Seema Ramesh Dere, Pune V. Income-tax Officer, Ward - 14(1), Pune

ITA 1412/PUN/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5442 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-03-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 10-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Source of fund; Date of conversion; Fair market value; Valuation report
• Section: 45(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.1412/PUN/2018 / ASSESSMENT YEAR : 2013-14 MS.SEEMA RAMESH DERE, S.NO.8, KESHAV NAGAR, PLENUM PARK, MUNDHWA, PUNE 411 036 PAN : BNBPD6984K VS. ITO, WARD-14(1), PUNE (APPELLANT) (RESPONDENT) . / ITA NO.1413/PUN/2018 / ASSESSMENT YEAR : 2013-14 MR. AKSHAY DILIP DERE, S.NO.8, KESHAV NAGAR, PLENUM PARK, MUNDHWA, PUNE 411 036 PAN : BNBPD6983Q VS. ITO, WARD-14(1), PUNE (APPELLANT) (RESPONDENT) . / ITA NO.1414/PUN/2018 / ASSESSMENT YEAR : 2013-14 MR. DILIP SARJERAO DERE, S.NO.8, KESHAV NAGAR, PLENUM PARK, MUNDHWA, PUNE 411 036 PAN : BMPPD8710E VS. ITO, WARD-14(1), PUNE (APPELLANT) (RESPONDENT) ITA NOS.1412 TO 1418/PUN/2018 DERE GROUP 2 . / ITA NO.1415/PUN/2018 / ASSESSMENT YEAR : 2013-14 MS. CHANDRAKALA VILAS DERE, S.NO.8, KESHAV NAGAR, PLENUM PARK, MUNDHWA, PUNE 411 036 PAN : BMPPD8709R VS. ITO, WARD-14(1), PUNE (APPELLANT) (RESPONDENT) . / ITA NO.1416/PUN/2018 / ASSESSMENT YEAR : 2013-14 MS. VINITA RAMESH DERE, S.NO.8, KESHAV NAGAR, PLENUM PARK, MUNDHWA, PUNE 411 036 PAN : BTTPD0932K VS. ITO, WARD-14(1), PUNE (APPELLANT) (RESPONDENT) . / ITA NO.1417/PUN/2018 / ASSESSMENT YEAR : 2013-14 MS. ALAKA SARJERAO DERE, S.NO.8, KESHAV NAGAR, PLENUM PARK, MUNDHWA, PUNE 411 036 PAN : BMVPD3749M VS. ITO, WARD-14(1), PUNE (APPELLANT) (RESPONDENT) . / ITA NO.1418/PUN/2018 / ASSESSMENT YEAR : 2013-14 MR. RAMESH SARJERAO DERE, S.NO.8, KESHAV NAGAR, PLENUM PARK, MUNDHWA, PUNE 411 036 PAN : BEAPD9776F VS. ITO, WARD-14(1), PUNE (APPELLANT) (RESPONDENT) ITA NOS.1412 TO 1418/PUN/2018 DERE GROUP 3 / ORDER PER R.S.SYAL, VP : THIS BATCH OF SEVEN APPEALS BY DIFFERENT BUT RELATED ASSE SSEES INVOLVE A COMMON ISSUE. AS SUCH, THESE APPEALS HAVE BEE N CLUBBED FOR DISPOSAL VIDE THIS CONSOLIDATED ORDER. 2. FOR THE SAKE OF CONVENIENCE, I AM TAKING UP FACTUAL MATR IX FROM ITA NO.1418/PUN/2018 IN THE CASE OF MR. RAMESH SARJ ERAO DERE. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASS ESSEE ALONG WITH OTHER CO-OWNERS, SOME OF WHICH ARE PART OF THIS BATCH OF APPEALS, HAVE SOME ANCESTRAL AGRICULTURAL LAND. SUCH ANC ESTRAL AGRICULTURAL LAND WAS CONVERTED INTO STOCK IN TRADE ON 01-04- 2012. THE ASSESSEE AND THE OTHER CO-OWNERS GOT VALUATION OF TH IS ANCESTRAL AGRICULTURAL LAND DONE FROM A REGISTERED VALUER, WHO DETER MINED THE FAIR MARKET VALUE OF THE LAND AS ON 01-04-2012 AT RS.24,24,00,000/-. ACCORDINGLY, THE ASSESSEES SHARE IN THIS VALUATION AT RS.2,89,85,044/- WAS CREDITED TO HIS CAPITAL ACCO UNT. THE ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE AN D OTHER APPELLANT (S) BY SHRI DEEPAK S. SASAR RESPONDENT BY SHRI RAJESH GAWALI DATE OF HEARING 16-05-2019 DATE OF PRONOUNCEMENT 17-05-2019 ITA NOS.1412 TO 1418/PUN/2018 DERE GROUP 4 CO-OWNERS ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S. G AURI SPACE CREATOR. COPIES OF DEVELOPMENT AGREEMENT AND SUPPLEMENTARY DEVELOPMENT AGREEMENT WERE FILED. IT IS UNDIS PUTED THAT NO ACTUAL TRANSFER OF THE LAND TOOK PLACE DURING THE YEAR UNDER CONSIDERATION. IN ORDER TO ASCERTAIN THE `FAIR MARKET VALUE (FMV) OF THE PROPERTY AS ON 01-04-2012, THE AO ISSUED SUMMO NS U/S.131 TO THE REGISTERED VALUER WHO HAD CARRIED OUT THE VALUATION OF THE PROPERTY AND DETERMINED THE FMV AT RS.24.24 CRORE. THE REGISTERED VALUER EXPRESSED HIS INABILITY TO ATTEND THE AOS OFF ICE DUE TO ADVANCED AGE AND HEALTH ISSUES. THE AO OBSERVED THAT THERE WAS HUGE DIFFERENCE BETWEEN THE FAIR MARKET VALUATION OF TH E PROPERTY AS DETERMINED BY THE REGISTERED VALUER AND THE STATE GOVERNMENT ON THE DATE OF ENTERING INTO DEVELOPMENT AGREEMEN T BY THE ASSESSEE AND OTHER FAMILY MEMBERS. AFTER ENTERTAINING OBJECTIONS FROM THE ASSESSEE, THE AO REFUSED TO ACCEPT THE VALUATION REPORT ON THE GROUND THAT THE VALUATION CARRIED OUT BY THE STA MP VALUATION AUTHORITY OF THE STATE GOVERNMENT FOR THE SAME PROPE RTY IN THE F.Y. 2012-13 ON 10-01-2013 STOOD AT RS.8,41,70,80 0/-. ACCORDINGLY, THE AO DIRECTED TO COMPUTE CAPITAL GAIN AND BUSINE SS INCOME AS AND WHEN THE QUESTION ARISES, BY CONSIDERING THE FMV AS ITA NOS.1412 TO 1418/PUN/2018 DERE GROUP 5 ON THE DATE OF CONVERSION AT RS.8,41,70,800/-. THE LD. CIT(A) COUNTENANCED THE VIEW TAKEN BY THE AO. 3. THE FACTS AND CIRCUMSTANCES OF ALL THE OTHER APPEALS O N THIS ISSUE ARE MUTATIS MUTANDIS SIMILAR. 4. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEV ANT MATERIAL ON RECORD. ALL THE ASSESSEES IN THESE APPEALS ALON G WITH SOME OTHER RELATIVES ARE CO-OWNERS OF ANCESTRAL AGRICULTURAL LAND. THE SAID LAND, EARLIER HELD AS CAPITAL ASSET, WAS CONVERTE D INTO STOCK IN TRADE ON 01-04-2012. IT IS UNDISPUTED THAT THE ACTUAL TRANS FER TOOK PLACE AT A LATER YEAR. IN SO FAR AS THE ASSESSMENT YEAR UNDER CONSIDERATION IS CONCERNED, IT IS ONLY A MATTER OF INVOCATION OF SECTION 45(2) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALS O CALLED THE ACT) FOR THE DETERMINATION OF THE FMV OF THE PROPERTY AS ON THE DATE OF CONVERSION. THE TAXABLE EVENT WOULD ARISE ONLY ON THE ACTUAL TRANSFER OF THE PROPERTY, WHICH EVENT TOOK PLACE IN A LATER YEAR AND NOT IN THE YEAR UNDER CONSIDERATION. SECTION 45 DEALS WITH INCOME CHARGEABLE UNDER THE HEAD `CAPITAL GAINS. SUB-SEC TION (2) OF SECTION 45 PROVIDES THAT : `NOTWITHSTANDING ANYTHING CONTAINE D IN SUB-SECTION (1), THE PROFITS OR GAINS ARISING FROM THE TRANSF ER BY WAY OF CONVERSION BY THE OWNER OF A CAPITAL ASSET INTO, OR ITS TREATMENT BY ITA NOS.1412 TO 1418/PUN/2018 DERE GROUP 6 HIM AS STOCK-IN-TRADE OF A BUSINESS CARRIED ON BY HIM SHA LL BE CHARGEABLE TO INCOME-TAX AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH STOCK-IN-TRADE IS SOLD OR OTHERWISE TRANSFERRED BY HIM AND, FOR THE PURPOSES OF SECTION 48, THE FAIR MARKET VALU E OF THE ASSET ON THE DATE OF SUCH CONVERSION OR TREATMENT SHALL BE DEEME D TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. A CAREFUL PERUSAL OF THIS SUB- SECTION TRANSPIRES THAT WHERE A CAPITAL ASSET IS CONVERTED INTO STOCK IN TRADE, INCOME SHALL BE CHARGEABLE TO TAX IN THE PREVIOUS YE AR IN WHICH SUCH STOCK IN TRADE IS SOLD OR OTHERWISE TRANSFERRED. IN SUCH YEAR OF TRANSFER OF THE CAPITAL ASSET, INCOME IS COMPUTED IN TWO PARTS, VIZ., FIRST IS THE CAPITAL GAIN WITH REFERENCE TO THE FMV OF THE ASSET AS ON THE DATE OF CONVERSION BY DEEMING IT AS FULL VA LUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE CAPI TAL ASSET FOR THE PURPOSES OF SECTION 48; AND SECOND IS THE BUSINESS INC OME W.R.T THE ACTUAL PRICE REALIZED AS DEDUCTED FROM THE FULL VALUE OF CONSIDERATION ON THE DATE OF CONVERSION AFTER ALLOWING DEDUCTIO N FOR OTHER COSTS INCURRED AFTER SUCH CONVERSION. THUS, IT IS CLE AR THAT IF A PARTICULAR ASSET IS CONVERTED INTO STOCK IN TRADE IN YEAR 1 AN D SUCH STOCK IN TRADE IS SOLD IN YEAR 2, IT IS IN THE YEAR 2 THAT THE CA PITAL GAIN ITA NOS.1412 TO 1418/PUN/2018 DERE GROUP 7 AND BUSINESS INCOME WOULD BE COMPUTED AND INCLUDED IN THE INCOME OF THE ASSESSEE. 5. IT HAS BEEN NOTICED ABOVE THAT IN SO FAR AS CAPITAL GAIN IS CONCERNED, IT IS COMPUTED BY CONSIDERING THE FAIR MARKET VALU E AS THE FULL VALUE OF CONSIDERATION OF THE ASSET CONVERTED INTO STOC K IN TRADE AS ON THE DATE OF CONVERSION. THE ISSUE WHICH, THER EFORE, INSTANTLY ARISES IS THE DETERMINATION OF FAIR MARKET VALUE OF TH E ASSET AS ON THE DATE OF THE CONVERSION. WHEREAS THE ASS ESSEES ADOPTED THE FMV OF THE ASSET AT RS.24.24 CRORE ON THE BASIS OF REPORT OF A REGISTERED VALUER, THE AO CONSIDERED A SUM O F RS.8.41 CRORE AS THE FMV ON THE DATE OF CONVERSION ON THE BASIS O F STAMP VALUE. I HAVE GONE THROUGH THE REPORT OF THE REGISTERED VALUER, A COPY OF WHICH IS AVAILABLE IN THE PAPER BOOK. THE REGISTERE D VALUER HAS ADMITTED ON PAGE 6 OF HIS REPORT THAT IN ORDER TO ASCERTA IN THE RATES PREVALENT IN THE YEAR 2012, A SEARCH AT THE SUB-REG ISTRARS OFFICE WAS CARRIED OUT FOR OBTAINING REGISTERED VALUE OF THE PROPERTIES IN THE VICINITY BUT THE EFFORTS DID NOT YIELD ANY SUITAB LE RESULTS. THEREAFTER, HE PROCEEDED TO DETERMINE THE FMV A T RS.24.24 CRORE ON THE BASIS OF HIS EXPERIENCE. IT IS THUS APPARENT THAT THE REPORT OF THE REGISTERED VALUER DOES NOT HAVE ANY AUTHENTIC BASIS FOR THE FMV OF THE LAND AS ON THE DATE OF CONVERSION. ON THE ITA NOS.1412 TO 1418/PUN/2018 DERE GROUP 8 OTHER HAND, THE VIEW TAKEN BY THE AO IN FIXING THE FMV OF TH E LAND AT RS.8.41 CRORE IS EQUALLY NOT PROPER IN AS MUCH AS HE HAS TAKEN SUCH VALUE ON 10-10-2013, WHEREAS THE LAND WAS CONVERTE D INTO STOCK IN TRADE ON 01-04-2012. IT IS THUS SEEN THAT BOTH THE VALUES DO NOT REPRESENT THE FMV OF THE PROPERTY ON THE DATE OF CONVER SION. UNDER SUCH CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THE FMV OF THE PROPERTY ON THE DATE OF CONVERSION NEEDS TO B E DETERMINED AFRESH ON A RATIONAL BASIS. I, THEREFORE, SET AS IDE THE IMPUGNED ORDERS AND REMIT THE MATTER TO THE AO FOR MAKING A REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER (DVO) FOR A FRESH DETERMINATION OF THE FMV OF THE PROPERTY AS ON 01-04-2012 , AFTER ENTERTAINING OBJECTIONS, IF ANY, FROM THE ASSESSES AND THEN PROCEEDING ACCORDINGLY. 6. ANOTHER ISSUE IS RAISED IN TWO APPEALS, NAMELY, ITA NO.1418/PUN/2018 IN THE CASE OF MR. RAMESH SARJERAO DERE AND ITA NO.1415/PUN/2018 IN THE CASE OF MS. CHANDRAKALA VILAS D ERE. 7. SHRI RAMESH S. DERE, THE ASSESSEE IN ITA NO.1418/PUN/201 8 CREDITED A SUM OF RS.20.00 LAKH TO HIS CAPITAL ACCOUNT WHICH WAS DEPOSITED IN THE BANK ACCOUNT. ON BEING CALLED UPON TO F URNISH THE SOURCE OF INVESTMENT, THE ASSESSEE STATED THAT FAMILY SETTLEM ENT TOOK ITA NOS.1412 TO 1418/PUN/2018 DERE GROUP 9 PLACE AND THE SAID AMOUNT OF RS.20.00 LAKH WAS GIVEN BY THE OTHER FAMILY MEMBERS OUT OF SALE PROCEEDS OF CERTAIN SHOPS AND ALSO OTHER SOURCES OF INCOME. 8. MRS. CHANDRAKALA VILAS DERE, THE ASSESSEE IN ITA NO.1415/PUN/2018 DEPOSITED A SUM OF RS.9,50,000/- IN HER BANK ACCOUNT. ON BEING CALLED UPON TO SUBSTANTIATE THE SOURCE OF INVESTMENT, SHE ALSO GAVE A SIMILAR REPLY AS THAT GIVEN BY S HRI RAMESH S. DERE. THE AO ADDED BOTH THE AMOUNTS, WHICH A DDITIONS CAME TO BE AFFIRMED IN THE FIRST APPEALS. 9. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEV ANT MATERIAL ON RECORD. THE LD. AR CONTENDED THAT THE ASSESSEE S WERE NOT GIVEN PROPER OPPORTUNITY TO EXPLAIN THEIR POSITION REGARDING THE SOURCE OF INVESTMENTS IN THE BANK ACCOUNTS. WITHOUT COMM ENTING ON THE MERITS, I AM OF THE CONSIDERED OPINION THAT IT WOULD BE IN THE INTEREST OF JUSTICE IF THE IMPUGNED ORDERS ARE SET-ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE RESPECTIVE AOS. I ORDER AC CORDINGLY AND DIRECT THE AOS TO DECIDE THIS ISSUE AFRESH IN THE HANDS OF THE SE TWO ASSESSEES AFTER GIVING REASONABLE OPPORTUNITY OF HEARING. ITA NOS.1412 TO 1418/PUN/2018 DERE GROUP 10 10. IN THE RESULT, ALL THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2019. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 17 TH MAY, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-7, PUNE 4. THE PR. CIT-6, PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NOS.1412 TO 1418/PUN/2018 DERE GROUP 11 DATE 1. DRAFT DICTATED ON 16-05-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 16-05-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *