Rajendra Keshavrao Kulkarni, Nashik V. Income-tax Officer,

ITA 1340/PUN/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1548 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 12-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Retrospective amendment; Question of law; Cost of acquisition; Fair market value; Valuation report
• Section: 50C; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE . . , BEFORE SHRI R.K. PANDA, AM . / ITA NO.1340/PN/2015 / ASSESSMENT YEAR : 2010-11 SHRI RAJENDRA KESHAVRAO KULKARNI, 5, SHRADDHA, SHRIRAM NAGAR, CANAL ROAD, THAKRE MALA, EAST PANCHAK, JAIL ROAD, NASHIK 422 101 PAN NO.ABDPK1235D . / APPELLANT V/S ITO, WARD - 3(2), NASHIK . / RESPONDENT / APPELLANT BY : SHRI SANKET JOSHI / RESPONDENT BY : SHRI HITENDRA NINAWE / ORDER PER R.K.PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 06-08-2015 OF THE CIT(A)-I, NASHIK RELATING T O THE ASSESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME ON 23-07-2010 DECLA RING TOTAL INCOME OF RS.3,61,740/-. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS SOLD O NE PROPERTY NAMED AS M/S. HOTEL SACHHIDANAND AT SHIRDI. THE SALE CONSIDERATION WHICH WAS SHOWN AT RS.1,30,00,000/- WAS BELOW THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITIES AT RS.2,65,75,000/-. THE AO FURTHER NOTED THAT AS PER THE V ALUATION / DATE OF HEARING :20.07.2016 / DATE OF PRONOUNCEMENT:22.07.2016 2 ITA NO.1340/PN/2015 REPORT DATED 20-09-2004 THE GOVERNMENT VALUER HAS DE TERMINED COST OF ACQUISITION AT RS.1,46,77,000/- IN THE A.Y. 2003-04 WH EN HE ACQUIRED THE PROPERTY BY INHERITANCE AND THE LONG TERM CAPITAL LOSS HAS BEEN DETERMINED AT RS.20,34,263/-. FURTHER, THE ASSE SSEE IS ONE OF THE PARTNERS OF THE FIRM M/S. HOTEL SAI SACHHIDANAND . SINCE THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING ON TRA NSFER OF CAPITAL ASSET IS LESS THAN THE VALUE ADOPTED BY THE STAM P VALUATION AUTHORITY, THE AO REFERRED THE MATTER TO THE DVO FOR AS CERTAINING THE FAIR MARKET VALUE. THE DVO DETERMINED THE FAIR MARKET VALUE AT RS.2,01,80,000/- AS ON 16-01-2010. THE AO ACCORDINGLY DETERMINED THE LONG TERM CAPITAL GAIN AT RS.74,44,005/- AND ASSESSEES SHARE IN THE SAME WAS COMPUTED AT RS.11,91,0 40/-, THE DETAILS OF WHICH ARE AS UNDER : 6.4 THE VALUE ADOPTED BY THE STAMP DUTY AUTHORITIE S AS PER THE SALE DEED IS OF RS.2,65,75,000/-. HOWEVER THE ASSESSEE HAS SOLD FOR RS.1,30,00,000/-. THE VALUE DETERMINED BY THE VALUA TION OFFICER IS OF RS.2,01,80,000/-. IN VIEW OF THE PROVISION OF SECTIO N 50C OF THE I.T. ACT, THE SALE PRICE DETERMINED BY THE DVO IS CONSIDERED AS S ALE CONSIDERATION OF THE LONG TERM CAPITAL ASSET. THE CAP ITAL GAINS ARE COMPUTED AS PER THE PROVISIONS OF SECTION 50C OF THE I .T. ACT, 1961 ACCORDINGLY WHICH ARE AS UNDER : SALE CONSIDERATION AS PER DVO OF HOTEL SAI SACHHIDANAND : 2,01,80,000/- LESS : A) INDEXED COST OF ACQUISITION OF PLOT AS ON 01-4-1981 (41400 X 632/100) : RS.2,61,648/- B) INDEXED COST OF IMPROVEMENT IN THE YEAR 1999 (6928000 X 632/351) : RS.1,24,74,347/- RS.1,27,35,995/- ---------------------- LONG TERM CAPITAL GAIN RS.74,44,005/- THE ASSESSEE;S SHARE IN CAPITAL GAIN (16%) RS.1 1,91,040/- 3 ITA NO.1340/PN/2015 3. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO. TH E SUBMISSION OF THE ASSESSEE THAT THE AO HAS NO POWER TO REFER THE MATTER TO DVO U/S.55A OF THE ACT WAS ALSO REJECTED BY THE CIT(A). 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE TO EACH OTHER - ON FACTS AND IN LAW, 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS.11,91,040/- MADE BY THE A.O. IN RESPECT OF LONG TE RM CAPITAL GAINS ON SALE OF HOTEL LAND AND BUILDING MADE ON 16.01.201 0. 2. THE LEARNED CIT(A) ERRED IN ADOPTING THE FAIR M ARKET VALUE OF HOTEL PROPERTY AS ON 01 . 04.1981 AT RS . 41 , 400/- AS DETERMINED BY THE DVO AS AGAINST THE FAIR MARKET VALUE OF RS.13,34,300/- DETERMINED BY THE REGISTERED VALUER FOR THE PURPOSES OF COMPUTING LO NG TERM CAPITAL GAINS AND THEREBY MAKING THE ADDITION OF RS.1 1 ,91,040/- IN THE HANDS OF THE ASSESSEE. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT TH E FAIR MARKET VALUE OF HOTEL PROPERTY AS ON 01 . 04.1981 CLAIMED BY THE ASSESSEE ON THE BASIS OF REGISTERED VALUER'S REPORT WAS MORE THAN TH E FAIR MARKET VALUE SOUGHT TO BE ADOPTED BY THE A.O. AND HENCE, TH E REFERENCE MADE TO THE DVO U/S 55A FOR THE CURRENT YEAR WAS BAD IN LA W AND THEREFORE, THE VALUATION AS ON 01 . 04.1981 CLAIMED BY THE ASSESSEE SHOULD HAVE BEEN ADOPTED FOR THE PURPOSES OF COMPUTING LONG TERM CAPITAL GAINS ON SALE OF THE HOTEL PROPERTY. 4. THE LEARNED ' CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ISSUE UNDER CONSIDERATION WAS SQUARELY COVERED BY THE DECISIO N OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF POOJA PRINTS [360 IT R 697] AND HON'BLE ITAT, PUNE IN THE CASE OF SUREKHA TANAJI BHI LARE [ITA NO. 1612/PN/2012] DATED 29.05.2014 AND HENCE, THERE WAS NO REASON TO FOLLOW THE DECISION OF HON'BLE ITAT, MUMBAI BY COMPL ETELY IGNORING THE DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT AND ITAT WHICH WERE BINDING ON THE LEARNED CIT(A). 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL . 5. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE DEC ISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PUJA PRINTS REPORTED IN 360 ITR 697 SUBMITTED THAT REFERENCE U/S.55A COULD BE MADE TO THE DVO ONLY WHEN THE VALUE ADOPTED BY THE ASSESSEE WAS LESS THAN THE FAIR MARKET VALUE. SINCE IN THE INSTANT CASE THE VALUE 4 ITA NO.1340/PN/2015 ADOPTED BY THE ASSESSEE IS MORE THAN THE FAIR MARKET V ALUE AND THE AMENDMENT TO THE PROVISIONS OF SECTION BY INSERTING THE W ORDS IS AT VARIANCE WITH ITS FAIR MARKET VALUE HAS BEEN INSERTED BY THE FINANCE ACT, 2012 W.E.F. 01-07-2012, THEREFORE, THE SAME IS N OT APPLICABLE IN THE INSTANT ASSESSMENT YEAR WHICH IS 2010-11. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDERS OF THE AO AND THE CIT(A). HE SUBMITTED THAT SINCE THE VALUE ADOPTED BY THE ASSESSEE IS MORE T HAN THE FAIR MARKET VALUE, THEREFORE, IN VIEW OF THE AMENDMENT TO THE PROVISIONS OF SECTION 55A THE AO CAN MAKE A REFERENCE TO THE VALUA TION OFFICER AND THE AMENDMENT TO THE PROVISIONS OF SECTION 55A(A) SHO ULD BE TREATED AS RETROSPECTIVE BEING CLARIFICATORY IN NATURE. 7. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH T HE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDER ED THE VARIOUS DECISIONS CITED BEFORE ME. I FIND THE ASSESSEE IN T HE INSTANT CASE ALONG WITH OTHER PARTNERS HAS SOLD THE PROPERTY M /S. HOTEL SAI SACHHIDANAND AT SHIRDI FOR A CONSIDERATION OF RS.1,30,00,000/- . THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITIES W AS AT RS. 2,65,75,000/-. THE ASSESSEE HAS DETERMINED THE COST OF ACQUISITION AT RS.1,46,77,000/- IN THE YEAR 2003-04 ON THE BASIS OF A VALUATION REPORT DATED 20-09-2004 BY THE GOVERNMENT VALUER. I FIND THE AO ON THE BASIS OF THE VALUATION REPORT OF THE D VO DETERMINED THE SALE CONSIDERATION AT RS.2,01,80,000/-. AFTER DEDUCTING THE INDEXED COST OF ACQUISITION OF THE PLOT AND THE INDEXED COST OF IMPROVEMENT AT RS.1,27,35,995/- THE AO DETERMINED THE LONG TERM CAPITAL GAIN AT RS.74,44,005/-. THE SHARE OF THE ASSESSEE IN THE SAID CAPITAL GAIN WAS DETERMINED AT 5 ITA NO.1340/PN/2015 RS.11,91,000/- BEING 16% SHARE OF THE ASSESSEE IN THE SAID PROPERTY. THE ABOVE ADDITION HAS BEEN SUSTAINED BY THE CIT(A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT T HE AO CANNOT MAKE A REFERENCE TO THE DVO UNDER THE PROVISION S OF SECTION 55A FOR DETERMINATION OF THE FAIR MARKET VALUE SINCE IN THE INSTANT CASE THE VALUE ADOPTED BY THE ASSESSEE IS MORE THAN T HE FAIR MARKET VALUE. 8. I FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PUJA PRINTS RE PORTED IN 360 ITR 697. THE HONBLE HIGH COURT AFTER CONSIDERING T HE PROVISIONS OF SECTION 55A AS WELL AS THE AMENDMENT TO TH E SAID SECTION BY THE FINANCE ACT, 2012 W.E.F. 01-07-2012 HAS HE LD THAT REFERENCE U/S.55A CAN BE MADE TO THE DVO ONLY WHEN TH E VALUE ADOPTED BY THE ASSESSEE IS LESS THAN THE FAIR MARKET VA LUE. WHERE THE VALUE ADOPTED BY THE ASSESSEE IS MUCH MORE THAN T HE FAIR MARKET VALUE, NO REFERENCE CAN BE MADE TO THE VALUATION OFFICER UNDER THE PROVISIONS OF SECTION 55A. THE RELEVANT OBSERVA TION OF THE HONBLE HIGH COURT AT PAGE 701 TO 703 READ AS UNDER : 6 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND T HAT THE IMPUGNED ORDER DATED 18 FEBRUARY, 2011 ALLOWING THE RESPONDENT ASSESSEE'S APPEAL HOLDING THAT NO REFERENCE TO THE DEPAR TMENTAL VALUATION OFFICER CAN BE MADE UNDER SECTION 55A OF THE ACT, ONLY FOLLOWS THE DECISION OF THIS COURT IN THE MATTER OF DA ULAL MOHTA HUF (SUPRA). THE REVENUE HAS NOT BEEN ABLE TO POINT OUT H OW THE AFORESAID DECISION IS INAPPLICABLE TO THE PRESENT FACTS NOR HAS TH E REVENUE POINTED OUT THAT THE DECISION IN DAULAL MOHTA HUF (SU PRA) HAS NOT BEEN ACCEPTED BY THE REVENUE. ON THE AFORESAID GROUND ALO NE, THIS APPEAL NEED NOT BE ENTERTAINED. HOWEVER, AS SUBMISSIONS WERE MA DE ON MERITS, WE HAVE INDEPENDENTLY EXAMINED THE SAME. 7 . WE FIND THAT SECTION 55A(A) OF THE ACT VERY CLE ARLY AT THE RELEVANT TIME PROVIDED THAT A REFERENCE COULD BE MA DE TO THE DEPARTMENTAL VALUATION OFFICER ONLY WHEN THE VALUE ADOPTED BY THE ASSESSEE WAS LESS THAN THE FAIR MARKET VALUE. IN THE PRESE NT CASE, IT IS AN UNDISPUTED POSITION THAT THE VALUE ADOPTED BY THE RESPONDENT- ASSESSEE OF THE PROPERTY AT RS.35.99 LAKHS WAS MUCH MORE T HAN THE FAIR MARKET VALUE OF RS.6.68 LAKHS EVEN AS DETERMINED BY TH E DEPARTMENTAL 6 ITA NO.1340/PN/2015 VALUATION OFFICER. IN FACT, THE ASSESSING OFFICER REFER RED THE ISSUE OF VALUATION TO THE DEPARTMENTAL VALUATION OFFICER ONL Y BECAUSE IN HIS VIEW THE VALUATION OF THE PROPERTY AS ON 1981 AS MADE BY THE RESPONDENT-ASSESSEE WAS HIGHER THAN THE FAIR MARKET VALUE . IN THE AFORESAID CIRCUMSTANCES, THE INVOCATION OF SECTION 55A (A) OF THE ACT IS NOT JUSTIFIED. 8. THE CONTENTION OF THE REVENUE THAT IN VIEW O F THE AMENDMENT TO SECTION 55A(A) OF THE ACT IN 2012 BY WHICH THE W ORDS 'IS LESS THEN THE FAIR MARKET VALUE' IS SUBSTITUTED BY THE WORDS ' 'I S AT VARIANCE WITH ITS FAIR MARKET VALUE' IS CLARIFACTORY AND SHOULD BE G IVEN RETROSPECTIVE EFFECT. THIS SUBMISSION IS IN FACE OF THE FACT THAT THE 2012 AMENDMENT WAS MADE EFFECTIVE ONLY FROM 1 JULY 2012. THE PARLIA MENT HAS NOT GIVEN RETROSPECTIVE EFFECT TO THE AMENDMENT. THEREFO RE, THE LAW TO BE APPLIED IN THE PRESENT CASE IS SECTION 55A(A) OF THE ACT AS EXISTING DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2006- 07. AT THE RELEVANT TIME, VERY CLEARLY REFERENCE COULD BE MADE TO DEPARTMENTAL VALUATION OFFICER ONLY IF THE VALUE DECLARED BY THE ASSESSEE IS IN THE OPINION OF ASSESSING OFFICER LESS THAN ITS FAIR MARKET VAL UE. 9. THE CONTENTION OF THE REVENUE THAT THE REFERENC E TO THE DEPARTMENTAL VALUATION OFFICER BY THE ASSESSING OFFICER IS SUSTAINABLE IN VIEW OF SECTION 55A(A) (II) OF THE ACT IS NOT ACC EPTABLE. THIS IS FOR THE REASON THAT SECTION 55A(B)OF THE ACT VERY CLEARLY STA TES THAT IT WOULD APPLY IN ANY OTHER CASE I.E. A CASE NOT COVERED BY SE CTION 55A(A) OF THE ACT. IN THIS CASE, IT IS AN UNDISPUTABLE POSITION THAT T HE ISSUE IS COVERED BY SECTION 55A(A) OF THE ACT. THEREFORE, RESORT CANN OT BE HAD TO THE RESIDUARY CLAUSE PROVIDED IN SECTION 55A(B)(II) OF TH E ACT. IN VIEW OF THE ABOVE, THE CBDT CIRCULAR DATED 25 NOVEMBER 1972 CAN HAVE NO APPLICATION IN THE FACE OF THE CLEAR POSITION IN LAW . THIS IS SO AS THE UNDERSTANDING OF THE STATUTORY PROVISIONS BY THE REVENU E AS FOUND IN CIRCULAR ISSUED BY THE CBDT IS NOT BINDING UPON THE ASSE SSEE AND IT IS OPEN TO AN ASSESSEE TO CONTEND TO THE CONTRARY. 10. THE CONTENTION OF THE REVENUE THAT THE ASSESSING OFFICER IS ENTITLED TO REFER THE ISSUE OF VALUATION OF THE PROPE RTY TO THE DEPARTMENTAL VALUATION OFFICER IN EXERCISE OF ITS POW ER UNDER SECTIONS 131, 133(6) AND 142(2) OF THE ACT IS ENTIRELY BASED U PON THE DECISION OF THE GUWAHATI HIGH COURT IN SMT. AMIYA BALA PAUL (SUPRA). HOWEVER, THE APEX COURT IN SMT. AMIYA BALA PAUL (SUPRA) HAS R EVERSED THE DECISION OF THE GUWAHATI HIGH COURT AND HELD THAT IF THE POWER TO REFER ANY DISPUTE WITH REGARD TO THE VALUATION OF THE PROP ERTY WAS ALREADY AVAILABLE UNDER SECTIONS 131(1), 136(6) AND 142(2) O F THE ACT, THERE WAS NO NEED TO SPECIFICALLY EMPOWER THE ASSESSING OFFICER TO DO SO IN CIRCUMSTANCES SPECIFIED UNDER SECTION 55A OF THE ACT. IT FURTHER HELD THAT WHEN A SPECIFIC PROVISION UNDER WHICH THE REFERE NCE CAN BE MADE TO THE DEPARTMENTAL VALUATION OFFICER IS AVAILABLE, THERE IS NO OCCASION FOR THE ASSESSING OFFICER TO INVOKE THE GENERAL POWERS O F ENQUIRY. IN VIEW OF THE ABOVE AND PARTICULARLY IN VIEW OF CL EAR PROVISIONS OF LAW AS EXISTING DURING THE PERIOD RELEVANT TO ASSESSME NT YEAR 2006- 07, WE ARE OF THE VIEW THAT QUESTIONS (A) AND (B) DO NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. 7 ITA NO.1340/PN/2015 REGARDING QUESTION (C):- 11 . THE TRIBUNAL BY ITS IMPUGNED ORDER HAS MERELY R EMANDED THE ISSUE TO THE ASSESSING OFFICER TO DETERMINE THE DATE ON W HICH THE RESPONDENT-ASSESSEE ACQUIRED THE PROPERTY FOR THE PURPOSE OF WORKING OUT THE COST OF ACQUISITION. NO SPECIFIC SUBMISSIONS IN RE GARD TO THIS ISSUE WAS MADE BY THE REVENUE DURING THE ORAL SUBMISSIONS. IN ANY EVENT, AN ORDER OF REMAND IN THESE FACTS DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. 12. ACCORDINGLY, WE SEE NO REASON TO ENTERTAIN QUESTI ONS (A), (B) AND (C) AS FORMULATED BY THE REVENUE AS THEY DO NOT RAISE ANY SUBSTANTIAL QUESTIONS OF LAW. ACCORDINGLY, APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 9. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. DAULAL MOHTA (HUF) REPORTED IN 360 ITR 680 HAS HELD THAT REFERE NCE TO DVO CAN ONLY BE MADE IN A CASE WHERE VALUE OF ASSET SH OWN BY THE ASSESSEE IS LESS THAN ITS FAIR MARKET VALUE OF THE LAND. 10. IN VIEW OF THE ABOVE BINDING PRECEDENTS OF THE HONB LE JURISDICTIONAL HIGH COURT AND CONSIDERING THE FACT THAT THE FAIR MARKET VALUE AS ON 01-04-1981 CLAIMED BY THE ASSESSEE ON THE BASIS OF THE REGISTERED VALUERS REPORT WAS MORE THAN THE FAIR MAR KET VALUE SOUGHT TO BE ADOPTED BY THE AO, THEREFORE, NO RE FERENCE COULD HAVE BEEN MADE BY THE AO U/S.55A OF THE ACT TO THE D VO. IN VIEW OF THE ABOVE DISCUSSION, I SET ASIDE THE ORDER OF THE CIT (A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS.11,91,040/-. GR OUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-07-2016. SD/- ( R.K. PANDA ) ACCOUNTANT MEMBER PUNE ; DATED :22 ND JULY, 2016. 8 ITA NO.1340/PN/2015 '# $# / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // // $ % //UE &' % * / SR. PRIVATE SECRETARY *, / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - I, NASHIK 4. 5. 6. THE CIT-I, NASHIK $ %%*, *, SMC BENCH / DR, ITAT, SMC BENCH PUNE; 2 / GUARD FILE.