M/s Jagtu Mal Kundal Lal, Chandigarh V. ACIT, Chandigarh

ITA 1216/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60842 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-05-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 18-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 50C; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L. KARWA, V.P. AND SHRI T.R. SOOD, AM ITA NO. 1216/CHD/2010 ASSESSMENT YEAR: 2006-07 M/S JAGTU MAL KUNDAN LAL V. A.C.I.T. C-2(1), JAGAT THEATRE COMPLEX CHANDIGARH SECTOR 17, CHANDIGARH PAN: AADFJ 3516 B ITA NO. 1357/CHD/2010 ASSESSMENT YEAR: 2006-07 A.C.I.T. C-2(1) V. M/S JAGTU MAL KUNDAN LAL CHANDIGARH CHANDIGARH (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI ASHWANI KUMAR RESPONDENT BY: SMT. JYOTI KUMARI, CIT DATE OF HEARING: 07.05.2012 DATE OF PRONOUNCEMENT: 11.05.2012 ORDER PER T.R. SOOD, A.M IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING G ROUND. THAT ORDER PASSED U/S 250(6) OF THE INCOME-TAX ACT , 1961 IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH THE LD. CIT(A), CH ANDIGARH WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD THE ACTION OF THE A SSESSING OFFICER WHEREBY HE ADOPTED THE DEEMED VALUE OF SALES CONSIDERATION OF RS. 15,26 CRORES AS AGAINST RS. 12.00 CRORES WITHOUT REFERRING THE M ATTER TO THE VALUATION CELL AS PROVIDED U/S 50C OF THE INCOME-TAX ACT, 196 1. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RETURNED CAPITAL GAINS OF RS. 4,14,50,000/-. THE ASSESSEE H AS SOLD COMMERCIAL PROPERTY MEASURING 3392.2 SQYDS, SITE NO. 32, SECTOR 17A, CH ANDIGARH AND THE SALE CONSIDERATION WAS SHOWN AT RS. 12.00 CRORES WHEREAS SOME ENQUIRIES WERE MADE WITH THE COLLECTOR IT WAS FOUND THAT FOR STAMP VALUATION CONSIDERATION WAS RS. 15.00 CRORES. THE ASSESSEE REQUESTED THAT A RE FERENCE MAY BE MADE TO 2 VALUATION OFFICER TO DETERMINE THE MARKET VALUE OF THE PROPERTY BUT INSTEAD PF REFERRING THE SAME TO THE DVO, THE ASSESSING OFFICE R CONSIDERED THE SALE CONSIDERATION AT RS. 15,26,49,000/-. 3. ON APPEAL, THE ACTION OF THE ASSESSING OFFICER W AS CONFIRMED BY THE LD. CIT(A) BECAUSE THE ASSESSEE HAD AGITATED THE VALUAT ION BEFORE THE SUB- REGISTRAR AND ACCORDING TO THE LD. CIT(A) THE MATTE R CAN BE REFERRED TO THE DVO ONLY IN THE CASES WHERE THE MATTER PENDING IS NOT L ITIGATED. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE MATTER WAS REQUIRED TO BE REFERRED TO DVO PARTICULARLY AFTER T HE SPECIFIC REQUEST WAS MADE. HE CONTENDED THAT THE WORD MAY USED IN SUB-SECTIO N 50C(2) REQUIRED TO CONSTRUED AS SHALL AND IN THIS REGARD HE RELIED O N THE DECISION OF ITAT JODHPUR BENCH IN CASE MANJULA SINGHAL V. ITO, 46 SOT 149 (J ODH). 5. ON THE OTHER HAND, LD. DR FOR THE REVENUE STRONG LY SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT SECTION 50C (2) READS AS UNDER: 50C(2) WITHOUT PREJUDICE TO THE PROVISIONS OF S UB-SECTION (1), WHERE (A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFIC ER THAT THE VALUE ADOPTED OR ASSESSED (OR ASSESSABLE} BY THE STAMP VA LUATION AUTHORITY UNDER SUB-SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER; (B) THE VALUE SO ADOPTED OR ASSESSED (OR ASSESSABL E) BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT B EEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BE FORE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT. THE ASSESSING OFFICER MAY REFER THE VALUATION OF T HE CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS M ADE, THE PROVISIONS OF SUB-SECTION (2), (3), (4), (5) AND (6) OF SECTIO N 16A, CLAUSE (I) OF SUB- SECTION (1) AND SUB-SECTION (6) AND (7) OF SECTION 23A, SUB-SECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SECTION 37 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957), SHALL WITH NECESSARY MODIFI CATIONS, APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATIO N TO A REFERENCE MADE BY THE ASSESSING OFFICER UNDER SUB-SECTION (1) OF S ECTION 16A OF THAT ACT. THE ABOVE CLEARLY SHOWS THAT WHEREVER IT IS CLAIMED BEFORE THE ASSESSING OFFICER THAT THE VALUE ADOPTED BY THE STAMP VALUATI ON AUTHORITY IS EXCESSIVE THAN THE MATTER NEEDS TO BE REFERRED TO THE DVO. E VEN IF THE WORD MAY IS NOT 3 CONSTRUED AS SHALL STILL THE MATTER HAS TO BE REF ERRED TO THE DVO. THE BASIC REASON FOR SAME IS THAT THE ASSESSING AUTHORITY IS NOT EXPERT IN VALUATION OF PROPERTY AND THAT IS WHY THE LEGISLATURE HAS PROVID ED FOR A REMEDY TO THE ASSESSEE BY MAKING A PROVISION FOR REFERENCE TO THE VALUATION CELL. ACCORDINGLY WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO MAKE REFERENCE TO THE DVO TO ASCERTAIN THE VALUE OF THE PROPERTY AND THEREAFTER DECIDE THE ISSUE IN ACCORDING TO THE LAW. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ITA NO. 1357/CHD/2010, REVENUES APPEAL 8. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 1,27,03,350/- ON ACCOUNT OF INTEREST ON FUNDS PARK ED WITH THE PARTNERS EVEN THOUGH THE ASSESSEE HAS PAID INTEREST. 2. THE LD. CIT(A) HAS ERRED IN DIRECTED TO COMPUTE THE LONG TERM CAPITAL GAINS FROM THE FINANCIAL YEAR 2005-06 INSTE AD OF FINANCIAL YEAR 2003-04 EVEN THOUGH THE COLLECTORATE RATE OF THE PR OPERTY HAS BEEN COMPUTED ON THE BASIS OF RATE APPLICABLE FOR THE FI NANCIAL YEAR 2003-04 ON THE REQUEST OF THE ASSESSEE. 9. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT SALE PROCEEDS OF THE PLOT BY THE ASSESSEE WERE NOT DIRECTLY CREDITED TO THE FIRMS A CCOUNT. PART OF THE CONSIDERATION WAS DIRECTLY RECEIVED BY THE PARTNERS AND WAS REMITTED TO THE ACCOUNT OF THE FIRM AFTER SOMETIME. SINCE NO REASO N WAS STATED FOR THE SAME THE ASSESSING OFFICER WAS OF THE OPINION THAT SOME INTEREST SHOULD HAVE BEEN CHARGED AND THUS HE CALCULATED THE INCOME BY APPLYI NG INTEREST RATE OF 18% PER ANNUM AND COLLECTED INCOME OF RS. 1,27,03,350/-. 10. ON APPEAL BEFORE THE LD. CIT(A) IT WAS MAINLY S UBMITTED THAT THE FUNDS REMAIN WITH THE PARTNERS ONLY FOR A SHORT TRANSITOR Y PERIOD. IN FACT AS PER AGREEMENT THE SALE CONSIDERATION WAS TO BE RECEIVED BY THE PARTNERS DIRECTLY AND SINCE THE FIRM WAS NOT IMMEDIATELY PLANNING ANY INVESTMENT, THE FUNDS 4 REMAINED WITH THE PARTNERS FOR SOMETIME WHICH WAS L ATER ON TRANSFERRED TO THE ACCOUNT OF THE FIRM. IT WAS FURTHER SUBMITTED THAT THERE IS NO CONCEPT FOR CHARGING NOTIONAL INCOME AND IN THIS REGARD RELIANC E WAS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT V. SHOO RJI VALLABHDAS & CO. (1962) 46 ITR 144 (S.C). IT WAS ALSO POINTED OUT T HAT THERE WAS NO PROVISION IN THE PARTNERSHIP DEED FOR CHARGING OF INTEREST. THE LD. CIT(A) WAS SATISFIED WITH THE SUBMISSIONS AND DELETED THE ADDITION. 11. BEFORE US, THE LD. DR FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER. HE ALSO POINTED OUT THAT THROUG H ACCOUNT STATEMENT THE ASSESSING OFFICER HAS CLEARLY POINTED OUT THAT MONE Y REMAINED WITH THE PARTNERS FOR QUITE A LONG PERIOD AND THEREFORE, IN TEREST INCOME WAS RIGHTLY SUBJECT TO TAX. 12. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE STRONGLY SUPPORTED THE APPELLATE ORDER. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY A ND FIND THAT CONSIDERATION WAS RECEIVED BY THE PARTNERS ON BEHALF OF THE FIRM ON 26.8.2005, 14.11.2005 AND WAS TRANSFERRED TO THE FIRM ACCOUNT ON 2.2.2006 AND 24.3.2006. THUS IT IS CLEAR THAT THE MONEY REMAINED WITH THE PARTNERS ONL Y FOR A SHORT PERIOD. MOREOVER AS POINTED OUT BY THE LD. CIT(A), CLAUSE ( VII) OF THE PARTNERSHIP DEED DATED 1.4.2002 READS AS UNDER: THAT THE PARTIES WILL NEITHER BE ENTITLED TO CHARG E ANY INTEREST ON THEIR INVESTMENTS MADE IN THE FIRM NOR THEY WILL BE ENTIT LED TO ANY WORKING ALLOWANCE FOR THE SERVICES RENDERED TO THE PARTNERS HIP FIRM, UNLESS OTHERWISE AGREED TO BETWEEN THE PARTIES IN THIS BEH ALF. 14. THE ABOVE CLAUSE MAKES IT CLEAR THAT THE FIRM W AS NOT PAYING ANY INTEREST ON CAPITAL, THEREFORE, LOGICALLY THE FIRM CAN ALSO NOT CHARGED ANY INTEREST. IN ANY CASE, THE FIRM HAS NOT MADE ANY BORROWINGS DURING T HIS PERIOD. THEREFORE, IT CANNOT BE SAID THAT THE FIRM HAS SUFFERED ANY LOSS BECAUSE OF MONEY BEING DIRECTLY TAKEN BY THE PARTNERS. IN ANY CASE THERE IS NO PROVISION IN THE ACT TO 5 CHARGE ANY INCOME ON NOTIONAL BASIS. THEREFORE, W E FIND NOTHING WITH THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 15. GROUND NO. 2 AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSING OFFICER HAS COMPUTED CAPITAL GAIN AFTER ALLOWING TH E INDEXATION OF COST OF ACQUISITION ONLY UPTO ASSESSMENT YEAR 2003-04. 16. ON APPEAL BEFORE THE LD. CIT(A) IT WAS SUBMITTE D THAT SINCE PROPERTY WAS SOLD IN ASSESSMENT YEAR 2005-06 AND 2006-07, THEREF ORE, THE BENEFIT OF INDEXATION SHOULD HAVE BEEN ALLOWED UPTO THE FINANC IAL YEAR 2005-06. THE LD. CIT(A) FOUND MERIT IN THE SUBMISSION OF THE ASSESSE E AND DIRECTED THE ASSESSING OFFICER TO ALLOW THE BENEFIT OF INDEXATIO N UPTO FINANCIAL YEAR 2005- 06. 17. BEFORE US, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER. 18. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE SUPPORTED THE ORDER OF LD. CIT(A). 19. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT IN FINANCIAL YEAR 2003-04 ONLY AN AGREEMENT TO SELL WAS ENTERED AND T HE SALE DEED HAS BEEN EXECUTED IN FINANCIAL YEAR 2006-07. CLAUSE (III) O F EXPLANATION TO SECTION 48 READS AS UNDER: (III) INDEXED COST OF ACQUISITION MEANS AN AMOU NT WHICH BEARS TO THE COST OF ACQUISITION THE SAME PROPORTION AS COST IN FLATION INDEX FOR THE YEAR IN WHICH THE ASSET IS TRANSFERRED BEARS TO THE COST INFLATION INDEX FOR THE FIRST YEAR IN WHICH THE ASSET WAS HELD BY THE A SSESSEE OR FOR THE YEAR BEGINNING ON THE IST DAY OF APRIL, 1981 WHICHEVER I S LATER. THE PLAIN READING OF THE ABOVE CLAUSE MAKES IT CLEA R THAT BENEFIT HAS TO BE GIVEN UPTO THE DATE OF TRANSFER. SINCE THE PROPERT Y WAS TRANSFERRED IN FINANCIAL YEAR 2005-06, INDEXATION HAS TO BE ALLOWED TO THIS YEAR. IT IS ABSOLUTELY CLEAR BECAUSE EVEN CAPITAL GAIN HAS TO BE CHARGED IN ASSE SSMENT YEAR 2006-07. THEREFORE, IT CANNOT BE SAID THAT THE PROPERTY WAS TRANSFERRED IN EARLIER YEARS. 6 ACCORDINGLY WE FIND NO INFIRMITY IN THE ORDER OF LD . CIT(A) AND THE SAME IS CONFIRMED. 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED ON 11.05.2012 SD/- SD/- (H.L. KARWA) (T.R. SOOD) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 11 .05.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR