M.K. Garg, Ghaziabad V. ACIT, Ghaziabad

ITA 2593/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65217 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 08-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 50C; 54F; 154

Judgement Text

ITA 2593/D/11 & 3024/D/11 ASSTT.YEAR 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO. 2593/DEL/2011 ASSESSMENT Y EAR: 2006-07 SHRI M.K. GARG, VS ASSTT.COMMISSIONER OF I NCOME TAX, C/O AKHILESH KUMAR, ADVOCATE, CIRCLE-1, G HAZIABAD. CHAMBER NO. 206-07, ANSAL SATYAM RDC RAJ NAGAR, GHAZIABAD. (PAN NO.AAGHR8866K) ITA NO. 3024/DEL/2011 ASSESSMENT Y EAR: 2006-07 ACIT, CIRCLE-I,GHAZIABAD VS SHRI M.K. GARG, 85, NAVYUG MARKET, GHAZIABAD. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AKHILESH KUMAR RESPONDENT BY: SHRI R.S. NEGI, SR.DR O R D E R PER K.D. RANJAN, ACCOUNTANT MEMBER THESE APPEALS FILED BY THE ASSESSEE AND THE REVENUE FOR AY 2006-07 ARISE OUT OF THE ORDER OF COMMISSIONER OF INCOME TA X(A), GHAZIABAD DATED 18.3.2011. THE GROUNDS OF APPEAL PREFERRED BY THE ASSESSEE ARE AS UNDER:- ITA 2593/D/11 & 3024/D/11 ASSTT.YEAR 2006-07 2 1. THAT, THE ORDER OF LEARNED LOWER AUTHORITY IS B AD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT , THE CAPITAL GAIN IS CHARGEABLE TO TAX EVEN IN THE ABSENCE OF ANY COST O F ACQUISITION AS PER THE PROVISIONS OF THE I.T. ACT 1961, IN TOTAL DISREGARD OF THE CASE LAW RELIED UPO N BY THE ASSESSEE AND THE UNIQUE CIRCUMSTANCES OF THE CASE. 3. THAT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS FURTHER WRONG IN STATING THAT AS THE ASSESSEE HIMSELF DECLARED CAPITAL GAIN HENCE HE CAN NOT GO BEYOND HIS OWN ADMISSION, WHILE ANY ADMISSION AGAINST THE LAW NEVER BINDS THE PARTY AND AS PER THE SETTLED LAW, TAX IS TO BE COMPUTED A S PER THE PROVISIONS OF ACT. 4. THAT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUMMARILY REJECTING THE ALTERNATIVE PRAYER OF THE ASSESSEE TO CALCULATE THE CAPITAL GAIN BY APPLYING COST INFLATION INDEX BACKWARD. 5. THAT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ACCEPTING THE OTHER ALTERNATIVE PLEA OF APPELLANT THAT, AS THE DIFFEREN CE IN THE ESTIMATED COST AS ON 01/.04.1981 OF THE LAND AS PER THE REPORT OF D.V.O. AND REGISTERED VALUER IS ONLY AROUND 8%. HENCE THE COST AS PER REGISTERED VALUER AS DECLARED BY ASSESSEE SHOULD BE TAKEN. 2. THE GROUNDS OF APPEAL PREFERRED BY THE REVENUE A RE AS UNDER:- 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL A S FACTS OF THE CASE BY DIRECTING TO APPLY THE DVO REPORT IN PROCEEDINGS U/S 154 OF THE I.T. ACT, 1961, WHICH W AS ITA 2593/D/11 & 3024/D/11 ASSTT.YEAR 2006-07 3 RECEIVED BELATEDLY AFTER THE ASSESSMENT PROCEEDINGS U/S 143(3) WERE COMPLETED. 2. WHETHER THE CIT(A) IS JUSTIFIED IN CONSIDERING THE DVOS REPORT U/S 154 WHEN IT WAS RECEIVED BELATEDLY INSTE AD OF THE VALUATION TAKEN ON THE BASIS OF CIRCLE RATE OF FAIR MARKET VALUE BY THE ASSESSING OFFICER. 3. HENCE ORDER OF THE LD. CIT(A) DESERVES TO BE S ET ASIDE AND THE ORDER OF THE AO BE RESTORED. 3. THE ONLY ISSUE IN THESE APPEALS RELATES TO COMPU TATION OF CAPITAL GAINS. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION, SOLD THREE PLOTS ON DIFFERENT DATES BELONGING TO KHASRA NO. 5370 SITUATED AT CIVIL LINES, MEERUT CITY. THE FIRST SALE DEED WAS EXECUTED ON 30.5.2005 IN RESPECT OF LAND MEASURING AREA OF 857.50 SQ. YDS FOR SUM OF RS.58,60,000. HOWEVER, FOR COMPUTING TH E CAPITAL GAINS, THE TOTAL SALE CONSIDERATION WAS ADOPTED BY THE ASSESSEE AT R S.86,05,000 AS THE STAMP DUTY WAS PAID OVER THIS VALUATION AS PER PREVALENT CIRCLE RATE ON THE DATE OF SALE U/S 50C OF THE ACT. FURTHER, TWO PLOTS OF LAN D MEASURING 122.50 SQ YDS AND 2509.05 SQ YDS. WERE SOLD VIDE SALES DEED DATED 14.12.2005 AND 4.1.2006 FOR SALE CONSIDERATION OF RS.12,30,000 AND RS.2,51,80,000 RESPECTIVELY. THUS, TOTAL SALE CONSIDERATION IN RE SPECT OF THREE PLOTS WAS RECEIVED BY THE ASSESSEE AT RS.3,50,15,000. THE AS SESSEE WHILE COMPUTING COST OF ACQUISITION ADOPTED THE VALUE PER SQ YARD A T RS.600 AS AGAINST CIRCLE ITA 2593/D/11 & 3024/D/11 ASSTT.YEAR 2006-07 4 RATES OF THAT AREA AS ON 1.4.1981 AT RS.250 TO RS.3 00 PER SQ. YD. ACCORDINGLY, IT WAS FOUND THAT THE ASSESSEE HAD ADO PTED HIGHER COST RATE FOR ACQUISITION AS ON 1.4.1981 WHICH RESULTED IN SUPPRE SSING OF LONG TERM CAPITAL GAINS. THE ASSESSEE WAS REQUIRED TO JUSTIFY THE CO ST OF ACQUISITION ADOPTED AT RS.600 PER SQ. YD. THE ASSESSEE WAS ALSO REQUIRED TO SHOW CAUSE AS TO WHY RATE OF LAND SOLD AS ON 1.4.1981 SHOULD NOT BE TAKE N AT RS.200 PER SQ. YD. AS MARKET PRICE. IT WAS SUBMITTED BY THE ASSESSEE THA T SINCE COST OF ACQUISITION OF ANCESTRAL PROPERTY CANNOT BE ENVISAGED IN THE HA NDS OF THE ASSESSEE OR IN THE HANDS OF PREDECESSOR/ANCESTOR, HENCE NO CAPITAL GAINS TAX WAS LIABLE TO BE IMPOSED. IT WAS FURTHER SUBMITTED THAT THE ASSESSE E HAD HIMSELF OFFERED LONG TERM CAPITAL GAINS AND PAID THE TAX ACCORDINGLY, F URTHER, AS PER PROVISIONS OF INCOME TAX ACT, CAPITAL GAINS IS CHARGEABLE ON THE SALE OF MOVEABLE OR IMMOVEABLE OR INTANGIBLE ASSETS OWNED BY ANY PERSON BY WAY OF ANY MODE I.E. FREE OF COST OR OTHERWISE. THEREFORE, THE CON TENTION OF THE ASSESSEE WAS NOT TENABLE. AS REGARDS THE APPLICABILITY OF CIRCL E RATES, THE ASSESSEE SUBMITTED THAT THERE IS NO PROVISION LIKE SECTION 5 0C OF THE ACT WHICH CAN BE INVOKED FOR DETERMINATION OF FAIR MARKET VALUE AS O N 1.4.1981 ON THE BASIS OF CIRCLE RATE. IT WAS ALSO POINTED OUT THAT NOWHERE IN THE QUERY LETTER IT WAS PROPOSED TO APPLY THE PROVISION OF SECTION 50C WHIL E TAKING THE COST OF ACQUISITION AS ON 1.4.1981 TO WORK OUT THE ACTUAL L ONG TERM CAPITAL GAINS ON ITA 2593/D/11 & 3024/D/11 ASSTT.YEAR 2006-07 5 SALE OF PLOTS. THE ASSESSING OFFICER REFERRED THE MATTER TO DISTRICT VALUATION OFFICER (DVO) FOR THE PURPOSE OF DETERMINATION OF M ARKET VALUE OF THE PROPERTY AS ON 1.4.1981. HOWEVER, THE REPORT OF DV O WAS NOT RECEIVED IN TIME. ACCORDINGLY, THE ASSESSING OFFICER APPLIED T HE RATE AS NOTIFIED BY DISTRICT MAGISTRATE FOR DIFFERENT AREAS AS ON 1.4.1 981. THE ASSESSING OFFICER APPLIED THE RATE OF RS.300 PER SQ. YARD FOR THE PUR POSE OF COMPUTATION OF CAPITAL GAINS. FROM THE SALE CONSIDERATION, THE IND EX COST OF THE PROPERTIES WAS REDUCED. THE ASSESSING OFFICER ACCORDINGLY DET ERMINED THE LONG TERM CAPITAL GAIN AT RS.1,94,94,573. 4. AFTER COMPLETION OF ASSESSMENT, THE ASSESSING OF FICER RECEIVED THE VALUATION REPORT FROM THE DVO WHEREIN VALUE OF PROP ERTY AS ON 1.4.1981 WAS ESTIMATED @RS.550/- PER QS. YARD. THE ASSESSIN G OFFICER FORWARDED THE COPY OF VALUATION REPORT TO THE ASSESSEE AND A NOTI CE WAS ISSUED ON 15.2.2010. THE ASSESSEE FILED WRITTEN SUBMISSIONS STATING THAT COST OF ACQUISITION OF LAND SHOULD BE TAKEN @RS.600 PER SQ. YD. AS HAS BEEN WORKED OUT BY THE ASSESSEE AT THE TIME OF FILING OF INCOME TAX RETURN. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ORIGINAL ASSESSME NT WAS COMPLETED ON 29.12.2008. A REFERENCE TO THE DEPARTMENTAL VALUER WHICH IS GOVERNED BY THE PROVISIONS OF SECTION 55A OF THE ACT DOES NOT E XTEND THE TIME ALLOWED FOR COMPLETING ASSESSMENT. FURTHER, NO COGNIZANCE CAN BE TAKEN OF THE ITA 2593/D/11 & 3024/D/11 ASSTT.YEAR 2006-07 6 VALUATION REPORT RECEIVED AFTER THE EXPIRY OF LIMIT ATION DATE. THE REPORT IN A CASE WHEREIN A REFERENCE HAS BEEN MADE TO VALUATION CELL/ASSTT. VALUATION OFFICER HAS TO BE OBTAINED BEFORE THE TIME BARRING DATE AND APPLIED TO THE CASE AND IN CASE IT IS RECEIVED AFTER THE TIME BARR ING DATE, THEN IT IS BELATED IN THE EYES OF LAW AND NO BENEFIT TO IT CAN BE GIVEN B Y RESORTING TO SECTION 154 OF THE ACT OR ANY OTHER PROVISION OF LAW. THE ASSE SSING OFFICER, AFTER RELYING ON SEVERAL DECISIONS, APPLIED THE INDEX COS T OF THE LAND AS PER ORIGINAL ASSESSMENT ORDER. HE ALLOWED BENEFIT OF S ECTION 54F AND 54EC OF THE ACT. 5. BEFORE THE COMMISSIONER OF INCOME TAX(A), THE AS SESSEE CHALLENGED THE ORDER PASSED U/S 143(3) AS WELL AS SECTION 154. LD. COUNSEL FOR THE ASSESSEE PLEADED THAT CAPITAL GAIN SHOULD BE COMPUT ED BY APPLYING COST INFLATION INDEX BACKWARD. THIS CONTENTION OF THE A SSESSEE WAS REJECTED BY LD. COMMISSIONER OF INCOME TAX(A) THAT IT WAS NOT P OSSIBLE IN THE CASES IN WHICH COST AS ON 1.4.1981 WAS DETERMINED. AS REGAR D THE ESTIMATION OF FAIR MARKET VALUE, THE COMMISSIONER OF INCOME TAX(A) HAS OBSERVED THAT REGISTERED VALUER IS AN EXPERT PERSON AND IS CAPABL E OF VALUING A PARTICULAR PROPERTY AT A GIVEN POINT OF TIME. THE ASSESSING O FFICER HAD REJECTED THE VALUATION FILED BY THE ASSESSEE BEING WITHOUT ANY C ONCRETE BASIS BUT REFERRED THE MATTER TO DVO FOR DETERMINATION OF FAIR MARKET VALUE AS ON 1.4.1981 ITA 2593/D/11 & 3024/D/11 ASSTT.YEAR 2006-07 7 THOUGH THE RATE OF ADM FINANCE WAS ADOPTED. LD. CO MMISSIONER OF INCOME TAX(A), HOWEVER, OBSERVED THAT DVOS REPORT RECEIVE D AFTER COMPLETION OF ASSESSMENT CAN BE ADOPTED FOR THE PURPOSE OF GIVING EFFECT TO THE EXPERT OPINION. LD. COMMISSIONER OF INCOME TAX(A) WAS OF THE OPINION THAT IT WOULD HAVE BEEN JUDICIOUS AND FAIR ON THE PART OF A SSESSING OFFICER TO REPLACE THE VALUE AS PER VALUATION REPORT OF DVO, E SPECIALLY WHEN IT WAS THE ASSESSING OFFICER WHO HAD ISSUED NOTICE U/S 154, PR OPOSING TO RECTIFY THE ASSESSMENT ORDER, IMPLYING THAT HE HIMSELF CONSTRUE D THE VALUATION, AS THE MISTAKE APPARENT FROM RECORD. LD. COMMISSIONER OF INCOME TAX(A) FURTHER OBSERVED THAT AT THE WORST, THE ASSESSING OFFICER S HOULD HAVE REFUSED TO ACCEPT THE DVOS REPORT BY GIVING SOME RATIONAL REA SONING ON TECHNICAL ASPECTS. NO SUCH REASON AS TO WHY DVOS REPORT IS NOT ACCEPTABLE WAS GIVEN BY THE ASSESSING OFFICER APART FROM REASONING OR TH E LEGALITY OF THE ISSUE. LD. COMMISSIONER OF INCOME TAX(A) FURTHER HELD THAT THE ASSESSING OFFICER SHOULD HAVE ACCEPTED THE VALUATION MADE BY THE DVO IN ORDER U/S 154. LD. COMMISSIONER OF INCOME TAX(A) FURTHER DIRECTED THE ASSESSING OFFICER TO ADOPT FAIR MARKET VALUE AS ON 1.4.1981 AS ESTIMATED BY DVO. THE ADDITION ON ACCOUNT OF THIS DIFFERENCE IN FAIR MARKET VALUE AS ON 1.4.1981 WAS DELETED AND ADDITION WAS RESTRICTED TO RS.50 PER SQ. YD. AS PER DVOS REPORT. ITA 2593/D/11 & 3024/D/11 ASSTT.YEAR 2006-07 8 6. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME TAX(A) BOTH THE ASESSEE AND REVENUE ARE IN APPEAL BEFORE US. 7. BEFORE US, LD. AR OF THE ASSESSEE SUBMITTED THAT ASSESSEE HAD INHERITED PROPERTY AND, THEREFORE, COST OF ACQUISITION WAS NI L IN HIS HAND, THEREFORE NO CAPITAL GAINS CAN BE COMPUTED. LD. AR OF THE ASSES SEE FURTHER SUBMITTED THAT THE ASSESSEE HAD HIMSELF ESTIMATED THE VALUE OF THE LAND AS ON 1.4.1981 @RS.600 PER SQ YD. THE DVO HAS ESTIMATED THE VALUE OF LAND @RS.550/- PER SQ YARD. LD. AR OF THE ASSESSEE THEREFORE REQU ESTED THAT AT THE BEST, THE RATE ADOPTED BY THE ASSESSEE @ RS.600/- PER SQ YARD SHOULD BE ADOPTED. ON THE OTHER HAND, LD. SR. DR SUBMITTED THAT ASSESSEE HAD NOT BROUGHT ON RECORD ANY SALE INSTANCE FOR DETERMINATION OF COST OF ACQU ISITION AS ON 1.4.1981. THE ASSESSING OFFICER HAS ADOPTED THE RATE AS NOTIF IED BY ADM(FINANCE) AS ON 1.4.1981. THEREFORE, ASSESSING OFFICER IS JUSTI FIED IN COMPUTING THE CAPITAL GAINS BASED ON THE RATES NOTIFIED BY DISTRI CT MAGISTRATE. 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS NOTED ABOVE, I T IS CLEAR THAT THE ASSESSING OFFICER HAD SIMPLY ADOPTED THE RATES OF A DM(FINANCE). THE REPORT OF DVO WAS RECEIVED AFTER COMPLETION OF ASSE SSMENT WHICH WAS REJECTED ON THE GROUND THAT AFTER COMPLETION OF ASS ESSMENT, THE REPORT COULD NOT BE ACTED UPON. ACCORDING TO LD. COMMISSIONER O F INCOME TAX(A), THE ITA 2593/D/11 & 3024/D/11 ASSTT.YEAR 2006-07 9 ASSESSING OFFICER SHOULD HAVE POINTED OUT CERTAIN M ISTAKES IN THE VALUATION REPORT. ONLY THEN, THE REPORT OF DVO CAN BE REJECT ED. IN OUR CONSIDERED OPINION, THE COST OF ACQUISITION HAS TO BE DETERMIN ED ON THE BASIS OF SALE INSTANCES OR ANY OTHER MATERIAL. THE REPORT OF DVO CANNOT BE IGNORED. IT MAY FORM A VALUABLE EVIDENCE. WE, THEREFORE, FEEL IT NECESSARY THAT THE MATTER SHOULD BE SET ASIDE TO THE FILE OF THE ASSES SING OFFICER WITH THE DIRECTION TO COMPUTE THE CAPITAL GAINS ON THE BASIS OF THE MARKET RATE OF THE PROPERTY AS ON 1.4.1981. THE ASSESSING OFFICER WIL L PROVIDE NECESSARY OPPORTUNITY TO THE ASSESSEE. 9. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14.8.2012. SD/- SD/- (R.P. TOLANI) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DT 14 TH AUGUST 2012 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR ITA 2593/D/11 & 3024/D/11 ASSTT.YEAR 2006-07 10