ACIT, New Delhi V. Shri Kunal Sharad Shah, Mumbai

ITA 1904/DEL/2011

• Counselvise Citation: 190420114 RSA 2011
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR
• Assessee Lawyers: B K DOSHI
• Keywords: Capital asset; Principle of natural justice; Cost of acquisition; Fair market value; Valuation report; Revised return
• Section: 143(3); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI D BENCH BEFORE SHRI R.P. TOLANI, JM & SHRI A.N. PAHUJA, AM ITA NO.1904/DEL./2011 ASSESSMENT YEAR:2005-06 A.C.I.T.CIRCLE-42(1), ROOM NO. 621,MAYUR BHAVAN,CONNAUGHT PLACE, NEW DELHI V/S . SHRI KUNAL SHARAD SHAH 10 TH FLOOR, SUSHANT BUILDING, JT. 8 TH & 10 TH ROAD, KHAR WEST, MUMBAI-400052 [PAN:AOIPS 2453 K] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI B.K. DOSHI, CA REVENUE BY MS. Y. KAKKAR, DR DATE OF HEARING 12-10-2011 DATE OF PRONOUNCEMENT 14-10-2011 O R D E R A.N.PAHUJA:- THIS APPEAL FILED ON 18.04.2011 BY THE REVENUE AGA INST AN ORDER DATED 2 ND FEBRUARY, 2011 OF THE LEARNED CIT(A)-XXX, NEW DELH I, RAISES THE FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN:- 1. DELETING THE ADDITION ON ACCOUNT OF LONG-TERM CA PITAL GAIN BY TAKING THE COST OF PROPERTY AS ON 01.04.1981 AT ` 3,97,610/- (BEING 1/4 TH SHARE OF ASSESSEE) AS AGAINST ASSESSING OFFICERS VALUATION AT ` `35,818/-. 2. DELETING THE ADDITION OF LONG-TERM CAPITAL GAIN BY REDUCING THE VALUE OF ALTERNATE ACCOMMODATION PROVIDED BY TH E DEVELOPER. THE APPELLANT CRAVES THE RIGHT TO ALTER, AMEND ADD OR SUBSTITUTE THE GROUNDS OF APPEAL. 2. ADVERTING TO GROUND NOS. 1 AND 2 IN THE APPEAL, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF ` 3,78,350/- FILED ON 24 TH ITA NO.1904/DEL./2011 2 AUGUST, 2005 BY THE ASSESSEE, AFTER BEING PROCESSED ON 10 TH MAY, 2006 U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ,ISSUED ON 26 TH JULY, 2006. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE A LONGWITH THREE OTHER CO-OWNERS ENTERED INTO A DEVELOPMENT AGREEMENT WITH M/S SEASI DE PROPERTIES (P) LTD. ON 28 TH FEBRUARY, 2005 FOR THEIR PROPERTY E-610 KNOWN AS SUSHANT AT BOMBAY ADMEASURING 909 SQ. YARDS. THE CO-OWNERS ARE STATE D TO HAVE RECEIVED THE FOLLOWING CONSIDERATION IN TERMS OF THE DEVELOPMEN T AGREEMENT:- I) AMOUNT OF ` `4.81 CRORES. II) THREE FLATS IN THE BUILDING TO BE CONSTRUCTED F OR THREE OF THE CO-OWNERS HAVING 2000 SQ. FT. APPROX. OF SALEABLE BUILD UP AR EA (REF. CLAUSE 3 OF THE DEVELOPMENT AGREEMENT). THE PRESENT ASSESSEE WAS O NE OF THE CO- OWNERS WHO WAS TO RECEIVE ONE OF THE CONSTRUCTED FL ATS. III) PENDING DELIVERY OF THE VACANT POSSESSION OF T HE SAID THREE FLATS BY THE DEVELOPER TO THE CO-OWNERS, THE DEVELOPER ALSO AGRE ED TO PROVIDE TEMPORARY ALTERNATE RESIDENTIAL ACCOMMODATION BY WA Y OF TWO SEPARATE THREE-BED ROOM FLATS BEING, FLAT NO.12 AND 32 IN TH E BUILDING KNOWN AS VISHWTARA. ALL COSTS FOR THE SAID TEMPORARY ACCO MMODATION, EXCEPT ELECTRICITY & TELEPHONE, WERE TO BE BORNE & PAID BY THE DEVELOPER. THE ASSESSEE WAS IN OCCUPATION OF FLAT NO.32 . 2.1 THE LONG-TERM CAPITAL GAIN AS A RESULT OF TRANS FER OF THE AFORESAID PROPERTY WAS WORKED OUT BY THE ASSESSEE IN THE COMPUTATION A NNEXED WITH THE RETURN AND LATER REVISED VIDE LETTER DATED 3 RD OCTOBER, 2004 ,AS EXTRACTED IN THE ASSESSMENT ORDER IN PARA 2.2,. AS UNDER:- ITA NO.1904/DEL./2011 3 PARTICULARS AMT. AS PER I.TAX RETURN COMPUTATION (IN ` `) AMT. AS PER REVISED COMPUTATION VIDE LETTER DT. 3.10.200 (IN ` `)4 RECEIVED BY CHEQUE ON 8.6.2004 9,60,000 9,60,000 RECEIVED BY CHEQUE ON 1.3.2005 85,65,000 85,65,000 MARKET VALUE OF FLAT AS PER STAMP DUTY READY RECKNOR 2005 AS PER AGREEMENT DT. 28.02.2005 1,24,32,000 46,52,154 GROSS CONSIDERATION 2,19,57,000 1,41,77,154 LESS EXPENSES- BROKERAGE & LEGAL EXPENSES 4,50,800 4,50,800 NET CONSIDERATION 2,15,06,200 1,37,26,354 LESS INDEXED COST OF RESIDENTIAL HOUSE I.E. 1/4 TH OF ` `8,51,295= ` `2,122,773X480/100 10,21,314 10,21,314 LONG TERM CAPITAL GAINS 2,04,84,886 1,27,05,040 LESS EXEMPTION U/S 54: I) INVESTMENT IN NEW RES. FLAT = ` `1,24,32,000/- II) INVESTMENT IN CAPITAL BONDS: = ` `80,00,000/- 2,04,32,000 46,52,154+ 80,00,000= 1,26,52,154 NET TAXABLE LTCG 52,886 52,886 2.2 THE ASSESSEE ADOPTED COST OF THE ACQUISITION OF AFORESAID PROPERTY AT ` `8,51,095/- AS ON 1.4.1981 ON THE BASIS OF VALUATI ON REPORT DATED 4 TH DECEMBER, 2004 OF THE REGISTERED VALUER. HOWEVER, T HE AO NOTICED THAT THE MARKET VALUE OF THE PROPERTY IN THE PROBATE GRANTED ON 3 RD JULY, 2002 BY THE HONBLE HIGH COURT OF BOMBAY IN TERMS OF WILL DATED 11 TH SEPTEMBER, 1983 OF THE ASSESSEES GRANDFATHER WAS ` `1,43,273/-.IN THE SCHEDULE OF ASSETS SUBMITTED BEFORE THE COURT ALSO, THE MARKET VALUE OF ` `1,43,273/- AS ON THE DATE OF PETITION FOR GRANT PROBATE IN 1988 WAS MENTIONED IN RESPECT OF THE SAID PROPERTY. IN THESE CIRCUMSTANCES, THE AO WAS OF THE OPINION THAT THE V ALUE OF LAND AND STRUCTURE ADOPTED BY THE ASSESSEE AT ` `8,51,095/- AS ON 1.4.1981 WAS NOT REASONABLE AND ACCORDINGLY, ISSUED A SHOW CAUSE NOTICE TO THE ASSE SSEE AS TO WHY COST OF ACQUISITION MAY NOT BE ADOPTED AT ` `1,43,273/-. IN RESPONSE, THE ASSESSEE ITA NO.1904/DEL./2011 4 REPLIED THAT VALUE REFLECTED IN THE PROBATE WAS MAR KET VALUE WHEREAS CAPITAL GAIN HAS TO BE DETERMINED BY ADOPTING FAIR MARKET VALUE .SINCE REGISTERED VALUER HAD DETERMINED THE FAIR MARKET VALUE AT ` 8,51,095/-,ACCORDINGLY, THE CAPITAL GAIN SHOULD BE WORKED OUT ON THAT BASIS, THE ASSESSEE PL EADED. HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE ON THE G ROUND THAT FAIR MARKET VALUE DETERMINED BY THE REGISTERED VALUER IN DECEMBER, 20 04 WAS PURELY AN ESTIMATE, ESPECIALLY WHEN NO SPECIFIC INSTANCE OF A SIMILARLY SITUATE PROPERTY WAS CITED IN THE VALUATION REPORT. THE AO FURTHER OBSERVED THAT NO CREDENCE COULD BE GIVEN TO THE REGISTERED VALUER REPORT SINCE AGAIN ON 19 TH OCTOBER, 2007, A REVISED VALUATION REPORT HAS BEEN FILED BY THE SAME VALUER, ENHANCING THE VALUE AS ON 01.04.1981 TO ` `16,84,095/- NOR THE ASSESSEE SUBMITTED ANY REVISED RETURN MODIFYING THE CAPITAL GAIN. IN THESE CIRCUMSTANCES, THE AO MADE A REFERENCE TO DVO-II, MUMBAI U/S 55A OF THE ACT ,WHO DETERMINED T HE VALUE OF THE PROPERTY AS ON 01.04.1981 AT ` `15,90,440/- IN TERMS OF HIS REPORT DATED 29.11.20 07 AND ACCORDINGLY, ASSESSEES SHARE WORKED OUT TO BE ` ` 3,97,610/-. SINCE CERTAIN DISCREPANCIES WERE NOTICED IN THE SAID REPORT, THE AO ASKED THE DVO TO CLARIFY. HOWEVER, THE DVO INFORMED VIDE LETTER DATED 14 TH DECEMBER, 2007 THAT VALUATION REPORT SENT ON 29.11.2007 WAS BEING REVIEWED. SINC E THE ASSESSMENT WAS TIME BARRING, THE AO ADOPTED FAIR MARKET VALUE OF THE PR OPERTY AS ON 1.4.1981 AT ` `1,43,273/- AS MENTIONED IN THE PETITION, SEEKING PROBATE IN 1988/1992 AND ACCORDINGLY, DETERMINED 1/4 TH SHARE OF THE ASSESSEE IN THE COST OF ACQUISITION AT ` `35,818/-. 2.3 SINCE IN TERMS OF DEVELOPMENT AGREEMENT, THE AS SESSEE WAS, INTER ALIA, PROVIDED ALTERNATE RESIDENTIAL ACCOMMODATION IN BUI LDING KNOWN AS VISHWA TARA FOR TWO YEARS, THE AO DETERMINED FAIR RENTAL VALUE OF THE PROPERTY AT ` `8 LACS PER ANNUM FOR 24 MONTHS, ADOPTING THE RETURN @4% OF THE VALUE OF THE FLAT ,ESTIMATED AT ` `2 CRORES. ACCORDINGLY, FULL VALUE OF THE CONSIDER ATION ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET NAMELY LAND AND BUILDING AT SUSHANT WAS DETERMINED AT ` ` `1,57,77,154/- .AS A RESULT ,LONG TERM CAPITAL GAIN WAS ITA NO.1904/DEL./2011 5 DETERMINED AT ` ` `1,51,54,420/-. AFTER ALLOWING DEDUCTION U/S 54 & 5 4EC OF THE ACT, TAXABLE LONG TERM CAPITAL GAIN WAS DETERMINED AT ` 25,02,274/- AS UNDER: 1/4 TH SHARE OF SALE CONSIDERATION RECEIVED ` `95,25,000/- ADD: I) COST OF CONSTRUCTION OF THE FLAT BORNE BY THE DEVELOPER AS PER REVISED COMPUTATION. ` `46,52,154/- ` `1,41,77,154/- II) CONSIDERATION PASSING TO THE ASSESSEE ON ACCOUNT OF ALTERNATE ACCOMMODATION AS DISCUSSED IN PARA 3.9 ` ` 16,00,000/- TOTAL CONSIDERATION FOR THE ASSESSEE: ` `1,57,77,154/- LESS: BROKERAGE & LEGAL EXPENSES AS CLAIMED. ` ` 4,50,800/- NET CONSIDERATION: ` `1,53,26,354/- LESS INDEXED COST OF THE HOUSE 1/4 TH OF MARKET VALUE AS ON 1.4.1981 AS DISCUSSED ABOVE = ` 35,818/-. INDEXED COST OF THE SAME. 480/100*35818= ` 1,71,926/- LONG TERM CAPITAL GAIN. ` `1,51,54,428/- LESS: EXEMPTED U/S 54 VALUE OF CONSTRUCTION AS ADDED ABOVE.- ` ` 46,52,154 EXEMPTED U/S 54EC: INVESTMENT IN NHB BONDS. ` 80,00,000/- ` `1,26,52,154/- NET TAXABLE LTCG ` ` 25,02,274/- 3. ON APPEAL, THE LD. CIT(A) ADJUDICATED THE ISS UES IN THE FOLLOWING TERMS:- 2.7 I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE APPELLANT. I FEEL THAT VALUATION MADE BY ASSISTANT VALUATION OFF ICER-II, INCOME TAX DEPARTMENT, MUMBAI WHO IS TECHNICALLY COMPETENT PER SON FOR THE PURPOSE OF VALUATION OF PROPERTY CANNOT BE IGNORED AND THEREFORE AO IS DIRECTED TO TAKE VALUE OF RS.3,97,610/- BEING 1/4 TH SHARE OF APPELLANT AS FAIR MARKET VALUE OF PROPERTY AS ON 1.4.1981 FOR THE PURPOSE OF LONG TERM CAPITAL GAIN. 3.1 AS REGARDS FAIR RENTAL VALUE OF ALTERNATE ACCO MMODATION, THE LD. CIT(A) CONCLUDED AS UNDER: ITA NO.1904/DEL./2011 6 .3.5 I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE APPELLANT. I FEEL THAT METHOD TO WORK OUT RENTAL VALUE OF FLAT ADOPTE D BY THE AO IS NOT REALISTIC AS IT WAS BASED ON MARKET VALUE OF FLAT S OLD AND THEREFORE, I DIRECT THE AO TO TAKE FAIR AND REASONABLE VALUE WHI CH ACCORDING TO ME IS RS. 30,000/- PER MONTH AND SINCE THIS FLAT IS SH ARED BY THE APPELLANT WITH HIS BROTHER, HIS SHARE OF SO CALLED RENT TO BE TAKEN AS RS.15,000/- PER MONTH & RS.3,60,000/- FOR 24 MONTHS IS TO BE AD DED IN THE SALE CONSIDERATION OF THE PROPERTY FOR THE PURPOSE OF CA LCULATION OF LONG TERM CAPITAL GAIN. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LEARNED CIT(A).THE LEARNED DR, WHILE SUPPORTING T HE FINDINGS OF AO CONTENDED THAT THE LD. CIT(A) DID NOT ADDRESS THE ISSUES IN PROPER PERSPECTIVE, ESPECIALLY WHEN THE REPORT RECEIVED BY THE AO FROM DVO ,MUMBAI WAS NOT FINAL, THE AO HAVING POINTED OUT CERTAIN INCONSISTENCIES IN THE R EPORT. LIKEWISE, THE LD. CIT(A) DID NOT GIVE ANY BASIS FOR ESTIMATING THE RENTAL VA LUE OF ALTERNATE ACCOMMODATION AT RS. 15,000/- PER MONTH ,FORMING PART OF FULL VAL UE OF CONSIDERATION NOR ADDUCED ANY REASONS WHILE RECORDING HIS CONCLUSION. IN NUTSHELL, IMPUGNED ORDER WAS NOT SPEAKING ONE, THE LD. DR ADDED. 5. ON THE OTHER HAND, THE LD. AR ON BEHALF OF THE ASSESSEE WHILE REFERRING TO ASSESSMENT ORDER DATED 12 TH JULY, 2007 IN THE CASE OF A CO-OWNERS SMT. BINDU DATTA CONTENDED THAT DETERMINATION OF CAPITAL GAINS WAS ACCEPTED IN THE ASSESSMENT ORDER U/S 143(3) OF THE ACT IN HER CASE . IN THAT CASE, THE ASSESSEE WORKED OUT CAPITAL GAIN AS UNDER:- VALUE AS ON 01.04.1981 ` ` `8,51,095 TOTAL INDEXED COST OF ACQUISITION ` ` 40,85,256 ONE-FOURTH SHARE OF INDEXED COST OF ACQUISITION. ` ` 10,21,314 SALE PROCEEDS (ONE FOURTH) ` ` 95,25,000 LESS EXPENSES ON A/C BROKERAGE, LAWYERS FEES ETC. ` ` 4,53,800 NET SALE PROCESS(1/4 TH ) ` ` 90,071,200 1/4 TH SHARE IN INDEXED COST OF ACQUISITION ` ` 10,21,314/- ITA NO.1904/DEL./2011 7 LONG TERM CAPITAL GAIN ` 80,49,886/- 5.1 LIKEWISE, IN THE CASE OF DR. USHA K. SHAH, CAP ITAL GAIN WAS RETURNED BY HER AS UNDER: SALE OF PROPERTY INHERITED FROM FATHER ` ` 1,95,25,000 COST OF SELLING ` ` 4,50,800 NET SALE CONSIDERATION ` ` 1,90,74,200 COST OF ACQUISITION `` ` 2,12,774/- 01/04/1981 WITH INDEXATION @460/100 ` ` 10,21,315 CAPITAL GAIN ` ` 1,80,52,885 THE AFORESAID CAPITAL GAIN HAS BEEN ACCEPTED U/S 14 3(1) OF THE ACT. ACCORDINGLY, THE LD. AR PLEADED THAT COMPUTATION OF CAPITAL GAIN MADE BY THE ASSESSEE SHOULD BE ACCEPTED. TO A QUERY BY THE BENCH, THE LD. AR RE PLIED THAT THE ASSESSEE DID NOT DISPUTE THE AFORESAID FINDINGS OF THE LD. CIT(A ) IN FURTHER APPEAL. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSEE ALONG WITH THREE OTHER CO-OWNERS SHRI VISHAL SHARAD SHAH,MS. BINDU SAROJKUMAR DUTTA AND MS. USHA KISHOR SHAH TRANSFERRED THEIR AFORESAID INHERITED PROPERTY AT SUSHANT JUNCTION OF 8 TH & 10 TH ROAD,KHAR(W), MUMBAI, IN TERMS OF A DEVELOPMENT AGREEMENT DATED 2 8.2.2005 FOR A CONSIDERATION AS EXTRACTED IN PARA 2 ABOVE. AS IS A PPARENT FROM THE TERMS OF THE DEVELOPMENT AGREEMENT, APART FROM TOTAL CONSIDERAT ION OF ` 4,81,00,000/- ALL THE OTHER THREE CO-OWNERS EXCEPT MS. USHA KISHORE SHAH GOT THREE FLATS. MS. BINDU SAROJKUMAR DUTTA, IS ENTITLED TO A 2000 SQ. FT. ON FIRST FLOOR ALONG WITH TERRACE NOT LESS THAN 200 SQ. FT AND TWO PARKING SPACES WHILE S HRI VISHAL SHAH IS ENTITLED TO A 2000 SQ. FT FLAT ON 9 TH FLOOR ALONG WITH TWO PARKING SPACES AND THE ASSESS EE ON 10 TH FLOOR ALONG WITH ONE PARKING SPACE. THESE THREE C O-OWNERS WERE ALSO ENTITLED TO ALTERNATE RESIDENTIAL ACCOMMODATION IN FLAT NOS. 12 & 32 IN THE BUILDING ITA NO.1904/DEL./2011 8 KNOWN AS VISHWA TARA SITUATE AT 12 TH ROAD KHAR UNTIL THE DELIVERY OF AFORESAID FLATS EARMARKED FOR THEM.. SINCE RETURN OF INCOME WAS ACCEPTED IN THE CASE OF MS. USHA KISHOR SHAH AND SHE IS NOT ENTITLED TO ANY FLAT NOR ANY ALTERNATE ACCOMMODATION, APPARENTLY CONSIDERATION ON ACCOUNT OF EARMARKED FLAT OR ALTERNATE ACCOMMODATION DID NOT FORM PART OF FULL VALUE OF CONSIDERATION IN HER CASE. THE ASSESSEE IS ENTITLED TO A FLAT AT 10 TH FLOOR WHILE MS. BINDU SAROJKUMAR DUTTA ON FIRST FLOOR WITH DIFFERENT PARKING SPACES AND AREA. THUS, CONSIDERATION FOR THESE FLATS VARIED IN THEIR CASES. EVEN OTHERWI SE, THERE IS NOTHING TO SUGGEST AS TO WHETHER THE TERMS AND CONDITIONS OF THE DEVEL OPMENT AGREEMENT WERE ANALYSED BY THE CONCERNED AO WHILE COMPLETING ASSES SMENT IN THE CASE OF MS. BINDU SAROJKUMAR DUTTA. APPARENTLY, TERMS AND COND ITIONS OF THE DEVELOPMENT AGREEMENT AS ANALYSED BY THE AO IN THE INSTANT CAS E ,HAVE NOT BEEN ANLAYSED IN THE ASSESSMENT OF AFORESAID TWO LADIES WHILE THE ASSESSEE DID NOT INFORM THE STATUS OF ASSESSMENT IN THE CASE OF SHRI VISHAL SHA RAD SHAH. 6.1 BEFORE PROCEEDING FURTHER, WE MAY HAVE A LOO K AT THE RELEVANT PROVISIONS GOVERNING DETERMINATION OF CAPITAL GAINS. IN TERMS OF PROVISIONS OF SEC. 48 OF THE ACT, THE INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' HAS TO BE COMPUTED, BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATI ON RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET, THE FO LLOWING AMOUNTS, NAMELY:- (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITION OF THE ASSET AND THE C OST OF ANY IMPROVEMENT THERETO 6.2 COST OF ACQUISITION IN TERMS OF PROVISIONS OF SEC.. 55(2)(B)(II) OF THE ACT IN CASE OF THE CAPITAL ASSET ,WHICH BECAME THE PROPER TY OF THE ASSESSEE BY ANY OF THE MODES SPECIFIED IN SUB-SECTION (1) OF SECTION 4 9 OF THE ACT, AND THE CAPITAL ASSET BECAME THE PROPERTY OF THE PREVIOUS OWNER BEF ORE THE 1ST DAY OF APRIL, 1981, MEANS THE COST OF THE CAPITAL ASSET TO THE PR EVIOUS OWNER OR THE FAIR MARKET VALUE OF THE ASSET ON THE 1ST DAY OF APRIL, 1981, A T THE OPTION OF THE ASSESSEE.. IN THE INSTANT CASE, THE PROPERTY IS INHERITED BY THE ASSESSEE ALONG WITH OTHER CO- ITA NO.1904/DEL./2011 9 OWNERS AND THEREFORE, COST OF ACQUISITION IN TERMS OF CLAUSE (II) & (III) OF SEC. 49(1) OF THE ACT IS DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT, AS INCREASED BY THE COST OF ANY IMPROV EMENT OF THE ASSETS INCURRED OR BORNE BY THE PREVIOUS OWNER OR THE ASSESSEE, AS THE CASE MAY BE . IN THE CASE BEFORE US , THE ASSESSEE EXERCISED HIS OPTION AND ADOPTED COST OF ACQUISITION AS FMV AS ON 1.4.1981 IN TERMS OF REPO RT OF REGISTERED VALUER, WHO DETERMINED THE FAIR MARKET VALUE INITIALLY AT ` ` 8,51,295 AND LATER REVISED TO ` ` 16,84,095/-. HOWEVER, THE AO ADOPTED THE COST OF AC QUISITION AS THE FAIR MARKET VALUE OF THE PROPERTY ON 1.4.1981 MENTIONED IN THE PETITION FOR PROBATE FILED IN 1988 AT ` `1,43,273/- AND ACCORDINGLY, DETERMINED THE ASSES SEES SHARE. ON THE OTHER HAND , THE LD. CIT(A) ,WITHOUT ADVERTING TO T HE RELEVANT PROVISIONS OF SEC. 49 & 55 OF THE ACT, SIMPLY ADOPTED THE VALUATION AS DE TERMINED THE DVO, EVEN WHEN THE AO HIMSELF QUESTIONED THE VALIDITY OF THE SAID REPORT OF DVO, THERE BEING A NUMBER OF INCONSISTENCIES. LIKEWISE, THE LD. CIT(A) DETERMINED THE FAIR RENTAL VALUE OF ALTERNATE ACCOMMODATION IN THE FORM OF A FLAT AT VISHWA TARA ,FORMING PART OF FULL VALUE OF CONSIDERATION ACCRUING AS A R ESULT OF THE TRANSFER OF THE CAPITAL ASSET NAMELY LAND AND BUILDING AT SUSHANT ,MERELY A T RS. 15,000/- ,WITHOUT INDICATING ANY BASIS OR REASONS. THE LD. CIT(A) NO WHERE POINTED OUT AS TO WHY VALUATION MADE IN THE REPORT OF THE REGISTERED VALU ER ,DETERMINING FAIR MARKET VALUE AS IN 1.4.1981 INITIALLY AT ` ` 8,51,295 AND LATER ` ` 16,84,095/- IN HIS SUPPLEMENTARY REPORT, IS FAULTY AND HOW VALUE DETER MINED IN THE REPORT OF DVO, VALIDITY OF WHICH WAS QUESTIONED BY THE AO HIMSELF, IS CORRECT.THE LD. CIT(A) DID NOT CARE TO ASCERTAIN THE BASIS OF COST OF ` 1,43,273 MENTIONED IN THE PETITION FOR PROBATE, WHICH THE AO CONSIDERED AS FAIR REASONABL E VALUE AS ON 1.4.1981. IN FACT,THE LD. CIT(A) DID NOT RECORDED ANY FINDING S ON THESE FACTUAL ASPECTS. A MERE GLANCE