SANJAY JAYANTILAL SHAH, SURAT V. The Addl. Commissioner of income tax, Surat

ITA 212/SRT/2022

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 9078 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 11-01-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 20-07-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Fair market value; Valuation report; Capital Gains
• Section: 132; 143(3); 50C; 54F; 142(1); 133(6); 143(2); 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.212/SRT/2022 Assessment Year: (2013-14) (Physical Hearing) Sanjay Jayantilal Shah, Chaitanya Vilas, Opp. Narmad Library, Modi Road, Athwalines, Surat – 395005 Vs. The ACIT, Central Circle – 3, Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: ACIPS4823M (Appellant) (Respondent) Appellant by Shri P. M. Jagasheth, CA Respondent by Shri Ravinder Sindhu, CIT(DR) Date of Hearing 12/01/2024 Date of Pronouncement 22/01/2024 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2013-14, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-4, [in short “the ld. CIT(A)”], Surat, in Appeal No.CIT(A),Surat-4/10957/2015-16, dated 06.05.2022, which in turn arises out of an assessment order passed by Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 25.03.2015. 2. The grounds of appeal raised by the assessee are as follows: “1. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.1,53,57,708/- on account of long-term capital gain u/s 50C of the Income Tax Act, 1961. 2. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 2 212/SRT/2022/AY.2013-14 Sanjay Jayantilal Shah 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. Succinctly, the factual panorama of the case is that assessee before us is an Individual. A search action u/s 132 of the Income-Tax Act, 1961 was carried out on dated 05.03.2013, in the case of Diamond Group of Surat. One of the sub-groups covered during the course of this search action, was Union Sub Group. Shri Sanjay Jayantilal Shah is the principal person of the Union Sub Group, who was also covered u/s 132 of the IT Act. The assessee individual has filed his return of income for the assessment year (A.Y.) 2013-14 on dated 12.03.2014, declaring total income of Rs.1,57,38,670/-. The assessee`s case was also selected for scrutiny under CASS. The notice u/s 143(2) of the Act was issued on dated 24.03.2014, which was served upon to the assessee. The notice u/s 142(1) of the Act, along with questionnaire was issued on dated 03.09.2014, which was duly served to the assessee. In response to notices u/s 143(2) and 142(1) of the I.T. Act, the assessee, attended from time to time and filed the details called for. During the year under consideration, the assessee has derived income from House property, Business & Profession, Capital Gain, and other source etc. During the assessment proceeding, it was seen that the assessee has sold the following properties: Sr. No. Details of the property Dastavej No. Date of Dastavej Sale Consideration 1 R.S. No. 181,199 Block No. 149, Amroli 13/2013 02-01-2013 Rs. 7,14,31,200/- To verify the value as per Stamp Valuation authority, notice u/s 133(6) issued to the Sub Registrar, Palsana on dated 20.02.2015. The reply from the sub registrar office is received by assessing officer on dated 20.02.2015 stating the value of the property at Rs.11,90,52,000/-. Difference of the stamp value and sales consideration are as under: 3 212/SRT/2022/AY.2013-14 Sanjay Jayantilal Shah Stamp Value Rs.11,90,52,000/- Sales Consideration Rs.7,14,31,200/- Difference Rs.4,76,20,800/- Therefore, assessee vide show-cause notice dated 20.02.2015, was required to show cause as to why the difference of the sales consideration vis- a- vis the stamp value of Rs. 4,76,20,800/- should not be added to sale consideration for the purpose of the Capital gains as per section 50C of the I.T. Act. 4. In response, the assessee, vide his submission dated 23.02.2015, submitted before the assessing officer, as follows: “The assessee had sold the property on market rate but the stamp duty transaction as on date of transfer was higher than the market rate, hence we request your honor to refer the same to the department valuation officer for fair market valuation.” 5. On request of the assessee, the assessing officer, referred the case to District valuation officer (DVO) for valuation of the said property as per section 50C(2) of the I. T. Act. The DVO has made valuation of the property and submitted the valuation report vide letter dated 17.03.2015, estimating the value of property at Rs.8,67,88,908/-. Then, assessing officer, has again issued the show cause notice dated 19.03.2015 to the assessee for addition of Rs.1,53,57,708/- (Rs.8,67,88,908- Rs.7,14,31,200) u/s 50C of the Income Tax Act. 6. In response, to the above show cause notice, the assessee submitted his reply on dated 20.03.2015. The relevant portion of the reply of assessee, is produced as under: “1. In connection to above we would like to submit that the assessee had sold land at R.S. no. 181 & 199, Block no. 149, at Kodarada Antroli Road, Antroli, Palsana, Surat. The total consideration received for the sale of such land is Rs.7,14,31,200/- and same has been shown in our books of account. But the department valuation officer adopted value of Rs.8,67,88,908/- in his 4 212/SRT/2022/AY.2013-14 Sanjay Jayantilal Shah report for said land. We hereby file an objection against value adopted by department valuation officer in his report. Here we request your goodself to consider all following circumstances which affect the value of the land and accept our document value instead of value adopted by department valuation officer. Here we would like to inform you that the-sale price of above mentioned land, was substantially affected by the following fact that: a) The Sugar Factory is situated near the land. The land gets affected with intense smell of molasses burning and pungent smell of sugarcane brewing. Moreover the polluting water and waste of the sugar factory gets dump in my land. b) The land is affected by much larger Waterways near land. It becomes water logged frequently, level of land was very low so the water logged frequently. It is almost impossible to go there in monsoon as the road are kachha. c) The land is surrounded by two other factories dealing in brick making and dyeing unit is which intensifies the smell. d) The land is an agriculture land but this land is not suitable for every type of farming. This land is also not suitable for farming of sugarcane which is very popular source of income through farming in near villages as the dumping of chemicals from nearby factory has almost made the land barren and of no use. Hence we request your goodself to accept our document value instead of adopted by department valuation officer. 2. In respect details regarding exemption claimed u/s. 54F of Income Tax, 1961 we would like to submit that the assessee has purchased residential property of Rs.6.50 crores and same has been claimed as exemption u/s 54F. Copy of registered ‘Kabja Sahit no Satakhat/ Agreement to Sale’ is attached herewith. Also attached is account copy from Sanjay Shah evidencing payment of money for buying the property.” 7. However, the assessing officer has rejected the contention of the assessee and noted that it was upon the request of the assessee that the reference to the DVO was made. The report of the DVO estimates the value at an amount far less than that by the Stamp Valuing Authority. The assessee did not seem to be happy even with that. The assessing officer compared the provisions of section 50C(2) of the Act, with Wealth Tax Act and stated that provisions of section 50C(2) of the I.T. 5 212/SRT/2022/AY.2013-14 Sanjay Jayantilal Shah Act abundantly make it clear that the value estimated by the DVO is binding upon the Assessing officer so far as the valuation of the asset in question is concerned. Duly complying with the same, the value estimated by the DVO is deemed to be the full value of the consideration received as a result of the transfer of the asset under consideration. The objections of the assessee were rejected by the assessing officer and the difference between the value of the asset transferred as estimated by the DVO and that as per Registered Deed at Rs. 1,53,57,708/- (Rs.8,67,88,908- Rs.7,14,31,200), was brought to tax under the head Long term Capital Gains of the assessee as per Section 48 r.w.s. 50C of the Act. 8. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the action of the Assessing Officer. The ld CIT(A) noted that all the disadvantages relating to the property in question have been duly considered by the DVO, which is evident from his letter dated 20.12.2021. After considering all the drawbacks of the property, the DVO valued the same below the Jantri rates, therefore, in assessee`s case the valuation done by DVO is quite reasonable, and hence addition made by the assessing officer was confirmed by ld CIT(A). 9. Aggrieved by the order of ld. CIT(A), the assessee is in appeal before us. 10. Shri P. M. Jagasheth, Ld. Counsel for the assessee, pleaded that assessee`s land is situated in the disadvantage position and the comparison adopted by the DVO in the valuation report is not perfectly matching in the assessee’s circumstances. The assessee has purchased the land at Rs.7,77,200/- and sold the land at Rs.7,14,31,200/- and paid 6 212/SRT/2022/AY.2013-14 Sanjay Jayantilal Shah huge taxes on the capital gain, hence there should not be further addition in the hands of the assessee. The Ld. Counsel stated that during the assessment stage itself, the assessee submitted the causes/reasons, about above mentioned land which substantially affected by many factors, which were not considered by the DVO, therefore entire addition should be deleted. 11. On the other hand, Learned Commissioner of Income Tax – Departmental Representative [ld. CIT(DR)] for the Revenue reiterated the stand taken by the ld. CIT(A), which we have already noted in our earlier para and is not being repeated for the sake of brevity. 12. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that DVO in determining the FMV of the property has considered only two special observations/qualifications i.e. the agriculture land being deep from the village main road and about 1 to 2 kilometers on kachcha village road and it is adjacent to Sugar factory giving fall smell and affecting crop production. According to the ld Counsel for the assessee, there is water logging on the land during monsoon, due to dyeing and printing units in the close proximity results in chemical contamination of the land making it useless for agriculture or residence has not been considered by DVO. The assessee has submitted before the assessing officer that the-sale price of above mentioned land, was substantially affected by the following factors: 7 212/SRT/2022/AY.2013-14 Sanjay Jayantilal Shah (a) The Sugar Factory is situated near the land. The land gets affected with intense smell of molasses burning and pungent smell of sugarcane brewing. Moreover, the polluting water and waste of the sugar factory gets dump in my land. (b) The land is affected by much larger Waterways near land. It becomes water logged frequently, level of land was very low so the water logged frequently. It is almost impossible to go there in monsoon as the road are kachha. (c) The land is surrounded by two other factories dealing in brick making and dyeing unit is which intensifies the smell. (d) The land is an agriculture land but this land is not suitable for every type of farming. This land is also not suitable for farming of sugarcane which is very popular source of income through farming in near villages as the dumping of chemicals from nearby factory has almost made the land barren and of no use. 13. We note that above factors were considered by the DVO only partly and most of the above factors were ignored by the DVO. The ld Counsel for the assessee has submitted that the DVO has not considered all the objections filed by the assessee, hence the fair market value (FMV) determined by the DVO is an estimate which is not based on full facts of the case. It is fairly well known that the valuation of property involves some kind of guess work and estimation and this fact is very much evident from the valuation report of DVO. It is also a fact that the rate of property even in the same locality differs depending upon locational advantages and other factors. In the instant case, the DVO has not accepted the entire factors of the assessee`s case, as noted by us in 8 212/SRT/2022/AY.2013-14 Sanjay Jayantilal Shah above para. We note that determination of fair market value, after all, is an estimate only and therefore, considering the facts and circumstances of the assessee`s case, as noted above, we are of the view that ends of justice would be meet if an addition of Rs.50,00,000/- is sustained in the hands of the assessee, as the same would take care of the inconsistencies between DVO report and price of property adopted by the assessee. Therefore, we direct the assessing officer to make/sustain the addition in the hands of the assessee to the tune of Rs. 50,00,000/-. 14. In the result, appeal filed by the assessee is allowed partly in above terms. Order is pronounced on 22/01/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 22/01/2024 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat