MUKESH BHAWARLAL SHARMA, MUMBAI V. I.T.O. 14(3)(1), MUMBAI

ITA 1470/MUM/2012

• Counselvise Citation: 147019914 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 04-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: NEELKANTH KHANDELWAL
• Keywords: Retrospective amendment; Cost of acquisition; Fair market value; Valuation report
• Section: 234B

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL MUMBAI - B BENCH MUMBAI . . , / ! ! ! ! , BEFORE S/SH.B.R.MITTAL,JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 1470/MUM/2012, ' ' ' ' # # # # / ASSESSMENT YEAR 2008-09 MUKESH BHAWARLAL SHARMA C/O. SHARMA PICTURE PUBLICATION, VALLABHDAS KANJI STREET, MUMBAI-400002 VS. INCOME TAX OFFICER, 14(3) (1), MUMBAI. PAN: ADUPS8280R ( $% / APPELLANT ) ( &'$% / RESPONDENT) $% $% $% $% ( (( ( ) ) ) ) / ASSESSEE BY : SHRI NEEL KANTH KHANDE LWAL &'$% ( ) / REVENUE BY : SHRI PITAMBAR DAS ' ' ' ' ( (( ( *+ *+ *+ *+ / DATE OF HEARING : 13.02.2014 ,-# ( *+ / DATE OF PRONOUNCEMENT : 19.02.2014 ' ' ' ' , 1961 ( (( ( 254 )1( *.* *.* *.* *.* / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M : CHALLENGING THE ORDER DATED 17/1/2012 OF CIT(A)-28, MUMBAI, ASSESSEE HAS FILED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN PROCEEDING WITH THE DVOS REPORT FOR THE VALUATION OF THE PROPERTY AS ON 1.4.1981 THOUGH ACCEPTING THE FACT THAT THE A.O.WAS NOT JUSTIFIED I N REFERRING THE MATTER OF VALUATION TO THE VALUATION OFFICER U/S.55A.REASONS ASSIGNED BY HIM F OR DOING THE SAME ARE WRONG AND INSUFFICIENT. 2.HE HAS FURTHER ERRED IN NOT CONSIDERING THE SUBMI SSION OF THE APPELLANT THAT THERE IS NO PROVISION IN THE INCOME TAX ACT, 1961 WHICH CAN JUSTIFY THE R EFERENCE OF THE VALUATION AS ON 1.4.1981 WHEN VALUATION REPORT PREPARED BY THE REGISTERED VALUER HAS ALREADY BEEN FILED BY THE ASSESSEE. 3.REGARD BEING HAD TO THE FACT THAT REFERENCE U/S.5 5A CAN BE MADE TO THE DVO IF A.O. IS OF THE OPINION HAVING TO THE NATURE OF ASSET AND OTHER REL EVANT CIRCUMSTANCE THAT IT IS NECESSARY TO DO SO.NO CIRCUMSTANCE HAVING BEEN SPECIFIED ON THE BAS IS OF WHICH HE HAS FRAMED HIS OPINION TO MAKE REFERENCE,THE REFERENCE ITSELF WAS INVALID AND AS S UCH THE VALUATION MADE BY THE REGISTERED VALUER OUGHT TO HAVE BEEN ACCEPTED BY THE LEARNED CIT(A). 4.WITHOUT PREJUDICE TO THE CONTENTION MADE IN THE E ARLIER GROUNDS OF APPEAL IT IS FURTHER CONTENDED THAT THE LEARNED CIT(A) HAS ERRED IN DETERMINING TH E VALUE OF PROPERTY AS ON 1.4.1981 AT RS.5,09,766 (RS.2,65,300 + RS.2,44,466) AS AGAINST RS.7,31,000 CLAIMED BY THE ASSESSEE. REASONS ASSIGNED BY HIM FOR DOING THE SAME ARE WRONG AND IN SUFFICIENT. 5.HE HAS FURTHER ERRED IN NOT CONSIDERING THE GROUN D WITH REGARD TO CHARGE OF INTEREST U/S.234A & 234B THOUGH SPECIFICALLY TAKEN IN GROUNDS OF APPEAL FILED BEFORE HIM. NO REASONS HAVE BEEN ASSIGNED FOR NOT CONSIDERING OF THE SAME. 6.ORDER PASSED IS BAD IN LAW AND CONTRARY TO THE PR OVISION OF THE ACT. 7.THE APPELLANT CRAVES LEAVE TO ADD, ALTER AND OR M ODIFY THE GROUNDS OF APPEAL. ASSESSEE,AN INDIVIDUAL, FILED HIS RETURN OF INCOME ON 30/3/2010 DECLARING TOTAL INCOME OF RS.3.77 LAKHS.ASSESSING OFFICER(AO)FINALISED THE ASSESSMENT ON 29/12/2010 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.35.25 LAKHS.FIRST FOUR GROUND S OF APPEAL ARE ABOUT VALUATION OF PROPERTY AND REFERENCE MADE BY THE AO TO THE VALUATION OFFICER(V O). 2 ITA NO.1470/MUM/2012 MUKESH BHAWARLAL SHARMA 2. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD SOLD IMMOVABLE PROPERTY VALUED AT RS.58 LAKHS.AO CALLED FOR DETAILS IN THIS REGARD AND FOUND THAT ASSESSEE HAD BECOME OWNER OF HALF PORTION OF PROPERTY BY WAY OF INHERIT ANCE ON DEATH OF HIS MOTHER,THAT HE BECAME THE OWNER OF THE BALANCE HALF PROPERTY WHEN HIS FATHER RENOUNCED HIS INTEREST IN FAVOUR OF THE ASSESSEE ON 20.03.2007,THAT THE PROPERTY WAS SOLD ON 28.11.2 007.THE AO ALLOWED INDEXATION OF THE PROPERTY RELATING TO HALF PORTION INHERITED BY THE ASSESSEE ON DEATH OF HER M OTHER FROM 1991-92 WHILE REMAINING HALF PORTION OF THE PROPERTY WAS INDEXED FROM AY. 2006-0 7 WHEN HIS FATHER HAD RENOUNCED HIS SHARE IN THE IMPUGNED PROPERTY IN FAV OUR OF THE ASSESSEE.AO WAS OF THE VIEW THAT PERIOD OF HOLDING BY THE MOTHER WAS NOT TO BE TAKEN INTO ACCOUNT WHILE ALLOWING THE INDEXATION.HE REFERRED TO THE PROVISIONS OF EXPL.(I II) TO SECTION 48 OF THE ACT FOR WORKING OUT THE INDEXATION.ON THE OTHER HAND,THE ASSESSEE WAS OF TH E VIEW THAT THE AO OUGHT TO HAVE CONSIDERED THE PERIOD HELD BY THE PREVIOUS OWNER FOR THE PURPO SE OF INDEXATION. HE RELIED UPON THE SPECIAL BENCH DECISION OF ITAT MUMBAI IN TILE CASE OF MANJU LA J SHAH 318 ITR (AT) 417 (SB), WHICH WAS CITED BEFORE THE AO,BUT AO DID NOT ACCEPT THE C ONTENTION OF THE ASSESSEE.FURTHER,AO REFERRED THE MATTER FOR VALUATION U/S.55A(B)(II) OF THE ACT TO THE VO,JAIPUR,FOR ESTIMATING THE COST OF ACQUISITION AS ON 01.04.1.981.THE AO ADOPTED THE VA LUE ESTIMATED BY THE VO OF THE I.E.AT RS.4.59 LAKHS IN PLACE OF COST OF ACQUISITION WORKED OUT BY THE ASSESSEE AT RS.7,31,000/-. 2.1. AGGRIEVED BY THE ORDER OF THE AO,ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).AFTER CONSIDERING THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MANJULA J SHAH HE HELD THAT THE PLEA OF THE ASSESSEE IN RES PECT OF INDEXATION FROM 01.04.1981 HAD TO BE ACCEPTED,THAT THE PREVIOUS OWNER HAD ACQUIRED THE I MPUGNED ASSET ON 02.07.1965 AND THEREFORE,U/S.49(1) OF THE ACT,ASSESSEE WAS ENTITLE D TO TAKE COST OF ACQUISITION AS ON 01.04. 1981.HE DIRECTED THE AO TO ALLOW THE RELIEF ACCORDI NGLY.AS REGARDS ASSESSEES OBJECTION FOR ADOPTING THE REDUCED VALUE FOR COST OF ACQUISITION IN PREFERENCE TO THE VALUE TAKEN BY HIM,FAA HELD THAT THE AO WAS NOT JUSTIFIED IN REFERRING THE MATTER FOR VALUATION TO THE VALUATION OFFICER U/S.55A OF THE ACT,THAT AO WAS WITHIN HIS RIGHTS TO OBTAIN AN EXPERT OPINION TO FIND WHETHER THE VALUATION GIVEN BY THE VALUER OF THE ASSESSEE IS CO RRECT OR NOT,THAT THE ERROR OF THE AO IN REFERRING THE MATTER U/S.55A OF THE ACT WAS MERELY A TECHNICA L ERROR,THAT MUCH IMPORTANCE SHOULD NOT BE GIVEN TO THE SAID TECHNICAL MISTAKE COMMITTED BY HI M IN REFERRING THE MATTER TO THE DVO U/S 55A OF THE ACT INSTEAD OF RESORTING TO SECTION 133(6)/1 31 OF THE ACT. 2.1.A. HE FURTHER HELD THAT THE ASSESSEE HAD TAKEN FIGURE OF RS.7.31LAKHS AS THE COST OF ACQUISITION OF THE IMPUGNED PROPERTY AS ON 01.04.1981,THAT THE APPROVED VALUER OF THE ASSESSEE CONSIDERED THE COST OF ACQUISITION OF THE IMPUGNED PROPERTY @RS.10 0/-PER SQ.FT,THAT THE VO HAD ADOPTED THE FIGURE OF RS.57/- PER SQ.FT. BASED ON THE CONTEMPOR ARY RELIABLE SALE INSTANCES OF LAND DURING THE PERIOD CLOSE TO 01.04.1981,THAT THE APPROVED VALUER OF THE ASSESSEE HAD MERELY ESTIMATED THE FIGURE OF RS.100/- PER SQ.FT.WITHOUT ANY RATIONAL B ASIS,THAT MUNICIPAL COUNCIL,UDAIPUR HAD SHOWN THE ACTUAL VALUE OF THE COMMERCIAL LAND IN 1983 FOR THE CONCERNED AREA AT RS.40/- PER SQ. FT. FINALLY,HE HELD THAT THE VALUE ADOPTED BY THE ASSES SEE WAS ABNORMALLY HIGH,THAT VALUE OF RS.57/- PER SQ.FT. FOR THE 4654 SQ.FT. LAND WAS REASONABLE AND COULD BE TREATED AS FAIR ESTIMATED VALUE AS ON 01.04.1981. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE(AR)SUBMITTED TH AT REFERENCE TO THE VO ITSELF WAS NOT PROPER AND WAS INVALID AS THE ASSESSEE HAD SHOWN HI GHER COST OF ACQUISITION AS ON 01.04.1981 THAN ADOPTED BY THE VALUATION OFFICER AND AO COULD NOT H AVE COME TO CONCLUSION THAT FAIR MARKET VALUE OF THE PROPERTY WAS BEING SUPPRESSED,THAT THE FAA WAS NOT JUSTIFIED IN HOLDING THAT REFERENCE TO THE VO WAS A TECHNICAL MISTAKE,THAT VA LUE ADOPTED BY THE FAA WAS AGAINST THE PROVISIONS OF THE LAW.HE RELIED UPON THE DECISION O F PUJA PRINTERS(360ITR 697)DELIVERED BY THE HONBLE BOMBAY HIGH COURT.DEPARTMENTAL REPRESENTATI VE (DR) SUPPORTED THE ORDER OF THE FA 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF PUJA PRINTS (SUPRA).WE WOULD LIKE TO REPRODUCE THE HEAD NOTES OF THE CASE THAT READ AS UNDER : THE ASSESSEE, FOR THE ASSESSMENT YEAR 2006-07, CLAIMED LONG-TERM CAPITAL GAINS OF RS. 11.20 LAKHS IN RESPECT OF SALE OF ITS PROPERTY FOR A CONSIDERATION OF RS. 2 CRORES.THE ASSESSEE ALSO CLAIMED A DEDUCTION ON 3 ITA NO.1470/MUM/2012 MUKESH BHAWARLAL SHARMA ACCOUNT OF BROKERAGE OF RS. 5 LAKHS AND THE INDEXED COST AT RS.1.78 CRORES, ON THE BASIS OF THE VALUE OF THE PROPERTY BEING RS. 35.99 INK/IS AS ON APRIL 1, 1981. THIS VALUATION OF RS. 35.99 LAKHS AS A FAIR M ARKET VALUE AS ON APRIL 1,1981, OF THE PROPERTY WAS ON THE BASI S OF A VALUATION REPORT. THE ASSESSING OFFICER REFE RRED THE ISSUE OF VALUATION TO THE DEPARTMENTAL VALUATIO N OFFICER WHO VALUED THE PROPERTY AT RS. 6.68 LAKHS AS ON APRIL 1, 1981, AND THE INDEXED COST AT RS. 33.20 LAKHS. CONSEQUENTLY,ASSESSING OFFICER ENHANCED THE CAPITAL GAINS OF THE ASSESSEE FROM RS. 11.20 LACS TO RS. 1.61 CRORES. THE COMMISSIONER (APPEALS) HELD AGAINST THE ASSESSEE.THE TRIBUNAL HELD THAT IN VIEW OF SECTION 55A(A) IT WAS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO MAKE A REFERENCE TO THE DEPART MENTAL VALUATION OFFICER FOR THE PURPOSE OF VALUATION,AS THE VALUE OF THE PROPERTY DECLARED BY THE ASSESSEE WAS NOT LESS THAN ITS FAIR MARKET VALU E. THE DATE FROM WHICH THE ASSESSEE BECAME THE OWNER OF TH E PROPERTY NEEDED TO BE EXAMINED VIS-A-VIS THE VARIOUS PARTNERSHIP DEEDS ENTERED INTO BY THE PARTN ERS OF THE ASSESSEE.TO DETERMINE THE ISSUE OF THE D ATE OF FIRST ACQUISITION OF THE PROPERTY BY THE FIRM, THE ISSUE WAS RESTORED TO THE ASSESSING OFFICER. IN CAS E THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE WAS H OLDING THE PROPERTY WITH EFFECT FROM APRIL 2, 1981, THE ASSESSING OFFICER WAS TO ACCEPT THE VALUATION GIVEN BY THE ASSESSEE AND WORK OUT ITS CAPITAL GAINS. ON APPEAL: HELD: DISMISSING THE APPEAL,(I)THAT THERE WAS NO DISPUTE THAT THE VALUE ADOPTED BY THE ASSESSEE OF THE PROPE RTY AT RS. 35.99 LAKHS WAS MUCH MORE THAN THE FAIR MARKET VALU E OF RS. 6.68 LAKHS EVEN AS DETERMINED BY THE DEPARTMENTAL VALUATION OFFICER.IN FACT,THE ASSESSIN G OFFICER REFERRED THE ISSUE OF VALUATION TO THE DEPARTMENTAL VALUATION OFFICER ONLY BECAUSE IN HIS VIEW THE VALUATION OF THE PROPE RTY AS ON 1981 AS MADE BY THE ASSESSEE WAS HIGHER THAN THE FAIR MARKET VAL UE.THEREFORE, THE INVOCATION OF SECTION55A(A) WAS N OT JUSTIFIED.(II)THAT THE AMENDMENT TO SECTION55A(A) O F THE ACT IN 2012 BY WHICH THE WORDS IS LESS THAN ITS FAIR MARKET VALUEWERE SUBSTITUTED BY THE WORDSIS AT VARIANCE WITH ITS FAIR MARKET VALUE WAS MADE EFFECTIVE ONLY FROM JULY 1,2012. PARLIAMENT HAS NOT GIVEN RETROSPECTIVE EFFECT TO TH E AMENDMENT.THEREFORE, THE LAW TO BE APPLIED IN THE ASSESSEE,S CASE WAS SE CTION 55A(A)AS EXISTING DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2006-07. AT THE RELEVANT TIME, VERY CLEARLY REFERENCE COULD BE MADE TO THE DEPARTMENTAL VALUATION OFFICER ONLY IF THE VALUE DECLARED BY THE ASSESSEE WAS IN THE O PINION OF ASSESSING OFFICER LESS THAN ITS FAIR MARKET VALUE.(III) THAT SECTION 55A(B ) STATES THAT IT WOULD APPLY IN ANY OTHER CASE, I.E ., A CASE NOT COVERED BY SECTION 55A(A). THERE WAS NO DISPUTE THAT THE ISSUE WAS COVERED BY SECTION 55A(A). THEREFORE, RECOURSE COULD NOT BE HAD TO THE RESIDUA RY CLAUSE PROVIDED IN SECTION 55A(B)(II). THEREFORE , THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR DATED NOVEMB ER25 1972 (SEE [1973] 91ITR (ST.)1), COULD HAVE NO APPLICATION IN THE FACE OF THE CLEAR POSITION IN LA W.HENCE, THE REFERENCE TO THE DEPARTMENTAL VALUATIO N OFFICER BY THE ASSESSING OFFICER WAS NOT SUSTAINABL E IN VIEW OF SECTION 55A(A)(II). FROM THE ABOVE,IT IS CLEAR THAT REFERENCE TO THE VO CAN BE MADE ONLY WHEN VALUE ADOPTED BY THE ASSESSEE IS LESS THAN THE FAIR MARKET VALUE.WE FIND THAT FAA HAD HELD THAT REFERENCE BY THE AO TO THE VO WAS AGAINST THE PROVISIONS OF LAW. IF HE WAS OF THE OPINION THAT REFERENCE MADE BY THE AO WAS CONTRARY TO THE PROVISIONS OF ACT,HE SHOULD NOT HAVE REFERRED TO THE VALUATION REPORT OF THE VO AND SHOULD NOT HAVE ADOPTED FAIR MARKET VALUE AS INDICATED BY THE VO.WE ARE NOT ABLE TO ENDORSE HIS VIEWS, THEREFORE, GROUND NO. 1 TO 4 ARE DECIDED IN FAVOUR OF THE ASSESSEE. GROUND NO.5 IS ABOUT CHARGING OF INTEREST U/S. 234 AND 234B OF THE ACT, WE FIND THAT ASSESSEE HAD TAKEN SPECIFIC GROUND ABOUT CHARGING OF INTEREST OF RS. 1.54 AND 2.54 LACS RESPECTIVELY U/S. 234A AND 234B OF THE ACT.WE FIND THAT WHILE DECIDING THE APPEAL, FAA HAS NOT DECIDED THE ISSUE, THEREFORE, IN THE INTEREST OF JUSTICE WE RESTORE BA CK THE ISSUE TO THE FILE OF THE FAA FOR FRESH ADJUDICATION. HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO. 5 IS DECIDED IN FAVOUR OF THE ASSESSEE IN PART. AS A RESULT,APPEAL FILE D BY THE ASSESSEE STANDS PARTLY ALLOWED. 1 2 '1* 3 4 /*5 6* ( * 78 . ORDER PRONOUNCED IN TH E OPEN COURT ON 19 TH FEBRUARY, 2014. / ( ,-# 9 19 :+ , 2014 - ( . . SD/- SD/- ( . . . B.R.MITTAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, ;' /DATE: 19.02.2014 4 ITA NO.1470/MUM/2012 MUKESH BHAWARLAL SHARMA SK / / / / ( (( ( &*< &*< &*< &*< = <#* = <#* = <#* = <#* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ > ? , 4. THE CONCERNED CIT / > ? 5. DR B BENCH, ITAT, MUMBAI / <@. &*' , . . . 6. GUARD FILE/ . : . '<* &* //TRUE COPY// /' / BY ORDER, A / 7 DY./ASST. REGISTRAR , /ITAT, MUMBAI.