ITO 21(1)(4), MUMBAI V. PRATAP M INDULKAR, MUMBAI

ITA 1142/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8315 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDER SINGH
• Assessee Lawyers: V G GINDE
• Keywords: Value adopted by valuation officer; Capital asset; Cost of acquisition; Fair market value; Valuation report; Capital Gains
• Section: 208; 55A; 55(a)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI RAJENDRA SIN GH (A.M) ITA NO.1142/MUM/2010(A.Y. 2006-07) THE ITO 21(1)(4), ROOM NO.5606, 6 TH FLOOR, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E),MUMBAI 51. (APPELLANT) VS. SHRI PRATAP M. INDULKAR, PARVATI NIWAS, OPP. HANUMAN ROAD, P.O.VILE PARLE(E), MUMBAI 57. PAN: AAAPI 1017R (RESPONDENT) APPELLANT BY : SHRI NARENDER SINGH RESPONDENT BY : SHRI V.G.GINDE ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 12/11/2009 OF CIT(A) 32 MUMBAI RELATING TO ASSESSMENT YEAR 200 6-07. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS: 1(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO ADOPT T HE MARKET VALUE OF THE PROPERTY AS ON 1/4/81 AS PER APPELLANTS REGIST ERED VALUER AND NOT THE VALUATION GIVEN BY THE DVO WHEREIN REFERENCE WA S MADE TO THE DVO BY THE AO U/S. 55A OF THE IT ACT TO DETERMINE T HE COST OF ACQUISITION. (II) FURTHERMORE THE LD. CIT(A) HAS ERRED IN TREATI NG THE REFERENCE TO VALUATION OFFICER U/S. 55A AS INVALID. ON THE CONT RARY HE OUGHT TO HAVE UPHELD THE REFERENCE TO THE DVO IN VIEW OF THE PROV ISIONS LAID DOWN IN SEC. 55A(B)(II) OF THE I.T. ACT, 1961 WHICH CLEARLY STATES THE FOLLOWING: THAT IN ANY OTHER CASE IF AO IS OF THE OPINION THA T HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCE S IT IS NECESSARY TO DO. ITA NO.1142/MUM/2010(A.Y. 2006-07) 2 2. THE ASSESSEE IS AN INDIVIDUAL. HE SOLD DURING T HE PREVIOUS YEAR A PLOT OF LAND AT ANDHERI, MUMBAI. THE PLOT OF LAND HAD B EEN PURCHASED BY THE ASSESSEE UNDER A CONVEYANCE DEED DATED 16/7/1963. WHILE WORKING OUT THE LONG TERM CAPITAL GAIN ON TRANSFER OF THE AFORESAID PROPERTY THE ASSESSEE HAD ADOPTED THE FAIR MARKET VALUE(FMV) OF THE PROPERTY AS ON 1/4/81 AT RS. 23,00,221/-. THE ASSESSEE HAD A RIGHT TO ADOPT THE COST OF ACQUISITION AS ON 1/4/1981IN VIEW OF THE PROVISIONS OF SECTION 55(2)( B) OF THE INCOME TAX ACT, 1961 (THE ACT). IT IS NOT DISPUTE THAT THE ASSESSE E SUBSTANTIATED HIS FMV AS ON 1/4/1981 BY THE REPORT OF REGISTERED VALUER WHIC H WAS FILED BEFORE THE AO. THE AO HOWEVER MADE A REFERENCE TO THE DVO UN DER SECTION 55A OF THE ACT AND THE DVO ESTIMATED THE FMV OF THE PROPERTY A S ON1/4/1981 AT RS. 12,87,000/-. 