R.MEENAKSHI, MUMBAI V. DCIT (OSD)-II,C.R.-7, MUMBAI

ITA 1574/MUM/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1119 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 17-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Fair market value
• Section: 271(1)(c); 50C; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1574/MUM/2015 (ASSESSMENT YEAR:2009-10) SMT.R. MEENAKSHI FLAT NO. 132, 6-A, KALPATARU ESTATE, POONAM NAGAR OFF. JVL ROAD, ANDHERI (E) MUMBAI 400093 VS. DCIT (OSD) - II CENTRAL CIRCLE -7 MUMBAI PAN AADPR8075K APPELLANT RESPONDENT APPELLANT BY: SHRI VIMAL PUNMIYA RESPONDENT BY: SHRI S.K. BEPARI DATE OF HEARING: 25.09.2018 DATE OF PRONOUNCEMENT: 30.11.2018 O R D E R PER SAKTIJIT DEY, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-52, MUMBAI DAT ED 31.12.2014AND IT RELATES TO A.Y. 2009-10. 2. THE ISSUE ARISING FOR CONSIDERATION IS IN RELATION TO COMPUTATION OF LONG TERM CAPITAL GAIN BY THE ASSESSING OFFICER (AO ) AT ` 26,10,029/- AS AGAINST ` 3,49,723/- DECLARED BY THE ASSESSEE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN I NDIVIDUAL, FILED HER RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR O N 30.03.201 DECLARING INTEREST INCOME OF ` 1,668/- AND LONG TERM CAPITAL GAIN FROM SALE OF LAND AT ` 3,49,723/-. DURING THE ASSESSMENT PROCEEDINGS AO WH ILE EXAMINING THE SALE DEED DATED 20.02.2009 NOTICED TH AT, THOUGH, IN THE SALE DEED THE SALE CONSIDERATION WAS SHOWN AT ` 9,75,000/-, HOWEVER, THE REGISTERING AUTHORITY HAS DETERMINED THE FAIR MARKE T VALUE OF THE PROPERTY AT ` 30,00,000/- FOR STAMP DUTY PURPOSES. THUS, INVOKING THE PROVISIONS OF SECTION 50C OF THE INCOME TAX ACT, 1961 (HEREINAFTE R 'THE ACT') THE AO ITA NO. 1574/MUM/2015 SMT.R. MEENAKSHI 2 ADOPTED ` 30,00,000/- AS DEEMED SALE CONSIDERATION RECEIVED B Y THE ASSESSEE AND AFTER ALLOWING DEDUCTION TOWARDS COST OF TRANSFER AND INDEXED COST OF ACQUISITION DETERMINED THE LONG TERM CAPITA L GAIN AT ` 26,08,361/- AND ADDED BACK TO THE INCOME OF THE ASSESSEE. WHILE DOING SO HE ALSO DISALLOWED ASSESSEES CLAIM OF COST OF IMPROVEMENT. BEING AGGRIEVED WITH THE ADDITION MADE BY THE AO ON ACCOUNT OFLONG TERM CAPITAL GAIN THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) . 4. DURING THE APPELLATE PROCEEDINGS THE LEARNED CIT(A) HAVING NOTICED THAT THE AO HAS ADOPTED THE VALUE DETERMINED BY THE REGISTERED VALUER WITHOUT REFERRING THE VALUATION OF THE PROPERTY TO THE DEPARTMENTAL VALUATION OFFICER(DVO) DIRECTED THE AO TO REFER THE MATTER TO THE DVO FOR DETERMINING THE MARKET VALUE OF THE PROPERTY. HOWEV ER, AS OBSERVED BY THE LEARNED CIT(A), THE DVO EXPRESSES HIS INABILITY TO DETERMINE THE VALUE OF THE PROPERTY SOLD BY THE ASSESSEE POINTING OUT LACK OF DETAILS BEING FURNISHED BY THE ASSESSEE WITH REGARD TO THE LOCATI ON OF THE PROPERTY AND OTHER RELATED ISSUES. THUS, HE PROCEEDED TO DECIDE THE ISSUE KEEPING IN VIEW THE SUBMISSIONS MADE BY THE ASSESSEE. BEFORE T HE CIT(A) IT WAS SUBMITTED BY THE ASSESSEE THAT SHE HAS ENTERED INTO AN AGREEMENT OF SALE WITH ONE SMT. VALSAMMA ABRAHAM IN THE YEAR 2006-07 FOR SALE OF THE PROPERTY FOR A TOTAL SALE CONSIDERATION OF ` 9,75,000/-. IT WAS SUBMITTED THAT IN PURSUANCE OF THE SALE AGREEMENT THE ASSESSE E HAS RECEIVED ADVANCE OF ` 1,50,000/-. SUBSEQUENTLY, THE INTENDING BUYER SHOWE D HER LACK OF INTEREST IN PURCHASING THE PROPERTY ALLEGING ENCROA CHMENT AND OTHER ISSUES. THUS, THE ASSESSEE APPROACHED HER TO FIND O UT ANOTHER BUYER WHO CAN BUY THE PROPERTY. IT WAS SUBMITTED, SUBSEQUENTL Y THE ORIGINAL BUYER BROUGHT THE PERSON WHO ACTUALLY PURCHASED THE PROPE RTY FROM THE ASSESSEE AND A MEMORANDUM OF UNDERSTANDING WAS EXECUTED BETW EEN THE SUBSEQUENT BUYER AND THE ASSESSEE WHEREIN SMT. VALS AMMA ABRAHAM WAS ALSO A CONSENTING PARTY. AS PER THE SAID MEMORANDUM OF UNDERSTANDING THE PROPERTY WAS TO BE SOLD AT THE ORIGINAL SALE CO NSIDERATION OF ` 9,75,000/- AND OUT OF THE SAID SALE CONSIDERATION A N AMOUNT OF ` 1,50,000/- WAS TO BE REFUNDED BACK TO SMT. VALSAMMA ABRAHAM WITH WHOM ASSESSEE HAD ORIGINALLY ENTERED INTO AN AGREEM ENT FOR SALE. THUS, IT ITA NO. 1574/MUM/2015 SMT.R. MEENAKSHI 3 WAS SUBMITTED, THE FAIR MARKET VALUE OF THE PROPERT Y HAS TO BE DETERMINED AT THE RATE APPLICABLE TO FINANCIAL YEAR 2006-07. I T WAS SUBMITTED, THE FAIR MARKET VALUE DETERMINED BY THE STAMP VALUATION AUTH ORITY ON THE DATE OF REGISTRATION OF THE SALE DEED, I.E. ON 12.02.2009, THEREFORE, CANNOT BE ADOPTED FOR THE PURPOSE OF COMPUTING CAPITAL GAIN. AFTER CONSIDERING THE AFORESAID SUBMISSIONS OF THE ASSESSEE THE LEARNED C IT(A), HOWEVER, WAS NOT CONVINCED. HE OBSERVED THAT THE ASSESSEE HAS SOLD T HE PROPERTY BY VIRTUE OF SALE DEED REGISTERED ON 12,02.2009 AND THE FAIR MAR KET VALUE ADOPTED BY THE REGISTERED VALUER ON THE SAID DATE HAS TO BE AD OPTED AS THE VALUE OF THE PROPERTY FOR THE PURPOSE OF COMPUTATION OF CAPI TAL GAIN AS PER SECTION 50C(1) OF THE ACT. ACCORDINGLY, HE UPHELD THE DECIS ION OF THE AO. 5. THE LEARNED AUTHORISED REPRESENTATIVE (A.R.) REITER ATING THE STAND TAKEN BEFORE THE FIRST APPELLATE AUTHORITY SUBMITTE D THAT THE SALE CONSIDERATION FOR THE PROPERTY WAS FIXED AS PER THE AGREEMENT OF SALE EXECUTED BETWEEN THE ASSESSEE AND SMT. VALSAMMA ABR AHAM IN JULY 2006. THEREFORE, THE FAIR MARKET VALUE OF THE PROPE RTY HAS TO BE DETERMINED AS PER THE RATE APPLICABLE IN JULY, 2006. HE SUBMIT TED, SUBSEQUENT SALE DEED EXECUTED BETWEEN THE ASSESSEE AND THE ULTIMATE BUYER OF THE PROPERTY ON 12.02.2009 IS ONLY FOR DISCHARGING THE CONTRACTU AL LIABILITY BETWEEN THE ASSESSEE AND SMT. VALSAMMA ABRAHAM. THE LEARNED A.R . SUBMITTED, EVEN AS PER THE READY RECKONER RATE FOR STAMP DUTY PURPO SE THE FAIR MARKET VALUE OF THE PROPERTY IN 2006 WOULD BE ` 10,35,000/-. THUS, HE SUBMITTED, IN THE WORST CASE THE MARKET VALUE OF THE PROPERTY SHOULD BE DETERMINED BY APPLYING READY RECKONER RATE APPLICABLE TO THE YEAR 2006. IN SUPPORT OF HIS CONTENTION THE LEARNED A.R. RELIED UPON THE FOL LOWING DECISIONS: - I) MOHD. IRMAN BAIGVS. ITO ITA NO. 1943/HYD/2014 DATED 27.11.2015 II) LAHIRI PROMOTERS VS. ACIT ITA NO. 12/VIZAG/2009 DAT ED 22.06.2010 III) ITO VS. MODIPON LTD. ITA O. 2049/DEL/2009 DATED 09. 01.2015 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE (D.R.) STRO NGLY RELIED UPON THE OBSERVATIONS OF THE CIT(A). ITA NO. 1574/MUM/2015 SMT.R. MEENAKSHI 4 7. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UNDISPUTEDLY, THOUGH, IN THE REGISTERED SAL E DEED EXECUTED ON 12.02.2009 THE SALE CONSIDERATION HAS BEEN SHOWN AT ` 9,75,000/-,HOWEVER, WHILE DETERMINING THE FAIR MARKET VALUE OF THE PROP ERTY FOR STAMP DUTY PURPOSES THE REGISTERING AUTHORITY HAS VALUED IT AT ` 30,00,000/-. THEREFORE, AS PER THE DEEMING PROVISIONS OF SECTION 50C(1) OF THE ACT THE FAIR MARKET VALUE DETERMINED BY THE STAMP DUTY AUTH ORITY HAS TO BE SUBSTITUTED FOR THE SALE CONSIDERATION SHOWN IN THE SALE DEED. HOWEVER, IT IS THE SUBMISSIONS OF THE ASSESSEE BEFORE ME THAT S INCE THE ASSESSEE HAS ENTERED INTO AN AGREEMENT FOR SALE OF THE PROPERTY IN THE YEAR 2006, THE SALE CONSIDERATION AS PER THE SAID AGREEMENT OF SAL E WAS THE CONSIDERATION FOR WHICH THE PROPERTY WAS SOLD ULTIMATELY. THEREFO RE, EVEN IF THE STAMP DUTY VALUATION HAS TO BE ADOPTED, IT SHOULD BE AT T HE RATE APPLICABLE FOR JULY, 2006. IN THIS CONTEXT THE ASSESSEE HAS REFERR ED TO THE UNREGISTERED AGREEMENT OF SALE EXECUTED ON 19 TH JULY, 2006 WITH SMT. VALSAMMA ABRAHAM AND THE MEMORANDUM OF UNDERSTANDING BETWEEN THE ASSESSEE AND SHRI C. SHAMSUDDIN, THE ULTIMATE BUYER AND SMT. VALSAMMA ABRAHAM EXECUTED ON 18 TH JANUARY, 2007. AS REGARDS THE AGREEMENT OF SALE BETWEEN THE ASSESSEE AND SMT. VALSAMMA ABRAHAM , NOT ONLY IT IS AN UNREGISTERED DOCUMENT BUT IT IS ALSO A FACT ON RECO RD THAT THIS AGREEMENT HAS NOT BEEN ACTED UPON SINCE THE PROPERTY WAS ULTI MATELY SOLD IN THE YEAR 2009 TO ANOTHER BUYER, VIZ. SHRI C. SHAMUSUDDIN. AS REGARDS THE MEMORANDUM OF UNDERSTANDING SUPPOSEDLY EXECUTED ON 18 TH JAUNARY, 2007, MUCH RELIANCE CANNOT BE PLACEDON THIS DOCUMEN T NOT ONLY BECAUSE IT IS AN UNREGISTERED DOCUMENT BUT IT HAS NO SANCTI TY IN THE EYES OF LAW. MOREOVER, THE REGISTERED SALE DEED EXECUTED BETWEEN THE ASSESSEE AND THE ULTIMATE BUYER ON 12 TH FEBRUARY, 2009 NOWHERE REFERS EITHER TO THE AGREEMENT OF SALE BETWEEN THE ASSESSEE AND SMT. VAL SAMMA ABRAHAM OR THE MEMORANDUM OF UNDERSTANDING. FURTHER, SMT. VALS AMMA ABRAHAM HAS NOT BEEN SHOWN AS A CONSENTING PARTY IN THE FIN AL SALE DEED. CLAUSE 2 OF THE REGISTERED SALE DEED DESCRIBING THE MODE AND MANNER OF PAYMENT OF THE SALE CONSIDERATION NOWHERE REFERS TO ANY PAYMEN T/ADVANCE RECEIVED FROM SMT. VALSAMMA ABRAHAM. IN THESE CIRCUMSTANCES, ASSESSEES CLAIM ITA NO. 1574/MUM/2015 SMT.R. MEENAKSHI 5 THAT THE FINAL SALE DEED WITH SHRI C. SHAMUSUDDIN W AS TO GIVE EFFECT TO THE AGREEMENT OF SALE EXECUTED WITH SMT. VALSAMMA ABRAH AM IS UNACCEPTABLE. FOR THE VERY SAME REASON ASSESSEES CLAIM THAT STAM P DUTY VALUATION AS APPLICABLE TO JULY, 2006 SHOULD BE ADOPTED FOR DETE RMINING THE DEEMED SALE CONSIDERATION CANNOT BE ACCEPTED. HAVING HELD SO, IT IS RELEVANT AND NECESSARY TO OBSERVE, THOUGH, AS PER SUB-SECTION (1 ) OF SECTION 50C OF THE ACT THE AO IS EMPOWERED TO ADOPT THE FAIR MARKET VA LUE DETERMINED BY THE STAMP DUTY AUTHORITY AS DEEMED SALE CONSIDERATION, HOWEVER, SUB-SECTION (2) OF SECTION 50C OF THE ACT ENJOINS A DUTY UPON T HE AO TO REFER THE VALUATION TO THE DEPARTMENTAL VALUATION OFFICER TO ASCERTAIN THE FAIR MARKET VALUE OF THE PROPERTY. IN FACT, THE LEARNED CIT(A), AT THE REQUEST OF THE ASSESSEE, HAD DIRECTED THE AO TO MAKE A REFEREN CE TO THE DVO FOR DETERMINING THE FAIR MARKET VALUE OF THE PROPERTY. HOWEVER, AS IT APPEARS, THE DVO HAS EXPRESSED HIS INABILITY TO DETERMINE TH E VALUE OF THE PROPERTY ON THE REASONING OF LACK OF INFORMATION SUPPLIED BY THE ASSESSEE WHICH PREVENTED THE DVO FROM LOCATING THE PROPERTY. I DO NOT FIND MUCH SUBSTANCE IN THE AFORESAIDREASONING OF THE DVO.WHEN THE DESCRIPTION OF THE PROPERTY SOLD HAS BEEN WELL DEFINED IN THE REGI STERED SALE DEED ANDMOREOVER, WHEN THE DETAILS OF THE PURCHASER IS A LSO AVAILABLE, IT IS SURPRISING THAT THE DVO FINDS IT DIFFICULT TO LOCAT E THE PROPERTY SOLD. IN ANY CASE OF THE MATTER, IT WOULD NOT HAVE BEEN DIFFICUL T ON THE PART OF THE DVO TO ASCERTAIN THE FAIR MARKET VALUE OF THE PROPERTY BY COLLATING DATA RELATING TO SALE OF NEARBY PROPERTIES. AS IT APPEARS, THE DV O HAS SIMPLY WASHED OFF HIS HANDS WITHOUT MAKING ANY EFFORT TO FIND OUT/ASC ERTAIN THE FAIR MARKET VALUE OF THE PROPERTY SHOWN. IN VIEW OF THE AFORESA ID, I AM INCLINED TO RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRE CTION TO GET THE FAIR MARKET VALUE OF THE PROPERTY DETERMINED BY THE DVO AND THE REAFTER COMPUTE THE LONG TERM CAPITAL GAIN IN ACCORDANCE WITH THE PROVI SIONS OF SECTION 50C OF THE ACT. WHILE DOING SO THE AO MUST AFFORD REASONAB LE OPPORTUNITY OF HEARING TO THE ASSESSEE. AS REGARDS THE DECISION RE LIED UPON BY THE LEARNED A.R., ON CAREFULLY ANALYSING THEM, I AM OF THE VIEW THAT THE ASSESSEES CASE BEING FACTUALLY DISTINGUISHABLE, THE DECISIONS CITE D ARE NOT APPLICABLE. GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATIS TICAL PURPOSES. ITA NO. 1574/MUM/2015 SMT.R. MEENAKSHI 6 8. IN GROUND NO. 2 THE ASSESSEE HAS CHALLENGED THE DIS ALLOWANCE OF CERTAIN EXPENDITURES CLAIMED TOWARDS COST OF IMPROV EMENT. AS CAN BE SEEN FROM THE ORDERS OF THE DEPARTMENT AUTHORITIES, ASSE SSEES CLAIM THAT SHE HAS INCURRED CERTAIN COST FOR IMPROVEMENT OF THE PR OPERTY WAS DISALLOWED DUE TO LACK OF PROPER EVIDENCE. SINCE, I HAVE RESTO RED THE ISSUE RELATING TO DETERMINATION OF FAIR MARKET VALUE OF THE PROPERTY TO THE AO FOR FRESH ADJUDICATION, IN ALL FAIRNESS, I RESTORE THIS ISSUE ALSO TO THE AO FOR PROVIDING AN OPPORTUNITY TO THE ASSESSEE TO ESTABLISH HER CLA IM THROUGH PROPER EVIDENCES. THIS GROUND IS ALSO ALLOWED FOR STATISTI CAL PURPOSES. 9. IN GROUND NO. 3 THE ASSESSEE HAS CHALLENGED LEVY OF INTEREST UNDER SECTIONS 234A, 234B AND 234C OF THE ACT AND IN GROU ND NO. 4 THE ASSESSEE HAS CHALLENGED INITIATION OF PROCEEDINGS U NDER SECTION 271(1)(C) OF THE ACT. THESE TWO GROUNDS BEING CONSEQUENTIAL AND PREMATURE AT THIS STAGE, ARE NOT REQUIRED TO BE ADJUDICATED UPON. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2018. SD/ - (SAKTIJIT DEY) JUDICIALMEMBER MUMBAI, DATED: 30 TH NOVEMBER, 2018 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -52, MUMBAI 4. THE CIT- CENTRAL-II, MUMBAI 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.