DCIT, UDAIPUR V. Shri Rajendra Kumar Singhvi, UDAIPUR

ITA 313/JODH/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3089 (ITAT-JODHPUR)
• Duration Of Justice: 3 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 06-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEEPAK SEHGAL
• Keywords: Capital asset; Cost of acquisition; Fair market value; Corroborative evidences

Judgement Text

[1] IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N. K. SAINI, ACCOUNTANT MEMBER I.T.A. NO.313/JODH/2010 ASSESSMENT YEAR:2007-08 DY. C.I.T., VS. SHRI RAJENDRA KUMAR SINGHVI, CIRCLE-2, 122, PRIYADARSHINI NAGAR, UDAIPUR. BELDA ROAD, UDAIPUR. PAN:ADSPS9096H (APPELLANT) (RESPONDENT) APPELLANT BY : DR. DEEPAK SEHGAL, CIT, D.R. RESPONDENT BY : SHRI AMIT KOTHARI, ADVOCATE DATE OF HEARING : 09/07/2013 DATE OF PRONOUNCEMENT : 10/07/2013 ORDER PER N. K., SAINI: THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST THE ORDER DATED 15/03/2010 OF CIT(A), UDAIPUR. THE ONLY GROUND RAI SED IN THIS APPEAL READS AS UNDER: ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.75, 27,253/- BY REDUCING THE VALUE OF COST OF ACQUISITION WITHOUT C ONSIDERING THE VALUE DETERMINED BY THE VALUATION OFFICER AND OTHER SUPPORTING EVIDENCES. 2. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE HAD SHOWN LONG TERM CAPITAL GAIN OF RS.15,02,650/- ON SALE OF LAND AT SHASTRI NAGAR, JODHPUR. THE SAID LAND WAS PURCHASED BEFORE 01/04/ 1981, THEREFORE, THE ASSESSEE OPTED THE VALUATION AS ON 01/04/1981 ON TH E BASIS OF REPORT OF SHRI O. P. SRIMALI, APPROVED VALUER, WHO VALUED THE LAND AS ON 01/04/1981 [2] @228/- PER SQ. FT. THE ASSESSING OFFICER REFERRED THE MATTER TO THE DVO WHO DETERMINED THE VALUE @RS.36.42 PER SQ. FT. THE ASSESSING OFFICER ADOPTED THE SAID VALUE AND DETERMINED THE LONG TERM CAPITAL GAIN AT RS.75,27,253/-. 3. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED C IT(A) WHO DELETED THE ADDITION BY FOLLOWING THE DECISION OF ITAT, JOD HPUR BENCH IN THE CASE OF DEEN DAYAL RATHI, JODHPUR VS. INCOME TAX OFFICER -3 (4), JODHPUR WHEREIN TIME GAP METHOD I.E. THE REVERSE INDEXATION METHOD WAS APPLIED. 4. NOW THE DEPARTMENT IS IN APPEAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE VER Y OUTSET, STATED THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED V IDE ORDER DATED 4 TH APRIL, 2013 IN THE CASE OF DEEN DAYAL RATHI, JODHPUR VS. I NCOME TAX OFFICER - 3(4), JODHPUR IN I.T.A. NO.108/JOD/2013 FOR THE ASS ESSMENT YEAR 2009- 2010. COPY OF THE ORDER WAS FURNISHED WHICH IS PLA CED ON RECORD. 