Gujarat Agro Industries Corpn.Ltd., Ahmedabad V. The ACIT., Circle-4, Ahmedabad

ITA 174/AHD/2011

• Counselvise Citation: 17420514 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-12-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 24-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: M G PATELAR
• Keywords: Cost of acquisition; Fair market value; Difference of opinion; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD , , , , BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND , SHRI T.R. MEENA, ACCOUNTANT MEMBER .. , ! ! ! ! ITA NO. 174/AHD/2011 ASSESSMENT YEAR : 2005-06 GUJARAT AGRO INDUSTRIES CORPN. LTD. KHET UDYOG BHAVAN, OPP. HIGH COURT, NAVRANGPURA, AHMADABAD. V/S . ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-4, AHMADABAD. PAN NO. AAACG5620R (APPELLANT) .. (RESPONDENT) '# $ % /BY APPELLANT SHRI M. G. PATEL, A.R. &''# $ % /BY RESPONDENT SHRI P. L. KUREEL, SR. D.R. () $ /DATE OF HEARING 12.12.2013 *+, $ /DATE OF PRONOUNCEMENT 10.01.2014 O R D E R PER : SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATING FROM THE ORDER OF THE CIT(A)-VIII, AHMADABAD, DATED 16.12.2010. THE APPE LLANT HAS CHALLENGED THE CONFIRMATION OF PENALTY OF RS.31,68,949/- LEVIED U/ S.271(1)(C) OF IT ACT. 2. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER PASSED U/S.143(3) DATED 24.12.2007 AND THE PENALTY ORDER DATED 19.03.2009 WERE THAT THE ASSESSEE COMPANY IS STATED TO BE A GO VERNMENT UNDERTAKING ITA NO. 174/AHD/2011, A.Y. 05-06 PAGE 2 AND IN THE BUSINESS OF MANUFACTURING OF PESTICIDES, TRADING OF FERTILIZERS ETC. THE ASSESSEE HAD SOLD AGRO SERVICE COMPLEX, SURAT, WHICH CONSISTED LAND AND STRUCTURE FOR A TOTAL CONSIDERATION OF RS.1,79, 00,000/-. THE BIFURCATION OF THE SALE CONSIDERATION WAS DECLARED AS UNDER: THE ASSESSEE COMPANY BIFURCATED SHALE CONSIDERATIO N IN TWO PARTS. (I) CONSIDERATION FOR LAND RS.1,6 4,50,000/- (II) CONSIDERATION FOR BUILDING & PLANT & MACHINERY RS. 14,50,000/- THE ASSESSEE HAD DISCLOSED LONG TERM CAPITAL GAIN A T RS.27,89,200/- ON LAND AND SHORT TERM CAPITAL GAIN OF RS.14,50,000/- ON BU ILDING, PLANT AND MACHINERY. 2(I). THE A.O. WAS NOT CONVINCED AND MENTIONED THAT THE LAND IN QUESTION WAS SITUATED ON AHMADABAD MUMBAI NATIONAL HIGHWAY A ND THE LONG TERM CAPITAL GAIN WAS COMPUTED BY ADOPTING THE VALUE @ 1 25/- PER SQUARE METER AS ON 01.04.1981. THE SAID VALUE WAS STATED TO BE BAS ED UPON VALUATION REPORT PREPARED BY A REGISTERED VALUER. AS AGAINST THAT, THE A.O. HAS ADOPTED THE VALUE AS ON 01.04.1981 AT RS.11.85 PER SQUARE METER BY APPLYING THE SAID RATE AS FAIR MARKET VALUE AS ON 01.04.1981 ON THE T OTAL AREA OF LAND MEASURING 22,764/- SQUARE METER. THE A.O. HAS COMPUTED THE V ALUE AS ON 01.04.1981 AT RS.2,69,753/-. AFTER APPLYING THE COST INFLATION I NDEX, THE A.O. HAD COMPUTED LONG TERM CAPITAL GAIN AS UNDER: (A) AVERAGE OF RATE OF SALE INSTANCES AS SUPPLIED BY THE SUB-REGISTRAR, KAMREJ, COMMUNICATED TO THE ASSESSEE COMPANY VIDE T HIS OFFICE LETTER DATED 4 TH DECEMBER 2007, CALLING FOR ITS OBJECTION AND REPLY GIVEN BY THE ASSESSEE COMPANY ALONGWITH LETTER DATED 6 TH DECEMBER 2007 FROM REGISTERED VALUER AS DISCUSSED IN PARA (XI) ABOVE R S.11.85 PAISA PER SQUARE METER. ITA NO. 174/AHD/2011, A.Y. 05-06 PAGE 3 (B) TOTAL AREA OF LAND SOLD 22764 SQUARE METER (C) FAIR MARKET VALUE AS ON 1-4-1981 (11.85 X 22764 ) RS.2,69,753.40 SAY 2,69,753. (D) COST INFLATION INDEX FOR F.Y. 2004-05 IS 480 (E) FAIR MARKET VALUE FOR F.Y. 2004-05 IS 480 X 269 753/100 = RS.12,94,814 (F) LONG TERM CAPITAL GAIN SALE PRICE RS.1,64,50,000 LES FAIR MARKET VALUE AS ON 1-4-1981 RS. 12,94,814 LONG TERM CAPITAL GAIN RS.1,51,55,186 2(II). WHILE LEVYING THE PENALTY U/S.271(1)(C), IT WAS HELD BY THE A.O. THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS IN RE SPECT OF THE CAPITAL GAIN DISCLOSED, HENCE, SUBJECTED TO LEVY OF PENALTY. TH E MINIMUM PENALTY U/S. 271(1)(C) OF RS.31,68,949/- WAS COMPUTED AND IMPOSE D ON THE ASSESSEE. 3. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE TH E FIRST APPELLATE AUTHORITY. ACCORDING TO LD. CIT(A), THE REGISTERED VALUER WAS CALLED UPON BY THE A.O. BUT HE HAD NOT ATTENDED THE PROCEEDINGS AN D MERELY SUBMITTED THAT ON THE BASIS OF THE SALE INSTANCES THE SAID VALUATI ON WAS ADOPTED IN THE VALUATION REPORT. THEREFORE, IT WAS HELD THAT THE ASSESSEE HAD TRIED TO MANIPULATE THE COST OF ACQUISITION AS ON 01.04.1981 WITH THE HELP OF A REGISTERED VALUER. IT WAS HELD THAT THE ASSESSEE H AD FURNISHED INACCURATE PARTICULARS OF THE INCOME BY ENHANCING THE COST OF ACQUISITION OF THE LAND AS ON 01.04.1981 AND THEREFORE, CONCEALED THE CAPITAL GAI N INCOME. ACCORDING TO LD. CIT(A), THE PENALTY WAS CORRECTLY IMPOSED BY THE A. O. 4. FROM THE SIDE OF THE APPELLANT, LD. A.R. MR. M. G. PATEL APPEARED AND INFORMED THAT IN THE QUANTUM APPEAL BEFORE THE TRIB UNAL ITAT B BENCH, ITA NO. 174/AHD/2011, A.Y. 05-06 PAGE 4 AHMADABAD IN ITA NO. 612/AHD/2009 FOR A.Y. 05-06 VI DE ORDER DATED 31 ST MARCH, 2011 HAD CONFIRMED THE ACTION OF THE A.O. IN THE FOLLOWING MANNER: 7. HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AND WE FIND THAT ONLY ISSUE IN THIS APPEAL IS IN RESPECT OF VALUATIO N OF THE PROPERTY AS ON 01- 04-1981. THE ASSESSEE HAS TAKEN THE VALUE ON THE B ASIS OF GOVERNMENT APPROVED VALUERS REPORT WHO HAS VALUED THE PROPERT Y AS ON 01-04-1981 ON THE BASIS OF SALE INSTANCES OCCURRED BETWEEN THE PERIOD 08-03-1979 AND 20-04-1981. THUS, THE PERIOD IN WHICH SALE INS TANCES HAVE BEEN CONSIDERED BY THE VALUER STRETCHES MORE THAN TWO YE ARS. THIS LONG TIME PERIOD MADE THE VALUATION OF THE VALUER LESS RELIAB LE. WE FURTHER FIND THAT THE SURVEY NUMBER OF SALE INSTANCES QUOTED BY THE V ALUER ARE FROM 19 TO 23 WHICH ARE FAR FROM THE LOCATION OF THE PROPERTY UNDER CONSIDERATION. THEREFORE, THE RELEVANT DATES AND MATERIAL USED BY THE VALUER CANNOT BE SAID TO BE RELIABLE FOR VALUING THE PROPERTY. THE ASSESSING OFFICER ON THE OTHER HAND, WHILE MAKING THE VALUE OF THE PROPERTY HAS TAKEN INTO CONSIDERATION THE SALE INSTANCES WHICH OCCURRED BET WEEN 21-02-1981 AND 27-07-1981. HE HAS ALSO TAKEN INTO CONSIDERATION, T HE SALES INSTANCES OF THE BLOCKS WHICH ARE CLOSER TO THE BLOCK NUMBER OF THE PROPERTY UNDER CONSIDERATION. FROM THIS IT APPEARS THAT AO HAS TA KEN THE SALE INSTANCES FOR THE PERIOD, WHICH WERE CLOSE TO THE CRITICAL DA TE I.E. 01-04-1981 AND ALSO THE LOCATIONS OF THE VARIOUS PROPERTIES WHICH WERE CLOSE TO THE PROPERTY UNDER CONSIDERATION. IN VIEW OF THIS, WE ARE OF THE CONSIDERED OPINION THAT THE AVERAGE VALUE TAKEN BY AO AT 11.85 PER SQ.MT. IS QUIRE REASONABLE AND LD. CIT(A) HAS RIGHTLY CONFIRMED THI S ACTION OF AO AND THEREFORE ORDER PASSED BY HIM IS HEREBY UPHELD. TH E APPEAL FILED BY ASSESSEE IS HEREBY DISMISSED. 4(I). IN THE LIGHT OF THE ABOVE FACTS, LD. A.R. HAS ARGUED THAT THE VALUATION AS ON 01.04.1981 WAS NOTHING BUT A DIFFERENCE OF OPINI ON. THEREFORE, THE PENALTY WAS WRONGLY IMPOSED ON THE ASSESSEE. HE HAS INFORM ED THAT THE APPEAL OF THE ASSESSEE AGAINST THE SAID ORDER OF THE TRIBUNAL HAS NOW BEEN ADMITTED BY ITA NO. 174/AHD/2011, A.Y. 05-06 PAGE 5 THE HONBLE GUJARAT HIGH COURT VIDE TAX APPEAL NO. 1268 OF 2011 VIDE AN ORDER DATED 05.09.2012. HE HAS PLACED RELIANCE ON FEW JUDGMENTS WHICH WERE CITED BEFORE THE CIT(A) AS UNDER: (I) T. ASHOK PAI V. CIT [210 CTR 259 (SC)] (II) DILIP N. SHROFF V. JCIT [291 ITR 519 (SC)] (III) HINDUSTAN STEEL LTD. V. STATE OF ORISSA [83 I TR 26 (SC)] (IV) K.C.BUILDERS & ANR. V. ACIT [265 ITR 562 (SC)] (V) GEM GRANITES (KAR) V DCIT [18 DTR 358] (VI) CONTENTION CIT V. HOTEL SABAR P. LTD. [264 ITR 381 (GUJ)] (VII) CIT V. HARSHVARDHAN CHEMICALS & MINERALS LTD. [259 ITR 212 (GUJ)] (VIII) CIT V. SKYLINE AUTO PRODUCTS P. LTD. [271 IT R 335 (MP)] (IX) CIT V. ANAND WATER METER MFG. CO. [117 ITR 866 (P&H) (X) CIT V. M.P.NARAYANAN [244 ITR 528 (MAD)] (XI) CIT V. UNION ELECTRIC CORPORATION [281 ITR 266 (GUJ)] LD. A.R. HAS PLACED STRONG RELIANCE ON DILIP N. SHR OFF V. JCIT, 291 ITR 519 (SC). 4(I). FROM THE SIDE OF REVENUE, LD. SR. D.R. P. L. KUREEL HAS PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW AND ARGUED THAT BY HIRING A REGISTERED VALUER THE ASSESSEE HAS BEEN IN RELATIONSHIP WITH THAT VAL UER AND THEREFORE, THE ADVICE OF THE SAID VALUER WAS A BIASED ADVICE AND N OT AN INDEPENDENT ADVICE. THE VALUATION REPORT BEING A MOTIVATED REPORT, WHIC H WAS OBTAINED BY THE ASSESSEE BY PAYING AN AMOUNT TO THE VALUER THEREFOR E THAT VALUATION WAS NOT ACCEPTED IN THE QUANTUM PROCEEDINGS; EVEN BY RESPEC TED TRIBUNAL. HE HAS THEREFORE PLEADED THAT THE PENALTY WAS RIGHTLY IMPO SED ON THE APPELLANT. ITA NO. 174/AHD/2011, A.Y. 05-06 PAGE 6 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND IN THE LIGHT OF THE FACTS DISCUSSED HEREINABOVE; AT THE OUTSET, WE WOUL D LIKE TO REFER THE DECISION OF THE HONBLE SUPREME COURT PRONOUNCED IN THE CASE OF DILIP N. SHROFF V. JCIT, 291 ITR 519 (SC), WHEREIN THE APPELLANT WAS A HINDU UNDIVIDED FAMILY; WHICH HAD DECLARED LONG TERM CAPITAL LOSS. THE LON G TERM CAPITAL LOSS HAD ARISEN ON ACCOUNT OF SALE OF PROPERTY BEING LAND AN D BUILDING. FOR THE PURPOSE OF THE VALUATION OF THE SAID PROPERTY, A REGISTERED VALUER WAS APPOINTED, WHO HAD DETERMINED THE VALUE OF THE PROPERTY AS ON 01.0 4.1981 FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. THAT REPORT WAS NOT A CCEPTED BY THE A.O. HENCE, THE MATTER WAS REFERRED TO THE DVO. THEREAFTER, TH E ASSESSMENT WAS MADE ON THE BASIS OF DVOS REPORT AND THE CAPITAL GAIN W AS ALSO COMPUTED ACCORDINGLY. THE PENALTY WAS IMPOSED ON THE ASSESS EE ON THE GROUND THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS O F INCOME. THE OBSERVATION OF THE HONBLE APEX COURT WHILE DELETING THE PENALT Y, WAS AS UNDER: (III) THAT A REFERENCE UNDER SECTION 55A TO THE VA LUATION OFFICER WAS OPTIONAL AND WAS FOR THE PURPOSE OF MAKING AN ESTIM ATE. SUCH REFERENCE WOULD BE MADE, IF IN THE OPINION OF THE ASSESSING O FFICER THE VALUE OF THE ASSETS AS CLAIMED BY THE ASSESSEE IN ACCORDANCE WIT H THE ESTIMATE MADE BY THE REGISTERED VALUER WAS LESS THAN ITS FAIR MAR KET VALUE. CLAUSE (B) ALSO INDICATED THAT THE ASSESSEE HAD TWO OPTIONS : TO GET THE VALUE PREPARED THROUGH THE INDEX VALUE OR TO TAKE ANY OTH ER KNOWN MODE OF VALUATION. THE REGISTERED VALUER HAD ARRIVED AT HIS OPINION ON A CERTAIN BASIS AND WHILE MAKING THE VALUATION REPORT DISCLOS ED ALL THE PARTICULARS. HE DISCLOSED THAT HE HAD CHOSEN THE INDEX VALUE MET HOD. HE DID NOT RELY UPON ANY SALE INSTANCE. HE MIGHT HAVE REFERRED TO T HE VALUATION OF PROPERTY AS MENTIONED IN A LOCAL NEWSPAPER. BUT HE DID NOT FURNISH THE PARTICULARS. NOR HAD HE ENCLOSED THE SHEET SHOWING SALE INSTANCES, BUT ITA NO. 174/AHD/2011, A.Y. 05-06 PAGE 7 NOTHING TURNED UPON IT AS HE HAD NOT RELIED UPON AN Y SALES INSTANCES. THERE COULD BE A GENUINE DIFFERENCE OF OPINION BETW EEN TWO EXPERTS. A DUTY MIGHT BE ENJOINED ON THE ASSESSEE TO MAKE A CO RRECT DISCLOSURE OF INCOME BUT IF SUCH DISCLOSURE IS BASED ON THE OPINI ON OF AN EXPERT, WHO WAS OTHERWISE ALSO A REGISTERED VALUER HAVING BEEN APPOINTED IN TERMS OF A STATUTORY SCHEME, ONLY BECAUSE HIS OPINION WAS NO T ACCEPTED OR SOME OTHER EXPERT GAVE ANOTHER OPINION, THAT WOULD NOT B Y ITSELF BE SUFFICIENT FOR ARRIVING AT THE CONCLUSION THAT THE ASSESSEE HAD FU RNISHED INACCURATE PARTICULARS. (IV) THAT, THEREFORE, THE PENALTY WAS NOT EXIGIBLE . 5(I). WE ARE OF THE CONSIDERED OPINION THAT THE ABO VE CITED DECISION OF THE HONBLE SUPREME COURT IS DIRECTLY APPLICABLE ON THE FACTS OF THE CASE. HENCE, WE, HEREBY, PLACE RELIANCE ON THE SAID DECISION AND HOLD THAT THE PENALTY U/S. 271(1)(C) SHOULD NOT BE LEVIED ON THE ASSESSEE. IN THE PRESENT CASE, AS WELL THE ASSESSEE HAS DISCLOSED LONG TERM CAPITAL GAIN O N THE BASIS OF A REGISTERED VALUERS REPORT BUT THAT WAS NOT ACCEPTABLE TO THE REVENUE DEPARTMENT. HENCE, VALUE AS ON 01.04.1981 WAS QUESTIONED AND AL SO CHANGED BECAUSE OF THE CHANGE IN FAIR MARKET VALUE AS ON 01.04.1981. THE AMOUNT OF THE LONG TERM CAPITAL GAIN HAD ENHANCED, WHICH WAS THE SUBJE CT MATTER OF THE IMPUGNED PENALTY. THEREFORE, ACCORDING TO US, THE DISCLOSURE IN RESPECT OF THE AMOUNT OF CONSIDERATION AND OTHER RELATED MATERIAL FACTS WERE NOT IN DOUBT. THE ONLY DISPUTE WAS IN RESPECT OF THE FAIR MARKET VALUE AS ON 1.4.81. THE ASSESSEE HAS IN FACT EXPLAINED THE NATURE AND THE S OURCE OF THE CAPITAL GAIN, WHICH WAS NOT DOUBTED BY THE REVENUE DEPARTMENT. H ENCE, IT IS NOT FAIR TO HOLD THAT THE PARTICULARS IN RESPECT OF THE CAPITAL GAIN HAVE BEEN CONCEALED BY THE ASSESSEE. THE REVENUE DEPARTMENT ALSO NOT ESTA BLISHED THAT THE SAID ITA NO. 174/AHD/2011, A.Y. 05-06 PAGE 8 REGISTERED VALUER WAS IN ANY MANNER CONNIVED WITH T HE ASSESSEE OR HAND-IN- GLOVE WITH THE ASSESSEE. HENCE, WE HEREBY HOLD THA T THIS IS NOT A FIT CASE FOR LEVY OF CONCEALMENT PENALTY. WE HEREBY DIRECT TO D ELETE THE PENALTY. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 10.01.2014 SD/- SD/- (T.R. MEENA) ( MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY S.K.SINHA - - - - $ $$ $ &. &. &. &. /., /., /., /., / COPY OF ORDER FORWARDED TO:- 1. '# / APPELLANT 2. &''# / RESPONDENT 3. 33 4 / CONCERNED CIT 4. 4- / CIT (A) 5. .89 &( , , / DR, ITAT, AHMEDABAD 6. 9;< => / GUARD FILE. BY ORDER/ - , ?/ 3A , !