Shri Siddharth Khaitan, Kolkata V. ITO, Ward - 36(3), Kolkata, Kolkata

ITA 2126/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7968 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2010
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 29-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 16-12-2009
• Court: TRIBUNAL
• Department Lawyers: P C NAYAK
• Assessee Lawyers: A K GUPTA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Opportunity of being heard; Fair market value; Valuation report; Onus to prove
• Section: 50C; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : KOLKATA [BEFORE HONBLE SMT. DIVA SINGH, JM & SHRI B.C.MEE NA, AM] I.T. A. NO. 2126/KOL/2009 ASSESSMENT YEAR 2005-06 SHRI SIDDHARTH KHAITAN -VS- I.T.O., WARD-36(3), KOLKATA PAN:ALBPK-7841 F KOLKATA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K.GUPTA RESPONDENT BY : SHRI P.C.NAYAK, SR.DR O R D E R PER SMT. DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-XX, KOLKATA DATED 12.10.2009 PERTAINING TO A.YR.2005-06 WHEREIN THE ASSESSEE HAS AGITATED THE FOLLOWING GROUNDS :- 1. FOR THAT THE ASSESSING OFFICER ERRED IN ADOPTIN G THE SALE VALUE OF THE PROPERTY AT RS.74 LACS IN RESPECT OF THE 1/3 RD SHARE OF THE APPELLANT AND THE SAID VALUATION IS VITIATED IN LAW, ERRONEOUS, ARBITRARY AND ILLEGAL AND LD.CIT(A) ERRED IN CONFIRMING THE SAME WITHOUT GOING INTO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. FOR THAT FURTHER AND IN ANY EVENT THE LD. CIT(A) ERRED IN IGNORING THE VALUATION OFFICERS VALUATION REPORT AS REQUIRED BY SECTION 50C(2) OF THE INCOME TAX ACT, 1961 AND WRONGLY UPHELD THE ASSESSI NG OFFICERS ASSESSMENT OF LONG TERM CAPITAL GAIN AT RS.49,09,468/- AS AGAI NST RS.1,76,135/- DISCLOSED BY APPELLANT. 3. FOR THAT THE LD. CIT(A) ERRED IN IGNORING THE FA CT THAT THE VALUATION OF THE SAID PROPERTY MADE BY THE STAMP VALUATION AUTHORITY WAS E3XCESSIVE AND HIGH AND THE SAID FACT WAS PROVED BY THE APPELLANT WITH REFERENCE TO THE VALUATION OF THE PROPERTY MADE BY THE SAID AUTHORITY AT THE TIME OF THE PURCHASE OF THE SAID PROPERTY WHEN THE ORIGINAL VALUE DETERMINED BY IT W AS REDUCED IN APPEAL BY MORE THAN 63% 4. FOR THAT THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE PROPERTY WHICH WAS SOLD WAS COMPLETELY IN OCCUPATION OF THE TENANT S AND THE APPELLANT WAS REALIZING VERY LOW RENT AND/OR NO RENT AT ALL IN RE SPECT OF VARIOUS PORTIONS OF THE SAID BUILDING AND THE CONSIDERATION RECEIVED BY THE APPELLANT WAS FAR-IN EXCESS OF THE CONSIDERATION WHICH WOULD HAVE BEEN PAID BY ANY INDEPENDENT BUYER FOR THE SAID PROPERTY. 2 2. THE RELEVANT FACTS AS CULLED OUT FROM PAGE 3 OF THE IMPUGNED ORDER ARE AS UNDER :- 5. THE BRIEF FACTS OF THE CASE ARE THAT THE APPE LLANT HAD 1/3 RD SHARE IN THE PROPERTY AT 3, MARQUISE STREET, KOLKATA. THE APPELL ANT, ALONG WITH TWO OTHER CO- OWNERS, HAD PURCHASED THE PROPERTY IN 1995. THE PRO PERTY WAS SOLD IN THE RELEVANT YEAR FOR TOTAL CONSIDERATION OF RS.80,00,0 00/-. THE APPELLANT RETURNED LONG TERM CAPITAL GAIN OF RS.1,76,135/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO REQUESTIONED NECESSARY DETAILS AND INFORMATION FROM THE ADDITIONAL REGISTRAR OF ANNEXURE-II, KOLKATA. THE A O WAS INFORMED THAT THE DEED OF CONVEYANCE WAS PRESENTED FOR REGISTRATION O N 07-05-2004. THE VALUE ADOPTED FOR THE PURPOSE OF PAYMENT OF STAMP DUTY WA S RS.2,22,00,000/-. NO APPEAL WAS FILED AGAINST IT BY THE PURCHASERS. AND, THE STAMP DUTY OF RS.22,20,110/- AND REGISTRATION FEE OF RS.2,44,203/ - WAS PAID. THE APPELLANT SUBMITTED BEFORE THE AO THAT THE VALUE SO ADOPTED W AS HIGHER THAN THE FAIR MARKET VALUE. THE AO MADE A REFERENCE TO THE VALUAT ION OFFICER. HOWEVER, NO VALUATION REPORT WAS RECEIVED BY THE AO TILL THE 31 ST DECEMBER, 2007. THE AO ADOPTED BY THE STAMP VALUATION AUTHORITY AS THE FUL L VALUE OF CONSIDERATION IN VIEW OF THE PROVISIONS OF SECTION 50C. 2.1. IN APPEAL AGAINST THE SAID ACTION THE ASSESSE E AGITATED THE ISSUE BEFORE THE LD. CIT(A) WITHOUT ANY SUCCESS. STILL AGGRIEVED THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING IT WAS SUBMITTED BY THE L D. AR MR.A.K.GUPTA THAT A PERUSAL OF THE ASSESSMENT ORDER WOULD SHOW THAT THE REFERENCE WAS MADE TO THE DVO IN THE COURSE OF ASSESSMENT PROCEEDINGS BY THE AO O N THE REQUEST OF THE ASSESSEE. IT WAS ARGUED THAT HOWEVER, AT THE TIME OF PASSING THE ORDER THE SAID REPORT WAS NOT AVAILABLE TO THE AO AS SUCH THE ORDER WAS PASSED DE HORSE THE DVOS REPORT. IT WAS HIS SUBMISSION THAT THIS ISSUE WAS AGITATED BEFORE THE LD. CIT(A) WHO REMANDED THE ISSUE BACK TO THE FILE OF THE AO. IT WAS SUBMITTED THAT W ITHOUT GIVING ANY REASONS FOR NOT CONSIDERING THE DVOS REPORT THE CLAIM OF THE ASSES SEE WAS NOT ACCEPTED. 3.1. IN THE LIGHT OF THESE FACTS ON RECORD ATTENTIO N WAS INVITED TO THE ORDER OF THE DELHI BENCH IN THE CASE OF RAVI KANT VS- ITO (2007 ) 110 TTJ (DEL)297 AND ANOTHER ORDER OF THE ITAT, DELHI BENCH IN THE CASE OF ITO VS- SMT. MANJU RANI JAIN VIDE (2008) 24 SOT 24 (DELHI) FOR THE PROPOSITION THAT THE DVOS REPORT SHOULD HAVE BEEN TAKEN INTO CONSIDERATION. IN THE ABOVE FACTS AND PO SITION OF LAW A PRAYER WAS MADE THAT 3 THE ISSUE MAY BE RESTORED TO THE FILE OF THE AO FOR TAKING INTO CONSIDERATION THE RELEVANT MATERIAL. ON AN QUERY FROM THE BENCH IT WA S FURTHER CLARIFIED THAT HE WAS NOT AWARE OF THE POSITION OF THE OTHER TWO JOINT OWNERS AND HE WOULD HAVE NO OBJECTION IF THE VIEW TAKEN THEREIN IS ALSO TAKEN INTO CONSIDERA TION BY THE AO WHILE CONSIDERING THE DVOS REPORT. 4. THE LD. DR HAD NO OBJECTION IF THE ISSUE IS REST ORED BACK TO THE FILE OF THE AO FOR CONSIDERING THE DVOS REPORT. ON QUERY THE LD. DR WAS UNABLE TO ADDRESS THE BENCH ON THE POSITION IN REGARD TO THE OTHER JOINT OWNERS OF THE SAID PROPERTY AND AS SUCH THE DIRECTION TO THE AO TO TAKE INTO CONSIDERA TION THE POSITION IN REGARD TO THE OTHER TWO JOINT OWNERS WAS ALSO AGREED TO BY HIM. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT AS FAR AS THE FACTS ARE CON CERNED THERE IS NO DISPUTE. SINCE ADMITTEDLY AS PER UNNUMBERED PAGE 6 OF THE ASSESSME NT ORDER THE REFERENCE WAS MADE TO THE DVO ON 1.11.2007. THE ASSESSMENT ORDER WAS P ASSED ON 31.12.2007. ACCORDINGLY THE FACTUM OF REFERENCE MADE TO THE DVO AT THE ASSESSMENT STAGE IS NOT IN DISPUTE. 5.1. WE NOW PROPOSE TO CONSIDER THE REQUIREMENTS OF THE SECTION 50(C) OF THE INCOME TAX ACT. THE SAID SECTION READS AS UNDER :- 50C. SPECIAL PROVISION FOR FULL VALUE OF CONSIDE RATION IN CERTAIN CASES (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A R ESULT OF THE TRANSFER OF AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOV ERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORI TY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL, FOR THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (1) WHERE (A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICE R THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY UNDER SUB -SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRAN SFER ; 4 (B) THE VALUE SO ADOPTED OR ASSESSED BY THE STAMP V ALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT, THE ASSESSING OFFICER MAY REFER THE VALUATION OF T HE CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS M ADE, THE PROVISIONS OF SUB- SECTIONS (2),(3),(4),(5) AND (6) OF SECTION 16A, C LAUSE(I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION 37 OF THE WEALT H-TAX ACT, 1957 (27 OF 1957), SHALL, WITH NECESSARY MODIFICATIONS, APPLY IN RELAT ION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESS ING OFFICER UNDER SUB- SECTION (1) OF SECTION 16A OF THAT ACT. EXPLANATION FOR THE PURPOSES OF THIS SECTION, VA LUATION OFFICER SHALL HAVE THE SAME MEANING AS IN CLAUSE OF SECTION 2 OF THE WEALTH-TAX ACT, 1057 (27 OF 1957). (3) SUBJECT TO THE PROVISIONS CONTAINED IN SUB-SECT ION (2), WHERE THE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY REFERRED TO IN SUB-SECTIO N (1), THE VALUE SO ADOPTED OR ASSESSED BY SUCH AUTHORITY SHALL BE TAKEN AS THE FU LL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. 5.2. ON A CAREFUL READING THE SAID SECTION WHICH IN CORPORATES THE SCHEME OF THE ACT IT IS CLEAR THAT THE SAID SEC. 50C OF THE IT ACT, W AS INTRODUCED BY THE FINANCE ACT,2002 W.E.F. 1 ST APRIL, 2003, CONTAINS SPECIAL PROVISIONS FOR VALUA TION OF THE CONSIDERATION IN CERTAIN CASES. SEC. 50C(1) PROVIDES THAT WHERE CONS IDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER BY AN ASSESSEE OF A CAPITAL ASSE T, CONSISTING OF LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT (REFERRED TO AS STAMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY FOR SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHA LL, FOR THE PURPOSES OF S.48, BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIV ED OR ACCRUING AS A RESULT OF SUCH TRANSFER. MEANING THEREBY WHEN THE STATED SALES CON SIDERATION OF LAND OR A HOUSE PROPERTY IS LESS THANTHE STAMP DUTY VALUATION FOR T HE SAID PROPERTY, IT IS THE STAMP DUTY VALUATION WHICH SHALL PREVAIL FOR THE PURPOSES OF C OMPUTATION OF CAPITAL GAINS UNDER S.48. 5.3. FURTHER A READING OF SUB-SECTION (2) AND (3) O F SECTION 50C WOULD BEAR OUT THAT SECTION 50C IS SUBJECT TO AN IMPORTANT EXCEPTION CA RVED OUT IN THE SCHEME. SUB- SECTION. (2) AND (3) OF SECTION.50C PROVIDES THAT W HERE ASSESSEE PUT A CLAIM BEFORE THE 5 AO THAT THE VALUE ADOPTED BY THE STAMP VALUATION AU THORITY, UNDER S.50C(1), EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DAT E OF TRANSFER, AND UNLESS SUCH VALUATION IS A SUBJECT-MATTER OF LITIGATION BEFORE ANY AUTHORITY OR COURT, THE AO MAY REFER THE MATTER OF DETERMINATION OF FAIR MARKET VA LUE OF THE PROPERTY IN QUESTION TO THE DVO AND THE SAME SHALL BE TAKEN INTO ACCOUNT FOR CO MPUTATION OF CAPITAL GAINS. SEC. 50C(3), HOWEVER, PROVIDES THAT WHEN FAIR MARKET VAL UATION SO DETERMINED BY THE DVO IS HIGHER THAN THE VALUATION OR ASSESSMENT AS PER T HE STAMP VALUATION AUTHORITY, THE COMPUTATION OF CAPITAL GAINS IS TO BE DONE WITH REF ERENCE TO THE VALUATION OR ASSESSMENT AS PER THE STAMP VALUATION AUTHORITY. TH IS WOULD MEAN THAT THE LEGISLATURE WAS CAREFUL TO ENSURE THAT THE VALUATION OF PROPERT Y BY THE DVO WOULD NOT ACT TO THE DETRIMENT OF THE ASSESSEE; THE RATIONALE BEING THAT THE ASSESSEE CANNOT BE PUT TO ANY DISADVANTAGE IN CASE THE MATTER IS REFERRED TO THE DVO. 5.4. THE SAID SCHEME MAY BE SUMMARIZED IN THE FOLLO WING MANNER NAMELY (A) THE NORMAL RULE IS THAT WHERE STAMP DUTY VALUATION IS HIGHER THAN THE STATED CONSIDERATION ON TRANSFER, THE SAME IS TO BE ADOPTE D FOR THE PURPOSES OF COMPUTING CAPITAL GAINS; (B) EXCEPTION TO THE NORMAL RULES IS THAT IN CASE THE A SSESSEE CAN DEMONSTRATE THAT THE FAIR MARKET VALUATION IS LESS THAN THE STAMP DU TY VALUATION, THE FAIR MARKET VALUE IS TO BE ADOPTED; (C) THE SAFEGUARD IS THAT ASSESSEES CHALLENGE TO THE S TAMP DUTY VALUATION BEFORE THE TAX AUTHORITIES CANNOT PUT THE ASSESSEE TO A WO RSE POSITION. IN EFFECT THUS, WHEN STAMP DUTY VALUATION OF A PROPERTY IS HIGHER T HAN THE STATED VALUE OF SALE CONSIDERATION, THE ONUS TO PROVE THE FAIR MARKET VA LUE SHIFTS TO THE ASSESSEE. AS LONG AS ASSESSEE CAN REASONABLY DISCHARGE THIS ONUS , EVEN UNDER THE SCHEME OF S.50C, THE CONSIDERATION STATED BY THE ASSESSEE CAN NOT BE DISTURBED. 5.5. ACCORDINGLY IN THE LIGHT OF THE ABOVE POSITION OF LAW ON THE FACTS OF THE CASE IT IS CONSIDERED APPROPRIATE TO RESTORE THE ISSUE BACK TO THE FILE OF THE AO WITH THE DIRECTION TO DECIDE THE SAME IN ACCORDANCE WITH LAW BY WAY OF A SPEAKING ORDER TAKING INTO CONSIDERATION : 6 A) THE DVOS REPORT OBTAINED BY THE AO THOUGH AFTER AS SESSMENT PROCEEDINGS IN TERMS OF SECTION 50C OF THE ACT; B) THE AO SHALL ALSO TAKE INTO CONSIDERATION THE POSIT ION IN REGARD TO THE OTHER 2 JOINT OWNERS OF THE SAID PROPERTY. 5.6. THE AO SHALL PASS A SPEAKING ORDER AFTER GIVIN G THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES AS PER THE PRONOUNCEMENT MADE IN THE OPEN COURT IN THE PRE SENCE OF THE PARTIES ON THE DATE OF THE HEARING ITSELF I.E. 29.03.2010. SD/- SD/- (B.C.MEENA) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED : 29.03.2010. COPY OF THE ORDER IS FORWARDED TO :- 1) SHRI SIDDHARTH KHAITAN, C/O KHAITAN & CO., 1B, OLD POST OFFICE STREET, KOLKATA- 700001. 2) I.T.O., WARD-36(3), KOLKATA 3) CIT (A)-XX, KOLKATA (4) CIT - KOLKAT A. 5) D. R., I.T.A.T., KOLKATA. (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, (RG) I.T.A.T., KOLKATA.