PANKAJ P. SHAH, MUMBAI V. ITO 16(1)(1), MUMBAI

ITA 1719/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54832 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 05-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUBAL
• Assessee Lawyers: REEPAL G TRALSHAWALA
• Keywords: Sale consideration of property below Jantri Value; Fair market value; Valuation report
• Section: 50C; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1719/MUM/2010 (ASSESSMENT YEAR: 2005-06) SHRI PANKAJ P. SHAH INCOME TAX OFFICER - 16(1)(1) 804, SHIVTIRTH NO. 2, WEST WING MATRU MANDIR 4/6, BHULABHAI DESAI ROAD VS. MUMBAI MUMBAI 400026 PAN - AAHPS 4946C APPELLANT RESPONDENT APPELLANT BY: SHRI REEPAL G. TRALSHAWALA RESPONDENT BY: SHRI M.R. KUBAL DATE OF HEARING: 10.08.2011 DATE OF PRONOUNCEMENT: 10.08.2011 O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A) XXVII, MUMBAI DATED 08.01.2010. 2. ASSESSEE HAS RAISED THE FOLLOWING TO GROUNDS: - I. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION O F THE A.O. IN TAKING VALUATION OF STAMP DUTY AUTHORITIES OF SION PROPERT Y AS SALE CONSIDERATION WITHOUT REFERRING THE VALUATION TO TH E DEPARTMENTAL VALUATION OFFICER AS REQUIRED U/S 50C OF THE ACT. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTIO N OF THE A.O. IN MAKING REFERENCE U/S 55 OF THE ACT TO THE VALUATION OFFICER FOR ASCERTAINING THE VALUE FOR 01.04/1981 WHICH WAS SUP PORTED BY VALUATION REPORT OF THE ARCHITECT/REGISTERED VALUER AS REFERRED TO IN PARA 4 OF THE ORDER. 3. WITH REFERENCE TO GROUND NO. 1 IT WAS SUBMITTED THA T THIS ISSUE IS COVERED BY THE ORDER OF THE COORDINATE BENCH IN THE CASE OF M/S. ASHA BHARAT SHAH IN ITA NO. 1716/MUM/2010 DATED 15.02.20 11 AND ALSO IN THE CASE OF SHAKUNTALA H. SHAH IN ITA NO. 1715/MUM/2010 DATED 28.02.2011. ITA NO. 1719/MUM/2010 SHRI PANKAJ P. SHAH 2 4. THE ISSUE IS IN RESPECT OF THE APPLICABILITY OF PR OVISIONS OF SECTION 50C. THE ASSESSEE IS A CO-OWNER OF PROPERTY SOLD D URING THE PREVIOUS YEAR, WHICH WAS SITUATED AT PLOT NO. 10B OF SION-MATUNGA ESTATE, MUMBAI -400 023 DURING THE FINANCIAL YEAR 2004-05, THE SAID PR OPERTY WAS SOLD FOR THE TOTAL CONSIDERATION OF ` 4,21,00,000/- AS PER THE DEVELOPMENT AGREEMENT DATED 22.6.2004. THE SAID DEVELOPMENT AGREEMENT WA S REGISTERED AND FOR THE PURPOSE OF THE STAMP-DUTY PAYMENT THE FAIR MARK ET VALUE OF THE PROPERTY WAS DETERMINED AT ` 4,94,61,000/-. THE A.O. APPLIED SECTION 50C OF THE ACT AND ADOPTED THE VALUATION MADE BY THE STAMP DUTY AU THORITIES AS CONSIDERATION, WHICH WAS VALUED AT ` 4,94,61,000/- AND ACCORDINGLY WORKED OUT LONG-TERM-CAPITAL-GAIN AND BROUGHT TO TAX IN TH E HANDS OF THE ASSESSEE TO THE EXTENT OF HER SHARE. THE ASSESSEE CHALLENGE D THE ACTION OF THE A.O. BEFORE THE LD. CIT (A) BY TAKING THE CONTENTION THA T DESPITE THE SPECIFIC REQUEST OF THE ASSESSEE, THE A.O. DID NOT REFER THE MATTER TO THE DISTRICT VALUATION OFFICER (DVO), AS PER SUB-SECTION (4) TO SECTION 50C. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE ITAT LUCKNOW B BENCH IN THE CASE OF A.K.G. CONSULTANT P. LTD. IN SUPPORT OF HIS PLEA TH AT ONCE THE ASSESSEE CLAIMED BEFORE THE A.O. THAT THE FAIR MARKET VALUE DETERMINED BY THE STAMP- DUTY AUTHORITIES ARE HIGHER THEN THE ACTUAL SALE CO NSIDERATION AND THE A.O. IS BOUND TO REFER THE MATTER TO THE DVO FOR VALUATI ON UNDER SUB-SECTION (2) TO SECTION 50C. THE ASSESSEE ALSO RELIED ON THE DE CISION OF THE ITAT JODHPUR BENCH IN THE CASE OF MEGHRAJ BAID VS. ITO 114 TTJ 8 14 (JD.). 