ACIT Circle-32 (1), New Delhi V. Namita Singh, New Delhi

ITA 2256/DEL/2008

• Counselvise Citation: 225620114 RSA 2008
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 02-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 09-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KISHORE
• Assessee Lawyers: VK SABHARWAL
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Gift; Opportunity of being heard; Fair market value; Valuation report
• Section: 143(3); 50C; 56(2); 69; 54; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH F DELHI ] BEFORE SHRI RAJPAL YADAV, JM & SHRI K. D. RA NJAN, AM I. T. APPEAL NO. 2256 (DEL) OF 2008. ASSESSMENT YEAR : 200405. THE INCOME-TAX OFFICER, MS. NAMITA SI NGH, W A R D : 32 (1), VS. C 41, NIZAM UDDIN EAST, N E W D E L H I. N E W D E L H I. PAN / GIR NO. AARPS 4469C. A N D C. O. NO. 79 (DEL) OF 2010. [ IN I. T. APPEAL NO. 2256 (DEL) OF 2008 ]. ASSESSMENT YEAR : 200405. MS. NAMITA SINGH, THE INCOME-TAX OFFICER , C 41, NIZAMUDDIN EAST, VS. W A R D : 32 (1), N E W D E L H I. N E W D E L H I. PAN/GIR NO. AARPS4469C. ( APPELLANTS ) ( RESPONDENTS ) ASSESSEE BY : SHRI V. K. SABHARWAL, ADV.; DEPARTMENT BY : SHRI B. KISHORE, SR. D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE FOR ASSESSMENT YEAR 2004-05 ARISE OUT OF THE ORDER OF THE LD. CIT (APPEALS)XXVI, NEW DELHI. THESE APPEALS 2 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE , ARE DISPOSED OF, BY THIS CONSOLIDATED ORDER. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE IN I. T.A. NO. 2256 (DEL) OF 2008, READS AS UNDER:- THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW BY NOT ACCEPTING THE VALUATION MADE BY THE DVO IN RESPECT SALE OF P ROPERTY AND ALSO IN RESPECT OF INVESTMENTS MADE IN OTHER PROPERTY AND I N ALLOWING RELIEF OF RS.1,26,26,422/-. 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN C.O. NO. 79 (DEL) OF 2010, READ AS UNDER:- 1. THAT THE ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE ACT IS AGAINST THE PROVISIONS OF LAW CONTAINED UNDER SECTION 153 OF TH E INCOME-TAX ACT, 1961; 2. THAT THE ADDITION ON ACCOUNT RENT OF RS. 36,000/- MADE BY THE ASSESSING OFFICER AND UPHELD BY THE LD. CIT (APPEALS) IS AGAI NST THE FACTS AND TO THE PROVISIONS OF LAW. 4. FIRST WE TAKE UP THE APPEAL FILED BY THE REVENUE . THE ONLY ISSUE FOR CONSIDERATION IN REVENUES APPEAL RELATES TO DELETING THE ADDITION O F RS.1,26,26,422/- ON THE BASIS OF THE DVOS REPORT IN RESPECT OF SALE OF PROPERTY AND ALSO IN R ESPECT OF INVESTMENTS MADE IN OTHER PROPERTIES. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE SOLD PROPERTY KNOWN AS FLAT NO. B-28, LAJPAT NAGAR, NEW DELHI IN MAY, 2003 FOR SALE CONSI DERATION OF RS.12 LAKHS. THE SAID PROPERTY WAS PURCHASED BY THE ASSESSEE ON 25 TH OCTOBER, 1996 FOR A SUM OF RS.12 LAKHS. THUS THE CAPITAL GAIN ON ACCOUNT OF SALE OF PROPERTY WAS ADMITTED AS NIL. THE ASSESSING OFFICER IN ORDER TO ASCERTAIN THE MARKET VALUE OF THE PROPERTY DEPUTED AN INSPECTOR OF INCOME-TAX TO MAKE ENQUIRIES ABOUT THE FAIR MARKET VALUE OF THE PROPERTY SOLD. THE INSPECTOR OF INCOME-TAX VIDE HIS REPORT DATED 6/01/2006 REPORTED THAT THE PREMISES BEARING NO. B-III/28 AT LAJPAT NAGAR-III, NEW DELHI, WAS CONSTRUCTED FLOOR-WISE. HE ALSO MADE INQUIRY F ROM M/S. KOHLI PROPERTY DEALERS. THE ESTIMATED THE VALUE OF THE PROPERTY ACCORDING TO M/ S KOHLI PROPERTY DEALERS IN THE YEAR 2003 FLOOR-WISE WAS AS UNDER :- 3 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. GROUND FLOOR RS.55 TO 60 LAKHS; FIRST FLOOR RS.50 TO 55 LAKHS; SECOND FLOOR RS.35 TO 45 LAKHS; THIRD FLOOR RS.35 TO 40 LAKHS. THE BUILT-UP PLOT AREA WAS ABOUT 200 SQ. YDS. AND THE CURRENT VALUE OF THE ENTIRE PROPERTY WAS ABOUT RS.2 CRORES. SINCE THERE WAS HUGE DIFFERENC E BETWEEN THE VALUE SHOWN BY THE ASSESSEE AND THE REPORT OF THE INSPECTOR, THE ASSESSING OFFI CER REFERRED THE MATTER TO THE VALUATION OFFICER UNDER SECTION 50C/55A OF THE ACT WITH THE PRIOR APP ROVAL OF THE ADDL. CIT, RANGE : 32, NEW DELHI. DVO VIDE HIS REPORT DATED 5/12/2006 ESTIMAT ED THE VALUE OF THE PROPERTY AS ON MAY, 2003 AT RS.57, 58,400/-. THE ASSESSING OFFICER OBTAINED COMMENTS OF THE ASSESSEE. THE ASSESSEE RAISED PRELIMINARY OBJECTION THAT THE LD. DVO HAD N OT VALUED PROPERTY AS PER NORMAL PRACTICE IN THE REAL ESTATE BUSINESS. THE ASSESSEE HAS PURCHAS ED THESE APARTMENTS COMPLETE WITH ALL FITTINGS ETC. THE VALUATION OF THE PROPERTY COULD NOT BE DO NE BY CALCULATING THE COST OF EACH ITEM LIKE SANITARY FITTINGS, KITCHEN FITTINGS, ELECTRIC FITTI NGS AND WOOD-WORK ETC. THE ASSESSEE HAD NOT MADE ANY ADDITION OR ALTERATION IN THE APARTMENT UNDER R EFERENCE. ANY CHANGE MADE BY THE TENANT ACCORDING TO WHICH HER/HIS REQUIREMENT COULD NOT BE PART OF THE INVESTMENT MADE BY THE ASSESSEE. THE AREA OF THE FLAT AT B-28, LAJPAT NAGAR WAS ABOU T 1200 SQ. FT. AND ACCORDING TO THE DVO THE COST PER SQ. FT. WOULD COME TO RS.4,800/- PER SQ. F T. AS AGAINST ACTUAL COST OF RS.1,000/- PER SQ. FT. THE PROPERTY WAS SITUATED IN REHABILITATION COLONY AND THE CONTRACTOR MADE CONSTRUCTION OF THE BUILDING. THE QUALITY OF MATERIAL USED BY THE CONT RACTOR AND SELF-MADE BUILDING HAS NO COMPARISON. IT WAS ALSO SUBMITTED THAT THE VALUE O F THE RENTED PROPERTIES OR OCCUPIED PROPERTIES COULD NOT BE COMPARED WITH VACANT PLOT PURCHASED IN AUCTION OR OTHERWISE. A VACANT PROPERTY HAS HIGHER VALUE AS COMPARED TO PROPERTY OCCUPIED B Y A TENANT OR OTHERWISE. THE ASSESSEE ALSO CHALLENGED THE ASSESSEES SHARE IN THE LAND. THE OW NER OF THE APARTMENT IS ENTITLED TO PROPORTIONATE UNDIVIDED SHARE IN THE LAND OF THE PR OPERTY. THERE WAS NO SPECIFIC PORTION THAT COULD BE ASSUMED TO BE BELONGING TO THE OWNER OF TH E FLAT. THEREFORE, THE PROPORTIONATE AREA OF 57.56 SQ. MTS. WAS WRONGLY TAKEN BY THE DVO FOR THE PURPOSE OF VALUATION. THE ASSESSING 4 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. OFFICER CONSIDERED THE OBJECTIONS RAISED BY THE ASS ESSEE AND REJECTED THE SAME. HE ADOPTED SALE CONSIDERATION OF RS.57,58,400/- AS SALE CONSIDERATI ON AS PER DVOS REPORT AND COMPUTED CAPITAL GAINS OF RS.39,36,760/-. 5. THE ASSESSEE HAD MADE INVESTMENT IN SHOP NOS. 11 , 12 AND 12-A AT N-5, NDSE-II, NEW DELHI FOR AN AMOUNT OF RS.24 LAKHS. IN ORDER T O VERIFY THE FAIR MARKET VALUE OF THE INVESTMENT THE MATTER WAS REFERRED TO THE VALUATION OFFICER, WHO ESTIMATED THE VALUE OF ASSETS AT RS.1,51,26,800/-. THE COPY OF THE VALUATION REPORT WAS FORWARDED TO THE ASSESSEE FOR HER COMMENTS. THE ASSESSEE VIDE HER LETTER DATED 20/1 2/2006 OBJECTED THE VALUATION ON THE FOLLOWING GROUNDS :- (A) THE LEASE RENT OF ALL THE THREE PROPERTIES I S AT RS.65,000/- AS AGAINST RS.97,500/- ADOPTED BY THE DVO; (B) INTEREST FREE SECURITIES WERE AT RS.1,35,000 /- ONLY AS AGAINST RS.3,90,000/- TAKEN BY THE DVO. ALSO IT HAS BEEN CONTENDED THAT THE RA TE OF INTEREST CHARGED AT 15 PER CENT IS ON THE HIGHER SIDE. (C) THE COST OF PROPERTY PER SQ. FT. AS PER DVO COMES TO RS.25,211/- AS AGAINST ACTUAL/DECLARED COST OF RS.3,000/- PER SQ. FT. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT W AS SUBMITTED BY THE ASSESSEE THAT THE PROPERTIES IN QUESTION WERE PURCHASED BY THE ASSESS EE WHICH WERE EARLIER LET OUT TO M/S. BHARTI CELLULAR LTD. VIDE RENT AGREEMENT DATED 17/07/2001 FOR A PERIOD OF NINE YEARS AT A MONTHLY RENT OF RS.65,000/- IN RESPECT OF ALL THE THREE PROPERTI ES. HOWEVER, THIS CONTENTION OF THE ASSESSEE WAS NOT FOUND TO BE CORRECT IN VIEW OF ASSESSMENT ORDER OF THE MCD FILED BY THE ASSESSEE WHICH CLEARLY STATED THAT THE PROPERTY NO. 11 AND 12 WERE RENTED OUT TO BHARTI CELLULAR AND THIRD PROPERTY NO.12-A WAS SELF-OCCUPIED. THE SUBMISSIO NS MADE BY THE ASSESSEE WERE BASED ON THE LEASE DEED DATED 5/06/2004. SINCE THE LEASE DEED R ELIED UPON BY THE ASSESSEE WAS OUTSIDE THE PURVIEW OF FINANCIAL YEAR UNDER CONSIDERATION, THE SAME WAS REJECTED. AS REGARDS INTEREST FREE 5 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. SECURITIES, THE ASSESSEES CONTENTION WAS BASED ON LEASE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH UTI SECURITIES WHEREIN INTEREST FREE SECURITIE S OF RS.1,35,000/- HAD BEEN PROVIDED BEING THREE MONTHS SECURITY OF THE RENT OF RS.45,000/-. THE DVO WHILE ARRIVING AT THE FIGURE OF INTEREST FREE SECURITY AT RS.3,90,000/-, HE HAD TAKEN SIX MO NTHS SECURITY ON THE RENT OF RS.65,000/- PAID BY M/S. BHARTI CELLULAR. THE AO NOTED THAT THE ASSUMP TION OF THE DVO FOR A PERIOD OF SIX MONTHS WAS NOT BASED ON ANY DOCUMENTARY EVIDENCE. HE, THE REFORE, TOOK THE INTEREST FREE SECURITY AT RS.1,97,500/- BEING THREE MONTHS RENTAL PAID BY M/ S. BHARTI CELLULAR LTD. AS REGARDS THE RATE OF INTEREST, THE AO ADOPTED THE RATE AT 12 PER CENT AS AGAINST 15 PER CENT TAKEN BY THE DVO. ON THE BASIS OF THE ABOVE, THE AO COMPUTED ANNUAL RENT OF THE PROPERTIES AT RS.11,93,400/- FROM WHICH HE DEDUCTED MUNICIPAL TAX OF RS.18,355/-. HE ESTIM ATED THE VALUATION OF THE PROPERTY ON RENT CAPITALIZATION METHOD AT RS.1,46,88,062/-. THE AS SESSING OFFICER FROM THE ESTIMATED VALUE OF THE PROPERTY DETERMINED AT RS.1,46,88,062/- REDUCED T HE SALE CONSIDERATION OF RS.57,58,400/- AND DETERMINED UNDISCLOSED INVESTMENT OF RS.89,29,662/- . 7. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT THE REPORT OF THE VALUATION OFFICER SHOULD BE SUPPORTED BY EVIDENCE OTHERWISE THE SAME WILL NOT BE BINDING ON THE ASSESSING OFFICER. THE INSPECTOR OF INCOME-TAX HAS NO JURISDICTION TO ENTER INTO THE POWERS OF THE ASSESSING OFFICER. HE HAD ESTIMATED THE VALUE OF THE PROPERTY AT THE H EARSAY OF THE ALLEGED PROPERTY DEALER, NAMELY, M/S. KOHLI PROPERTY DEALER. IT WAS ALSO STATED THA T THE STATEMENT OF PROPERTY DEALER WAS NOT GIVEN TO THE ASSESSEE TO CONFIRM WHAT THE INSPECTOR HAD REPORTED. SINCE NO SUMMON WAS ISSUED TO THE PROPERTY DEALER FOR TAKING THE STATEMENT AND FOR CROSS EXAMINATION BY THE ASSESSEE, RELIANCE CANNOT BE MADE ON INSPECTORS REPORT. IT WAS ALSO SUBMITTED THAT THE VALUATION OFFICER HAS NOT GIVEN ANY SALE INSTANCES. NO CONFIRMATION FROM PUR CHASING ASSESSEE WAS AVAILABLE FOR ANY OF THE ALLEGED EXTRA PAYMENT MADE BY HIM, IF ANY, OTHER TH AN WHAT HAS BEEN STATED IN THE AGREEMENT. ACCORDING TO THE ASSESSEE WHATEVER HAS BEEN SUBMITT ED IN THE AGREEMENT HAS TO BE ACCEPTED TRUE AND CORRECT UNLESS CONTRARY PROVED. NO PROCEEDINGS WERE INITIATED AGAINST THE BUYER OF THE FLAT IN REGARD TO ITS COST. IT WAS ALSO SUBMITTED THAT THE PROPERTY WAS REFERRED TO THE VALUATION OFFICER UNDER SECTION 55A OF THE ACT FOR ASCERTAINING THE M ARKET VALUE AS ON MAY, 2003. THE PROVISIONS OF SECTION 55A(A) OF THE ACT WILL BE APPLICABLE IN THE CASES WHERE THE ASSESSING OFFICER OR THE 6 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. DEPARTMENTAL OFFICER HAD POINTED OUT ANY DEFECTS OR DISCREPANCIES IN THE VALUATION REPORT SUBMITTED BY THE ASSESSEE. THE ASSESSEE PLACING RE LIANCE ON SEVERAL DECISIONS AND IN VIEW OF THE ABOVE IT WAS SUBMITTED THAT THE VALUATION OF THE PR OPERTY MADE BY THE VALUATION OFFICER WAS NOT JUSTIFIED. 8. AS REGARDS INVESTMENT IN PROPERTY NO. N-5, N.D.S .E.-I, NEW DELHI, IT WAS SUBMITTED THAT THE ASSESSEE HAS PURCHASED ALL THE THREE PROPERTIES FOR A SUM OF RS. 24 LAKHS FROM SHRI ATUL TALWAR. THE PROPERTY PURCHASED WAS IN THE RESIDENT IAL COLONY AND THE TOTAL SUPER AREA OF THE THREE PROPERTIES WAS AT 770 SQ. FTS. WHICH WAS LET OUT TO M/S. BHARTI CELLULAR LTD. AT A MONTHLY RENT OF RS.65,000/-. THE INVESTMENT WAS MADE OUT O F SALE PROCEEDS OF RESIDENTIAL FLAT NO. B- II/28, GROUND FLOOR, LAJPAT NAGAR, NEW DELHI AND FR OM PERSONAL SOURCES, THERE WAS NO CAPITAL GAIN FROM SALE OF LAJPAT NAGAR FLAT AND IN ANY CASE THE CAPITAL GAINS FROM SALE OF RESIDENTIAL HOUSE WAS EXEMPT IF INVESTED IN THE PURCHASE OF A R ESIDENTIAL HOUSE UNDER SECTION 54 OF THE ACT. THE APPROVED VALUER HAD ESTIMATED THE VALUE OF THE THREE PROPERTIES AT RS.23,10,000/- VIDE REPORT DATED 2/07/2003. THE ASSESSING OFFICER WITHOUT POI NTING OUT ANY DEFECT, DEFICIENCIES OR OBJECTIONS IN THE ASSESSEES VALUER REPORT REFERRED THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER UNDER SECTION 142A OF THE INCOME-TAX ACT IN ORDER TO FIND OUT THE MARKET VALUE. IT WAS SUBMITTED THAT PROVISIONS OF SECTION 142A WERE APPL ICABLE IN THE CIRCUMSTANCES THAT THE ASSESSEE HAD MADE INVESTMENT AND SUCH INVESTMENT WAS UN-EXPL AINED. THERE WAS NO MATERIAL EVIDENCE TO ESTABLISH THAT THE ASSESSEE HAD MADE INVESTMENT OVER AND ABOVE THAT WAS RECORDED IN THE SALE DEED. IN THE ABSENCE OF ANY SUCH EVIDENCE , NO ADDITION COULD BE MADE UNDER SECTION 69 OF THE ACT. 9. IT WAS ALSO SUBMITTED THAT THE VALUATION REPORT WAS NOT BINDING ON THE ASSESSING OFFICER. THERE WAS NOTHING TO INDICATE ANY UNACCOUNTED AMOUN T WAS INVESTED IN PURCHASE OF THE PROPERTIES. THE ASSESSEE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SMT. AMIYA BALA PAUL VS. CIT 262 ITR 407 (SC). 7 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. 10. THE LD. CIT (APPEALS) IN RESPECT OF VALUATION O F THE PROPERTY, WHICH WAS SOLD, OBSERVED THAT THE REPORT OF THE DVO WAS ONLY ADVISORY IN NAT URE AND NOT BINDING ON THE ASSESSING OFFICER. THE CASE LAWS RELIED UPON BY THE ASSESSEE INDICATED THAT IN A CASE WHERE THERE WAS NOTHING TO INDICATE THAT ANY UNACCOUNTED MONEY WAS INVESTED, N O ADDITION WAS WARRANTED ON THE BASIS OF THE VALUATION REPORT. THE ASSESSING OFFICER APART FROM THE REPORT OF THE DVO HAS NOT DISCUSSED ANY FACTOR IN THE ASSESSMENT ORDER, WHILE ADOPTING THE VALUE OF PROPERTY AT RS.57,58,400/-. THE ASSESSEES OBJECTIONS HAVE BEEN QUOTED IN THE ASSES SMENT ORDER, BUT THE AO HAD TAKEN THE SALE VALUE OF THE PROPERTY AT RS.57,58,400/- WITHOUT ADE QUATELY CONSIDERING THE OBJECTIONS RAISED BY THE ASSESSEE. THE VALUATION OFFICER HAS ADOPTED THE RATE PER SQ. FT. AT RS.4,800/- AS AGAINST RS.1,000/- PER SQ. FT. HE HAD NOT CONSIDERED THE F ACT THAT THE FLAT WAS SITUATED IN THE REHABILITATIO N COLONY. THE AO HAS BRUSHED ASIDE THE OBJECTIONS RA ISED BY THE ASSESSEE. THE LD. CIT (APPEALS) AFTER CONSIDERING THE REPORT OF THE DVO AS WELL AS THE ASSESSEES OBJECTIONS ESTIMATED THE PURCHASE PRICE OF THE PROPERTY AT RS.1,200/- PER SQ . FT. AND THUS DETERMINED THE VALUE OF THE FLAT AT RS.14,40,000/-. 10.1 AS REGARDS PURCHASE OF PROPERTY CONSISTING OF THREE SHOPS AT N-5, NDSE-I, IT WAS SUBMITTED BY THE ASSESSEE THAT THE PROPERTY WAS LOC ATED IN THE RESIDENTIAL AREA, WHICH HAS BEEN MISUSED BY USING IT FOR COMMERCIAL PURPOSE. THE CA RPET AREA OF THE PROPERTY PURCHASED WAS 600 SQ. FT. [SUPER BUILT UP AREA OF 770 SQ. FT.]. AS P ER ASSESSEE, COST OF CARPET AREA PER SQ. FT. COMES TO RS.4000/-. IT WAS SUBMITTED THAT THE APPROVED VALU ER VALUED THE PROPERTY AT RS.23,10,000/-. NO DEFECTS WERE POINTED OUT BY THE ASSESSING OFFICER. THE AO HAS ACCEPTED THE DVOS REPORT WITH MINOR ADJUSTMENTS. ACCORDING TO THE ASSESSEE THE V ALUATION ADOPTED BY THE VALUATION OFFICER COMES TO RS.24,480/- PER SQ. FT. THE ASSESSEE PROD UCED COPY OF SALE DEED OF THE PREMISES, WHICH WERE COMPARABLE WITH THE PROPERTY IN QUESTION. THE COPY OF SALE DEED RELATED TO PREMISES B-9, NDSE HOUSING SOCIETY. THE SUPER BUILT UP AREA OF T HE PROPERTY WAS 488 SQ. FT. WHICH WAS SOLD FOR RS.4,75,000/- AT THE PRICE OF APPROX. RS.975/- PER SQ. FT. SINCE THE PROPERTY PURCHASED WAS LOCATED IN THE RESIDENTIAL COLONY, THE ASSESSEES P ROPERTY WAS COMPARABLE WITH THAT OF PREMISES B-9, NDSE HOUSING SOCIETY. IT WAS ALSO SUBMITTED T HAT THE DVO HAS NOT GIVEN ANY COMPARABLE SALE INSTANCE FOR VALUING THE PROPERTY AT SUCH EXCE SSIVE AMOUNT. THE VALUATION OFFICER HAS 8 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. WRONGLY TAKEN SUPER BUILT UP AREA OF SHOP AT 1155 S Q. FT. AS AGAINST 770 SQ. FT. THE LD. CIT (A) AFTER CONSIDERING THE DECISION OF HONBLE SUPREME C OURT IN THE CASE OF K. P. VERGHESE VS. ITO 131 ITR 597 (SC) AND ITAT DECISION IN THE CASE OF S ANJAY CHAWLA VS. ITO 89 I.T.D. 586 HELD THAT THERE WAS NO EVIDENCE AGAINST THE ASSESSEE, WH ICH HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE VALUE OF THE PROPERTY PURCHASED HAD TO BE REJEC TED. HE ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO ADOPT THE PURCHASE PRICE AS SHOWN BY THE ASSESSEE. 11. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT FOR THE PURPOSE OF DETERMINING THE CAPITAL GAINS, THE FULL VALUE OF CONSIDERATION HAS TO BE TAKEN AS PER PROVISIONS OF SECTION 50C OF THE ACT. THERE WAS NOTHING ON RECORD TO SUGGEST TH AT THE ASSESSEE HAD RECEIVED ANY AMOUNT MORE THAN WHAT WAS RECORDED IN THE SALE DEED. THEREFORE , THE ADDITION MADE IN RESPECT OF CAPITAL GAINS IS NOT JUSTIFIED. HE PLACED RELIANCE ON THE FOLLOW ING DECISIONS :- (1) DEV KUMAR JAIN VS. ITO 212 TAXATION 329 ( DEL); (2) CIT VS. SUSHILA MITTAL & OTHERS 250 ITR 5 31 (DEL.); (3) CIT VS. GULSHAN KUMAR 123 TAXMAN 1111 (DE L.); & (4) SANJAY CHAWLA VS. ITO 89 I.T.D. 586. 12. IT WAS FURTHER SUBMITTED THAT FOR THE PURPOSE O F COMPUTATION OF CAPITAL GAINS FULL VALUE OF CONSIDERATION IS TO BE TAKEN AND NOT FAIR MARKET VA LUE OF THE PROPERTY. AS REGARDS INVESTMENT IN THE PROPERTY, THE LD. AR OF THE ASSESSEE SUBMITTED THAT PROVISIONS OF SECTION 142A OF THE ACT HAS BEEN AMENDED BY FINANCE ACT, 2010 WITH EFFECT FROM 1/07/2010 FOR THE PURPOSE OF DETERMINING FAIR MARKET VALUE OF THE IMMOVABLE PROPERTY. SINCE THE ASSESSEE HAD PURCHASED PROPERTY IN MAY, 2003 REFERENCE MADE BY THE ASSESSING OFFICER UNDER SECTION 142A OF THE ACT IS NOT JUSTIFIED. IT WAS ALSO SUBMITTED THAT THE PROPERTIES PURCHASED AR E IN RESIDENTIAL COLONY AND, THEREFORE, THE VALUATION COULD NOT BE MADE AT SUCH AN EXORBITANT R ATE. THE DVO HAS NOT REFERRED ANY COMPARABLE CASE IN ORDER TO ARRIVE AT THE VALUE OF THE SHOPS. IT WAS ALSO SUBMITTED THAT FULL FACTS 9 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. OF THE ASSESSEES CASE THAT THE PROPERTY WAS LOCATE D IN RESIDENTIAL AREA, HAVE NOT BEEN CONSIDERED BY THE VALUATION OFFICER. HE FURTHER SUBMITTED THAT THE VALUATION MADE ON THE BASIS OF RENT CAPITALIZATION METHOD IS NOT JUSTIFIED. 13. ON THE OTHER HAND, THE LD. SR. D.R. SUPPORTED T HE ORDER OF THE ASSESSING OFFICER. HE SUBMITTED FOR THE PURPOSE OF INVESTMENT REFERENCE T O VALUATION OFFICER UNDER SECTION 142-A OF THE ACT WAS JUSTIFIED. RENT CAPITALIZATION METHOD FOR VALUATION OF THE PROPERTY IS AN APPROPRIATE METHOD. NO DEFECTS HAVE BEEN POINTED OUT BY THE AS SESSEE IN ADOPTING THE RENT CAPITALIZATION METHOD. THE ASSESSING OFFICER WAS FAIR TO REFER TH E MATTER TO THE VALUATION OFFICER TO HAVE A REPORT FROM AN EXPERT. IT HAS BEEN SUBMITTED THAT FOR THE PURPOSE OF DETERMINING THE VALUE OF INVESTMENT, REFERENCE TO THE VALUATION CELL WAS JUS TIFIED. HE PLACED RELIANCE ON THE DECISION OF THE ITAT IN THE CASE OF ITO VS. FIVE STAR HEALTH CA RE PVT. LTD. 42 SOT 153 (DEL.) WHEREIN INVOKING OF THE PROVISIONS OF SECTION 69 READ WITH SECTION 142A WAS HELD TO BE JUSTIFIED. 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD SHOWN CAPITAL GAIN ON SALE OF FLAT AT B-28, LAJPAT NAGAR AT NIL. AS AGAINST THIS THE LD. CIT (A) HAS ESTIMATED THE FULL VALUE OF CONSIDE RATION AT RS.14,40,000/-. THE ASSESSEE HAS NOT CHALLENGED THE ESTIMATION OF SALE CONSIDERATION BY THE LD. CIT (A) AT RS.14,40,000/- BEFORE THIS TRIBUNAL. FURTHER, THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE ASSESSEE HAD RECEIVED ANY AMOUNT OTHER THAN WHAT IS RECORDED IN THE SALE DEED . HOWEVER, FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS UNDER SECTION 48 OF THE I. T. ACT, 19 61 THE ASSESSEE WILL BE ELIGIBLE TO DEDUCT FROM THE FULL VALUE OF CONSIDERATION THE EXPENDITURE INC URRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF THE ASSET AND INDEX COST OF AC QUISITION AND INDEX COST OF ANY IMPROVEMENT TO THE PROPERTY. THE LEGISLATURE HAD USED THE EXPRESS ION FULL VALUE OF CONSIDERATION AND NOT EXPRESSION FAIR MARKET VALUE OF THE ASSET. SECTI ON 50C OF THE ACT PROVIDES THE MEANING OF FULL VALUE OF CONSIDERATION IN CERTAIN CASES. AS PER SE CTION 50C(1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSES SABLE BY ANY AUTHORITY OF STATE GOVT. [STAMP VALUATION AUTHORITY] FOR THE PURPOSE OF PAYMENT OF STAMP DUTY. IN RESPECT OF SUCH TRANSFER, THE 10 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE SHALL FO R THE PURPOSE OF SECTION 48, BE DEEM TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. HOWEVER, AS PER SECTION 50C(2) THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSET TO THE VALUATION OFFICER IN A CASE WHERE VALUE ADOPTED OR ASSESSED O R ASSESSABLE BY STAMP VALUATION AUTHORITY EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER; (B) THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AU THORITY HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY A UTHORITY, COURT OR HIGH COURT. ON COMBINED READING OF SUB SECTION (1) AND (2) OF SECTION 50C I T IS CLEAR THAT IN THE ABSENCE OF ANY MATERIAL TO THE EFFECT THAT THE ASSESSEE HAD RECEIVED AMOUNT OV ER AND ABOVE THE VALUE ON WHICH STAMP DUTY IS PAYABLE, THE FULL VALUE OF CONSIDERATION WILL BE TH E VALUE ADOPTED FOR THE PURPOSE OF STAMP VALUATION IN RESPECT OF TRANSFER OF THE ASSET. 15. UNDER SECTION 142A OF THE ACT THE AO IS EMPOWE RED TO REFER TO THE VALUATION CELL FOR THE PURPOSE OF MAKING AN ASSESSMENT OR REASSESSMENT WHE RE AN ESTIMATE OF THE VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 OR 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE, REFERRED TO IN SECTION 69A OR SEC TION 69B. THUS PROVISIONS OF SECTION 142A ARE APPLICABLE WHERE THE VALUE OF INVESTMENT IS TO BE D ETERMINED. PROVISIONS OF SECTION 142A ARE NOT APPLICABLE FOR THE PURPOSE OF DETERMINATION OF FULL VALUE OF CONSIDERATION. THEREFORE, IN OUR CONSIDERED OPINION, IN THE ABSENCE OF ANY CONTRARY EVIDENCE, FULL VALUE OF CONSIDERATION CANNOT BE ESTIMATED UNDER SECTION 142A. THE AO HAS TO ADO PT THE VALUE FOR THE PURPOSE OF STAMP VALUATION AS PER CIRCLE RATES AS ON THE DATE OF TRA NSFER. FROM THE SALE DEED OR FROM THE ASSESSMENT ORDER OR APPELLATE ORDER OF THE LD. CIT (A) IT IS N OT CLEAR AS TO WHETHER THE FLAT AT PLOT NO. B-28, LAJPAT NAGAR, WAS TRANSFERRED AT CIRCLE RATE PRESCR IBED FOR THE PURPOSE OF STAMP VALUATION. WE, THEREFORE, FEEL IT PROPER TO SET ASIDE THE MATTER T O THE FILE OF THE AO WITH THE DIRECTIONS TO EXAMINE WHETHER THE VALUE OF THE PROPERTY SOLD IS AT RS.14, 40,000/- OR THE VALUE WAS HIGHER AS PER CIRCLE RATES APPLICABLE AS ON THE DATE OF TRANSFER, THAN T HIS AMOUNT FOR THE PURPOSE OF STAMP VALUATION. IN CASE THE VALUE OF FLAT, AS PER CIRCLE RATE, WAS HIG HER THAN THE SALE PRICE MENTIONED IN THE SALE DEED, WHICH HAS BEEN ENHANCED TO RS.14,40,000/- BY CIT(A) . THE AO WILL ADOPT THE VALUE OF FLAT AS PER CIRCLE RATES AND DETERMINE THE CAPITAL GAINS AC CORDINGLY. THE AO WILL ALSO KEEP IN MIND THE REQUEST OF ASSESSEE, IF ANY, MADE U/S.50C(2) FOR DE TERMINATION OF FULL VALUE OF CONSIDERATION. 11 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. 15.1 NOW COMING TO THE INVESTMENT MADE BY THE ASSES SEE IN THREE SHOPS AT N-5, NDSE-I, NEW DELHI. THE DVO HAS ESTIMATED THE FAIR MARKET VALUE OF THE ASSETS AT RS.1,46,88,062/-. THE LD. CIT (APPEALS) HAS DELETED THE ADDITION BASED ON THE VALUATION REPORT ON THE GROUND THAT THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD APART FROM D VOS REPORT TO SHOW THAT THERE WAS ANY UNDISCLOSED INVESTMENT IN THE PROPERTY PURCHASED BY THE ASSESSEE. HE HAS ALSO OBSERVED THAT FOR MAKING AN ADDITION THE ASSESSEE MUST BE SHOWN TO HA VE RECEIVED OR PAID MORE THAN WHAT IS RECORDED OR DISCLOSED BY HIM AS THE CONSIDERATION. 15.2 BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT PROVISIONS OF SECTION 142A OF THE ACT ARE NOT APPLICABLE ON THE GROUND THAT AMENDMENT TO SECTION 142A HAS BEEN MADE BY FINANCE ACT, 2010 WITH EFFECT FROM 1/07/2010. WE HAVE GONE THROUGH THE PROVISIONS OF SECTION 142A(1) BEFORE AND AFTER THE AMENDMENT MADE BY FINANCE ACT, 2010. SECTION 142A WAS INSERTED BY FINANCE ACT, 2004 W.R.E.F. 1.4.1972 FOR PURPOSES OF ESTIMATING THE VALUE OF CERTAIN INVESTMENTS. SECTION 142A AS APPLICABLE FOR ASSESSMENT YEAR 2004 -05 UNDER CONSIDERATION READS AS UNDER: 142A. (1) FOR THE PURPOSES OF MAKING AN ASSESSMENT OR REA SSESSMENT UNDER THIS ACT, WHERE AN ESTIMATE OF THE VALUE OF ANY INVESTMENT RE FERRED TO IN SECTION 69 OR SECTION 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE REFERRED TO IN SECTION 69A OR SECTION 69B IS REQUIRED TO BE MADE, THE ASSESSING OFFICER MAY REQUIRE THE VALUATION OFFICER TO MAKE AN ESTIMATE OF SUCH V ALUE AND REPORT THE SAME TO HIM. 15.3 SECTION 69 OF INCOME TAX ACT, 1961 DEALS WITH UNEXPLAINED INVESTMENTS NOT RECORDED IN BOOKS OF ACCOUNTS, IF ANY, MAINTAINED BY THE ASSESS EE FOR ANY SOURCE OF INCOME; SECTION 69A IS APPLICABLE IN THE CASES WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS FOUND TO BE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE AND SUCH MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE IS NOT RECORDED IN THE BOOKS OF AC COUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME; AND SECTION 69B IS APPLICABLE IN CASES W HERE IN ANY FINANCIAL YEAR THE ASSESSEE HAS MADE INVESTMENTS OR IS FOUND TO BE THE OWNER OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE, 12 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. AND THE ASSESSING OFFICER FINDS THAT THE AMOUNT EXP ENDED ON MAKING SUCH INVESTMENTS OR IN ACQUIRING SUCH BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE EXCEEDS THE AMOUNT RECORDED IN THIS BEHALF IN THE BOOKS OF ACCOUNT MAINTAINED BY THE AS SESSEE FOR ANY SOURCE OF INCOME AND ASSESSEE OFFERS NO EXPLANATION ABOUT NATURE AND SOURCE OF I NVESTMENT/ACQUISITION OR OFFERS NO EXPLANATION ABOUT SUCH EXCESS AMOUNT OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY PROVISIONS SECTIONS 69/69A/69B WILL BE ATTRACTED. THE ASSESSING OFFICER IN ORDER TO ESTIMATE THE VALUE OF SUCH INVE STMENTS IN ASSETS MAY REFER THE MATTER TO VALUATION OFFICER. 15.4 ANOTHER CONTENTION OF THE ASSESSEE IS THAT THE PROVISIONS OF SECTION 142A OF THE ACT ARE NOT APPLICABLE FOR ASSESSMENT YEAR 2004-05 ON THE G ROUND THAT AMENDMENT TO SECTION 142A HAS BEEN MADE BY FINANCE ACT, 2010 WITH EFFECT FROM 1/0 7/2010. FINANCE ACT, 2010 AMENDED SECTION 142A BY INSERTING WORDS OR FAIR MARKET VALUE OF ANY PROPERTY REFERRED TO I N SUB SECTION (2) OF SECTION 56 WITH EFFECT FROM 1/07/2010. UNDER SECTION 56(2) IN COMES SPECIFIED IN CLAUSES (I) TO (VII) SHALL BE CHANGEABLE TO INCOME TAX UNDE R THE HEAD INCOME FROM OTHER SOURCES. AS PER SUB- CLAUSE (B) OF CLAUSE (VII) OF SECTION 56(2) WH ERE AN IMMOVABLE PROPERTY EXCEEDING THE STAMP DUTY VALUE OF WHICH EXCEEDS RS 50,000/- IS RECEIVED BY A PERSON ON OR AFTER 1/10/2009 FROM A PERSON OTHER THAN MENTIONED IN SECOND PROVISO WITHO UT CONSIDERATION THE STAMP DUTY VALUE OF SUCH PROPERTY WILL BE ASSESSED AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES IN THE CASE OF RECIPIENT. PROVISO TO CLAUSE (VII) OF SECTION 5 6(2) PROVIDES THAT WHERE THE STAMP DUTY VALUE OF PROPERTY AS REFERRED TO IN SUB CLAUSE (B) IS DISPUT ED BY THE ASSESSEE ON THE GROUND MENTIONED IN SUB SECTION (2) OF SECTION 50C, THE ASSESSING OFFIC ER MAY REFER THE VALUATION OF THE PROPERTY TO A VALUATION OFFICER AND THE PROVISIONS OF SECTION 50C AND SECTION 155(15) SHALL AS FAR AS MAY APPLY IN RELATION TO STAMP DUTY VALUE OF SUCH PROPERTY FO R THE PURPOSE OF SUB CLAUSE (B) AS THEY APPLY FOR VALUATION OF CAPITAL ASSET UNDER THOSE SECTIONS . IN OTHER WORDS THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE PROPERTY TO THE VALUATION OFFI CER IN A CASE WHERE (A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY STAMP VALUATION AUTHORITY EXCEEDS THE FAIR MARKET VALUE OF THE PROP ERTY AS ON THE DATE OF TRANSFER; (B) THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALU ATION AUTHORITY HAS NOT BEEN DISPUTED IN ANY 13 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BE FORE ANY AUTHORITY, COURT OR HIGH COURT. THUS IN ORDER TO ENABLE THE ASSESSING OFFICER IN TH E CIRCUMSTANCES MENTION U/S 50C(2), TO REFER THE VALUATION OF THE PROPERTY RECEIVED FROM A PERSON OT HER THAN SPECIFIED FOR SECTION 56(2)(VII)(B), SECTION 142A WAS AMENDED BY INSERTION WORDS OR FAIR MARKET VALUE OF ANY PROPERTY REFERRED TO IN SUB SECTION (2) OF SECTION 56 WITH EFFECT FROM 1/07/2010. 15.5 OUR VIEW GETS SUPPORT FROM MEMORANDUM EXPLAINI NG THE PROVISIONS IN FINANCE BILL, 2010 WHICH EXPLAINS THE LEGISLATIVE INTENTION FOR I NSERTION OF WORDS OR FAIR MARKET VALUE OF ANY PROPERTY REFERRED TO IN SUB SECTION (2) OF SECTION 56 IN SECTION 142A. CLAUSE (XXI) AND (XXXIII) OF FINANCE BILL, 2010 HAS BEEN EXPLAINED UNDER THE HEAD TAXATION OF CERTAIN TRANSACTIONS WITHOUT CONSIDERATION OR FOR INADEQUATE CONSIDERATI ON . THE RELEVANT PORTION OF MEMORANDUM EXPLAINING PROVISIONS IS REPRODUCED AS BELOW:- UNDER THE EXISTING PROVISIONS OF SECTION 56(2) (VII), ANY SUM OF MONEY OR ANY PROPERTY IN KIND WHICH IS RECEIVED WITHOUT CONSIDER ATION OR FOR INADEQUATE CONSIDERATION [IN EXCESS OF THE PRESCRIBED LIMIT OF RS.50,000/-] BY AN INDIVIDUAL OR A HUF IS CHARGEABLE TO INCOME-TAX IN THE HANDS O F RECIPIENT UNDER THE HEAD INCOME FROM OTHER SOURCES. HOWEVER, RECEIPTS FRO M RELATIVES OR ON THE OCCASION OF MARRIAGE OR UNDER A WILL ARE OUTSIDE THE SCOPE O F THIS PROVISION. THE EXISTING DEFINITION OF PROPERTY FOR THE PURPO SE OF SECTION 56(2)(VII) INCLUDES IMMOVABLE PROPERTY BEING LAND OR BUILDING OR BOTH, SHARES IN SECURITIES, JEWELLERY, ARCHEOLOGICAL COLLECTION, DRAWINGS, PAIN TINGS, SCULPTURE OR ANY WORK OF ART; . . . . (B) THE PROVISIONS OF SECTION 56(2)(VII) WERE INT RODUCED AS A COUNTER EVASION MECHANISM TO PREVENT LAUNDERING OF UNACCOUNTED INCO ME UNDER THE GARB OF GIFTS, PARTICULARLY, AFTER ABOLITION OF THE GIFT-TAX ACT. THE PROVISIONS WERE INTENDED TO 14 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. EXTEND THE TAX NET TO SUCH TRANSACTIONS IN KIND THE INTENT IS NOT TO TAX THE TRANSACTIONS ENTERED INTO IN THE NORMAL COURSE OF B USINESS OF TRADE, THE PROFITS OF WHICH ARE TAXABLE UNDER SPECIFIC HEAD OF INCOME. IT IS, THEREFORE, PROPOSED TO AMEND THE DEFINITION OF PROPERTY SO AS TO PROVIDE THAT SECTION 56(2)(VII) WILL HAVE APPLICATION TO THE PROPERTY WHICH IS IN THE NATURE OF A CAPITAL ASSET OF THE RECIPIENT AND, THEREFORE, WOULD NOT APPLY TO STOCK- IN-TRADE, RAW-MATERIAL AND CONSUMABLE STORES OF ANY BUSINESS OF SUCH RECIPIENT ; (C) IN SEVERAL CASES OF IMMOVABLE PROPERTY TRANSAC TIONS THERE IS A TIME-GAP BETWEEN THE BOOKING OF A PROPERTY AND THE RECEIPT O F SUCH PROPERTY ON REGISTRATION WHICH RESULTS IN A TAXABLE DIFFERENTIAL. IT IS, TH EREFORE, PROPOSED TO AMEND CLAUSE (VII) OF SECTION 56(2) SO AS TO PROVIDE THAT IT WOU LD APPLY ONLY IF THE IMMOVABLE PROPERTY IS RECEIVED WITHOUT ANY CONSIDERATION AND TO REMOVE THE STIPULATION REGARDING TRANSACTIONS INVOLVING CASES OF INADEQUAT E CONSIDERATION IN RESPECT OF IMMOVABLE PROPERTY. THESE AMENDMENTS ARE PROPOS ED TO TAKE EFFECT RETROSPECTIVELY FROM 1 ST OCTOBER, 2009 AND WILL ACCORDINGLY APPLY IN RELATI ON TO ASSESSMENT YEAR 2010-11 AND SUBSEQUENT YEARS; (D) IT IS PROPOSED TO AMEND THE DEFINITION OF PRO PERTY AS PROVIDED IN SECTION 56 SO AS TO INCLUDE TRANSACTIONS IN RESPECT OF BULL ION. THIS AMENDMENT IS PROPOSED TO TAKE EFFECT FROM 1 ST JUNE, 2010 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2011-12 AND SUBSEQUENT YEARS; (E) IT IS PROPOSED TO AMEND SECTION 142A(1) TO ALL OW THE ASSESSING OFFICER TO MAKE A REFERENCE TO THE VALUATION OFFICER FOR AN ESTIMAT E OF THE VALUE OF PROPERTY FOR THE PURPOSES OF SECTION 56(2). THIS AMENDMENT IS PROPO SED TO TAKE EFFECT FROM 1 ST JULY, 2010. 15.6 FROM PLAIN READING OF THE MEMORANDUM EXPLAINI NG THE PROVISIONS IN FINANCE BILL, 2010 THE LEGISLATIVE INTENTION IS CLEAR. THE AMENDMENT TO SECTION 142A (1) HAS BEEN MADE WITH A VIEW TO VALUE THE IMMOVABLE PROPERTY WHICH IS RECEI VED BY THE ASSESSEE BEING AN INDIVIDUAL OR A 15 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. HUF FROM PERSON OTHER THAN RELATIVES WITHOUT ANY CO NSIDERATION. THE ASSESSING OFFICER CAN MAKE REFERENCE TO THE VALUATION OFFICER UNDER SECTION 14 2A FOR DETERMINATION OF FAIR MARKET VALUE OF THE PROPERTY FOR THE PURPOSE OF ASSESSMENT IN RESPE CT OF PROPERTIES RECEIVED WITHOUT CONSIDERATION REFERRED TO IN SECTION 56(2) OF THE ACT AND THAT TO O WHEN ASSESSEE WHEN ASSESSEE CLAIMS THAT THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY STAMP VA LUATION AUTHORITY EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER. THEREFORE, IT IS INCORRECT ON THE PART OF THE LD. COUNSEL FOR THE ASSESSEE TO SAY THAT WITH EFFECT FR OM 1 ST JULY, 2010 REFERENCE TO VALUATION CELL CAN ONLY BE MADE IN RESPECT OF IMMOVABLE PROPERTIES. AC CORDINGLY WE REJECT THIS CONTENTION OF THE ASSESSEE. 15.7 HERE WE WOULD LIKE TO MENTION THAT IN CASE OF CAPITAL GAINS THE LEGISLATURE HAS ENACTED SECTION 50C, ACCORDING TO WHICH, FULL VALUE OF CONS IDERATION WOULD MEAN THE STAMP VALUE FOR THE PURPOSE OF STAMP DUTY FOR TRANSFER OF SUCH ASSET. HOWEVER, FOR THE PURPOSE OF DETERMINATION OF INVESTMENT MADE BY THE ASSESSEE THE LEGISLATURE IN ITS WISDOM HAS MADE PROVISION UNDER SECTION 142A FOR REFERENCE TO VALUATION CELL FOR THE PURPOS E OF DETERMINATION OF MARKET VALUE OF THE INVESTMENT. THE LEGISLATURE IS AWARE OF THE FACT T HAT IN THE HANDS OF SELLER FOR THE PURPOSE OF CAPITAL GAINS THE FULL VALUE OF THE CONSIDERATION W ILL BE AS PER CIRCLE RATES FIXED FOR THE PURPOSE OF STAMP DUTY. HOWEVER IN THE CASE OF PURCHASER THE SA LE CONSIDERATION MENTIONED IN SALE DEEDS CANNOT BE TREATED AS FULL VALUE OF INVESTMENT. THE LEGISLATURE HAS PROVIDED FOR A REFERENCE TO THE VALUATION OFFICER IN SECTION 142-A OF THE ACT IN A CASE WHERE ASSESSEE MAKES INVESTMENT FALLING UNDER SECTIONS 69/69A/69B OF THE ACT. IN THE CASE OF ASSESSEE THE INVESTMENT OF RS 24,00,000/- IN THREE COMMERCIAL PROPERTIES HAS BEEN MADE. THE A SSESSEE HAD MADE INVESTMENT IN PURCHASE OF SHOPS LOCATED IN ONE OF THE COSTLIEST AREA OF DELHI . THE ASSESSEE HAD RECEIVED GROSS ANNUAL RENT IN RESPECT OF SHOP NO. 11 AND 12 AT THE RATE OF RS.65, 000/- PER MONTH TOTALING TO RS.7,80,000/-. THE RENT FOR SHOP NO. 12-A WAS RECEIVED AT THE RATE OF RS.32,500/- PER MONTH AND THE ANNUAL RENT WILL BE AT RS.3,90,000. THE TOTAL GROSS ANNUAL RENT FROM THESE PROPERTIES WAS DETERMINED AT RS.11,70,000/-. THUS MINIMUM ANNUAL RETURN FROM THE SE PROPERTIES WAS 11,70,000/- WHICH CANNOT BE FETCHED FROM PROPERTIES VALUING AT RS 24, 00,000/-. THE RECEIPT OF EXTRA ORDINARY HIGH RETURNS FROM THESE PROPERTIES SUGGESTS THAT VALUE O F THE IMPUGNED PROPERTIES SHOULD BE MUCH 16 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. HIGHER THAN THE VALUE SHOWN BY THE ASSESSEE IN SALE DEEDS. AS PER WEALTH VALUATION OF PROPERTIES IS MADE BY TAKING ANNUAL RETURN @ 8 TO 10% OF THE VALUE OF THE PROPERTY AND AT ABOUT 50% AS IN THE CASE OF THE ASSESSEE. WE ARE AWARE OF THE LEGAL POSITION THAT THE ADDITION CANNOT BE MADE MERELY BASED ON THE VALUATION REPORT. BUT IN THE IN STANT CASE RECEIPT OF EXTRAORDINARY HIGH RETURN INDICATE TO THE HUMAN PROBABILITIES THAT THE MARKET COST OF INVESTMENTS SHOULD BE VERY HIGH AS COMPARED THE VALUE RECORDED IN SALE DEEDS. IT IS AL SO A SETTLED LAW THAT THE REVENUE CANNOT BE ASKED TO PROVE THE IMPOSSIBLE PARTICULARLY IN THE C IRCUMSTANCE WHERE ACTUAL INFORMATION IS IN POSSESSION OF THE ASSESSEE. THE DIFFERENCE IN VALUA TION AS PER REGISTERED VALUERS REPORT OR SALE DEED VIS A VIS DVOS REPORT IS NOT SMALL. IT ALMO ST IS ALMOST SIX TIMES. THEREFORE, THE DECISION OF ITAT DELHI BENCH IN THE CASE OF ITO VS. FIVE STA R HEALTHCARE P. LTD. (SUPRA) WILL BE APPLICABLE. 15.8 ITAT, DELHI IN THE CASE OF ITO VS. FI VE STAR HEALTHCARE P. LTD. (SUPRA) FOR AY 2006- 07 HAS HELD THAT THE AO WAS RIGHT IN INVOKING PROVI SIONS OF SECTION 69 READ WITH SECTION 142A OF THE ACT. IN THIS CASE THE ASSESSEE COMPANY HAD PUR CHASED LAND FOR CONSIDERATION OF RS.7 LAKHS. THE AO OBSERVING THAT THE LAND WAS UNDER-VALUED, RE FERRED THE VALUATION OF THE LAND TO THE DVO, WHO VALUED THE PROPERTY AT RS.22 LAKHS. THE AO MAD E ADDITION OF RS.15 LAKHS TOWARDS UNDISCLOSED INVESTMENT UNDER SECTION 69B OF THE ACT . THERE WAS HUGE DIFFERENCE IN THE AMOUNT SHOWN TO HAVE EXPENDED BY THE ASSESSEE ON PURCHASE OF LAND AND THE AMOUNT REPRESENTING THE AVERAGE RATE OF SIMILAR PROPERTY IN THE AREA AND TH E DIFFERENCE WAS ALMOST THREE-FOLD. THE ASSESSEE DID NOT DISCLOSE PROPER VALUE OF INVESTMEN T MADE BY IT IN THE BOOKS OF ACCOUNTS. IT WAS HELD THAT WHERE THERE WAS UNDER-STATEMENT OF INVEST MENT BY THE ASSESSEE, THE DIFFERENCE BEING MORE THAN THREE-FOLD, SECTION 69B WAS CLEARLY ATTRA CTED AND THERE WAS NO INFIRMITY IN THE ACTION OF THE AO WHEN HE MADE REFERENCE TO THE DVO UNDER S ECTION 142A OF THE ACT. THE BURDEN WILL BE ON THE ASSESSEE TO PROVE THAT IT HAD ACTUALLY PA ID THE AMOUNT, WHICH IS STATED IN THE TITLE DEED. 17 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. 15.9 IN VIEW OF ABOVE AND FOLLOWING THE DECISION OF THE ITAT, DELHI BENCH IN THE CASE OF INCOME-TAX OFFICER VS. FIVE STAR HEALTHCARE LTD. (S UPRA) IT IS HELD THAT REFERENCE TO THE VALUATION CELL UNDER SECTION 142-A OF THE ACT IS JUSTIFIED. 16. IN THE CASE OF ASSESSEE AS DISCUSSED ABOVE REN T RECEIVED BY THE ASSESSEE IS EXTRAORDINARY HIGH. RENT CAPITALIZATION METHOD OF VALUATION OF TH E PROPERTY FOR ESTIMATING THE VALE OF INVESTMENTS IS ALSO AN APPROVED METHOD RECOGNIZED I N LAW AND PRESCRIBED IN WEALTH TAX ACT WHICH IS ALSO APPLICABLE FOR VALUATION OF PROPERTY COVERED BY SECTIONS 69/69A/69B OF IT ACT, 1961. DURING THE COURSE HEARING LD. AR OF THE ASSES SEE HAD NOT DENIED/OBJECTED THE APPLICABILITY OF CAPITALIZATION METHOD OF VALUATION OF THE PROPER TY. HENCE IT IS HELD THAT DVO WAS JUSTIFIED TO VALUE THE INVESTMENTS IN PROPERTIES BY ADOPTING REN T CAPITALIZATION METHOD. 17. NOW COMING TO THE VALUATION OF THE PROPERTY BY ADOPTING RENT CAPITALIZATION METHOD, THE LD. DVO HAS ESTIMATED THE VALUE OF PROPERTY BY MULTIPLYING FACTOR OF 12 .5 AS PER RULE 3 OF SCHEDULE III WITH NET MAINTAINABLE RENT WHICH IS DE FINED IN RULE 4 OF SCHEDULE III. THE ASSESSEE HAD RECEIVED GROSS ANNUAL RENT IN RESPECT OF SHOP N O. 11 AND 12 AT THE RATE OF RS.65,000/- PER MONTH TOTALING TO RS.7,80,000/-. THE RENT FOR SHOP NO. 12-A WAS RECEIVED AT THE RATE OF RS.32,500/- PER MONTH AND THE ANNUAL RENT TAKEN BY THE DVO IS AT RS.3,90,000/-. THE ASSESSING OFFICER HAS TAKEN INTO ACCOUNT THE NOTIONAL INTERES T ON ADVANCE OF RS.1,95,000/- RECEIVED BY APPLYING THE RATE OF 12 PER CENT AT RS.23,400/-. THE TOTAL GROSS ANNUAL RENT FROM THESE PROPERTIES WAS DETERMINED AT RS.11,93,400/- INCLUDING OF NOTIO NAL INTEREST ON ADVANCE AT RS.23,400/-. FROM THIS FIGURE MUNICIPAL TAX OF RS.18,355/- HAS BEEN D EDUCTED AND NET MAINTAINABLE RENT WAS DETERMINED AT RS.11,75,045/- AS AGAINST ACTUAL GROS S RENT OF RS.11,70,000/-. NET MAINTAINABLE RENT FOR THE PURPOSES OF RULE 3 IN RELATION TO AN I MMOVABLE PROPERTY SHALL BE THE AMOUNT OF GROSS MAINTAINABLE RENT, AS REDUCED BY AMOUNT OF TAXES LE VIED BY ANY LOCAL AUTHORITY IN RESPECT OF THE PROPERTY AND A SUM EQUAL TO 15 PER CENT OF GROSS MA INTAINABLE RENT. AS PER RULE 5, GROSS MAINTAINABLE RENT IS TO BE COMPUTED IN RESPECT OF P ROPERTY WHICH IS LET AND WILL BE THE AMOUNT RECEIVED OR RECEIVABLE BY THE OWNER AS ANNUAL RENT OR THE ANNUAL VALUE ASSESSED BY THE LOCAL 18 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. AUTHORITY IN WHOSE AREA THE PROPERTY IS SITUATED FO R THE PURPOSES OF LEVY OF PROPERTY TAX OR ANY OTHER TAX ON THE BASIS OF SUCH ASSESSMENT, WHICHEVE R IS HIGHER. THEREFORE, FOR THE PURPOSE OF DETERMINATION OF GROSS MAINTAINABLE RENT THE INTERE ST ON ADVANCE RECEIVED CANNOT BE INCLUDED. MOREOVER, THE ASSESSING OFFICER HAS ALLOWED THE DED UCTION IN RESPECT OF MUNICIPAL TAXES PAID BY THE ASSESSEE AT RS.18,355/-, BUT NO DEDUCTION OF A SUM EQUAL TO 15 PER CENT OF GROSS MAINTAINABLE RENT HAS NOT BEEN ALLOWED. FURTHER IT IS NOT KNOWN WHETHER THE SOAPS PURCHASED BY THE ASSESSEE ARE FREE-HOLD OR LEASE-HOLD. IF IT IS A CASE OF LE ASE HOLD PROPERTY, PROVISO TO RULE 3 WILL COME INTO OPERATION, ACCORDING TO WHICH WHERE THE UNEXPIRED P ERIOD OF LEASE OF SUCH LAND IS 50 YEARS OR MORE, THE FIGURE 10 SHOULD BE TAKEN IN PLACE OF 12. 5 AND IN A CASE UN-EXPIRED OF LEASE OF SUCH LAND IS LESS THAN 50 YEARS, THE FIGURE 8 HAS TO BE SUBSTITUTED IN PLACE OF FIGURE 12.5 IN VIEW OF ABOVE, WE FEEL IT PROPER TO SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIONS TO COMPUTE THE VALUE OF THE PROPERTY AS PER RULE 3 OF SCHEDULE III OF THE WEALTH-TAX ACT, 1957. 18. NOW COMING TO THE CROSS OBJECTIONS OF ASSESSEE, THE FIRST ISSUE RAISED RELATES TO COMPLETION OF ASSESSMENT UNDER SECTION 143(3) OF TH E ACT, WHICH IS CONTRARY TO PROVISIONS OF SECTION 153 OF THE ACT. THE ASSESSEE HAD NOT TA KEN THIS GROUND BEFORE THE LD. CIT (APPEALS). BEFORE US THE LD. AR OF THE ASSESSEE CO ULD NOT SUBSTANTIATE AS TO HOW THE ASSESSMENT FRAMED WAS CONTRARY TO THE LAW CONTAINED UNDER SECT ION 153 AND, THEREFORE, THIS GROUND OF APPEAL IS REJECTED. 19. THE NEXT GROUND OF CROSS OBJECTION FOR CONSIDER ATION RELATES TO CONFIRMING THE ADDITION OF RS.36,000/- MADE BY THE ASSESSING OFFICER AND UPHEL D BY THE LD. CIT (APPEALS). THE FACTS STATED IN BRIEF ARE THAT THE ASSESSING OFFICER HAS TAKEN T HE RENT OF THE PROPERTY B-28, LAJPAT NAGAR AT RS.36,000/-. THE PREMISES WERE VACATED BY THE TENA NT AT THE END OF MAY, 2003, AS PER NOTICE DATED 26 TH APRIL, 2003 PLACED AT PAGE 19. THEREAFTER THE PRE MISES WERE IN SELF-OCCUPATION OF THE ASSESSEE. THE SAID PROPERTY WAS SOLD VIDE AGREEMEN T DATED 1 ST AUGUST, 2003. THE AO WHILE MAKING ASSESSMENT UNDER SECTION 143(3) OF THE INCOM E-TAX ACT, 1961 MADE ADDITION OF RS.36,000/- ON ASSUMPTION THAT THE PROPERTY CONTINU ED TO BE ON RENT FROM JUNE AND JULY, 2003 19 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. WITHOUT ENQUIRY OR BRINGING ANY MATERIAL ON RECORD. THE ASSESSEE WAS RECEIVING RENT SINCE THE BEGINNING BY CHEQUE AND THERE WAS NO SUCH DEPOSIT I N THE ASSESSEES BANK ACCOUNT TO INDICATE THE RECEIPT OF RENT FOR THE MONTHS OF JUNE AND JULY, 20 03 AS PER BANK STATEMENT, AS SUCH, ADDITION OF RS.36,000/- WAS UNJUSTIFIED. THE LD. CIT (APPEALS) CALLED FOR THE COMMENTS OF THE AO IN RESPECT OF SUBMISSIONS MADE BY THE ASSESSEE. IT WAS STATED BY THE AO THAT NO NEW EVIDENCE WAS PUT FORWARD BY THE ASSESSEE TO SHOW THAT THE SAID PREMI SES REMAINED VACANT DURING THESE MONTHS. THE LD. CIT (A) NOTED THAT EVEN IF THE SAID PREMISE S REMAINED VACANT FOR THE MONTHS OF JUNE AND JULY, 2003 THEN ALSO THE ASSESSEE WAS LIABLE TO DEC LARE HER INCOME AS DEEMED RENT FOR THESE MONTHS UNDER SECTION 23(4)(B) OF THE ACT. IN REJOI NDER THE ASSESSEE DID NOT MAKE ANY SUBMISSION. THEREFORE, THE LD. CIT (A) UPHELD THE ADDITION. 20. WE HAVE HEARD BOTH THE PARTIES. THE CONTENTION OF THE ASSESSEE IS THAT THE LAJPAT NAGAR PROPERTY WAS VACANT FOR THE PERIOD OF JUNE AND JULY , 2003 AND, THEREFORE, THE INCOME CANNOT BE ASSESSED ON NOTIONAL BASIS. UNDER SECTION 23(1) TH E ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH PROPERTY MIGHT R EASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EX CESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR (C) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND WAS VACANT DURING THE WHOLE OR ANY PART OF THE PREV IOUS YEAR AND OWING TO SUCH VACANCY THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS LESS THAN THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE . IN THE CASE OF ASSESSEE THE HOUSE PROPERTY WAS VACANT FOR THE MONTHS OF JUNE AND JULY, 2003. THEREFORE, THE ANNUAL VALUE OF THE PROPERTY HAS TO BE DETERMINED AS PER THE PROVISIONS OF SECTI ON 23(1)(C) AS ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER WILL BE LESS THAN THE SUM F OR WHICH PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR. SINCE THE ASSES SING OFFICER WHILE ADDING THE RENT OF RS.36,000/- HAD NOT EXAMINED THE CASE IN THE LIGHT OF PROVISIONS OF SECTION 23(1)(C) AND HAD NOT CONSIDERED ASSESSEES CONTENTION IN RESPECT OF VACA NCY OF THE HOUSE PROPERTY, WE THEREFORE, SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIONS TO EXAMINE THE CASE OF 20 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010. THE ASSESSEE IN THE LIGHT OF PROVISIONS OF LAW AND DECIDE THE ISSUE AFTER AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 21. IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE PARTLY ALLOWED, FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON : 30 TH AUGUST, 2011. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH AUGUST, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANTS. 2. RESPONDENTS. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 21 I. T. APPEAL NO. 2256 (DEL) OF 2008. A N D C. O. NO. 79 (DEL) OF 2010.