Karanbhai Bharatbhai Gangdev, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-5(2), RAJKOT-GUJARAT

ITA 139/RJT/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5197 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 26-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVENN S VERMA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value; Set aside
• Section: 50C; 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.139/RJT/2014 (ASSESSMENT YEAR : 2008-09) KARANBHAI BHARATBHAI GANGDEV VINAYAK SOCIETY B/H. P.D. MALAVIYA COLLEGE GONDAL ROAD RAJKOT VS. THE ITO WARD-5(2) RAJKOT [PAN NO. AIEPG 9599A] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI KALPESH DOSHI RESPONDENT BY : SHRI PRAVENN S. VERMA, SR.DR DATE OF HEARING 03/09/2019 DATE OF PRONOUNCEMENT 25/10/2019 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:\ THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEA LS)IV, RAJKOT [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-IV/0287/11-12 DATED 2 4/01/2014 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOM E TAX ACT, 1961(HEREINAFTER REFERRED TO AS 'THE ACT') DATED 29/12/2011 RELEVAN T TO ASSESSMENT YEAR (AY) 2008-09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- - 2 - ITA NO.139/RJT/2014 KARANBHAI BHARATBHAI GANGDEV VS. ITO ASST.YEAR 2008-09 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS. 20,91,108/-. THE ADDITION NEEDS DELETION. 2. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS. 20,91,108/- WITHOUT FOLLOWING THE SETTLED LAW THAT VALUATION IN SUCH CA SE IS TO BE MADE AS PER RENTAL METHOD THE ADDITION NEEDS DELETION. 3. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS. 20,91,108/- BASED ON IRRELEVANT FACTORS WHICH HE DESCRIBED WRONGLY. T HE ADDITION NEEDS DELETION. 4. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS. 20,91,108/- IGNORING AND DISBELIEVING THE EVIDENCES AND EXPLANATION FURN ISHED. THE ADDITION NEEDS DELETION. 5. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING ADDITION OF RS. 20,91,108/- BASED ON PRESUMPTION AND CERMISES. THE ADDITION NEEDS DELETI ON. 6. TAKING INTO CONSIDERATION THE LEGAL, STATUTORY, FACTUAL AND ADMINISTRATIVE ASPECTS, NO ADDITION OF AN AMOUNT OF RS. 20,91,108/- OUGHT TO HAVE BEEN CONFIRMED. THE ADDITIONS NEED DELETION. 7. WITHOUT PREJUDICE, THE ASSESSMENT MADE IS BAD IN LAW AND DESERVES ANNU LMENT. 8. WITHOUT PREJUDICE, NO ADEQUATE, SUFFICIENT AND REASONABLE OPPORT UNITY HAS BEEN PROVIDED WHILE PASSING ASSESSMENT ORDER. THE ASS ESSMENT NEEDS ANNULMENT. 9. WITHOUT PREJUDICE, NO ADEQUATE, SUFFICIENT AND REASONABLE OPPORTUNITY HAS BEEN PROVIDED WHILE PASSING APPEAL ORDER. THE ASSESSMENT NEEDS AN NULMENT. 10. WITHOUT PREJUDICE, NO ADEQUATE, SUFFICIENT AND REASONABLE OPPORTUNITY HAS BEEN PROVIDED BY THE LD. VALUATION OFFICER. THE ASSESSMENT NEEDS ANN ULMENT. 11. THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AME ND AND/OR SUBSTITUTE ANY OR ALL GROUND OF APPEAL BEFORE THE ACTUAL HEARING TAKES PLACE. 2. THE ASSESSEE HAS RAISED AS MANY AS 11 GROUNDS OF APPEAL BUT THE EFFECTIVE ISSUE RAISED IS THAT THE LEARNED CIT (A) ERRED IN CONFIRM ING THE ORDER OF THE ASSESSING OFFICER (AO IN SHORT) BY SUSTAINING THE ADDITION OF RS. 20,91,108/- ON ACCOUNT OF THE DIFFERENCE IN THE VALUATION OF THE PROPERTY DET ERMINED UNDER SECTION 50C OF THE ACT VIS-A-VIS SALE PRICE DECLARED BY THE ASSESSEE I N THE RETURN OF INCOME. - 3 - ITA NO.139/RJT/2014 KARANBHAI BHARATBHAI GANGDEV VS. ITO ASST.YEAR 2008-09 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE I N THE PRESENT CASE IS AN INDIVIDUAL AND ENGAGED IN THE ACTIVITY OF JOB WORK OF MARBLE C UTTING AND KOTA STONE. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION CLAIMED TO HAVE SOLD ITS FACTORY PREMISES AT RS. 6 LAKHS ONLY THOUGH THE SAME WAS VALUED FOR THE PURPOSE OF THE STAMP DUTY AT RS. 27,41,890/- WHICH RESULTED A DIFFERENCE IN T HE AMOUNT OF CAPITAL GAIN OF RS. 21,41,890/- ONLY. ACCORDINGLY, THE MATTER WAS REFER RED TO THE DVO TO DETERMINE THE FAIR MARKET VALUE OF THE PROPERTY FOR COMPUTING THE CAPITAL GAIN UNDER THE PROVISIONS OF SECTION 50C OF THE ACT. THE DVO IN TU RN HAS VALUED THE PROPERTY AT RS. 26,91,300/- ONLY. ACCORDINGLY, THE AO OBSERVED THE DIFFERENCE OF RS. 20,91,108/- AS CAPITAL GAIN WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARN ED CIT (A) WHO HAS CONFIRMED THE ORDER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED AR BEFORE US FILED A PAPER BOOK RU NNING INTO PAGES 1 TO 58 AND FURNISHED THE WRITTEN SUBMISSION PLACED ON RECORD. 5. ON THE OTHER HAND, THE LEARNED DR BEFORE US VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH T HE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE PRE SENT CASE RELATES TO THE - 4 - ITA NO.139/RJT/2014 KARANBHAI BHARATBHAI GANGDEV VS. ITO ASST.YEAR 2008-09 DETERMINATION OF THE FAIR MARKET VALUE OF THE PROPE RTY UNDER THE PROVISIONS OF SECTION 50C OF THE ACT SOLD BY THE ASSESSEE. THE AS SESSEE IN THE CASE ON HAND BASED ON REGISTERED VALUER HAS CLAIMED THE VALUE OF THE P ROPERTY AT RS. 2,38,000/- WHEREAS THE AO, BASED ON THE REPORT OF DVO DETERMIN ED THE VALUE OF THE PROPERTY AT RS. 26,91,300/-. ACCORDINGLY, AN ADDITION OF RS. 20,91,108/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF SHORT TE RM CAPITAL GAIN. THE VIEW ADOPTED BY THE AO WAS SUBSEQUENTLY CONFIRMED BY THE LEARNED CIT (A). THERE IS NO DISPUTE TO THE FACT THAT THE CONSIDERAT ION OF THE IMMOVABLE PROPERTY, IF IT IS LESS THAN THE STAMP VALUE THEN THE VALUE DETE RMINED FOR THE PURPOSE OF THE STAMP DUTY SHALL BE TAKEN AS THE SALE CONSIDERATION IN PURSUANCE TO THE PROVISIONS OF SECTION 50C OF THE ACT. HOWEVER, IF THE ASSESSEE DISPUTES THE VALUE DETERMINED BY THE AO AS DISCUSSED ABOVE, THEN THE AO HAS TO RE FER THE MATTER TO THE DVO TO DETERMINE THE FAIR MARKET VALUE OF SUCH IMMOVABLE P ROPERTY. THE RELEVANT EXTRACT OF THE PROVISIONS OF SECTION 50C READS AS UNDER: (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS L ESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE 'STAMP VALUATION AUTHORITY') FOR THE PURPOSE OF PAYMENT OF STAMP DUT Y IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL, FOR THE PURPOSES OF SECT ION 48 , BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF S UCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (1), WHERE (A ) THE ASSESSEE CLAIMS BEFORE ANY ASSES SING OFFICER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER; (B ) ***** THE ASSESSING OFFICER MAY REFER THE VALUATION OF TH E CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUB-SECTIONS (2), (3), (4), (5) AND (6) OF SECTION16A, CLAUSE (I) OF SUB-SECTION (1) AND SUB-S ECTIONS (6) AND (7) OF SECTION 23A, SUB-SECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SEC TION 37 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957), SHALL, WITH NECESSARY MODIFICATIONS, APPLY I N RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESSING OFFIC ER UNDER SUB-SECTION (1) OF SECTION 16A OF THAT ACT. - 5 - ITA NO.139/RJT/2014 KARANBHAI BHARATBHAI GANGDEV VS. ITO ASST.YEAR 2008-09 ONCE THE MATTER HAS BEEN REFERRED TO THE DVO, THEN THE VALUE OF THE IMPUGNED PROPERTY HAS TO BE DECIDED TO DETERMINE THE FAIR MA RKET VALUE OF THE PROPERTY AS PER THE PROVISIONS OF SECTION 7 READ WITH SCHEDULE III OF THE WEALTH TAX ACT 1957. THE RELEVANT EXTRACT OF THE SCHEDULE III READS AS UNDER : 3. VALUATION OF IMMOVABLE PROPERTY. - SUBJECT TO THE PROVISIONS OF RULES 4, 5, 6, 7 AND 8 FOR THE PURPOSES OF SUB-SECTION (1) OF SECTION 7, THE VALUE OF ANY IMMOVABLE PROPERTY, BEI NG A BUILDING OR LAND APPURTENANT THERETO, OR PART THEREOF, SHALL BE THE AMOUNT ARRIV ED AT BY MULTIPLYING THE NET MAINTAINABLE RENT BY THE FIGURE 12.5: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXX 4. NET MAINTAINABLE RENT HOW TO BE COMPUTED. - FOR THE PURPOSES OF RULE 3, 'NET MAINTAINABLE RENT' IN RELATION TO AN IMMOVABLE PROPERTY REFERRED TO IN THAT RULE, SHALL BE THE AMOUNT OF GR OSS MAINTAINABLE RENT AS REDUCED BY (I) THE AMOUNT OF TAXES LEVIED BY ANY LOCAL AUTHORI TY IN RESPECT OF THE PROPERTY; AND (II) A SUM EQUAL TO FIFTEEN PER CENT, OF THE GROSS MAINTAINABLE RENT. 5. GROSS MAINTAINABLE RENT HOW TO BE COMPUTED. - FOR THE PURPOSES OF RULE 4, 'GROSS MAINTAINABLE REN T', IN RELATION TO ANY IMMOVABLE PROPERTY REFERRED TO IN RULE 3, MEANS-- (I) WHERE THE PROPERTY IS LET, THE AMOUNT RECEIVED OR RECEIVABLE BY THE OWNER AS ANNUAL RENT OR THE ANNUAL VALUE ASSESSED BY THE LOC AL AUTHORITY IN WHOSE AREA THE PROPERTY IS SITUATED FOR THE PURPOSES OF LEVY OF PR OPERTY TAX OR ANY OTHER TAX ON THE BASIS OF SUCH ASSESSMENT, WHICHEVER IS HIGHER; (II) **** THERE IS NO DISPUTE TO THE FACT THAT THE PROPERTY I N DISPUTE WAS OCCUPIED BY THE TENANT. AS SUCH THE ASSESSEE ACQUIRED THE PROPERTY DATED 19-04-2015 WHICH WAS ALREADY OCCUPIED BY THE TENANT. THE PURCHASE VALUE OF THE PROPERTY WAS OF RS. 4,51,000/- WHICH WAS SOLD IN THE SAME POSITION (OCC UPIED BY THE TENANT) TO - 6 - ITA NO.139/RJT/2014 KARANBHAI BHARATBHAI GANGDEV VS. ITO ASST.YEAR 2008-09 HARESHBHAI CHHAGANBHAI FOR A CONSIDERATION OF RS. 6 LACS AS CLAIMED BY THE ASSESSEE. THUS, THE CASE OF THE ASSESSEE IS COVERED UNDER CLA USE 5 (I) PART B OF SCHEDULE III OF THE WEALTH TAX ACT 1957 AS DISCUSSED ABOVE WHICH RE QUIRES TO DETERMINE THE FAIR MARKET VALUE CONSIDERING THE ACTUAL RENT RECEIVED/R ECEIVABLE OR THE VALUATION DETERMINED BY THE LOCAL AUTHORITY FOR LEVYING THE P ROPERTY TAX/OTHER TAX WHICHEVER IS HIGHER. HOWEVER, WE NOTE THAT THE DVO IN THE CASE ON HAND H AS ADOPTED CAPITALIZATION METHOD TO DETERMINE THE FAIR MARKET VALUE WHICH IS AGAINST THE PROVISIONS OF THE SCHEDULE III OF THE WEALTH TAX ACT. THE REPORT OF T HE DVO IS PLACED ON PAGE 38 TO 41 OF THE PAPER BOOK. ON PERUSAL OF THE REPORT OF THE DVO, WE NOTE THAT T HERE WAS NO REFERENCE MADE TO THE VALUE DETERMINED BY THE LOCAL AUTHORITY FOR THE LEVY OF TAX OR THE ACTUAL RENT RECEIVED/ RECEIVABLE BY THE ASSESSEE. THUS, WE ARE OF THE VIEW THAT THE DVO HAS NOT DETERMINED THE VALUE OF THE PROPERTY IN THE LIG HT OF THE PROVISIONS OF WEALTH TAX AS DISCUSSED ABOVE. THEREFORE THE SAME CANNOT B E ACCEPTED FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN UNDER THE PROVISIONS OF SECTION 50C OF THE ACT. SIMILARLY, WE ALSO NOTE THAT THERE WAS THE VALUATIO N REPORT FROM THE REGISTERED VALUER FURNISHED BY THE ASSESSEE WHICH IS PLACED ON PAGE 43 OF THE PAPER BOOK. ON PERUSAL OF THE SAME, WE NOTE THAT THE VALUE OF THE PROPERTY HAS BEEN DETERMINED AS PER THE PROVISIONS OF SCHEDULE III OF THE VALVE TAX ACT. AS SUCH THE COPY OF THE RENT - 7 - ITA NO.139/RJT/2014 KARANBHAI BHARATBHAI GANGDEV VS. ITO ASST.YEAR 2008-09 AGREEMENT AS WELL AS THE VALUE DETERMINED FOR THE P URPOSE OF LEVYING THE TAX BY THE LOCAL AUTHORITY IS PLACED ON PAGES 7 & 8 AND 22 TO 24 OF THE PAPER BOOK. NONE OF THE AUTHORITY BELOW HAS POINTED OUT ANY DEFECT IN T HE DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK. THUS, IN THE ABSENCE OF ANY DEFECT POINTED OUT BY THE LOWER AUTHORITIES IN THE REGISTERED VALUATION REPOR T FURNISHED BY THE ASSESSEE, WE ARE NOT CONVINCED WITH THE FINDING OF THE AUTHORITI ES BELOW. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LEARNED CIT (A) AND DIRECT T HE AO TO DELETE THE ADDITION MADE BY HIM. HENCE THE GROUND OF APPEAL OF THE ASSE SSEE IS ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 25/ 10 /2019 SD/- SD/- (MS. MADHUMITA ROY) ( WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 25 / 10 /2019 .., .../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' #! / CONCERNED CIT 4. ' #! ( ) / THE CIT(A)-IV, RAJKOT 5. '() ! , , /DR,ITAT, RAJKOT 6. )45 67 / GUARD FILE. / BY ORDER, '! ! //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !', / ITAT, RAJKOT