Sh. Ravinder Lakhanpal, Chandigarh V. ITO, Chandigarh

ITA 1086/CHANDI/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3800 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 18-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Principle of natural justice; Cost of acquisition
• Section: 133(6); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1086/CHD/2016 ASSESSMENT YEAR: 2009-10 SHRI RAVINDER LAKHANPAL, VS THE ITO, HOUSE NO. 746, WARD 3(3), SECTOR 22-A, CHANDIGARH. CHANDIGARH. PAN: AUZPP8387L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SI NGH RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 20.12.2016 DATE OF PRONOUNCEMENT : 30.12.2016 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-I CHANDIGARH DATED 12.09.2016 FOR ASSESSMENT YEAR 2009-10. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE FINDINGS OF AUTHORITIES BELOW. 3. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO. 2 OF THE APPEAL, SAME IS ACCORDINGLY, DISMISSED AS NOT PRESSED. 4. GROUND NO. 1 READS AS UNDER : THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE AND 2 HAS THEREBY ERRED IN ADOPTING THE RATE OF LAND OF H OUSE NO 546, SECTOR 16, CHANDIGARH AT RS 580 PER SQ. YD. AS AGAI NST RS 700 PER SQ. YD. THE ACTION OF THE LEARNED CIT(A) IS ARBITRARY A ND AGAINST THE PROVISIONS OF LAW AND NATURAL JUSTICE. 5. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE ALONGWITH CO-OWNERS HAD SOLD HOUSE NO. 546 SECTOR 1 6 FOR RS. 3,45,00,000/- AND RECEIVED 25% SHARE OUT OF THE PROCEEDS AMOUNTING TO RS. 86,25,000/-. THIS HOUSE W AS INHERITED FROM THE FATHER BEFORE 01.04.1981 AND THEREFORE, COST OF ACQUISITION AS ON 01.04.1981 WAS ADOPTED. THE DISPUTE IS REGARDING VALUE OF COST OF ACQUISITION AS ON 01.04.1981. THE ASSESSEE ADOPTED COST OF ACQUISITION AS RS. 6,25,000/- AND THE ENTIRE INC OME AFTER INDEXATION THE LONG TERM CAPITAL GAIN WAS COM PUTED AT RS. 49,87,500/-. THE ASSESSING OFFICER DID NOT AGREE WITH THIS COST AND ADOPTED THE COST OF ACQUISITION AT RS. 10,81,440/- AND WORKED OUT THE INDEXED COST AT RS. 62,93,980/- AND CAPITAL GAIN AT RS. 2,82,06,020/-. THE ASSESSEE'S 1/4 TH SHARE FOR LONG TERM CAPITAL GAIN WAS TAKEN AT RS. 70,51,505/- AND INCOME WAS ACCORDINGLY COMPUTED. 5(I) THE ISSUE WITH REGARD TO COST OF ACQUISITION I .E. VALUE OF THE PLOT WAS CONSIDERED IN THE WAY THAT CO ST ADOPTED BY VALUERS REPORT SUBMITTED BY ASSESSEE BE FORE ASSESSING OFFICER. DURING ASSESSMENT, VALUATION RE PORT DATED 20.08.2011 WAS SUBMITTED IN WHICH THE COST AS ON 3 01.04.1981 WAS WORKED OUT AS PER THE FOLLOWING CALCULATION : I) PLOT 949 SQ.YDS. X RS. 500/- PER SQ.YDS. = RS. 4,74,500/- II) COST ADOPTED BY THE ASSESSEE DURING ASSESSME NT : PLOT 949 SQ.YD. X RS.800/- PER S Q.YDS. =RS. 7,59,200/- (COST OF PLOT WAS ADOPTED AT RS. 700/- AND RS. 100/ - WAS ADDED AS COST OF CONVERSION TO FREE HOLD ) III) COST ADOPTED BY THE A.O. : PLOT 949 SQ.YDS. X RS.560/- PER SQ.YDS. = RS. 5,31,440/- 5(II) FOR ADOPTING THE COST OF RS. 560/-, THE ASS ESSING OFFICER OBTAINED INFORMATION UNDER SECTION 133(6) O F THE ACT FROM THE ESTATE OFFICE, CHANDIGARH REGARDING SA LE VALUE/MARKET VALUE OF RESIDENTIAL PROPERTIES SOLD BETWEEN 1980 TO 1982 AS PER THE FOLLOWING WORKING : DATE OF AUCTION PRICE 02.08.1980 RS. 290/- 30.10.1981 RS. 821/- TOTAL : RS.1115/- AVERAGE PRICE RS. 557/- 6. THE ASSESSEE CHALLENGED THE ABOVE FINDINGS OF THE ASSESSING OFFICER BEFORE LD. CIT(APPEALS) AND SUBMI TTED THAT THE ASSESSING OFFICER SHOULD HAVE ADOPTED COST OF 4 ACQUISITION AT RS. 800/- PER SQ.YD. FOR VALUE OF TH E PLOT. IT WAS SUBMITTED THAT HOUSE SOLD BY THE ASSESSEE WA S FREE HOLD AND NOT LEASE HOLD. THE ASSESSEE HAS ADO PTED RS. 100/- PER SQ.YD. AS CONVERSION CHARGES TO ARRIV E AT THE VALUE OF THE PLOT ON FREE HOLD BASIS ON ESTIMAT ED BASIS. THE ASSESSING OFFICER SOUGHT INFORMATION FR OM ESTATE OFFICE, UT, CHANDIGARH WITH REGARD TO VALUE OF PROPERTY AS ON 01.04.1981. THE ESTATE OFFICE, UT CHANDIGARH REPLIED THAT AUCTION RATE WITH REGARD TO A LEASE HOLD PROPERTY SITUATED IN A SIMILAR AREA AS O N 30.10.1981 WAS RS. 825/- PR SQ.YD. AND RS. 290/- PE R SQ.YD. AS ON 02.08.1980. THE ASSESSING OFFICER, THEREFORE, ADOPTED AVERAGE RATE OF THE ABOVE TWO. THE ASSESSING OFFICER HAS, HOWEVER LOST SIGHT OF THE FA CT THAT PROPERTIES ON AUCTION ARE LEASE HOLD FOR 99 YEARS A ND FREE HOLD PROPERTIES ARE ON OWNERSHIP IN PERPETUITY. TH E RATE ADOPTED BY THE ASSESSEE WAS OF THE FREE HOLD RATE A ND NOT LEASE HOLD RATE AS ADOPTED BY THE ASSESSING OFFICER . EVEN AS PER ESTATE OFFICE, UT CHANDIGARH AS ON OCTOBER,1981, THE RATE OF THE PROPERTY IS RS. 825/- PER SQ.YD., THEN THE VALUE OF THE FREE HOLD PLOT IN 198 1 WOULD NOT BE BELOW RS. 800/- PER SQ.YD. GOING BY THE BACK WARD REVISION OF RATES. IT WAS, THEREFORE, PRAYED THAT ASSESSING OFFICER MAY BE DIRECTED TO ADOPT RATE OF LAND AT RS. 800/- PER SQ.YD. INSTEAD OF RS. 560/- PER SQ.YD . ADOPTED BY THE ASSESSING OFFICER WHICH IS VERY FAIR AND REASONABLE. 5 7. THE LD. CIT(APPEALS), CONSIDERING THE ABOVE SUBMISSIONS NOTED THAT THE FIRST VALUE OF RS. 500/- SQ.YD. IS FURNISHED BY M/S A.S. MEHANDIRATTA & ASSOCIATES, WHO IS REGISTERED VALUER AND IS PROFESS IONAL IN THIS FIELD. THE VALUER WAS APPOINTED BY THE ASS ESSEE AND THERE IS NO REASON THAT THIS VALUE SHOULD NOT B E BELIEVED. HOWEVER, SECOND VALUATION OF RS. 800/- PROVIDED BY THE ASSESSEE AT THE TIME OF ASSESSMENT WAS MUCH HIGHER THAN THE VALUE ADOPTED BY THE REGISTERE D VALUER OF THE ASSESSEE. THE ASSESSEE HAS NOT FURNI SHED ANY BASIS FOR ADOPTING HIGH RATE. THE ASSESSEE HAS VALUED BROKEN-UP VALUE AS VALUE OF THE LEASE HOLD PROPERTY @ RS. 700/- SQ.YD. AND ADOPTED VALUE OF RS . 100/- SQ.YD. AS CONVERSION CHARGES TO FREE HOLD PRO PERTY. THE ASSESSING OFFICERS VALUE OF RS. 560/- SQ.YD. I S BASED ON THE RATES OBTAINED FROM ESTATE OFFICE AND AVERAG ING THEM. THE VALUE IS CLOSE TO THE RATE ADOPTED BY TH E REGISTERED VALUER. THEREFORE, RATE OF RS. 800/- SU BMITTED BY ASSESSEE IS NOT ACCEPTABLE. THE ASSESSING OFFIC ER HAS ADOPTED RATE OF RS. 560/- ON SCIENTIFIC BASIS BY AV ERAGING THE RATES AND ACCORDINGLY, NO FAULT WAS FOUND IN TH E WORKING OF THE ASSESSING OFFICER AND APPEAL OF THE ASSESSEE WAS ACCORDINGLY, DISMISSED. 8. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW THE AUTHORITIES BELOW SHOULD NOT HAVE ADOPTED THE AVERAGE RATE OF COST OF ACQUISITION AS ON 01.04.198 1. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ONL Y 6 DISPUTE IN THE PRESENT APPEAL IS ADOPTION OF COST O F ACQUISITION OF PLOT AS ON 01.04.1981. HE HAS REITE RATED SUBMISSIONS MADE BEFORE AUTHORITIES BELOW. HE HAS RELIED UPON DECISION OF THE HON'BLE SUPREME COURT I N THE CASE OF STATE OF PUNJAB & ORS. VS HANS RAJ 5 SCC 73 4 IN WHICH IT WAS HELD THAT AVERAGING PRICE FETCHED BY THE SALE OF DIFFERENT LANDS OF DIFFERENT KIND AT DIFFER ENT TIMES MAY NOT LEAD TO CORRECT RESULT REGARDING THE MARKET VALUE OF LAND IN QUESTION. IT WAS, THEREFORE, HELD THAT METHOD OF WORKING OUT AVERAGE PRICE PAID UNDER DIFFERENT S ALE TRANSACTIONS NOT PROPER. COMPARABLE SALES PROXIMAT E IN TIME AND PLACE RELIABLE. HE HAS ALSO RELIED UPON D ECISION OF HON'BLE SUPREME COURT IN THE CASE OF ANJANI MOLU DESSAI VS STATE OF GOA & ANR, CIVIL APPEAL NO. 8042 OF 2004 DATED 07.12.2010 IN WHICH IN PARA 13, IT IS HE LD AS UNDER : 13. THE LEGAL POSITION IS THAT EVEN WHERE THERE AR E SEVERAL EXEMPLARS WITH REFERENCE TO SIMILAR LANDS, USUALLY THE HIGHES T OF THE EXEMPLARS, WHICH IS A BONA FIDE TRANSACTION, WILL BE CONSIDERE D. WHERE HOWEVER THERE ARE SEVERAL SALES OF SIMILAR LANDS WHOSE PRIC ES RANGE IN A NARROW BANDDWIDTH, THE AVERAGE THEREOF CAN BE TAKEN, AS RE PRESENTING THE MARKET PRICE. BUT WHERE THE VALUES DISCLOSED IN RES PECT OF TWO SALES ARE MARKEDLY DIFFERENT, IT CAN ONLY LEAD TO AN INFERENC E THAT THEY ARE WITH REFERENCE TO DISSIMILAR LANDS OR THAT THE LOWER VAL UE SALE IS ON ACCOUNT OF UNDER-VALUATION OR OTHER PRICE DEPRESSING REASON S. CONSEQUENTLY AVERAGING CAN NOT BE RESORTED TO. WE MAY REFER TO T WO DECISIONS OF THIS COURT IN THIS BEHALF. 9. HE HAS FURTHER SUBMITTED THAT ASSESSEE HAS FURNISHED AUCTION PRICE OF PLOT (PROPERTY NO. 2171 SECTOR 7 15, CHANDIGARH) ON 31.10.1981 OF RS. 700/- PR SQ.YD . THE CONVERSION CHARGES ARE RS. 100/- PR SQ.YD. THE ASSESSING OFFICER REFERRED CASE OF SANJIV LAL OF SE CTOR 8-B,CHANDIGARH. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT AVERAGE COST OF ACQUISITI ON APPLIED BY THE ASSESSING OFFICER WAS INCORRECT AND CLAIM OF THE ASSESSEE SHOULD BE ACCEPTED. ON THE OTHER H AND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW. 9(I) ON CONSIDERATION OF THE RIVAL SUBMISSIONS, I A M OF THE VIEW AUTHORITIES BELOW WERE NOT JUSTIFIED IN AD OPTING AVERAGE RATE OF RS. 557/- AS COST OF ACQUISITION OF PLOT AS ON 01.04.1981. THE FACTS AS NOTED ABOVE ARE NOT IN DISPUTE. THE ASSESSING OFFICER OBTAINED INFORMATIO N UNDER SECTION 133(6) OF THE ACT FROM ESTATE OFFICE REGARDING MARKET VALUE/SALE VALUE OF RESIDENTIAL PROPERTIES SOLD DURING THE YEAR 1980 TO 1982. AS P ER THEIR REPLY DATED 22.09.2011 ESTATE OFFICE HAS FURN ISHED REPLY INTIMATING THE DATE OF AUCTION AND AVERAGE PR ICE AS NOTED ABOVE. THE FIRST DATE OF AUCTION IS 02.08.19 80 WHICH IS NOT RELEVANT TO THE DATE OF ACQUISITION OF THE PROPERTY ON 01.04.1981. THE SECOND DATE OF AUCTION IS 30.10.1981 ON WHICH THE PRICE WAS RS. 825/- SQ.YD. WHICH IS RELEVANT TO THE DATE OF ACQUISITION AS ON 01.04.1981. THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER LOST SIGHT OF THE FACT THAT PROPERTIES ON A UCTION ARE LEASE HOLD PROPERTIES BUT IN THE CASE OF ASSESS EE, IT IS FREE HOLD PROPERTY. COPY OF THE SALE DEED IN TH E CASE 8 OF THE ASSESSEE WAS AVAILABLE ON RECORD OF THE ASSE SSING OFFICER BUT AUTHORITIES BELOW DID NOT DISPUTE THIS CLAIM OF THE ASSESSEE. THEREFORE, IT IS CLEAR THAT THERE WOULD BE A DIFFERENCE BETWEEN RATES ADOPTED FOR LEASE HOL D PROPERTY AND FREE HOLD PROPERTY. EVEN OTHERWISE, I F THE VALUE OF PROPERTY, AS SUBMITTED BY THE ESTATE OFFIC E, UT CHANDIGARH AS ON OCTOBER,1981 IS RS. 825/- SQ.YD., THEN VALUE OF FREE HOLD PLOT IN APRIL,1981 WOULD NOT BE BELOW THE AMOUNT OF RS. 700/- PER SQ.YD. AS CLAIMED BY TH E ASSESSEE. THEREFORE, THERE IS NO QUESTION OF APPLY ING AVERAGE PRICE FOR THE PURPOSE OF COMPUTING THE COST OF ACQUISITION AS ON 01.04.1981. THE ASSESSING OFFICE R SHOULD HAVE CONSIDERED THE HIGHEST OF THE VALUE AS AGAINST AVERAGE PRICE NOTED IN THE IMPUGNED ORDER. THE ASSESSEE HAS ALSO PROVIDED THE INSTANCE OF AUCTION PRICE OF PLOT NO. 2171 SECTOR 15, CHANDIGARH ON 31.10.19 81 OF RS. 700/- SQ.YD. SECTOR 15 PROPERTY IS NEAR THE PR OPERTY UNDER REFERENCE WHICH IS SITUATED IN SECTOR 16, CHANDIGARH. THEREFORE, THIS INSTANCE SHOULD HAVE B EEN CONSIDERED BY THE ASSESSING OFFICER INSTEAD OF REFE RRING THE CASE OF SHRI SANJIV LAL OF PROPERTY SITUATED IN SECTOR 8-B, CHANDIGARH. THE AUTHORITIES BELOW HAVE ALSO P LACED RELIANCE ON THE REPORT OF REGISTERED VALUER DATED 20.08.2011 WHO HAS REPORTED RS. 500/- SQ.YD. VALUE OF THE PROPERTY. THE LD. CIT(APPEALS) IN THE IMPUGNED ORDER HAS NOTED THAT CLAIM OF THE ASSESSEE WAS NOT ACCEPT ED BECAUSE THE RATE ADOPTED BY THE ASSESSING OFFICER H AS THE SCIENTIFIC BASIS I.E. THE REPORT OF THE ESTATE OFFICE, 9 UT CHANDIGARH. THEREFORE, WHEN REPORT OF ESTATE OFF ICE, UT CHANDIGARH HAS BEEN RELIED UPON, THERE IS NO QUESTION OF TAKING INTO CONSIDERATION THE REPORT OF REGISTERED VALUER EVEN IF SUBMITTED BY THE ASSESSEE BECAUSE IT WAS BASED ON ESTIMATE ONLY. THE RATE DISCLOSED BY THE ESTATE OFFICE, UT CHANDIGARH ARE RELIABLE AND SHALL HAVE TO BE CONSIDERED AS MARKET VALUE FOR THE PURPOSE OF COMPUTING THE COST OF ACQUISITIO N AS ON 01.04.1981. 10. CONSIDERING TOTALITY OF THE FACTS AND CIRCUMSTA NCES NOTED ABOVE, IT IS CLEAR THAT WHEN ESTATE OFFICE, U T CHANDIGARH HAS REPORTED COST OF RS. 825/- AS ON 30.10.1981, THE RATE ADOPTED BY THE ASSESSEE OF RS. 700/- PER SQ.YD. AS ON 01.04.1981 COULD NOT BE SAID TO BE UNREASONABLE OR IMPROPER. THE AVERAGE PRICE ADO PTED BY AUTHORITIES BELOW WERE, THEREFORE, WHOLLY UNJUST IFIED AND WOULD NOT GIVE THE PROPER VALUATION OF COST OF ACQUISITION AS ON 01.04.1981. IT IS ALSO A FACT TH AT THE ASSESSEE, DESPITE MAKING A CLAIM THAT AMOUNT OF RS. 100/- SQ.YD. PAID FOR LAND CONVERSION FROM LEASE HO LD TO FREE HOLD BUT NO EVIDENCE OF PAYING RS. 100/- AS CONVERSION CHARGES HAVE BEEN PLACED ON RECORD. MOREOVER, ASSESSEE HAS NOT MADE CLAIM OF RS. 100/- AS CONVERSION CHARGES IN THE GROUND OF APPEAL, THEREFO RE, IT CANNOT BE CONSIDERED IN FAVOUR OF THE ASSESSEE. TH E DECISIONS RELIED UPON BY LD. COUNSEL FOR THE ASSESS EE APPLY TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 10 11. IN THIS VIEW OF THE MATTER, I AM OF THE VIEW TH AT THE VALUE OF COST OF ACQUISITION OF PLOT AS ON 01.04.19 81 SHOULD HAVE BEEN ADOPTED AT RS. 700/- SQ. YD. INSTE AD OF RS. 560/- SQ. YD. ADOPTED BY THE AUTHORITIES BELOW. THE ASSESSEE, THEREFORE, SUCCEED ON GROUND NO. 1. GROU ND NO. 1 OF APPEAL OF THE ASSESSEE IS, ACCORDINGLY, AL LOWED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 30 TH DECEMBER,2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH