AKSHAY V SANDU, MUMBAI V. ITO 22(2)(1), NAVI MUMBAI

ITA 2740/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1234 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 15-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: ASHOK PATILAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Additional evidence; Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 50C; 54; 263

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -HBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./2740/MUM/2015 , /ASSESSMENT YEAR: 2008-09 SHRI AKHSAY V. SANDHU 12A, AKSHAY ANAND, 7 TH SANDUWADI CHEMBUR, MUMBAI-400 071. PAN:BSAPS 3162 G VS. INCOME TAX OFFICER-22(2)-(1) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M.C. OMI NINGSHEN- DR ASSESSEE BY: SHRI ASHOK PATIL-AR / DATE OF HEARING: 22.02.2017 / DATE OF PRONOUNCEMENT: 12.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 27/02/2015 OF THE CIT ( A) -25, MUMBAI, THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE,AN INDIVIDUAL,HAD FILED HIS RETURN OF INCOME ON 31/07/2008,DECLARING TOTAL INCOME AT RS.19.62 LAKHS .THE ASSESSING OFFICER (AO)COMPLETED THE ORIGINAL ASSESSMENT, U/S. 143 (3) OF THE ACT,ON 23/12/2010, DETERMINING HIS INCOME AT RS. 28.15 LAKHS. 2. THE ASSESSEE, IN HIS LETTER, DATED 21/10/2016,HAS M ADE A REQUEST TO ADMIT ADDITIONAL GROUNDS OF APPEAL.IT WAS STATED THAT GROUND RAISED BY IT WA S LEGAL IN NATURE AND WOULD GO TO THE ROOT OF THE MATTER.WE FIND THAT IN THE ADDITIONAL GROUND TH E ASSESSEE HAS RAISED THE ISSUE OF TRANSFER OF DEVELOPMENT RIGHTS TO THE BUILDER AND TAXABILITY OF SUCH RIGHT.WE FIND THAT THE ISSUE DOES NOT REQUIRE INVESTIGATION OF THE FACTS AND THAT IT IS A PURE LEGAL ISSUE. THEREFORE, HE ADMITTED ADDITIONAL EVIDENCE RAISED BY HIM. BRIEF FACTS: 3. AS STATED EARLIER,THE AO HAD PASSED ORIGINAL SCRUTI NY ASSESSMENT IN THE MONTH OF DECEMBER, 2010.SUBSEQUENTLY,THE CIT-22 MUMBAI, ON PERUSAL OF THE RECORD FOUND THAT SAID ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE.ACCORDINGLY,HE PASSED AN ORDER U/S. 263 ON 23/01/2013 DIRECTING THE AO TO RE VISE THE ASSESSMENT. IN HIS ORDER, THE CIT OBSERVED THAT AS PER THE VALU ATION OF PROPERTY AND AS PER THE STAMP DUTY VALUATION THE MARKET VALUE OF THE PLOT WAS RS.3.55 CRORES, I.E., THE AGREEMENT VALUE WAS 2740/M/15(08-09) AKSHAY SANDHU 2 SHOWN AT RS. 2.50 CRORES, THAT IN THE RETURN OF INC OME THE ASSESSEE HAD CALCULATED THE CAPITAL GAIN AS PER THE AGREEMENT VALUE I.E. AT RS. 2.50 CR ORES, THAT THE AO HAD ACCEPTED THE SAME WHILE COMPLETING THE ASSESSMENT, THAT THE ASSESSEE WAS HAVING 12.5% SHARE IN THE SAID PROPERTY. IN RESPONSE TO THE NOTICE ISSUED U/S. 263 , THE ASSESSEE CONTENDED THAT HE HAD NOT ONLY RECEIVED THE CONSIDERATION CASH BUT ALSO RECEI VED CONSIDERATION INCURRING IN FORM OF A FLAT OF 1580 SQ. FT., THAT THE VALUE OF THE FLAT WA S ALSO INCLUDED IN THE TOTAL CONSIDERATION RECEIVED FROM THE DEVELOPER, THAT THE TOTAL CONSIDE RATION WOULD BE RS.3.43 CRORES, THAT AFTER CONSIDERING THE OTHER EXPENSES LIKE STAMP DUTY, REG ISTRATION CHARGES, LEGAL SERVICES, ETC. THE COST OF TEMPORARY ACCOMMODATION INCURRED BY THE DEV ELOPER COMES TO RS.34.69 CRORES, THAT THE TOTAL CONSIDERATION WOULD EXCEED THE STAMP DUTY VALUATION OF THE PROPERTY. 3.1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT OBSERVED THAT THE STAMP DUTY CHARGES WERE MADE ON THE BASIS OF PROPERTY AVAILABL E AT THE TIME OF TRANSACTION, THAT ANY SUBSEQUENT INVESTMENT MADE BY THE DEVELOPER AS PROM ISED BY HIM WAS NOT TO BE INCLUDED IN SUCH VALUATION, THAT THE CONTENTION OF THE ASSESSEE THAT COST OF CONSTRUCTION WAS INCLUDED IN THE VALUATION DONE BY THE STAMP DUTY AUTHORITIES WE RE NOT TENABLE, THAT ASSESSEE HAD RECEIVED A FLAT OF 1580 SQ.FT. FREE OF COST IN ADDITION THE MONETARY CONSIDERATION,THAT THE ASSESSEE HAD AVAILED EXEMPTION U/S. 54 OF THE ACT FOR THE SAID F LAT RECEIVED AS PART OF CONSIDERATION, THAT HE HAD OFFERED ONLY MONETARY CONSIDERATION FOR TAXATIO N.THE CIT DIRECTED THE AO TO EXAMINE THE ABOVE-MENTIONED TWO ISSUES. IN HIS ORDER, PASSED U/ S. 143 (3) R.W.S. 263 OF THE ACT, THE AO OBSERVED THAT AS PER THE PROVISIONS OF SECTION 50 C FOR TRANSFER OF IMMOVABLE PROPERTY, THE VALUE FIXED AT RS. 3.55 CRORES BY THE STAMP VALUATI ON AUTHORITY,WAS TO BE ADOPTED IF THE VALUE WAS MORE THAN THE CONSIDERATION SHOWN AS RECEIVED, THAT VALUE OF THE FLAT (RS. 93.78 LAKHS) WAS TO BE ADDED AS FORMING PART OF CONSIDERATION FO R TRANSFER ALONG WITH THE REGISTRATION CHARGES (RS. 3.86 LAKHS), THAT CONSIDERATION OF RS. 4.52 CRORES (RS. 3.55 CRORES PLUS RS. 93.78 LAKHS PLUS RS. 3.86 LAKHS) WAS TO BE ADOPTED IN PLA CE OF RS. 2.50 CRORES IN THE ORIGINAL ASSESSMENT ORDER. HE FURTHER OBSERVED THAT THE ASSE SSEE HAD CLAIMED EXEMPTION U/S. 54 OF THE ACT WHEREIN ONLY MONETARY CONSIDERATION WAS OFFERED FOR TAXATION,THAT IN THE COMPUTATION OF TOTAL INCOME THERE WAS NO INDICATION THAT SUCH EXEM PTION WAS CLAIMED IN RESPECT OF THE FLAT, THAT ASSESSEE DID NOT FILE ANY CLAIM U/S. 54 OF THE ACT, DURING THE REVISIONARY PROCEEDINGS. 3.2. DURING THE REVISIONARY-ASSESSMENT PROCEEDINGS THE AUTHORISED REPRESENTATIVE (AR) POINTED OUT THAT NOTICES U/S.263 WERE ISSUED ON 18/ 05/2012 AND 09/01/2013, THAT AN APPELLATE ORDER WAS ALREADY ISSUED BY THE FIRST APPELLATE AUT HORITY (FAA). HOWEVER, THE AO HELD THAT 2740/M/15(08-09) AKSHAY SANDHU 3 SUCH ISSUES COULD NOT BE TAKEN FOR CONSIDERATION. F INALLY, HE DETERMINED THE INCOME OF THE ASSESSEE U/S. 143(3) R.W.S. 263 ON 26.11.2013, AT R S.44.98 LAKHS. 4. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FAA. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED A COPY OF THE VALUATION REPORT,DATED 07/04/2008, OF A GOVERNMENT APPROVED PROPERTY VALUE R IN SUPPORT OF HIS CLAIM FOR SUBSTITUTION OF FAIR MARKET VALUE AS ON 01/04/1981 ALONG WITH TH E DEVELOPMENT AGREEMENT DATED 31/12/2006. THE FAA REFERRED TO THE PROVISIONS OF S ECTION 50 C OF THE ACT AND STATED THAT THE ASSESSEE HAD GRANTED WORKABLE POWER OF ATTORNEY IN FAVOUR OF THE DEVELOPERS, THAT THERE WAS TRANSFER OF LAND BY THE ASSESSEE IN FAVOUR OF THE D EVELOPER FOR CONSIDERATION, THAT PROVISIONS OF SECTION 50C OF THE ACT WERE APPLICABLE, THAT THE AO HAD RIGHTLY INVOKED THE SAID PROVISIONS. HE ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ASKIN G TO EXPLAIN AS TO WHY THE MARKET VALUE ADOPTED BY THE STATE GOVERNMENT SHOULD NOT BE CONSI DERED IN PLACE OF THE AGREEMENT VALUE CONSIDERED BY THE AO. HE FURTHER ASKED THE ASSESSEE AS TO WHY THE VALUE OF THE RECOMMENDATION SHOULD NOT BE TAXED AS FORMING PART OF SALE CONSIDERATION.THE FAA IN A TABULAR FORM CALCULATED THE CONSIDERATION. AFTER C ONSIDERING THE REPLY OF THE ASSESSEE DATED 13/02/2015,HE HELD THAT THE ARGUMENT OF THE ASSESSE E THAT VALUATION ADOPTED BY THE STATE GOVERNMENTS HAD TO BE REDUCED FURTHER ON ACCOUNT OF OWNER HELD PROPERTY WAS NOT ACCEPTABLE ON FACTS, THAT DURING ASSESSMENT/APPELLATE PROCEEDI NGS, THE ASSESSEE HAD NOT DISCLOSED THE OPTION EXERCISED BY HIM FOR RECEIPT OF CONSIDERATIO N IN TERMS OF CLAUSE 11 OF THE DEVELOPMENT AGREEMENT, THAT THE AO HAD NOT DISCOVERED THE IMPOR TANT ASPECT PERTAINING TO SALE CONSIDERATION,THAT THE FULL VALUE OF CONSIDERATION RECEIVED/ACCRUED TO THE ASSESSEE WOULD BE RS.86.39 LAKHS.HE DIRECTED THE AO TO CONSIDER THE S AID VALUE AS FULL VALUE OF CONSIDERATION FOR THE PURPOSE OF COMPUTING CAPITAL GAINS.WITH REG ARD TO DISALLOWING THE CLAIM FOR DEDUCTION U/S. 54 OF THE ACT, THE FAA OBSERVED THAT THE ASSES SEE DID NOT CLAIM DIRECTION IN THE ORIGINAL RETURN, THAT DURING THE APPELLATE PROCEEDINGS HE DI D NOT OFFER ANY EXPLANATION FOR THE CLAIM MADE, THAT THE COST OF ACQUISITION OF NEW RESIDENTI AL PROPERTY IN THE HANDS OF THE ASSESSEE WAS NIL, THAT IN THE ABSENCE OF ANY COST INCURRED BY HI M TOWARDS NEW RESIDENTIAL PROPERTY THE CLAIM MADE BY THE ASSESSEE WAS NOT ACCEPTABLE. 5. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) STATED THAT WHILE DECIDING THE APPEAL, THE FAA HAD TAKEN A FIGU RE OF 1180 SQ. FT. INSTEAD OF ONE 1008 SQ. FT., THAT THE OF THE COST OF CONSTRUCTION WAS TAKEN AT RS.38,300 PER SQ. FT. AS AGAINST COST OF CONSTRUCTION OF RS.7,500 PER SQ. FT., THAT THE F AA HAD NOT REFERRED THE MATTER TO THE DISTRICT VALUATION OFFICER (DVO) THOUGH THE ASSESSEE HAD DIS PUTED THE VALUATION ARRIVED AT BY THE 2740/M/15(08-09) AKSHAY SANDHU 4 STAMP DUTY AUTHORITIES, THAT THE ACTUAL DEVELOPMENT RIGHTS TRANSFERRED PERTAINED TO HALF OF THE PIECE OF LAND ONLY,THAT BALANCE WAS RETAINED BY THE ASSESSEE AND MEMBERS OF HUF ALONG WITH THE TENANTS,THAT THE FAA HAD NOT ADJUDICATED THE CL AIM OF THE ASSESSEE U/S.54 OF THE ACT WITH REGARD TO COST OF CONSTRUCTION RECEIVED, THAT THE A O/FAA HAD NOT CONSIDERED THE FACTS WITH REGARD TO VALUATION OF THE PROPERTY, THAT THE VALUA TION OF THE PROPERTY ADOPTED BY BOTH THE AUTHORITIES WAS INCORRECT, THAT THE VALUATION SHOUL D HAVE BEEN DONE ON THE AREA OFFERED FOR DEVELOPMENT TO THE DEVELOPER, THAT IN THE RETURN SU BMISSION DATED 09/12/2011 TO THE FAA THE ASSESSEE HAD SHOWN CALCULATION OF LONG-TERM CAPITAL GAIN I.E. DEDUCTION U/S. 54 OF THE ACT.THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDE R OF THE FAA. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND THEIR PERUS ED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD SOLD HIS INHERITED PROPERTY IN WHI CH SHE HAD A 12.5% SHARE IS A COPARCENER OF HINDU UNDIVIDED FAMILY (HUF),THAT ALL THE COPARCENE RS OF HUF DECIDED TO DEVELOP THE PROPERTY AND THE DEVELOPMENT AGREEMENT WAS ENTERED WITH THE DEVELOPER, THAT THE ASSESSEE HAD SHOWN HIS LONG-TERM CAPITAL GAIN AT RS.19.26 LA KHS IN HIS RETURN OF INCOME, THAT THE ORIGINAL ASSESSMENT WAS REVISED BY THE AO, AS PER T HE DIRECTION OF THE CIT, PASSED U/S. 263 OF THE ACT, THAT IN THE ORDER PASSED U/S.143(3)R.W.S. 263, THE AO ENHANCED THE INCOME OF THE ASSESSEE,THAT HE DID NOT CONSIDER THE CLAIM MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS TOWARDS DEDUCTION U/S.54 OF THE ACT,THAT THE FAA CONFIRMED THE ORDER OF THE AO AND MADE FURTHER ADDITIONS. WE FIND THAT THE ENTIRE PLOT OF LAND WAS NOT HANDED OVER BY THE HUF TO THE DEVELOPER,THAT THE FA A HAD ADOPTED WRONG FIGURES IN THE TABLES FOR ENHANCING THE INCOME OF THE ASSESSEE,THA T THE ASSESSEE HAD OBJECTED TO THE VALUATION OF STAMP DUTY AUTHORITIES,THAT THE MATTER WAS NOT REFERRED TO THE DVO,THAT THE ASSESSEE HAD CHALLENGED THE ORIGINAL ORDER OF THE A O BEFORE THE FAA,THAT THE THEN FAA HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE,THAT DU RING THE ASSESSMENT/APPELLATE PROCEEDINGS,CHALLENGING THE ORDER PASSED U/S.143(3) R.W.S.263 THE ORDER OF THE THEN FAA WAS NOT CONSIDERED,THAT ONE OF THE GROUNDS RAISED THE A SSESSEE BEFORE THE FAA REMAINED UNADJUDICATED.IN OUR OPINION,IN THESE CIRCUMSTANCES ,THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE FAA FOR FRESH ADJUDICATION,IN THE INTER EST OF JUSTICE.THE FAA IS DIRECTED TO DECIDE THE ISSUE DE NOVO AFTER AFFORDING A REASONABLE OPPO RTUNITY OF HEARING TO THE ASSESSEE.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESS EE,IN PART. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2017. 12 , 2017 2740/M/15(08-09) AKSHAY SANDHU 5 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 12.04 .2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.