ASST. C.I.T., CIRCLE 21(1), MUMBAI V. DILIP NABERA (HUF), MUMBAI

ITA 1743/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83933 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 30-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 03-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Value adopted by valuation officer; Business income; Principle of natural justice; Valuation report
• Section: 143(3); 50C; 142(1); 147; 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI ! , ' #$ % % % % , , #$ & BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 1743/MUM/2011 (ASSESSMENT YEAR: 2005-06) THE ASST COMMISSIONER OF INCOME- TAX -21(1), 6 TH FLOOR, ROOM NO. 601, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI -400 051 VS M/S DILIP NABERA (HUF), JASU, PLOT NO. 60, VITTAL NAGAR SOCIETY, N S ROAD NO. 12, VILE PAREL (E), MUMBAI -400 056 $' ' .: PAN: AAAHD 3286 K '* (APPELLANT) +,'* (RESPONDENT) APPELLANT BY : SHRI MAURYA PRATAP RESPONDENT BY : SHRI RAKESH JOSHI -./' /DATE OF HEARING : 30-07-2014 012-./'/ DATE OF PRONOUNCEMENT : 08-10-2014 4 4 4 4 # 5 # 5 # 5 # 5 O R D E R , . . . . . .. . PER VIVEK VARMA, J.M. : THE APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A) -32, MUMBAI, DATED 13.12.2010, WHEREIN, THE FOLLOWING GROUND HAS BEEN TAKEN: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 30,10,999/- U/S 69B OF THE I.T. ACT ON THE BASIS OF VALUATION REPORT OF DVO AND INVOKING THE PROVISIONS OF SECTIO N 142A OF THE I.T. ACT, 1961. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR TO ALTER ANY GROUND OR ADD A NEW GROUND, WHICH MAY BE NECESSARY. 2. IN ADDITION TO THE ABOVE GROUND RAISED BY THE DE PARTMENT, THE ASSESSEE HAS MOVED AN ADDITIONAL GROUND UNDER RULE 27 OF THE ITAT RULES, WHICH READS AS UNDER: M/S DILIP NABERA (HUF) ITA NO. 1743/MUM/2011 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE NOTICE U/S 148 R.W.S. 147 IS VOID, ILLEGAL AND WITHOUT JURISDICTIO N A IT IS BASED UPON REASON TO SUSPECT/MAKING FISHING INQUIRES. 3. THE ASSESSEES CASE WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT. SUBSEQUENTLY, THE AO ISSUED A NOTICE U/S 148 O N 02.05.2008, WHICH WAS SERVED ON THE ASSESSEE ON 18.05.2009. ACC ORDING TO THE REASONS RECORDED, THE ISSUE WAS: INFORMATION HAS BEEN RECEIVED THAT THE ASSESSEE HA S PURCHASED PROPERTY WORTH OF RS. 90,00,000/- ON 14.02.2005. FRO M THE DETAILS FILED BY THE ASSESSEE IT HAS BEEN SEEN THAT THE VALUE OF THE PROPERTY IS RS. 1,65,90,000/- AS PER STAMP DUTY VALUATION OF THE PR OPERTY AT FLAT NO. 101, JASU, PLT. NO. 326, VITHAL NAGAR CO-OP HOUSING SOCIETY LTD., N.S. ROAD 12, J.V.P.D. SCHEME, MUMBAI 400 049. IN ADDITIO N TO THIS ASSESSEE HAS SPENT REGISTRATION CHARGES OF RS. 30,48 0/- AND STAMP DUTY OF RS. 8,13,000/- ON THE SAID PROPERTY. THE COS T OF FLAT SHOWN BY THE ASSESSEE IS LESS BY RS. 66,90,000/-. THE SOURCE OF INVESTMENT TO BE INVESTIGATED AND THE ACTUAL COST OF THE FLAT TO BE INVESTIGATED. 2. FROM THE COMPUTATION OF INCOME IT IS SEEN THAT A SSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN RS. 68,10,822/- (SALE AFTER 1-10-2004) AND PAID AT THE RATE OF 10%. THE TRANSACTION IS IN THE NATUR E OF TRADING IN SHARES AND THE INCOME DERIVED FROM THE SAME IS IN NATURE O F SPECULATION PROFIT WHICH HAS TO BE TAXED AS BUSINESS INCOME OF THE ASS ESSEE AT HIGHER RATE. THEREFORE, THERE IS ESCAPEMENT OF TAX TO THAT EXTENT APPLICABLE TO BUSINESS INCOME. 3. LAST SIX YEARS BALANCE SHEET TO BE EXAMINED TO V ERIFY THE SOURCE OF INVESTMENTS IN SHARES AND IMMOVABLE PROPERTY/JEWELL ERY. 4. ASSESSEE HAS SHOWN CAPITAL GAIN ON SALE OF OLD GO LD JEWELLERY WORTH RS. 9,80,002/- AND THE NET LTCG IS SHOWN AT RS. 7,49 ,164/- AND THE ENTIRE LTCG HAS BEEN CLAIMED EXEMPT U/S 54 F BEING INVESTED IN RESIDENTIAL FLAT. THE VALUATION OF GOLD PURCHASE AN D SALE PRICE FOR CLAIMING LTCG HAS TO BE VERIFIED. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE PURCHAS ED A PROPERTY FOR RS. 99,00,000/- ON 14.02.2005, WHOSE STAMP DUTY VAL UATION WAS REPORTED AT RS. 1,65,90,000/-. THE AO CALLED FOR AN EXPLANATION AS TO WHY AN ADDITION UNDER SECTION 69B SHOULD NOT BE MAD E. THE ASSESSEE OBJECTED TO THE VALUATION OF THE PROPERTY, BASED ON STAMP DUTY, HE, THEREFORE, REFERRED THE ISSUE TO DVO, WHO MADE THE VALUATION AT RS. 1,29,10,999/-. THE AO, ADOPTING THE VALUATION DONE BY THE DVO, MADE AN ADDITION OF RS. 30,10,999/- (1,29,10,999 99,00 ,000). M/S DILIP NABERA (HUF) ITA NO. 1743/MUM/2011 3 5. ON THIS ADDITION ON MERITS AS WELL AS ON PRINCIP ALS OF NATURAL JUSTICE, THAT NO OPPORTUNITY WAS AFFORDED TO THE AS SESSEE TO REBUT THE VALUATION ARRIVED AT BY THE DVO, THE ASSESSEE APPRO ACHED THE CIT(A). 6. BEFORE THE CIT(A), THE ASSESSEE MADE AN INITIAL OBJECTION THAT BECAUSE THE DVO REPORT WAS RECEIVED BY THE AO ON 31 .12.2009, THE DAY ON WHICH THE ASSESSMENT ORDER WAS PASSED, THERE FORE, NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO OBJECT TO THE DVOS REPORT. ON THIS ARGUMENT OF THE ASSESSEE, THE CIT(A) CALLED FOR REMAND REPORT FROM THE AO. IN THE REMAND REPORT SENT, THE AO MENT IONED THAT VALUE ADOPTED BY THE DVO WAS CLOSED TO THE STAMP VALUATIO N AND ON THAT BASIS, THE DVOS VALUATION WAS TAKEN. 7. BEFORE THE CIT(A), ASSESSEE NOT ONLY OBJECTED TO THE ADOPTION OF VALUE TAKEN BY THE AO BUT ALSO TOOK ANOTHER LEGAL P OINT THAT PROVISIONS OF SECTION 50C DO NOT APPLY ON THE PURCHASE OF PROPERTY. IT WAS ALSO SUBMITTED THAT TO IMPORT THE DEEMING PROVISION OF S ECTION 69B, THE AO SHOULD HAVE HAD SOME INDEPENDENT MATERIAL, WHICH SU GGESTED THAT THERE WAS CERTAIN INVESTMENT, WHICH WAS NOT FOUND T O BE RECORDED IN THE BOOKS. IN HIS SUBMISSION, THE ASSESSEE PLACED R ELIANCE ON THE A HOST OF DECIDED CASE LAWS, WHICH HAS BEEN REPRODUCE D BY THE CIT(A) IN THE IMPUGNED ORDER. 8. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED, I HAVE CONSIDERED THE ARGUMENTS OF THE WAR. THE CAPTION OF STAMP DUTY AS THE APPARENT SALE CONSIDERATION IS PROVIDED ONLY U/S 50C FOR THE PURP OSE OF COMPUTATION OF CAPITAL GAINS. THE PROVISIONS SEC . 50C ARE DEEMING PROVISIONS AND HENCE THESE PROVISIONS CANNOT BE IMPORTED FOR ANY OTHER PURPOSE S FOR COMPUTATION OF INCOME UNDER ANY OTHER SECTION SUCH AS 69B. THE PROVISIONS OF SECTION 50C CANNOT BE EXTEND ED TO THE CASE OF PURCHASER UNLESS THE FACT OF UNDERSTATEMENT IS ESTABLISHED BY THE AO AS HELD M/S DILIP NABERA (HUF) ITA NO. 1743/MUM/2011 4 IN SANGAM TOWERS 31 DTR (JP) TRIBUNAL 172. THE STAMP DUTY RATES ARE THE READY RECKONER RATES APPLICABLE TO PARTICULAR AREA WHEREAS THE ACTUAL CONSIDERATION MAY BE MORE OR LESS THAN THE STAMP VALUATION RATES. THE MERE FACT THAT THE PURCHASE CONSIDERATION IS LESS THAN THE STAMP VALUATION RATE S DOES NOT BY ITSELF LEADS TO A CONCLUSION THAT THE A SSESSEE HAD PAID THE DIFFERENCE OVER AND ABOVE. IN CASE OF SANJAY CHWLA 89 ITD 586 (DELHI), SWAMI COMPLEX P. LTD, 111 TTJ (JP) 531, RADHESHYAM PODDAR, HUF 86 TT J 538, 103 TTJ 843 (JD), 38SOT 486 (AHD), IT HAS BEEN HELD THAT EVEN IF THE MARKET VALUE APPEARS TO BE HI GHER THAN THE CONSIDERATION DECLARED IN THE DOCUMENTS, I T CANNOT BE ITSELF THE SOLE GROUND FOR TREATING THE D IFFERENCE AS UNEXPLAINED INVESTMENT OF THE ASSESSEE. THE STAM P DUTY VALUATION CANNOT BE TREATED AS PURCHASE PRICE FOR THE PURPOSE OF ASCERTAINING UNEXPLAINED INVESTMENT, AS HELD IN 193 ITR 770 (AILD), 323 ITR 510 (P & H), RAJ KUMAR VIMALADEVI 279 ITR 360 (ALLD), K.P. VERGHESE J3 1 ITR 597(SC) AND JAWAJEE NAGNATHAN (1994) 4 SCC 595. THE REFERENCE MADE BY THE AO U/S. 142A WAS WITHOUT ANY EVIDENCE THAT SOME ADDITIONAL AMOUNT HAS BEEN PAID BY THE ASSESSEE OVER AND ABOVE THE AMOUNTS RECORDED IN THE AGREEMENT. IN ABSENCE OF ANY EVIDEN CE THE REFERENCE U/S.142A WAS ITSELF VOID AS HELD BY TH E DECISIONS MENTIONED ABOVE. BEFORE MAKING THE REFERE NCE U/S. 142A, AO HAS NOT POINTED OUT ANY OTHER DEFECT IN THE BOOKS NOR HE HAS REJECTED THE OF ACCOUNTS OF TH E ASSESSEE, THEREFORE, THE REFERENCE U/S 142A CANNOT B E SAID TO BE A VALID REFERENCE. THE DECISION OF THE S UPREME COURT IN CASE OF SARGAM CINEMA 328 ITR 513 (SC), DHARIA CONSTRUCTION CO 328 ITR 515(SC), SMT. SURAJ D EVI 328 ITR 604(DEL), NAVEEN GERA (DELHI) 328 ITT 516(DE L), SMT AMAR KUMARI SURANA 89 TAXMAN 544(RAJ) RELIED BY THE APPELLANT'S AR SUPPORT THE CONTENTIONS OF THE APPELLANT THAT UNLESS THERE IS SOME POSITIVE MATERI AL TO SHOW THAT THERE WAS UNDERSTATEMENT OF INVESTMENT, ADDITION SOLELY ON BASIS OF REPORT OF VALUATION OFF ICER CANNOT BE UPHELD. EVEN OTHERWISE THERE IS HUGE DIFFERENCE BETWEEN STAMP VALUATION AND THE DVO'S VALUATION, WHICH ITSELF SUGGEST THAT THE DVO'S REPO RT IS ALSO AN ESTIMATE WHICH CANNOT BE TAKEN AS GOSPEL TR UTH AND STRAIGHTAWAY BE CONSIDERED TO SUBSTITUTE THE AC TUAL COST UNLESS THERE IS SOME EVIDENCE TO SUGGEST THAT THE ASSESSEE WAS INDULGING IN MAKING PAYMENTS OVER AND ABOVE RECORDED IN THE BOOKS OF ACCOUNTS. IN FACT IF THE STAMP DUTY PAID BY THE ASSESSEE IS INCLUDED IN THE AGREEMENT VALUE THEN THE COST RECORDED BY THE ASSES SEE WOULD BE 1,07,44,080/- WHICH IS MUCH HIGHER THAN TH E VALUE OF THE PROPERTY VALUED BY THE REGISTERED VALUE R AT RS. 1,03,50,000/-. UNDER THESE CIRCUMSTANCES NO ADDITION U/S.69B CAN BE MADE ON PRESUMPTIONS AND ASSUMPTIONS. HENCE THE ADDITION ON ACCOUNT OF (I. M/S DILIP NABERA (HUF) ITA NO. 1743/MUM/2011 5 DIFFERENCE BETWEEN DVO'S REPORT AND THE AGREEMENT VALUE U/S.69B IS NOT TENABLE LEGALLY. ACCORDINGLY RS . 30,10,999 U/S.69B MADE BY THE AO IS DELETED. 9. AGAINST THIS ORDER OF THE CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE ITAT. 10. BEFORE US DR SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND, THE AR SUPPORTED THE ORDER OF THE CIT(A) AND POINTE D OUT THAT A LEGAL ISSUE HAD BEEN RAISED UNDER RULE 27 OF THE INCOME T AX RULES, PERTAINING TO THE INITIATION OF REASSESSMENT PROCEE DINGS. 11. WE HAVE HEARD THE ARGUMENTS FROM EITHER SIDE AN D WE HAVE PERUSED THE MATERIAL AND CASE LAWS, CITED BEFORE US . AT THE OUTSET, WE HAVE TO DEMARCATE THE TERRITORY OF THE CASE, I.E. A PPLICATION OF SECTION 50C AND ADDITION TO BE MADE U/S 69C. WE FIND THAT B OTH THE SECTIONS OPERATE INDEPENDENTLY I.E. TO SAY THAT SECTION 50C SHALL BET ATTRACTED WHERE THERE IS A TRANSFER OF PROPERTY BY THE ASSESS EE AND RECEIVES SALES CONSIDERATION. THIS AUTOMATICALLY PUTS INTO OBLIVIO N THE PURCHASE PART OF THE AGREEMENT. HENCE, THE ARGUMENT OF THE ASSESS EE BEFORE THE CIT(A0 WAS CORRECT THAT PROVISIONS OF SECTION 50C D O NOT APPLY ON PURCHASE PART OF THE AGREEMENT. 12. COMING TO APPLICATION OF SECTION 69B, IT IS ATT RACTED IF THE AO FINDS THAT THE AMOUNT EXPENDED ON MAKING INVESTMENT EXCEEDS THE AMOUNT RECORDED IN THE BOOKS OR THE EXPLANATION, AS MADE BY THE ASSESSEE IS NOT ACCEPTABLE. FROM THE ORDERS OF THE REVENUE AUTHORITIES, WE HAVE FIND THAT THE MATERIAL AVAILABLE WITH THE A O WAS REPORT OF THE DVO, AND THE REPORT OF THE REGISTERED VALUER. AS SE EN FROM THE IMPUGNED ORDER, THE REMAND REPORT DOES NOT TALK ABO UT ANY THING FACTUAL BUT IT ONLY SAYS THAT SINCE THE DVO VALUATI ON IS CLOSER TO STAMP M/S DILIP NABERA (HUF) ITA NO. 1743/MUM/2011 6 DUTY VALUATION, HENCE DVOS REPORT IS BEING ADOPTED . AS SUCH THERE IS NOTHING IN THE REPORT OF THE DVO. THE ONLY ACCEPTAB LE DOCUMENT IS THE REPORT OF THE REGISTERED VALUER, WHICH HAS SAME BAS IS. 13. WE FIND THAT THE OBSERVATION OF THE CIT(A) THAT THE AO MUST HAVE SOME REASONABLE MATERIAL TO PUT THE LEASH ON THE AS SESSEE. BUT THE ONLY MATERIAL AVAILABLE WITH THE AO WAS THE DVOS E STIMATED REPORT, WHICH IS BASED ENTIRELY ON COMPARATIVE TRANSACTIONS IN THE CLOSE VICINITY. THIS, CANNOT BECOME THE BASIS OF ADOPTION OF FINANCIAL VALUATION. 14. WE, THEREFORE, HOLD THAT THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A) TO ACCEPT THE ASSESSEE VALUATION, WHICH ULTI MATELY WAS MORE THAN THE REGISTERED VALUERS VALUATION. 15. COMING TO THE GROUND RAISED BY THE ASSESSEE UND ER RULE 27 OF THE INCOME TAX RULES THE ARRANGEMENTS REFERRED TO IN SECTIONS 194 AND 2 36 TO BE MADE BY A COMPANY FOR THE DECLARATION AND PAYMENT OF DIVIDEND S (INCLUDING DIVIDENDS ON PREFERENCE SHARES) WITHIN INDIA SHALL BE AS FOLL OWS : ( 1 ) THE SHARE - REGISTER OF THE COMPANY FOR ALL SHAREHOLDERS SHALL BE REGULARLY MAINTAINED AT ITS PRINCIPAL PLACE OF BUSINESS WITHI N INDIA, IN RESPECT OF ANY ASSESSMENT YEAR FROM A DATE NOT LATER THAN THE 1ST DAY OF APRIL OF SUCH YEAR. ( 2 ) THE GENERAL MEETING FOR PAS SING THE ACCOUNTS OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AND FOR DECLARING A NY DIVIDENDS IN RESPECT THEREOF SHALL BE HELD ONLY AT A PLACE WITHI N INDIA. ( 3 ) THE DIVIDENDS DECLARED, IF ANY, SHALL BE PAYABLE ON LY WITHIN INDIA TO ALL SHAREHOLDERS. FROM THE ORDER OF THE CIT(A) , THE GROUND RAISED PE RTAINED TO NON- ISSUANCE OF NOTICE U/S 143(2) WITHIN 12 MONTHS OF N OTICE U/S 148. 16. FROM THE ORDER OF THE ASSESSMENT U/S 143(3)/148 , NOTICE U/S 142(1) WAS ISSUED AND SERVED ON THE ASSESSEE ON 07. 09.2009. THOUGH THE DATE OF NOTICE U/S 143(2) IS NOT GIVEN IN THE O RDER, BUT IT IS M/S DILIP NABERA (HUF) ITA NO. 1743/MUM/2011 7 APPARENT THAT EITHER IT WOULD HAVE BEEN ISSUED ALON G WITH 142(1) OR SUBSEQUENT. IN EITHER CASES, THE NOTICE IS BARRED, BECAUSE AS PER THE PROVISO THE NOTICE SHOULD HAVE BEEN ISSUED WITHIN T HE PERIOD OF EXPIRY OF TWELVE MONTHS FROM THE DATE OF FILING OF THE RET URN. 17. IN SUCH A CIRCUMSTANCE, THE ISSUE OF NOTICE U/S 143(2) BEYOND THE PERIOD OF 1 YEAR IS BARRED BY LIMITATION, WHICH MAKES THE ENTIRE PROCEEDINGS VITIATED. 18. WE, THEREFORE, HOLD THAT THE REASSESSMENT PROCE EDINGS AND ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTIO N 148 IS BAD IN LAW, WHICH WE QUASH. 19. WE, THEREFORE, ALLOW THE GROUND RAISED BY THE A SSESSEE UNDER RULE 27 OF THE INCOME TAX RULES. 20. IN THE RESULT, THE APPEAL BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH OCTOBER, 2014. SD/- SD/- ( ! ) ( ) ' #$ #$ (N.K. BILLAIYA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 8 TH OCTOBER, 2014 +./ COPY TO:- 1) '*/ THE APPELLANT. 2) +,'*/ THE RESPONDENT. 3) THE CIT (A)-32, MUMBAI. 4) 446 - CITY -21 , MUMBAI / THE CIT- CITY -21, MUMBAI M/S DILIP NABERA (HUF) ITA NO. 1743/MUM/2011 8 5) 89+. 4 , THE D.R. J BENCH, MUMBAI. 6) 9:; COPY TO GUARD FILE. 4# 5 / BY ORDER / / TRUE COPY / / [