AT THE IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE, NAMELY, THAT EVERY JU DICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS REASONED ORDER, WHICH SHOU LD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO T HE ISSUES/POINTS RAISED BEFORE IT. THE APPLICATION OF MIND TO THE MA TERIAL FACTS AND ITA NO.1904/DEL./2011 10 THE ARGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. SECTION 250(6) OF THE ACT MANDATES THAT THE ORDER OF THE CIT(A) WHIL E DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POIN TS FOR DETERMINATION, THE DECISION THEREON AND THE REASONS FOR THE DECISION. THE REQUIREMENT OF RECORDING OF REASONS A ND COMMUNICATION THEREOF BY THE QUASI-JUDICIAL AUTHORI TIES HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PRO CEDURE AND IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RUL E OF LAW. IT INTRODUCES CLARITY, CHECKS THE INTRODUCTION OF EXTR ANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZES ARBITRARINE SS IN THE DECISION-MAKING PROCESS. WE MAY REITERATE THAT A D ECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHI N ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB,(1995)1SCC 760(SC)]. AS IS APPARENT, THE IMPUGNED ORDER SUFFERS FROM LACK OF REASONING AND IS NOT A SPEAKI NG ORDER. IN VIEW OF THE FOREGOING, ESPECIALLY WHEN THE LD. CIT(A) HA VE NOT PASSED A SPEAKING ORDER ON VARIOUS ISSUES WHILE DETERMINING FULL VALUE OF CONSIDERATION ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET NAMELY LAND AND BUILDING OR EVEN COST OF ACQUISITION AS ON 1.4. 1981 IN THE LIGHT OF RELEVANT PROVISIONS, WE CONSIDER IT FAIR AND APPROP RIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUES RAISED IN THE GROUNDS BEFORE US, AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF OUR AFORESAID O BSERVATIONS, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES . NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL, THE LEARNED CIT(A ) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MA NDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT. WITH THESE O BSERVATIONS, GROUND NOS. 1 & 2 IN THE APPEAL ARE DISPOSED OF. 7.. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND IN THE APPEAL, THEREFORE, THIS GROUND IS DI SMISSED. ITA NO.1904/DEL./2011 11 8.. NO OTHER ARGUMENT OR PLEA WAS MADE BEFORE US. 9. IN RESULT, APPEAL IS ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- ( R.P. TOLANI) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER COPY OF THE ORDER FORWARDED TO :- 1. A.C.I.T.,CIRCLE-42(1), ROOM NO. 621,MAYUR BHAVA N,CONNAUGHT PLACE,NEW DELHI 2. SHRI KUNAL SHARAD SHAH, 10 TH FLOOR SUSHANT BUILDING, JT. 8 TH & 10 TH ROAD, KHAR WEST, MUMBAI-400052 3. CIT (APPEALS)-XXX, NEW DELHI 4. THE CIT CONCERNED. 5. THE DR, ITAT,D BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI