Putta Surya Rao, Bargarh V. ITO, Bargarh

ITA 203/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4392 (ITAT-CUTTACK)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 25-05-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 20-04-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY; PARAMITA TRIPATHY
• Assessee Lawyers: S S SHRI S S AGARWAL; S N PADHEE ARS
• Keywords: Opportunity of being heard; Fair market value; Valuation report

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. SL. NO. ITA NO. APPELLANT RESPONDENT A.Y. 1 ) 203/CTK/2011 PUTTA SURYA RAO PAN: ADSPP 37 31 A ITO, BARGARH. 1998 - 99 2 ) 204/CTK/2011 MURARILAL AGRAWAL HUF PAN: AABHM 9873 J ITO, BARGARH 1998 - 99 3 ) 205/CTK/2011 RAJESH KUMAR AGRAWAL PAN: ACEPA 9061 F ITO, BARGARH. 1998 - 99 4 ) 206/CTK/2011 CHIRANJILAL AGRAWAL(HUF) PAN: ABPPA 2356 M ITO, BARGARH. 1998 - 99 5 ) 207/CTK/2011 LINGRAJ SAHU PAN:AAAHL 3502 G ITO, BARGARH. 1998 - 99 6 ) 208/CTK/2011 PITRAM GUPTA PAN: ABBPG 2119 N ITO, BARGARH. 1998 - 99 7 ) 209/CTK/2011 D . INDIRA DORA PAN:AAQPL 3838 N ITO, BARGARH. 1998 - 99 8 ) 210/CTK/2011 SHYAMLAL AGRAWAL PAN: ABR PA 6623 R ITO, BARGARH. 1998 - 99 9 ) 211/CTK/2011 DINDAYAL AGRAWAL HUF PAN: ABPPA 2260 A ITO, BARGARH 1998 - 99 10 ) 212/CTK/2011 RAJENDRA KUMAR AGRAWAL PAN: ACEPA 9060 E ITO, BARGARH. 1998 - 99 11 ) 213/CTK/2011 MEENA AGRAWAL PAN: ABPPA 2337 Q ITO, BARGARH. 1998 - 99 12 ) 214/ CTK/2011 BASANTI AGRAWAL PAN: ABPPA 2325 N ITO, BARGARH. 1998 - 99 13 ) 215/CTK/2011 PARAMESWAR AGRAWAL HUF PAN: AACHP 1044 R ITO, BARGARH. 1998 - 99 14 ) 216 CTK/2011 BIHARILAL AGRAWAL PAN: ABPPA 2134 F ITO, BARGARH. 1998 - 99 15 ) 217/CTK/2011 TARANISE N SAHU PAN: AAAHT 5093 C ITO, BARGARH. 1998 - 99 16 ) 218/CTK/2011 PUTTA SURYA PRABHABATI PAN: ADEPP 3728 M ITO, BARGARH. 1998 - 99 17 ) 219/CTK/2011 SAKUNTALA DEVI PAN: ABRPD 2080 R ITO, BARGARH. 1998 - 99 ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 2 18 ) 220/CTK/2011 JYOTI AGRAWAL PAN: ABZPA 1893 P ITO, BA RGARH. 1998 - 99 19 ) 221/CTK/2011 PUTTA SATYA NARYAN PAN: ADCPP 3730 B ITO, BARGARH. 1998 - 99 20 ) 222/CTK/2011 MURARILAL AGRAWAL PAN: AABHM 9873 J ITO, BARGARH. 1998 - 99 21 ) 223/CTK/2011 BENUMADHAB DORA PAN: ABTPD 8836 F ITO, BARGARH. 1998 - 99 FOR ASSESSEES: S/ SHRI S.S.AGARWAL AND S.N.PADHEE, ARS FOR DEPARTMENT: SMT. PARAMITA TRIPATHY & SHRI S.C.MOHANTY , DR S ORDER PER BENCH : ALL THESE APPEALS ARE FILED BY DIFFERENT ASSESSEES BUT THE FACTS OF THE CASE AND THE ISSUES INVOLVED THEREIN ARE ONE AND SIMILAR AN D AS SUCH, THEY WERE HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAK E OF CONVENIENCE AND BREVITY. 2. THE ASSESSEES HAVE RAISED THE FOLLOWING COMMON ISSUE S IN THESE APPEALS. 1. FOR THAT THE ORDER OF THE LEARNED CIT(A) AND THE LEARNED ASSESS ING OFFICER SUFFER FROM MISINTERPRETATION OF THE DECISION OF THE ITAT, SPECIAL BENCH IN THE CASE OF HIRALAL LOKCHANDANI V. ITO IN ITA NO.555/CTK/2002 DT.17.11.2006. 2. FOR THAT HAVING IDENTIFIED THE VALUATION OF TWO DIFFERENT SETS OF ASSETS WERE TO BE IN ACCORDANCE WITH ADOPTING A FAIR MARKET VALUE THEREOF ON 1ST APRIL,1981 WHEN ONE SET OF ASSETS VIZ., AS DECLARED IN VDIS, 1997 WAS HELD NOT TO BE ADOPTED FOR THE PURPOSE OF COMPUTING CAPITAL GAINS, BEING VALUED AS ON 1.4.1987. 3. FOR THAT THE HONBLE TRIB UNAL IN THEIR DECISION OF THE SPECIAL BENCH IN THE CASE OF HIRALAL LOKCHANDANI V. ITO IN ITA NO.555/CTK/2002 DT.17.11.2006 HAD CATEGORICALLY ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 3 NOTED INVOKING THE PROVISIONS OF RULE 46A WOULD RESULT IN REMAND TO THE ASSESSING OFFICER WAS FOR SPECIFICALLY ADOP TING THE FAIR MARKET VALUE OF ROUGH AND UNCUT DIAMONDS AS ON 1.4.1981 WHICH SUFFERED CAPITAL GAIN AFTER ALLOWANCE OF PROCESSING CHARGES THEREON. 4. FOR THAT THE AUTHORITIES FAILED TO OBSERVE THAT A VALUE AS ON 1.4.1981 WHETHER TO BE VALUED APPLYING INDEXE D COST OF INFLATION BOTH FORWARD OR BACKWARD WOULD REMAIN THE SAME AND WOULD NOT CHANGE UNLESS THE DIAMOND IN QUESTION TO BE VALUED HAS CHANGED ITS FORM AND SHAPE. THE LEARNED CIT(A) IS NOT JUSTIFIED IN THIS REGARD, PARTICULARLY WHEN THE HONBLE ITAT, SPEC IAL BENCH HAS ALREADY CONSIDERED AND DECIDED THIS SPECIFIC ISSUE. 5. FOR THAT THE CHAPTER OF VALUATION UNDER THE VDIS,1997 CLOSED SOON AFTER ITS ACCEPTANCE BY THE LEARNED COMMISSIONER OF INCOME - TAX U/S.68(2), THEREFORE, CANNOT BE NOW CHALLENGED AS FOR THE DATE OF ACQUISITION, ITS NATURE AND/OR ITS FAIR MARKET VALUE AS ON 1.4.1981 AS IT WAS TO BE VALUED ON 1.4.1987 FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN WHEN THEY WERE SOLD IN THE YEAR 1998. 6. FOR THAT PROCEEDINGS OF VDIS GOT COMPLETED WHEN THE ASS ESSEE CREDITED THE SAME IN ITS RECORDS UPTO 31.3.1998 AND THEREFORE, THE CAPITAL GAIN TO BE COMPUTED BY THE ASSESSEE ON DIAMONDS WAS TO BE CONSIDERED FOR THE PURPOSE OF FAIR MARKET VALUE AS ON 1.4.1981, WHICH THE HONBLETRIBUNAL IN SPECIAL BENCH HAS ALREAD Y CONSIDERED AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 7. FOR THAT FOR THE AFORESAID REASONS, THE LEARNED ASSESSING AUTHORITIES WERE NOT JUSTIFIED IN NOT ACCEPTING THE FAIR MARKET VALUE OF THE DIAMOND, VALUED BY THE REGISTERED VALUER, AS ON 1.4.198 1 FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN IN THE ASSESSMENT YEAR 1998 - 99 IN COMPLETE DISREGARD TO THE DIRECTION OF THE ITAT. 8. FOR THAT THE LEARNED CIT(A) HAS PASSED THE IMPUGNED ORDER IN COMPLETE DEFIANCE OF AND ALSO NOT IN CONSONANCE WITH THE OR DER OF THE HONBLE TRIBUNAL AND ON ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 4 CONSIDERATION OF EXTRANEOUS FACTS, AND AS SUCH, THE ORDER PASSED BY THE LEARNED CIT(A) IS ILLEGAL, UNJUST AND IMPROPER AND THEREFORE, LIABLE TO BE SET ASIDE. 9. FOR THAT THE APPEAL OF THE ASSESSEE MAY PLEASE BE ALLOWED O N THE ABOVE GROUNDS OR ANY OTHER GROUND/S AS MAY BE RAISED AT THE TIME OF HEARING. 3. BOTH PARTIES WERE HEARD REGARDING THE ISSUES RAISED BY THE ASSESSEES IN THEIR APPEALS AND THEIR LEGAL IMPLICATIONS. 4. DURING THE COURSE OF HEARING, THE LEARNED AR OF THE ASSESSEE HAS VEHEMENTLY ARGUED APART FROM REITERATING THE FACTS AND CIRCUMSTANCES OF THE CASE THAT BOTH THE LOWER AUTHORITIES HAVE MISINTERPRETED THE DECISION OF THE ITAT, SPECIAL BENCH, CUTTACK AT KOLKATA IN THE CASE OF SHRI HIRALAL LOKCHANDANI V. ITO IN I.T.A.NO.555/CTK/2002 DT.17.11.2006. IN THE SAID CASE, THE ITAT, SPECIAL BENCH HAS RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE - COMPUTE THE CAPITAL GAIN AFTER CONSIDERING THE VALUATION REPORT OF ROUGH DIAMONDS AS B ASIS FOR DETERMINING FAIR MARKET VALUE OF RAW AND UNCUT DIAMOND AS ON 1.4.1981. BOTH THE LOWER AUTHORITIES HAVE NOT ARRIVED AT ANY CONCLUSION AS TO THE VALUE AS ON 1.4.1981 TO BE MADE BY APPLYING COST OF INDEXATION BOTH FORWARD AND BACKWARD . AS SOON AS THE VALUE W AS GIVEN UNDER VDIS 1987 AND SOON AFTER ITS ACCEPTANCE BY THE COMMISSIONER OF INCOME - TAX U/S.68(2) , IT CANNOT BE CHALLENGED WITH REGARD TO THE DATE OF ACQUISITION , ITS NATURE AND ITS FA IR MARKET VALUE AS ON 1.4.1981, SINCE THE DIAMOND VALUED AS O N 1.4.1987 WAS ONLY FOR ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 5 THE PURPOSE OF COMPUTATION OF CAPITAL GAIN AS THEY WERE SOLD IN THE YEAR 1998. BOTH THE LOWER AUTHORITIES HAVE FAILED TO COMPUTE THE VALUE OF NEW CUT AND POLISHED DIAMONDS WHICH HAS TO BE CONSIDERED FOR THE PURPOSE OF FAIR MARKET VA LUE AS ON 1.4.81. BOTH THE LOWER AUTHORITIES HAVE ERRED IN NOT ACCEPTING THE FAIR MARKET VALUE OF DIAMOND VALUED BY THE REGISTERED VALUER AS ON 1.4.1981 FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN IN THE ASSESSMENT YEAR 1998 - 99, WHICH WAS TO BE CONSIDER ED AS BASIS, AS PER THE DIRECTION OF THE TRIBUNAL. BOTH THE LOWER AUTHORITIES HAVE PASSED THE IMPUGNED ORDERS IN COMPLETE DEFIANCE OF THE ORDER OF THE TRIBUNAL AND BY TAKING INTO CONSIDERATION EXTRANEOUS FACTS AND ACCORDINGLY THE ORDERS PASSED BY THE LEAR NED CIT(A) ARE ILLEGAL, UNJUST AND IMPROPER THEREBY RENDER THOSE LIABLE TO BE SET ASIDE. ACCORDINGLY, HE SOUGHT FOR ALLOWING THE APPEALS OF THE ASSESSES BY SETTING ASIDE THE ORDERS OF THE LEARNED CIT(A). 5. CONTRARY TO THIS, THE LEARNED DR S HA VE VEHEMENTLY ARGUED SUPPORTING THE ORDERS PASSED BY THE LEARNED CIT(A) CONTENDING INTER ALIA THAT THIS TRIBUNAL HAS DIRECTED THE ASSESSING AUTHORITIES TO CONSIDER THE VALUATION REPORT OF THE REGISTERED VALUER FOR ARRIVING AT THE FAIR MARKET VALUE OF THE DIAMONDS AS ON 1 .4.1 981 BUT IT WAS NEVER DIRECTED TO ADOPT THE VALUE GIVEN BY THE REGISTERED VALUER IN HIS REPORT. THEREFORE, THE DEPARTMENTAL AUTHORITIES ARE WELL WITHIN THEIR RIGHT IN CONSIDERING THE VALUATION REPORT FILED BY THE ASSESSEE FOR DETERMINING THE FAIR MARK ET VALUE OF THE DIAMONDS IN QUESTION. IN ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 6 THAT WAY, THE IMPUGNED ORDERS PASSED BY THE LEARNED CIT(A) ARE NOT AT ALL INFIRM IN ANY WAY REQUIRING INTERFERENCE. HENCE, THE SAME MAY BE UPHELD BY DISMISSING THE APPEALS OF THE ASSESSEE S . 6. ON CAREFUL CONSIDERATI ON OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL AND ANALYZING THE SAME IN THE LIGHT OF THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND THE DECISION OF SPECIAL BENCH OF ITAT, CUTTACK AT KOLKATA IN THE CASE OF SHRI HIRALAL LOKCHANDANI V. ITO IN I.T.A.NO.555/ CTK/2002 , THE UNDISPUTED FACTS RELATING TO THE ISSUES ON HAND ARE THAT DURING THE ASSESSMENT YEAR 1998 - 99 THE ASSESSEES HAVE SOLD LOOSE DIAMONDS TO M/S. SANTOSH GEMS AND JEWELLERS. WHILE COMPUTING THE INCOME UNDER THE HEAD LONG TERM CAPITAL GAIN, THE AS SESSEE S HA VE TAKEN THE FAIR MARKET VALUE OF THE PROCESSED AND POLISHED DIAMOND AS ON 1.4.1981 BASED ON VALUATION REPORT OF VALUER. THIS WAS NOT ACCEPTED WHILE MAKING ASSESSMENTS U/S.144/147 FOR THE ASSESSMENT YEAR 1998 - 99 AND TREATED THE ENTIRE SALE PROCEE DS OF CUT AND POLISHED LOOSE DIAMONDS IN COMPUTING THE LONG TERM CAPITAL GAIN AND MADE ADDITION TO THE TOTAL INCOME OF THE ASSESSEES. THE ASSESSING OFFICER HAS ALSO REJECTED THE PETITIONS FILED BY THE ASSESSEES U/S.154 OF THE I.T.ACT FOR RECTIFYING THE ASS ESSMENT ORDERS. AGGRIEVED BY THE ORDERS OF THE ASSESSING OFFICER, THE ASSESSEES PREFERRED APPEALS BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS) , WHO CONFIRMED THE ASSESSMENTS BY PASSING THE ORDERS EXPARTE. AGAINST THE SAID ORDERS, THE ASSESSEES FILED AP PEALS BEFORE THE TRIBUNAL. ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 7 7. IN THE MEANTIME, THE ITAT, SPECIAL BENCH, CUTTACK AT KOLKATA PASSED THE ORDER DT.17.11.2006 IN THE CASE OF SHRI HIRALAL LOKCHANDANI V. ITO IN I.T.A.NO.555/CTK/2002 , AND RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE - COMPUTE THE CAPITAL GAIN AFTER CONSIDERING THE VALUATION REPORT OF ROUGH DIAMONDS AS BASIS FOR DETERMINING FAIR MARKET VALUE OF RAW AND UNCUT DIAMOND AS ON 1.4.1981. THE SPECIFIC DIRECTION GIVEN BY THE ITAT, SPECIAL BENCH IN THE ABO VE REFERRED CASE, IS AS FOLLOWS : 21. IN VIEW OF ABOVE FACTUAL/LEGAL POSITION IN OUR OPINION, IT WOULD MEET THE ENDS OF JUSTICE IF THE ORDER OF THE LOWER AUTHORITIES ON THIS POINT IS SET ASIDE AND MATTER IS RESTORED BACK TO THE FILE OF A.O. THE ASSESSEE IS DIRECTED TO PRODUCE THE VALUATION REPORT OF RAW AND UNCUT DIAMOND BEFORE THE A.O. THEREAFTER THE A.O. WILL RE - COMPUTE THE CAPITAL GAIN AFTER CONSIDERING SUCH VALUATION REPORT AS BASIS FOR DETERMINING FAIR MARKET VALUE OF RAW AND UNCUT DIAMOND AS ON 1.4. 1981 . THE A.O. WILL ALLOW ADEQUATE OPPORTUNITY TO THE ASSESSEE WHILE GIVING EFFECT TO THIS ORDER. 8. FOLLOWING THE SAID DECISION OF ITAT, SPECIAL BENCH , THE PRESENT ASSESSEES CASES WERE ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER BY ORDER DT.10.1 2.2007 WITH A SPECIFIC DIRECTION TO PASS FRESH ORDERS IN THE LIGHT OF THE DECISION OF ITAT, SPECIAL BENCH, CUTTACK AT KOLKATA RENDERED IN THE CASE OF SHRI HIRALAL LOKCHANDANI V. ITO IN I.T.A.NO.555/CTK/2002. THE DIRECTION GIVEN BY THE ITAT,CUTTACK BENCH IN ASSESSEES CASES IS QUOTED HERE AS UNDER : 3. AT THE TIME OF HEARING BOTH THE PARTIES AGREED THAT THE ISSUES INVOLVED IN THIS APPEAL ARE COVERED BY THE DECISION OF SPECIAL BENCH, CUTTACK, AT KOLKATA IN THE CASE OF HIRALAL LOKCHANDANI VS. ITO IN ITA NO.5 55/CTK/2002 DATED 17.11.2006. ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 8 4. HEARD BOTH THE PARTIES, PERUSED THE RECORD AND THE ORDER OF THE SPECIAL BENCH, RELIED BY BOTH THE PARTIES. IN VIEW OF THE JUDICIAL DISCIPLINE, THE MATTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO PASS A FRES H ORDER IN THE LIGHT OF THE SPECIAL BENCH DECISION CUTTACK, AT KOLKATA IN THE CASE OF HIRALAL LOCHANDANI VS. ITO IN ITA NO.555/CTK/2002 DATED 17.11.2006. 9. ACCORDINGLY THE ASSESSMENTS WERE TAKEN UP BY THE ASSESSING OFFICER WHEN THE ASSESSEES FURNISHED VALUATION REPORT OF SHAH BHAGWANDAS KASHIDAS CHOKSI, IN WHICH THE FAIR MARKET VALUE OF ROUGH DIAMONDS WITH SKIN AND SPOT, PARTLY TRANSPARENT (I.E., ROUGH UNCUT AND UNPOLISHED DIAMONDS) AS ON 1.4.1981 HAS BEEN INDICATED. THE SAME REPORT WAS ALSO MADE AVAI LABLE TO THE TRIBUNAL ON 23.10.2007. BUT THE ASSESSING OFFICER HAS NOT ACCEPTED THE SAME STATING THAT THE VALUATION REPORT WAS NEVER FILED AT ANY STAGE EARLIER EITHER BEFORE THE ASSESSING OFFICER, CIT(A) OR ITAT AND ACCORDINGLY WENT UPON ADOPTING THE VALUA TION IGNORING THE DIRECTION OF THE TRIBUNAL . AGGRIEVED BY THESE ASSESSMENT ORDERS, THE ASSESSEES FILED APPEALS BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS). IT WAS SPECIFICALLY CONTENDED BEFORE THE LEARNED CIT(A ) THAT THE ASSESSING OFFICER HAS ERRED IN DECLINING TO ACCEPT THE VALUATION OF RAW AND UNCUT DIAMONDS AS ON 1.4.1981 FURNISHED BY THE APPELLANT BEFORE THE ITAT ON 2 3.10.2007 AND BEFORE HIM ON 7.12.2007, WHICH SHOULD HAVE BEEN THE BASIS FOR DETERMINATION OF FMV OF RAW AND UNCUT DIAMONDS TO RE - COMPU TE THE CAPITAL GAIN ON ITS SALES AS PER THE DIRECTION OF THE TRIBUNAL. THE LEARNED CIT(A) COMPARED THE VALUE AS DISCLOSED UNDER ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 9 VDIS AS ON 1.4.1987 AND THE VALUE OF ROUGH, UNCUT AND UNPOLISHED DIAMONDS AS ON 1.4.1981 AS PER THE VALUATION REPORT SUBMITTED B Y THE ASSESSEES. HE DID NOT ACCEPT THE VALUATION REPORT AS ON 1.4.1981 SUBMITTED BY THE ASSESSEES AND DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE FAIR MARKET VALUE OF RAW AND UNCUT DIAMOND AS ON 1.4.1981 TO BE AT PAR WITH THE FMV AS ON 1.4.1987 (DECLARE D UNDER VDIS) AND RE - COMPUTE THE LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEES. HENCE, THE ASSESSEES HAVE FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 10. DURING THE COURSE OF HEARING, THE LEARNED AR OF THE ASSESSEE HAS ASSAILED THE ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES CONTENDING INTER ALIA THAT THEY ARE NOT IN CONSONANCE WITH THE TRIBUNALS ORDER SINCE DIRECTION TO THE ASSESSING OFFICER BY HONBLE ITAT, SPECIAL BENCH CONTAINED IN ITS ORDER DT.17.11.2006 IS THAT THE ASSESSING OFFICER WILL RECOMPUTE THE CAPITAL GAIN AFTER CONSIDERING SUCH VALUATION REPORT AS BASIS FOR DETERMINING FAIR MARKET VALUE OF RAW AND UNCUT DIAMOND AS ON 1.4.81. THE ORDER OF THE TRIBUNAL IS VERY CLEAR THAT SUCH A DIRECTION WAS MADE AS PER THE SUGGESTION OF THE DEPARTM ENT ONLY AS PER THE OBSERVATION MADE IN PARAGRAPH 20 OF THE SAID ORDER DT.17.11.2006. SO AS PER THAT DIRECTION, THE DEPARTMENTAL AUTHORITIES OUGHT TO HAVE CONSIDERED THE VALUATION REPORT SUBMITTED BY THE ASSESSEE AS THE BASIS FOR DETERMINING FAIR MARKET VA LUE OF RAW AND UNCUT DIAMOND AS ON 1.4.81. AS THEY HAVE NOT DONE LIKE SO, THERE IS NONCOMPLIANCE OF THE DIRECTION OF THE TRIBUNAL. THE ORDERS OF THE ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 10 DEPARTMENTAL AUTHORITIES HAVING BEEN PASSED WITHOUT FOLLOWING THE DIRECTION OF THE TRIBUNAL ARE UNSUSTAINA BLE UNDER LAW AND REQUIRE TO BE SE T ASIDE. HE FURTHER CONTENDED THAT THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) HAVE CIRCUMVENT ED THE DIRECTION OF I.T.A.T. CUTTACK BENCH AS WELL AS THAT OF THE HONBLE SPECIAL BENCH OF I.T.A.T. THEY ARE NOT EXPECT ED TO SIT OVER THE JUDGMENT ON THE ISSUES ALREADY ADJUDICATED BY THE ITAT,CUTTACK AS WELL AS THE SPECIAL BENCH OF THE TRIBUNAL. THE SAID ORDERS HAVING BECOME FINAL AND BINDING ON THE PARTIES THERETO, THE DEPARTMENTAL AUTHORITIES HAS NO OTHER ALTERNATIVE TH EN TO FOLLOW THE SAME. CONTRARY TO THIS, THE DEPARTMENTAL AUTHORITIES HAVE AGAIN ADJUDICATED THE VERY SAME ISSUES THOSE WERE CONSIDERED BY THE ITAT, CUTTACK AS WELL AS THE SPECIAL BENCH OF THE TRIBUNAL. , AND HAVE PASS ED THE IMPUGNED ORDERS. THEREFORE, SUCH ORDERS ARE NOT AT ALL SUSTAINABLE FOR LEGAL SCRUTINY AND REQUIRE TO BE SET ASIDE. IN A WAY THAT ACT ION OF THE DEPARTMENTAL AUTHORITIES RESULTED IN VIOLATION THE NORMS OF JUDICIAL DISCIPLINE AND IN THAT VIEW OF THE MATTER, THE ORDERS PASSED BY THE DEPARTME NTAL AUTHORITIES ARE VOID AS PER THE PRINCIPLES DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF ORISSA CERAMIC SALES VS. I.T.O. AND ANOTHER,(1984) 145 ITR 464(ORI) . SIMILAR OPINION WAS EXPRESSED BY HONBLE ALLAHABAD HIGH COURT IN T HE CASE OF OM PRAKASH TRIVEDI VS. UNION OF INDIA AND ANOTHER (2006) 287 ITR 11 (ALL) . IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT JUDICIAL DISCIPLINE DEMANDS THAT AUTHORITIES SUBORDINATE TO THE TRIBUNAL SHOULD ACCEPT THE DECISIONS OF ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 11 THE TRIBUNAL AS BINDING . THIS PROPOSITION IS FORTIFIED BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF KHALID AUTOMOBILES VS. UNION OF INDIA (1995) 4 SCC (SUPPL.) 65 , WHEREIN IT WAS HELD THAT THE TRIBUNAL ORDERS ARE BINDING ON THE ASSESSING OFFICER AND THE FIRST APPELLATE AUTHORITY. HONBLE MADRAS HIGH COURT WAS OF THE SAME VIEW AS PER THE DICTUM RENDERED IN THE CASE OF SREE RAJENDRA MILLS LTD. VS. JOINT CTO, 28 STC 483 (MAD) AND IN THE CASE OF SENTHIL RAJA METAL VS. CTO, 79 STC 38 (MAD) . TH ESE PRINCIPLES WERE ALSO UPHELD BY THE HONBLE APEX COURT IN THE DECISION RENDERED IN UNION OF INDIA VS. KAMALAKSHI FINANCE CORPORATION LTD. AIR 1992 SC 711. FROM THESE DICTUMS IT IS CLEAR THAT THE SUBORDINATE AUTHORITIES HAVE TO UNRESERVEDLY FOLLOW THE ORDERS OF THE HIGHER APPELLATE AUT HORITIES. HONBLE MADHYA PRADESH HIGH COURT HAS ALSO EXPRESSED SAME VIEW IN THE CASE OF AGRAWAL WAREHOUSING AND LEASING LTD. VS. CIT (2002) 257 ITR 235 (MP) ,WHEREIN IT WAS HELD THAT THE ORDERS PASSED BY THE TRIBUNAL ARE BINDING ON ALL TAX AUTHORITIES FUNCT IONING UNDER THE JURISDICTION OF TRIBUNAL. RESPECTFULLY FOLLOWING THE ABOVE DICTUMS LAID DOWN BY THE VARIOUS HIGHER FORUMS STATED SUPRA, THE LOWER AUTHORITIES ARE BOUND TO ACCEPT THE DIRECTION OF THE TRIBUNAL AND ACCORDINGLY PASS THE ORDERS. WHEN ONCE THE VALUATION AS ON 1.4.1987 MADE AVAILABLE BY THE ASSESSEE BEFORE THE DEPARTMENT HAS BEEN ACCEPTED BY THE DEPARTMENT UNDER THE VDIS SCHEME, 1997, IT CANNOT BE UTILIZED FOR ANY OTHER PURPOSES AS THE VDIS SCHEME ITSELF LAID TO THAT EFFECT. THE GRANT OF CERTIFIC ATE UNDER VDIS BY THE CIT MADE IT CLEAR THAT IT CANNOT ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 12 BE USED AGAINST THE ASSESSEE AND THIS IS ALSO OBSERVED AS SUCH BY THE ITAT, SPECIAL BENCH IN THE CASE OF HIRALAL LOKCHANDANI V. ITO IN ITA NO.555/CTK/2002 DT.17.11.2006. AS CAN BE SEEN FROM THE ORDE RS PASSED BY THE LOWER AUTHORITIES, IT IS CLEAR THAT THE ISSUES THOSE HAVE BEEN DECIDED BY THE LEARNED CIT(A) IN THE IMPUGNED ORDERS, WERE ALREADY ADJUDICATED BY THE ITAT, SPECIAL BENCH , THAT TOO BASING ON THE SUGGESTION OF THE DEPARTMENT. THEREFORE, VIEWI NG FROM ANY ANGLE, THE IMPUGNED ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES ARE NOT AT ALL SUSTAINABLE UNDER LAW AND REQUIRE TO BE SET ASIDE. 11. ON CAREFUL ANALYSIS OF THE ORDERS OF THE LEARNED CIT(A) AS WELL AS THE ASSESSING OFFICER PASSED AFTER THE MA TTER WAS RESTORED TO THE ASSESSING OFFICER BY THE TRIBUNAL VIDE ORDER DT.10.12.2007 STATED SUPRA, IT IS FOUND THAT THE TRIBUNAL HAS RESTORED BACK THE CASES TO THE FILE OF THE ASSESSING OFFICER TO PASS FRESH ORDERS IN THE LIGHT OF THE SPECIAL BENCH DECISION OF THE ITAT, CUTTACK SITTING AT KOLKATA IN THE CASE HIRALAL LOKCHANDANI V. ITO IN ITA NO.555/CTK/2002 DT.17.11.2006. ITAT, SPECIAL BENCH HAS HELD IN PARA 21 OF THEIR ORDER THAT THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE IS DIRECTED TO PRODUCE THE VALUATION REPORT OF RAW AND UNCUT DIAMOND BEFORE THE ASSESSING OFFICER. THEREAFTER THE ASSESSING OFFICER WILL RECOMPUTE THE CAPITAL GAIN AFTER CONSIDERING THE VALUATION REPORT OF ROUGH DIAMONDS AS ON 1.4.1981 AS BASIS FOR DETERMI NING FAIR MARKET VALUE OF RAW AND UNCUT DIAMOND AS ON 1.4.1981. HOWEVER, THE ASSESSING OFFICER WILL HAVE TO AFFORD ADEQUATE OPPORTUNITY TO THE ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 13 ASSESSEE WHILE GIVING EFFECT TO THE ABOVE DIRECTION. THE ASSESSING OFFICER HAS STARTED RECONSIDERATION OF THE ASS ESSMENT PROCEEDINGS AFTER HAVING BEEN RESTORED BY THE TRIBUNAL. THE ASSESSING OFFICER HAS ISSUED NOTICE U/S.142(1) AND 143(2) TO THE ASSESSEES. THE ASSESSEES HAVE FILED THROUGH THEIR ADVOCATE A PETITION ALONG WITH THE COPY OF THE VALUATION REPORT OF RAW AN D UNCUT DIAMONDS AS PER THE DIRECTION OF THE ITAT, SPECIAL BENCH. THEREAFTER HE PROCEEDED TO ANALYZE THE ORDER OF THE SPECIAL BENCH OF ITAT AND THEN HE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASES ON HAND. HE FOUND THAT THE ASSESSE S HAVE AGR EED TO THE FINDINGS OF THE TRIBUNAL THAT THE FAIR MARKET VALUE OF DIAMOND WITH SPOTS AND CRACKS AS ON 1.4.81 IS TO BE ADOPTED FOR INDEXATION AND COMPUTATION OF LONG TERM CAPITAL GAIN AND THEY HAVE FILED VALUATION REPORT DT.10.1.1998 OF M/S.SHAH BHAGWANDA S KASHIDAS CHOKSI, SURAT., WHEREIN FAIR MARKET VALUE AS ON 1.4.1981 WAS MENTIONED. THEREAFTER THE ASSESSING OFFICER HAS CONCLUDED THAT THE ASSESSEES HAVE NOT FILED SUCH VALUATION REPORTS EITHER BEFORE THE ASSESSING OFFICER, CIT(A) OR ITAT EARLIER SHOWING THE FAIR MARKET VALUE THEREOF. ON PERUSAL OF THE ORDER OF THE TRIBUNAL, CUTTACK BENCH DT.10.12.2007 IT WAS OBSERVED BY THE TRIBUNAL THAT AT THE TIME OF HEARING BOTH THE PARTIES AGREED THAT THE ISSUES INVOLVED IN THESE APPEALS ARE COVERED BY THE DECISION OF SPECIAL BENCH, CUTTACK SITTING AT KOLKATA IN THE CASE OF HIRALAL LOKCHANDANI V. ITO IN ITA NO.555/CTK/2002 DT.17.11.2006. THEREFORE, THE DEPARTMENT IS NOT ALLOWED TO SAY THAT THE ASSESSEES HAVE NOT FILED THE VALUATION REPORT ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 14 EITHER BEFORE THE ASSESSING O FFICER, CIT(A) OR TRIBUNAL , BEFORE IT IS REMANDED TO THE ASSESSING OFFICER. THE MATTER WAS RESTORED TO THE ASSESSING OFFICER BY THE TRIBUNAL WITH A DIRECTION TO PASS FRESH ASSESSMENT ORDER IN THE LIGHT OF THE DECISION OF ITAT,SPECIAL BENCH IN THE CASE OF H IRALAL LOKCHANDANI V. ITO IN ITA NO.555/CTK/2002 DT.17.11.2006 . THE SPECIAL BENCH HAS CATEGORICALLY OBSERVED IN PARAGRAPH 21 THAT THE ASSESSING OFFICER HAVE TO RECOMPUTE THE CAPITAL GAIN AFTER CONSIDERING THE VALUATION REPORT AS BASIS FOR DETERMINING FAIR MARKET VALUE OF RAW AND UNCUT DIAMOND AS ON 1.4.1981. THE ASSESSING OFFICER HAS OBSERVED ON THE BOTTOM OF PAGE 2 OF HIS ORDER (IN CASE OF ASSESSEE PUTTA SURYA RAO) THAT THE FAIR MARKET VALUE OF CUT AND POLISHED DIAMONDS AT RS.1,30,950 SHOWN IN THE RETURN WITHOUT ANY JUSTIFIABLE REASON OR BASIS THEREOF, AS FABRICATED, IMPROBABLE ABSURD AND NON - ACCEPTABLE. FOR THIS OBSERVATION HE HAS MENTIONED THAT IN VIEW OF CONTINUED NON - COOPERATION OF THE ASSESSEE IN FURNISHING THE DETAILS REQUIRED VIDE SEVERAL NOTICES SE RVED UPON HIM, HE HAS NO OTHER ALTERNATIVE THAN TO FOLLOW THE ORIGINAL ASSESSMENT MADE AS ABOVE AND DETERMINE THE TOTAL INCOME. THIS CLEARLY INDICATES THAT THE ASSESSING OFFICER HAS NOT FOLLOWE D THE DIRECTION OF THE TRIBUNAL, WHEREBY HE WAS ONLY TO TAKE TH E VALUATION REPORT FROM THE ASSESSEE AND DETERMINE THE FAIR MARKET VALUE OF THE RAW AND UNCUT DIAMONDS AFTER CONSIDERING SUCH VALUATION REPORT AS BASIS FOR DETERMINING FAIR MARKET VALUE OF RAW AND UNCUT DIAMOND AS ON 1.4.1981 AND COMPUTE THE CAPITAL GAINS THAT IS TAXABLE IN THE HANDS OF ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 15 THE ASSESSEE S . SO, THERE IS CLEAR VIOLATION OF THE DIRECTION OF THE TRIBUNAL BY THE ASSESSING OFFICER. NOW COMING TO THE ORDER OF THE LEARNED CIT(A) , IT IS FOUND THAT HE HAS WRITTEN AN ELABORATE ORDER BUT WITHOUT CONSIDERIN G AS TO WHETHER THE ASSESSING OFFICER HAS FOLLOWED OR NOT THE DIRECTION OF THE TRIBUNAL GIVEN IN THE CASE OF HIRALAL LOKCHANDANI V. ITO IN ITA NO.555/CTK/2002 DT.17.11.2006. ON THE OTHER HAND, HE HAS STARTED HIS OWN REASONING FOR INTERPRETING THE DIRECTIO N OF THE TRIBUNAL IN THE CASE OF HIRALAL LOKCHANDANI V. ITO (SUPRA). SO THE ACTION OF THE CIT(A) IS NOTHING BUT APPRECIATION OF THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL , WHICH IS NOT THE DUTY OF THE CIT(A). IF HE REQUIRES ANY CLARIFICATION REGARDING A N Y FINDING IN THE SAID ORDER OF THE TRIBUNAL OR THE MEANING OF THE OBSERVATION MADE BY THE TRIBUNAL, THE ONLY COURSE LEFT TO HIM IS TO SEEK CLARIFICATION NECESSARY IN THAT REGARD FROM THE SPECIAL BENCH OF THE TRIBUNAL ITSELF BUT HE IS NOT ENTITLED TO HAVE HIS OWN INTERPRETATION OF THE DIRECTION OF THE SPECIAL BENCH OF THE TRIBUNAL, BECAUSE HE IS NOT A SUPERIOR AUTHORITY TO THE SPECIAL BENCH OF THE TRIBUNAL IN HIERARCHY. ON THE OTHER HAND, HE HAS TO FOLLOW THE DIRECTION GIVEN BY THE TRIBUNAL WITHOUT SITTING ON THE JURISDICTION OF THE TRIBUNAL WHICH PASSED THAT ORDER. HONBLE APEX COURT IN THE CASE OF SARASWATI INDUSTRIAL SYNDICATE LTD V. CIT (237 ITR 1) HAS HELD TO THE EFFECT THAT NEITHER THE INCOME TAX OFFICER NOR, INDEED, THE HIGH COURT WERE ENTITLED TO M AKE STATEMENTS ON TECHNICAL MATTERS FOR WHICH NO BASIS HAD BEEN LAID ON THE RECORD BY EITHER THE REVENUE OR THE ASSESSEE. FROM THIS IT IS CLEAR ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 16 THAT RELIANCE ON A REPORT OF THE TECHNICAL PERSON, SUCH AS, VALUER OF DIAMOND IN SUPPORT OF HIS CLAIM CANNOT B E BRUSHED ASIDE ON SPECIOUS PLEA THAT HE WAS NOT PRODUCED FOR CRO SS EXAMINATION, SIMPLY BECAUSE THERE IS NO EVIDE NCE PRODUCED BY THE ASSESSEE SUB STANTIAT ING THE CONTENTS OF THE REPORT , SU CH AS EXAMINATION OF THE VALUER, SINCE EITHER THE ASSESSING OFFICER OR THE CIT(A) ARE NOT HAVING ANY REQUIRED TECHNICAL QUALIFICATION TO CONTROVERT THE VALUATION REPORT OF THE REGISTERED VALUER. IF AT ALL THEY WANT TO CONTROVERT THE VALUATION GIVEN BY THE VALUER, IT IS OPEN FOR THEM TO CALL FOR A REPORT FROM THE DEPARTMENT AL VALUATION CELL. EVEN THAT WAS ALSO NOT DONE BY THE LOWER AUTHORITIES. THIS IS WHAT HONBLE APEX COURT HAS HELD IN SARASWATI INDUSTRIAL SYNDICATE LTD V. CIT (237 ITR 1) THAT THE AUTHORITIES CANNOT REFUSE TO RELY ON THE EXPERTS OPINION BECAUSE THE SAID EX PERT WAS NOT PRODUCED FOR CROSS EXAMINATION. CONSIDERING ALL T HE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE LOWER AUTHORITIES HAVE NOT FOLLOWED THE DIRECTION OF THE SPECIAL BENCH OF THE ITAT, CUTTACK AT KOLKATA IN THE CASE OF HIRALAL LOKCHANDANI V. ITO (SUPRA) IN THEIR RESPECTIVE ORDERS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES ARE NOT SUSTAINABLE FOR LEGAL SCRUTINY AND HENCE, THEY ARE HEREBY SET ASIDE BY ALLOWING THE AP PEALS OF THE ASSESSEES. THE LEARNED ASSESSING OFFICER IS HEREBY DIRECTED TO ADOPT THE VALUE AS PER THE VALUATION REPORT STATING THEREIN THE FAIR MARKET VALUE OF RAW AND UNCUT DIAMOND AS ON 1.4.1981 FURNISHED BY THE ASSESSEE PURSUANT TO ITA NOS. 203 TO 223/CTK/2011 (ASSESSMENT YEAR 1998 - 99) (GROUP CASES) 17 THE DIRECTION OF THE TRIBUNAL AND RECOMPUTE THE CAPITAL GAIN TO BE TAXED IN THE HANDS OF THE RESPECTIVE ASSESSEES IN ACCORDANCE WITH LAW . N EEDLESS TO SAY THAT THE ASSESSING OFFICER WILL EXTEND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEES. 12. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEES ARE ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 27 TH MAY, 2011 SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 27 TH MAY, 2011 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: 2. THE RESPONDENT: ITO, BARGARH. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY. H.K.PADHEE, SENIOR PRIVATE SECR ETARY.