5. ON THE SAME FACTS IN THE CO-OWNERS HANDS THE COORD INATE BENCH HAS CONSIDERED THE ISSUE AND HELD AS UNDER VIDE PARA 3 OF THE ORDER AS UNDER: - 3. SECTION 50C IS A DEEMING PROVISION AND IT IS APP LICABLE IN RESPECT OF TRANSFER OF THE LAND OR BUILDING OR BOTH BY THE ASSESSEE. IT PROVIDES THAT IN CASE OF TRANSFER OF A LAND OR A BUILDING IF THE VALUATION MADE FOR THE PURPOSE OF THE PAYMENT OF THE STAMP-DUTY BY THE STATE REGISTRATION AUTHORITY IS MORE THAN THE SALE CONSID ERATION DECLARED BY THE ASSESSEE IN THE CONVEYANCE, THEN THE SAID VALUE WILL BE ADOPTED AS A CONSIDERATION FOR COMPUTATION OF THE CAPITAL GAIN U/S.48 OF THE ACT. SUB-SECTION (2) PROVIDES THAT IF THE ASSESSEE CLAIMS BEFORE THE A.O. THAT THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF THE TRANSFER WHICH HAS NOT BEEN DISPUTED BY THE ASSESSE E IN ANY LEGAL PROCEEDINGS THEN THE A.O. MAY REFER THE CASE TO TH E VALUATION OFFICER, ITA NO. 1719/MUM/2010 SHRI PANKAJ P. SHAH 3 AS PER THE PROVISIONS OF THE WEALTH-TAX ACT, 1957. THE LD. CIT (A) DECLINED TO ENTERTAIN THE PLEA OF THE ASSESSEE FOR REFERRING THE MATTER TO THE DVO BY HOLDING THAT THE WORD MAY IS USED B Y THE LEGISLATURE AND IT IS DISCRETION OF THE A.O. TO REFER OR NOT TO REFER. IN THE CASE OF MEGHRAJ BAID (SUPRA) IT IS HELD THAT THE WORD MAY USED IN SUB-SEC. (2) TO SEC. 50C SIGNIFIES THAT IN CASE THE A.O. IS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE THEN HE SHOULD REFER TH E MATTER TO THE DVO FOR THE VALUATION. WE, THEREFORE, FOLLOWING TH E DECISION OF THE TRIBUNAL IN MEGHRAJ BAID (SUPRA) ALLOW GROUND NO.1 TAKEN BY THE ASSESSEE AND DIRECT THE A.O. TO REFER THE MATTER TO THE DISTRICT VALUATION OFFICER FOR DETERMINING THE FAIR MARKET V ALUE AS PER PROVISIONS OF SUB-SEC. (2) OF SECTION 50C. ACCORDI NGLY, GROUND NO.1 IS ALLOWED. 6. SINCE THE ISSUES ARE ALREADY RESTORED TO THE FILE O F THE A.O. TO REFER THE MATTER TO THE DVO FOR DETERMINING THE FAIR MARKET V ALUE AS PER PROVISIONS OF SECTION 50C IN THE OTHER CO-OWNERS HANDS, WE, RESP ECTFULLY FOLLOWING THE SAME, RESTORE THE ISSUE TO THE FILE OF THE A.O. WIT H A DIRECTION TO REFER THE MATTER TO THE DVO AND COMPLETE THE PROCEEDINGS FOLL OWING THE PROVISIONS OF SECTION 50C. ACCORDINGLY GROUND NO. 1 IS CONSIDERED ALLOWED. 7. GROUND NO. 2 IS WITH REFERENCE TO ASCERTAINING THE VALUE AS ON 01.04.1981, WHICH WAS SUPPORTED BY THE VALUATION RE PORT IN THE CASE OF ASSESSEE BUT REFERRED TO DVO UNDER SECTION 55 OF TH E ACT. AS THE SAID PROPERTY WAS PURCHASED PRIOR TO 1.4.1981, THE ASSES SEE ADOPTED FAIR MARKET VALUE OF THE PLOT FOR THE PURPOSE OF THE INDEX COST OF THE ACQUISITION (ICA). THE ASSESSEE FILED THE VALUATION REPORT OF THE REGI STERED VALUER AND AS PER THE VALUATION MADE BY THE REGISTERED VALUER THE FAI R MARKET VALUE OF THE SAID PROPERTY AS ON 1.4.1981 AT ` 43,10,100/- AND INDEX COST WAS WORKED OUT AT ` 2,06,88,000/-. THE A.O. MADE A REFERENCE TO THE DI STRICT VALUATION OFFICER I MUMBAI UNDER SECTION 55A OF THE ACT. IT APPEARS THAT AS THE VALUATION REPORT WAS NOT RECEIVED FROM THE DVO AND ASSESSMENT WAS GETTING TIME BARRED, THE A.O. COMPLETED THE ASSESSMENT SUBJECT T O THE FURTHER RECTIFICATION. NOW, THE ASSESSEE HAS CHALLENGED TH E ACTION OF THE A.O. FOR REFERRING THE MATTER TO THE VALUATION. 8. SIMILAR ISSUE WAS CONSIDERED BY THE ITAT IN THE ABO VE REFERRED ORDER IN ITA NO. 1716/MUM/2010 VIDE PARA 6, 7 AND 8, WHIC H ARE AS UNDER: - ITA NO. 1719/MUM/2010 SHRI PANKAJ P. SHAH 4 6. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUB MITTED THAT THE DVO HAS DETERMINED THE FAIR MARKET VALUE OF THE PRO PERTY AS ON 1.4.1981 AT ` 29.62 LAKHS AS AGAINST THE VALUE DECLARED BY THE ASSESSEE AT ` 43.10 LAKHS. IT IS ARGUED THAT NO RE FERENCE CAN BE MADE BY THE DVO FOR DETERMINING THE LESSER FAIR MAR KET VALUE AND THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT MUMBAI IN THE CASE OF SMT. SARALA N. SAKRA NEY VS. ITO 46 DTR (MUM)(TRIB) 208. HE, THEREFORE, PLEADED THAT T HE A.O. MAY BE DIRECTED TO ADOPT THE FAIR MARKET VALUE AS PER VALU ATION MADE BY ASSESSEES VALUER. WE HAVE ALSO HEARD THE LD. D.R . 7. AFTER ELABORATELY DISCUSSING THE PROVISIONS OF S ECTION 55A AND RELYING ON THE DECISION IN THE CASE OF CIT VS. DAUL AL MOHTA (HUF)1031 OF 2008 JUDGMENT DATED 22ND SEPTEMBER, 2008 AND HEL D AS UNDER:- 14. IN VIEW OF THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT REFERENCE BY THE AO TO THE DVO UNDER S.55A FOR VALUATION OF FAIR MAR KET VALUE OF THE PROPERTY AS ON 1ST APRIL, 1981 IS NOT VALID FOR THE REASON THAT FA IR MARKET VALUE DECLARED BY THE ASSESSEE AS PER GOVERNMENT REGISTERED VALUERS REPO RT WAS MORE THAN THE FAIR MARKET VALUE AS ESTIMATED BY THE DVO. SINCE DETERM INATION OF THE FAIR MARKET VALUE AS ON 1ST APRIL, 1981 WAS BASED ON THE REPORT OF THE DVO, THE SAME IS HELD TO BE INVALID. CONSEQUENTLY, ESTIMATION OF THE FAIR M ARKET VALUE OF THE PROPERTY AS ON 1ST APRIL, 1981 AS MADE BY THE ASSESSEE IS DIRECTED TO BE ACCEPTED. GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 8. IN THE PRESENT CASE, THE FAIR MARKET VALUE DECLA RED BY THE ASSESSEE AS ON 1.4.1981 IS MORE THAN THE FAIR MARKE T VALUE DETERMINED BY THE DVO, HENCE THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF THE ITAT MUMBAI IN THE C ASE OF SMT. SARALA N. SAKRANEY (SUPRA) AND ACCORDINGLY GROUND NO.2 IS ALLOWED AND THE A.O. IS DIRECTED TO ADOPT THE FAIR MARKET VALUE DEC LARED BY THE ASSESSEE AS PER THE VALUATION REPORT AS ON 1.4.1981 . IN VIEW OF THIS, RESPECTFULLY FOLLOWING THE COORDIN ATE BENCH DECISION, AS FAR AS THE FAIR MARKET VALUE DECLARED BY THE ASSESSEE A S ON 01.04.1981 IS MORE THAN THE FAIR MARKET VALUE DETERMINED BY THE DVO, T HE DECISION IS CLEARLY COVERED IN FAVOUR OF HE ASSESSEE. THEREFORE, A.O. I S DIRECTED TO ADOPT THE FAIR MARKET VALUE DECLARED BY THE ASSESSEE AS PER VALUAT ION REPORT AS ON 01.04.1981. THIS GROUND IS ALSO ALLOWED. 9. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PU RPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST 2011. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 10 TH AUGUST 2011 ITA NO. 1719/MUM/2010 SHRI PANKAJ P. SHAH 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXVII, MUMBAI 4. THE CIT XVI, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.