M/s. Premani Prouducts, Ahmedabad V. The Deputy Commissioner of Income Tax, Circle-6(1), Ahmedabad

ITA 1146/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9279 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-01-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 11-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEELIPKUMAR
• Keywords: Capital asset; Depreciation; Cost of acquisition; Fair market value; Set aside
• Section: 143(2); 48

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 1146/AHD/2017 / ASSESSMENT YEAR: 2011-12 M/S.PREMANI PRODUCTS 406, ANIKET BUILDING NR. GIRISH COLD DRINKS C.G. ROAD AHMEDABAD 380 009 PAN : AABFP 9455 H. VS DCIT, CIR.6(1) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI KARAN SHAH, AR REVENUE BY : SHRI DEELIP KUMAR, SR.DR / DATE OF HEARING : 07/01/2020 /DATE OF PRONOUNCEMENT : 10/01/2020 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT(A)- 6, AHMEDABAD DATED 20.4.2017 PASSED FOR THE ASSTT.YEAR 2011-12. 2. REVENUE HAS TAKEN FOUR GROUNDS OF APPEAL WHICH A RE NOT IN CONSONANCE WITH THE RULE 8 OF THE INCOME TAX (APPELLATE TRIBUN AL) RULES, 1963 - THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NA TURE. HOWEVER, PRAYER CLAUSE AT THE END OF APPEAL EXHIBITING GRIEVANCE OF THE AS SESSEE, READS AS UNDER: 1. THE ADDITION ON ACCOUNT OF REDUCING THE COST OF ACQ UISITION FMV AS ON 01.04.1981 AND SUBSEQUENTLY REDUCING THE INDEX COST BY RS.21,48,394/- CONFIRMED BY THE LD.CIT(A) MAY KINDL Y BE DELETED. ITA NO.1146/AHD/2017 - 2 - 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 11.09.2011 DECLARING TOTAL INCOME AT RS.7 ,76,47,010/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS REVEALED TO THE AO THAT TH E ASSESSEE HAS DECLARED LONG TERM CAPITAL GAIN ON SALE OF LAND AT RS.7,92,41,360/-. THE FACTS RELATING TO SUCH COMPUTATION OF LONG TERM CAP ITAL GAIN ARE THAT IN THE YEAR 1972 THE ASSESSEE HAD PURCHASED A LAND FOR A CONSIDERATION OF RS.1,33,000/-. IT WAS A PLOT OF 5493 SQ.METERS. T HE ASSESSEE HAD VALUED THE LAND FOR THE PURPOSE OF INDEXATION AS ON 1.4.19 81 AT RS.8,24,000/-. AFTER INDEXATION BENEFIT, ITS INDEXED COST REPRESEN TING ACQUISITION COST WAS WORKED OUT AT RS.58,58,640/-. THE ASSESSEE HAD ADOPTED THIS VALUE ON THE BASIS OF REPORT OF REGISTERED VALUER WHO TOO K INTO CONSIDERATION THREE SALE DEEDS VIZ. (A) SALE DEED DATED 17.10.198 0 FOR RS.95 PER SQ.METER, (B) SALE DEED DATED 4.2.1980 FOR RS.132.2 4 SQ.METER, AND (C) SALE DEED DATED 17.6.1980 FOR RS.107.81 PER SQ.METER. THE ASSESSEE THEREAFTER ENHANCED THE ACQUISITION COST BY A SUM OF RS.20 LAK HS ON THE GROUND THAT THE ABOVE LAND WAS GIVEN ON RENT TO M/S.PP PRODUCTS (PPP FOR SHORT) AT THE RATE OF RS.4800PER ANNUM. PPP HAS CONSTRU CTED A SHED ON THE SAID LAND, AND IN ORDER TO GET VACANT POSSESSION, T HE ASSESSEE HAD TO PAY A SUM OF RS.20 LAKHS TO PPP. THE LD.AO WHILE CON SIDERING THE ABOVE DETAILS OBSERVED THAT NEAREST DATE IN THE SALE INST ANCES WAS 17.10.1980. IN OTHER WORDS, THIS SALE INSTANCE WAS OF RS.95 PER SQ.METER AND CLOSURE TO 1.4.1981. THUS, IGNORING THE REPORT OF REGISTER ED VALUER, THE LD.AO ADOPTED THE PURCHASE VALUE OF THE LAND AS ON 1.4.19 81 AT RS.95/- PER SQ. METER. HE CALCULATED THE FAIR MARKET VALUE AT RS.5 ,21,835/-, AND AFTER GIVING INDEXATION BENEFIT WORKED OUT VALUE AT RS.37 ,10,246/- AS AGAINST ITA NO.1146/AHD/2017 - 3 - RS.58,58,640/-. IN OTHER WORDS, FMV PRIOR TO INDEX ATION WAS WORKED OUT BY THE ASSESSEE AT RS.8,24,000/- (RS.5423 SQ.MT X RS.150/- ). THE AO HAS WORKED OUT AT RS.5,21,835/- (RS.5493 SQ.MT. X 9 5). THIS EXERCISE HAS GIVEN A DIFFERENCE IN THE COMPUTATION OF CAPITAL GA IN, AND THE AO HAS ENHANCED CAPITAL GAIN BY A SUM OF RS.21,48,394/-. SIMILARLY, HE DID NOT ALLOW ALLEGED IMPROVEMENT COST OF RS.20 LAKHS AND M ADE ADDITION OF RS.20 LAKHS ALSO. DISSATISFIED WITH THE ASSESSMENT ORDER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A), BUT APPEAL DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF RECORD WOULD INDICATE THAT THE STAND OF THE ASSESSEE BEFORE THE LD.REVENUE AUT HORITIES WAS THAT THE LD.AO HAS NOT CALLED FOR ANY REPORT FROM THE DVO. HE HAS JUST ADOPTED ONE OF THE SALE DEEDS FOR THE PURPOSE OF REDUCING T HE COMPUTATION OF COST OF ACQUISITION. BEFORE THE LD.CIT(A), THE ASS ESSEE HAS FILED SUPPLEMENTARY REPORT OF REGISTERED VALUER WHO HAVE JUSTIFIED ADOPTION OF RATE AT RS.150 PER SQ.METERS. SUCH SUBMISSIONS HAVE BEEN TAKEN NOTE BY THE LD.CIT(A) AT PAGE NO.7 AND RELEVANT PART OF THE REPORT IN THIS CONNECTION, READS AS UNDER: 'WHOLE PLOT IS SITUATED AT JUNCTION OF FOUR TP ROAD S, P.P. 143 ABUTS 60' WIDE T.P. ROAD ON NORTH SIDE AND 40 WIDE ROAD ON EAST SI DE. AREA OF PLOT IS 5493 SQ.MT. COMPARED TO THE SALES INSTANCES UNDER SERIAL NO 1 , 2 AND 3 AREA OF THE PROPERTY UNDER CONSIDERATION I.E. P.P. NO 143 IS VE RY LARGE. ALMOST 5 TIMES OR MORE. .IT HAS VERY GOOD DEVELOPMENT POTENTIAL. . FRONTAGE ON ROAD IS MORE COMPARED TO ITS DEPTH. IT IS LEVELED PLOT. .AMENITIES SUCH AS WATER SUPPLY, ELECTRICAL CONNEC TION ALREADY EXISTS. .SUCH A LARGE PLOT IS NOT EASILY AVAILABLE IN THE VICINITY. . WHOLE PLOT ABUTS ROAD ON ITS NORTH AND EAST SID E. HENCE IT IS POSSIBLE TO HAVE SEPARATE EXIT AND ENTRY POINTS FOR MATERIAL AN D PRODUCT HANDLING WHICH IS ITA NO.1146/AHD/2017 - 4 - VERY CRUCIAL FOR A INDUSTRIAL UNIT. ALSO SEPARATE EN TRANCE CAN BE POSSIBLE FOR WORKERS AND VISITORS TO MAINTAIN SECRECY OF THE PRO DUCT/PROCESS. .ALSO PLOT CAN BE SUB DIVIDED IF REQUIRED AND MOST OF SUB DIVISIONS CAN HAVE DIRECT ENTRY FROM ROAD. LAYOUT PLAN SHOWING PROPERTY AND PROPERTY OF COMPARATIVE SALE INSTANCES IS ENCLOSED CONSIDERING ALL THE ABOVE POINTS LAND RATE OF RS. ISO/ SQ.MTS ADOPTED FOR VALUATION IS FAIR AND REASONABLE IN MY OPINION'. 5. THE LD.CIT(A) WHILE REJECTING CONTENTIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE FAILED TO GIVE ANY SPECIFIC EVIDE NCE IN SUPPORT OF ADOPTION OF RATE OF RS.150/- PER SQ.METER. IT HAS ONLY PRODUCED THREE SALE INSTANCES, AND THERE IS NO REASON AS TO WHY NE AREST SALE INSTANCE FROM THE APPOINTED DATE I.E. 1.4.1981 SHOULD NOT BE ADOPTED. TO OUR MIND, MOOT POINT IS TO ASCERTAIN WHAT IS THE FMV OF A PROPERTY PURCHASED IN 1972 AS ON 1.4.1981 WOULD BE ? THERE C ANNOT BE ANY STRAIGHT JACKET FORMULA. IT CAN ONLY BE ASCERTAINE D ON THE BASIS OF SOME SCIENTIFICALLY ESTIMATE FORMULA. THERE ARE VARIOUS METHODS PROVIDED UNDER DIFFERENT ENACTMENTS I.E. RENT CAPITALIZATION METHOD, TREND IN THE MARKET, OR WHAT IS THE POTENTIAL VALUE ON THE STREN GTH OF COMPARATIVE SALE INSTANCE. THE LD.REGISTERED VALUER HAS ADOPTED METHOD ON THE BASIS OF COMPARATIVE SALE INSTANCE. HE THEREAFTER MADE L ITTLE ADJUSTMENT CONSIDERING PECULIAR FACTS OF THE LAND. THIS IS AN OPINION OF THE EXPERT, AND CONTRARY TO THIS NOTHING HAS BEEN COLLECTED BY THE REVENUE. THERE IS NO JUSTIFICATION TO REJECT THIS STUDY MERELY UNDER THE REASONING THAT A SINGLE INSTANCE WHICH IS LITTLE CLOSURE TO THE DATE OF TRANSACTION IS TO BE TAKEN INTO CONSIDERATION. TO OUR MIND, THIS APPROA CH IS NOT JUSTIFIABLE HENCE WE SET ASIDE THE FINDING OF THE REVENUE AUTHO RITIES ON THIS ISSUE, AND DIRECT THE AO TO COMPUTE CAPITAL GAIN BY ADOPTI NG THE LAND RATE OF RS.150 PER SQ.METER AS ON 1.4.1981. HE WOULD THERE AFTER GIVE BENEFIT OF INDEXATION ON THE ALLEGED VALUE OF RS.8,24,000/-. ITA NO.1146/AHD/2017 - 5 - 6. AS FAR AS ADDITION OF RS.20 LAKHS IS CONCERNED, IT IS PERTINENT TO OBSERVE THAT SECTION 48 OF THE INCOME TAX ACT CONTE MPLATES THAT INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAIN SHALL BE COM PUTED BY DEDUCTING FROM THE VALUE OF CONSIDERATION RECEIVED OR ACCRUIN G AS A RESULT OF THE TRANSFER, THE AMOUNTS, VIZ. (I) EXPENDITURE INCURRE D WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER, AND ( II) THE COST OF ACQUISITION ASSET AND THE COST OF ANY IMPROVEMENT T HERETO. THE ASSESSEE HAS GIVEN THIS PIECE OF LAND ON RENT TO PPP. THE ASSESSEE HAS FILED COMPUTATION OF INCOME SHOWN BY THE PPP. IN THIS RETURN PPP HAS DECLARED SHORT TERM CAPITAL GAIN UNDER SECTION 50 A T RS.19,52,953/-. IT HAS CLAIMED DEPRECIATION ON THIS SHED. IN THE PAST , THESE DETAILS WERE SUBMITTED BEFORE THE AO. THE AO DID NOT INQUIRE FR OM PPP WHETHER THEY HAVE ERECTED A SHED OR NOT. HE SIMPLY DISBELI EVED ASSERTION OF THE ASSESSEE ON THE GROUND SINCE IT HAS RENTED OUT THE LAND, PPP WOULD NOT HAVE CONSTRUED THIS SHED. IN OTHER WORDS, ACCORDIN G TO THE AO SINCE OWNERSHIP TITLE OF THE LAND WAS NOT WITH THE PPP, THERE IS NO QUESTION OF RAISING THE CONSTRUCTION, ALLEGEDLY IN THE NAME OF PPP ON THIS LAND. 7. ON DUE CONSIDERATION OF THE ABOVE FACTS AND CIRC UMSTANCES, WE ARE OF THE VIEW THAT THE LD.AO HAS NOT JUSTIFIED IN REJ ECTING CONTENTIONS OF THE ASSESSEE. IT IS PERTINENT TO NOTE THAT PPP HAS S HOWN GAINS FROM BUSINESS OR PROFESSION AT RS.13,31,916/-. IT HAS S HOWN SHORT TERM CAPITAL GAIN ON SALE OF SHED UNDER SECTION 50. ITS TAX LIAB ILITY HAS BEEN WORKED OUT AT RS.5,93,419/-. CONTRARY TO THIS, THE ASSESS EE WOULD SHOW LONG TERM CAPITAL GAIN ON SALE OF THIS SHED. THE ASSESS EE HAS DISCLOSED SALE VALUE OF THE LAND AT RS.7,92,00,000/-. HARDLY INCL USION OF RS.20 LAKHS OR EXCLUSION WOULD MAKE ANY DIFFERENCE TO THE ASSESSEE WHO IS FILING RETURN ITA NO.1146/AHD/2017 - 6 - OF MORE THAN RS.7.76 CRORES. TO OUR MIND, SUM OF R S.20 LAKHS WAS VERY SMALL AMOUNT IN COMPARISON TO RS.7.92 COREES, AND T HE ASSESSEE WOULD NOT INVOLVE IN MANIPULATION OF THIS SMALL AMOUNT, W HEN SUCH HUGE SALE CONSIDERATION IS AVAILABLE. MODUS OPERANDI AT THE END OF THE ASSESSEE COULD BE CONSTRUED, HAD THERE BEEN A BIGGER ALLOCAT ION MADE BY THE ASSESSEE FOR REDUCING THE TAX LIABILITY. ALL THESE FACTORS ARE TO BE WEIGHED WHILE APPRECIATING THE STAND OF THE ASSESSE E VIS--VIS REASONING GIVEN BY THE AO. HE HAS NOT GIVEN ANY CONCRETE REA SONS, RATHER SIMPLY DISBELIEVED THE VERSION OF THE ASSESSEE. THEREFORE , WE DO NOT FIND FORCE IN THE REASONING OF THE AO. WE DIRECT THE AO TO DE LETE THE ADDITION OF ALLEGED RS.20 LAKHS, AND CONSIDER THIS AMOUNT AS IM PROVEMENT COST OF THE CAPITAL ASSET WHOSE SALE HAS GIVEN RISE TO THE CAPITAL GAIN. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 10 TH JANUARY, 2020 SD/- SD/- (WASEEM AHMED) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER