Sh. Mahesh Chand Jain, Gurgaon V. ITO, New Delhi

ITA 203/DEL/2012

• Counselvise Citation: 20320114 RSA 2012
• Duration Of Justice: 3 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 25-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 13-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJHA
• Assessee Lawyers: SATYAM SETHI; A T PANDA S
• Keywords: Sale consideration of property below Jantri Value; Opportunity of being heard; Cost of acquisition; Fair market value; Valuation report
• Section: 50C

Judgement Text

ITA NO. 203/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A.NO. 203/DEL/2012 A.Y. : 2008 - 09 MAHESH CHAND JAIN, I - 923, PALAM VIHAR, GURGAON - 122017 (PAN: AALPJ7704P) VS. INCOME TAX OFFICER, WARD - 32(4), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SATYAM SETHI & SH. A.T. PANDA, ADVOCATES DEPARTMENT BY : SH. P. DAM KANUNJHA, SR. DR. DATE OF HEARING : 25 - 3 - 2015 DATE OF ORDER : 2 7 - 3 - 2015 ORDER PER H.S. SIDHU : JM THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 18/10/2011 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - XXVI, NEW DELHI PERTAINING TO THE AS SESSMENT YEAR 2008 - 09. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THE ASSESSEE S APPEAL. ITA NO. 203/DEL/2012 2 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME - TAX (APPEALS) - XXVI, NEW DELHI [BRIEFLY 'THE CIT(A)'] HAS ERRED IN UPHOLD ING THE ASSESSMENT OF TOTAL INCOME AT RS.22,44,5701 - . THE ASSESSEE DENIES HIS LIABILITY TO BE ASSESSED AT THE INCOME OFRS.22,44,570/ - . 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN HOLDING THAT LONG TERM CAPITAL GA IN ON SALE OF PLOT NO.65 - B, ROOP NAGAR INDUSTRIAL ESTATE LONI (UP) WAS RIGHTLY COMPUTED AT RS.17, 73,417/ - . 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT APPRECIATING THAT VALUE DETERMINED BY THE AVO OF PLOT NO .65 - B, ROOP NAGAR INDUSTRIAL ESTATE LONI (UP), WHICH WAS A TENANTED PROPERTY AND WAS SOLD TO THE PERSON WHO WAS IN ACTUAL CONTROL & POSSESSION THEREOF WAS NOT PROPERLY AN CORRECTLY DETERMINED. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE VALUE OF PLOT NO.65 - B, ROOP NAGAR INDUSTRIAL ESTATE LONI (UP) DETERMINED AT RS.28,24,100/ - DID NOT REPRESENT FAIR MARKET VALUE MORE SO BECAUSE IT WAS A CASE OF DISTRESS SALE. ITA NO. 203/DEL/2012 3 5. THAT ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN NOT CONSIDERING THE SUBMISSIONS IN PROPER PERSPECTIVE. THAT THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY ANY OF THE GROUND EITHER AT OR BEFORE THE HEARING OF THE APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 27.09.2008/ DECLARING A TOTAL INCOME OF RS. 4,71,150/ - . THE CASE WAS PROCESSED U/S 143(1) AND SUBSEQUENTLY WAS SELECTED FOR SCRUTINY ON THE BASIS OF THE RECEIPT OF AIR INFO RMATION. THEREAFTER NOTICE U/S 143(2) WAS ISSUED ON 13.08.2009 THROUGH SPEED POST. IN RESPONSE TO THE SAME THE AR OF THE ASSESSEE ATTENDED THE PROCEEDINGS AND FILED THE DETAILS. ACCORDING TO THE AIR INFORMATION/ THE ASSESSEE SOLD AN IMMOVABLE PROPERTY AT R S.31,32,000/ - AND THE SAME MADE AVAILABLE TO THE ASSESSEE BY THE ASSESSING OFFICER. ON PERUSAL OF THE SALE DEED FURNISHED BY THE AR DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS/ IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE SOLD THE PROPERT Y AT RS.10,25,000/ - WHEREAS ACCORDING TO THE GOVT. CIRCLE THE VALUE OF RATE THE PROPERTY WAS RS.38,56,000/ - . AFTER TAKING INTO CONSIDERATION THE SALE VALUE AT RS.10,25,000/ - THE ASSESSEE IN HIS COMPUTATION CALCULATED A CAPITAL LOSS AT RS.25,683/ - . THEREFORE , THE ASSESSING OFFICER CONSIDERED THE ITA NO. 203/DEL/2012 4 SALE VALUE AT RS.38,56,000/ - IN CONCURRENCE TO THE PROVISIONS LAID IN SECTION 50C OF THE IT ACT/ 1961. IN COMPLIANCE TO THE REQUEST MADE BY THE A.O. VIDE LETTER DATED 02.08.2010 THE ASSESSING OFFICER REFERRED THE PROP ERTY TO THE AVO, MEERUT VIDE LETTER DATED 09.08.2010/ U/S 50C(2) TO DETERMINE THE FAIR MARKET VALUE OF THE PROPERTY. VIDE REPORT DATED 13.12.2010, THE AVO DETERMINED THE FAIR MARKET VALUE OF THE PROPERTY IN QUESTION AT RS.28,24,100/ - .THEREAFTER ON 16.12.20 10/ THE COPY OF THE VALUATION REPORT WAS FORWARDED TO THE ASSESSEE TO OFFER HIS OBJECTIONS/COMMENTS. VIDE LETTER DATED 20.12.2010, THE ASSESSEE DID NOT ACCEPT THE AVO S VALUATION OF PROPERTY AT RS.28,24,100/ - AND RAISED CERTAIN OBJECTIONS MAINLY ON TWO GRO UNDS/ FIRSTLY IT WAS ON THE GROUND THAT THE AVO ADOPTED A DETAILED MEASUREMENT METHOD INSTEAD OF RENT CAPITALIZATION METHOD AND SECONDLY, THE PROPERTY WAS SOLD IN DISTRESS. THESE OBJECTIONS WERE REPRODUCED BY THE A.O. IN THE ASSESSMENT ORDER DATED 28.12.20 10. THE OBJECTIONS RAISED BY THE ASSESSEE WERE CONSIDERED AND VIDE LETTER DATED 20.12.2010 THE ASSESSING OFFICER REJECTED THE SAME. IN THE SAME LETTER, THE A.O. SHOW CAUSED THE ASSESSEE AS TO WHY THE PROPOSED VALUATION OF RS.28,24,100/ - SHOULD NOT BE TAKEN AS SALE CONSIDERATION FOR CALCULATING THE CAPITAL GAINS. THROUGH THE ASSESSEE APPEARED ON 22.12.2010, NO REPLY TO THE SAID SHOWN CAUSE WAS FORWARDED TO THE ASSESSING OFFICER. THEREFORE, AS THE ISSUE IS WITHIN THE AMBIT OF ITA NO. 203/DEL/2012 5 SECTION 50C AND ON REQUEST OF THE ASSESSEE U/S. 50C(2), THE ASSESSING OFFICER REFERRED THE PROPERTY TO THE AVO AND ADOPTED THE VALUE REPORTED BY THE AVO FOR CALCULATION OF CAPITAL GAINS RATHER THAN ADOPTING THE VALUE OF STAMP VALUATION AUTHORITY AND RE - COMPUTED THE LONG TERM CAPITAL GAINS RESULTING IN AN ADDITION OF RS.17,73,417/ - (AVO'S VALUATION OF PROPERTY AT RS.28,24,100/ - MINUS INDEX COST OF ACQUISITION AS GIVEN BY THE ASSESSEE) AS AGAINST RS.4,71,150/. 4 . AGGRIEVED BY THE AFORESAID ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 18.10.2011 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 5 . AGAINST THE ORDER DATED 18.10.2011 OF THE LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD. COUNSEL OF THE ASSESSEE HAS RE ITERATED THE GROUNDS OF APPEAL AND STATED THAT IT IS RES - INTEGRA THAT RENT CAPITALIZATION METHOD IS ONE OF THE RECOGNIZED METHODS OF VALUING IMMOVABLE PROPERTY. VALUATION OF PROPERTY IS AN ISSUE THAT IS RELEVANT NOT ONLY FOR THE PURPOSES OF COMPUTAT ION OF CAPITAL GAIN BUT ALSO FOR THE PURPOSES OF LEVY OF WEALTH TAX, COMPULSORY ACQUISITION OF PROPERTY AND PRE - EMPTIVE PURCHASE OF PROPERTIES. HE ALSO STATED THAT THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. NEW INDIA CONSTRUCTION CO. ( 1980) 123 ITR 68 HAS CONSIDERED THE ISSUE OF ITA NO. 203/DEL/2012 6 APPROPRIATE METHOD OF VALUATION IN CASE OF TENANTED PROPERTY. IN THIS CASE, TRANSFEROR SOLD A FIRST FLOOR OF A BUILDING SITUATED IN CONNAUGHT PLACE WHICH WAS IN THE OCCUPATION OF THREE TENANTS FOR THE SUM OF RS . 2,20,000/ - . THE TRANSFEREE WAS ALSO GIVEN RIGHT TO EFFECT CONSTRUCTION ABOVE THE FIRST FLOOR. AFTER THE SALE, THE TRANSFEREE OBTAINED VACANT POSSESSION FOR TENANT BY PAYING CERTAIN AMOUNT TO EACH OF THE TENANT AND ALSO GOT THE USER OF PROPERTY CONVER TED FROM RESIDENTIAL TO COMMERCIAL. BASED UPON THE REPORT OF VALUATION OFFICER, WHO ON THE BASIS OF LAND AND BUILDING METHOD DETERMINED THE FAIR MARKET VALUE AT RS. 11,41,900/ - , ACQUISITION PROCEEDING UNDER SECTION 269C WERE INITIATED. ON APPEAL, THE TRI BUNAL QUASHED THE ACQUISITION OBSERVING THAT A BUILDING WITH VACANT POSSESSION AND A BUILDING WITH TENANTS WERE TWO DIFFERENT THINGS ALTOGETHER. UPHOLDING THE ORDER OF THE TRIBUNAL, THE HON BLE COURT HAS OBSERVED THAT : - THE FAIR MARKET VALUE OF THE PROPERTY ON THE BASIS OF COST OF LAND AND BUILDING METHOD WOULD HAVE BEEN RELEVANT IF IT WAS SELF OCCUPIED BY THE TRANSFEROR AND HE WAS IN A POSITION TO HAND OVER THE VACANT POSSESSION THEREOF TO THE TRANSFEREE. 6.1 LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE PRESENT ISSUE IN DISPUTE IS COVERED BY THE JURISDICTIONAL HIGH COURT DECISION ITA NO. 203/DEL/2012 7 AS AFORESAID AND HENCE, THE PRESENT CASE MAY BE DECIDED ON THE SIMILAR LINES. HE ALSO SUBMITTED THAT THE REASON THAT FOR RENT CAPITALIZATION METHOD TO BE APP LIED, A SMALL PROPORTION OF THE PROPERTY MUST BE SELF OCCUPIED IS DEVOID OF ANY MERIT. HE ALSO STATED THAT IN THE CASE OF CIT VS. NEW INDIA CONSTRUCTION (SUPRA) IT WAS HELD THAT WHERE RENT CAPITALIZATION METHOD WAS ADOPTED TO VALUE THE RESPECTIVE PROPERTI ES, THE PREMISES WERE FULLY TENANTED. THEREFORE, THE CONCLUSION OF THE VALUATION OFFICER THAT HAS BEEN ENDORSED BY THE AO THAT FOR RENT CAPITALIZATION METHOD CAN BE APPLIED WHERE SMALL PROPORTION OF THE PROPERTY IS SELF OCCUPIED IS AGAINST THE LEGAL POSS ESSION BECAUSE THE METHOD HAS REGULARLY BEEN APPLIED TO FULLY TENANTED PREMISES. 7. ON THE CONTRARY, LD. DR HAS RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND REQUESTED THAT THE SAME MAY BE UPHELD. 8. WE HAVE HEARD BOTH PARTIES AND PERUSED THE RE LEVANT RECORD AVAILABLE WITH US ES PECIALLY THE ORDERS OF THE REVENUE AUTHORITIES. WE FIND THAT IN THIS CASE ACCORDING TO THE AIR INFORMATION/ THE ASSESSEE SOLD AN IMMOVABLE PROPERTY AT RS.31,32,000/ - AND THE SAME MADE AVAILABLE TO THE ASSESSEE BY THE ASSESSING OFFICER. ON PERUSAL OF THE SALE DEED FURNISHED BY THE AR DURING THE COURSE OF THE ASSESSME NT PROCEEDINGS/ IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE SOLD THE PROPERTY AT RS.10,25,000/ - ITA NO. 203/DEL/2012 8 WHEREAS ACCORDING TO THE GOVT. CIRCLE THE VALUE OF RATE THE PROPERTY WAS RS.38,56,000/ - . AFTER TAKING INTO CONSIDERATION THE SALE VALUE AT RS.10, 25,000/ - THE ASSESSEE IN HIS COMPUTATION CALCULATED A CAPITAL LOSS AT RS.25,683/ - . THEREFORE, THE ASSESSING OFFICER CONSIDERED THE SALE VALUE AT RS.38,56,000/ - IN CONCURRENCE TO THE PROVISIONS LAID IN SECTION 50C OF THE IT ACT/ 1961. IN COMPLIANCE TO THE RE QUEST MADE BY THE A.O. VIDE LETTER DATED 02.08.2010 THE ASSESSING OFFICER REFERRED THE PROPERTY TO THE AVO, MEERUT VIDE LETTER DATED 09.08.2010/ U/S 50C(2) TO DETERMINE THE FAIR MARKET VALUE OF THE PROPERTY. VIDE REPORT DATED 13.12.2010, THE AVO DETERMINED THE FAIR MARKET VALUE OF THE PROPERTY IN QUESTION AT RS.28,24,100/ - .THEREAFTER ON 16.12.2010/ THE COPY OF THE VALUATION REPORT WAS FORWARDED TO THE ASSESSEE TO OFFER HIS OBJECTIONS/COMMENTS. VIDE LETTER DATED 20.12.2010, THE ASSESSEE DID NOT ACCEPT THE AV O S VALUATION OF PROPERTY AT RS.28,24,100/ - AND RAISED CERTAIN OBJECTIONS MAINLY ON TWO GROUNDS/ FIRSTLY IT WAS ON THE GROUND THAT THE AVO ADOPTED A DETAILED MEASUREMENT METHOD INSTEAD OF RENT CAPITALIZATION METHOD AND SECONDLY, THE PROPERTY WAS SOLD IN DI STRESS. THESE OBJECTIONS WERE REPRODUCED BY THE A.O. IN THE ASSESSMENT ORDER DATED 28.12.2010. THE OBJECTIONS RAISED BY THE ASSESSEE WERE CONSIDERED AND VIDE LETTER DATED 20.12.2010 THE ASSESSING OFFICER REJECTED THE SAME. IN THE SAME LETTER, THE A.O. SHOW CAUSED THE ASSESSEE AS TO WHY THE PROPOSED VALUATION OF ITA NO. 203/DEL/2012 9 RS.28,24,100/ - SHOULD NOT BE TAKEN AS SALE CONSIDERATION FOR CALCULATING THE CAPITAL GAINS. THROUGH THE ASSESSEE APPEARED ON 22.12.2010, NO REPLY TO THE SAID SHOWN CAUSE WAS FORWARDED TO THE ASSESSIN G OFFICER. THEREFORE, AS THE ISSUE IS WITHIN THE AMBIT OF SECTION 50C AND ON REQUEST OF THE ASSESSEE U/S. 50C(2), THE ASSESSING OFFICER REFERRED THE PROPERTY TO THE AVO AND ADOPTED THE VALUE REPORTED BY THE AVO FOR CALCULATION OF CAPITAL GAINS RATHER THAN ADOPTING THE VALUE OF STAMP VALUATION AUTHORITY AND RE - COMPUTED THE LONG TERM CAPITAL GAINS RESULTING IN AN ADDITION OF RS.17,73,417/ - (AVO'S VALUATION OF PROPERTY AT RS.28,24,100/ - MINUS INDEX COST OF ACQUISITION AS GIVEN BY THE ASSESSEE) AS AGAINST RS.4, 71,150/. THEREAFTER, ON APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS ORDER 18.10.2011 HAS CONFIRMED THE ORDER OF THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE. DURING THE HEARING BEFORE US, LD. COUNSEL OF THE ASSESSEE HAS FILED A PAPER BOK CONTAINING THE VARIOUS DECISION OF THE HON BLE HIGH COURTS, ESPECIALLY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. NEW INDIA CONSTRUCTION CO. (1980) 123 ITR 68 (DEL.) AND STATED THAT THE PRESENT CASE MAY BE DECIDED IN ACCORDANCE WITH THE DECISION OF THE H ON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. NEW INDIA CONSTRUCTION CO. (SUPRA), AS THE FACTS AND CIRCUMSTANCE OF THE PRESENT CASE ARE SIMILAR TO THAT CASE. WE HAVE PERUSED THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT ITA NO. 203/DEL/2012 10 VS. NEW INDIA CONSTRUCTION CO. (SUPRA), AND THEREFORE, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE, THE PRESENT ISSUES IN DISPUTE ARE REQUIRED THOROUGH EXAMINATION AT THE LEVEL OF THE ASSESSING OFFICER, HENCE, WE QUASH THE ORDER OF THE LD. CIT (A) AND REMIT BACK THE ISSUES IN DISPUTE, TO THE FILE OF THE ASSESSING OFFICER, WITH THE DIRECTION TO DECIDE THE PRESENT ISSUES IN DISPUTE, IN ACCORDANCE WITH THE AFORESAID DIRECTIONS OF THE HON BLE JURISDICTIONAL HIGH COURT DELIVERED IN THE CASE OF CIT VS. NEW INDIA CONSTRUCTION CO. (1980) 123 ITR 68 (DEL.), AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COUR T ON 2 7 / 3 /2015. S D / - S D / - [ N.K. SAINI ] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 2 7 / 3 /2015 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT T RUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES