Kushal Chand, CHENNAI V. ITO Non Corporate WArd 9(2), CHENNAI

ITA 3008/CHNY/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2499 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 07-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Sale consideration of property below Jantri Value; Fair market value; Valuation report
• Section: 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ! ' ! # . $ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.3008/CHNY/2017 ( / ASSESSMENT YEAR: 2013-14) SHRI KUSHAL CHAND, 54/70, MADDOX STREET, CHOOLAI, CHENNAI 600 112. VS THE INCOME TAX OFFICER, NON-CORPORATE WARD 9(2), CHENNAI PAN:AAIPJ0682K ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI B. RAMAKRISHNAN, CA / RESPONDENT BY : SMT. S. VIJAYAPRABHA, JCIT /DATE OF HEARING : 20.06.2018 /DATE OF PRONOUNCEMENT : 28.08.2018 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS)-10, CHENNAI, DATED 30.10.2017 IN ITA NO.14/2016-17/CIT( A)-10 FOR THE ASSESSMENT YEAR 2013-14 PASSED U/S. 250(6) R.W.S. 1 43(3) OF THE ACT. 2 ITA NO.3008/CHNY/2017 2. THE ASSESSEE HAS RAISED FOUR GROUNDS IN ITS A PPEAL HOWEVER THE CRUXES OF THE ISSUES ARE THAT (I) THE LD.CIT(A) HAS ERRED IN PARTLY CONFIRMING TH E ADDITION MADE BY THE LD.AO BY ADOPTING THE SALE CONSIDERATION OF THE IMMOVABLE PROPERTY SOLD AT RS.6,50,59,000/- AS AGAI NST RS.8,83,05,000/- INVOKING THE PROVISION OF SECTION 50C OF THE ACT. (II) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDE R OF THE LD.AO WITH RESPECT TO LEVY OF INTEREST U/S.243B & 234C OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN FABRICS FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013-14 ON 29.09.2013 ADMIT TING TOTAL INCOME OF RS.10,39,660/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S.143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 02.09.2014. FINALLY ASSESSMENT ORDER WAS PASSED U/S.143(3) OF THE ACT ON 31.03.2016 WHEREIN THE LD.AO COMPUTED TH E LONG TERM CAPITAL GAIN OF THE ASSESSEE AT RS.3,55,82,222/- IN VOKING THE PROVISIONS OF SECTION 50C OF THE ACT. 3 ITA NO.3008/CHNY/2017 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD SOLD LA ND ADMEASURING 88,305 SQ.FT., IN SURVEY NO.150/2B, 150, ARUL NAGAR SITUATED AT 170, IRUMBULIYUR VILLAGE, TAMBARAM TALUK, KANCHEEPURAM D IST., FOR SALE CONSIDERATION OF RS.5,17,97,800/-. IT WAS FURTHER O BSERVED THAT THE GUIDELINE VALUE MENTIONED IN THE SALE DEED WAS RS.8 ,83,05,000/- IE. RS.1000 PER SQFT.. THEREFORE THE LD.AO INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT AND COMPUTED THE LONG-TERM C APITAL GAIN OF THE ASSESSEE AT RS.3,55,82,226/- ADOPTING THE NOTIO NAL SALE CONSIDERATION AS RS.8,83,05,000/-. ON APPEAL THE LD .CIT(A) RELYING ON THE REPORT OF THE DISTRICT VALUATION OFFICER (DV O) DATED 13.07.2016 WHICH WAS RECEIVED SUBSEQUENT TO THE DATE OF ASSESS MENT ORDER ESTIMATED THE FAIR MARKET VALUE OF THE PROPERTY AS ON 27.08.2012 AT RS.6,50,59,000/-. WHILE ARRIVING AT HIS DECISION TH E LD.CIT(A) REJECTED THE VALUATION REPORT OF THE APPROVED VALUER SUBMITT ED BY THE ASSESSEE BY OBSERVING AS UNDER:- THE VALUATION REPORT OF THE VALUER SHOULD HAVE BEE N SUBMITTED EARLIER WHEN MANY OPPORTUNITIES WERE GIVEN DURING THE COURS E OF PROCEEDINGS BUT CHOOSE TO SUBMIT THE REPORT AFTER THE PRELIMINARY V ALUATION ORDER WAS ISSUED. IN SPITE OF THAT THE VALUATION REPORT SUBMI TTED BY THE ASSESSEE IS PERUSED AND NOT CONSIDERED DUE TO THE FOLLOWING REA SONS: THE VALUER HAS BIFURCATED THE PROPERTY INTO TWO POR TIONS AND ANALYZED THE VALUE FOR THIS TWO PORTIONS WITHOUT CONSIDERING THE COMBINED EFFECT/BENEFIT OF ONE ON ANOTHER BY GIVING A REDUCTION OF 70% IN T HE RESTRICTED ZONE AND 4 ITA NO.3008/CHNY/2017 45% IN THE UN-RESTRICTED ZONE. THE EFFECT OF LONGER LENGTH OF THE PROPERTY ABUTTING THE 40 FEET WIDE PUBLIC ROAD IS NOT CONSID ERED IN VALUATION. HENCE NOT ACCEPTED. 5. BEFORE US THE LD.AR VEHEMENTLY ARGUED BY REITERA TING THE SUBMISSIONS MADE BEFORE THE LD.REVENUE AUTHORITIES ON THE EARLIER OCCASIONS BY STATING THAT THE PROPERTY WAS SITUATED ADJACENT TO THE TAMBARAM AIRFORCE STATION AND THERE WERE RESTRICTIO NS IMPOSED ON THE LAND FOR CONSTRUCT BUILDING. IT WAS FURTHER SUB MITTED THAT OUT OF THE TOTAL AREA OF 88,305 SQ.FT., OF LAND SOLD BY THE AS SESSEE, 66,667 SQ.FT., OF THE LAND WAS AFFECTED DUE TO SUCH RESTRICTIONS. IT WAS THEREFORE ARGUED THAT THE VALUATION REPORT OF THE APPROVED VA LUER IS MORE APPROPRIATE THAN THE VALUE WORKED OUT BY THE DVO. H ENCE IT WAS PLEADED THAT THE ADDITION MADE BY THE LD.AO BY INVO KING 50C OF THE ACT MAY BE DELETED. THE LD.DR ON THE OTHER HAND ARG UED IN SUPPORT OF THE ORDER OF THE LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE VALUATION REPORT OF THE LD.DVO WAS NOT BEFORE THE L D.AO WHILE HE PASSED THE ASSESSMENT ORDER. FURTHER THE BASIS IN W HICH THE LD.DVO ESTIMATED THE VALUE OF THE LAND AT RS.6.5 CRORES IS NOT AVAILABLE 5 ITA NO.3008/CHNY/2017 BEFORE US BECAUSE THE VALUATION REPORT OF THE LD.DV O IS NOT PLACED BEFORE US BY THE LD.REVENUE AUTHORITIES. HOWEVER TH E VALUATION REPORT OF THE APPROVED VALUER IS ENCLOSED IN THE PA PER BOOK SUBMITTED BEFORE US BY THE ASSESSEE FOR OUR PERUSAL. THE RELE VANT PORTION OF THE SAME IS EXTRACTED HEREIN BELOW FOR REFERENCE:- DISADVANTAGE OF LAND: THE BOUNDARY TO THE SOUTH SIDE OF THE LAND IS ABUTT ING TO THE EXISTING COMPOUND WALL OF TAMBARAM AIR FORCE STATION. THERE IS RESTRI CTION IMPOSED BY THE GOVERNMENT OF INDIA AND ALSO BY GOVERNMENT OF TAMIL NADU FOR DEVELOPMENT OF THE PROPERTY ADJOINGING THE AIR FORCE STATION. LAND VALUE: THE GUIDELINE VALUE AS ON 01.04.2012 ONWARDS RS.1,0 00/- PER SQFT. TOTAL EXTENT OF LAND : 88305 SQFT. (I.E.) 1.98 ACRE S FAIR MARKET VALUE: TOTAL EXTENT OF LAND : 88305 SQFT. (I.E.) 1.98 ACRE S. A THE RESTRICTED ZONE FOR DEVELOPMENT IS 100 METRES , THE LAND AREA WORKS OUT TO 66667 SQFT. B THE AREA WHICH CAN BE DEVELOPED BEYOND 100 METERS 21638 SQFT. 30% IS CONSIDERED FOR LAND DEVELOPMENT FOR INFRA STRUCTURE 21638 SQFT @ DEDUCT 30% (-) 6491.4 SQFT. = 15146 .6 SQFT. THE GUIDELINE VALUE AS ON 01042012 ONWARDS RS 1,000 /- PER SQFT. DISCOUNTING GUIDELINE VALUE @ 15% ON ACCOUNT OF THE PROPERTY BEING AT THE DEAD END OF THE PRIVATE ROAD, CLOSE TO THE B OUNDARY WALL OF AIR FORCE STATION. (I.E.) RS.1,000/- X 15% (-) RS.150/-=RS.850 PER SQF T. EXTENT OF LAND: 15146.6 SQFT. @ RS.850/- PER SQFT. RS. 1.28.74,610/- (OR) SAY RS.128.75 LAKHS FURTHER THE SUBJECT PROPERTY WHOSE DEVELOPMENT POTE NTIAL IS RESTRICTED TO IS 66667 SQFT. IN THIS REPORT. THI S AREA CAN AT BEST BE USED ONLY FOR OPEN STORAGE YARD. . 6 ITA NO.3008/CHNY/2017 THE PROPERTY WHOSE DEVELOPMENT POTENTIAL IS RESTRIC TED BY THE LOCAL BYELAWS, STATUTORY RESTRICTIONS WILL NOT BE ATTRACTIVE IN NORMAL CIRCUMSTANCES UNLESS SUCH RESTRICTION ARE LIFTED IN THE NEAR FUTURE. HENCE MARKETABILITY OF SUCH LANDS, WHICH ARE GOVERNED BY STATUTORY RESTRICTION. CANNOT BE PR EDICTED IN A FILM MANNER THE CHANCES OF WHICH IN THE SUBJECT P ROPERTY ARE VERY VERY REMOTE HOWEVER WE ADOPTED A MEAN VALUE OF GUIDELINE RATE I .E. 70% DISCOUNTED TO THE GUIDELINE RATE OF RS.1,000/- PER SQFT., NAMELY RS.300/- PER SQFT. IN THE DEVELOPMENT RESTRICTED ZONE OF 66667 SQFT. FAIR VALUE: 66667 SQFT.@RS.300/- PER SQFT. = RS.2,0 0,00,100/- TOTAL FAIR VALUE: A+B = 1,28,74,610 + 2,00,00,100/- RS.3,28.74,710/- FROM THE ABOVE IT IS EVIDENT THAT 75.5% OF THE LAND SOLD BY THE ASSESSEE IS AFFECTED BY THE RESTRICTIONS IMPOSED BY THE AUTHORITIES FOR BUILDING CONSTRUCTION DUE TO THE CLOSE PROXIMITY OF TAMBARAM AIRFORCE STATION. THEREFORE THE MARKET VALUE OF THE LAND TO THE EXTENT OF 66,667 SQ.FT., CANNOT BE ADOPTED AT RS.1000/- PER SQ.FT.. ONLY 24.5% OF THE LAND WHICH WORKS OUT TO 21638 SQ.FT., THE MARKET VA LUE OF RS.1000/- CAN BE ADOPTED WHICH WORKS OUT TO RS.2,16,38,000/-. EVEN IF 25% OF THE MARKET VALUE OF RS.1000/- PER SQ.FT., IS ADOPTE D FOR THE AREA OF THE LAND WHERE THERE ARE RESTRICTIONS FOR DEVELOPMENT, THE VALUE OF THE LAND WOULD BE RS.1,66,66,750/- (66,667 SQ.FT., * RS .250/- PER SQ.FT.,). THUS THE AGGREGATE VALUE OF THE LAND WOULD BE RS.3, 83,04,750/- (RS.2,16,38,000 + RS.1,66,66,750). IN THIS SITUATIO N THE APPROVED 7 ITA NO.3008/CHNY/2017 VALUER HAS ESTIMATED THE VALUE OF THE LAND AT RS.3, 28,74,710/- TAKING INTO CONSIDERATION OF THE OTHER INHERENT DRAWBACKS OF THE LAND, WHICH WE ARE OF THE VIEW IS APPROPRIATE. THEREFORE CONSID ERING THE MARKET VALUE OF THE LAND SOLD BY THE ASSESSEE AND THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE WHICH IS RS.5,17,97,800/-, WE ARE OF THE VIEW THAT IN THE CASE OF THE ASSESSEE INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT IS NOT WARRANTED. FOR THE AB OVE STATED REASONS, WE HEREBY DIRECT THE LD.AO TO ADOPT THE AC TUAL SALE CONSIDERATION RECEIVED BY THE ASSESSEE AT RS.5,17,9 7,800/- WHILE COMPUTING THE LONG-TERM CAPITAL GAIN OF THE ASSESSE E AND GRANT RELIEF ACCORDINGLY. FURTHER LEVY OF INTEREST U/S.234B & 23 4C OF THE ACT IS CONSEQUENTIAL IN NATURE AND ACCORDINGLY THE SECOND GROUND RAISED BY THE ASSESSEE IS DISPOSED OFF. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON THE 28 TH AUGUST, 2018 AT CHENNAI. SD/- SD/- ( ! ' ! # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # $% /JUDICIAL MEMBER $% / ACCOUNTANT MEMBER &# /CHENNAI, '$ /DATED 28 TH AUGUST, 2018 8 ITA NO.3008/CHNY/2017 RSR $ )* +* /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. . ( )/CIT(A) 4. . /CIT 5. */0 1 /DR 6. 02 /GF