M/s. Balanoor Printers Ltd., Bangalore V. ITO, Bangalore

ITA 1351/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51303 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 01-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIII
• Assessee Lawyers: P C CHADAGA ITP
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Depreciation; Valuation report; Unabsorbed depreciation
• Section: 143(3); 50C

Judgement Text

PAGE 1 OF 6 ITA NO.1351/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.1351/BANG/2010 (ASSESSMENT YEAR 2005-06) M/S BALANOOR PRINTERS LTD., EMPIRE INFANTRY, 3 RD FLOOR, 29, INFANTRY ROAD, BANGALORE-1. - APPELLANT PA NO.AAACB 6793 J VS THE INCOME TAX OFFICER, WARD-11(1), BANGALORE-32. - RESPONDENT DATE OF HEARING : 11/10/2011 DATE OF PRONOUNCEMENT : 14/10/2011 APPELLANT BY : SHRI P C CHADAGA, ITP RESPONDENT BY : SHRI ETWA MUNDA, CIT-III ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSE E IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, BANGALORE DATED 30.09.2010. THE RELEVANT ASST. YEAR IS 2005-06. 2. THE EFFECTIVE GROUNDS READS AS FOLLOWS:- I) THE CIT(A) ERRED IN CONFIRMING THE AOS ORDER ADOPTING THE FULL VALUE OF CONSIDERATION AT RS.3,13,36,080/- OF THE LAND SOLD DISREGARDING THE APPELLANTS CLAIM MADE IN ITS LETTER DATED 26/7/2007 FOR REFERRING THE MATTER OF VALUATION TO THE VALUATION OFFICER ON THE GROUND THAT THOUGH THE MATTER WAS REFERRED TO THE VALUATION OFFICER, THE LATTERS REPORT HAD NOT BEEN RECEIVED AND THE ASSESSMENT WAS GETTING BARRED BY LIMITATION. PAGE 2 OF 6 ITA NO.1351/BANG/2010 2 II) THE CIT(A) ERRED IN CONFIRMING THE AOS ORDER REGARDING THE ADOPTION OF THE FULL VALUE OF CONSIDERATION WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HAVING FILED ITS RETURN OF INCOME ON 27/10/2005, THE AO HAD MORE THAN 2 YEARS TIME TO COMPLETE THE ASSESSMENT. III) THE CIT(A) ERRED IN CONFIRMING THE AOS ORDER REFUSING TO ALLOW SET-OFF OF THE LOSS ARISING FROM THE SALE OF THE IMMOVABLE PROPERTY AGAINST THE INCOME FROM BUSINESS. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY CARRYING ON THE BUSINES S OF PRINTING WORKS FOR OTHERS. IT WAS HAVING A PRINTIN G PRESS SITUATED IN AN INDUSTRIAL LAND WITH A FACTORY BUILDING AT GUIND Y IN CHENNAI. DURING THE PREVIOUS YEAR RELEVANT TO THE ASST. YEAR UNDER APPEAL, THE ASSESSEE SOLD THE FACTORY BUILDING AND LAND. I N THE REGISTERED SALE DEED, THE SALE CONSIDERATION WAS DISCLOSED AT RS.2,00,00,000/-. HOWEVER, THE BUYER PAID THE STAMP DUTY FOR THE TRAN SFER AND CONVEYANCING OF THE DOCUMENTS AT RS.3,13,36,080/- B EING THE PUBLISHED GUIDELINE VALUE OF THE STATE GOVERNMENT U NDER ITS STAMP AND REGISTRATION ACT. THE ASSESSEE HAD INVESTED TH E NET SALE CONSIDERATION OF RS.1,92,00,000/- IN THE ELIGIBLE S PECIFIED INVESTMENTS AS PER PROVISIONS OF SECTION 54EC OF TH E INCOME TAX ACT AND CLAIMED AS FULLY EXEMPT THE LONG TERM CAPIT AL GAINS ARISING OUT OF THE TRANSFER AMOUNTING TO RS.1,88,97,827/-. 3.1 THE RETURN OF INCOME WAS TAKEN UP FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(3) OF THE ACT. THE AO I NVITED OBJECTION OF THE ASSESSEE, FOR THE REASON THAT, AS PER THE PROVI SIONS OF SECTION 50C(1) OF THE ACT, CAPITAL GAINS IS TO BE COMPUTED ON AN AMOUNT OF RS.3,13,36,080/- BEING THE VALUE ON WHICH THE STAMP DUTY WAS PAID INSTEAD OF THE SALE CONSIDERATION DISCLOSED IN THE SALE DEED. THE PAGE 3 OF 6 ITA NO.1351/BANG/2010 3 ASSESSEE FILED DETAILED OBJECTION TO THE PROPOSAL V IDE ITS LETTER DATED 26.7.2007. THE AO, IN VIEW OF THE SAID OBJECTION, REFERRED THE MATTER TO THE DISTRICT VALUATION OFFICER (DVO) AS P ER THE PROVISIONS OF SECTION 50C(2) OF THE ACT. THEREAFTER, THE DVO VIDE HIS LETTER DATED 12.9.2007 DIRECTED THE ASSESSEE TO FILE CERTA IN DETAILS, WHICH WERE DULY SUBMITTED VIDE ASSESSEES LETTER DATED 21 .9.07. 3.2 THE AO ON 7.12.07 INTIMATED THE ASSESSEE THAT HE IS YET TO RECEIVE THE VALUATION REPORT FROM THE VALUER AND SINCE THE ASSESSMENT IS GETTING TIME BARRED, HE WOULD COMPLET E THE ASSESSMENT WITHOUT WAITING FOR THE REPORT. ACCORDI NGLY, ASSESSMENT WAS COMPLETED BY RE-COMPUTING THE INCOME UNDER LONG TERM CAPITAL GAIN AND FIXED THE ASSESSABLE INCOME AT RS.1,12,85,413/-. 4. THE ASSESSEE BEING AGGRIEVED CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS BR OUGHT TO THE NOTICE THAT THE TAMILNADU GOVERNMENT ITSELF HAD SINCE ANNOUNCED KARSAMADHAN SCHEME BY REDUCING THE STAM P DUTY AND THEREBY REDUCING THE GUIDELINE VALUE. IT WAS SUBMI TTED THAT THE AO ERRED IN PASSING ORDER WITHOUT WAITING FOR THE REPO RT OF THE DVO. IT WAS CONTENDED THAT IT IS MANDATORY FOR THE AO TO PA SS AN ORDER IN CONFORMITY WITH THE VALUATION REPORT. 6. THE CIT(A) CONFIRMED THE ASSESSMENT ORDER IN TO TO VIDE HIS IMPUGNED ORDER DATED 30.9.2010. 7. THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFOR E US. PAGE 4 OF 6 ITA NO.1351/BANG/2010 4 8. THE LEARNED AR SUBMITTED THAT THE INCOME TAX AUTHORITIES ERRED IN PASSING THE ORDERS WITHOUT WAI TING FOR THE REPORT OF THE VALUATION OFFICER AS REQUIRED U/S 50C OF THE ACT. IT WAS FURTHER CONTENDED THAT THE PROVISIONS OF SECTION 16 A OF THE WEALTH TAX ACT IS APPLICABLE WHEN THE MATTER OF VALUATION I S BEING REFERRED TO THE VALUATION OFFICER AND SUB-SECTION (6) THEREO F MAKES IT MANDATORY FOR THE AO TO PASS AN ORDER IN CONFORMITY WITH THE VALUATION REPORT. ALTERNATIVELY IT WAS CONTENDED T HAT THE AUTHORITIES OUGHT TO HAVE REDUCED THE INCOME DETERMINED AGAINST THE CARRY FORWARD BUSINESS LOSS AND UNABSORBED DEPRECIATION AND WHAT WAS SOLD IS A BUSINESS ASSET THOUGH THE INCOME THEREFRO M IS ASSESSED UNDER THE HEAD CAPITAL. 9. THE LEARNED DR SUPPORTED THE ORDERS OF THE INCO ME TAX AUTHORITIES. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. A PLAIN READING OF SECTION 50C MAKES IT CLEAR THAT WHEN CONSIDERATION RECEIVED BY THE SELLER IS L ESS THAN THE VALUE ADOPTED BY THE GOVERNMENT FOR STAMP DUTY PURPOSE, T HE VALUE SO ADOPTED BY THE GOVERNMENT FOR STAMP DUTY PURPOSE SH ALL DEEM TO BE TAKEN AS A FULL VALUE OF CONSIDERATION. HOWEVER , WHEN ASSESSEE OBJECTS TO THE VALUATION ADOPTED BY THE STAMP DUTY AUTHORITY, THEN SUCH VALUATION IS TO BE REFERRED TO THE DISTRICT VA LUATION OFFICER BECAUSE THE AO IS NOT TECHNICALLY EQUIPPED TO PUT U P CORRECT VALUE. IN THE INSTANT CASE, THE PROPOSAL OF THE AO TO ADOP T THE STAMP DUTY VALUE OF RS.3,13,36,080/- WAS OBJECTED TO BY THE AS SESSEE IN ITS LETTER DATED 26.7.2007. ACCORDING TO THE ASSESSEE, THE SALE CONSIDERATION IS LESS THAN THE VALUE DETERMINED FOR STAMP DUTY. THE AO IN FACT REFERRED THE MATTER TO THE DVO AS PER TH E PROVISIONS OF SECTION 50C(2) OF THE ACT. THE DVO, VIDE HIS LETTE R DATED 12/9/2007, PAGE 5 OF 6 ITA NO.1351/BANG/2010 5 HAD CALLED FOR CERTAIN DETAILS FROM THE ASSESSEE, W HICH WAS DULY SUBMITTED BY THE ASSESSEE. THEREAFTER, THE ASSESSM ENT WAS COMPLETED WITHOUT WAITING FOR THE VALUATION REPORT, SINCE ACCORDING TO THE AO, THE ASSESSMENT WAS GETTING TIME BARRED. 10.1 THE CONSTITUTION VALIDITY OF SECTION 50C WAS UPHELD BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF K R PA LANISAMY V UNION OF INDIA 306 ITR 61. THE HONBLE MADRAS HIGH COURT HELD THAT THERE ARE SUFFICIENT SAFEGUARDS TO PROTECT THE INTE REST OF THE ASSESSEE AND ACCORDINGLY, SECTION 50C CANNOT BE HEL D TO BE ARBITRARY AND VIOLATIVE OF THE CONSTITUTION. THE R IGHT OF AN ASSESSEE CONFERRED U/S 50C(2) IS A VALUABLE RIGHT. THE TRIB UNAL IN THE CASE OF MANJULA SINGHAL V ITO 46 SOT 149 HAD HELD THAT THE AO IS BOUND TO REFER THE MATTER TO DVO FOR DETERMINATION OF FAIR M ARKET VALUE OF THE PROPERTY WHEN STAMP DUTY VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY IS DISPUTED BEFORE THE HIM. IT WAS HEL D THAT THOUGH THE TERM MAY IS USED IN SUB SECTION (2) OF SECTION 50 C, THE SAME IS TO BE READ AS SHALL. IN THIS CASE, THE AO HAS RIGHT LY REFERRED THE MATTER TO THE DVO. HOWEVER, THE ASSESSMENT WAS COM PLETED WITHOUT WAITING FOR THE REPORT OF THE DVO, SINCE TH E ASSESSMENT WAS GETTING TIME BARRED. THE FIRST APPELLATE AUTHORITY OUGHT TO HAVE CALLED FOR THE VALUATION REPORT OF THE DVO AND ACCO RDINGLY MADE THE COMPUTATION OF LONG TERM CAPITAL GAINS. THEREFORE, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE CIT(A) WITHOUT AW AITING FOR THE REPORT OF THE DVO AS REQUIRED U/S 50C OF THE ACT IS NOT CORRECT. IN THE INTEREST OF JUSTICE, THE MATTER IS RESTORED TO THE FILE OF THE AO, WHO SHALL CALL FOR THE REPORT OF THE DVO AND ON THE BASIS OF THE SAME, COMPUTE THE LONG TERM CAPITAL GAINS. WE MAKE IT CLEAR THAT IF THE VALUE ASCERTAINED BY THE STAMP DUTY AUTHORITIES IS MORE THAN THE VALUE ADOPTED BY THE ASSESSEE, THEN THE DVOS VALUA TION IS TO BE ADOPTED. ON THE CONTRARY, IF THE VALUATION AS PER THE DVO REPORT IS PAGE 6 OF 6 ITA NO.1351/BANG/2010 6 MORE THAN THE VALUATION AS PER THE STAMP DUTY AUTHO RITY, THEN THE VALUATION AS PER THE STAMP DUTY VALUATION AUTHORITY IS TO BE ADOPTED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED ON THE 14 TH DAY OF OCTOBER, 2011 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. SZ