Awadhesh Kumar, Ballia V. ITO, Ward - 2(4), Ballia

ITA 179/VNS/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0793 (ITAT-VARANASI)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-10-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 19-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Rule of consistency; Fair market value; Valuation report; Assessment record; Set aside
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT ‘SMC’ BENCH, VARANASI (THROUGH VIRTUAL HEARING) BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER ITA No.179/VNS/2019 Assessment Year: 2016-17 Awadhesh Kumar, Arya Samaj Road, Ballia, Uttar Pradesh PAN-ATHPK1294N v. Income Tax Officer, Ward-2(4), Ballia, U.P. (Appellant) (Respondent) Appellant by: Sh. Praveen Godbole, C.A. Respondent by: Sh. A.K. Singh, Sr. DR Date of hearing: 12.10.2022 Date of pronouncement: 14.10.2022 O R D E R SHRI VIJAY PAL RAO, JUDICIAL MEMBER: This appeal by the assessee is directed against the order dated 01.05.2019 of CIT(A) for the assessment year 2016-17. The assessee has raised the following grounds of appeal:- “1. That in any view of the matter the assessment made on an income of Rs. 14,73,417/- by order dated 28-12-2018 passed u/s 143(3) of the Income Tax Act is bad both on the facts and in law. 2. That in any view of the matter the addition of Rs. 8,32,507/ was on account of short term capital gain as made by the Assessing Officer and confirmed by CIT(A) is highly unjustified. 3. That in any view of the matter addition of Rs 8,32,507/ wrongly made by the Assessing Officer by invoking provision of section 50C of the Act without considering the valuation report of the assessee and the location/defects in the said land hence simply on presumption addition as made is highly unjustified. 4. That in any view of the matter the law is very clear that tax to be levied on real income and not on artificial income as done in the present case. Further the department failed to refer the matter to the valuation officer to determine the fair market value of the said property hence the working of short term capital gain as determined by the Assessing ITA No.179/VNS/2019 Awadhesh Kumar 2 Officer at Rs. 15,07,000/- as against Rs. 6,74,493/- as disclosed by the assessee thereby making an addition of Rs. 8,32,507/- is highly unjustified. 5. That in any view of the matter addition of Rs. 84,000/- on account of cost of improvement as claimed by the assessee which was disallowed by the Assessing Officer and his action confirmed by the CIT(A) is highly unjustified. 6. That in any view of the matter finding an observation of both the two lower authorities with regard to addition of Rs. 8,32,507/- and Rs. 84,000/- are incorrect and contrary to the actual facts of the case. 7. That in any view of the matter the appellant reserves his right to take any fresh grounds of appeal before hearing of appeal.” 2. The only issue arises in this appeal of the assessee is regarding the addition made by the AO to the short term capital gain declared by the assessee by taking the stamp duty valuation as full value consideration under section 50C of the Income Tax Act as against the sale consideration shown in the sale deeds. 3. The assessee sold three plots of land for a consideration of Rs. 6,74,493/- and declared short term capital gain calculated on the basis of the sale consideration shown in the sale deeds. The AO noted that the stamp duty authority has valued these properties for the purpose of stamp duty at Rs. 31,11,000/-. Accordingly, the AO propose to make the addition by considering the full value consideration as per section 50C of the Act. The assessee objected to the same and filed the written submissions. The AO did not accept the contention of the assessee and computed the short term capital gain on the basis of the full value consideration in terms of section 50C of the Income Tax Act by adopting the stamp duty valuation. The assessee challenged the action of the AO before the CIT(A) but could not succeed. 4. Before the Tribunal, the learned AR of the assessee has submitted that the assessee purchased 0.0211 hectare land at cost of Rs. 17,00,000/- and stamp duty valuation at Rs. 16,88,000/- on 27.02.2015. Out of the aforesaid ITA No.179/VNS/2019 Awadhesh Kumar 3 land, the assessee sold three plot of land vide sale deeds dated 4.7.2015, 24.8.2015 and 25.8.2015, respectively. The total sale consideration for these plots of land was received by the assessee of Rs. 8,50,000/- whereas the stamp duty authority has valued these properties at Rs. 31,11,000/-. The learned AR has submitted that the assessee sold the land in question within a short period of 5 to 6 months from the date of purchase and at the time of purchase of the property, the stamp duty valuation of the entire land was only Rs. 16,88,000/- but at the time of sale of small piece out of the total land has been value by the stamp duty authority at Rs. 31,11,000/- which is an increase of more than 1300%. The learned AR has thus submitted that despite the reply filed by the assessee, the AO has not referred the valuation to the DVO for determination of fair market value of the property in question and made the addition by adopting the stamp duty valuation as full value consideration. He has further submitted that the assessee has also filed a valuation report in support of the claim of the fair market value of the property but the same was not considered by the authorities below. The learned AR has pointed out that an identical issue has been considered by this Tribunal in the case of wife of the assessee Smt. Manju Soni vs. Income Tax Officer in ITA No. 9/VNS/2020, vide order dated 28 th July, 2022. He has filed a copy of the said order and submitted that the Tribunal has set aside the issue to the record of the AO for re-computation of the capital gain after referring the valuation of the property to DVO for determination of the fair market value as per the provisions of section 50C(2) of the Income Tax Act. 5. On the other hand, the learned DR has relied upon the orders of the authorities below. 6. I have considered the rival submissions as well as relevant material on record. The facts are not in dispute that the assessee has offered the short term ITA No.179/VNS/2019 Awadhesh Kumar 4 capital gain from sale of the plots of land computed on the basis of the sale consideration shown in the sale deeds whereas the AO propose to make the addition by taking the full value consideration being the stamp duty value at Rs. 31,11,000/- as against the sale consideration of Rs. 8,50,000/- shown in the sale deeds. The assessee filed the written submissions dated 13.12.2018 which has been reproduced by the AO in the assessment order. The assessee raised the objections for adopting the stamp duty valuation as full value consideration. The AO did not accept the contention of the assessee and adopted the stamp duty valuation as full value consideration on the ground that the assessee has not disputed the rate before the stamp duty authority. 7. At the outset, it is noted that an identical issue has been considered by this Tribunal in the case of Smt. Manju Soni vs. Income Tax Officer (supra), vide order dated 28.07.2022 in para 6 and 7 as under:- “6. I have considered the rival submissions as well as relevant material on record. The assessee purchased the land in question situated at mauja Newari Ballia measuring 52 decimal or 0.21 hectare, vide purchase deed dated 27.2.2015 for a total consideration of Rs. 16,00,000/-. Thereafter, the assessee sold a part of the said land measuring 0.025 hectare or about 2 Kattha on 24 th March, 2015 for a consideration of Rs. 2,00,000/-. The transaction of purchase and sale of land happened within a period of one month. The Assessing Officer has made an addition under section 50C of the Act to the short term capital gain by adopting the Stamp Duty Valuation of Rs. 28,05,000/- as full value consideration as against the sale consideration of Rs. 2,00,000/- shown by the assessee. Consequently, an addition of Rs. 26,90,000/- has been made by the Assessing Officer to the total income of the assessee. It is evident from the assessment record that the assessee has submitted its reply explaining the reasons for the sale consideration of Rs. 2,00,000/- as fair market value of the land in question and also contended that the entire piece of land was valued by the Stamp Duty at Rs. 16,88,000/- at the time of purchase on 27 th February, 2015 and within one month only 10% of the said land was valued at the time of sale on 24 th March, 2015 at Rs. 28,05,000/- which itself shows that the Stamp Duty Valuation is not reasonable and abnormally high. It is a matter of fact that the Stamp Duty authority has valued the property in question at Rs. 16,88,000/- on 27 th February, 2015 and then within a period of one month, 10% of the said land was valued by the Stamp Duty authority at Rs. 28,05,000/- which shows that ITA No.179/VNS/2019 Awadhesh Kumar 5 there is a steep hike in the valuation for the purpose of Stamp Duty and that too within a period of one month. Thus, such an enhancement / increase in the Stamp Duty Valuation is possible only when some abnormal or inordinary event happened. All these facts explained by the assessee before the Assessing Officer which lead to the fair inference that the assessee has seriously objected to the adoption of Stamp Duty Valuation as full value consideration in terms of section 50C(2) of the Income Tax Act and consequently the Assessing Officer is duty bound to refer the valuation of the property in question to the DVO for determination of fair market value of the property. Only after getting the fair market value determined by the DVO, the Assessing Officer ought to have computed the capital gain and consequential addition, if any. The Agra Bench of this Tribunal in the case of Raj Kumari Agarwal vs. DCIT (supra) has considered this issue in para 6 to 8 as under:- “6. We find that here is a case in which the assessee has specifically objected to the adoption of stamp duty valuation rate. The mere fact that the appellant has not challenged the stamp duty valuation cannot be put against the assessee. The authority for the this proposition is contained in, Hon’ble jurisdictional High Court’s judgment, in the case of CIT Vs Chandra Narain Chaudhuri ([2013] 38 taxmann.com 275 (Allahabad), wherein Their Lordships have observed that, “The question as to whether the assessee filed any objections before the Stamp Valuation Authority to dispute the valuation, or filed appeal or revision or made reference before any authority, court or the High Court under sub section (2) (b) of Section 50C of the Act is not of any relevance in this case, as the AO himself observed that the assessee did not dispute the stamp valuation before the Stamp Valuation Authority. There may be several reasons for the purchaser not to file such objection. A purchaser may not go into litigation, and pay stamp duty, as fixed by the Stamp Valuation Authority, which may be over and above the fair market value of the property, as on the date of transfer, though the amount so determined has not been actually received by owner of the property”. The position as to whether reference should be made to the DVO, even when there is no specific plea to that effect by the assessee, is now well set out in Hon’ble Calcutta High Court’s judgment in the case of Sunil Kumar Agarwal CIT (GA No 3686/2013 in ITAT No 221/ 2013; judgment dated 13th March 2014), wherein Their Lordships have, inter alia, observed as follows:- “ ....we are of the opinion that the valuation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned ITA No.179/VNS/2019 Awadhesh Kumar 6 advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi-judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law.” 7. As there is no binding judicial precedent contrary to what has been held by Hon’ble Calcutta High Court, as above, the esteemed views of Their Lordships, even though from a non-jurisdictional High Court, bind us as well. 8. In the light of the above legal position, the plea of the assessee, as set out in the ground of appeal, is indeed well taken. The prevailing legal position is now like this. Once the assessee claims that the actual market value of the land or building is less than stamp duty valuation adopted by the authorities, it is incumbent upon the Assessing Officer to refer the valuation of said land or building to the departmental valuation officer. In the present case, the Assessing Officer has not done so. In view of this factual position, and in the light of the discussions above, we deem it fit and proper to remit the matter to the file of the Assessing Officer for adjudication de novo after making a reference to the DVO, and completing the assessment on the basis of the valuation so received from the DVO. While so deciding the matter afresh, the Assessing Officer will decide the matter in accordance with the law, by way of a speaking order and after giving a reasonable opportunity of hearing to the assessee. We direct so.” 7. Similar view has been taken by the Tribunal in a series of decisions including the decisions relied upon by the learned AR. Accordingly, in the facts and circumstances of the case, the impugned order is set aside and the matter is remanded to the record of the Assessing Officer to redo computation of the capital gain after referring valuation of the property to the DVO for determination of the fair market value, as per section 50C(2) of the Income Tax Act. Needless to say, the assessee be given an appropriate opportunity of hearing before passing the fresh order.” 8. The properties sold by the assessee as well as his wife are part of the same parcel of land and therefore, the facts of both the case are identical. Accordingly, to maintain the rule of consistency, the impugned orders of the authorities below are set aside and matter is remanded to the record of the AO for re-computation of the capital gain after getting the fair market value determined through reference to the DVO under section 50C(2) of the Income ITA No.179/VNS/2019 Awadhesh Kumar 7 Tax Act. Needless to say, the assessee be given an appropriate opportunity of hearing before passing the fresh order. 9. In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in virtual court proceedings on 14.10.2022. Sd/- [VIJAY PAL RAO] JUDICIAL MEMBER DATED: 14/10/2022 Allahabad Sh Copy forwarded to: 1. Appellant- 2. Respondent- 3. CIT(A) 4. CIT 5. DR By order Sr. P.S.