Arun Kumar Basu , Kolkata V. ITO, Ward - 22(3), Kolkata

ITA 2168/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2769 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-04-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 12-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RABIN CHOUDHURY CIT SR DR R
• Assessee Lawyers: ARVIND AGARWAL
• Keywords: Sale consideration of property below Jantri Value; Depreciation; Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT, KZ] I.T.A. NO. 2168/KOL/2018 ASSESSMENT YEAR: 2013-14 ARUN KUMAR BASU................................................................................APPELLANT 303C, HERRA PANNA, 11A, HINDUSTAN ROAD, KOLKATA 700 029. [PAN: ADWPB 8429 P] ITO, WARD 22(3), KOLKATA................................RESPONDENT 54/1, RAFI AHMED KIDWAI ROAD, KOLKATA 700 016. APPEARANCES BY: SHRI ARVIND AGARWAL, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE. SHRI RABIN CHOUDHURY, ADDL. CIT, SR. DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : APRIL 01, 2019 DATE OF PRONOUNCING THE ORDER : JUNE 07, 2019 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 6, KOLKATA DATED 20.07.2018 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE ADDITION OF RS. 14,61,484/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF LONG TERM CAPITAL GAIN. 2. THE ASSESSEE IN THE PRESENT IS AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 15.03.2014 DECLARING HIS TOTAL INCOME AT RS. 5,07,750/-. THE ASSESSEE WAS JOINT OWNER OF PROPERTY SITUATED AT 109/F, SHYAMA PRASAD MUKHERJEE ROAD, KOLKATA 700 026 HAVING 9/48 TH SHARE. THE SAID PROPERTY WAS INHERITED BY THE ASSESSEE BEFORE 01.04.1981 WITH THE OTHER CO-OWNERS AND THE SAME WAS SOLD DURING THE YEAR UNDER CONSIDERATION ON 26.09.2012. IN HIS RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, LONG TERM 2 I.T.A. NO. 2168/KOL/2018 ASSESSMENT YEAR: 2013-14 ARUN KUMAR BASU CAPITAL GAIN OF RS. 3,91,793/- WAS DECLARED BY THE ASSESSEE AS WORKED OUT AS UNDER: A. VALUE OF THE ENTIRE ASCERTAINED BY STAMP VALUATION AUTHORITY ON THE DATE OF ITS SALE IS CONSIDERED AS FULL VALUE OF CONSIDERATION OF THE ENTIRE PROPERTY AS PER SECTION 50C OF I.T. ACT, 1961. RS. 1,74,00,000/- B. FAIR MARKET VALUE OF THE ENTIRE PROPERTY AS ON 01.04.1981 ASCERTAINED BY THE REGISTERED VALUER RS. 17,97,000/- C. FULL VALUE OF CONSIDERATION OF ASSESSEES SHARE-9/48 OF RS. 1,74,00,000/- RS. 32,62,500/- D. ASSESSEES SHARE OF THE FAIR MARKET VALUE AS ON 01.04.1981 9/48 OF RS. 17,97,000/- RS. 3,36,938/- E. INDEXED COST OF ACQUISITION 3,36,938X852/100 RS. 28,70,708/- F. LONG TERM CAPITAL GAIN (C-E) RS. 3,91,793/- 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A REFERENCE WAS MADE BY THE AO TO THE DVO FOR DETERMINING THE FAIR MARKET VALUE OF THE PROPERTY AS ON 01.04.1981. IN THE REPORT DATED 22.03.2016 SUBMITTED TO THE AO, THE FAIR MARKET VALUE OF THE ENTIRE PROPERTY WAS DETERMINED BY THE DVO AT RS. 8,82,080/- AS AGAINST THE VALUE OF RS. 17,97,000/- ASCERTAINED BY THE REGISTERED VALUER. WHEN THIS REPORT WAS CONFRONTED BY THE AO TO THE ASSESSEE, THE ASSESSEE SUBMITTED THE COPY OF LETTER DATED 21.03.2016 ADDRESSED TO THE DVO RAISING HIS OBJECTION. SINCE THE SAID LETTER WAS ADDRESSED BY THE ASSESSEE TO THE DVO, THE AO PRESUMED THAT THE OBJECTIONS RAISED BY THE ASSESSEE THEREIN HAD ALREADY BEEN CONSIDERED BY THE DVO. HE ACCORDINGLY ADOPTED THE FAIR MARKET VALUE OF THE PROPERTY AS DETERMINED BY THE DVO AS ON 01.04.1981 AND WORKED OUT THE LONG TERM CAPITAL GAIN 3 I.T.A. NO. 2168/KOL/2018 ASSESSMENT YEAR: 2013-14 ARUN KUMAR BASU CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE AT RS. 18,53,277/-. HE ACCORDINGLY MADE AN ADDITION OF RS. 14,61,484/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF LONG TERM CAPITAL GAIN IN THE ASSESSMENT COMPLETED U/S 143(3) VIDE AN ORDER DATED 21.03.2016. 4. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT THE OBJECTIONS RAISED BY HIM IN RESPECT OF VALUATION MADE BY THE DVO WERE NEITHER CONSIDERED BY THE DVO. THE LD. CIT(A), THEREFORE, SOUGHT A REMAND REPORT FROM THE AO. IN THE REMAND REPORT SUBMITTED TO THE LD. CIT(A), THE AO OFFERED HIS COMMENTS AS UNDER: 1. DETAILED MEASUREMENT WAS TAKEN BY THE CONCERNED AVO IN PRESENCE OF THE ASSESSEE AND ACCORDINGLY DRAFT VALUATION REPORT WAS PREPARED. 2. THE SAID DRAFT VALUATION REPORT WAS SENT TO THE ASSESSEE TO SUBMIT AS ACCEPTANCE / REJECTION WITHIN 23.03.2016 AT 1.30 P.M. BUT TILL SUCH DATE THE ASSESSEE DID NOT RAISE ANY OBJECTION. 3. THE SALE INSTANCE PROPERTY IS IN THE SAME BEING 180 METRES DISTANCE FROM THE SUBJECTED PROPERTY AND THE SAME WAS ENCLOSED IN ANNEXURE III OF DRAFT VALUATION REPORT AND IN FINAL VALUATION REPORT. 4. DETAILED CLARIFICATION REGARDING NON ADMISSIBILITY OF THE VALUATION REPORT HAS SUBMITTED BY THE ASSESSEE. 5. BOTH THE DRAFT VALUATION REPORT AND FINAL VALUATION REPORT HAVE BEEN PREPARED AS PER INFORMATION OF THE ASSESSEE AND ALSO IN THE CBDT GUIDELINES IN THIS REGARD. KEEPING IN VIEW THE REMAND REPORT SUBMITTED BY THE AO AS WELL AS THE OTHER MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) DID NOT FIND MERIT IN THE OBJECTIONS RAISED BY THE ASSESSEE AND PROCEEDED TO CONFIRM THE ADDITION MADE BY THE AO ON ACCOUNT OF LONG TERM CAPITAL GAIN. AGGRIEVED 4 I.T.A. NO. 2168/KOL/2018 ASSESSMENT YEAR: 2013-14 ARUN KUMAR BASU BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT IN THE WRITTEN SUBMISSION FILED BEFORE THE LD. CIT(A), COMPARATIVE DETAILS OF THE VALUATION REPORTS PREPARED BY THE DVO AND THE REGISTERED VALUER WERE GIVEN BY THE ASSESSEE AS UNDER AND CERTAIN DEFECTS IN THE VALUATION OF DVO WERE ALSO POINTED OUT: A COMPARATIVE STUDY OF THE VALUATION REPORT PREPARED BY THE LD. AVO AND THE REGISTERED VALUER SHOWS THE DIFFERENCE AS UNDER: VALUE AS PER LD. AVO () VALUE AS PER REGISTERED VALUER () LAND VALUE 6,94,617 13,02,000 VALUE OF BUILDING 1 ST & 2 ND FLOOR 1,68,148 2,83,000 VALUE OF GARAGE & 3 RD FLOOR 19,315 75,000 VALUE OF MISC. WORKS SUCH AS PARAPET WALL, STAIR ROOM, PUJA ROOM, OVERHED WATER TANK, SPIRAL STAIRS ETC. NIL 1,37,000 8,82,080 17,97,000 THE LD. AVO HAD APPLIED DISCOUNTING METHOD TO ARRIVE AT THE FMV OF LAND AS ON 01.04.1981. WITHOUT PREJUDICE TO OUR SUBMISSION HEREINBEFORE, EVEN IF COST INFLATION INDEX OF CBDT WOULD HAVE BEEN APPLIED, THE FMV OF LAND WOULD HAVE BEEN RS. 7,67,383/- AS AGAINST RS. 6,94,617/-. THE 1 ST & 2 ND FLOORS OF BUILDING IN QUESTION WERE CONSTRUCTED DURING 1933- 34 AND THE SAME WAS SOLD IN 2010, I.E. AFTER 75 YEARS OF CONSTRUCTION. THE LD. AVO HAD CONSIDERED TOTAL LIFE OF THE BUILDING AS 75 YEARS ONLY WHICH IS HIGHLY UNJUSTIFIED AS THE APPELLANT HAD SOLD THE BUILDING WHICH MUST HAVE SOME MORE YEARS OF LIFE AT THE TIME OF SALE. 3 RD FLOOR OF THE BUILDING WAS CONSTRUCTED IN 1976 WHICH MEANS IT WAS ONLY 5 YEARS OLD IN 1981. BUT THE LD. AVO HAD TAKEN DEPRECIATION FOR 47 YEARS INSTEAD OF 5 YEARS TO ARRIVE AT THE VALUE OF 3 RD FLOOR. 5 I.T.A. NO. 2168/KOL/2018 ASSESSMENT YEAR: 2013-14 ARUN KUMAR BASU THE LD. AVO HAD NOT CONSIDERED THE MISC. WORKS SUCH AS PARAPET WALL, STORE ROOM, PUJA ROOM, OVERHEAD WATER TANK, SPIRAL STAIRS ETC. WHICH HAD BEEN VALUED BY THE REGISTERED VALUER FOR 1,37,000. 6. AS RIGHTLY POINTED OUT ON BEHALF OF THE ASSESSEE, THE DISCOUNTING METHOD ADOPTED BY THE DVO TO ARRIVE AT THE FAIR MARKET VALUE OF LAND AS ON 01.04.1981 WAS NOT APPROPRIATE AND EVEN IF COST INFLATION INDEX OF CBDT HAD BEEN APPLIED INSTEAD OF FACTORING THE SELLING RATE OF 1980 BY 8% TO ARRIVE AT THE DISCOUNTED FIGURE OF 1981, THE FAIR MARKET VALUE OF LAND WOULD HAVE BEEN RS. 7,67,383/- AS AGAINST RS. 6,94,617/-. SIMILARLY, THE RATE OF DEPRECIATION OF 62% APPLIED BY THE DVO TO DETERMINE THE VALUE OF BUILDING I.E. 1 ST & 2 ND FLOOR AND VALUE OF GARAGE & 3 RD FLOOR WAS TOO HIGH KEEPING IN VIEW THE GOOD AND WELL MAINTAINED CONDITION OF THE BUILDING AS POINTED OUT BY THE REGISTERED VALUER IN HIS REPORT. MOREOVER, 3 RD FLOOR OF THE BUILDING WAS CONSTRUCTED IN THE YEAR 1976 AND APPLYING DEPRECIATION AT 62% TO DETERMINE THE VALUE IN THE 1981 WAS HIGHLY UNJUSTIFIED. THE OTHER MISCELLANEOUS WORK CARRIED OUT BY THE ASSESSEE IN THE BUILDING SUCH AS PARAPET WALL, STORE ROOM, PUJA ROOM, OVERHEAD WATER TANK, SPIRAL STAIRS ETC. WHICH HAD BEEN VALUED BY THE REGISTERED VALUER FOR RS. 1,37,000/- WAS ALSO NOT CONSIDERED BY THE DVO IN HIS VALUATION. IN MY OPINION, THESE ARE THE GLARING MISTAKES IN WHICH WERE THERE IN THE DVOS REPORT AND EVEN THE LEARNED DR HAS NOT DISPUTED THE SAME. IF THESE MISTAKES IN THE DVOS REPORT ARE RECTIFIED AND THE VALUATION MADE BY THE DVO IS ADJUSTED TO THAT EXTENT, THE ENTIRE VALUE OF THE PROPERTY SOLD BY THE ASSESSEE AND OTHER CO-OWNERS WOULD BE AS UNDER: 1. LAND VALUE RS. 7,67,383/- 2. VALUE OF BUILDING 1 ST & 2 ND FLOOR (DEPRECIATION AT 35%) RS. 2,50,679/- 3. VALUE OF GARAGE & 3 RD FLOOR (DEPRECIATION AT 5%) RS. 42,085/- 4. VALUE OF MISCELLANEOUS WORK RS. 1,37,000/- 6 I.T.A. NO. 2168/KOL/2018 ASSESSMENT YEAR: 2013-14 ARUN KUMAR BASU (AS TAKEN BY THE REGISTERED VALUER) TOTAL RS.11,97,147/- THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO RECOMPUTE THE LONG TERM CAPITAL GAIN CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE BY ADOPTING THE FAIR MARKET VALUE OF THE PROPERTY AS ON 01.04.1981 AT RS. 11,97,147/- 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2019. SD/- (P.M. JAGTAP) VICE PRESIDENT DATED: 07/06/2019 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. ARUN KUMAR BASU, 303C, HERRA PANNA, 11A, HINDUSTAN ROAD, KOLKATA 700 029. 2. ITO, WARD 22(3), KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA