JYOTI KHUSHAL GALA, VASAI V. ITO 23(2)(3), MUMBAI

ITA 265/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2320 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 21-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KHETAN N G ADA
• Keywords: Sale consideration of property below Jantri Value; Opportunity of being heard; Fair market value; Corroborative evidences; Valuation report; Capital expenditure
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI C. N. PRASAD , JM AND SHRI N. K. PRADHAN , AM ./ I.T.A. NO. 265/MUM/2014 ( / ASSESSMENT YEAR: 2009 - 10 ) JYOTI KHUSHAL G ALA B - 603, I RIS , MIRCHANDANI NAGAR, SUNCITY 100 FEET ROAD, DEEWANMAN, VASAI - 401 202 / VS. ITO - 23(2)(3), MUMBAI ./ ./ PAN/GIR NO. AAEPG 3740 R ( / APPELLANT ) : ( / RESPONDENT ) / APP ELLANT BY : SHRI KHETAN N. G ADA / RESPONDENT BY : SHRI RAJESH OJHA / DATE OF HEARING : 18.10.2016 / DATE OF PRONOUNCEMENT : 26 .10.2016 / O R D E R PER N. K. PRADHAN , A. M.: THIS IS AN APPEAL F ILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 200 9 - 10 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) - 33, MUMBAI AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 14 3(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 2 ITA NO. 265/MUM/2014 (A.Y. 2009 - 10) JYOTI KHUSHAL GALA VS. ITO 1. LEARNED CIT(APPEALS - 33) WITHOUT REACHING TO THE ACTUAL FACT OF THE CASE, MECHANICALLY ACCEPTED THE VALUATION REPORT THEREBY MAKING ADDITIONAL LONG TERM CAPITAL GAIN OF RS.4,54,360/ - . 2. LEARNED CIT(APPEA LS - 33) IGNORED THE MATERIAL EVIDENCES BROUGHT ON RECORD IN RESPECT OF THE CAPITAL EXPENDITURE INCURRED AMOUNTING TO RS.2,50,000/ - THEREBY MECHANICALLY CONFIRMING THE DISALLOWANCE OF INDEXED COST OF IMPROVEMENT AMOUNTING TO RS.3,03,125/ - . 3. THE A SSESSIN G OFFICER (A O ) NOTED THAT THE ASSESSEE HA D SHOWN CAPITAL GAINS OF RS.2,26,959/ - AFTER INDEXATION. THE ASSESSEE HAD FURNISHED A COPY OF THE RELEVANT AGREEMENT WITH RESPECT TO RESIDENTIAL HOUSE PROPERTY WHICH WAS SOLD FOR A TOTAL CONSIDERATION OF RS.45 LACS OF WHICH THE ASSESSEES SHARE WAS ONLY 50%. AS PER THE SAID AGREEMENT, THE MARKET VALUE DETERMINED BY THE STAMP DUTY AUTHORITY CAME TO RS.54,08,720/ - . THE AO TOOK INTO ACCOUNT THE ABOVE FIGURE AND ARRIVED AT THE ASSESSEES SHARE OF 50% WHICH COMES TO RS.2 7,04,360/ - . 4. THE AO ALSO DISALLOWED THE CLAIM OF THE ASSESSEE FOR COST OF IMPROVEMENT OF RS.2,50,000/ - ( I NDEXED ONE RS.3,03,125/ - ) HOLDING THAT THERE WILL BE NO COST OF IMPROVEMENT ATTACHED TO THE ASSESSEES PROPERTY. 5. THE LD. CIT(A) WENT THROUGH TH E DVOS REPORT DATED 16. 7 .2012, WHEREIN THE FAIR MARKET VALUE OF THE SAID PROPERTY HAS BEEN DETERMINED AT RS.52,91,000/ - AND THE ASSESSEE S 50% SHARE AT RS.26,45,500/ - . THEREFORE, HE DIRECTED THE AO TO ADOPT THE FAIR MARKET VALUE OF CONSIDERATION AT RS.26, 45,500/ - AS AGAINST THE CONSIDERATION OF RS.27,04, 360/ - TAKEN BY HIM AND RECOMPUTE THE CAPITAL GAINS KEEPING IN VIEW THE PROVISIONS OF SUB SECTION (2) OF SECTION 50C OF THE ACT. 6. THE LD. CIT(A) ALSO SUSTAINED THE DISALLOWANCE OF COST OF IMPROVEMENT OF RS.2,50,000/ - (INDEXED ONE RS.3,03,125/ - ) MADE BY THE AO. 3 ITA NO. 265/MUM/2014 (A.Y. 2009 - 10) JYOTI KHUSHAL GALA VS. ITO 7. THE LD. COUNSEL OF THE ASSESSEE SUBMITS BEFORE US THAT THE VALUATION REPORT WAS PREPARED FULLY ON MECHANICAL BASIS IGNORING THE FACTS OF THE CASE. THE EFFECT ON THE MARKET VALUE OF THE PROPERT Y DUE TO THE DECLARATION OF THE SAID LAND AS FOREST LAND WAS IGNORED BY THE VALUATION OFFICER. IT IS FURTHER STATED THAT THE SALES INSTANCES QUOTED BY THE VALUATION OFFICER FOR REFERENCES IS UNTENABLE IN LAW, AS BOTH THE SALES INSTANCES QUOTED BY THE VALUA TION OFFICER IS OUT OF COVERAGE OF ARMS LENGTH. 8. THE LD. COUNSEL ALSO SUBMITS THAT INSPITE OF PRODUCING THE SUPPORTING EVIDENCES TO PROVE THE NEXUS THAT THE EXPENDITURE INCURRED WAS TOWARDS COST OF IMPROVEMENT, THE AO HAS MECHANICALLY DISALLOWED THE INDEX COST OF IMPROVEMENT. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT IN THE CASE OF THE CO - OWNER, I.E., KHUSHAL MURJI GALA VS. ITO , FOR THE SAME A.Y. 2009 - 10 , THE ITAT SMC BENCH, MUMBAI (ITA NO.264/ M/2014 DATED 22.7.2015 ) HELD AS UNDER: SO FAR AS GROUND N O .1 IS CONCERNED, WHICH RELATES TO THE INVOKING OF PROVISIONS OF SECTION 50C OF THE ACT, IT APPEARS THAT ASSESSEE HAS OBJECTION F OR CONSIDERING THE MARKET VALUE AS PER THE GUIDELINES FOLLOWED BY THE REG I STRATION AUTHORITIES. WHEN SUCH OBJECTIONS ARE RAISED, ASSESSING AUTHORITY IS BOUND TO REFER THE MATTER TO THE VALUATION AUTHORITIES IN ORDER TO ASCERTAIN THE MARKE T VALUE OF THE SPECIFIED PROPERTY UNDER CONSIDERATION. THE ASSESSING AUTHORITIES HAVE N OT MADE REFERENCE TO THE DVO FOR ASCERTAINING THE SAME. IT IS ALSO UNDISPUTED FACT THAT THE ASSESSEE HIMSELF FILED A VALUATION REPORT DATED 16.7.2012 FROM TH E RE GISTERED VALUERS AS PER PARA 3 .2 OF THE IMPUGNED ORDER. IT IS MY INFERENCE THAT T O THIS EXTENT, ASSESSEE HAS NO OBJECTION. ACCORDINGL Y , ASSESSEE'S SHARE OF RS.26,45,500/ - SHOULD NOT BE INTERFERED WITH. ACCORDINGLY, THE DECISION GIVEN BY THE CIT(A) IN THE SAID PARA 3.2 OF HIS ORDER IS PROPER AND THE SAME DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGL Y, GROUND NO.1, RAISED BY THE ASSESSEE IS DISMISSED. 10. IN VIEW OF THE ABOVE, THE ORDER OF THE LD. CIT(A) DIRECT ING THE AO TO ADOPT THE FAIR VALUE OF CONSIDERATION AT RS.26,45,500/ - AS AGAINST THE CONSIDERATION OF RS.27,04,360/ - TAKEN BY HIM AND TO RECO MPUTE THE CAPITAL GAINS KEEPING IN VIEW THE 4 ITA NO. 265/MUM/2014 (A.Y. 2009 - 10) JYOTI KHUSHAL GALA VS. ITO PROVISIONS OF SUB SECTION (2) OF SECTION 50C IS UPHELD. THE 1 ST GROUND OF APPEAL IS THUS DISMISSED. 11. NOW WE SHALL TURN TO THE ORDER OF THE LD. CIT(A) UPHOLDING THE ACTION OF THE AO IN DISALLOWING THE INDEX COST OF IMPROVEMENT OF RS.3,05,125/ - . THE LD. COUNSEL OF THE ASSESSEE SAYS THAT THE DETAILS IN RESPECT OF COST OF IMPROVEMENT WERE FILED BEFORE THE AO. THE AO HAS TAKEN A STAND THAT THE DETAILS IN RESPECT OF PAYMENTS WERE NOT FILED BEFORE HIM. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS POINT AND RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING THE ABOVE ISSUE AFRESH AS PER THE ACT AFTER ALLOWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALS O DIRECTED TO FURNISH THE RELEVANT DETAILS BEFORE THE AO. THE 2 ND GROUND OF APPEAL IS THUS ALLOWED FOR STATISTICAL PURPOSE 12. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN C OURT ON OCTOBER 26 , 201 6 SD/ - SD/ - ( C. N. PRASAD ) ( N. K. PRADHAN ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 26 . 10 .201 6 . . ./ ROSHANI , SR. PS 5 ITA NO. 265/MUM/2014 (A.Y. 2009 - 10) JYOTI KHUSHAL GALA VS. ITO / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CI T(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI