAIPUR 10 11