3. THE ISSUE BEFORE THE CIT(A) WAS AS TO WHETHER RE FERENCE MADE BY THE AO TO THE DVO UNDER SECTION 55A OF THE FOR DETERMIN ING THE FMV AS ON 1/4/1981 WAS LEGALLY VALID. ON THIS ISSUE THE CIT( A) HELD AS FOLLOWS: 18. THE ISSUE FOR MY CONSIDERATION IS WHETHER THE REFERENCE MADE BY THE LD. ASSESSING OFFICER U/S. 55A TO THE VO TO DET ERMINE THE FAIR MARKET VALUE OF THE PROPERTY AS AT 1/4/1981 IS LEGA LLY VALID OR NOT. I HAVE CAREFULLY CONSIDERED THE ARGUMENTS ADVANCED BY THE LD. AUTHORISED REPRESENTATIVE AND ALSO GONE THROUGH VAR IOUS DECISIONS CITED BEFORE ME. IF FIND THAT IN PATEL INDIA (P) L TD. VS. DCIT (63 TTJ (MUMBI) 19,IT WAS HELD THAT SINCE VALUATION OF PROP ERTY IS HIGHLY TECHNICAL NATURE, REFERENCE COULD BE MADE BY THE L D. ASSESSING OFFICER U/S.55A(B)(II) EVEN THOUGH IT WAS NOT PERMISSIBLE U /S.55(A) OR 55A(B)(I). HOWEVER, IT IS NOTED THAT IN THAT CASE IT WAS THE A SSESSEE WHO HAD SOUGHT A DIRECTION TO THE LD. ASSESSING OFFICER TO MAKE REFERENCE TO VO U/S. 55A. 1. ON PLAIN READING OF THE PROVISIONS OF SECTION 55A, I FIND MERIT IN THE ARGUMENT OF THE APPELLANT. SECTION 55A COULD B E INVOKED ONLY IF THE LD. ASSESSING OFFICER IS OF THE OPINION THAT TH E VALUE DECLARED BY THE ASSESSEE IS LESS THAN THE FAIR MARKET VALUE OF THE ASSET. IN THE APPELLANTS CASE, THE LD. ASSESSING OFFICER HAS MAD E THIS REFERENCE BECAUSE HE FELT THAT THE VALUE OF THE PROPERTY AS O N 1/4/1981 DECLARED BY THE APPELLANT IS MORE THAN THE FAIR MARKET VALUE . THUS, IN MY OPINION, THE CONDITION OF CLAUSE (A) OF SECTION 55A IS NOT SATISFIED. ITA NO.1142/MUM/2010(A.Y. 2006-07) 3 FURTHER, SINCE THE APPELLANT SUBMITTED VALUATION R EPORT OF A REGISTERED VALUER, HIS CASE DOES NOT FALL IN CLAUSE (B) EITHER . THEREFORE, IN MY VIEW, REFERENCE MADE UNDER SECTION 55A IS INVALID. IN TAKING THIS VIEW I DERIVE SUPPORT FROM THE JUDGMENT IN HIABEN JAYANT ILAL SHAH VS. ITO (SUPRA). SIMILAR VIEW HAS ALSO BEEN TAKEN BY TRIBU NAL IN A NUMBER OF CASES, VIZ. MS. RUBAB M. KAZERANI VS. JCIT(SUPRA); ITO VS. SMT. LALITABEN B. KAPADIA (SUPRA); SMT. KRISHNABAI TINGR E VS. ITO (SUPRA); SAJJANKUMAR HARLALKA VS. JCIT (SUPRA); URMILA BAWA VS. ACIT (11 SOT 661) (SUPRA). INCIDENTALLY, I MAY MENTION THAT IN HIABEN JAYANTILAL SHAHS CASE (SUPRA) IT WAS HELD THAT WHERE THE VALU E CLAIMED BY THE ASSESSEE IS SUPPORTED BY A REPORT OF A REGISTERED V ALUER, CLAUSE (B) OF SECTION 55A HAS NO APPLICATION. IN THE APPELLANTS CASE, IT IS ON RECORD THAT THE VALUE CLAIMED BY HIM IS SUPPORTED BY SUCH A VALUATION REPORT, AND HENCE CLAUSE (B) WOULD NOT HAVE ANY APPLICATION IN HIS CASE AS PER THE GUJARAT HIGH COURTS DECISION. BESIDES, IN A N UMBER OF SUBSEQUENT DECISIONS TRIBUNAL HAS TAKEN THE VIEW T HAT REFERENCE U/S. 55A WAS INVALIED. 20. IN VIEW OF THE ABOVE DISCUSSION, I DIRECT THE L D. ASSESSING OFFICER TO SUBSTITUTE THE FAIR MARKET VALUE OF THE PROPERTY AS AT 1/4/1981 OF RS.23,00,221/- AS PER THE APPELLANTS REGD. VALUER S VALUATION REPORT AS THE COST OF ACQUISITION AND FURTHER INDEX COST T HUS ARRIVED AT IN COMPUTING LONG TERM CAPITAL GAINS. 4. BEFORE US IT IS NOT IN DISPUTE THAT IDENTICAL IS SUE HAS COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE CASE OF SM T. SARALA N. SAKARANEY VS. ITO (2010) 46 DTR (MUM) (TRIB) 208 AND THIS TRI BUNAL HAS HELD AS FOLLOWS. 11. AGGRIEVED BY THE ORDERS OF LEARNED CIT(A), ASSE SSEES HAVE PREFERRED GROUND NO. 1 TO 3 BEFORE THE TRIBUNAL. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS. AS FAR AS GROUND NO. 1 IS CONCERNED, WE ARE OF THE VIEW THAT THE REFERENCE TO THE DVO WAS INVLAID. ON THIS ISSUE, LEARNED DR RELIED ON THE OR DER OF LEARNED CIT(A). WHILE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON TH E DECISIONS WHICH WERE CITED BEFORE LEARNED CIT(A) AND FURTHER DREW O UR ATTENTION TO THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F DAULAL MOHTA HUF, ITA NO. 1031 OF 2008 DATED 22.9.2008; WHEREIN, HON'BLE BOMBAY HIGH COURT HAS APPROVED THE DECISION OF HON'BLE ITA T MUMBAI, THIRD MEMBER DECISION IN THE CASE OF MS. RUBAB M. KAZERAN I, 91 ITD 429 (MUM)(TM)AND THE HONBLE ITAT PUNE DECISION IN THE CASE OF SMT. ITA NO.1142/MUM/2010(A.Y. 2006-07) 4 KRISHNABAI TINGRE VS. ITO, 101 ITD 317 (PUNE)(TM). FURTHER REFERENCE WAS ALSO MADE TO THE DECISION OF HON'BLE GUJARAT HI GH COURT IN THE CASE OF HIABEN JAYANTILAL SHAH VS. ITO, 310 ITO 31 (GUJ). IT HAS TO BE MENTIONED HERE THAT THERE IS A DECISION OF ITAT MUM BAI BENCH IN THE CASE OF VIJAYKUMAR M. SHAH VS. DCIT (2009), 29 SOT 338 (MUM); WHEREIN A CONTRARY VIEW WAS TAKEN. IN THE SAID DECI SION, MUMBAI BENCH OF THE TRIBUNAL HAD TAKEN A VIEW THAT THE ASS ESSING OFFICER IS EMPOWERED TO MAKE REFERENCE UNDER SUB-CLAUSE (II) O F SECTION 55A(B), EVEN IN CASES WHERE FMV CLAIMED BY THE ASSESSEE IS HIGHER THAN ACTUAL FAIR MARKET VALUE AND THAT A REFERENCE CAN B E MADE EVEN WHERE CONDITIONS SPECIFIED IN SUB-CLAUSE (II) RELATING TO HAVING REGARD TO ASSET AND OTHER RELEVANT CIRCUMSTANCES IS MET. IT MAY MENTIONED HERE THAT THE AFORESAID DECISION DOES NOT CONSIDER DECIS ION OF HON'BLE BOMBAY HIGH COURT AS WELL AS DECISION OF HON'BLE GU JARAT HIGH COURT AND TO THAT EXTENT, WE ARE OF THE VIEW THAT THE SAI D DECISION IS NOT BINDING. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DAULAL MOHATA HUF (SUPRA) DEALT WITH FOLLOWING SUBSTANTIAL QUESTI ON OF LAW :- B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE HON'BLE TRIBUNAL WAS RIGHT IN LAW TO OBSERVE TH AT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING A REF ERENCE UNDER SECTION 55A OF THE ACT TO THE DVO FOR DETERMINATION OF THE FAIR MARKET VALUE OF THE PROPERTY? IN PARA NO. 4&5 OF ITS JUDGEMENT OF HON'BLE HIGH CO URT HELD AS FOLLOWS:- 4. THE TRIBUNAL IN ITS ORDER DATED 23 RD JULY, 2004 HAS CATEGORICALLY OBSERVED THUS :- THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE DVO U/S. 55A IS BAD IN LAW UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS ISSUE, IN OUR CONSIDERED OPINION IS COVERED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JUDGEMENT I N THE CASE OF RUBAB M. KAZERANI REPORTED IN 91 ITD 429 (MUM)(T M). FURTHER THE ASSESSEE ALSO COVERED BY THE THIRD MEMB ER DECISION OF THE PUNE BENCH OF THE TRIBUNAL, THE CASE OF THE KRISHNABAI TINGORE VS. ITO REPORTED IN 101 ITD 317 (PUNE)(TM) WHEREIN IT HAS BEEN HELD THAT REFERENCE TO DVO CAN ONLY BE MAD E IN CASES WHERE THE VALUE OF CAPITAL ASSET SHOWN BY THE ASSES SEE IS LESS THAN ITS FAIR MARKET VALUE OF LAND AS ON 1 ST APRIL, 1981 SHOWN BY THE ASSESSEE ON THE BASIS OF APPROVED VALUERS REPO RT BEING MORE THAN ITS FAIR MARKET VALUE, REFERENCE UNDER SECTION 35A WAS NOT VALID. RESPECTFULLY FOLLOWING THE PROPOSITIONS LAID DOWN THESE TWO CASES BY THE COORDINATE BENCHES WE UPHOLD THE CONTE NTION OF THE ITA NO.1142/MUM/2010(A.Y. 2006-07) 5 ASSESSEE AND HOLD THAT THE REFERENCE MADE BY THE AS SESSING OFFICER TO THE DVO U/S. 55A IN THE PECULIAR FACTS A ND CIRCUMSTANCES OF THE CASE IS BAD IN LAW. THUS, ON T HE SOLE GROUNDS OF APPEAL, OF THE ASSESSEE HAS TO BE ALLOWE D. BEFORE PASSING, WE HAVE TO MENTION THAT THE ASSESSE E HAS SUBMITTED THE ARGUMENTS. AS ON THE BASIS OF THE LEG AL ASPECTS ITSELF WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE, WE REFRAIN FROM UNDERTAKING THIS ACADEMIC EXERCISE OF DISPOSING THIS CASE ON MERITS. 5. IN VIEW THEREFORE IS NO MERIT IN THE APPEAL. APP EAL STANDS DISMISSED. 13. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF H IABEN JAYANTILAL SHAH(SUPRA) HAS HELD ON THIS ISSUE AS FOLLOWS :- UNDER CL. (A) OF S. 55A THE AO IS ENTITLED TO MAKE THE REFERENCE TO THE VALUATION OFFICER IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH THE E STIMATE MADE BY THE REGISTERED VALUER, IF THE AO IS OF THE OPINI ON THAT THE VALUE SO CLAIMED IS LESS THAN THE FAIR MARKET VALUE. IN A NY OTHER CASE, AS PROVIDED UNDER CL. (B) OF S. 55A, THE AO HAS TO RECORD AN OPINION THAT (I) THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MO RE THAN SUCH PERCENTAGE OR BY MORE THAN SUCH AN AMOUNT AS MAY BE PRESCRIBED; OR (II) HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT IS NECESSARY TO MA KE SUCH A REFERENCE. AS CAN BE SEEN FROM THE COMMUNICATION DA TED NIL FROM DVO TO THE PETITIONER INSOFAR AS THE FAIR MARK ET VALUE OF THE PROPERTY AS ON 1ST APRIL, 1981 IS CONCERNED, THE PE TITIONER HAD CLAIMED THE SAME AT A SUM OF RS. 6,25,000 AS PER RE GISTERED VALUER S REPORT. THEREFORE, THE AO WAS REQUIRED T O FORM AN OPINION THAT THE VALUE SO CLAIMED IS LESS THAN THE FAIR MARKET VALUE. THE ESTIMATED VALUE PROPOSED BY THE DVO IS S HOWN AT RS. 3,97,000, WHICH IS LESS THAN THE FAIR MARKET VALUE SHOWN BY THE ASSESSEE AS ON 1ST APRIL, 1981. THEREFORE, CL. (A) OF S. 55A CANNOT BE MADE APPLICABLE. CLAUSE (B) OF S. 55A CAN BE INV OKED ONLY IN ANY OTHER CASE, NAMELY WHEN THE VALUE OF THE ASSET CLAIMED BY THE ASSESSEE IS NOT SUPPORTED BY AN ESTIMATE MADE B Y A REGISTERED VALUER . IN THE FACTS OF THE PRESENT CAS E, CL. (B) OF S. 55A ALSO CANNOT BE INVOKED. THEREFORE THERE IS NO Q UESTION OF HAVING RECOURSE TO SUB-CL. (II) OF CL. (B) OF S. 55 A OF THE ACT. 14. IN VIEW OF THE AFORESAID DECISIONS, WE ARE OF T HE VIEW THAT REFERENCE BY THE ASSESSING OFFICER TO THE DVO U/S. 55A FOR VALUATION OF ITA NO.1142/MUM/2010(A.Y. 2006-07) 6 FMV OF THE PROPERTY AS ON 1.4.1981 IS NOT VALID FOR THE REASONS THAT FMV DECLARED BY THE ASSESSEE AS PER GOVERNMENT REGI STERED VALUERS REPORT WAS MORE THAN THE FMV AS ESTIMATED BY THE DV O. SINCE DETERMINATION OF THE FMV AS ON 1.4.1981 WAS BASED O N THE REPORT OF THE DVO, THE SAME IS HELD TO BE INVALID. CONSEQUEN TLY, ESTIMATION OF THE FMV OF THE PROPERTY AS ON 1.4.1981 AS MADE BY T HE ASSESSEE IS DIRECTED TO BE ACCEPTED. GROUND NO. 1 OF THE ASSESS EES IS ALLOWED. 5. IT IS THUS CLEAR FROM THE AFORESAID DECISION TH AT SECTION 55A COULD BE INVOKED ONLY IF THE LD. ASSESSING OFFICER IS OF THE OPINION THAT THE VALUE DECLARED BY THE ASSESSEE IS LESS THAN THE FAIR MARK ET VALUE OF THE ASSET. IN THE ASSESSS CASE, THE LD. ASSESSING OFFICER HAS MA DE THIS REFERENCE BECAUSE HE FELT THAT THE VALUE OF THE PROPERTY AS ON 1/4/19 81 DECLARED BY THE ASSESSEEE IS MORE THAN THE FAIR MARKET VALUE. THUS , THE CONDITION OF CLAUSE (A) OF SECTION 55A IS NOT SATISFIED. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE WE UPHOLD THE ORDER OF T HE CIT(A) AND DISMISS THE APPEAL BY THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9TH DAY OF MARCH, 2011. SD/- SD/- (RAJENDRA SINGH) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 9 TH MARCH.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RE BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.1142/MUM/2010(A.Y. 2006-07) 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 1/3/2011 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 2/3/2011 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER