M/s OmPrakash Mittal, Indore V. ITO 2(2), Indore

ITA 243/Ind/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5562 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 28-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.S. AMBEDKAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value; Revised return
• Section: 143(3); 50C; 142(1); 143(2); 73

Judgement Text

आयकर अपील य अ धकरण, ,, , इंदौर यायपीठ, ,, , इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER (Conducted through Virtual Court) ITA No.243/Ind/2021 Assessment Year: 2017-18 M/s. Omprakash Mittal 7/3 Narsingh Bazar, Indore बनाम /Vs. ITO 2(2) Indore (Appellant / Assessee) (Respondent/ Revenue) PAN: AABFO4603J Assessee by Shri Ashish Goyal & N.D. Patwa, ARs Revenue by Shri R.S. Ambedkar, Sr. DR Date of Hearing 19.05.2022 Date of Pronouncement 20.06.2022 आदेश / / / / O R D E R O R D E RO R D E R O R D E R Per B.M. Biyani, A.M.: THIS APPEAL: 1. This appeal filed by the assessee is directed against the order dated 17.11.2021 of learned Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre [“Ld. CIT(A)”] in Appeal No. CIT(A), Indore- 1/10627/2019-20 which in turn arises out of the order of assessment dated 23.12.2019 passed by the learned ITO, 2(2), Indore [“Ld. AO”] u/s 143(3) of the Income-tax Act, 1961 [“the Act”] for the Assessment-Year 2017-18. M/s Omprakash Mittal ITA No.243/Ind/2021 Assessment year 2017-18 Page 2 of 9 BACKGROUND: 2. The assessee filed original Return of Income on 30.10.2017 declaring a total income of Rs. 11,74,260/- and subsequently filed a revised Return of Income on 05.01.2018 declaring a total income of Rs.11,76,260/-. The case was selected for scrutiny and the statutory notices u/s 143(2) and 142(1) were issued from time to time. Finally, the assessment was completed u/s 143(3) by order dated 23.12.2019 at a total income of Rs. 29,66,132/-, after making various additions. The assessee filed appeal to Ld. CIT(A) challenging one of those additions, viz. the addition of Rs. 15,71,040/- u/s 56(2)(vii) on account of difference between the fair market value of the land purchased by assessee i.e. Rs. 1,35,23,540/-) and the actual purchase-price of the land (i.e. Rs. 1,19,52,500/-). However, the Ld. CIT(A) did not grant any relief. Against the order of Ld. CIT(A), the assessee has filed this appeal and now before us. GROUNDS: 3. The assessee has raised following grounds: “1. On the facts and circumstances of the case, the ld. CIT(A) NFAC Delhi erred in sustaining the addition of Rs. 15,71,040/- being the difference between alleged Fair Market Value determined by the DVO Indore and purchase price of Rs. 1,19,52,500/- u/s 56(2)(vii) of the Income Tax 1961 of the land situate at village Reward Tehsil Depalpur which is wrong illegal and unjustified. 2. The Ld. CIT(A) should have considered the facts of the case in proper perspective. 3. The Ld. CIT(A) failed to appreciate that the meager difference between value of land ascertained by Valuation Officer and purchase price of land could arise due to various factor like bargaining power quality of land or location etc. 4. The appellant prays for the relief. 5. Without prejudice to the above, the additions made by the Ld. AO are excessive. M/s Omprakash Mittal ITA No.243/Ind/2021 Assessment year 2017-18 Page 3 of 9 6. The appellant craves leave to add, alter or amend any Grounds of Appeal as and when the necessity or occasion arises.” ISSUE: 4. The solitary issue involved in various Grounds is the income of Rs. 15,71,740/- taxed by Ld. AO as “income from other sources” by applying section 56(2)(vii) of the Act. PROCEEDINGS BEFORE Ld. AO: 5. The assessee purchased a land situated at village Rawad, Tehsil Depalpur for Rs. 1,19,52,500/-, which was valued by the Stamp Authority at Rs. 4,11,60,000/- for registration purpose. The assessee was not satisfied with the valuation of Stamp Authority and therefore requested the Ld. AO to refer the matter to the Departmental Valuation Officer [“Ld. DVO”]. The Ld. AO made a reference to Ld. DVO, whereupon the Ld. DVO estimated fair market value of land at Rs. 1,35,23,540/- vide his Report dated 13/12/2019, a copy of which is placed at Page No. 69 to 73 of the Paper-Book. On the basis of this Report of Ld. DVO, the Ld. AO issued a show-cause notice to the assessee u/s 56(2)(vii) with a proposal to tax a sum of Rs. 15,71,740/- (being the difference of Rs. 1,35,23,540/- finalized by Ld. DVO and Rs. 1,19,52,500/- actual purchase-price) as Income from Other Sources. In response, the assessee submitted that the land is interior, situated in a remote village and the assessee has not paid any money other than what is declared in the purchase-deed. The assessee further submitted that the difference of Rs. 1,35,23,540/- is just 13.14% of the actual purchase price of Rs. 1,19,52,500/- which is very meagre and can happen due to the subjectivity involved in estimation. The assessee also relied upon the decisions in C.B. Gauttam Vs. Union of India & Ors. dated 17.11.1992 (Supreme Court) and M/s Kaysons Builders Pvt. Ltd. Vs. Department of Income-tax (ITAT-Lucknow). However, the Ld. AO was not satisfied with the submission of assessee and made an addition of Rs. 15,71,040/- u/s 56(2)(vii). M/s Omprakash Mittal ITA No.243/Ind/2021 Assessment year 2017-18 Page 4 of 9 PROCEEDINGS BEFORE Ld. CIT(A): 6. Before Ld. CIT(A), the assessee repeated the same submissions as made before Ld. AO. However, the Ld. CIT(A) observed that the Ld. AO has already referred matter to DVO at the request of assessee and the Ld. DVO has finalized valuation at Rs. 1,35,23,540/-. The Ld. CIT(A) further observed that the difference in valuation is about 13.14% which has exceeded the permissible range of 5% as applicable for the assessment-year 2017-18. On this basis, the Ld. CIT(A) confirmed the addition made by Ld. AO. SUBMISSIONS OF Ld. AR: 6. Before us, the Ld. AR submitted that the assessee has provided the instances of similar transactions of land in that area and also supplied their registered documents to the Ld. TPO vide letters dated 03.12.2019 and 09.12.2019. Carrying our attention to the copies of letters placed in the Paper-Book, the Ld. AR demonstrated that there were two purchase- transactions of similar lands in the same area on 09/06/2016, viz. (i) there was a transaction of 6.54 bighas of land for a price of Rs. 24,50,000/-, giving per bigha rate of Rs. 3,74,376/-, and (ii) there was another transaction of 1.654 bighas of land for Rs. 24,50,000/-, giving per bigha rate of Rs. 3,74,149/-. Ld. AR submitted that the assessee has purchased the impugned comprising of approx. 21.73 bighas for a sum of Rs. 1,19,52,500/-, which comes to Rs. 5,50,046/- per bigha. Ld. AR submitted that the purchase-price paid of Rs. 5,50,046/- paid by the assessee is substantially more than the purchase price of Rs. 3,74,149/- paid in the comparable instances. Ld. AR submitted that the assessee has brought these instances to the knowledge of Ld. DVO vide letter dated 09.12.219 which is very much clear from the Report of Ld. DVO, placed at Page No. 70 of the Paper-Book, but the Ld. DVO has not considered the same. Ld. AR also carried our attention to Page No. 72 of the Paper-Book and submitted that the Ld. DVO has himself mentioned in this Report “40 Km from Indore. It is in interior about 5-6 KM from main road. This property is agricultural land but after seeing the property it is found rocky area. Regarding residential purpose to build M/s Omprakash Mittal ITA No.243/Ind/2021 Assessment year 2017-18 Page 5 of 9 colony it has not potential. But as per rocky area it has potential. So this potential of property considered in valuation of property.” Ld. AR submitted that the Ld. DVO has openly accepted extreme deficiencies in the quality of land i.e. the land is interior as well as rocky and it does not have potential for building residential colony, which have a great impact on the valuation. Ld. AR further submitted that it is also apparent from the Valuation-Report that no concrete basis has been given for making valuation, therefore the value determined by the Ld. DVO is a pure estimate. Ld. AR submitted that the Ld. DVO has finalized valuation at Rs. 1,35,23,540/- as against the purchase-price declared by the assessee at Rs. 1,19,52,500/- and therefore the difference is just 13.14% which is meagre. Ld. AR submitted that although the assessee has raised these contentions before the Ld. AO as well as Ld. CIT(A) but the authorities have not given due consideration to the assessee’ contentions. Ld. AR also referred to the decision of Hon'ble Supreme Court in case of C.B. Gautam vs. Union of India & Ors dated 17.11.1992. Ld. AR submitted that although the decision was given for a different provision of Income-Tax Act, 1961 yet it can be gainfully used even in the present appeal. According to Ld. AR, the Hon'ble Supreme Court has accepted that the valuation is a substantive-matter and difference up to 15% is an acceptable margin. Ld. AR submitted that the benefit of the decision should be given to the assessee. Ld. AR further referred to the decision of Hon'ble’, I.T.A.T., Mumbai Bench in Suresh C Mehta vs. ITO-13(2)(1), Mumbai, ITA No. 33/Mum/2011, order dated 17.05.2013 where a similar issue arose and the Hon'ble Bench has held as under: “7. We have carefully considered the rival submissions, perused the relevant findings of the learned Commissioner (Appeals) as well as the Assessing Officer. The assessee has sold the property for a sum of Rs. 12,00,000, and has computed the long term capital gain at Rs. 10,05,783, whereas the V.O. to whom reference was made under section 50C, has estimated the fair market value at Rs. 13,79,913. For the purpose of section 50C, the Assessing Officer has adopted the value determined by the V.O. and has computed the long term capital gain at Rs. M/s Omprakash Mittal ITA No.243/Ind/2021 Assessment year 2017-18 Page 6 of 9 11,38,020. Section 50C is a deeming provision wherein the fair market value for sale consideration received on an asset is deemed to be taken as per the value assessed or adopted by the stamp valuation authority for the purpose of stamp duty. Sub- section (2) of section 50C further provides that if the assessee claims before the Assessing Officer that valuation adopted or assessed by the stamp valuation authority has exceeded the fair market value of the property on the date of transfer, the Assessing Officer may refer the valuation of the capital asset to the V.O. and on such a reference, provisions of section 16A of Wealth Act, 1957, will apply. Sub-section (2) further provides that if such a reference is made then certain provisions of section 16A, 23A, 24, 34AA, 35 and 37 of the Wealth Tax Act, 1957,shall apply with necessary modification. Section 16A of the Wealth Tax Act, 1957, provides power to make reference to the V.O. for determining the fair market value and the functions of the V.O. Sub-section (6) of section 16A, makes it obligatory to the Assessing Officer to adopt the value as reported by the V.O. Provisions of section 23A gives scope of first appeal and the subject matter which can be appealed before the learned Commissioner (Appeals) including that of any order of the V.O. and the powers of the learned Commissioner (Appeals) in relation to such valuation. Section 24 deals with the appeal to the appellate Tribunal and section 34AA deals with the appearance of the assessee through registered valuers before the learned Commissioner (Appeals) and the Tribunal and section 35 deals with rectification of mistakes. A combined reading of these sections provide that in so far as the Assessing Officer is concerned, he is bound by the valuation adopted by the V.O. whereas the learned Commissioner (Appeals) and the Tribunal can entertain objections relating to such valuation and V.O's valuation is not binding upon them. Sub-section (3) of section 50C provides that if the value ascertained by the V.O. exceeds the value adopted or assessed by the stamp valuation authority then such valuation adopted or assessed by the stamp valuation authority shall be taken, that is, if the V.O's value exceeds the value adopted by the stamp valuation authority, the same should be ignored by the Assessing Officer. From the conjoined reading of sub-section (1), (2) and (3) of section 50C along with the relevant provisions of Wealth Tax Act as have been referred to in sub-section (2), it is evident that though the Assessing Officer is bound by the V.O's report in case it is lower than the value assessed by the stamp valuation authority, however, the same is not binding upon the learned Commissioner (Appeals) or the Tribunal wherein the assessee can further raise objection to such valuation. If that is so, then the learned Commissioner (Appeals) and the Tribunal can also examine into the fact whether the difference of less than 15% between the actual sale consideration and the value adopted by the V.O. can be ignored on the facts M/s Omprakash Mittal ITA No.243/Ind/2021 Assessment year 2017-18 Page 7 of 9 and circumstances of the case. In the present case, the assessee has objected to the fair market value adopted by the V.O. vide letter dated 13th November 2009. Neither the Assessing Officer nor the learned Commissioner (Appeals) entertained any such objection or has given any cogent reasons. If the assessee has made various objections to the V.O's report, the learned Commissioner (Appeals) was bound to look into these objections so as to arrive at proper fair market value. He was also bound to consider the contentions of the assessee that in case of difference of less than 15% between the value shown by the assessee and the value estimated by the V.O., the benefit should be given to the assessee and such a difference can be ignored. We, therefore, set aside the impugned order passed by the learned Commissioner (Appeals) and remit the matter back to him to decide the same afresh after considering the objections of the assessee to V.O's estimate as well as his claim for benefit when the difference is less than 15%. Consequently, the appeal of the assessee is treated as allowed for statistical purposes.” SUBMISSIONS OF Ld. DR: 7. Ld. DR strongly supported the order of lower authorities and argued that addition of Rs. 15,71,740/- made by the Ld. AO is very much justified in accordance with the clear mandate of section 56(2)(vii) of the Act. Ld. DR submitted that the reference to Ld. DVO was done at the request of assessee and therefore whatever value was finalized by Ld. DVO, is binding upon the assessee. Ld. DR further argued that section 56(2)(vii) of the Act does not give any flexibility to deviate from the value finalized by Ld. DVO. With these submissions, Ld. DR requested to uphold the addition made by Ld. AO. OUR ANALYSIS: 8. We have considered rival submissions of both sides, perused material held on record and considered the legal precedents cited by Ld. AR. Firstly we observe that the assessee has submitted comparable instances to Ld. DVO as well as Ld. CIT(A) with supportive evidences to demonstrate that the assessee has purchased land at much higher price as compared the prices paid in the those comparable instances. But no finding has been given by the lower authorities on this submission. Secondly, we observe that the land purchased by the assessee is situated in interior area, is rocky and is not M/s Omprakash Mittal ITA No.243/Ind/2021 Assessment year 2017-18 Page 8 of 9 suitable for activities. These undisputed features, which are well-accepted by Ld. TPO, have a substantial bearing on the valuation of land and must be taken into account. Thirdly, we observe that the difference in valuation is about 13.14% which is a meagre difference which against is due to estimation involved in the valuation. We observe that these factual aspects are similar to the facts involved in the decision of Hon'ble, ITAT, Mumbai Bench in Suresh C Mehta (Supra) relied upon by Ld. AR. On perusal of the decision, we observe that in the similar set of facts, the Hon’ble ITAT has set aside the order passed by the learned Commissioner (Appeals) and remitted the matter back to him to decide afresh after considering the objections of the assessee to V.O's estimate as well as claim for benefit when the difference is less than 15%. At this stage, we would like to make it clear that this decision pertains to Section 50C of the act but that does not make any difference because section 56(2)(vii) is pari materia section 50C due to following specific provision prescribed in section 56(2)(vii): “Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assesee on grounds mentioned in sub-section 50C(2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub- section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections:” Respectfully following the decision of Hon’ble Co-ordinate Bench, we also think it fit to remit the present matter back to Ld. CIT(A) for a fresh adjudication after considering the objections of assessee. DISPOSITION: 9. In the result, this appeal of assessee is allowed for statistical purposes. M/s Omprakash Mittal ITA No.243/Ind/2021 Assessment year 2017-18 Page 9 of 9 Order pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 20.06. 2022. Sd/- Sd/- (SUCHITRA KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore दनांक /Dated : 20.06.2022 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore 1. Date of taking dictation 24.5.22 2. Date of typing & draft order placed before the Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the fair order is placed before the Dictating Member for pronouncement 5. Date on which the file goes to the Bench Clerk 6. Date on which the file goes to the Head Clerk 7. Date on which the file goes to the Assistant Registrar for signature on the order 8. Date of dispatch of the Order