Smt. Hari Priya Mann, New Delhi V. ITO, New Delhi

ITA 2823/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0986 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-10-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 11-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Assessee Lawyers: SM MATHUR
• Keywords: Capital asset; Cost of acquisition; Fair market value; Valuation report; Capital Gains
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI R.C.SHARMA, AM AND SHRI GEORGE MATHAN, JM ITA NO.2823/DEL/2009 ASSESSMENT YEAR : 2006-07 SMT.HARI PRIYA MANN, H-27, JANGPURA EXTN., NEW DELHI 110 014. PAN NO.AHEPM6100C. VS. INCOME TAX OFFICER, WARD-32(3), NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO.3421/DEL/2009 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER, WARD-32(3), NEW DELHI. VS. SMT.HARI PRIYA MANN, H-27, JANGPURA EXTN., NEW DELHI 110 014. PAN NO.AHEPM6100C. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.M.MATHUR, CA. REVENUE BY : SHRI G.S.SAHOTA, SR.DR. ORDER PER R.C.SHARMA, AM : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 29.5.2009 FOR THE AY 2006 -07. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE HAD SHOWN INCOME FROM CAPITAL GAIN. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS SOLD A PROPERTY FLAT NO.1011, PADM A TOWER-I, 5, RAJENDRA PLACE, NEW DELHI 110008 ON TOTAL SALE CONSIDERATION OF R S.6,00,000/-. LOOKING TO THE PLACE OF PROPERTY, THE SALE CONSIDERATION WAS FOUND TO BE LOW. THE SAME WAS CONFRONTED BEFORE THE AR OF THE ASSESSEE. IN RESPO NSE TO THIS, THE AR OF THE ASSESSEE HAS EXPLAINED THAT THE SALE CONSIDERATION IS ACCORDING TO MARKET VALUE. ITA-2823/D/2009 & 3421/D/2009 2 THE AO DID NOT ACCEPT ASSESSEES CONTENTION AND A P ROPOSAL U/S 55A WAS SENT TO DISTRICT VALUATION OFFICER. IN RESPONSE TO THIS, A N ORDER U/S 55A OF THE IT ACT, 1961 DATED 19.12.2008 WAS RECEIVED FROM ASSTT. VALU ATION OFFICER-II IN WHICH HE HAS ESTIMATED THE VALUE OF SAID PROPERTY AT RS.36,0 2,740/-. KEEPING IN VIEW OF VALUATION REPORT RECEIVED FROM ASSTT. VALUATION OFF ICER, THE VALUATION OF LONG TERM CAPITAL GAINS WAS RECOMPUTED BY THE AO AS UNDER:- SALE CONSIDERATION ON SALE OF FLAT NO.10/1011, PADMA TOWER-I, RAJENDRA PLACE ON 19.10.2005 RS.36,02,740/- LESS : INDEXED COST OF ACQUISITION COST OF ACQUISITION TO THE PREVIOUS OWNER OF RS.1, 12,500/- DATE OF ACQUISITION BY PREVIOUS OWNER 01.09.1979 1,12,500*497/100 RS.5,59,125/- -------------------- LONG TERM CAPITAL GAIN RS.30,43,615/- LESS : EXEMPT U/S 54F PURCHASED RESIDENTIAL FLAT ON 05.11.2005 AT NOIDA RS.5,50,000/- NET LONG TERM CAPITAL GAIN RS.24,93,615 /- 3. IN AN APPEAL FILED BEFORE THE CIT(A), HE DELETED THE ADDITION ON MERIT BY RECORDING A FINDING THAT TRANSACTION OF SALE OF FLA T WAS DISTRESS SALE AND ASSESSEE WAS NOT IN RECEIPT OF ANY CONSIDERATION MORE THAN W HAT WAS STATED IN THE SALE DEED. WITH REGARD TO LEGAL ISSUE RAISED BY THE ASSESSEE F OR REFERENCE HAVING BEEN MADE U/S 55A AND THE ADOPTION OF DVOS REPORT, THE CIT(A ) DID NOT FIND ANY SUBSTANCE THEREIN AND HELD THAT REFERENCE TO DVO WAS VALID. AGGRIEVED BY THE ABOVE ORDER OF CIT(A), BOTH ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US. THE ASSESSEE IS AGGRIEVED FOR HOLDING THAT REFERENCE TO THE DVO U/S 55A WAS VALID, WHEREAS REVENUE IS AGGRIEVED FOR DELETION OF ADDITION MADE BY THE AO ON ACCOUNT OF HIGHER CAPITAL GAIN EARNED BY THE ASSESSEE. ITA-2823/D/2009 & 3421/D/2009 3 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE HAS FILED A COPY OF SALE DEED OF FLAT BEFORE THE AO. THIS FLAT PRIOR TO SALE WAS GIVEN ON RENT BY THE ASSESSEE ON 28.10.2002 TO ONE M/S SND MARKET ING PVT.LTD. ON A MONTHLY RENTAL OF RS.9,860/- FOR A PERIOD OF THREE YEARS CO MMENCING FROM 1 ST NOVEMBER, 2002 TO 30 TH OCTOBER, 2005. COPY OF RENT DEED WAS ALSO FILED B Y THE ASSESSEE. BOTH THESE DOCUMENTS VIS--VIS SALE DEED AND RENT D EED WERE ALSO FILED WITH THE AO. DURING THE COURSE OF HEARING, IT WAS EXPLAINED THAT THE SAID TENANT HAD PAID RENT TO HER UPTO MAY, 2004 BUT THEREAFTER IT DID NO T PAY ANY RENT. RATHER HE HAD LOCKED THIS FLAT AND LEFT WITHOUT ANY INTIMATION TO THE ASSESSEE. THEIR WHEREABOUTS WERE NOT KNOWN TO THE ASSESSEE AND STATEDLY NOBODY WAS AVAILABLE FROM THE COMPANY (TENANT) SIDE TO TALK TO HER WITH THE RESUL T THAT THIS FLAT REMAINED UNDER THEIR LOCK AND KEY TILL SEPTEMBER, 2005 I.E. ONE MO NTH BEFORE THE DATE OF SALE OF THE FLAT. FOR UNLOCKING THIS FLAT, BY PROCESS OF BREAK ING THE LOCK, THE ASSESSEE HAD STATEDLY TAKEN HELP OF SHRI KAILASH VOHRA ESTATE MANAGER OF THE BUILDER OF THE BUILDING, PADMA TOWER-I, 5, RAJINDRA PLACE, NEW DEL HI AS WELL AS ONE SHRI PRITAM DASS WHO HAD HELPED HER IN GETTING THE FLAT UNLOCKE D BY BREAKING THE LOCK PUT BY THE TENANT. DURING THE COURSE OF HEARING BEFORE TH E CIT(A), THE COPIES OF THEIR AFFIDAVITS WHICH WERE ALREADY FILED BY THE ASSESSEE WITH AO WERE ALSO FILED BEFORE HIM. THIS EXERCISE OF UNLOCKING THE LOCK BY BREAKI NG THE LOCK WAS STATED TO BE CARRIED OUT BY THE ASSESSEE IN SEPTEMBER, 2005 AND SHE UNLOCKED THE FLAT. IT WAS ALSO STATED THAT THE ASSESSEE BEING A LADY WAS FACI NG UNNECESSARY HARASSMENT, THEREFORE, SHE HAD SOLD THIS FLAT TO SHRI RAVINDER GOEL FOR A TOTAL SALE CONSIDERATION OF RS.6.00 LAKHS AS DISTRESS SALE. AFTER CONSIDERI NG ALL THESE ARGUMENTS AND THE MATERIAL ON RECORD, THE CIT(A) REACHED TO THE CONCL USION THAT THE TRANSACTION OF SALE OF FLAT WAS A DISTRESS SALE. THE SALE CONSIDE RATION OF RS.6.00 LAKHS RECEIVED BY HER WAS THE ONLY SALE CONSIDERATION RECEIVED BY HER IN THE ABSENCE OF ANY POSITIVE MATERIAL BROUGHT IN BY THE AO ON RECORD WHICH COULD ESTABLISH THAT SHE HAD RECEIVED MORE SALE CONSIDERATION THAN THAT DECLARED SALE CONSIDERATION OF RS.6.00 LAKHS. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE, AND THE FACT THAT ITA-2823/D/2009 & 3421/D/2009 4 THE TRANSACTION WAS DISTRESS SALE, IT WAS HELD BY C IT(A) THAT THE ADDITIONS OF RS.24,93,613/- MADE BY THE AO RELYING MERELY UPON T HE REPORT OF THE DVO IS NOT PROPER. THE ADDITION WAS NOT BASED ON ANY MATERIAL ON RECORD. THEREFORE, THE ADDITION IS LIABLE TO BE DELETED. HELD ACCORDINGLY . NOTHING WAS BROUGHT ON RECORD BY LEARNED DR TO CONTROVERT THE FINDING OF CIT(A) W ITH REGARD TO REJECTION OF DVOS REPORT FOR THE PURPOSE OF MAKING ADDITION ON ACCOUNT OF CAPITAL GAIN SHOWN BY THE ASSESSEE. WE, THEREFORE, DO NOT FIND ANY RE ASON TO INTERFERE IN THE SAME. 5. EVEN ON THE LEGAL ISSUE RAISED BY THE ASSESSEE, THE ISSUE IS SQUARELY COVERED IN ASSESSEES FAVOUR BY DECISION OF HON'BLE DELHI H IGH COURT IN THE CASE OF NILOFER I.SINGH 176 TAXMAN 252. WITH REGARD TO THE QUEST ION OF MAKING A REFERENCE U/S 55A TO THE DVO, FOLLOWING WAS THE OBSERVATION OF TH E HON'BLE DELHI HIGH COURT IN THE CASE OF SMT.NILOFER I.SINGH (SUPRA) :- 8. WITH REGARD TO THE ARGUMENTS OF THE LEARNED COU NSEL FOR THE APPELLANT BASED ON THE PROVISION OF S. 55A OF THE S AID ACT, IT IS IMMEDIATELY TO BE NOTICED THAT THE SAID PROVISION B EGINS WITH THE EXPRESSION WITH A VIEW TO ASCERTAINING THE FAIR MA RKET VALUE OF A CAPITAL ASSET. IN OTHER WORDS, THE REFERENCE TO A VALUATION OFFICER UNDER S. 55A IS FOR THE OBJECT OF ASCERTAINING THE FAIR MARKET VALUE OF A CAPITAL ASSET. IT IS ONLY WHEN THE AO IS REQUIRE D TO ASCERTAIN THE FAIR MARKET VALUE OF A CAPITAL ASSET THAT THE PROVI SIONS OF S. 55A CAN BE INVOKED. THERE MAY BE CERTAIN SITUATIONS WHERE THE AO IS REQUIRED TO DETERMINE THE FAIR MARKET VALUE. ONE O F THE SITUATIONS IS INDICATED IN S. 45(4) OF THE SAID ACT WHERE THE PRO FITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BY WAY OF DIST RIBUTION OF CAPITAL ASSETS ON THE DISSOLUTION OF A FIRM OR OTHER AOP OR BOI ARE TO BE COMPUTED IS IN QUESTION. IN SUCH A SITUATION, THE PROVISION ITSELF MAKES IT CLEAR THAT FOR THE PURPOSES OF S. 48, THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF SUCH TRANSFER SHALL BE DEE MED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. IN A SITUATION, AS ONE OBTAINING UNDER S . 45(4) OF THE ACT, SINCE THERE IS NO APPARENT CONSIDERATION FOR THE TR ANSFER OF THE ASSET, THE FULL VALUE OF THE CONSIDERATION HAS TO BE DETER MINED IN AN INDIRECT MANNER AND THAT INDIRECT MANNER HAS BEEN INDICATED TO BE THE FAIR MARKET VALUE OF THE ASSET. THUS, WHEN THE FAIR MAR KET VALUE OF THE ASSET UNDER S. 45(4) IS TO BE DETERMINED, IT IS OBV IOUS THAT S. 55A OF ITA-2823/D/2009 & 3421/D/2009 5 THE ACT WOULD GET TRIGGERED AND A REFERENCE TO THE VALUATION OFFICER WOULD BE NECESSARY. 6. ITAT DELHI BENCH IN THE CASE OF TEJ PRATAP SINGH 22 SOT 156 ALSO OBSERVED THAT UNDER PROVISIONS OF SECTION 48, CAPIT AL GAIN IS TO BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATIO N RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF CAPITAL ASSET, I.E. COST OF ACQUISITION AND EXPENDITURE INCURRED IN CONNECTION WITH THE TRANSFER, ARE TO BE DEDUCTED FROM THE FULL VALUE OF THE ASSET. THE EXPRESSION FULL VALUE OF CONSIDERA TION DOES NOT MEAN MARKET VALUE OR FAIR MARKET VALUE OF THE ASSET TRANSFERRE D. HENCE, CAPITAL GAIN TAX CANNOT BE COMPUTED OR LEVIED WITH REFERENCE TO THE FAIR MA RKET VALUE DETERMINED ON THE BASIS OF VALUATION REPORT. 7. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY MERIT I N THE ACTION OF CIT(A) FOR MAKING A REFERENCE TO THE DVO AS VALID U/S 55A OF T HE IT ACT. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED WHEREAS THE APPEAL OF THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 8 TH OCTOBER, 2009. SD/- SD/- (GEORGE MATHAN) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :08.10.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-2823/D/2009 & 3421/D/2009 6