ASCON ARABIAN ALUMINIUM CO. PVT. LTD., MUMBAI V. I.T.O. 3(1)(1), MUMBAI

ITA 2883/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7708 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 27-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: SANJUKTA CHOW DHURY
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Opportunity of being heard; Bad and doubtful debts; Valuation report
• Section: 143(3); 50C; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 2883/MUM/2012 ASSESSMENT YEAR: 2006-07 M/S. ASCON ARABIAN ALUMINIUM CO. VS. ITO 3( 1)(1) PVT. LTD. MUMBAI 75-B, MITTAL COURT, NARIMAN POINT MUMBAI 400021 PAN NO. AAACA5687N (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. SANJUKTA CHOWDHURY, AR REVENUE BY: SHRI B.S. BIST, DR DATE OF HEARING :11/01/201 7 DATE OF PRONOUNCEMENT:29/03/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) 5, MUMBAI AND ARISES OUT O F THE ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER:- 1. ADDITION ON ACCOUNT OF ALLEGED NOTIONAL RECEIPT OF CON SIDERATION FOR DETERMINATION OF CAPITAL GAINS RS. 34,09,300/- A. THE LD. CIT(A) ERRED IN DIRECTING TO DETERMINE THE CAP ITAL GAINS BY ADOPTING DVOS VALUATION (OF RS. 1,19,15,000/-) WITH OUT APPRECIATING THAT HE HIMSELF HAD DISCARDED THE APPLICATION OF VALUAT ION AS PER STAMP DUTY AUTHORITY (FOR RS. 1,98,35,000/-) AND ON HIS FAILURE TO APPRECIATE THE PRACTICAL, REASONABLE AND SCIENTIFIC VALUATION DETERMINED BY THE REGISTERED VALUER, THE ENHANCED VALUE OF NOTIONAL CONSIDERATION OF RS. 34,09,300/- (1,19,15,000/- - 85 ,05,700/- AS ITA NO. 2883/MUM/2012 2 ACTUALLY RECEIVED) FOR DETERMINATION OF CAPITAL GAINS SUFFERS FROM DUE MERITS AND NO JUSTIFIED. THE SAME MAY BE DELETED. B. THE LD. CIT(A) ERRED IN HOLDING THAT DVOS VALUE BE ADO PTED FOR CAPITAL GAINS AS THERE WOULD BE NO END TO THE MATTER IF REGISTERED VALUERS VALUATION IS ACCEPTED. C. WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT ON THE FACE OF STAMP DUTY VALUATION O F RS. 1,98,35,000/-, THE DVO HAS VALUED THE SAID PROPERTIES AT RS. 1,19,15 ,000/- WHICH INDICATES THAT PROPERTIES WHICH WERE BESEIZED WITH RO CKS, ALL-ROUND DISFIGUREMENTS LEADING TO NO CLEAR PASSAGE ON THE INT ERIOR PARTS OF THE VILLAGE HAVING NO ACCESS TO WATER SUPPLY, ELECTRICI TY, PROPER ROAD AND SEWERAGE FACILITIES AND ZIG ZAG SIZE OF PROPERTIES W HICH COULD NOT FACTUALLY COMMAND ANY HIGHER VALUE; THEREFORE, THE V ALUATION AS PER THE CIRCULAR RATE COULD NOT STRAIGHT WAY BE APPLIED A ND THE VALUE OF THE REGISTERED VALUER DETERMINED AFTER STUDY AND ANALYS IS OF PRACTICAL FACTORS OF DEMERITS (WHICH HAD BEEN IGNORE D BY THE DVO) SHOULD BE THE VALUE WHICH MAY BE ADOPTED. D. WITHOUT FURTHER PREJUDICE TO ABOVE, MERE WRITTEN CO MMENT BY DVO THAT AFTER DUE CONSIDERATION OF OBJECTIONS RAISED BY THE APPELLANT WITHOUT DUE EXERCISE OF CARE AND CAUTION WOULD NOT SUF FICE TO JUSTIFY HIS STATED VALUE OF RS. 1,19,15,000/-, THEREFORE, TH E VALUE AS PER REGISTERED VALUER IS THE CORRECT VALUE WHICH IS DETER MINED AFTER CONSIDERING ALL POSITIVE AND NEGATIVE FACTORS. THE SA ME MAY BE ACCEPTED. 2. DISALLOWANCE OF BAD DEBTS REPRESENT SMALL SUNDRY BALA NCES WRITTEN OFF RS. 47,701/- A. THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE WI THOUT APPRECIATING THAT THERE WERE SMALL SUNDRY ACCOUNT BALANCES WHICH WERE WRITTEN OFF BY THE APPELLANT ON ACCOUNT OF BUSINESS EXPEDIENCY AND WITHOUT VIOLATING TO THE NORMS OF SEC. 36(1)(VII) R.W.S. 36(2)(I). B. WITHOUT PREJUDICE TO ABOVE, ALTERNATIVELY, THE WRIT E OFF IN THE ACCOUNTS MAY BE ALLOWED U/S 28. 3. LEVY OF PENAL INTEREST THE APPELLANT, ON MERITS, DENIES ITS LIABILITY TO PE NAL INTEREST. 3. WE BEGIN WITH THE 1 ST GROUND OF APPEAL. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE HAD SOLD TWO LAND PROPERTIES (I) ONE SITUATED AT VILLAGE VASHIWALI, TALUKA KHALAPUR, DIST. RAIGAD MEASURING 4.92 HECTARES AND (II) OTHER ALSO SITUATED IN THE SAME V ILLAGE MEASURING 4.245 HECTARES. THESE WERE SOLD FOR RS. 46,74,950/- AND RS. 38,32,750/- RESPECTIVELY, THUS TOTALLING TO RS. 85, 07,700/-. THE ITA NO. 2883/MUM/2012 3 ASSESSING OFFICER (AO) FOUND OUT THE MARKET VALUE A S PER STAMP DUTY AGREEMENT WHICH IS AS UNDER: PROPERTY MEASURING 4.25 HECTARE RS. 89,95,000/- PROPERTY MEASURING 4.92 HECTARE RS. 1,08,40,000/- MARKET VALUE AS PER STAMP DUTY AGREEMENT RS. 1,98,35,000/- IN RESPONSE TO A QUERY RAISED BY THE AO TO EXPLAIN WHY SALE CONSIDERATION OF RS. 1,98,35,000/- SHOULD NOT BE AD OPTED AS PER THE PROVISIONS OF SECTION 50C OF THE ACT, THE AR OF TH E ASSESSEE FILED A WRITTEN SUBMISSION DATED 22.12.2008 WHICH HAS BEEN EXTRACTED AT PAGE 2-3 IN THE ASSESSMENT ORDER. THE AO WAS NOT CO NVINCED WITH THE SAID REPLY OF THE ASSESSEE AND RELYING ON THE PROVI SION OF SECTION 50C(1) OF THE ACT ADOPTED RS. 1,98,35,000/- (AS PER THE STAMP DUTY AUTHORITIES) AS THE SALE CONSIDERATION OF BOTH THE LAND AND MADE THE ASSESSMENT U/S 143(3) OF THE ACT ON 23.12.2008. 3.1 THE ASSESSEE PREFERRED AN APPEAL AGAINST THE ORDER OF THE AO BEFORE THE LEARNED CIT(A). THE ASSESSEE MADE A SPEC IFIC REQUEST TO THE LEARNED CIT(A) TO REFER THE MATTER FOR VALUATION OF THE SAID PROPERTIES TO THE DISTRICT VALUATION OFFICER (DVO). THE LEARNE D CIT(A) DIRECTED THE AO TO REFER THE MATTER FOR VALUATION OF THE SAI D PROPERTIES TO THE DVO. THE AO RECEIVED THE TWO VALUATION REPORTS DATE D 23.12.2009 AND 24.12.2009 FROM THE DVO. AS PER THE SAID VALUAT ION REPORTS OF THE DVO, THE MARKET VALUE OF THE ABOVE TWO PROPERTIES W ERE DETERMINED AS UNDER: SR. NO PROPERTY AREA IN HECTOR CONSIDERATION RECEIVED BY THE APPELLANT VALUE ADOPTED BY THE A.O. VALUE AS PER DVO REPORT 1 1 ST LAND 4.921 46,74,950/- 1,08,40,000/- 63,97,000/- 2 2 ND LAND 4,245 38,32,750/- 89,95,000/- 55,18,000/- TOTAL 85,05,700/- 1,98,35,000/- 1,19,15,000/- AFTER RECEIPT OF THE VALUATION REPORT OF DVO, TH E LEARNED CIT(A) SENT A COPY OF IT TO THE ASSESSEE FOR ITS COMMENT / REJO INDER. IN RESPONSE TO ITA NO. 2883/MUM/2012 4 IT, THE ASSESSEE FILED A WRITTEN SUBMISSION BEFORE THE LEARNED CIT(A) STATING THAT THE APPLICATION OF UNIFORM RATE OF RS . 130 PER SQ.MTR. IS HIGHLY UNJUSTIFIED AND INCOMPARABLE TO THE SIMILAR LAND WITH SIMILAR ADVERSE FACTORS. THE ASSESSEE ALSO SUBMITTED BEFOR E THE LEARNED CIT(A) THAT THE ASSESSEE BE GIVEN AN OPPORTUNITY TO FILE THE VALUATION REPORT FROM A CERTIFIED VALUER. HOWEVER, THE LEARNE D CIT(A) WAS NOT CONVINCED WITH THE SAME AND RELYING ON SECTION 50C OF THE ACT, DIRECTED THE AO TO TAKE INTO ACCOUNT RS. 1,19,15,00 0/- AS PER THE VALUATION REPORT OF THE DVO FOR WORKING OUT THE CAP ITAL GAINS AS AGAINST RS. 1,98,35,000/- IN THE ASSESSMENT ORDER. 4. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE SUBM ITS THAT THE ASSESSEE HAD MADE A REQUEST BEFORE THE LEARNED CIT( A) TO REFER THE MATTER FOR VALUATION OF THE SAID PROPERTIES TO THE DVO TO ARRIVE AT THE CORRECT AMOUNT PREVAILING DURING THE RELEVANT PERIO D. IT IS STATED THAT THE DVO HAS NOT TAKEN INTO CONSIDERATION THE FOLLOW ING OBJECTIONS RAISED BEFORE HIM. I. THE SAID PROPERTY IS UNDEVELOPED AND HAVING NO WATE R SUPPLY, NO ELECTRICITY AND NO SEWERAGE LINE. II. THE SAID PROPERTY IS AWAY FROM MAIN ROAD (VERY INT ERIOR PLACE) AND IS NEAR TO HILL ROCK III. THE SAID PROPERTY IS SPREAD OUT IN HILLY AREA AND H AVING LOTS OF ROCKS WHICH IS NOT SUITABLE FOR CONSTRUCTIO N ALSO (UNEVEN LEVEL OF THE PLOT). IV. THE SIZE OF PROPERTY IS VERY LARGE IN SIZE I.E. 4,9 21 HECTARES. V. THE SHAPE OF THE PROPERTY IS IRREGULAR. FURTHER IT IS SUBMITTED BY THE LEARNED COUNSEL OF T HE ASSESSEE THAT (I) IT WAS PURELY A KIND OF DISTRESS SALE AS DURING THE TIME OF SALE, NO BUYER WAS AVAILABLE, THEREFORE, THE ASSESSEE SOLD I T AS PER ITS REGISTERED VALUERS REPORT, (II) THE SALE TOOK PLAC E ON 26.05.2005 ITA NO. 2883/MUM/2012 5 WHEREAS THE DVO REPORT WAS OBTAINED ON19.07.2010 AF TER GAP OF 5 YEARS AND (III) NO COMPARATIVE RATE CHART WAS OBTAI NED BY THE DVO. 5. ON THE OTHER HAND, THE LEARNED DR SUPPORTS THE ORDE R PASSED BY THE LEARNED CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT ON 23.12.2008. WE FIND THAT DURING THE COUR SE OF APPELLATE PROCEEDING, THE ASSESSEE MADE A SPECIFIC REQUEST TO THE LEARNED CIT(A) TO REFER THE VALUATION OF SAID TWO PROPERTIE S TO THE DVO. THE LEARNED CIT(A) RECEIVED A COPY OF THE VALUATION REP ORT OF THE DVO FROM THE AO AND MADE AVAILABLE TO THE ASSESSEE THE SAME FOR COMMENT / REJOINDER. WE FIND THAT THE OBJECTIONS RA ISED BY THE LEARNED COUNSEL OF THE ASSESSEE HAVE NOT BEEN PROPE RLY EXAMINED BY THE DVO OR THE LEARNED CIT(A) OR THE AO. IN VIEW OF THE ABOVE, THE ORDER OF LEARNED CIT(A) ON THE ABOVE GROUND IS SET ASIDE AND THE DVO IS DIRECTED TO EXAMINE THE CONTENTION OF THE ASSESS EE AS MENTIONED AT PARA 4 HERE-IN-ABOVE AND GIVE A REASONABLE OPPORTUN ITY TO THE ASSESSEE TO EXPLAIN ITS CASE AND THEN SEND A REPORT TO THE AO. THE AO IS DIRECTED TO (I) SEND A COPY OF THE SAID REPORT O F THE DVO TO THE ASSESSEE AND (II) PASS AN ORDER AS PER THE PROVISIO NS OF THE ACT AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. WE ORDER ACCORDINGLY. THEREFORE, GROUND NO 1 OF THE AP PEAL IS ALLOWED FOR STATISTICAL PURPOSES. 7. WE NOW TURN TO GROUND NO 2 OF THE APPEAL. AS NO DET AILS WERE FILED BEFORE THE AO OR LEARNED CIT(A), THE DISALLOW ANCE OF RS. 47,701/- IS CONFIRMED. THEREFORE, GROUND NO 2 OF TH E APPEAL IS DISMISSED. ITA NO. 2883/MUM/2012 6 8. THE LEVY OF INTEREST IS MANDATORY, THOUGH CONSEQUEN TIAL. WE ORDER ACCORDINGLY. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/03/2017 SD/ SD/- (MAHAVIR SINGH) ( N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI: DATED: 29/03/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI