DCIT 1(2)(2), MUMBAI V. MAHALAXMI ROPE WORKS LTD, MUMBAI

ITA 2954/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4534 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D G
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Fair market value
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO.2954/M/2017 ASSESSMENT YEAR: 2012-13 DY. COMMISSIONER OF INCOME TAX-1(2)(2), ROOM NO.535, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. MAHALXMI ROPE WORKS LTD., 2 ND FLOOR, SHREENIWAS HOUSE, H SOMANI MARG FORT, MUMBAI 400 001 PAN: AAACM2682D (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI PRAKASH JOTWANI, A.R. REVENUE BY : SHRI D.G. PANSARI, D.R. DATE OF HEARING : 21.02.2019 DATE OF PRONOUNCEMENT : 14.03.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 18.01.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.2,31,95,180/- BY LD. CIT(A) AS MA DE BY THE AO UNDER SECTION 50C OF THE ACT ON THE GROUND THAT SAL E CONSIDERATION DECLARED BY THE ASSESSEE IS LESS THAN THE VALUE AS PER STAMP DUTY VALUATION AUTHORITY. ITA NO.2954/M/2017 M/S. MAHALXMI ROPE WORKS LTD. 2 3. THE FACTS IN BRIEF ARE THAT DURING THE YEAR THE ASSESSEE SOLD A PLOT OF LAND LOCATED AT OSHIWARA, RAM MANDIR ROA D, GOREGOAN WEST, MUMBAI, MEASURING ABOUT 1359.62 METERS TO SA DGURU CORPORATION SERVICES PVT. LTD. FOR A CONSIDERATION OF RS.4,89,46,320/- WHEREAS THE STAMP VALUATION OF THE SAID PROPERTY WAS RS.7,21,41,500/-. THE SAID PROPERTY W HICH WAS PURCHASED BY THE ASSESSEE IN FINANCIAL YEAR 1981-82 FOR A CONSIDERATION OF RS.2,93,183/-. IN THE CASE OF THE ASSESSEE WAS SELECTED UNDER SCRUTINY PROCEEDINGS . THE AO NOTICE D FROM 26AS THAT THE ASSESSEE HAS DECLARED SALES CONSIDERATION IS LESS THEN THE VALUE AS PER STAMP VALUATION AUTHORITY AND AC CORDINGLY ISSUED SHOW CAUSE NOTICE THROUGH ORDER SHEET ENTRY DATED 16.01.2015 WHICH WAS REPLIED BY THE ASSESSEE VIDE L ETTER DATED 27.01.2015. THE ASSESSEE SUBMITTED BEFORE THE AO T HAT THE RATE FOR THE SAID PLOT WAS AGREED TO BE SOLD HAPPENED M UCH BEFORE THE CHANGE IN THE VALUE AS PER READY RECKNOR. THE VALUE HAS BEEN INCREASED ON 01.01.2012 WHEN PER SQUARE METER RATE AS PER AGREEMENT WAS RS.36,000/- WHEREAS THE SAID RATE HAS BEEN INCREASED FROM RS.1,112 TO RS.37,900/- PER SQR. MTR . WHICH WORKS OUT TO RS.5,15,29,528/-. AS PER AIR INFORMAT ION THE VALUE MENTIONED OF THE OPEN PLOT WAS RS.7,21,41,500 /- WHICH IS APPROXIMATELY 140% OF THE READY RECKNOR VALUE OF RS.5,15,29,528/-. THE ASSESSEE ALSO OBTAINED INFOR MATION THROUGH RTI WHETHER TDR CAN BE LOADED ON THE SAID P LOT WHICH WAS ANSWERED IN NEGATIVE. FINALLY, THE AO NOT ACCE PTING THE EXPLANATION OF THE ASSESSEE ADDED A SUM OF RS.2,31, 95,180/- BEING DIFFERENCE BETWEEN THE MARKET VALUE OF RS.7,2 1,41,500/- AND RS.4,89,46,320/- SALE CONSIDERATION AS PER AGRE EMENT AND ITA NO.2954/M/2017 M/S. MAHALXMI ROPE WORKS LTD. 3 ADDED THE SAME TO THE INCOME OF THE ASSESSEE UNDER SECTION 50C OF THE ACT. 4. THE LD. CIT(A) ALLOWED THE APPEAL OBSERVING AND HOLDING AS UNDER: 3. DISALLOWANCE U/S 50C OF THE INCOME-TAX AC T: THE AO HAS ADDED SUM OF RS.2,31,95,180/- U/S 50C AS AGAINST THE AGREEMENT VALUE SHOWN BY THE APPELLANT COMPANY OF RS.4,89,46,320/- WHILE TAKING INTO ACCOUNT THE FAIR MARKET VALUE OF RS.7,21,41,500/- AS PER AIR IN FORMATION. THE APPELLANT COMPANY CONTESTED THAT THIS SUOMOTO VALUE OF RS.7,2 1,41,500/- DISPUTED BY THE APPELLANT IS UNFAIR AND THEREFORE REQUESTED THIS OF FICE TO REFER TO VALUATION CELL TO ARRIVE AT FAIR MARKET VALUE AND ACCORDINGLY A REQUE ST HAS BEEN MADE TO THE AO ON 16.02.2016 AND A FINAL REPORT RECEIVED BY THIS OFFI CE ON 23.06.2016 OF THE DVO REPORT DATED 13/06/2016 BY ADOPTING THE FAIR MARKET VALUE OF RS.5,15,29,600/-. THE DIFFERENCE BETWEEN THE DVO'S VALUATION (RS.5,15 ,29,600/- AND THE AGREEMENT VALUE RS.4,89,46,320/- COMES TO AROUND RS.25,83,278 /-. THEREFORE, THE ESTIMATION OF DIFFERENCE WORKED OUT BY DVO IS DUE TO NEGLIGENC E AND THE ADDITION MADE BE DELETED. FURTHER, THE AR OF THE APPELLANT RELIES ON THE FOLLOWING HON'BLE SUPREME COURT'S DECISION IN THE CASE OF C.B. GAUTARN [65 TAXMANN 440 (SC)] WHEREIN IT IS HELD THAT THE DIFFERENCE IN ADMITTED VALUE AND VALU E DETERMINED BY THE DVO IS ABOUT 15% OR LESS IS TO BE IGNORED. THE RELEVANT PO RTION IS AS UNDER : 'THE LEGISLATIVE HISTORY OF CHAPTER XX-C AND THE ST AND TAKEN BY THE CBDT AS EVIDENT FROM INSTRUCTION NO, 1A88 MAKES IT DEAR THA T THE POWERS OF COMPULSORY PURCHASE CONFERRED UNDER THE PROVISIONS OF CHAPTER XX-C ARE BEING USED AND ARE INTENDED TO BE USED ONLY IN CASE S WHERE IN AN AGREEMENT TO SELL AN IMMOVABLE PROPERLY IN AN URBAN AREA TO WHICH THE PROVISIONS OF THE SAID CHAPTER APPLY, THERE IS A SI GNIFICANT UNDER VALUATION OF THE CONCERNED PROPERTY, NAMELY, OF 15 PER CENT OR M ORE. IF THE APPROPRIATE AUTHORITY IS SATISFIED THAT IN AN AGREEMENT TO SELL IMMOVABLE PROPERTY IN SUCH AREAS, THE APPARENT CONSIDERATION IS LESS THAN THE FAIR MARKET VALUE BY 15 PER CENT OR MORE IT MAY DRAW A PRESUMPTION THAT THIS UNDER VALUATION HAS BEEN DONE WITH A VIEW TO EVADE TAX, OF COURSE, SUCH A PRESUMPTION IS REBUTTABLE AND THE INTENDED SELLER OR PURCHASER CAN LEAD EVIDENCE TO REBUT SUCH A PRESUMPTION.' FURTHER, THE AR OF THE APPELLANT ALSO RELIES ON THE FOLLOWING JURSIDICTIONAL ITAT'S DECISION VIDE ITA NO. 5402/MUM/2014 DATED 23/11/201 6 IN THE CASE OF KRISHNA ENTERPRISES VS. ADDL CIT 12(1] AND THE JURISDICTION AL ITAT, JAIPUR BENCH IN THE CASE OF SITA BAI KHETAN VS. ITO WARD 6(3} : KRISHNA ENTERPRISES VS. ACIT(ITATMUMBAI) DATED 26-1 1-2016 S. 50C: IF THE DIFFERENCE BETWEEN THE SALE CONSIDER ATION OF THE PROPERTY SHOWN BY THE ASSESSEE AND THE FMV DETERMINED BY THE DVO U/S 50C(2) IS ITA NO.2954/M/2017 M/S. MAHALXMI ROPE WORKS LTD. 4 LESS THAN 10%, THE AO IS NOT JUSTIFIED IN SUBSTITUT ING THE VALUE DETERMINED BY THE DVO FOR THE SALE CONSIDERATION DISCLOSED BY THE ASSESSEE. SITA BAI KHETAN VS. ITO (ITAT JAIPUR) DATED AUGUST, 2016 S. 50C: VALUATION IS A MATTER OF ESTIMATION AND SOM E DEGREE OF DIFFERENCE IS BOUND TO BE THERE. IF THE DIFFERENCE BETWEEN THE ST AMP DUTY VALUATION AND THE DECLARED SALE CONSIDERATION IS LESS THAN 10%, A DDITION U/S 50C SHOULD NOT BE MADE. 4. IN THE LIGHT OF THE ABOVE FACT ON RECORD AND ALS O THE DIFFERENCE BETWEEN VALUE ADOPTED BY THE APPELLANT AND THE DVO IS AT 5.28% AN D ALSO CONSIDERING THE JURISDICTIONAL DECISIONS CITED ABOVE, I AM OF THE C ONSIDERED OPINION THAT THE DIFFERENCE OF 25,83,278/- IS NOT TO BE CONSIDERED F OR MAKING ADDITION U/S 50C OF THE ACT. I THEREFORE, DIRECT THE AO TO DELETE THE ADDIT ION OF RS.2,31,95,180/-. 5. IN THE RESULT, THE APPEAL IS ALLOWED. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER OF LD. CIT(A), WE OBSERVE THAT IN THIS CASE THE ASSESSEE HAS DISPUTED THE FAI R MARKET VALUE OF RS.7,21,41,500/- AS PER AIR INFORMATION AND REQU ESTED BEFORE LD. CIT(A) TO REFER THE VALUATION OF THE PROPERTY TO DVO TO ASCERTAIN THE FMV. THE LD CIT(A), ACCORDINGLY, REFE RRED THE MATTER TO AO ON 16.02.2016 AND A FINAL VALUATION R EPORT WAS RECEIVED BY THE OFFICE OF LD. CIT(A) ON 23.06.2016 DATED 13.06.2016 ACCORDING TO WHICH THE FMV WAS RS.5,1 5,29,600/- . THE LD. CIT(A) DELETED THE ADDITION ON THE GROUN D THAT DIFFERENCE BETWEEN THE FAIR MARKET VALUE AS PER DVO REPORT AND AGREEMENT VALUE COMES TO AROUND RS.25,83,278/- WHIC H IS 5.8% APPROXIMATELY AND LD. CIT(A) BY RELYING ON THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF C.B. GAUTAM 65 TAXMANN 440 SC AND DECISION OF THE BOMBAY TRIBUNAL IN THE C ASE OF KRISHNA ENTERPRISES VS. ACIT IN ITA NO.5402/M/2014 (SUPRA) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLD ING THAT THE DIFFERENCE BETWEEN THE FAIR MARKET VALUE AS PER DVO AND THE VALUE AS PER AGREEMENT IS AROUND 5.8% WHICH IS NOT TO BE ITA NO.2954/M/2017 M/S. MAHALXMI ROPE WORKS LTD. 5 CONSIDERED FOR MAKING ADDITION UNDER SECTION 50C AN D THUS DELETED THE ADDITION OF RS.2,31,95,180/-. WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) OR ANY REASON TO DEVIATE FROM THE FINDING OF THE LD. CIT(A). ACCORDINGLY, WE UP HOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE APPEAL OF THE REVEN UE. ORDER PRONOUNCED IN THE OPEN COURT ON 14.03.2019. SD/- SD/- ( RAM LAL NEGI) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.03.2019. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.