Garden City Multiplex Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 1367/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63762 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 29-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A SUNDAR RAJAN
• Assessee Lawyers: NAGIN KHINCHA
• Keywords: Capital asset; Depreciation; Fair market value; Valuation report
• Section: 143(3); 234B; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.1367/BANG/2011 (ASSESSMENT YEAR : 2008-09) M/S. GARDEN CITY MULTIPLEX PVT. LTD., NO.1221/A, 20THCROSS, 12 TH A MAIN, SECTOR 7, HSR LAYOUT, BANGALORE-560 102 . . APPELL ANT. PAN AACCG 0855E VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 11(3), BANGALORE. .. RESPONDENT. APPELLANT BY : SHRI NAGIN KHINCHA. RESPONDENT BY : SHRI A. SUNDAR RAJAN. DATE OF HEARING : 16.10.2012. DATE OF PRONOUNCEMENT : 2.11.2012. O R D E R PER SHRI JASON P. BOAZ : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE DT.14.11..2011 FO R ASSESSMENT YEAR 2008-09. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE COMPANY (HEREINAFTER REFERRED TO A S THE ASSESSEE), IN THE BUSINESS OF REAL ESTATE AND ALLIED ACTIVITIES, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 ON 26.9.2008 DECLARING INCOME OF RS.84,80,170. THE RE TURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY BY ISSUE OF NOT ICE UNDER SECTION 143(2) OF THE ACT ON 2 ITA NO.1367/BANG/11 13.08.2009. THE ASSESSMENT WAS COMPLETED BY AN ORD ER UNDER SECTION 143(3) OF THE ACT ON 31.12.2010 DETERMINING THE INCOME OF THE ASSESSEE A T RS.1,71,99,421. IN THIS ORDER OF ASSESSMENT, THE ASSESSING OFFICER MADE THE FOLLOWI NG ADDITIONS / DISALLOWANCES : I) DISALLOWANCE OF BROKERAGE CHARGES PAID IN COMPUTING INCOME FROM HOUSE PROPERTY RS.10,10,024 II) ADDITIONS MADE IN COMPUTING CAPITAL GAINS RS.61,30,940 III) DISALLOWANCE OF LOSSES CLAIMED RS.16,18,288 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESS MENT YEAR 2008-09 DT.31.12.2010, THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT(APPE ALS) WHO DISMISSED THE ASSESSEE'S APPEAL BY ORDER DT.14.11.2011. 3.0 AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) DT.1 4.11.2011, THE ASSESSEE IS NOW IN APPEAL BEFORE US. IN THE GROUNDS OF APPEAL RAISED, IT IS CONTENDED AS UNDER : 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PAS SING THE ORDER IN THE MANNER PASSED BY HIM AND THE LEARNED CIT (APPEALS) HAS ERR ED IN CONFIRMING THE SAME. THE ORDERS PASSED BEING BAD IN LAW ARE LIABLE TO BE QUA SHED. 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISA LLOWING THE BROKERAGE EXPENSE ON THE GROUND THAT IT IS COVERED UNDER GENERAL DEDU CTIONS UNDER SECTION 24(1). ON PROPER APPRECIATION OF THE LAW BROKERAGE CHARGES PA ID IS TO BE REDUCED AT A PRIOR CHARGE WHILE COMPUTING THE ANNUAL VALUE OF THE PROP ERTY UNDER SECTION 22. THE DISALLOWANCE, AS CONFIRMED BY CIT (APPEALS) IS ON A WRONG PREMISE AND IS TO BE DISREGARDED AND THE DEDUCTION AS CLAIMED IS TO BE A LLOWED. 3.1 THE LEARNED ASSESSING OFFICER HAS ERRED IN D ISALLOWING THE BUSINESS LOSS CLAIMED BY THE APPELLANT HOLDING THAT THE APPELLANT HAS NOT STARTED ITS BUSINESS OPERATIONS AND THE LEARNED CIT (APPEALS) HAS ERRED IN CONFIRMING THE SAME. ON THE FACTS AND CIRCUMSTANCES THE CASE, THE APPELLANT HAV ING SET UP ITS BUSINESS, THE DISALLOWANCE OF BUSINESS LOSS BEING ERRONEOUS IS TO BE DELETED AND BUSINESS LOSS AS CLAIMED IS TO BE ALLOWED. 3.2 THE AUTHORITIES BELOW HAVE FAILED TO APPR ECIATE THE FACT THAT APPELLANT COMPANY HAS SET UP ITS BUSINESS OPERATIONS AND THE EXPENDITURE CLAIMED IS BONAFIDE AND INCURRED FOR THE PURPOSE OF BUSINESS AND IS TO BE ACCEPTED AS SUCH. 4.1 THE LEARNED ASSESSING OFFICER HAD ERRED I N : A) REJECTING THE SALE VALUE OF LAND AS PER THE SAL E DEED DATED 7.4.2007 B) RECOMPUTING THE CAPITAL GAIN ON TRANSFER OF LAND BY INCREASING THE SALE CONSIDERATION OF LAND. 3 ITA NO.1367/BANG/11 C) NOT CONSIDERING AND NOT ACCEPTING THE VALUE ARR IVED AT BY THE DISTRICT VALUATION OFFICER. D) NOT APPRECIATING THE FACT THAT THE SALES VALUE A S PER THE APPELLANT AND VALUE AS PER DISTRICT VALUATION OFFICERS REPORT ARE AT SLIG HT VARIATION. E) INCREASING THE VALUE AS ARRIVED AT BY THE DISTRI CT VALUATION OFFICER ON AN ADHOC BASIS. SUCH AN INCREASE ON ADHOC BASIS IS WITHOUT AUTHORIT Y IS TO BE DISREGARDED. THE ACTION OF AUTHORITIES BELOW BEING CONTRARY BOTH TO THE FACTS AND PROVISIONS OF LAW IS TO BE DISREGARDED AND CAPITAL GAINS AS COMPUTED BY THE APPELLANT ARE TO BE ACCEPTED. 4.2 THE COMPUTATION OF CAPITAL GAINS AS DONE BY T HE APPELLANT BEING CORRECT IS TO BE ACCEPTED. 5. THE APPELLANT ALSO DENIES THE LIABILITY TO PAY INTEREST. INTEREST BEING LEVIED ERRONEOUS IS TO BE DELETED. 6. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO B E ADDUCED AT THE TIME OF HEARING, THE IMPUGNED ORDER BE QUASHED OR THE BROKERAGE CHAR GES BE ALLOWED AS DEDUCTION, CLAIM OF BUSINESS LOSS BE ALLOWED AND THE ADDITIONS MADE IN COMPUTING CAPITAL GAINS BE DELETED AND THE CONSEQUENTIAL INTEREST LEVIED AL SO BE DELETED. 4.1 THE GROUNDS RAISED AT S.NOS.1 AND 6 BEING GENERAL IN NATURE, NO ADJUDICATION IS CALLE D FOR THEREON. 5.1 THE GROUND RAISED AT S.NO.2 , CHALLENGES THE ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE DISALLOWANCE OF BROKERAGE EXPENSES W HILE COMPUTING INCOME FROM HOUSE PROPERTY ON THE GROUND THAT IT IS COVERED UNDER GEN ERAL DEDUCTIONS UNDER SECTION 24(1) OF THE ACT. IT IS CONTENDED THAT ON PROPER APPRECIATION OF LAW, BROKERAGE CHARGES PAID IS TO BE REDUCED AS A PRIOR CHARGE WHILE COMPUTING THE ANNUA L VALUE OF THE PROPERTY UNDER SECTION 22 OF THE ACT. AT THE OUTSET OF THE HEARING ITSELF, THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT THIS ISSUE IS SQUARELY COVERED AGAINS T THE ASSESSEE BY THE DECISION OF A CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. EQUITY FINANCIAL SERVICES PVT LTD VS. ACIT IN ITA NO.1016(BANG)/2010 DT.26.8.2011. 5.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS ALS O HEARD IN THE MATTER. 4 ITA NO.1367/BANG/11 5.3 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSE D AND CONSIDERED THE MATERIAL ON RECORD AND THE JUDICIAL DECISION CITED (SUPRA). WE FIND THAT A SIMILAR ISSUE ON THE TREATMENT TO BE GIVEN TO PAYMENT OF BROKERAGE CHARGES WHILE COMP UTING INCOME FROM HOUSE PROPERTY HAS BEEN CONSIDERED AND ADJUDICATED UPON BY A CO-ORDINA TE BENCH OF THIS TRIBUNAL IN THE CASE OF EQUITY FINANCIAL SERVICES PVT LTD (SUPRA). THE CON CLUSION / FINDING OF THE TRIBUNAL IN THIS CASE AT PARA 8 ON PAGES 4 & 5 THEREOF IS EXTRACTED HEREU NDER : 8. HAVING HEARD BOTH THE PARTIES AND HAVING CONS IDERED THE RIVAL CONTENTIONS, WE FIND THAT SECTIONS 23 & 24 OF THE IT ACT RELATE TO THE MODE OF COMPUTATION OF INCOME FROM HOUSE PROPERTY. UNDER SECTION 23 AS RI GHTLY POINTED OUT BY THE LEARNED CIT (APPEALS), THE RENTAL INCOME IS TO BE C OMPUTED BY COMPUTING THE ANNUAL VALUE OF THE PROPERTY BY TAKING INTO CONSIDERATION THE MONTHLYRENTAL INCOME FOR WHICH THE PROPERTY CAN BE LET OUT AND WHEN THE ACTU AL RENT RECEIVED IS MORE, THEN SUCH ACTUAL RENT RECEIVED AS THE ANNUAL VALUE OF TH E PROPERTY. IN THE CASE BEFORE US, THE ASSESSEE'S ACTUAL RENT RECEIVED IS NOT IN D ISPUTE. ONLY THE DEDUCTION TO BE ALLOWED UNDER SECTION 24 IS TO BE CONSIDERED. AS R IGHTLY POINTED OUT BY THE LEARNED DR AND ALSO AS FOLLOWED BY THE CIT (APPEALS), THE I SSUE OF PAYMENT OF BROKERAGE AND ALSO THE STAMP DUTY FOR REGISTRATION OF LEASE D EED ARE COVERED BY THE DECISION OF THE DELHI TRIBUNAL AND AND ALSO BY THE HON'BLE R AJASTHAN HIGH COURT (CITED SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT (APPEALS) AND THE ASSE SSEE'S APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN THE CASE OF EQUITY FINANCIAL SERVICES PVT LTD (SUPRA), WE HOLD THAT IN COMPUTING THE INCOME FROM HOUSE PROPERTY ONLY DEDUCTION AS PERMISSIBLE UNDER SECTIO N 24 OF THE ACT ARE TO BE CONSIDERED AND NO DEDUCTION IS ALLOWABLE THEREIN FOR PAYMENT OF BROKE RAGE CHARGES. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARN ED CIT(APPEALS) ON THIS POINT AND ACCORDINGLY DISMISS THE GROUND RAISED BY THE ASSESS EE. 6.1 IN THE GROUNDS RAISED AT S.NOS.3.1 AND 3.2 , THE ASSESSEE CONTENDS THAT THE LEARNED CIT(APPEALS) OUGHT NOT TO HAVE SUSTAINED THE FINDIN G OF THE ASSESSING OFFICER IN DISALLOWING THE BUSINESS LOSS CLAIMED BY THE ASSESSEE HOLDING THAT THE ASSESSEE HAD NOT STARTED ITS 5 ITA NO.1367/BANG/11 BUSINESS OPERATIONS WHEN IN FACT THE ASSESSEE HAD S ET UP ITS BUSINESS OPERATIONS AND THE RESULTANT BUSINESS LOSS WAS BONA FIDE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT BOTH BEFORE THE ASSESSING OFFICER AND THE LEARNED C IT(APPEALS) THE ASSESSEE HAS URGED THAT BUSINESS OPERATIONS HAD COMMENCED AND THE EXPENSES INCURRED SUCH AS SALARY TO DIRECTORS, DEPRECIATION CLAIMED, PROFESSIONAL CHARGES, ETC., W ERE IN CONNECTION WITH ITS BUSINESS OPERATIONS ONLY AND WERE GERMINE AND IN ORDER TO AC HIEVE THE OBJECTS OF THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HE LEARNED CIT(APPEALS) DISMISSED THE ASSESSEE'S GROUND ON THIS ISSUE AT PARA 12 ON PAGE 5 OF HIS ORDER STATING THROUGH SOME EXPENDITURE HAS BEEN INCURRED, IT DOES NOT REFLECT THAT SUCH EXPENSES HAVE BEEN INCURRED AS ADVANCE PAYMENT FOR ACQUISITION OF LANDS OR CONSTRU CTION OF MULTIPLEX OR SIMILAR ACTIVITY. IN ORDER TO DEMONSTRATE THAT CONTRARY TO THE LEARNED C IT(APPEALS)S FINDING THE ASSESSEE HAD IN FACT COMMENCED ITS BUSINESS OPERATIONS IN THE RELEV ANT PERIOD, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAGE 30 OF THE PAPER BOOK FILED ON 12.06.2012 WHICH IS THE SCHEDULE C OF FIXED ASSETS, FORMING PART OF THE BAL ANCE SHEET FOR THE PREVIOUS YEAR ENDING 31.3.2008 RELEVANT TO ASSESSMENT YEAR 2008-09. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE SCHEDULE EVIDENCES THAT IN THE RELEVANT PERIOD THE ASSESSEE HELD LANDS AT GANDHI BAZAR, BANGALORE FOR WHICH IT HAD ENTERED IN TO A JOINT DEVELOPMENT AGREEMENT ON 7.10.2005 WITH M/S. BAGADIA ESTATE DEVELOPERS P. LT D. FOR DEVELOPING THE SAID PROPERTY INTO A COMMERCIAL BUILDING AND TOWARDS WHICH OBJECT IT PUT UP A BUILDING CONSTRUCTION TO THE EXTENT OF RS.1,74,86,625. IT WAS SUBMITTED THAT THE ASSESSEE ALSO HELD LANDS AT HOSUR. THESE FACTS ON RECORD AS PER THE AUDITED FINANCIAL STATEMENTS OF T HE ASSESSEE FOR THE RELEVANT PERIOD, IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE C LEARLY ESTABLISHED WITH IRREFUTABLE 6 ITA NO.1367/BANG/11 EVIDENCE THAT THE ASSESSEE HAD COMMENCED ITS REAL E STATE BUSINESS OPERATIONS IN THE RELEVANT PERIOD AND THE EXPENSES INCURRED FOR SALARIES, WAGE S, BROKERAGE, PROFESSIONAL FEES, RENT, REGISTRATION FEES, AUDIT FEES, BANK CHARGES, ETC WE RE GENUINELY INCURRED FOR THE BONA FIDE CONDUCT OF BUSINESS OPERATIONS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE LIGHT OF THESE FACTUAL EVIDENCES ON RECORD, THE RES ULTANT BUSINESS LOSS OF RS.16,18,288 WAS TO BE ALLOWED. 6.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPR ESENTATIVE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6.3 WE HAVE HEARD BOTH PARTIES, PERUSED AND CAREFUL LY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN FROM THE RECORDS OF ASSESSMENT THAT THE LEARNED CIT(APPEALS) HAS DISMISSED THE ASSESSEE'S CLAIM FOR BUSINESS LOSS ON THE BASIS OF THE ASSESSING OFFICERS FINDING THAT THE ASSESSEE HAD NOT COMMENCED ITS BUSINESS OPERATIONS AND HIS OWN OBSERVATION THAT THOUGH SOME EXPENDITURE HAS BEEN INCURRED, IT DOES NOT REFLECT THAT THESE HAVE BEEN INCURRED AS ADVANCE PAYMENT FOR ACQUISITION OF LAND OR CONSTRUCTION OF MULTIPLEX ETC. ON PERUSAL OF THE COPIES OF AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE FOR TH E RELEVANT PERIOD AT PAGES 1 TO 34 OF THE PAPER BOOK FILED BY THE ASSESSEE ON 12.10.2012, WE FIND AT PAGE 30 (SCHEDULE OF FIXED ASSETS) THEREOF, TO WHICH THE LEARNED COUNSEL FOR THE ASSES SEE HAS DRAWN OUR ATTENTION, THE FACT THAT THE ASSESSEE, IN THE REAL ESTATE BUSINESS, HELD LAN D AT GANDHI BAZAR WHICH IT WAS DEVELOPING INTO A COMMERCIAL COMPLEX PURSUANT TO A JOINT DEVEL OPMENT AGREEMENT DT.7.10.2005 WITH M/S. BAGADIA ESTATE DEVELOPERS PVT LTD AND HAD PUT UP A BUILDING CONSTRUCTION TO THE EXTENT OF RS.1,74,86,625 IN THE RELEVANT PERIOD. WE ALSO NOT E FROM THE SCHEDULE OF FIXED ASSETS THAT THE ASSESSEE ALSO HELD LANDS AT HOSUR. ALL THIS, I N OUR CONSIDERED OPINION, GOES TO ESTABLISH THAT 7 ITA NO.1367/BANG/11 THE ASSESSEE HAD IN FACT COMMENCED AND CARRIED ON I TS BUSINESS OF REAL ESTATE OPERATIONS IN THE RELEVANT PERIOD DISPROVING THE FINDINGS OF THE AUTHORITIES BELOW TO THE CONTRARY. IN THIS FACTUAL MATRIX, WE HOLD THAT THE EXPENDITURE INCURR ED BY THE ASSESSEE, AS DEBITED IN ITS PROFIT AND LOSS ACCOUNT AND THE SCHEDULES THERETO, HAVE B EEN INCURRED IN THE NORMAL COURSE OF BUSINESS OPERATIONS AND THE RESULTANT BUSINESS LOSS OF RS.16,18,288 IS TO BE ALLOWED. THE ASSESSEE'S GROUND ON THIS ISSUE IS ALLOWED. 7.1 IN THE GROUNDS RAISED AT S.NO.4.1 AND 4.2 , THE ASSESSEE CHALLENGES THE ASSESSING OFFICERS ACTION IN RECOMPUTING THE CAPITAL GAINS ON TRANSFER OF LAND BY INCREASING THE SALE CONSIDERATION OF LAND, REJECTING THE SALE VALUE OF LAND AS PER SALE DEED DT.7.4.2007; NOT ACCEPTING THE VALUE ARRIVED AT BY THE DISTRICT VALU ATION OFFICER (DVO); NOT APPRECIATING THE FACT THAT THE SALE VALUE AS PER THE ASSESSEE AND VA LUATION AS PER DVOS REPORT HAVE ONLY A SLIGHT VARIATION AND IN INCREASING THE VALUE AS ARR IVED BY THE DVO ON AN ADHOC BASIS. 7.2 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE RELEVANT PERIOD, THE ASSESSEE HAD DECLARED CAPITAL GAINS OF RS.59,29,616 ON SALE OF LAND. IT WAS SUBMITTED THAT THE ASSESSEE OWNED LAND AT NO.84, GANDHI BAZAR, BANGALO RE AND HAD ENTERED INTO A JOINT DEVELOPMENT AGREEMENT WITH M/S. BAGADIA ESTATE DEVE LOPERS PVT LTD AS PER WHICH THE SUPER BUILT UP AREA WAS TO BE SHARED BETWEEN THE ASSESSEE AND M/S. BAGADIA ESTATE DEVELOPMENT PVT LTD. IN THE RATIO OF 57.5% AND 42.5% RESPECTIVELY. IN PURSUANCE THEREOF, WHEN THE CONSTRUCTION OF THE PROPERTY WAS COMPLETED, THE ASS ESSEE TRANSFERRED 42.5% OF THE SHARE OF LAND TO M/S. BAGADIA ESTATE PVT LTD VIDE SALE DEED DT.7.4.2007 FOR A CONSIDERATION OF RS.1,43,75,000 WHICH WAS @ RS.2,866 PER SQ. FT OF L AND. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER, NOT BEING SAT ISFIED WITH THE SALE CONSIDERATION IN THE 8 ITA NO.1367/BANG/11 SALE DEED, MADE A REFERENCE TO THE DVO FOR FAIR MAR KET VALUATION OF THE SAID LAND. THE DVO BY HIS REPORT DT.24.10.2010 VALUED THE SAID LAND WA S AT RS.1,46,47,090. IT IS SUBMITTED THAT THE ASSESSING OFFICER BY LETTER DT.28.12.2010 INFOR MED THE ASSESSEE THAT HE PROPOSED TO ADOPT THE VALUE AS PER THE DVOS REPORT DT.24.12.20 10 AND TO WHICH PROPOSITION THE ASSESSEE HAD NO OBJECTION. THE LEARNED COUNSEL FOR THE ASSE SSEE CONTENDS THAT THE ASSESSING OFFICER, INSTEAD OF ADOPTING THE VALUATION OF LAND AS PER T HE DVOS REPORT AS SUCH, RECOMPUTED THE CAPITAL GAINS BY MAKING A MARK UP OF 40% ON THE SAL E CONSIDERATION OF RS.1,46,47,100, AS PER THE JOURNAL PUBLICATION OF ESTIMATED MARKET VALUE O F IMMOVABLE PROPERTIES & BUILDINGS FOR REGISTRATION BANGALORE (URBAN) DISTRICT AS IT WAS A COMMERCIAL PROPERTY. THIS, THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY ARGUED, WAS ERRON EOUS. IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICE R NOT BEING SATISFIED WITH THE SALE CONSIDERATION AS PER SALE DEED AND HAVING MADE A RE FERENCE UNDER SECTION 55A OF THE ACT TO THE DVO WITH A VIEW ASCERTAINING THE FAIR MARKET V ALUE OF THE LAND IN THE PRESENT ;CASE, THE PROVISIONS OF SUB-SECTIONS (2), (3), (4), (5) AND ( 6) OF SECTION 16A OF THE WEALTH TAX ACT, 1957 SHALL APPLY TO SUCH REFERENCE AS IF IT WAS MADE BY ASSESSING OFFICER UNDER SECTION 16A OF THAT ACT. IN THIS REGARD, THE LEARNED COUNSEL FOR THE A SSESSEE POINTED OUT TO US THAT AS PER THE PROVISIONS OF SECTION 16A OF THE WEALTH TAX ACT AND PARTICULARLY SUB-SECTION (6) OF THAT SECTION, THAT ON RECEIPT OF THE VALUATION REPORT OF THE DVO, THE ASSESSING OFFICER SHALL, SO FAR AS THE VALUATION OF THE ASSET IN QUESTION IS CONCER NED, PROCEED TO COMPLETE THE ASSESSMENT IN CONFORMITY WITH THE ESTIMATE OF THE VALUATION OFFIC ER. IN THESE CIRCUMSTANCES, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSI NG OFFICER WAS BOUND TO ADOPT THE VALUE OF THE SAID LAND AT RS.1,46,47,090 AS ESTIMATED IN THE DVOS REPORT DT.24.12.2010 TO THE 9 ITA NO.1367/BANG/11 ADOPTION OF WHICH THE ASSESSEE HAD NO OBJECTION, IN PLACE OF THE VALUE OF RS.1,43,75,000 AS PER SALE DEED. INSTEAD OF DOING SO, AS WAS WARRANTED U NDER THE PROVISIONS OF SECTION 55A OF THE ACT R.W.S. 16A OF THE WEALTH TAX ACT, 1961, THE LEA RNED COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE ASSESSING OFFICER WENT ON TO AD D A SUM OF RS.58,58,840 TO THE VALUATION OF THE SAID LAND AS PER DVOS REPORT ON ACCOUNT OF 40% FOR COMMERCIAL PROPERTY AND THEN PROCEEDED TO COMPUTE THE CAPITAL GAINS. THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY CONTENDED THAT SUCH AN ADHOC INCREASE OF THE COST O F THE PROPERTY BY 40% FOR COMMERCIAL PROPERTY BY THE ASSESSING OFFICER WAS WITHOUT ANY BASIS ON FACTS OR THE PROVISIONS OF LAW AND ARGUED THAT THE CAPITAL GAINS OUGHT TO COMPUTED AS DONE BY THE ASSESSEE AND ADOPTING THE ESTIMATED VALUE OF THE LAND AT RS.1,46,47,090 AS PE R THE DVOS REPORT. 7.3 THE LEARNED DEPARTMENTAL REPRESENTATIV E SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7.4 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUS ED AND CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN THAT NOT BEING SATISFIED WITH THE STATED CONSIDERATION OF RS.1,43,75,000 OF THE SAID LAND IN THE SALE DEED, THE ASSESSING OF FICER MADE A REFERENCE UNDER SECTION 55A OF THE ACT ON 10.12.2010 TO THE DVO FOR ASCERTAININ G THE FAIR MARKET VALUE OF THE LAND. THE DVO VIDE HIS REPORT DT.24.12.2010, ESTIMATED THE FM V OF THE SAID LAND AT RS.1,46,47,090. THERE WAS NO OBJECTION FROM THE ASSESSEE FOR ADOPTI ON OF THE ESTIMATED VALUE OF RS.1,46,47,090 AS PER DVOS REPORT. WE FIND THAT I NSTEAD OF ADOPTING THIS VALUE OF RS.1,46,47,090 IN ACCORDANCE WITH THE PROVISIONS OF SECTION 55A OF THE ACT R.W.S. 16A(B) OF THE WEALTH TAX ACT, 1957, WHICH WARRANTS THAT THE ASSES SING OFFICER SHALL SO FAR AS THE VALUATION OF THIS ASSET IS CONCERNED, PROCEED TO COMPLETE THE ASSESSMENT IN CONFORMITY WITH THE 10 ITA NO.1367/BANG/11 ESTIMATE OF THE VALUATION OFFICER, THE ASSESSING OF FICER PROCEEDED TO COMPUTE THE CAPITAL GAINS IN RESPECT OF THE SAID LAND AT RS.2,05,05,940 BY MAKING THEREIN A MARK UP OF 40% OF THE ASSESSED VALUE OF RS.1,46,47,090 FOR COMMERCIAL PRO PERTY. THIS ACTION OF THE ASSESSING OFFICER AND THE LEARNED CIT(APPEALS)S SUSTENANCE OF THIS ARE, IN OUR CONSIDERED OPINION, ERRONEOUS AND CONTRARY TO THE REQUIREMENTS LAID DOW N IN THE PROVISIONS OF SECTION 55A OF THE ACT R.W.S. 16A(6) OF THE WEALTH TAX ACT, 1957. IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AND THE LEGAL POSITION AS DISCUSSED ABOVE , WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE CAPITAL GAINS ARISING TO THE ASSESSEE ON ACCOUNT OF SALE OF THE SAID LAND TO M/S. BAGADIA ESTATE DEVELOPERS PVT LTD TAKING THE SALE P RICE OF THE PROPERTY AT RS.1,46,47,090 AS ESTIMATED BY THE DVO IN HIS REPORT DT.24.12.2010. IT IS ORDERED ACCORDINGLY. 8.0 IN THE GROUNDS OF APPEAL AT S.NO.5 , THE ASSESSEE HAS MERELY DENIED ITS LIABILITY TO B E CHARGED INTEREST WHICH IS WRONGLY LEVIED. THE CHAR GING OF INTEREST UNDER SECTION 234B & 234C OF THE ACT ARE CONSEQUENTIAL AND MANDATORY AND THE ASSESSING OFFICER HAS NO DISCRECTION IN THE MATTER. WE, THEREFORE, UPHOLD HIS ACTION IN CH ARGING THE SAME. THE ASSESSING OFFICER IS, HOWEVER, DIRECTED TO RECOMPUTE THE INTEREST TO BE C HARGED UNDER THESE SECTIONS, IF ANY, WHILE GIVING EFFECT TO THIS ORDER. 9. IN THE RESULT, THE ASSESSEE'S APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND NOV., 2012. SD/- SD/- (GEORGE GEORGE K) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER *REDDY GP 11 ITA NO.1367/BANG/11 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - C BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE