Tax Recovery Officer & A.O., V. Shri Sandeep Tupe, Pune

ITA 209/PUN/2014

• Counselvise Citation: 20924514 RSA 2014
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C KOTHARI
• Keywords: Capital asset; Question of law; Cost of acquisition; Fair market value; Valuation report
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.209/PN/2014 (ASSESSMENT YEAR : 2007-08) TAX RECOVERY OFFICER, RANGE-7, PUNE. . APPELLANT VS. SHRI SANDEEP C. TUPE, B-301, AMAR AMBIENCE NO.61, BEHIND EMPRESS GARDEN, GHORPADI, PUNE 411 001. PAN : AAKPT8657L . RESPONDENT DEPARTMENT BY : SHRI D. C. KOTHARI ASSESSEE BY : SHRI SUHAS BORA DATE OF HEARING : 07-01-2015 DATE OF PRONOUNCEMENT : 21-01-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 28.11.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 12.12.2011 PASSED BY THE ASSESSING OFFICER U/S 143(3) R.W.S. 147 OF THE INCOME-TAX ACT , 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2007-08. 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN BRINGING THE ACTION OF THE AO WITHIN THE AMBIT OF THE PROVISION OF SECTION 55A WHEN IN FACT, NO RE FERENCE U/S.55A HAD BEEN MADE BY THE AO IN THE PRESENT CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN INFERRING A DEEMED REFE RENCE U/S.55A BY THE AO WHEN SUCH CONCEPT OF DEEMED REFERENCE IS ALIEN TO T HE PROVISIONS OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THA T THE FACTS MENTIONED IN THE VALUATION REPORT OF A DVO IN RESPECT OF AN ADJOININ G PROPERTY, WHETHER OR NOT THE REPORT BEING TECHNICALLY OR LEGALLY SUSTAINABLE , CONSTITUTED RELEVANT MATERIAL AS THE FAIR MARKET VALUE DETERMINED THEREIN WAS BAS ED ON ACTUAL SALE INSTANCES. ITA NO.209/PN/2014 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN IGNORING THE RATIO OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF POORANMAL VS DIT REPOR TED IN 93 ITR 505(SC) IN WHICH IT IS HELD THAT THE INCOME TAX AUTHORITIES ARE ENTITLED TO USE EVEN THAT EVIDENCE OR MATERIAL WHICH IS ILLEGALLY OR IRREGULA RLY OBTAINED. 5. IT IS PREYED THAT THE ORDER OF THE LEARNED CIT(A ) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. ALTHOUGH, REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL BUT THE SOLITARY DISPUTE IS WITH REGARD TO AN ADDITION OF R S.1,50,97,254/- MADE BY THE ASSESSING OFFICER WHICH HAS SINCE BEEN DELETED BY T HE CIT(A). 4. IN BRIEF, THE RELEVANT FACTS ARE THAT THE RESPON DENT-ASSESSEE HAD TRANSFERRED HIS LAND SITUATED AT HADAPSAR, PUNE TO CITY CORPORATION LTD. (CCL) FOR A TOTAL CONSIDERATION OF RS.3,67,50,000/-. THE ASSESSEE DECLARED CAPITAL GAIN ON THIS TRANSACTION WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ONLY POINT OF DIFFERENCE BETWEEN THE ASSESSEE AND T HE ASSESSING OFFICER WAS THE ADOPTION OF FAIR MARKET VALUE OF THE PROPERTY A S ON 01.04.1981 FOR THE PURPOSES OF COMPUTING THE COST OF ACQUISITION. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD ARRIVED AT THE FAIR MARKET VALUE OF THE PROPERTY AS ON 01.04.1981 AT RS.33,60,000/- BASED ON THE RATE OF R S.560/- PER SQ.MTR., WHICH WAS SUPPORTED BY THE REPORT OF A REGISTERED VALUER. THE ASSESSING OFFICER DID NOT AGREE TO THE REPORT OF THE REGISTERED VALUER SU BMITTED BY THE ASSESSEE AND INSTEAD HE ADOPTED THE RATE OF RS.101/- PER SQ.MTR. FOR THE PURPOSES OF DETERMINING THE FAIR MARKET VALUE OF THE PROPERTY A S ON 01.04.1981. ACCORDINGLY, THE ASSESSING OFFICER ADOPTED THE FAIR MARKET VALUE OF THE PROPERTY AS ON 01.04.1981 AT RS.4,60,000/- AS AGAIN ST RS.33,60,000/- ADOPTED BY THE ASSESSEE. THE RATE ADOPTED BY THE ASSESSING OFFICER WAS BASED ON A VALUATION REPORT PREPARED BY THE DEPARTMENTAL VALUA TION OFFICER (DVO) IN RESPECT OF A LAND AT SURVEY NO.189/2A/1, SADE SATRA NALLI, HADAPSAR WHICH WAS ADJACENT TO ASSESSEES LAND. THIS ASPECT OF TH E CONTROVERSY WAS CARRIED IN APPEAL BY THE ASSESSEE BEFORE THE CIT(A). THE C IT(A) HAS SINCE ITA NO.209/PN/2014 DISAPPROVED THE ACTION OF THE ASSESSING OFFICER BY MAKING THE FOLLOWING DISCUSSION :- 3.6. THUS, FROM THE FOREGOING DISCUSSION, IT IS SE EN THAT THE COURTS HAVE HELD THAT THE SCOPE OF SECTION 55A, AS IS EVID ENT FROM ITS TERMS, IS CONFINED TO THE ASCERTAINMENT OF THE FAIR MARKET VA LUE OF A CAPITAL ASSET WHICH HAS BEEN THE SUBJECT MATTER OF TRANSFER. UNDER THIS SECTION, WHERE THE A.O. IS OF THE OPINION THAT THE VALUE OF THE ASSET AS CLAIM ED BY THE ASSESSEE, THOUGH IN ACCORDANCE WITH THE ESTIMATE MADE BY THE REGISTE RED VALUER, IS LESS THAN THE FAIR MARKET VALUE, HE MAY REFER THE VALUATION O F THE CAPITAL ASSET TO A VALUATION OFFICER. HE CAN ALSO DO SO WHERE IN OTHER CASES, HE IS OF THE OPINION THAT THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MORE THAN SUCH PERCENTAG E OF THE VALUE OF THE ASSET AS SO CLAIMED OR BY MORE THAN SUCH AMOUNT AS MAY BE PRESCRIBED AS PER RULE 111A OF WEALTH TAX RULES IN THIS BEHALF, O R, THAT HAVING REGARD TO THE NATURE OF THE ASPECT AND OTHER RELEVANT CIRCUMSTANC ES, IT IS NECESSARY SO TO DO. HOWEVER, IN THE PRESENT CASE THE ASSESSING OFFI CER HAS NOT ORDERED THE MATTER FOR VALUATION BUT HAS MERELY RELIED UPON THE RESULT OF THE REFERRAL MADE IN A DIFFERENT CASE AND HAS COMPLETELY DISREGARDED THE VALUATION REPORT AS ON 01.04.1981 ADOPTED BY THE APPELLANT AND COMPUTED TH E CAPITAL GAIN ON THE BASIS OF THE REPORT OF THE GOVT. APPROVED VALUER, A S THE A.O. HELD THAT THE APPELLANT HAD TAKEN A HIGHER FAIR MARKET VALUE AS O N 01.04.1981 FOR THE PURPOSE OF INDEXATION. THE ASSESSING OFFICER, HOWEV ER, HAS NOT DOUBTED OR CHALLENGED THE VALUATION REPORT OF THE APPROVED VAL UER AS PROVIDED BY THE APPELLANT, IT HAS ALREADY BEEN SEEN THAT THE ASSESS ING OFFICER ASSUMES POWERS U/S 55A(A) ONLY WHEN IN HIS/HER OPINION THE FAIR MARKET VALUE DISCLOSED BY THE ASSESSEE IS LESS AND IN THE CASE OF THE APPE LLANT THE ASSESSING OFFICER HAS HIMSELF HELD THE FAIR MARKET VALUE ADOPTED BY T HE APPELLANT TO BE MORE WHICH IS ALREADY AGAINST THE PROVISIONS OF SECTION 55A(A) OF THE ACT. IN THIS CONTEXT THE RATIO OF THE DECISION RELIED UPON BY TH E APPELLANT ASSUMES IMPORTANCE WHICH IS DISCUSSED HEREUNDER: 3.7. THE GUJARAT HIGH COURT IN THE CASE OF M V SHAH , OFFICIAL LIQUIDATOR, ANNUL MILLS LTD VS U J MATAIN & ANR 209 ITR 568 HELD THAT THE ASSESSING OFFICER HAS TO RECORD HIS OPINION HAVI NG REGARD TO THE NATURE OF ASSET AND OTHER RELEVANT CIRCUMSTANCES THAT THE VALUATION OF THE PROPERTY IS LESS THAN THE FMV BEFORE HE CAN MADE A REFERENCE TO THE VALUATION OFFICER. THE RELEVANT PARA OF THE HIGH COURT OLDER IS REPROD UCED HEREIN UNDER :- 'ASSUMING THAT CLAUSE (B)(II) APPLIES TO A CASE WHE RE THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS IN ACCORDANCE W ITH THE ESTIMATE MADE BY A REGISTERED VALUER BUT THE ASSESSING OFFICER IS OF THE OPINION THAT THE VALUATION IS LESS THAN THE FAIR MARKET VALUE, WE CA NNOT JUSTIFY THE ACTION OF THE SECOND RESPONDENT IN VIEW OF THE FACTS AND CIRCUMST ANCES OF THE PRESENT CASE. REFERENCE UNDER CLAUSE (B)(II) COULD HAVE BEEN MADE IF THE INCOME-TAX OFFICER WAS OF THE OPINION THAT HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT WAS NECESSARY SO TO DO. IN THIS CASE, AS POINTED OUT ABOVE, THE ASSET IS A PIECE OF LAND. THEREFORE, THE RE IS NOTHING SPECIAL ABOUT THE NATURE OF THE ASSET WHICH COULD HAVE JUSTIFIED THE INCOME-TAX OFFICER TO MAKE A REFERENCE TO THE VALUATION OFFICER. NO OTHER RELEVANT CIRCUMSTANCE COULD BE POINTED OUT BY THE VALUATION OFFICER IN HI S AFFIDAVIT OR BY THE RESPONDENTS IN ANY OTHER MANNER IN JUSTIFICATION OF THE ACTION OF RESPONDENT NO. 2. THE ONLY REASON THAT WE FIND FROM THE MATERI AL ON RECORD IS THAT IN THE OPINION OF THE INCOME-TAX OFFICER, THE FAIR MARKET VALUE OF THE LAND IN QUESTION AS ON JANUARY 1, 1954, WAS ABOUT RS. 4 PER SQ. YARD . AGAIN, THE MATERIAL ITA NO.209/PN/2014 DISCLOSED THAT THE SAID OPINION WAS FORMED BY TILT INCOME-LAX OFFICER ON THE BASIS OF SALE INSTANCES AND OTHER DATA RELATING TO SALES IN THAT LOCALITY. THUS, IN THIS CASE, THE INCOME-TAX OFFICER HAD REACHED THE O PINION ON THE GROUND THAT IT WAS NECESSARY TO MAKE A REFERENCE BECAUSE OF THE SP ECIAL NATURE OF THE ASSET INVOLVED. IT MAY ALSO BE STATED THAT THE INCOME-TAX OFFICER HAS NOT FILED ANY REPLY EVEN THOUGH HIS ACTION HAS BEEN CHALLENGED AS WITHOUT ANY AUTHORITY OF LAW. THE ONLY REASON WHICH IS GIVEN FOR MAKING THE REFERENCE IS THAT THE INCOME-TAX OFFICER WAS OF THE OPINION THAT THE VALU E OF THE PROPERLY AS ON JANUARY 1, 1954, WAS ABOUT RS. 4 PER SQ. YARD AND N OT RS. 12 PER .SQ. YARD. NO ATTEMPT WAS MADE TO JUSTIFY THE ACTION OF RESPON DENT NO. 2 UNDER ANY OTHER PROVISIONS OF SECTION 55A. WE ARE, THEREFORE, CLEAR LY OF THE OPINION THAT THE ACTION OF RESPONDENT NO. 2 IN MAKING THE REFERENCE TO RESPONDENT NO. 1 WAS NOT IN ACCORDANCE WITH, LAW AND. THEREFORE, IT DESE RVES TO BE QUASHED.' 3.8. THE JURISDICTIONAL PUNE ITAT IN THE CASE OF KR ISHNABAI TINGARE (CITED SUPRA) HAS REFERRED TO THE THIRD MEMBER DECI SION OF MUMBAI ITAT IN THE CASE OF RUBAB M KAZERANI (CITED SUPRA) TO REITERATE THE PRINCIPLE THAT A REFERENCE U/S 55A CAN BE MADE BY THE ASSESSING OFFI CER ONLY IN THE CIRCUMSTANCES THAT THE FMV DISCLOSED BY THE ASSESSE E IS LESS THAN THE ACTUAL FMV OR WHERE THE FMV DISCLOSED BY THE ASSESSEE IS N OT BASED UPON THE REPORT OF AN APPROVED VALUER. THE DECISION OF THE J URISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF DAULAT MEHTA HUF (CITED SUPRA) HAS ALSO BEEN BROUGHT TO MY NOTICE, WHEREIN THE TWO QUESTIONS OF LAW REFERRE D BY THE DEPARTMENT WERE DISMISSED ON THE GROUND THAT THEM WAS NO QUESTION O F LAW INVOLVED IN THE APPEALS. THE HON'BLE COURT HELD AS UNDER (EMPHASIS SUPPLIED) :- 'IN THE ABOVE APPEAL TWO QUESTIONS ARE SOUGHT TO BE RAISED. A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE ITAT WAS RIGHT IN LAW IN REVERSING THE DECISION OF THE CIT(A) ON VALUATION OF LAXMI NIWAS PROPERTY AT RS.1,35,40,000/- MADE BY TH E DVO AS AGAINST THE VALUATION DONE BY THE GOVERNMENT APPROVED VALUER WH ICH WAS AT RS.2,13,31,000/-? B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE OF HON'BLE TRIBUNAL WAS RIGHT IN LAW TO OBSERVE THAT THE A.O. WAS NOT JUSTIFIED IN MAKING A REFERENCE UNDER SEC. 55A OF THE ACT TO THE DVO FOR DETERMINATION OF THE FAIR MARKET VALUE OF THE PROPERTY? WE HAVE PERUSED THE JUDGMENT OF THE TRIBUNAL. IT IS EXPLICITLY CLEAR THAT THE QUESTIONS SOUGHT TO BE RAISED ARE WITH REGARD TO TH E QUANTUM OF VALUATION WHICH IS ONLY A FINDING OF FACT AND THERE IS ABSOLUTELY NO QUESTION OF LAW INVOLVED IN THE ABOVE APPEAL.' 3.9. THUS, KEEPING IN VIEW THE RATIO OF THE DECISIO N AND FINDINGS OF THE JURISDICTIONAL HIGH COURT AND ITAT ON SIMILAR S ET OF FACTS AND CIRCUMSTANCES, GROUND NOS. 3 TO 6 ARE ALLOWED. AGAINST THE AFORESAID, REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US IT A COMMON POINT BETWEEN THE PARTIES THAT IN IDENTICAL CIRCUMSTANCES THE PUNE BENCH OF THE TRIBUNAL IN THE FOLLOWING CASES : (I) ITO VS. SANGEETA JEEVAN BHOSALE, ITA NO.1125/PN/2012 DA TED 30.05.2014; (II) RAMDAS SONBA TUPE VS. ITO, ITA NO.534/PN/2013 DATED 08.07.2014; AND, ITA NO.209/PN/2014 (III) SMT. VIJAYA C. TUPE VS. ITO & OTHERS, ITA NO. 1129/PN/2013 & OTHERS DATED 27.08.2014 HAS UPHELD THE STAND OF THE CIT(A) . 6. AT THE TIME OF HEARING, IT WAS ALSO A COMMON POI NT BETWEEN THE PARTIES THAT IN THE PRESENT CASE THE ACTION OF THE ASSESSIN G OFFICER IN RELYING UPON THE REPORT OF THE DVO AND THAT TOO IN THE CASE OF A DIF FERENT ASSESSEE, WITH REFERENCE TO SECTION 55A OF THE ACT FOR DETERMINING THE FAIR MARKET VALUE AS ON 01.04.1981 ON THE GROUND THAT FAIR MARKET VALUE IS LESSER THAN THAT DECLARED BY THE ASSESSEE IS NOT IN CONFORMITY WITH THE JUDGEMEN T OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PUJA PRINTS, 360 ITR 697. THE CIT(A) HAS ALSO NOTED THAT THE ASSESSING OFFICER ASSUMES POWER U/S 55A(A) OF THE ACT FOR DETERMINING THE VALUATION MADE BY THE DVO ONLY WHEN IN HIS OPINION THE FAIR MARKET VALUE DISCLOSED BY THE ASSESSEE IS LESS THAN THE FAIR MARKET VALUE IN HIS OPINION. IN THE PRESENT CASE, IT IS QUITE CLEA R THAT THE ASSESSING OFFICER HAS OPINED THAT THE FAIR MARKET VALUE DISCLOSED BY THE ASSESSEE OF THE PROPERTY AS ON 01.04.1981 IS MORE THAN THE FAIR MARKET VALUE IN HIS OPINION AND THEREFORE IN THIS VIEW OF THE MATTER THE SAID ACTION WAS NOT IN CONFORMITY WITH THE JUDGEMENT OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF M.V. SHAH, OFFICIAL LIQUIDATOR, ANANT MILLS LTD. VS. U. J. MATAIN & ANR ., 209 ITR 568 (GUJ). 7. IN THE CASE OF VIJAYA C. TUPE (SUPRA) ALSO THE A SSESSEES HAD TRANSFERRED LAND TO CITY CORPORATION LTD. IN THAT CASE ALSO THE LANDS WERE SITUATED AT HADAPSAR AND THEREIN ALSO THE ASSESSING OFFICER DIFFERED WITH THE ASSESSEE ON THE FAIR MARKET VALUE OF THE LANDS AS O N 01.04.1981 FOR THE PURPOSES OF ASCERTAINING THE COST OF ACQUISITION. IN THE SAID CASE ALSO THE ASSESSING OFFICER RELIED UPON THE REPORT OF THE DVO TO HOLD THAT THE FAIR MARKET VALUE ADOPTED BY THE ASSESSEE AS ON 01.04.1981 WAS HIGHER IN COMPARISON TO THE REPORT OF THE DVO. THE TRIBUNAL BY RELYING ON ITS EARLIER DECISION IN THE CASE OF SANGEETA JEEVAN BHOSALE (SUPRA) WHEREIN REL IANCE WAS PLACED ON THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF PUJA PRINTS ITA NO.209/PN/2014 (SUPRA) HELD THAT THE REFERENCE TO THE DVO BY THE A SSESSING OFFICER IN SUCH CIRCUMSTANCES WAS NOT SUSTAINABLE IN LAW. IN OUR C ONSIDERED OPINION, THE AFORESAID PRECEDENTS CLEARLY COVERS THE CONTROVERSY BEFORE US AND THEREFORE THE CIT(A) MADE NO MISTAKE IN DISREGARDING THE ACTI ON OF THE ASSESSING OFFICER. 8. IN VIEW OF THE AFORESAID DISCUSSION, WE HEREBY A FFIRM THE ORDER OF THE CIT(A) AND THE REVENUE FAILS IN ITS APPEAL. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY, 2015. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 21 ST JANUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE