ITO 16(1)(1), MUMBAI V. L/H OF MADANLAL CHHABRIA, MUMBAI

ITA 2701/MUM/2010

• Counselvise Citation: 270119914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RK GUPTA
• Assessee Lawyers: RAKESH JOSHI
• Keywords: Sale consideration of property below Jantri Value; Fair market value; Valuation report
• Section: 27; 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI PRAMOD KUMAR (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) ITA NO. 2701/MUM/2010 ASSESSMENT YEAR-2005-06 THE ITO 16(1)(1), MATRU MANDIR, MUMBAI-400 007 VS. L/H OF MADANLAL CHHABRIA, 4-C, BHAGWAT NIWAS, PEDDAR ROAD, MUMBAI-400 036 PAN-AAAPO 7987L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.K. GUPTA RESPONDENT BY: SHRI RAKESH JOSHI O R D E R PER ASHA VIJAYARAGHAVAN (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 20.1.2010 PASSED BY THE LD. CIT(A)-27 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAD SOLD A PROPERTY FOR A SUM OF RS . 1,19,01,954/- AND AFTER INDEXATION THE NET CONSIDERATION WAS SHOW N AT RS. 1.07 CRORES WHICH WAS INVESTED U/S. 44AC. THE ASSESSING OFFICE R TOOK THE VALUE AS PER THE STAMP DUTY ACT AT RS. 1,37,99,632/- AGAINST THE ASSESSEES ACTUAL SALE CONSIDERATION OF RS. 1.19 CRORES AND CA LCULATED CAPITAL GAINS ACCORDINGLY RESULTING IN AN ADDITION. 3. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE TH E LD. CIT(A). BEFORE THE LD. CIT(A) THE LD. AR OF THE ASSESSEE SU BMITTED THAT THE AO BEFORE TAKING THE VALUE AS PER THE STAMP DUTY ACT S HOULD HAVE REFERRED THE MATTER TO THE VALUATION CELL OF THE DEPARTMENT TO ASCERTAIN THE CORRECT ITA NO. 2701/M/2010 2 MARKET VALUE OF THE FLAT IN VIEW OF THE PROVISIONS OF SEC.50(C)(2). THE AO HAD NOT ACCEPTED THEIR REQUEST FOR REFERENCE TO THE VALUATION CELL. THE ASSESSEE HAS STATED THAT THE AO HAD NOT APPRECIATED THE FACT THAT THE PROPERTY UNDER CONSIDERATION WAS SUBJECT TO VARIOUS DISPUTES AND LEGAL PROBLEMS AND THE PROPERTY WAS UNDER A RECEIVER APPO INTED BY THE COURT, AND HENCE, COULD NOT BE SOLD AT THE SALE RATES ADOP TED BY THE STAMP DUTY ACT AND THE AO SHOULD HAVE REFERRED THE MATTER TO THE VALUATION CELL. THE AR ALSO STATED THAT EITHER THE MATTER SHO ULD HAVE BEEN REFERRED TO THE VALUATION CELL OR THE VALUE SHOWN BY THEM SH OULD HAVE BEEN ADOPTED. IT HAS BEEN STATED THAT THE ASSESSEE HAD P URCHASED A FLAT IN THE BUILDING PREMISES BEING CONSTRUCTED KNOWN AS OM SA DAN SITUATED AT 15, NARAYAN DABHAOLKAR ROAD, MUMBAI ON 1.11.1980 FO R RS.2,60,750/-. THE FLAT ALLOTTED WAS NO.104 SITUATED ON 10 TH FLOOR. THIS FLAT WAS SOLD ON 28.10.2004 TO ONE MRS. REKHA BHIMJIYANI AND OTHERS FOR RS.1,19,01,954/-. THE AR FURTHER STATED THAT EVEN T HOUGH THE STAMP DUTY WAS CHARGED AT RS.1.38 CRORES, BUT THERE WERE DISPUTES IN THE BUILDING FOR WHICH IT WAS SOLD AT A LOWER PRICE AND THE REGULAR MARKET PRICE WAS NOT APPLICABLE TO THE PRESENT SALE DEED A S THE CONSTRUCTION HAD NOT BEEN COMPLETED TILL 2007 EVEN AFTER 27 YEARS, S O THERE WAS NO WAY THAT THE FLAT COULD BE SOLD AT A HIGHER PRICE. THE ASSESSEE HAS FILED A COPY OF THE ORDER OF THE VALUATION OFFICER OF THE I.T. D EPARTMENT IN ANOTHER CASE OF A FLAT LOCATED ON THE SAME BUILDING AND ON THE SAME FLOOR I.E. FLAT NO.103, 10 TH FLOOR, OM SADAN, N.D. ROAD, MUMBAI WHEREIN THE VAL UATION OFFICER OF THE I.T. DEPARTMENT HAS ASSESSED THE VAL UE AT RS.80,49,512/- AS ON 29.10.2004. ACCORDING TO THE ASSESSEE, IF THE AO HAD REFERRED THE MATTER TO THE VALUATION OFFICER A SIMILAR VALUE WOU LD HAVE BEEN TAKEN BY THE DVO AND IT HAS BEEN STATED BY THE ASSESSEE THAT SINCE THIS VALUATION HAS ALREADY BEEN DONE BY THE VALUATION OFFICER OF T HE DEPARTMENT FOR A FLAT ON THE SAME FLOOR ON THE SAME BUILDING AT RS.8 0.49 LAKHS, THEN THE SALE CONSIDERATION WHICH HAS BEEN SHOWN BY THEM AT A HIGHER PRICE OF ITA NO. 2701/M/2010 3 RS.1.19 CRORES SHOULD BE TAKEN OR THE MATTER SHOULD BE REFERRED TO THE DVO. 4. THE LD. CIT(A) HELD AS FOLLOWS: CONSIDERING THE REPLY OF THE APPELLANT AND SINCE I T IS SEEN FROM THE COPY OF THE VALUATION REPORT SUBMITTED THA T THE VALUATION OFFICER-1 OF THE I.T. DEPARTMENT HAS VALUED THE PRO PERTY IN AN INTER- RELATED CASE OF MRS. LAJJA N. CHHABRIA VIDE HIS REP ORT DT. 4.11.2009 TAKING THE VALUE OF THE FLAT AT RS.80,49,512/-. UND ER SUCH CIRCUMSTANCES, SINCE THE VALUATION REPORT OF THE DV O IS AVAILABLE FOR A FLAT ON THE SAME FLOOR OF THE SAME BUILDING AT TH E SAME PLACE WHICH IS MUCH LOWER THAN THE VALUE ADOPTED BY THE S TAMP DUTY ACT AND THE SALE CONSIDERATION SHOWN BY THE APPELLANT, I THINK THIS VALUE CAN BE TAKEN AS THE VALUATION OF THE VALUATION OFFI CER WITHOUT REFERRING THE MATTER TO THE VALUATION CELL SINCE TH EY HAVE ALREADY VALUED THE PROPERTY IN THE CASE OF A DIFFERENT PERS ON WHO IS RELATED TO THE APPELLANT. SINCE THE BUILDING WAS IN DISPUTE AND UNDER CONSTRUCTION, THEREFORE, THE VALUE FOR THE SALE CON SIDERATION SHOWN BY THE APPELLANT HAS TO BE ACCEPTED AND SINCE IT IS MUCH MORE THAN AS VALUED BY THE DVO, THE SALE CONSIDERATION SHOWN BY THE APPELLANT IS CONSIDERED REASONABLE AND ACCEPTABLE. IF THE AO HAD ALSO MADE THE REFERENCE TO THE VALUATION OFFICER, H E WOULD HAVE RECEIVED THE SAME VALUE AS SHOWN IN THE CASE OF MRS . LAJJA CHHABRIA. THEY HAVE ALSO FILED A COPY OF THE ASSESS MENT ORDER OF THE AO OF MRS. LAJJA CHHABRIA FOR A.Y. 2005-06 WHEREIN THE AO HAS ACCEPTED THE SALE VALUE OF RS.80.49 LAKHS AS ON 29. 10.2004. HENCE, THE ADDITION MADE BY THE AO ON THE GROUNDS OF TAKIN G A HIGHER VALUE ON THE BASIS OF THE STAMP DUTY ACT STANDS DELETED A ND THE SALE CONSIDERATION SHOWN BY THE APPELLANT IS ACCEPTED. A CCORDINGLY, GROUND NO.1 IS ALLOWED. 5. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US AND RA ISED THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) ERRED IN ACCEPTING THE SALE CONS IDERATION OF THE PROPERTY AT RS.1,19,01,954/- AS PER THE SALE AGREEMENT VALUE ADOPTED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN INSTEAD OF THE STAMP DUTY VALUE OF RS. 1,37,99,632/- AS PER TH E STAMP DUTY ACT. 2. THE LD. CIT(A) ERRED IN LAW IN NOT CONSIDERING T HE PROVISIONS OF SEC. 50C OF THE I.T. ACT WHICH OVERRI DES ALL ITA NO. 2701/M/2010 4 OTHER PROVISIONS FOR TAXING OF LONG TERM CAPITAL GA IN IN RESPECT OF SALE OF IMMOVABLE PROPERTIES. 6. THE LD. COUNSEL FOR THE ASSESSEE SHRI RAKESH JOS HI POINTED OUT AT PAGE 2 OF THE ORDER OF THE ASSESSING OFFICER AND STATED THAT THE OBJECTION HAD BEEN RAISED BY THE ASSESSEE AT THE TIME OF ASS ESSMENT PROCEEDINGS ITSELF WHICH CAN BE GATHERED FROM THE ORDER OF THE AO WHICH IS AS FOLLOWS: UNDER THE INSTRUCTIONS OF OUR CLIENT, WE STATE AND SUBMIT THAT THE SALE OF SHARES ALONG WITH THE BENEFIT OF FLAT N O.104 ON THE 10 TH FLOOR OF A BUILDING KNOWN AS OM SADAN WAS UNDER S EVERAL PENDING DISPUTES AND COURT MATTERS. THE VARIOUS REC ITALS AND TERMS AND CONDITIONS OF AGREEMENT REFER TO THESE DISPUTES AND PENDING SUITS. OUR CLIENT HAS SOLD SUCH PROPERTY FOR A CONS IDERATION OF RS.1,19,01,954/- AND THE SAME IS CONSIDERED TO BE M UCH ABOVE THE TEN PREVAILING MARKET RATE. THE VALUE ADOPTED BY TH E STAMP DUTY OFFICE IS NOT ACCEPTABLE TO OUT CLIENT AND OUR CLIE NT IS DISPUTING SUCH VALUATIONS AS THE SAID VALUATION OF RS.1,37,99,632/ - IS HIGHLY INFLATED AND WORKED OUT WITHOUT C CONSIDERING VARIO US CIRCUMSTANCES PREVAILING/APPLICABLE TO SUCH A PROPERTY. THE VALUE ADOPTED BY STAMP OFFICE AUTHORITY IS HIGHLY INFLATED AND ABSUR D AND UNDER NO CIRCUMSTANCES THE SAME CAN BE CONSIDERED AS FAIR MA RKET VALUE. 7. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT HE HAD REQUESTED THE MATTER TO BE REFERRED TO THE VALUATION CELL OF THE DEPARTMENT TO ASCERTAIN THE CORRECT AND FAIR MARKET VALUE OF THE FLAT IN VI EW OF SEC. 50C OF THE I.T. ACT. FURTHER, THE LD. COUNSEL ALSO SUBMITTED THAT AT PAGE 1 OF THE PAPER BOOK THE COMPARISON OF TWO SALE DEEDS IN THE SAME B UILDING HAS BEEN PROVIDED WHICH IS AS FOLLOWS: PARTY NAME L/H OF MADANLAL CHHABARIA (RESPONDENT) LAJA M. CHHABARIA (WIFE OF RESPONDENT) PROPERTY DETAILS FLAT NO. 104, 10 TH FLOOR, OM SADAN CHS LTD., 15 NARAYAN DHABOLKAR ROAD, MUMBAI -400 006 FLAT NO. 104, 10 TH FLOOR,OM SADAN CHS LTD.,15 NARAYAN DHABOLKAR ROAD, MUMBAI -400 006 ITA NO. 2701/M/2010 5 ALONGWITH ONE COVERED CAR PARKING ALONGWITH ONE COVERED CAR PARKING CARPET AREA 967 SQ. FT. .(AS PER PAGE NO. 13 OF COMPILATION) 654 SQ. FT.(AS PER PAGE NO. 13 OF COMPILATION) RATE PER SQ. FT. 12,308/ - 12,308/ - TOTAL SALE CONSIDERATION 1,19,01,954/ - (967 X 12308) 80,49,512/ - (967 X 12308) DATE OF SALE 28 TH OCTOBER, 2004 29 TH OCTOBER, 2004 D.V.O. VALUATION N.A. 80,49,512/ - VALUE FOR STAMP DUTY PURPOSE 1,37,99,632/ - (AS PER PAGE NO. 22 OF COMPILATION) 99,33,056/ - (AS PER PAGE NO. 26 OF COMPILATION) VALUE ADOPTED BY AO 1,37,99,632/ - 80,49,512/ - 8. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDER OF THE AO. 9. WE HEARD BOTH THE PARTIES. WE ARE OF THE OPINION THAT THE VALUATION OF THE DVO HAS BEEN PRODUCED FOR THE FLAT ON THE SA ME FLOOR OF THE SAME BUILDING. THE AO WITHOUT REFERRING THE MATTER TO T HE VALUATION CELL COULD HAVE ADOPTED THE SAME SINCE THE PROPERTY HAS BEEN A LREADY VALUED IN THE CASE OF A DIFFERENT PERSON WHO IS RELATED TO THE AS SESSEE IN THE SAME BUILDING, ON THE ASSUMPTION THAT IF THE AO HAD MADE THE REFERENCE TO THE VALUATION OFFICER, HE WOULD HAVE RECEIVED THE SAME VALUE AS SHOWN IN THE CASE OF THE RELATIVE MRS.LAJJA CHHABRIA. THEREFORE WE DELETE THE ADDITION MADE BY THE AO. FURTHER, THE SALE CONSIDERATION SH OWN BY THE ASSESSEE CAN BE ACCEPTED FOR THE REASON THAT A COPY OF THE A SSESSMENT ORDER OF THE AO OF MRS. LAJJA CHHABRIA FOR THE A.Y. 2005-06 HAS BEEN FILED FROM WHICH WE HAVE FIND THAT THE AO HAS ACCEPTED THE SAL E VALUE OF RS. 80.49 LAKHS AS ON 29.10.2004. IN SHORT, WE CONFIRM THE O RDER OF THE LD. CIT(A) AND DISMISS THE REVENUES APPEAL. ITA NO. 2701/M/2010 6 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 1 ST DAY OF JUNE, 2011 SD/- SD/- (PRAMOD KUMAR) ( ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 1ST JUNE, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR B BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI ITA NO. 2701/M/2010 7 DATE INITIALS 1 DRAFT DICTATED ON: 9 . 0 6 . 201 1 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 10 .0 6 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10 . DATE OF DISPATCH OF ORDER: _________ ______