The DCIT, Circle-5, Baroda V. Shri Ashokbhai Chhotalal Dalwadi, Baroda

ITA 16/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60326 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-05-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 03-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARISING OUT OF
• Keywords: Business income; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT ME MBER I.T.A. NO.16/AHD/2012(BY DEPARTMENT) A. Y. 2008-09 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5, 5 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA-390 007 APPELLANT VS. SHRI ASHOKBHAI CHHOTALAL BALWADI 38, SONALI SOCIETY, NR. JAY SANTOSHI NAGAR, KARELLBAUG, VADODARA-390 018 PAN-ACOPD0392G RESPONDENT WITH C.O. NO.59/AHD/2012(BY ASSESSEE) (ARISING OUT OF I.T.A. NO.16/AHD/2012) SHRI ASHOKBHAI CHHOTALAL BALWADI CROSS OBJECTOR VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5, 5 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA RESPONDENT DEPARTMENT BY : SHRI VINOD TANWANI, SR. D.R. ASSESSEE BY : NONE DATE OF HEARING : 08.05.2012 DATE OF PRONOUNCEMENT : 11.05.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER ITA NO.16/AHD/2012 , A.Y. 2008-09 WITH C.O. NO.59/AHD/2012 2 THIS REVENUES APPEAL AND C.O. OF THE ASSESSEE HAVE BEEN FILED AGAINST THE ORDER OF AGAINST THE ORDER OF LD. CIT(A )-V, BARODA DATED 20.10.2011 PASSED IN APPEAL NO.CAB/(A)V-221/10-11. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE AT THE TIME OF HEARING, HOWEVER, WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ARE ON RECORD, THEREFORE, WE PROCEEDED TO DECIDE THIS APPEAL AFTER TAKING INTO C ONSIDERATION THE WRITTEN SUBMISSIONS OF THE ASSESSEE AND HEARING LD. D.R. 3. THE REVENUE IN ITS APPEAL HAS TAKEN FOLLOWING G ROUND:- THE LD. CIT(A) ERRED IN LAW IN DELETING THE ADDITI ON OF RS.12,73,200/- ON ACCOUNT OF PROFIT ON SALE OF LAND ON THE BASIS OF THE VALUATION REPORT OF STAMP VALUATION AUTHORITY. 4. THE A.O., WHILE MAKING ADDITION OF RS.12,73,200 /- HAS OBSERVED IN HIS ASSESSMENT ORDER AS UNDER:- THE ASSESSEE IS ENGAGED WITH THE BUSINESS TRADING IN LAND. THE ASSESSEE HAS EARNED INCOME FROM PROFIT AND GAIN S OF BUSINESS OR PROFESSION, INCOME FROM CAPITAL GAIN, INCOME FROM O THER SOURCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEES AR SHRI MADHUSUDAN PATEL APPEARED FOR HEARING ON 13.12.2010 AND THE AS SESSEE WAS SHOW CAUSED VIDE ORDER SHEET ENTRY DATED 13.12.2010 TO R EPLY AS TO WHY IN THE CASE OF SURVEY NO.29,T.P. NO.5 FINAL PLOT NO.323 CI TY SURVEY TIKA NO.1/A/1 AND AGRICULTURAL LAND-VIBHAG-3, MOJE GAM B ILLLBLOCK SURVEY NO.8/A & 8/B WHEREIN THE VALUATION WAS ARRIVED THRO UGH STAMP VALUATION OF AUTHORITY SHOULD NOT BE CONSIDERED AS THE CORREC T VALUATION OF THE PROPERTY, BEING SOLD CONSIDERING THE REASONABLENESS OF THE ESTIMATION OF PROPERTY. IN THE CASE OF THE ASSESSEE HAD SOLD ABO VE MENTIONED LAND AT RS.8,10,000/- AND RS.11,01,000/- RESPECTIVELY WHERE AS THE STAMP VALUATION AUTHORITY (SUB REGISTRAR HAS VALUE ABOVE MENTIONED PROPERTY AS RS.18,03,700/- AND RS.13,80,500/- RESPECTIVELY) CON SIDERING THE REASONABLENESS AND THE SUB REGISTRAR BEING THE APPR OPRIATE AUTHORITY IN VALUING THE LAND AS ALL THE LANDS WHICH ARE PURCHAS ED OR SOLD HAVE TO BE REGISTERED WITH THE SUB REGISTRAR OFFICE, HE WAS AS KED TO SHOW CAUSE AS TO WHY THE VALUATION ARRIVED AS FROM SUB REGISTRAR SHO ULD NOT BE CONSIDERED AS THE SALE VALUE OF THE PROPERTY AS ON THE DATE OF SALE. THE ASSESSEE REPLIED VIDE LETTER DATED 15.12.2010 W HERE HE STATED THE TRANSACTION RELATED PURCHASE AND SALE WE RE RECORDED ON REGULAR BOOKS OF ACCOUNTS MENTIONED AND SUPPORTED BY PROPER DOCUMENTS. ITA NO.16/AHD/2012 , A.Y. 2008-09 WITH C.O. NO.59/AHD/2012 3 PAYMENTS WERE RECEIVED THROUGH BANKING CHANNELS AND THE ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS NECESSARY FOR ASSE SSMENT. HE FURTHER STATED THAT THE CONFIRMATIONS ARE RECEIVED FROM THE PURCHASER OF LAND REGARDING THE AMOUNT AT WHICH THE LAND HAVE BEEN PU RCHASED BY THEM. HENCE HE STATED THAT THE TRANSACTIONS ARE PROVED GE NUINE FINALLY HE STAT ED THAT THE ADDITION CANNOT BE MADE ON THE BASIS OF IMAGINATION IN THE ABSENCE OF ANY MATERIAL ON ASSUMPTION OR PRESUMPTIO NS OR SURMISES OR CONJECTURES. THE ASSESSEES ARGUMENTS ARE DULY CONSIDERED AND AR E PUT ON RECORD HOWEVER, HIS SUBMISSION IS NOT ACCEPTABLE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF LAN D. IN THIS KIND OF TRANSACTION THE COMPONENT OF CASH PAYMENT AND RECEI PT IS ALWAYS PREVALENT THEREFORE THERE ARE DIFFERENCES BETWEEN D OCUMENT PRICE AND ACTUAL PRICE. THE ASSESSEE SAYS IN HIS SUBMISSION THAT PURCHASES AND SALES ARE RECORDED IN BOOKS OF ACCOUNTS AND PAYMENT HAVE BEEN RECEIVED THROUGH BANKING CHANNELS IS NOT UNDER QUESTION, HOW EVER, THE ONLY THING WHICH WAS INQUIRED AND ARRIVED AT AFTER REFERRING T HE CASE TO THE STAMP VALUATION AUTHORITY IS THE SUPPRESSED RECEIPTS OUT OF THE SALE OF THE LAND WHICH THE ASSESSEE DID NOT DISCLOSE IN HIS BOOKS OF ACCOUNT. THEREFORE, WHAT WAS RECORDED IN THE BOOKS OF ACCOUNT WAS ONLY RESTRICTED TO THE AMOUNT WHICH WAS RECEIVED THROUGH BANKING CHANNELS. THE COMPONENT WHICH WAS RECEIVED BY OTHER MEANS APART FROM BANKIN G CHANNELS WAS NOT DISCLOSED IN ASSESSEES BOOKS OF ACCOUNT. IN ADDIT ION IN ORDER TO ARRIVE AT THE CORRECT AND ACCURATE AMOUNT OF INCOME IT IS IMP ORTANT TO ANALYZE THE SITUATIONS RELATED TO THE TRANSACTIONS WHICH HAVE R ESULTED IN THE KIND OF INCOME TO THE ASSESSEE. THEREFORE THE MARKET REALI TIES HAVE TO BE CONSIDERED BEFORE DETERMINING THE AMOUNT OF INCOME I.E. IN THE CASE OF ASSESSEE THE VALUE OF THE LAND IS DETERMINED AFTER CONSIDERING ITS LOCATION, SIZE, NATURE OF ENCUMBRANCES, NATURE OF PROPERTY WH ETHER DISPUTED OR NOT, AGRICULTURAL OR NON AGRICULTURAL ETC. JANTRY RATE I S ARRIVED AFTER CONSIDERING THE LOCATION OF THE PROPERTY, COMPARABLE PROPERTY R ATES, NATURE OF PROPERTY AND THE VALUATION OF THE AREA AS PER MUNIC IPAL RECORDS VIS--VIS PREVIOUS YEARS. EACH AREA IS GIVEN A SEPARATE VALU ATION ON THE BASIS OF ITS DISTINCT IDENTITY AND ITS LOCATION. THEREFORE THE VALUATION AS PER STAMP VALUATION AUTHORITY IS HIGHLY RELIABLE, VALID EMPIR ICAL AND NORMATIVE. FURTHER IT IS CARRIED BY RECOGNIZED GOVERNMENT AGEN CIES WHO ARE SPECIALISTS IN THE FIELD OF VALUATION OF LAND. MOR EOVER THE ASSESSEE HAS NEVER QUESTIONED THE CORRECTNESS OF VALUE ARRIVED A S A RESULT OF REFERRING THE SALE TRANSACTION TO STAMP VALUATION AUTHORITY. HENCE, THE ADDITION WHICH IS TO BE MADE IN THE CASE OF THE ASSESSEE IS NOT BASED ON IMAGINATION OR CONJECTURES BUT IT IS BASED ON CONCR ETE GROUND RELYING ON THE VALUATION OF PROPERTY PROVIDED BY STAMP VALUATI ON AUTHORITY. IN ADDITION TO THIS THE CASE WAS REFERRED TO THE STAMP VALUATION OFFICER ONLY TO ARRIVE AT THE CORRECT MARKET VALUE OF THE PROPER TY ON THE DATE OF SALE. THEREFORE IN ORDER TO ASCERTAIN THE PROFIT MARGIN T HE CASE OF A BUSINESS IT IS PERTINENT TO REACH THE CORRECT VALUATION OF THE SALE TRANSACTION. WHEN PURCHASE IS VALUED AT COST AND CLOSING STOCK IS VAL UED AT MARKET PRICE OR ITA NO.16/AHD/2012 , A.Y. 2008-09 WITH C.O. NO.59/AHD/2012 4 THE COST PRICE AS THE CASE MAY BE (IN THE CASE OF T HE ASSESSEE IT IS COST PRICE) THEN THE SALE SHOULD BE CONSIDERED AT ITS FA IR MARKET VALUE BECAUSE SALE CANNOT BE DETERMINED AT COST PRICE OTHERWISE T HERE WOULD BE NO PROFIT IN THE CASE OF BUSINESS. THE SALE VALUE CANNOT BE FIXED AT THE DISCRETION OF THE ASSESSEE IN COLLUSION WITH THE BUYER BY NEGLECT ING THE FAIR MARKET VALUE IN ORDER TO REDUCE HIS PROFIT MARGIN. THEREF ORE, IN ORDER TO PLUG THIS LEAKAGE AND TO ARRIVE AT CORRECT VALUE OF THE PROPE RTY, THE CASE WAS REFERRED TO THE STAMP VALUATION AUTHORITY. AS PER THE REPORT PROVIDED BY THE STAMP VALUATION AUTHORITY FOLLOWING DIFFERENCES WERE EMERGED IN THE SALE PRICE SHOWN BY THE ASSESSEE AND THE FAIR MARKE T VALUE ON THE DATE OF SALE. THE DETAILS REGARDING THE DIFFERENCE IS REPR ODUCED BY THE TABLE: HENCE THE TOTAL DIFFERENCE OF RS.12,73,200/- IS ADD ED BACK TO THE ASSESSEES TOTAL INCOME. AGGRIEVED BY THIS ORDER THE ASSESSEE WENT IN APPEA L BEFORE THE CIT(A). SR. NO. DESCRIPTION OF PROPERTY DATE OF SALE SALE PRICE AS PER SALE DEED RS. REGN. NO. VALUE OF THE PROPERTY AS PER VALUATION REPORTS RS. DIFFERENCE 1 REG.DIST.VADODARA SUB. DISTRICT VADODARA, VADODARA KASBA, TAL. VADODARA REVENUE SURVEY NO.29 TP NO.5 FINAL PLOT NO.323, CITY SURVEY TIKA NO.1/A/1 30.03.2008 8,10,000 SR.NO.258 1 OF 2008 1803700 993700 2. AGRICULTURAL LAND VADODARA SUB DISTRICT AKOTA VADODARA VIBHAG.3, MOJE GAM BILL BLOCK SURVEY NO.8A & 8B 05.02.2008 11,01,000 SR.NO.110 4 OF 2008 13,80,500 2,79,500 TOTAL 12,73,200 ITA NO.16/AHD/2012 , A.Y. 2008-09 WITH C.O. NO.59/AHD/2012 5 5. THE LD. CIT(A), AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE WHICH HAVE BEEN REPRODUCED BY LD. CIT(A) F ROM PAGES 6 TO 10 OF HIS ORDER, DELETED THIS ADDITION. AGGRIEVED BY THIS OR DER OF LD. CIT(A) NOW THE REVENUE IS IN APPEAL. 6. AT THE TIME OF HEARING LD. D.R. PLACED RELIANCE ON THE ORDER PASSED BY THE A.O. 7. AFTER HEARING LD. D.R. AND TAKING INTO CONSIDER ATION THE WRITTEN SUBMISSIONS OF THE ASSESSEE AND PERUSING THE RECORD , WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING IN LAND WHICH ARE HELD BY HIM AS A BUSINESS ASSETS. DURING THE YEAR UNDER APPEAL THE ASSESSEE SOLD TWO PIECES OF LAND AT RS.8,10,000/- AND RS.11,01,000/-. THE A.O., INVOKING THE PROVISIONS OF SECTION 50 C OBTAINED INFORMATION FROM THE LAND VAL UATION AUTHORITY AND ON THE BASIS OF SUB-REGISTRARS REPORT ARRIVED AT THE VALUE OF THESE PROPERTIES AT RS.18,37,000/- AND RS.13,18,000/- RESPECTIVELY. AF TER GIVING SHOW CAUSE TO THE ASSESSEE DIFFERENCE IN VALUATION OF THESE TWO PROPE RTIES AMOUNTING TO RS.12,73,200/- WAS ADDED BACK TO THE ASSESSEES TOT AL INCOME. THE LD. CIT(A) HAS DELETED THIS ADDITION BY HOLDING THAT THE PROVI SIONS OF SECTION 50 C HAVE NO APPLICATION IN COMPUTATION OF BUSINESS INCOME. WE FURTHER FIND THAT THE A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT ACTUAL CONSIDERATION RECEIVED BY THE ASSESSEE WAS MORE THAN THE CONSIDER ATION RECORDED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS. THE FACT THAT T HE VALUATION ADOPTED BY THE STAMP VALUATION AUTHORITY WAS MORE THAN THE SALES C ONSIDERATION RECORDED IN THE BOOKS OF ACCOUNTS MAY PROVOKE THE A.O. TO START THE INVESTIGATION BUT IS NOT SUFFICIENT TO HOLD THAT ACTUAL CONSIDERATION RECEIV ED BY THE ASSESSEE WAS MORE ITA NO.16/AHD/2012 , A.Y. 2008-09 WITH C.O. NO.59/AHD/2012 6 THAN THE CONSIDERATION RECORDED IN THE BOOKS OF ACC OUNTS. THE SAME CAN BE DONE ONLY AFTER BRINGING SOME RELEVANT MATERIAL ON RECORD. IN THIS CASE THE A.O. HAS NOT BROUGHT ANY SUCH MATERIAL ON RECORD. THERE FORE, IN OUR CONSIDERED OPINION, LD. CIT(A) HAS RIGHTLY DELETED THIS ADDITI ON AND THE ORDER PASSED BY HIM IS HEREBY UPHELD. 8. IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. 9. THE C.O. FILED BY THE ASSESSEE IN SUPPORT OF AN ORDER PASSED BY LD. CIT(A) HAS THEREFORE BECOME INFRUCTUOUS AND THE SAM E IS ACCORDINGLY DISMISSED AS INFRUCTUOUS. 10. IN THE RESULT, THE REVENUES APPEAL AS WELL AS THE CO.O. OF THE ASSESSEE BOTH ARE DISMISSED. . SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER JU DICIAL MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. - 11/05/2012 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. !' / CONCERNED CIT 4. !' - / CIT (A) 5. #$% , & , / DR, ITAT, AHMEDABAD 6. %'( )* / GUARD FILE. BY ORDER/ , + / , & ,