6. IN HIS RIVAL SUBMISSIONS, THE LEARNED D.R. ALTHO UGH SUPPORTED THE ORDER OF THE ASSESSING OFFICER BUT COULD NOT CONTRO VERT THE AFORESAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 7. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND THE MATERIAL ON RECORD, IT IS NOTICED THAT THE PRESENT ISSUE IS COVERED VIDE AFORESAID REFERRED TO ORDER DATED 4 TH APRIL, 2013 WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 10 OF THE SAID ORDER, WHICH READ S AS UNDER: 10. REGARDING VALUATION OF FMV AS ON 1.4.81 WE HAV E FOUND THAT THE ASSESSEE HAS DECLARED IT ON THE BASIS OF THE RE PORT OF THE REGISTERED VALUER WHO HAS DETERMINED THE VALUE OF T HE BUILDING AT RS.20,04,207/- AND THAT OF THE LAND AT RS 44,25,600 /- TOTALLING TO RS.64,29,807/-. THERE IS NO DISPUTE REGARDING THIS FACT. THE REGISTERED VALUER HAS FOCUSED HIS REPORT ON THE UND ISPUTED SALE [3] PRICE OF RS.4,01,00,000/- (IN THE MONTH OF MAY, 200 8) AND BY TAKING FMV OF THE BUILDING CONSISTING OF BASEMENT, GROUND FLOOR AND FIRST FLOOR, HAS ARRIVED AT A DEPRECIATED COST OF T HE BUILDING AS ON 1.4.1981 OF RS.20,04,207/-, WHICH HAS ALSO BEEN ACC EPTED BY THE AO. THUS, THE THEN COST OF CONSTRUCTION HAS BEEN AC CEPTED, AS GIVEN BY THE REGISTERED VALUER AT RS.34,63,809/-. F ROM THIS FIGURE ONLY THE REGISTERED VALUER (RV) HAS ARRIVED AT THE COST OF RS.20,04,207/- AS ON 1.4.81 AND THIS HAS BEEN ACCEP TED SINCE THE BUILDING HAD BEEN DEMOLISHED BY THE PURCHASER BY TH E TIME THE DVO REACHED THE SPOT. THUS, AS PER RV THE COST OF T HE LAND COMES TO RS.3,66,36,191/-, AT THE TIME OF ITS SALE. THE R EGISTERED VALUER HAS ADOPTED THE DECREASE IN LAND RATE @7 % PER ANN UM PER SQUARE FOOT AND HAS ARRIVED AT ITS FMV AS ON 1.4.81 AT RS. 44,25,600/-. THE AREA OF THE LAND BEING 9600 SQ. FT (80 X 120). THUS, THE TOTAL COST OF THE PROPERTY IN QUESTION CO MES TO RS.64,30 LAKHS. THE ARGUMENT OF LD. AR THAT HOW THE AO CAN A CCEPT ONE PART OF RVS REPORT AND IGNORE THE OTHER PART SEEMS TO B E NOT ONLY LOGICAL BUT ALSO JUSTIFIED. THERE CANNOT BE TWO DIV ERGENT VIEWS ABOUT THE SAME REPORT IN RESPECT OF LAND AND BUILDI NG. IF REPORT REGARDING ONE IS ACCEPTED, THE OTHER SHALL HAVE TO BE ACCEPTED UNLESS THERE ARE DERIVING REASONS. IN THE GIVEN CAS E, THE DEMOLITION OF THE BUILDING CANNOT BE SUCH A FACTOR, WHICH CAN JUSTIFY ONE CONCLUSION. ON THAT BASIS, THE REPORT CANNOT BE ACC EPTED IN PART, AND REJECTED IN PART. IN OUR CONSIDERED OPINION, TH IS ACTION OF THE AO IS NOT LEGALLY JUSTIFIED. EVEN AS PER THE BACKWA RD INDEXATION BY TAKING ADVANTAGE OF CBDT CIRCULAR NO. 636 DATED 31. 07.1992 THE VALUE OF THE LAND AS ON 1.4.1981 WOULD BE AROUND TH E SAME AS DETERMINED BY THE REGISTERED VALUER. THE RVS REPOR T IS ANNEXED AT ASSESSEES PAPER BOOK 26 TO 32. HE HAS ADOPTED THE LAND RATES AT RS. 10/- PER SQ. FT. AND HAS FURTHER INCREASED THE VALUE BY 15% FOR LOCATION WISE ADVANTAGE AND BY 10% ON ACCOUNT OF IT BEING SITUATED ON THE 200 FEET WIDE ROAD. THUS, HE HAS TAKEN LAND VALUE AT RS. 12.5 PER SQ. FT. THE SALE RATE IS RS. 4000/- PER SQ . FT. THE VALUE OF THE BUILDING GIVEN BY THE REGISTERED VALUER AND ACC EPTED BY THE AO COMES TO RS.34,63,809/-. THIS AMOUNT IS OUT OF TOT AL SALE CONSIDERATION OF RS.4,01,00,000/- AND GIVES 8.64% O F THE TOTAL VALUE. THE VALUE OF LAND AS ON 1.4.1981 HAS BEEN CL AIMED BY THE ASSESSEE AT RS.20,04,207/- BUT THE VALUE OF THE LAN D HAS BEEN TAKEN AT RS.1,20,000/- AS AGAINST CLAIMED AT RS.44, 25,600/- BY THE ASSESSEE. ADMITTEDLY, AS PER THE DVOS REPORT NO D LC RATE WAS AVAILABLE AS ON 1.4.1981. THE REPORT OF THE RV IS S UPPORTED BY THE BACKWARD INDEXATION COMPUTED ON THE BASIS OF COST I NFLATION INDEX. THIS METHOD OF COST-INFLATION INDEX WAS INTRODUCE D FOR THE COMPUTATION OF THE CAPITAL GAINS LIABLE TO TAX. FOR THIS PURPOSE REFERENCE CAN BE MADE TO CBDTS CIRCULAR NO. 636 DA TED 31.08.1992. AS A MEASURE TO OFFSET THE EFFECT OF IN FLATION, ALL [4] APPRECIATION IN VALUE OF CAPITAL ASSETS BEFORE 1.4. 1974 WERE EXCLUDED FROM TAX. THE CUT-OFF DATE WAS TAKEN AS 1. 4.1981. THUS, THE APPRECIATION IN FAIR MARKET VALUE OF CAPITAL AS SET UPTO 1.4.1981 WAS TAKEN AS A SUBSTITUTE FOR ACTUAL COST OF ACQUIS ITION TO OFFSET THE IMPACT OF INFLATION UPTO THAT DATE AND THIS HAS TO BE INCREASED BY APPLYING COST INFLATION INDEX AS MAY BE NOTIFIED IN THE OFFICIAL GAZETTE FROM TIME TO TIME. THIS IS A FURTHER WAY TO SQUARE-UP THE IMPACT OF INFLATION FOR THE PERIOD POST 1.4.1981. E XPLANATION (V) OF SECTION 48 DEFINES COST INFLATION INDEX AS UNDER :- COST INFLATION INDEX, IN RELATION TO PREVIOUS YEA R, MEANS SUCH INDEX AS THE CENTRAL GOVERNMENT MAY, HAVING RE GARD TO SEVENTY-FIVE PER CENT OF AVERAGE RISE IN THE CON SUMER PRICE INDEX FOR URBAN NON-MANUAL EMPLOYEES FOR THE IMMEDIATELY PRECEDING PREVIOUS YEAR TO SUCH PREVIOU S YEAR, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN THIS BENEFIT. LIKEWISE, PARA 35.6 OF THE CIRCULAR NO. 636 DATED 3 1.08.1992 READS AS UNDER:- 35.6. FOR THE FINANCIAL YEAR 1981-82, COST INFLATI ON INDEX IS 100 AND C.I.T. FOR EACH SUBSEQUENT YEAR WOULD BE DETERMINED IN SUCH A WAY THAT 75% OF THE RISE IN CO NSUMER PRICE INDEX FOR URBAN NON-MANUAL EMPLOYEES WOULD BE REFLECTED IN THE RISE IN C.I.J. THE COST INFLATION INDEX AS ON 1.4.1981 WAS 100 AND THE CORRESPONDING FIGURE RELATING TO A.Y. 2009-10 WAS 5 82 WHICH INDUCED 75% OF THE RISE IN CONSUMER PRICE INDEX. TH EREFORE IF THE COST INFLATION INDEX, WHICH GIVES A STATUTOR Y FORMULA FOR DETERMINING THE FAIR MARKET VALUE FOR PURPOSES OF COMPUTATION OF CAPITAL GAINS, IF APPLIED BACKWARD, WILL RESULT IN MAXIMUM AMOUNT OF CAPITAL GAINS LIABLE TO TAX AT 25% OF THE FULL SCALE CONSIDERATION. IN OTHER WORDS, ONE C AN CALCULATE THE TAXABLE CAPITAL GAINS ON THE BASIS OF ABOVE STATUTORY FORMULA AS UNDER :- SALE CONSIDERATION RS. 4,01,00,000/- LESS: 25% WHICH IS DEDUCTED WHILE PREPARING NOTIFIED COST INFLATION INDEX RS. 1,00,2 5,000/- AMOUNT EQUIVALENT TO 582 OF COST INDEX RS. 3,00,75 ,000/- IF 582 OF CII IS = RS. 3,00,75,000/- THEN FOR 100 IT WILL BE RS. 3,00,75,000 X 100 = 51,67,525/- 582 THIS FIGURE IS EQUIVALENT TO COST INDEX FIGURE OF 1 00 AS ON 1.4.1981. THE FAIR MARKET VALUE AS ON 1.4.1981 WILL HAVE TO BE FURTHER INCREASED BY 25% AS BELOW: [5] 51,67,525 X 125 = 64,59,407/- 100 THUS, RS. 64,59,407/- IS THE AMOUNT OF FMV AS ON 1. 4.1981 COMPUTED AS PER THE NOTIFIED COST INFLATION INDEX, WHICH IS MANDATORY AND BINDING FOR COMPUTATION OF CAPITAL GA INS. 10. THE LEGAL ANGLE FROM WHICH REFERENCE BY AO U/S 55 A TO DVO HAS BEEN ASSAILED IN AS MUCH AS THAT BEFORE SUCH RE FERENCE THE AO HAS NOT OPINED THAT THE VALUE SO CLAIMED BY THE ASS ESSEE IS LESS THAN THE FMV OF THE CAPITAL ASSET, IS ALSO FOUND TO HOLD MERIT WHICH IS ALSO SUPPORTED BY VARIOUS JUDICIAL PRONOUNCEMENT S. FOLLOWING DECISIONS WILL SUPPORT OUR ABOVE CONCLUSION: (I) HIBABEN JAYANTILAL SHAH VS ITO (2008) 6 DTR 20 3 (GUJ) (II) ITO VS. SMT. LALITABAN B. KAPADIA (2008) 3 DT R 28 (MUM). (III) MS. RUBAB M. KAZERANI VS. JCIT (2005) 97 TTJ 698 (TM) (MUM) (IV) CIT VS. ARIHANT BUILDERS (2008) 6 DTR 185 (RA J.). HENCE, WE ALLOW THIS ISSUE IN FAVOUR OF THE ASSESSE E. 8. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER, WHICH WAS ADMITTED TO BE APPLICABLE TO THE FACTS OF THE PRESE NT CASE BY BOTH THE PARTIES, WE DO NOT SEE ANY VALID GROUND TO INTERFER E WITH THE FINDINGS OF THE CIT(A). ACCORDINGLY, WE DO NOT SEE ANY MERIT IN TH IS APPEAL OF THE DEPARTMENT. 9. IN THE RESULT, THE APPEAL IS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 10/07/2013) SD/. SD/. ( HARI OM MARATHA ) ( N. K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:10/07/2013 *CL SINGH [6] COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. D.R. ASSISTANT REGISTRAR