Assistant Commissioner of Income Tax,Circle-1, Nagpur V. Shri. Navendranath Mithal, Nagpur

ITA 116/NAG/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3920 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 04-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A S DOGA
• Keywords: Sale consideration of property below Jantri Value; Fair market value; Valuation report
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR E-BENCH, NAGPUR (THROUGH VIDEO CONFERENCE AT MUMBAI) BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER I.T.A. NO.116/NAG/2011 ASSESSMENT YEAR: 2007-2008 ASSTT. CIT, CIRCLE-1, 5 TH FLOOR, MECL BUILDING, SEMINARY HILLS, NAGPUR. VS SHRI NAVENDRANATH MITHAL, 201, SHUBHAM ENCLAVE, RAHATE COLONY, NAGPUR. PAN: AACPM 1955 E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH MANE, JCIT RESPONDENT BY : SHRI A.S. DOGA DATE OF HEARING: 12.3.2013 DATE OF ORDER: 05.04.2013 O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 4.7.2011 IS AGA INST THE ORDER OF CIT (A)- I, NAGPUR DATED 22.4.2011 FOR THE ASSESSMENT YEAR 20 07-2008. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROU NDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD CIT (A) ERRED IN ADOPTING THE VALUE OF FLAT AT RS. 1,30,00,000/- AS AGAINST RS. 1,47,62,034/- ESTIMATED BY THE VALUATION OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT (A) ERRED IN REJECTING THE VALUATION REPORT WHICH WAS P REPARED BY THE DVO AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE WITHOUT ANY RELEVANT EVIDENCE OR MATERIAL ON RECORD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD CIT (A) ERRED IN HOLDING THAT ONLY BECAUSE SALE WAS GUIDED BY THE HIGH COURT THE PROVISIONS OF SECTION 50C WILL NOT APPLY. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE SOLD A RESIDENTIAL PROPERTY FOR A SUM OF RS. 1.3 CR. HOWE VER, THE SALE CONSIDERATION AS PR THE FIGURES AVAILABLE ON THE SALE DEED OF THE REGIS TRATION OFFICER IS RS 1.8 CR. AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE AND IN A CCORDANCE WITH THE PROVISIONS OF SECTION 50C(2) OF THE ACT, THE FAIR MARKET VALUE OF THE PROPERTY IS FINALLY FIXED BY THE 2 DVO AT RS. 1,47,62,034/-. AO ADOPTED THE SAME AND C OMPUTED THE CAPITAL GAINS ADOPTING THE SAID VALUATION OFFICERS FIGURE OF RS. 1,47,62,034/-. AGGRIEVED WITH THE ABOVE, ASSESSEE FILED AN APPEAL BEFORE THE CIT (A). 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLAT E AUTHORITY, IT WAS SUBMITTED THAT THE ASSESSEE FILED THE CASE AGAINST DEVELOPER AND THE LITIGATION HAS REACHED THE HONBLE HIGH COURT AND THE PROPERTY WAS FINALLY SOL D TO THE DEVELOPER, IN VIEW OF THE APPRISING OF THREATS AND DETERIORATION OF HEALTH OF THE ASSESSEE. THUS, THE CASE OF THE DISTRESS SALE AND THE SALE CONSIDERATION INVOLVED IS ONLY RS. 1. 3 CR. AS PER THE DIRECTIONS OF THE HONBLE HIGH COURT, THE PROPERTY WAS SOLD TO MR. P.C. NATH FOR A SUM OF RS. 1.30 CR ONLY. IN FACT, THE SAID AMOUNT W AS ROUTED THROUGH THE HONBLE BOMBAY HIGH COURT. THERE IS A THREAT OF SLUMS BEIN G DEVELOPED IN THE NEIGHBORHOOD. THE PROPERTY IN QUESTION IS LOCATED IN SANTACRUZ AREA, MUMBAI. CIT (A) CONSIDERED THE ABOVE SUBMISSIONS OF THE ASSESSE E AND DISCUSSED THE SAME THAT REVOLVES AROUND THE DISTRESS SALE AND THE SALE WAS AFFECTED IN RESPECT OF CONSENT ORDER OF BOMBAY HIGH COURT, THE FACTS RELATING TO T HE VALUATION REPORT AND THE OBJECTIONS RAISED BY THE ASSESSEE BEFORE THE DVO. FINALLY, CIT (A) HELD THAT THE DVO HAS DISREGARDED THE RELEVANT FACTORS BEFORE DET ERMINING THE FIGURE OF RS. 1,47,62,034/- AND ALSO MENTIONED THAT THE DIFFERENC E BETWEEN THE ABOVE FIGURE AND RS. 1.3 CR AS DECLARED BY THE ASSESSEE, CONSTITUTES ONLY 14% AND, THEREFORE, THE REPORT OF DVO COULD HAVE BEEN EASILY IGNORED CONSID ERING THE DIFFERENCE WHICH IS BELOW 15%. ACCORDINGLY, CIT (A) ALLOWED THE APPEAL FILED BY THE ASSESSEE. AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 5. DURING E-COURT PROCEEDINGS BEFORE US, LD REPRESE NTATIVES OF BOTH THE PARTIES RELIED ON THE ORDERS OF THE AO / CIT (A) AS THE CAS E MAY BE. HOWEVER, LD DR RELIED ON THE PROVISIONS OF SECTION 50-C OF THE ACT AND AL SO ON THE REPORT OF THE DVO. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AND FIND THAT PARAS 4 TO 7 OF THE CIT ( A)S ORDER ARE RELEVANT IN THIS REGARD AND THE SAME ARE SELF-EXPLANATORY, WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE. CONSIDERING THEIR IMPORTANCE, THE SAME P ARAS ARE REPRODUCED HERE UNDER: 3 4. I HAVE EXAMINED THE FACTS OF THE CASE IN GREAT DETAIL. THE MAIN CONTENTION OF THE APPELLANT IS THAT THE SALE WAS AF FECTED IN TERMS OF CONSENT ORDER OF THE HONBLE HIGH COURT, MUMBAI. THEREFORE THERE WAS NO SCOPE FOR RECEIVING ANY EXTRA CONSIDERATION. ASSESSEE HAD ATT EMPTED TO SELL THE PROPERTY IN OPEN MARKET. THIS WAS OBJECTED TO BY TH E ORDER CO-OWNERS AND THEY EXERCISED A CLAIM TO OBTAIN FIRST PREFERENCE T O PURCHASE THE PROPERTY. THE HONBLE HIGH COURT HAS ACCEDED TO THE CLAIM OF THE CO-OWNERS TO PURCHASE THE SUBJECT PROPERTY AT MARKET RATES. CONS EQUENT TO THIS THE PROPERTY WAS SOLD TO SHRI P.C. NATH WHO OWNED THE F IRST FLOOR AT A CONSIDERATION OF RS. 1.30 CRORE, THROUGH CONSENT TE RMS IN THE NOTICE OF MOTION FILED BY THE SELLER IN MUMBAI HIGH COURT. AP PELLANT HAS ALSO DURING THE COURSE OF APPELLATE PROCEEDINGS FURNISHED A CHRONOL OGICAL ORDER OF EVENTS BEFORE THE MUMBAI HIGH COURT. 5. APPELLANT HAS CONTENDED THAT THE SALE CONSIDERAT ION FETCHED ON TRANSFER OF 1/3 RD SHARE IN THE PROPERTY WAS LESS THAN THE STAMP DUTY VALUATION DUE TO SEVERAL FACTORS. THE BUILDING WAS NOT IN VER Y GOOD CONDITION. THE FACT THAT THERE WAS NO LIFT WAS ALSO A DISADVANTAGE. FUR THER THERE WAS A LOCATIONAL DISADVANTAGE AS THE PROPERTY WAS CLOSE TO SLUMS. IT IS ALSO REITERATED BY THE APPELLANT THAT DUE TO ONGOING LITIGATION AND THE FA CT THAT THIS WAS A PRE- EMPTIVE SALE ALSO CONTRIBUTED TO THE CONSIDERATION BEING LESS. 6. I HAVE EXAMINED THE VALUATION REPORT OF THE DVO DATED 07.12.2009. IN THE CONTEXT OF THE VARIOUS FACTS AND CIRCUMSTANC ES PUT FORTH BY THE APPELLANT IT IS SEEN THAT DVO HAS MENTIONED THAT TH IS WAS A DISTRESS SALE. THE METHOD ADOPTED BY DVO IN DETERMINING THE VALUE OF T HE PROPERTY IS STATED TO BE PHYSICAL METHOD OF VALUATION WHEREIN COMPARABLE SALE INSTANCES HAVE BEEN RELIED UPON. HOWEVER, IT IS EVIDENT FROM THE V ALUATION REPORT THAT NO MARGIN OF CONCESSION ATTRIBUTABLE TO THE PECULIAR C IRCUMSTANCES UNDER WHICH THE PROPERTY HAS BEEN SOLD HAS BEEN QUANTIFIED BY T HE DVO. TO MY MIND THE MOST OF THE SIGNIFICANT FACTOR IN THIS CASE IS THAT THE APPELLANT WAS UNDER COMPULSION TO SELL THE PROPERTY TO A PARTICULAR PUR CHASER DUE TO ONGOING LITIGATION AND THE HONBLE MUMBAI HIGH COURT HAS OV ERSEEN THE TRANSFER OF THIS PROPERTY. THESE HAVE NOT BEEN THE FACTORS IN T HE VALUATION REPORT OF THE DVO. THERE IS NO QUANTIFICATION ATTRIBUTED TO THESE DISADVANTAGES NAMELY THE FACT OF ONGOING LITIGATION, THE LOCATIONAL DISADVAN TAGE OF THE PROPERTY, THE CONDITION OF THE BUILDING, ABSENCE OF LIFT AND THE CLAIM BY THE CO-OWNERS. 7. I AM THEREFORE OF THE CONSIDERED OPINION THAT TH E VALUATION OFFICER HAS DISREGARDED VERY PERTINENT FACTORS IN DETERMINI NG THE VALUE OF THE PROPERTY AT RS. 1,47,62,034/-. IT IS ALSO WORTH NOT ING THAT WHILE VALUATION OFFICER HAS ADOPTED THE VALUE WHICH IS AROUND 14% M ORE THAN VALUE OF APPARENT SALE CONSIDERATION HE HAS NOT JUSTIFIED TH IS ADEQUATELY. THE FACT THAT THE SALE WAS OVERSEEN UNDER THE DIRECTION OF THE HO NBLE MUMBAI HIGH COURT IS ALSO MATERIAL IN DETERMINING THE VALUATION OF TH E PROPERTY. AO IS THEREFORE DIRECTED TO ADOPT THE SALE CONSIDERATION AT RS. 1,3 0,00,000/- AS AGAINST 1,47,62,034/- ESTIMATED BY VALUATION OFFICER. 7. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER HAS NOT STRICTLY FOLLOWED THE CONSIDERATION OF RS. 1.3 CR IN ACCORDA NCE WITH THE DIRECTION OF THE HIGH COURT ACCORDINGLY HE RELIED ON THE REPORT OF THE VA LUATION OFFICER. THE QUESTION IS 4 WHETHER THE VALUATION OFFICER IS JUSTIFIED IN VALUI NG THE PROPERTY AT RS. 1,47,62,034/-. IT IS AN UNDISPUTED FACT THAT THE PROPERTY IS IN DI SPUTE AND THE AMOUNT INVOLVED IS RS. 1.3 CR AS PER THE CONSENT DEED OF THE HONBLE HIGH COURT DATED 20.12.2006 AND THE FIRST PARA OF THE SAME READS AS UNDER: 1. THE APPELLANT (ORIG. DEFENDANT NO.1) AGREES TO S ELL, ASSIGN, TRANSFER & CONVEY & THE RESPONDENT NO.1 IN EXERCISE OF HIS RIGHT OF P RE-EMPTION AGREES TO PURCHASE THE APPELLANTS FLAT ON THE 3 RD FLOOR OF THE BUILDING GITANJALI & HIS ONE THIRD UNDIVIDED SHARE, RIGHTS, TITLE & INTEREST I THE SUI T PROPERTY NAMELY, PLOT NO.30, OFF. 17 TH ROAD, GAZDAR SCHEME BEARING C.T.S. NO.397/15 ADMEA SURING 572 SQUARE METERS EQUIVALENT TO 663 SQUARE YARDS SITUATED AT S ANTACRUZ (WEST), MUMBAI- 400054 FOR A TOTAL CONSIDERATION OF RS. 1,30,00,000/- TO BE PAID BY THE RESPONDENT NO.1 TO THE APPELLANT AS UNDER: (A) RS. 30,00,000/- ON OR BEFORE 30 TH DECEMBER, 2006; (B) RS. 1,00,00,000/- ON OR BEFORE 3 RD FEBRUARY, 2007 8. THUS, THE FIGURE OF RS 1.3 CRORES ADOPTED BY THE ASSESSEE HAS THE SANCTION OF THE HIGHER JUDICIARY. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) DOES NOT CALL FOR ANY INTERFERENCE. AC CORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF APRIL, 2013. SD/- SD/- (R.K. GUPTA) (D. KARUNAKAR A RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 5.4.2013 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR NAGPUR, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI