ADIT, New Delhi V. M/s Ranjay Gulati, New Delhi

ITA 1678/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3807 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 07-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 06-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KISHORE
• Assessee Lawyers: AVDHESH BANSAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Opportunity of being heard; Principle of natural justice; Additional evidence; Cost of acquisition; Fair market value; Valuation report; Benefit of exemption
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH F DELHI ] BEFORE SHRI RAJPAL YADAV, JM AND SHRI K. D. RAN JAN, AM I. T. APPEAL NO. 1678 (DEL) OF 2011 ASSESSMENT YEAR : 2007-08. ASSTT. DIRECTOR OF INCOME-TAX, SHRI RANJAY GULATI, CIRCLE : 1 (2); INTL. TAXATION, VS. C2/53, SAFDARJUNG DEV. AREA, N E W D E L H I. N E W D E L H I 110 016. P A N / G I R NO. ALA PG 9873 C. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI AJAY VOHRA, ADV.; & SHRI AVDHESH BANSAL, A. R.; DEPARTMENT BY : SHRI B. KISHORE, SR. D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 7-08 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XXII, NEW DELHI. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITIONS AND HOLDING THAT TH E REPORT OF DVO IS UNJUSTIFIED. 3. THE ONLY ISSUE FOR OUR CONSIDERATION RELATES TO DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF DVOS REPORT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE, A 2 I. T. APPEAL NO. 1678 (DEL) OF 2011 NON-RESIDENT DURING THE YEAR UNDER CONSIDERATION HA D SOLD AN INDUSTRIAL PLOT AT NARAINA INDL. AREA, PHASE-II, WHICH WAS INHERITED BY HIM FROM HIS LATE MOTHER. THE ASSESSEES SHARE IN THE PROPERTY SOLD WAS 2/3 RD . THE ASSESSEES SHARE OF SALE CONSIDERATION OF RS .2,90,00,000/- WORKS OUT TO RS.1,93,33,333/-. OUT OF THE DECLARED CAPITAL G AINS OF RS.1,80,83,239/- THE ASSESSE HAD INVESTED RS.50 LAKHS IN REC BONDS AND RS.1,44,00,00 0/- IN A SPECIFIED CAPITAL GAIN ACCOUNT TO BE UTILIZED FOR PURCHASE OR THE CONSTRUCTION OF A RESI DENTIAL HOUSE TO AVAIL THE BENEFIT OF EXEMPTION UNDER SECTION 54-EC AND 54-F OF THE ACT. THE ASSE SSING OFFICER MADE A REFERENCE TO THE DISTT. VALUATION OFFICER (DVO) TO ASCERTAIN THE FAIR MARKE T VALUE OF THE PLOT ON THE DATE OF SALE. THE DVO ARRIVED AT A VALUATION OF RS.5,36,00,000/- AS O PPOSED TO DECLARED SALE CONSIDERATION OF RS.2,90,00,000/- OF THE WHOLE PLOT. THE ASSESSING OFFICER RECEIVED VALUATION REPORT ON 31 ST DECEMBER, 2009 AND THE ASSESSMENT WAS GETTING BARRE D BY LIMITATION ON THE SAME DAY, HE COMPLETED THE ASSESSMENT WITHOUT ALLOWING ANY OPPOR TUNITY TO THE ASSESSEE OF BEING HEARD. THE AO AFTER ALLOWING CREDIT FOR INVESTMENTS IN REC BON DS AND CAPITAL GAIN ACCOUNT, CHARGED THE AMOUNT OF RS.1,51,23,238/- UNDER THE HEAD CAPITAL G AINS. 4. BEFORE THE LD. CIT (APPEALS) THE ASSESSMENT ORDE R WAS CHALLENGED ON THE GROUND THAT THE AO HAD FINALIZED THE ASSESSMENT WITHOUT AFFORDING O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE BASIS FOR VALUATION TAKEN BY THE DVO WAS ALSO I NCORRECT. IT WAS SUBMITTED THAT THE PLOT OF THE ASSESSEE WAS SITUATED IN NARAINA INDL. AREA, PH ASE-II, NEW DELHI, WHICH IS UNDER G CATEGORY WHEREAS THE VALUE OF THE REFERENCE PLOT TAKEN FOR VALUATION PURPOSE WAS SITUATED IN OKHLA INDL. ESTATE, WHICH IS UNDER D CATEGORY FOR CIRCLE RATE PURPOSES AND MCD. THE DVO HAD APPLIED ARBITRARILY ADJUSTMENT TO THE VALUATION TAKEN SIX Y EARS PRIOR TO THE SALE OF THE PROPERTY. IT WAS ALSO SUBMITTED THAT THE DVO IN HIS REPORT HAD STATE D THAT DURING THE PERIOD FROM 18/02/2001 TO 31 ST DECEMBER, 2003, THE RATES WERE MORE OR LESS STATIC AND HENCE NO ADJUSTMENT HAD BEEN MADE FOR THIS PERIOD IN HIS REPORT. DURING THE PERIOD 1 /04/2004 TO 5/01/2007 THE DVO HAD ARBITRARILY ADDED AN INCREASE OF 1 PER CENT PER MONTH WITHOUT A NY BASIS AND ON HIS OWN PRESUMPTIONS AND SURMISES TO ARRIVED AT THE VALUE OF THE PLOT. FURT HER THE CIRCLE RATES FOR CATEGORY D WAS RS.21,800/- PER SQ. MT. AND FOR CATEGORY G WAS RS.1 3,700/- PER SQ. MT. THEREFORE, THERE WAS A DIFFERENCE OF RS.8,100/- PER SQ. MT. IN TWO CATEGOR IES. THE LD. DVO HAD NOT MADE ANY ADJUSTMENT FOR THE DIFFERENCE IN THE CATEGORY OF TH E TWO PLOTS, WHICH IS COMPLETELY INCORRECT AND 3 I. T. APPEAL NO. 1678 (DEL) OF 2011 AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. T HE LD. CIT (APPEALS) CONSIDERED THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AS THE ASSESSEE HAD NOT BEEN PROVIDED OPPORTUNITY OF BEING HEARD BY THE AO. THE LD. CIT (A) NOTED THAT THE ASSESSEE HAD SOLD PLOT ON 5/01/2007 SHORTLY BEFORE THE NOTIFICATION OF CIRCLE RATES BY THE DELHI DEVELOPME NT AUTHORITY ON 18/07/2007. AS PER THE SAID NOTIFICATION THE LAND IN NARAINA WAS PLACED IN CATE GORY G FOR WHICH CIRCLE RATE WAS PRESCRIBED AT RS.13,700/- PER SQ. MT. BY APPLYING THIS CIRCLE RA TE, THE VALUE OF PLOT OF LAND SOLD BY THE ASSESSEE WORKED OUT TO RS.2,00,98,722/-. AS AGAINST THIS TH E ASSESSEES SALE CONSIDERATION DECLARED WAS RS.2,90,00,000/-. HE FURTHER NOTED THAT THE ASSES SEE VIDE HIS LETTER DATED 18/12/2009 HAD FURNISHED COPY OF NOTIFICATION DATED 18/07/2007 TO THE DVO WITH THE WORKING OF VALUE OF LAND AS PER CIRCLE RATES. HOWEVER, THE DVO IN HIS REPORT D ATED 30/12/2009 HAD ADOPTED A BASE, A SALE INSTANCE OF PLOT OF 2,023.41 SQ. MTS. AT OKHLA INDL . ESTATE, NEW DELHI SOLD ON 18/02/2001 FOR RS.48,899/- PER SQ. MT. THE DVO HAD ADJUSTED THE L AND RATE BY AN INCREASE OF 1 PER CENT PER MONTH 1/4/2001 TO 5/1/2007 AND AN INCREASE OF 10 PE R CENT AS THE PLOT OF LAND BELONGING TO THE ASSESSEE WAS OF A SMALLER SIZE AND ARRIVED AT A VAL UE OF RS.73,133/- PER SQ. MT. AS ON 5/1/2007. THE LD. CIT (A), THEREFORE, CAME TO THE CONCLUSION THAT THE METHOD OF VALUATION WAS ARBITRARY AND UNREASONABLE. THE DVOS VALUATION REPORT WAS 2.67 T IMES THE CIRCLE RATES PRESCRIBED BY THE DDA FOR NARAINA INDL. AREA, WHICH WAS RS.27,400/-(13,70 0X2). HE ALSO NOTED THAT THERE COULD NOT BE ANY COMPARISON BETWEEN THE LAND IN NARAINA AND IN O KHLA. THE CIRCLE RATES PRESCRIBED BY THE DDA IN JULY, 2007 VARIED FROM RS.43,000/- FOR CATEG ORY A LAND TO RS.6,900/- FOR CATEGORY H LAND. THE CIRCLE RATES IN NARAINA CATEGORY G THE S ECOND LOWEST WAS RS.13,700/- AND FOR OKHLA AT CATEGORY D WAS RS.21,800/-. THE DVO HAD NOT PATENT LY MADE ANY EFFORT TO FIND OUT A COMPARABLE SALE TRANSACTION IN NARAINA INDL. AREA W HEREAS THE ASSESSEE HAD OBTAINED UNDER RTI SEVEN CERTIFIED INSTANCES OF LAND OF NARAINA INDL. AREA AND ITS NEIGHBORING AREA OF MAYAPURI INDL. AREA OF DATES OF SALE FROM APRIL, 2006 TO JUNE, 200 7 HAVING SALE VALUE RANTING FROM RS.8,969/- PER SQ. MT. TO RS.13,953/- PER SQ. MT. IN NARAINA A ND OF RS.6,503/- TO RS.10,758/- IN MAYAPURI. THE LD. CIT (A) ON THE BASIS OF THE ABOVE FACTS CAM E TO THE CONCLUSION THAT THE VALUE ADOPTED BY THE AO BASED ON THE DVOS REPORT AT RS.73,153/- PER SQ. MT. WAS EXCESSIVE AND UNFOUNDED. THE LEGAL VALIDITY OF THE ADDITION WAS FURTHER IMPAIRED BY THE LACK OF OPPORTUNITY GIVEN BY THE AO OR THE DVO, TO REBUT THE VALUATION ARRIVED AT ON THE L AST WORKING DAY OF THE YEAR. THE LD. CIT (A) FURTHER OBSERVED THAT UNLESS THE AO OBTAINED EVIDEN CE THAT MORE THAN WHAT WAS STATED WAS RECEIVED, NO HIGHER PRICE COULD BE TAKEN TO MEET TH E BASIS OF COMPUTATION OF CAPITAL GAINS. 4 I. T. APPEAL NO. 1678 (DEL) OF 2011 RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF K. P. VERGHESE VS. ITO 131 ITR 597 (SC) THE LD. CIT (A) HELD THAT ONUS OF PROV ING UNDERSTATEMENT OF CONSIDERATION HAS NOT BEEN DISCHARGED BY THE DEPARTMENT. HE ACCORDINGLY DELETED THE ADDITION. 5. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT THE INDUSTRIAL PLOT HAS BEEN SOLD AT MUCH HIGHER RATE THAN CIRCLE RATES PRESCRIBED FOR G CATEGORY OF LAND. UNDER SECTION 50-C OF THE ACT THE FULL VALUE OF CONSIDERATION IS TO BE TAKEN ON THE BASIS OF VALUE FIXED BY ANY AUTHORITY OF A STATE GOVT. FOR THE PURPOSE OF STAMP VALUATION I.E. AT CIRCLE RATES. HE FURTHER SUBMITTED THAT IN A CASE WHERE THE ASSESSEE CLAIMS BEFORE THE AO THAT T HE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY STAMP VALUATION AUTHORITY EXCEEDS THE FAIR MARKET R ATE OF THE PROPERTY AS ON THE SALE DATE OF TRANSFER, THE AO MAY REFER THE CASE FOR VALUATION O F CAPITAL ASSETS TO THE VALUATION OFFICER. IT MEANS THAT AS PER PROVISIONS OF SECTION 50C(1) THE MAXIMUM VALUE CAN BE TAKEN AS PER CIRCLE RATES, PRESCRIBED BY THE STATE GOVT. FOR THE PURPOS E OF STAMP VALUATION. SINCE THE ASSESSEE HAD SOLD THE PROPERTY AT MUCH HIGHER RATE ABOVE THE CIR CLE RATES PRESCRIBED IN THE CONCERNED AREA, THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION BASED ON THE DVOS REPORT. ON THE OTHER HAND, THE LD. SR. DR SUPPORTED THE ORDER OF THE LD. CIT ( APPEALS). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THRO UGH THE MATERIAL AVAILABLE ON RECORD. UNDER SECTION 48 OF THE INCOME TAX ACT, 1961 THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS SHALL BE COMPUTED, BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE F OLLOWING AMOUNTS, NAMELY ( I ) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRAN SFER; ( II ) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT THERETO. THEREFORE FOR THE PURPOSES OF COMPUTATION OF CAPITAL GAINS FULL VALUE OF CONSIDERATION OF CAPITAL ASSET TRANSFERRED IS TO BE TAKEN AND NOT THE FAIR MARKET VALUE OF THE ASSET TRANSFERRED. UNDER SECTION 50C O F THE ACT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS THE FULL VALUE OF CONSIDERATION HAS T O BE ADOPTED AS PER CIRCLE RATES. IN A CASE WHERE CIRCLE RATES ARE HIGHER THAN THE FAIR MARKET VALUE OF THE PROPERTY, SUB SECTION (2) OF SECTION 50C PROVIDES THAT THE ASSESSEE CAN MAKE REQUEST TO THE ASSESSING OFFICER TO REFER THE MATTER TO VALUATION OFFICER FOR VALUATION OF THE PROPERTY, AS PER MARKET RATES. THUS FROM THE PROVISIONS OF 5 I. T. APPEAL NO. 1678 (DEL) OF 2011 SECTION 50C OF THE ACT IT IS CLEAR THAT FOR THE PUR POSE OF COMPUTATION OF CAPITAL GAINS UNDER SECTION 45, THE FULL VALUE OF CONSIDERATION HAS TO BE TAKEN AS PER CIRCLE RATES PRESCRIBED BY THE STATE GOVT. FOR THE PURPOSE OF STAMP VALUATION UNLE SS THE AO HAS MATERIAL IN HIS POSSESSION TO PROVE THAT THE ASSESSEE HAD RECEIVED HIGHER AMOUNT THAN THE CIRCLE RATES. IN THAT SITUATION THE AO WILL BE JUSTIFIED TO ADOPT AMOUNT RECEIVED BY THE ASSESSEE AS THE FULL VALUE OF CONSIDERATION. IN THE CASE OF THE ASSESSEE FROM THE FACTS STATED ABOV E, IT MAY BE SEEN THAT THE CIRCLE RATE FOR THE PROPERTY SOLD BY THE ASSESSEE WAS RS.13,700/- PER S Q.MTR. AS AGAINST THE SALE INSTANCES ADOPTED BY THE DVO FOR OKHLA INDL. ESTATE, WHICH FALLS IN CATE GORY D. THE VALUE OF ASSESSEES SHARE OF THE PROPERTY AS PER CIRCLE RATES APPLICABLE IN THE CASE OF THE ASSESSEE WORKS OUT TO RS.2,00,98,722/- AS AGAINST SALE CONSIDERATION OF RS.2,90,00,000/- ADMI TTED BY THE ASSESSEE. IN THE CASE OF THE ASSESSEE, THERE IS NOTHING WITH THE AO TO SUGGEST T HAT THE ASSESSEE HAD RECEIVED MORE THAN WHAT IS STATED IN THE SALE DEED AND, THEREFORE, FULL VAL UE OF CONSIDERATION CANNOT BE ADOPTED AS PER THE DVOS REPORT WHICH REPRESENT FAIR MARKET VALUE OF I NDUSTRIAL PLOT SOLD. ADOPTION OF DVOS REPORT WITHOUT PROVIDING OPPORTUNITY OF BEING HEARD IS ALSO AGAINST THE PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A) DELETING THE ADDITION BASED ON THE REPORT OF THE DVO. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 17 TH JUNE, 2011. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH JUNE, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 6 I. T. APPEAL NO. 1678 (DEL) OF 2011 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.