M/s. Kiran Metal Works, Jalandhar city V. The Income-tax Officer, Jalandhar

ITA 296/ASR/2011

• Counselvise Citation: 29620914 RSA 2011
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Sale consideration of property below Jantri Value; Application of stay; Fair market value; Valuation report
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: AMRITSAR BENC H: AMRITSAR BEFORE SHRI H L KARWA, VP AND SHRI D K SRIVASTAVA, AM ITA NO. 296/ASR/2011 AND SA NO.13/ASR/2011 AY 2006-07 M/S KIRAN METAL WORKS V I.T.O. WARD II(1), JALANDHAR O-3A, INDUSTRIAL AREA JALANDHAR CITY APPELLANT BY: SHRI Y.K. SUD RESPONDENT BY: SHRI TARSEM LAL DATE OF HEARING: 09.12.2011 DATE OF PRONOUNCEMENT: 16.12.2011 ORDER D K SRIVASTAVA : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE LD. CIT(A) ON 31.3.2011, ON THE FOLLOWING GROUNDS:- 1 THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAIN ING THE ESTIMATION OF SALE PRICE OF LAND FROM RS. 1868750/- MADE BY TH E AO TO RS. 1358438/- AND THEREFORE WORKING OUT THE CONSEQUENTI AL LONG TERM CAPITAL GAINS UNDER THE PROVISIONS OF SECTION 50C O F THE INCOME-TAX ACT, 1961. 2. THAT BOTH THE AO AND THE LD. CIT(A) FAILED TO CO NSIDER THAT UNDER THE CIRCUMSTANCES THE VALUE OF LAND WAS NOT MORE TH AN THE REGISTERED VALUE OF RS. 640000/- AND BOTH OF THEM EACH IGNORED THE VALUATION REPORT OF APPROVED REGISTERED VALUER. 3. THAT BOTH THE LD. CIT(A) AND THE AO WERE NOT JUS TIFIED IN RELYING UPON THE LOAN SPEAKING VALUATION REPORT SUBMITTED B Y THE DVO AGAINST THE VALUATION REPORT OF APPROVED REGISTERED VALUER. 4. THAT THE ORDER OF THE AO AND THE LD. CIT(A) ARE AGAINST THE LAW AND FACTS OF THE CASE. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN OF INCOME ON 28.2.2007 RETURNING TOTAL INCOME AT RS .146001. AFTER PROCESSING, THE RETURN WAS SELECTED FOR SCRUTINY. DURING THE CO URSE OF SCRUTINY, IT WAS FOUND THAT THE ASSESSEE HAD SOLD IMMOVEABLE PROPERTY MEAS URING 35 MARLAS OF LAND THROUGH TWO CONVEYANCE DEEDS FOR RS.3,25,000/- AND RS.3,15,000/- ON PERUSAL OF THE CONVEYANCE DEEDS, THE AO NOTICED THAT THE AF ORESAID PROPERTIES HAVE KIRAN METAL WORKS V ITO ITA NO. 296/ASR/2011 2 BEEN VALUED BY THE STAMP VALUATION AUTHORITY AT RS. 14,55,000/- AND RS.12,30,000/-. THE AO THEREFORE PROPOSED TO ADOPT THE AFORESAID VALUE OF THE PROPERTY ASSESSED BY THE STAMP VALUATION AUTHORITY FOR PAYMENT OF STAMP DUTY, FOR COMPUTATION OF CAPITAL GAIN. THE ASSESSEE OBJECTED TO THE ACTION PROPOSED BY THE AO. RESULTANTLY, THE AO REFERRED TH E MATTER TO THE DVO FOR VALUATION OF THE PROPERTY U/S 50C OF THE INCOME-TAX ACT, 1961. THE DVO DETERMINED THE VALUE OF THE PROPERTY AT RS.19,68,75 0/- AS AGAINST RS.26,85,000/- ADOPTED BY THE STAMP VALUATION AUTHO RITY. ON BEING CONFRONTED WITH THE VALUATION REPORT, THE ASSESSEE FILED WRITT EN SUBMISSIONS STATING THAT THE BASIS ON WHICH THE DVO HAS ASSESSED THE FAIR MA RKET VALUE HAS NOT BEEN MENTIONED IN HIS ORDER AND THEREFORE THE FAIR MARKE T VALUE DETERMINED BY THE DVO WAS LIABLE TO BE DISCARDED. THE AO HOWEVER ADOP TED THE FAIR MARKET VALUE AS DETERMINED BY THE DVO AND ACCORDINGLY COMPUTED T HE CAPITAL GAINS. 3. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE FI LED A COPY OF REPORT OF A REGISTERED VALUER WHO VALUED THE PROPERTY AT RS.6,3 0,000/- AS AGAINST RS.6,40,000/- DECLARED IN THE CONVEYANCE DEEDS AND RS.19,68,750/- DETERMINED BY THE DVO. THE CASE OF THE ASSESSEE BEF ORE THE LD. CIT(A) WAS THAT A PIECE OF LAND MEASURING 80 MARLAS WAS PURCHA SED IN 1977-78 AT SAINI COLONY. A PRIVATE LTD. COMPANY KNOWN AS KANAHAYA AE QUA CONTROL (P) LTD WAS STARTED ON 10.4.1995 AFTER WHICH THE COMPANY HAD CA RRIED CONSTRUCTION ON LAND MEASURING 35 MARLAS OUT OF 80 MARLAS OF LAND. IT WA S FURTHER STATED BEFORE THE LD. CIT(A) THAT NO RENT OR LEASE MONEY WAS CHARGED BY THE ASSESSEE FROM THE SAID COMPANY AS THE SAID COMPANY WAS A FAMILY CONCE RN. IT WAS ALSO SUBMITTED THAT A FAMILY DISPUTE AROSE IN 2002 BETWEEN THE FAM ILY MEMBERS AS A RESULT OF WHICH SOME FAMILY MEMBERS RETIRED FROM THE COMPANY WHILE SOME OTHERS RETIRED FROM THE ASSESSEE-FIRM. THE SUM AND SUBSTAN CE OF THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT THE PROPERTY WAS IN EFFECTIVE CONTROL AND POSSESSION OF OTHER FAMILY ME MBERS WITH WHOM THE PARTNERS OF THE ASSESSEE WERE NOT ON TALKING TERMS. IT WAS ALSO THE CASE OF THE ASSESSEE BEFORE THE CIT(A) THAT THE LOCATION OF THE LAND IN QUESTION WAS SUCH THAT IT WAS NOT POSSIBLE FOR THE ASSESSEE TO SELL T HE SAME TO ANYONE ELSE OTHER THAN THE FAMILY MEMBERS WHO WERE IN EFFECTIVE POSSE SSION OF THE LAND THOUGH KIRAN METAL WORKS V ITO ITA NO. 296/ASR/2011 3 THE TITLE OVER THE LAND VESTED IN THE ASSESSEE-FIRM . AFTER TAKING INTO ACCOUNT THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) DIRECTE D THE AO TO RESTRICT THE FAIR MARKET VALUE AT RS. 1350438/- WITH THE FOLLOWING OB SERVATIONS:- 8.3 IN LIGHT OF THE AFORESAID FACTS AND CIRCUMSTAN CES, I AM OF THE VIEW THAT THE VALUE MENTIONED IN THE REGISTERED SALE DEE D HAS BEEN SHOWN BELOW THE FAIR MARKET VALUE, TAKING INTO ACCOUNT EV EN THE ENCUMBRANCE, BECAUSE OF PERSONAL REASONS RELATING TO PHYSICAL AN D MENTAL HARASSMENT OF THE PARTNERS OF THE ASSESSEE FIRM. THESE FACTORS , THOUGH RELEVANT AMONG THE RELATED PARTIES, SHOULD NOT AFFECT THE DE TERMINATION OF THE PRICE AT WHICH THE PROPERTY COULD BE SOLD IF SOLD I N THE OPEN MARKET. THE VO HAS ALLOWED REBATE OF 20% FOR ENCUMBRANCE AND 5% FOR CO- OWNERSHIP OF LAND. CONSIDERING THE FACTS OF THE CAS E, I AGREE WITH THE APPELLANTS CONTENTION THAT THE VO SHOULD HAVE ALLO WED REBATE OF 30% ON ACCOUNT OF ENCUMBRANCE SINCE A FACTORY AN IMMO VEABLE PROPERTY BELONGING TO ANOTHER PERSON WAS CONSTRUCTED ON THE IMPUGNED LAND. I ALSO AGREE THAT 12.5% REBATE SHOULD HAVE BEEN ALLOW ED BY THE VO FOR CO-OWNERSHIP IN THE CIRCUMSTANCES OF THE CASE. HENC E, REBATE OF 42.5% IS HELD TO BE ALLOWABLE OVER THE MARKET PRICE OF TH E LAND IN THE AREA. AFTER ALLOWING THIS REBATE, THE PER MARLA RATE WORK S OUT TO RS. 43125/- AND THE VALUE OF THE LAND AT THIS RATE WORKS OUT TO RS. 15,09,375/-. I AM FURTHER OF THE VIEW THAT SINCE THE VO HAS NOT DETER MINED THE VALUE OF THE ACTUAL COMPARABLE TRANSACTION IN THE ARA BUT HA S STARTED HIS ESTIMATION FROM THE RATE FIXED BY THE VALUATION AUT HORITIES DIRECTLY, A FURTHER REBATE OF 10% OVER THE RATE ARRIVE AT ABOVE SHOULD BE ALLOWED SINCE MANY OF THE PROPERTY TRANSACTIONS ARE LIKELY TO BE REGISTERED AT OR BELOW THE RATES FIXED BY STAMP DUTY AUTHORITIES. HE NCE, GIVING A FURTHER REBATE OF 10% OVER THE RATE DETERMINED ABOVE, THE F AIR MARKET VALUE OF THE IMPUGNED PROPERTY WORKS OUT TO RS. 13,58,438/-. THE AO IS DIRECTED TO TAKE THIS VALUE FOR COMPUTING LONG TERM CAPITAL GAINS OF THE ASSESSEE. GROUND NO. 1 TO 3 OF APPEAL ARE, THEREFORE, PARTLY ALLOWED. 4. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, IT WAS SUBMITTED THAT THE PROPERTY IN QUESTION WAS IN EFFECTIVE POSSESSION AN D CONTROL OF FAMILY MEMBERS WITH WHOM THE PARTNERS OF THE ASSESSEE-FIRM WERE NO T EVEN ON TALKING TERMS. ACCORDING TO HIM, THE PROPERTY WAS SO LOCATED THAT IT WAS NOT POSSIBLE TO RENT OR LEASE OR SELL THE SAME TO ANYONE OTHER THAN THE FAMILY MEMBERS OCCUPYING THE SAID LAND. THE ASSESSEE WAS THEREFORE COMPELLED TO SELL THE SAME TO THEM AT WHATEVER PRICE HE COULD MANAGE TO GET FROM THEM. HE SUBMITTED THAT THE VALUE DECLARED BY THE ASSESSEE SHOULD THEREFORE BE ADOPTED FOR COMPUTING THE CAPITAL GAIN. KIRAN METAL WORKS V ITO ITA NO. 296/ASR/2011 4 5. IN REPLY, THE LD. DR SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. THE LD. CIT(A) HAS GIVEN THE BENEFIT O F OVER 50% ON ACCOUNT OF ADVERSE POSSESSION/ENCUMBRANCE, CO-OWNERSHIP OF LAN D ETC. IT IS DIFFICULT TO WORK OUT WITH MATHEMATICAL CURRENCY THE EXTENT OF R EBATE THAT SHOULD BE ALLOWED TO THE ASSESSEE ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE. THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE VALUA TION ADOPTED BY THE STAMP VALUATION AUTHORITY FOR THE PURPOSE OF PAYMENT OF S TAMP DUTY. THE DEPARTMENT, ON THE OTHER HAND, HAS NOT BEEN ABLE TO REBUT THE STATEMENTS OF THE ASSESSEE THAT THE PROPERTY WAS UNDER ADVERSE PO SSESSION OF HIS FAMILY MEMBERS. AFTER TAKING INTO ACCOUNT THE TOTALITY OF FACTS AND CIRCUMSTANCES, IT IS CONSIDERED APPROPRIATE TO RESTRICT THE FAIR MARKET VALUE OF THE PROPERTY AT RS.10.00 LAKHS AS AGAINST RS.13,58,438/- TAKEN BY T HE LD. CIT(A). WE ORDER ACCORDINGLY. THE AO IS DIRECTED TO COMPUTE THE CAPI TAL GAIN AFTER TAKING THE FAIR MARKET VALUE OF THE PROPERTY IN QUESTION AT RS.10.0 0 LAKHS. APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED WITH THE AFORESAID OBSER VATIONS. 7. WE HAVE ALREADY DISPOSED OF THE APPEAL FILED BY THE ASSESSEE. THEREFORE THE STAY APPLICATION BEARING SA NO.13/ASR/2011 FILE D BY THE ASSESSEE HAS BECOME INFRUCTOUS. IT IS THEREFORE DISMISSED. ORDER PRONOUNCED ON 16.12.2011 SD/- SD/- (H L KARWA) ( D K SRIVASTAVA) VICE PRESIDENT ACCOUNTANT MEMBER AMRITSAR, 16.12.2011 SURESH COPY TO:- 1. THE APPELLANT, M/S KIRAN METAL WORKS 2. THE RESPONDENT, I.T.O 3. THE CIT(A), JALANDHAR KIRAN METAL WORKS V ITO ITA NO. 296/ASR/2011 5 4. THE LD. CIT, JALANDHAR 5. THE D.R., INCOME TAX DEPARTMENT, AMRITSAR