Smt. Shirin Kamaljit Singh, New Delhi V. ACIT, New Delhi

ITA 3180/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65939 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 13-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 20-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRABHA KANT
• Keywords: Opportunity of being heard; Principle of natural justice; Cost of acquisition; Fair market value; Valuation report; Benefit of exemption
• Section: 143(3); 263; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G : NEW DELHI BEFORE SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOU NTANT MEMBER ITA NO. 3180/DEL/2012 ASSESSMENT YEAR: 2008- 2009 SMT. SHIRIN KAMALJIT SINGH VS. ADDITIONAL COMMISSIONER OF B-6, 2 ND FLOOR, WEST END COLONY INCOME TAX NEW DELHI 110 021 RANGE-24, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.S. A GGARWAL, SR. ADVOCATE, SHRI GAUTAM JAIN, CA, SHRI R.P.MALL, ADVOCATE RESPONDENT BY : SHRI P RABHA KANT, SR. DR DATE OF HEARING : 13/9/2012 DATE OF PRONOUNCEMENT : ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE ASSESSEE HAS IMPUGNED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS :- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-XXIII, NEW DELHI, HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS I N DETERMINING THE LONG TERM CAPITAL GAIN ARISING ON SALE OF RESID ENTIAL HOUSE LOCATED AT B-91, WEST END COLONY, NEW DELHI-110 021 AT RS. 18,22,28,176/- AS AGAINST LONG TERM CAPITAL GAIN DE CLARED IN THE RETURN OF INCOME OF RS. 11,94,15,000/- AND ASSESSED BY THE LEARNED ASSESSING OFFICER OF RS. 13,06,35,024/- 2 THAT ENHANCEMENT BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OF LONG TERM CAPITAL GAIN DECLARED AND AS SESSED BY THE LEARNED ASSESSING OFFICER BY RS. 5,15,93,152/- (18, 82,28,176- 13,06,35,024) WAS BEYOND THE SUBJECT MATTER OF APPE AL AND ITA NO. 3180/DEL/2012 2 WITHOUT ISSUING ANY ENHANCEMENT NOTICE U/S 251(2) O F THE ACT AND AS SUCH, WITHOUT JURISDICTION. 2.1 THAT ENHANCEMENT BY THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) IN THE IMPUGNED ORDER HAS BEEN OTHERWISE MADE WITHOUT GRANTING FAIR AND PROPER OPPORTUNITY OF BEING HEARD AND AS SUCH, IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND T HEREFORE, VITIATED. 3 THAT ENHANCEMENT OF RS. 5,15,93,152/- HAS BEEN M ADE BY INCORRECTLY DETERMINING BOTH IN LAW AND ON FACTS IN DEXED COST OF RESIDENTIAL HOUSE AT RS. 2,70,81,824/- AS AGAINST R S. 7,86,74,976/- ACCEPTED BY THE LEARNED ASSESSING OFF ICER IN THE ORDER OF ASSESSMENT IN THE MANNER TABULATED HEREUND ER: 1 II III IV V SR. NO. PARTICULARS AS PER ASSESSING OFFICER (RS.) AS PER COMMISSIONER OF INCOME TAX (APPEALS) (RS.) DIFFERENCE (V-III-IV) (RS.) 1) COST I) LAND 1,15,56,500/- 26,64,000/- 88,92,500/- II) COST OF CONSTRUCTION 11,20,180/- 11,20,180/- ----- III) COST OF IMPROVEMENT 16,00,000 8,00,000/- 8,00,000 IV) CONVERSION COST ------ 4,49,013/- (4,49,013) TOTAL 1,42,76,680/- 50,33,193 92,43,487/- II INDEX COST 7,86,74,976/- 2,70,81,824/- 5,15,93,152/- 4 THAT FURTHERMORE WHILE DETERMINING THE LONG TERM CAPITAL GAIN AT RS. 18,22,28,176/-, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN ADO PTING THE FAIR MARKET VALUE OF THE LAND AS ON 1.4.1981 AT RS. 26,6 4,000/- AS AGAINST FAIR MARKET VALUE OF THE LAND DECLARED BY T HE ASSESSEE AND ACCEPTED BY THE LEARNED ASSESSING OFFICER IN THE OR DER OF ASSESSMENT AT RS. 1,15,56,500/- IN THE MANNER HEREU NDER: ITA NO. 3180/DEL/2012 3 SR. NO. PARTICULARS AREA RATE VALUE (RS.) I) AS PER ASSESSEE AND ACCEPTED BY LEARNED ASSESSING OFFICER 797 (SQ.YD.) 14,500 (RS. PER SQ.YD.) 1,15,56,500/- II) AS PER LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 666 (SQ.MTR.) 4,000 (RS. PER SQ.MTR.) 26,64,000/- 4.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) WHILE APPLYING THE RATE OF RS. 4000 PER SQ. MTR. HAS PRO CEEDED ON SUBJECTIVE ASSUMPTIONS AND PRESUMPTIONS AND HAS FAI LED TO APPRECIATE THAT THE RATE DECLARED BY THE APPELLANT WAS SUPPORTED BY VALUATION { REPORT FROM REGISTERED VALUER. 4.2 THAT THE RATE ADOPTED BY THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) AT RS. 4000 PER SQ. MTR. IS UNSUPPORTED B Y ANY BASIS AND THEREFORE, UNTENABLE. 4.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH IN LAND AND ON FACTS IN RELYING UPON THE SALE INSTANCES OF THE PROPERTY AT DIPLOMATIC ENCLAVE EXTENSION WHEREAS THE PROPERTY SOLD BY THE APPELLAN T WAS LOCATED AT DIPLOMATIC ENCLAVE AND HENCE, INSTANCES RELIED U PON BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE TO TALLY AND WHOLLY NON-COMPARABLE AND CANNOT BE A GROUND IN LAW AND ON FACTS TO RESTRICT THE RATE FROM 14500 PER SQ. YD. T O RS. 4000 PER SQ. MTR. 4.4 THAT THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS ) HAS FURTHER FAILED TO APPRECIATE THAT CIRCLE RATE CANNO T BE A BASIS TO DETERMINE THE FAIR MARKET VALUE OF THE LAND. INFACT , SHE HAS OVERLOOKED THE FACT THAT THE RESIDENTIAL HOUSE WAS ITSELF SOLD AT SIX TIMES THE CIRCLE RATE, WHICH ITSELF ESTABLISHED THA T, CIRCLE RATE CANNOT BE A GROUND TO DETERMINE THE FAIR MARKET VAL UE OF THE PROPERTY. 5 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS FURTHER ERRED BOTH IN LAW AND ON FACTS IN ARBITRARI LY RESTRICTING OF ITA NO. 3180/DEL/2012 4 COST OF IMPROVEMENT BY 50% FROM RS. 16,00,000/- TO RS. 8,00,000/- IN THE MANNER HEREUNDER: S.NO. HEAD AS PER ASSESSEE DECLARED BY ASSESSING OFFICER (RS.) AS PER COMMISSIONER OF INCOME TAX (APPEALS) (RS.) DIFFERENCE (RS.) I) BOUNDRY WALL 5,00,000/- 2,50,000/- 2,50,000/- II) FANCY CAR PARKING 1,50,000/- 75,000/- 75,000/- III) SWIMMING POOL 6,50,000/- 3,25,000/- 3,25,000/- IV) GRASSY LAWN 3,00,000/- 1,50,000/- 1,50,000/- TOTAL 16,00,000/- 8,00,000/- 8,00,000/- 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN DISREGARDING THE EXPLANATION OF SUBMISSION MADE BY THE APPELLANT AND, EVIDENCE LED BY THE APPE LLANT AND HENCE, THE DETERMINATION OF LONG TERM CAPITAL GAIN ON MISCO NCEIVED AND MISPLACED CONSIDERATION IS UNTENABLE. 2. WE HAVE HEARD AND CONSIDERED THE ARGUMEN TS ADVANCED BY THE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIA L AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE FACTS IN BRIEF ARE THAT IN HER RETURN OF INCOME FOR ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DISCLOSED TOT AL INCOME OF RS. 9,21,47,730/- CONSISTING OF LONG TERM CAPITAL GAIN OF RS. 8,78,32,400/- FROM SALE OF RESIDENTIAL PROPERTY , B-19, WEST END ENCLAVE, NEW DELHI SOLD ON 18.8.2007. THE ASSESSEE CLAIMED BENEFIT OF EXEMPTION OF RS. 3, 14,82,600/- U/S 54 OF THE ACT ITA NO. 3180/DEL/2012 5 FOR PURCHASE OF RESIDENTIAL FLAT IN MUMBAI IN TERMS OF THE AGREEMENT FOR SALE DATED 29.11.2007. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS U/S 143(3) OF THE ACT THE AO EXAMINED THE SALE DEED OF THE PROPE RTY SHOWING THAT THE TOTAL SALE CONSIDERATION WAS RS. 21.50 CRORE WHEREAS THE CONSIDERATION DISCLOSED IN THE RETURN OF INCOME WAS RS. 20,50,00,000/-. THE AS SESSEE EXPLAINED THAT THE DIFFERENCE OF RS. 1,00,00,000/- IN THE DISCLOSED SA LE CONSIDERATION WAS DUE TO CALCULATION MISTAKE AND THE ASSESSEE PAID THE TAX O N THE AMOUNT IN DIFFERENCE. THE AO FURTHER NOTICED THAT THE NEW INVESTMENT IN T HE RESIDENTIAL FLAT WAS MADE BY A PURCHASE DEED EXECUTED JOINTLY IN THE NAME OF THE ASSESSEE AND OF HER DAUGHTER. THE AO PROPOSED TO DISALLOW 50% OF THE CL AIMED DEDUCTION U/S 54 PERTAINING TO THE SHARE OF OWNERSHIP OF THE DAUGHTE R. THE ASSESSEE EXPLAINED THAT SHE WAS MORE THAN 70 YEARS IN AGE AND INTENDED THAT HER DAUGHTER SHOULD INHERIT THE PROPERTY AFTER HER DEMISE, THE NAME OF THE OWNER HAS BEEN ENTERED IN THE DEED MERELY TO AVOID TRANSFER FORMALITIES. I T WAS ALSO SUBMITTED THAT THE ENTIRE PURCHASE CONSIDERATION OF RS. 3,14,82,600/- HAD BEEN PAID BY THE ASSESSEE THROUGH HER BANK ACCOUNT. THE AO, HOWEVER, RELIED UPON ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F PRAKASH VS. ITO 312 40 (BOMBAY) WHEREIN IT WAS HELD THAT FOR QUALIFYING FO R EXEMPTION, IT WAS NECESSARY TO HAVE THE INVESTMENT IN THE RESIDENTIAL HOUSE IN THE NAME OF THE ASSESSEE. THE AO ACCORDINGLY RESTRICTED THE CLAIM OF DEDUCTION U /S 54 AMOUNTING TO RS. 1,57,41,300/- I.E. HALF OF THE INVESTED AMOUNT. THE AO ALSO EXAMINED THE DETAILS OF COST OF ACQUISITION / IMPROVEMENT OF THE PROPERT Y SOLD AS PER VALUATION REPORT ITA NO. 3180/DEL/2012 6 OF THE REGISTERED VALUER FILED BEFORE THE AO, THE T OTAL COST OF RS. 13,41,600/- WAS RELATED TO TOTAL COVERED AREA OF 6240 SQ. FEET. HOW EVER AS PER THE SALE DEED DATED 1.8.2007, THE COVERED /PINTH AREA WAS 5210.1 4 SQ. FEET. THE AO MADE A PROPORTIONATE DISALLOWANCE OF THE COST OF CONSTRUCT ION WHICH WAS TAKEN AT RS. 11,20,180/-. IN APPEAL THE ASSESSEE HAD DISPUTED ON LY THE DISALLOWANCE OF 50% OF CLAIM OF DEDUCTION U/S 54 AMOUNTING TO RS. 1,57, 41,300/-. 4. AFTER DISCUSSING THE ISSUE IN DETAIL LD. CIT(A) HAS DIRECTED THE AO TO ALLOW THE FULL CLAIM OF DEDUCTION U/S 54 OF THE ACT AT RS. 3,14,82,600/-. THUS ISSUE RAISED IN THE FIRST APPEAL WAS ALLOWED BY THE LD. CIT(A) IN FAVOUR OF THE ASSESSEE. 5. LD. CIT(A) HOWEVER NOTICED THAT THE ASSESS EE HAD CLAIMED COST OF ACQUISITION OF THE PROPERTY SOLD AT THE FAIR MARKET VALUE AS ON 1.4.81 AT RS. 1,45,00,000/- INCLUDING THE COST OF CONSTRUCTION OF RS. 13,41,600/-. THE VALUATION REPORT OF A REGISTERED VALUER WAS SUBMITTED DURING THE ASSESSMENT PROCEEDING IN SUPPORT OF THE FAIR MARKET VALUE AS ON DATE 1.4.81 AT RS. 14,500/- PER SQ. YARD INCLUDING THE COST OF CONSTRUCTION AT RS. 13,41,600 /-. THE VALUATION REPORT OF A REGISTERED VALUER WAS SUBMITTED DURING THE ASSESSME NT PROCEEDING IN SUPPORT OF THE FAIR MARKET VALUE. THE VALUE OF THE LAND OF 797 SQ. YARDS/666 SQ. METRES WAS TAKEN AT RS. 14,500/- PER SQ. YARD WHICH WORK ED OUT TO RS. 1,15,56,500/-. THE LD. CIT(A) WAS OF THE VIEW THAT THE FAIR MARKET VALUE WAS MUCH HIGHER THAN THE PRICE WHICH THE LAND WOULD HAVE ORDINARILY FETC HED ON SALE IN THE OPEN MARKET AS ON 1.4.81. VIDE LETTER DATED 16.8.2011 TH E LD. CIT(A) DIRECTED THE AO ITA NO. 3180/DEL/2012 7 TO CARRY OUT NECESSARY ENQUIRY FROM THE SUB REGISTR AR, NEW DELHI, REGARDING COMPARABLE INSTANCES OF SALE IN THE SAME AREA IN 19 81 OR THEREABOUTS TO VERIFY THE COST OF ACQUISITION CLAIMED. THEREAFTER EFFORTS WERE ALSO MADE TO VERIFY THE FAIR MARKET VALUE OF LAND IN WEST END COLONY BY VER IFYING INSTANCES OF AUCTION BY THE GOVERNMENT OF DELHI AND THE MARKET RATE FIXE D FOR SUCH PURPOSE. ON THE BASIS OF ABOVE EFFORT THE LD. CIT(A) CAME TO THE CO NCLUSION THAT THERE WAS NO DOUBT THAT THE FAIR MARKET VALUE CLAIMED IN THE VAL UATION REPORT OF A REGISTERED VALUATION AT RS. 14,500/- PER SQ. YARDS DID NOT BE PRESENT THE CORRECT VALUE AT WHICH THE LAND WOULD HAVE ORDINARILY BEEN SOLD AS O N 1.4.81. SHE NOTED FURTHER THAT THE ASSESSEE HAD ACQUIRED THE LAND BY A PERPET UAL SUB LEASE DATED 20.8.1966 FOR RS. 21,116 ONLY. THE COMPLETION CERTI FICATE OF HOUSE HOLD WAS ISSUED BY THE DELHI NAGAR NIGAM ON 22.11.1979 WHICH SHOWED A TWO AND A HALF STORIED RESIDENCE. THE VALUATION REPORT OF THE REGI STERED VALUER, HOWEVER, CLAIMED COST OF CONSTRUCTION OF THE HOUSE AT RS. 13 ,41,600/- AND THE FURTHER AMOUNT OF RS. 16,00,000/- AS ON 1.4.1981 FOR BOUNDA RY WALL, CAR PORCH, SWIMMING POOL AND LANDSCAPED GARDENS, OF WHICH NO M ENTION WAS AVAILABLE IN THE RECORDS. LD. CIT(A) ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE FAIR MARKET VALUE OF THE LAND AS ON 1.4.1981 SHOULD NOT BE ADOPTED AT RS. 13,32,000/- FOR COMPUTING THE COST OF ACQUISITION O F THE PROPERTY SOLD. THE ASSESSEE WAS ALSO ASKED TO PROVIDE EVIDENCE OF PERM ISSION TAKEN / APPLICATION FOR SANCTION/COMPLETION CERTIFICATE/EXPENSES INCURR ED ON THE SAME TO JUSTIFY THE CLAIMED COST OF CONSTRUCTION OF THE HOUSE AS PER RE GISTERED VALUER AT RS. ITA NO. 3180/DEL/2012 8 13,41,600/- AND A FURTHER AMOUNT OF RS. 16,00,000/ - SHOWN FOR BOUNDARY WALL, CAR PORCH, SWIMMING POOL AND LANDSCAPED GARDENS. TH E ASSESSEE RESPONDED WITH A DETAILED REPLY BUT THE LD. CIT(A) DID NOT ACCEPT THE SAME AND COME TO THE CONCLUSION THAT ACQUISITIONG OF 666.38 SQ. MTS OF LAND AT RS. 4000/- PER SQ. MTS. AS ON 1.4.1981 WOULD BE REASONABLE . SHE ACCORDINGL Y WORKED OUT THE AMOUNT OF RS. 26,64,000/- ON WHICH THE ASSESSEE IS ENTITLED T O THE BENEFIT OF INDEXATION. SHE HELD FURTHER THAT THE ASSESSEE IS ALSO ENTITLED TO THE COST OF CONVERSION OF THE LAND FROM LEASEHOLD TO FREEHOLD INCURRED IN FINANCI AL YEAR 1999-2000 AMOUNTING TO RS. 4,49,013/- WITH BENEFIT OF INDEXATION. SHE D IRECTED THE AO TO RE-COMPUTE THE COST OF ACQUISITION OF THE LAND ACCORDINGLY. ON THE ISSUE OF COST OF IMPROVEMENT TO THE PROPERTY, THE LD. CIT(A) HAS RES TRICTED THE CLAIMED COST OF IMPROVEMENT TO 50% I.E. RS. 8 LAC. SHE HELD THE COS T OF CONSTRUCTION OF THE HOUSE IS TO BE ADOPTED AT RS. 11,20,180/- AS DETERM INED IN THE ASSESSMENT ORDER. THE CONCLUSION OF THE LD. CIT(A) GIVEN IN PA RA NO. 10 OF THE FIRST APPELLATE ORDER IS REPRODUCED HEREUNDER FOR A READY REFERENC E :- (10) TO CONCLUDE, THE APPELLANT IS ENTITLED TO DE DUCTION OF THE COST OF ACQUISITION AND IMPROVEMENT OF THE PROPERTY SOLD WITH BENEFIT OF INDEXATION FROM FINANCIAL YEAR 1981-82 OF THE LAND COST OF RS. 26,64,000/-, COST OF CONSTRUCTION OF RS. 11,20,180/ - AND COST OF IMPROVEMENT OF RS. 8,00,000/- ; ALONG WITH COST OF ACQUISITION OF RS. 4,49,013/- WITH BENEFIT OF INDEXATION FROM FINA NCIAL YEAR 1999- 2000. THE INDEXED COST OF ACQUISITION, THUS, WORKS OUT TO RS. 2,70,81,824/- AS AGAINST RS. 7,86,95,000/- CLAIMED IN THE RETURN OF INCOME AND AS AGAINST RS. 7,86,74,975/- ALLOWED IN THE ASSESSMENT ORDER. AFTER ALLOWING THE DEDUCTION UNDER SECTION 5 4 OF RS. 3,14,82,600/-, THE LONG TERM CAPITAL GAINS ARE TO B E ASSESSED AT RS. 15,07,45,576/- AS AGAINST RS. 9,21,47,730/- OFFERED IN THE RETURN OF ITA NO. 3180/DEL/2012 9 INCOME AND AS AGAINST RS. 11,48,725/- AS PER THE AS SESSMENT ORDER. 6. THE ABOVE ACTION OF THE LD. CIT(A) HAS BE EN QUESTIONED BY THE ASSESSEE ON BOTH THE COUNTS I.E. ON VALIDITY OF IT ( GROUND NOS. 2 AND 2.1) AND ON THE QUANTUM OF COST OF THE LAND ESTIMATED BY THE LD. CI T(A) (REST OF THE GROUNDS). GROUND NOS. 2 AND 2.1 7. ON THE VALIDITY OF ENHANCEMENT OF COST OF LAND BY THE LD. CIT(A), LD. AR CONTENDED THAT ENHANCEMENT BY THE LD. CIT(A) OF LON G TERM CAPITAL GAIN DECLARED AND ASSESSED BY THE AO BY RS. 5,15,93,152/ - (RS. 18,82,28,176 13,06,35,024) WAS BEYOND THE SUBJECT MATTER OF THE APPEAL AND WITHOUT ISSUING ANY ENHANCEMENT NOTICE U/S 251 (2) OF THE ACT. LD. AR SUBMITTED THAT THE ENHANCEMENT HAS BEEN MADE BY THE LD. CIT(A) WITHOUT GRANTING FAIR AND PROPER OPPORTUNITY OF BEING HEARD AND AS SUCH IN VIOLATION OF PRINCIPLES OF JUSTICE. HE SUBMITTED THAT SO FAR AS THE FAIR MARKET VALUE OF L AND AS ON 1.4.81 WAS CONCERNED, A REGISTERED APPROVED VALUER HAS ESTIMAT ED THE LAND RATE AS ON 1.4.81 AT RS. 14,500/- PER SQ. YD AND THE AO DID NO T DISPUTE THE SAME AND THUS THERE WAS NO DISPUTE ABOUT THE ESTIMATION OF FAIR M ARKET RATE AS ON 1.4.81. INDEED THE AO HAD NOT EVEN RAISED ANY QUERY ABOUT T HE SAID FAIR MARKET VALUE OF LAND IN VIEW OF THE REPORT OF THE REGISTERED VALUER NOR DID SUCH DISPUTE EMANATE FROM HIS ORDER OF THE ASSESSMENT. IN DOING SO HE H OWEVER ESTIMATED THE COST OF CONSTRUCTION AS ON 1.4.81 AT RS.1120100/- AS AGAINS T RS.13,41,600/- CLAIMED BY THE ASSESSEE AND AS A RESULT OF INDEXATION , THE AM OUNT OF COST OF CONSTRUCTION ITA NO. 3180/DEL/2012 10 WAS REDUCED BY RS. 9,98,604/-. HOWEVER THERE WAS NO DISPUTE RAISED BY THE AO WHEN HE DID NOT OBJECT TO THE FAIR MARKET VALUE OF LAND AS ON 1.4.81 AS WAS ADOPTED BY THE REGISTERED VALUER . THE LD AR SUBMIT TED THAT THIS WAS ACCEPTED BY THE ASSESSEE AND THERE WAS NO DISPUTE RAISED IN THE APPEAL. 8. LD. AR SUBMITTED THAT THE ASSESSEE HOWEVE R HAD FURTHER CLAIMED AN EXEMPTION U/S 54 OF THE ACT OF RS. 3,14,82,600/-. T HE SAME WAS NOT ALLOWED IN FULL ON THE GROUND THAT PROPERTY FOR CLAIM OF EXEMP TION U/S 54 OF THE ACT HAS BEEN ACQUIRED BY THE ASSESSEE WITH HER DAUGHTER. TH E DISPUTE THUS BEFORE THE LD. CIT(A) WAS LIMITED I.E. WHETHER THE EXEMPTION IS TO BE ALLOWED OF RS. 1,57,41,300/- OR OF RS. 31,482,600/- AND THERE WAS NO OTHER DISPUTE. THUS THE LD. CIT(A) COULD NOT TRAVEL BEYOND THE SUBJECT MATT ER OF THE APPEAL BEFORE HER WHEN SHE ADOPTED THE FAIR MARKET VALUE OF LAND AS O N 1.4.81 AT RS. 4000/- PER SQ. YARD DESPITE THAT SUCH ISSUE DID NOT ARISE FRO M THE ORDER OF THE ASSESSMENT. LD. AR CONTENDED THAT THE LD. CIT(A) HAS POWER TO E NHANCE AN INCOME OR ADJUDICATE A NEW SOURCE ONLY IN RESPECT OF THE ISSU ES WHICH ARISE FROM THE ORDER OF THE ASSESSMENT. LD. CIT(A) CANNOT TOUCH UPON ANY ISSUE WHICH DOES NOT ARISE FROM THE ORDER OF THE ASSESSMENT AND WAS OUTSIDE TH E SCOPE OF THE ORDER OF THE ASSESSMENT I.E AN ISSUE WHICH WAS EVEN NOT TAKEN UP BY THE AO. LD. AR REFERRED THE CONTENTS OF PROVISIONS LAID DOWN U/S 251 OF THE ACT. HE SUBMITTED THAT THE POWER OF ENHANCEMENT CANNOT EXTEND TO ISSUE WHICH W AS NEITHER THE SUBJECT MATTER OF ORDER APPEALED AGAINST NOR COULD POSSIBL Y ARISE FROM THE ORDER APPEALED. IN SUPPORT HE PLACED RELIANCE ON THE FOLL OWING DECISIONS :- ITA NO. 3180/DEL/2012 11 1. CIT VS. SHAPOORJI PALLONJI MISTRY 34 ITR 342 (BOMBAY) AFFIRMED BY SC IN 44 ITR 891 2. CIT VS. RAI BAHADUR HARDUTOROY M OTILAL CHAMARIA 66 ITR 443 (SC) 3. CIT VS. UNION TYRES 240 ITR 556 (DELHI) 4. CIT VS. SARDARI LAL & CO. 251 IT R 864 (DELHI) (FB). 9. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION THE LD. AR CONTENDED FURTHER THAT THE LD. CIT(A) IN THE ABSENCE OF ANY MATERIAL HAS ERRED IN NOT ACCEPTING FAIR MARKET VALUE OF LAND AND COST OF IMPROVEMENT AS ON 1.4.81 AS DISCLOSED AND ACCEPTED BY THE AO. HE SUBMITTED THAT AFTER 1.6.198 8 ONCE THE LEGISLATURE BESTOWED THE POWER WITH THE LD. COMMISSIONER OF INC OME TAX TO REFUSE AN ORDER OF ASSESSMENT, IT COULD ONLY MEAN THAT POWER TO INTERFERE WITH AN ASSESSMENT, WHEN IT IS PREJUDICIAL TO THE INTERES T OF REVENUE COULD NOT VEST WITH TWO AUTHORITIES AND THUS THE LD. CIT(A) HAD NO POW ER TO DETERMINE THE ACCEPTED COST OF ACQUISITION. HE SUBMITTED THAT AFT ER THE INSERTION OF EXPLANATION BELOW SECTION 263 (I) OF THE ACT POWE R TO REVISE ANY ORDER U/S 263 WAS VESTED WITH THE LD. COMMISSIONER OF INCOME TAX. IN VIEW THEREOF THE ACTION OF THE LD. CIT(A) TO RE-COMPUTE THE COST OF ACQUISI TION, DESPITE THE FACT THAT THERE WAS NO DISPUTE ABOUT THE COMPUTATION OF COST OF ACQUISITION IS WITHOUT JURISDICTION, CONTENDED THE LD. AR. ITA NO. 3180/DEL/2012 12 10. LD. AR CONTENDED FURTHER THAT UNLESS A NO TICE OF ENHANCEMENT IS SPECIFICALLY ISSUED UNDER THE ACT, NO ENHANCEMENT C OULD BE MADE BY THE LD. CIT(A) AND AS SUCH THE SAME IS INVALID AND CONTRARY TO THE PROVISIONS OF THE STATUTE. HE SUBMITTED THAT SECTION 251 (2) OF THE AC T IS A SECTION WHICH PROVIDES FOR OPPORTUNITY TO BE PROVIDED BEFORE THE LD. CIT( A) WHO SEEKS TO ENHANCE AN ASSESSMENT OR PENALTY OR REDUCE A REFUND. HE SUBMIT TED THAT THE LETTER DATED 31 ST JANUARY, 2012 A COPY THEREOF HAS BEEN MADE AVAILAB LE PAGE NO. 230 TO 231 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE, CANNOT BE REGARDED AS ENHANCEMENT NOTICE. ENHANCEMENT NOTICE SHOULD BE SP ECIFIC WHICH IS NOT THE CASE HERE. THE ENHANCEMENT NOTICE HAS BEEN MADE IN COMPLETE VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. IN SUPPORT HE PLACE D RELIANCE ON THE FOLLOWING DECISION: - 1. S.L. KAPOOR VS. JAGMOHAN & OTHERS, AIR 198 1 (SC) 136 2. J.T. EXPORTS LTD. VS. UOI 262 ITR 269 (DELH I (FB) 11. LD. DR ON THE OTHER HAND TRIED TO JUSTIFY THE ORDER ON THE ISSUE. ON ITS VALIDITY HE SUBMITTED THAT NO NEW SOURCE OF INCOME BUT CAPITAL GAIN WAS THERE BEFORE THE LD. CIT(A). IN THIS REGARD HE PLACED REL IANCE ON THE FOLLOWING DECISIONS :- 1. CIT VS. KANPUR COAL SYNDICATE 53 ITR 225 (S C) 2. P.N. BALASUBRAMANIAN VS. ITO 112 ITR 512 (A P) 3. CIT VS. SCINDIA STEAM NAVIGATION CO. LTD. 80 ITR 589 (SC) ITA NO. 3180/DEL/2012 13 4. ACIT VS. GURUJARGRAVURES P. LTD. 111 ITR 1 (SC) 5. CIT VS. NIRBHERAM DALURAM 224 ITR 610 (SC) 6. CIT VS. SARDARILAL & CO. 120 TAXMAN 595/DEL (FB) 7. KHODAY ESHWARSA AND SON VS. CIT 251 ITR 884 (DEL) 12. ON THE CONTENTION OF NON ISSUANCE OF SPEC IFIC NOTICE U/S 251 (2), THE LD. DR SUBMITTED THAT ASSESSEE WAS KNOWING WELL ABOUT T HE PROPOSED ENHANCEMENT BY THE LD. CIT(A). IN THIS REGARD, HE REFERRED PAGE NOS. 8 TO 10 OF THE FIRST APPELLATE ORDER. HE SUBMITTED THAT THE SUBJECT MATT ER BEFORE THE AUTHORITIES BELOW WAS CAPITAL GAIN AND COST OF IMPROVEMENT AS W ELL AS COST OF PLINTH WERE DEALT WITH WHILE DECIDING THE QUANTUM OF CAPITAL GA IN. IN THIS REGARD HE REFERRED PARA NO.9 AT PAGE 21 OF THE FIRST APPELLATE ORDER. HE SUBMITTED FURTHER THAT THE LD. CIT(A) IN PARA NO. 8 PAGE NO. 16 OF THE FIRST A PPELLATE ORDER HAS ALSO DISCUSSED THE REASONABLENESS OF THE COST OF LAND AS ON 1.4.81 DETERMINED BY THE REGISTERED VALUER. HE ALSO REFERRED THE PROVISIONS LAID DOWN UNDER SECTION 292BB OF THE I.T. ACT. 13. IN REJOINDER THE LD. AR SUBMITTED THAT BE FORE THE AO THERE WAS NO EXAMINATION ON COST OF ACQUISITION, HENCE CIT(A) WA S HAVING NO POWER TO MAKE ENHANCEMENT ON THE ISSUE OF COST OF ACQUISITION. HE SUBMITTED THAT SEVERAL NOTICES WERE ISSUED BY THE AO. COPIES THEREOF HAVE BEEN MADE AVAILABLE IN THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE, TO SUPP ORT THE ABOVE CONTENTION THAT THE AO DID NOT EXAMINE THE COST OF ACQUISITION AND HAS ACCEPTED THE OPINION OF EXPERT REGISTERED VALUER IN THIS REGARD. ITA NO. 3180/DEL/2012 14 14. CONSIDERING THE ABOVE SUBMISSION WE DO NO T FIND SUBSTANCE IN THE CONTENTION OF THE AR AGAINST THE VALIDITY OF ENHANC EMENT MADE BY THE LD. CIT(A) REGARDING THE COST OF LAND IN QUESTION AS ON 1.4.81 . THE FIRST CONTENTION OF THE LD. AR REMAINED THAT THE COST OF FAIR MARKET VALUE OF LAND AND COST OF IMPROVEMENT AS ON 1.4.81 WAS NOT EVEN THE SUBJECT M ATTER OF APPEAL OR EVEN CONSIDERED BY THE AO IN THE COURSE OF ASSESSMENT PR OCEEDINGS. IN THIS REGARD THE LD. AR CONTENDED THAT THE LD. CIT(A) WAS HAVING NO POWER TO ENHANCE THE ASSESSMENT BY DISCOVERING A NEW SOURCE OF INCOME NO T CONSIDERED BY THE INCOME TAX OFFICER IN THE ORDER APPEALED AGAINST. IN SUPPO RT RELIANCE WAS PLACED ON SEVERAL DECISIONS INCLUDING DECISIONS OF HONBLE DE LHI HIGH COURT IN THE CASE OF CIT VS. SARDARI LAL & CO. (SUPRA) AND IN THE CASE O F CIT VS. UNION TYERS (SUPRA). WE FIND THAT NO NEW SOURCE OF INCOME NOT CONSIDERED BY THE AO WAS DISCOVERED BY THE LD. CIT(A) IN THE APPELLATE PROCEEDINGS. THE SUBJECT MATTER BEFORE THE AO AND THE LD. CIT(A) WAS ONE AND SAME I.E. CAPITAL GA IN EARNED BY THE ASSESSEE ON THE SALE OF LAND IN QUESTION AND COST OF ACQUISITIO N OF THE LAND VALUED AS ON 1.4.81 AND THE EXPENDITURE INCURRED ON THE IMPROVEM ENT OF THE SAME AS ON THAT DATE WERE INGREDIENTS OF COMPUTATION OF THE CAPITAL GAIN EARNED BY THE ASSESSEE OUT OF THE TRANSACTION. UNDER THE PROVISIONS OF SEC TION 251 OF THE ACT THE LD. CIT(A) WHILE DISPOSING OFF APPEAL AGAINST AN ORDER OF ASSESSMENT IS EMPOWERED TO CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT . IN EXPLANATION BELOW THE SECTION 251 IT HAS BEEN MADE CLEAR THAT IN DISPOSIN G OFF AN APPEAL THE LD. CIT(A) MAY CONSIDER AND DECIDE ANY MATTER ARISING OUT OF T HE PROCEEDINGS IN WHICH THE ITA NO. 3180/DEL/2012 15 ORDER APPEALED AGAINST WAS PASSED NOTWITHSTANDING T HAT SUCH MATTER WAS NOT RAISED BEFORE THE COMMISSIONER (APPEALS) BY THE APP ELLANT. THE DECISIONS RELIED UPON BY THE LD. AR MENTIONED ABOVE HAVING DISTINGUI SHABLE FACTS ARE NOT HELPFUL TO THE ASSESSEE AS THE LD. CIT(A) HAS NOT INTRODUCE D IN THE ASSESSMENT A NEW SOURCE OF INCOME AND HAS CONFINED THE ASSESSMENT ON THE SUBJECT OF CAPITAL GAIN OF THE ORIGINAL ASSESSMENT. 15. SO FAR AS OBJECTION AGAINST ENHANCEMENT OF CAPITAL GAIN BY THE LD. CIT(A) IS CONCERNED THE MAIN CONTENTION OF THE LD. AR REMAINED THAT NO NOTICE OF ENHANCEMENT U/S 251(2) OF THE ACT WAS ISSUED BY THE LD. CIT(A) BEFORE ENHANCING THE INCOME ASSESSED BY THE AO. IT WAS CON TENDED THAT THE LETTER DATED 27.1.2012 / 31.1.2012 CANNOT BE REGARDED AS E NHANCEMENT NOTICE. A COPY OF THIS NOTICE HAS BEEN MADE AVAILABLE AT PAGE NOS. 230 TO 231 OF THE PAPER BOOK. HAVING GONE THROUGH THE FIRST APPELLATE ORDER AND THE PROVISIONS LAID DOWN U/S 251 (2) OF THE ACT WE AGREE WITH THE LD. AR TO THIS EXTENT THAT ENHANCEMENT NOTICE SHOULD BE SPECIFIC. AS PER THE PROVISIONS LA ID DOWN IN SUB SECTION (2) TO SECTION 251 OF THE ACT THE LD. CIT(A) SHALL NOT ENH ANCE AN ASSESSMENT OR A PENALTY OR REDUCE THE AMOUNT OF REFUND UNLESS THE A PPELLANT HAD A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST SUCH ENHANCEME NT OR REDUCTION. IN THE PRESENT CASE BEFORE US WE FIND THAT DURING THE COUR SE OF FIRST APPELLATE PROCEEDINGS, THE LD. CIT(A) VIDE LETTER DATED 27.1 .2012 / 30.1.2012 HAD ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO SHOW CAUSE WHY THE FAIR MARKET VALUE OF THE LAND AS ON 1.4.81 SHOULD NOT BE ADOPTED AT RS. 13,32,000/- FOR COMPUTING ITA NO. 3180/DEL/2012 16 THE COST OF ACQUISITION OF THE PROPERTY SOLD. THE A SSESSEE WAS FURTHER ASKED TO SHOW CAUSE AS TO WHY ONLY THOSE EXPENSES WHICH HAVE BEEN ACTUALLY INCURRED IN MAKING ADDITIONS AND IMPROVEMENTS CAN BE TAKEN INTO CONSIDERATION AS COST OF ACQUISITION /IMPROVEMENT AS ON 1.4.81. ASSESSEE WAS ASKED TO PROVIDE EVIDENCE OF PERMISSION TAKEN / APPLICATION FOR SANCTION / CO MPLETING CERTIFICATE / EXPENSES INCURRED ON THE SAME. ASSESSEE HAS ALSO SHOWN THE C AUSE AS ASKED FOR BUT LD. CIT(A) WAS NOT AGREEABLE TO THAT AND THUS SHE ENHAN CED THE AMOUNT OF CAPITAL GAIN BY REDUCING THE COST OF ACQUISITION OF LAND AN D IMPROVEMENT CLAIMED AND ACCEPTED BY THE AO. IF THE PROVISIONS LAID DOWN U/ S 251 (2) ARE READ AND UNDERSTOOD IN ITS STRICT SENSE, THE LD. CIT(A) AFTE R CONSIDERATION OF THE CAUSE SHOWN BY THE ASSESSEE ON THE VALUE OF COST OF THE L AND AS ON 1.4.81 AND BEING NOT SATISFIED THERWITH SHOULD HAVE ISSUED NOTICE U/ S 251(2) OF THE ACT INTIMATING THE PROPOSED ENHANCEMENT IN SPECIFIC TERM TO THE A SSESSEE. NO SUCH NOTICE HAS BEEN ISSUED BY THE LD. CIT(A). WE HOWEVER FIND FROM THE FIRST APPELLATE ORDER IN THIS REGARD THAT BEFORE MAKING THE ENHANCEMENT SUFF ICIENT OPPORTUNITY WAS AFFORDED TO THE ASSESSEE AND ONLY AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE MADE IN THIS REGARD, THE LD. CIT(A) HAS E NHANCED THE CAPITAL GAIN. THUS THE VERY PURPOSE OF THE LEGISLATURE TO AFFORD AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE THE ENHANCEMENT HAS BEEN MET OUT BY THE LD. CIT(A) IN THE PRESENT CASE. THUS WE ARE OF THE VIEW THAT NON ISSUANCE OF THE NOTICE OF ENHANCEMENT U/S 251(2) OF THE ACT INTIMATING THE PR OPOSED ENHANCEMENT THEREIN IN SPECIFIC WORDING IS MERE IRREGULARITY AN D THEREFORE THE ACTION OF LD. ITA NO. 3180/DEL/2012 17 CIT(A) IN ENHANCING THE CAPITAL GAIN CANNOT BE ANNU LLED DUE TO SUCH IRREGULARITY. IN THE DECISIONS IN THE CASES OF S.L. KAPOOR VS. JA GMOHAN & OTHERS (SUPRA) AND JT EXPORTS LTD. VS. UOI (SUPRA) PRINCIPLE OF NATURAL JUSTICE WAS VIOLATED BY NOT AFFORDING OPPORTUNITY OF HEARING TO THE AFFECTED PA RTY. SUCH IS NOT THE CASE WITH THE PRESENT ASSESSEE BEFORE US. ASSESSEE WAS GIVEN SUFFICIENT TIME TO PRESENT HER CASE BEFORE THE LD. CIT(A) ON THE ISSUE OF COST OF ACQUISITION OF LAND AND IMPROVEMENT OF THE LAND AS ON 1.4.81 FOR THE COMPUT ATION OF CAPITAL GAIN. THE GROUND NOS. 2 & 2.1 INVOLVING THE LEGAL ISSUES REGA RDING THE VALIDITY OF ACTION OF THE LD. CIT(A) IN ENHANCING THE CAPITAL GAIN ARE TH US REJECTED. GROUND NOS. 1,3 TO 6 16. REMAINING GROUNDS ARE RELATED TO MERIT OF THE CASE. IN THESE GROUNDS THE ASSESSEE HAS QUESTIONED THE ACTION OF THE LD. CIT(A ) IN DETERMINING THE LONG TERM CAPITAL GAIN ARISING ON SALE OF RESIDENTIAL HO USE IN QUESTION I.E. LOCATED AT B- 91, WEST END COLONY, NEW DELHI 21 AT RS. 18,22,28,17 6/- AS AGAINST LONG TERM CAPITAL GAIN DECLARED IN THE RETURN OF INCOME AT RS . 11,94,15,000/- AND ASSESSED BY THE AO AT RS. 13,06,35,024/-( GROUND NOS. 1,3,4, 4.1 TO 4.4 & 6). THE FIRST APPELLATE ORDER WHEREBY THE LD. CIT(A) HAS RESTRICT ED THE COST OF IMPROVEMENT BY 50% FROM RS. 16 LAC TO 8 LAC HAS ALSO BEEN QUEST IONED. (GROUND NO. 5). 17. LD. AR CONTENDED THAT ON PERUSAL OF CONTE NTS OF PAGE NO. 20 OF THE FIRST APPELLATE ORDER TO SHOW THAT RATE ADOPTED AT RS. 40 00/- PER SQ. METRE IS NOT SUPPORTED BY ANY BASIS. LD. CIT(A) HAS TRIED TO STA TE THAT THE ESTIMATION MADE BY HER IS REASONABLE IN VIEW OF THE FACT THAT THE V ALUE OF RS. 4000 PER SQ. METRE ITA NO. 3180/DEL/2012 18 IS TWICE AS MUCH AS THE MARKET RATE OF THE GOVT. O F INDIA (PAGE NOS. 234 TO 238 OF THE PAPER BOOK) FOR THAT YEAR AND 126 TIMES OF T HE PURCHASE PRICE AT RS. 21,116/- OF THE LAND IN 1966. HE POINTED OUT THAT R EGISTERED VALUER HOWEVER HAD ADOPTED THE LAND RATE AT RS. 14500 PER SQ. YARD BAS ED ON PREVAILING MARKET RATE AFTER HAVING MADE NECESSARY INQUIRES. IN SUPPORT HE REFERRED PAGE NO. 61 OF THE PAPER BOOK THAT IS FINAL PART OF THE VALUATION REPO RT OF THE REGISTERED VALUER. THE LD. AR SUBMITTED THAT THE ABOVE OBSERVATION OF THE LD. CIT(A) IS MISCONCEIVED, MISPLACED AS RATES RELIED UPON ARE NOT EVEN PRESCRI BED RATES TO DETERMINE MARKET VALUE BUT RATES PRESCRIBED FOR LEVYING LEASE CHARGES AND IN ANY CASE I.E. CIRCLE RATE CANNOT BE A BASIS TO DETERMINE FAIR MAR KET VALUE OF LAND. IN FACT IN ARRIVING AT THE ABOVE CONCLUSION, THE LD. CIT(A) HA S OVERLOOKED THE FACT THAT THE RESIDENTIAL HOUSE WAS ITSELF SOLD AT 6 TIMES THE CI RCLE RATE WHICH ITSELF ESTABLISHES THAT CIRCLE RATE CANNOT BE A BASIS TO DETERMINE FAI R MARKET VALUE OF THE PROPERTY. THE LD. AR POINTED OUT THAT THIS FACT WAS DULY STAT ED BEFORE THE LD. CIT(A) VIDE WRITTEN SUBMISSIONS DATED 20.3.2012 A COPY THEREOF HAS BEEN MADE AVAILABLE AT PAGE NOS. 276 TO 277 OF THE PAPER BOOK. LD. AR SUBM ITTED THAT WHAT HAS TO BE SEEN IS THE PREVAILING VALUE IN THE MARKET AND NOT THE VALUE CALCULATING IN AN ABSTRACT MANNER BY APPLYING A MULTIPLIER TO SOME UN KNOWN SALE. IN SUPPORT HE PLACED RELIANCE ON THE DECISIONS OF HONBLE DELHI H IGH COURT IN THE CASE OF CIT VS. ARUN MEHRA 157 ITR 308 (DELHI). 18. LD. AR SUBMITTED THAT APART FROM THE ABOV E, THE LD. CIT(A) HAD REFERRED TO 6 INSTANCES EACH OF WHICH IS WHOLLY MISCONCEIVED AS THEY DO NOT PERTAIN TO THE ITA NO. 3180/DEL/2012 19 WEST END COLONY BUT PERTAINS TO PROPERTIES LOCATED A T ANAND NIKETAN AND SHANTI NIKETAN WHICH AREAS ARE AT LEAST 6 KM AWAY FROM A P ROPERTY SOLD BY THE APPELLANT. THE INSTANCES RELIED UPON ARE NOT EVEN V ICINITY OF PROPERTY SOLD BY THE APPELLANT. IN FACT IT IS WELL KNOWN THAT RATE OF PR OPERTY NOT ONLY VARIES FROM LOCALITY TO LOCALITY BUT ALSO WITHIN THE LOCALITY O N ACCOUNT OF LOCATIONAL ADVANTAGES AND DISADVANTAGES I.E. THREE SIDE OPEN, APPROACH RO ADS NEAR TO PUBLIC AREA LIKE MARKET ETC. IN FACT THE AO IN HIS REPORT DATED 21.1 0.2011 , A COPY THEREOF HAS BEEN MADE AVAILABLE AT PAGE NO. 233 OF THE PAPER BO OK, HAS HIMSELF ADMITTED THAT AFTER GOING THROUGH THE REGISTERS INVOLVING VO LUMINOUS ENTRIES, NO ENTRY RELATING TO THE SALE OF PROPERTY IN WEST END COLONY ( PREVIOUSLY KNOWN AS DIPLOMATIC ENCLAVE EXTENSION HOUSING BUILDING SOCIETY LTD.) WAS FOUND IN THE SAID REGISTER. 19. LD. AR SUBMITTED FURTHER THAT EVEN OTHERW ISE THE PURPORTED COMPARISON ADOPTED ARE OF EVIDENTLY NON- COMPARABLE CASES AND IS THUS MISCONCEIVED FOR THE FOLLOWING BRIEF REASONS :- A) THREE INSTANCES CITED IN THE REP ORT OF THE AO PERTAINING TO ANAND NIKETAN ARE TABULATED HEREUNDER : SR. NO. DATE AREA (SQ. YD.) RATE (RS. PER SQ. YD.) PAGE OF PAPER BOOK I) 7.3.1981 319.62 1501.78 249-253 II) 15.5.1981 375 746.62 265-270 III) 17.7.1981 N.A. (IN RESPECT OF PROPERTY TAKEN ON LEASE N.A. 254-257 ITA NO. 3180/DEL/2012 20 20. FROM THE AFORESAID TABLE IT IS EVIDENT TH AT, THE LAND RATES FOR EACH OF THE PLOT FOR LAND EVEN IN ANAND NIKETAN ARE HIGHLY FLUC TUATING I.E. WITHIN A GAP OF TWO MONTHS THE RATE VARIED FROM RS. 764 PER SQ. YD. TO RS. 1501/- PER SQ. YD. FURTHER, THE AREA OF THE PLOTS REFERRED WAS ONLY OF 375 SQ. YD. OR 319 SQ. YD., WHEREAS THE PLOT OF THE APPELLANT WAS MEASURING 747 PER SQ. YD. WHICH HAD MORE AMENITIES LIKE LAWN, PARKING, ETC. IN FACT THE PROP ERTY OF THE APPELLANT IS LOCATED IN HIGHLY POSH COLONY AND AS SUCH, THE INSTANCES RE FERRED ARE TOTALLY NON- COMPARABLE. IN THIS REGARD, HE PLACED RELIANCE ON THE FOLLOWIN G DECISIONS :- I) CIT VS. AMRIT SPORTS INDUSTRIES 145 IT R 231 )P &H) II) SUTLEJ CHIT FUND AND FINANCEIERS (PVT.) L TD. VS CIT 161 ITR 174 (P & H) III) CIT VS. RITA JOSEPH 238 ITR 391 (MAD) B) THE OTHER THREE INSTANCES REPORTED B Y THE AO ARE PERTAINING TO SHANTI NIKETAN, WHICH ARE ALSO TABULATED HEREUNDER :- SR. NO. DATE AREA (SQ. YD.) RATE (RS. PER SQ. YD.) PAGE OF PAPER BOOK I) 2.4.1981 N.A. N.A. ---- II) 11.8.1981 N.A. (IN RESPECT OF PROPERTY TAKEN ON LEASE) N.A. 258-264 III) 8.12.1981 401.29 329 240-248 21. LD. AR SUBMITTED THAT THE ABOVE STATED 3 P LOTS WERE OF FAR SMALL SIZE AND WERE NOT LOCATED IN THE LOCALITY WHERE THE PLOT OF THE ASSESSEE WAS LOCATED AND ITA NO. 3180/DEL/2012 21 THEREFORE IS NOT COMPARABLE. IT IS WELL ESTABLISHE D RULE OF LAW THAT WHENEVER THERE IS AN ATTEMPT TO COMPARE THE LAND RATE, IT IS NECESSARY THAT THE LAND WITH WHICH LAND RATE IS COMPARED, MUST ATLEAST BE SITUAT ED IN THE SAME COLONY LOCALITY. IN THE PRESENT CASE, ALL WHAT THE LEARNED CSIT(A) H AS DONE IS THAT CERTAIN SALE INSTANCES OF THE LAND IN DIFFERENT LOCALITY HAS BEE N CONSIDERED WITHOUT EVEN CONSIDERING THE AREA OF THE PLOT AND ON SEVERAL OTH ER FACTORS AND HELD THAT IN HER OPINION, THE FAIR MARKET VALUE OF THE LAND AS ON 1. 4.1981 SHOULD BE ADOPTED AT RS. 4000 SQ. YARDS. LD. CIT(A) HAS FAILED TO COMPRE HEND THAT IN THE YEAR 1966, WHEN ASSESSEE HAS BEEN LEASED A PLOT OF LAND IN DIP LOMATIC ENCLAVE EXTENSION THERE WAS NO TAKERS SINCE THE ENTIRE AREA WAS BARRE N AND IT WAS ONLY BY 1980 OR SO, THE AREA DEVELOPED. HE CONTENDED THAT THE METHO D OF VALUATION OF A FAIR MARKET VALUE HAD TO BE JUST AND REASONABLE AND PLAC ED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF APPROPRIATE AUTHORITY VS. KAILASH SUNEJA 251 ITR 1 (SC). 22. LD. AR CONTENDED FURTHER THAT THE LD. CIT( A) WHILE REJECTING THE ESTIMATE OF THE REGISTERED VALUER DID NOT CALL UPON OR ISSUE ANY NOTICE TO REGISTERED VALUER WHO HAD ARRIVED AT A VALUE OF RS. 14,500/- PER SQ. YARD TO SHOW THE BASIS ON WHICH HE HAS ASSESSED THE VALUE THEREOF. HE SUBMITT ED THAT LD. CIT(A) HAS PROCEEDED ON THEORETICAL CONSIDERATION AND ARRIVED AT AN ARBITRARY VALUE OF RS. 4000 PER SQ. METRE. THE LD. AR SUBMITTED THAT THE LD. CIT(A) BEING NOT AN EXPERT COULD NOT REJECT AN EXPERTS EVIDENCE WITHOU T THERE BEING AMENDED ITA NO. 3180/DEL/2012 22 EXPERTS EVIDENCE AND THUS COULD NOT ADOPT THEORETIC AL RATE OF RS. 4,000/- WITHOUT ANY BASIS. 23. LD. AR SUBMITTED THAT THE LD. CIT(A) HAS F AILED TO APPRECIATE INCREASE OF 15.05 TIMES IN THE VALUE OF PROPERTY FROM 1981 TO D ATE OF SALE I.E. 1.8.2007 AT RS. 21,50,00,000/- AGAINST INCREASE OF 5.51 TIMES I N COST INFLATION INDEX U/S 48 OF THE ACT IS REASONABLE. IN SUPPORT HE PLACED RELIANC E ON THE DECISION OF CALCUTTA BENCH OF THE TRIBUNAL IN THE CASE OF SMT. MINA DEOG UN VS. ITO IN 117 TTJ (CALCUTTA) 121.HE POINTED OUT THAT IN FACT IF THE B ASIS ADOPTED BY THE LD. CIT(A) HAS TAKEN AS CORRECT, THEN THE INCREASE IS OF 47-52 TIMES WHICH IS APPARENTLY UNREASONABLE. HE POINTED OUT THAT LD. CIT(A) HAS OB SERVED AT PAGE NO. 19 THAT THE ALLEGED FAIR MARKET VALUE OF RS. 1,15,56,500/ - OF THE LAND AS ON 1.4.1981 IS 547 TIMES THE PURCHASE CONSIDERATION OF RS. 21,116/ - IN 1966. SHE HAS FURTHER OBSERVED AT PAGE NO. 20 THAT THE VALUE OF RS. 4000/ - PER SQ. METRE IS TWICE AS MUCH AS THE NOTIFIED MARKET RATE OF THE GOVT. OF IN DIA FOR THAT YEAR AND 126 TIMES OF THE PURCHASE PRICE OF RS. 21,116/- IN 1966 . HE SUBMITTED THAT IT IS REALLY NOT KNOWN IF INCREASE OF 547 TIMES IS UNREASONABLE THEN ON WHAT BASIS OF INCREASE OF 126 TIMES IS STATED TO BE REASONABLE. I N ANY CASE, THE SUBMISSION IS THAT IN ABSENCE OF ANY VALID BASIS HAVING BEEN STAT ED BY THE LD. CIT(A), THE REJECTION OF REPORT OF REGISTERED VALUE IS NOT IN A CCORDANCE WITH LAW AND THEREFORE UNSUSTAINABLE, SUBMITTED THE LD. AR. 24. ON THE ISSUE OF COST OF IMPROVEMENT, THE L D. AR SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN ARBITRARILY RESTRICTING THE COS T OF IMPROVEMENT BY 50% FROM ITA NO. 3180/DEL/2012 23 RS. 16,00,000/- TO RS. 8,00,000/-. SHE HAS ERRED IN DISREGARDING THE EXPLANATION OF THE ASSESSEE AT PAGE NOS. 279 TO 280 OF THE PAPE R BOOK. SHE HAS REJECTED THE REPORT OF REGISTERED VALUER AND RESTRICTED THE CLAI MED COST OF IMPROVEMENT BY 50% WITHOUT ANY BASIS. SHE COULD NOT HAVE SUBSTITUT ED HER VIEW BY DISCARDING THE REPORT OF REGISTERED VALUE WITHOUT CALLING OF A NOTHER EXPERT. IN SUPPORT HE PLACED RELIANCE ON THE DECISION OF AGRA BENCH OF TR IBUNAL IN THE CASE OF PYARE MOHAN MATHUR (HUF) VS ITO 2011 46 SOT 315 (AGRA). 25. THE LD. DR ON THE OTHER HAND TRIED TO JUS TIFY THE FIRST APPELLATE ORDER ON THE ISSUE. HE SUBMITTED THAT THE LD. CIT(A) HAS GIV EN SUFFICIENT REASON FOR RESTRICTION OF VALUE OF THE PROPERTY AS ON 1.4.81 T O RS. 4000/- SQ. METRES. SHE HAS CONSIDERED THE CIRCLE RATE ETC. AS PER THE GOVT . RECORD TO ESTIMATE THE VALUE OF THE PROPERTY ON THE SAID DATE. 26. CONSIDERING THE ABOVE SUBMISSIONS WE FIND SUBSTANCE IN THE CONTENTION OF THE LD. AR THAT THE FAIR MARKET VALUE OF THE LAND I N QUESTION AS ON 1.4.81 IS TOBE TAKEN ON ACCOUNT WHILE COMPUTING THE CAPITAL GAIN E ARNED AGAINST THE SALE OF THE PROPERTY IN QUESTION. THE REGISTERED VALUER HAD ADO PTED THE LAND RATE AT RS. 14,500/- PER SQ. YARD BASED ON PREVAILING MARKET RA TE AFTER HAVING MADE NECESSARY LOCAL ENQUIRES. THE LD. CIT(A) ON THE OTH ER HAND HAS ESTIMATED THE LAND RATE AT RS. 4000/- PER SQ. METRE AS ON 1.4.81 ON THE BASIS OF RATES PRESCRIBED FOR LEVYING THE LEASE CHARGES AND CIRCLE RATE. THE LD. CIT(A) HAS OVERLOOKED THIS MATERIAL FACT THAT THE RESIDENTIAL HOUSE WAS ITSELF SOLD AT 6 TIMES THE CIRCLE RATE WHICH STRENGTHENS THE CONTENTION OF THE LD. AR THAT CIRCLE RATE ITA NO. 3180/DEL/2012 24 CANNOT BE A BASIS TO DETERMINE FAIR MARKET VALUE OF THE PROPERTY. WE CONCUR WITH THE CONTENTION OF THE LD. AR THAT WHAT HAS TO BE SE EN IS THE PREVAILING VALUE IN THE MARKET AND NOT THE VALUE CALCULATING IN AN ABST RACT MANNER BY APPLYING A MULTIPLIER TO SOME UNKNOWN SALE. IN THIS REGARD WE FIND SUPPORT FROM THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ARUN MEHRA (SUPRA). THE 6 INSTANCES REFERRED BY LD. CIT(A) DO NOT PERT AIN TO THE WEST END COLONY BUT TO ANAND NIKETAN AND SHANTI NIKETAN WHICH AREAS ARE ATLEAST 6 KMS AWAY FROM THE PROPERTY SOLD BY THE ASSESEE. THE RATE OF PROPERTY NOT ONLY VARIES FROM LOCALITY TO LOCALITY BUT WITHIN THE LOCALITY ON ACC OUNT OF LOCATIONAL ADVANTAGES AND DISADVANTAGES. THE HONBLE PUNJAB & HARYANA HIGH CO URT IN THE CASE OF SUTLUZ CHIT FUND AND FINANCE PVT. LTD. VS. CIT (SUPRA) HAS BEEN PLEASED TO HOLD THAT THE QUESTION OF THE USE OF THE METHOD WHICH IS FAVOURAB LE EITHER TO ASSESSEE OR TO THE REVENUE HAS NO BEARING BECAUSE IT IS THE FAIR M ARKET VALUE WHICH IS TO BE DETERMINED AND NOT THE PRICE WHICH IS FAVOURABLE EI THER TO THE ASSESSEE OR TO THE REVENUE. IF THE CIRCLE RATE AS ON THE DATE OF SALE AS ADOPTED WHICH WAS RS. 43,000/- PER SQ. METRE THEN ON THE BASIS OF THE CIR CLE RATE, THE VALUE OF THE LAND ON THE DATE OF SALE WOULD HAVE BEEN RS. 3,58,97,692 /- WHEREAS ADMITTEDLY THE LAND WHICH IS STRUCTURED, THE VALUE OF WHICH HAS BE EN ESTIMATED AT RS. 72,43,782/- HAS BEEN SOLD AT RS. 21.50 CRORES WHICH IS APPROX. 6 TIMES OF THE CIRCLE RATE. IF THE SAME YARDSTICK IS ADOPTED AND T HE SO CALLED MARKET RATE OF RS. 2000/- PER SQ. METRE AS ADOPTED OF THE LD. CIT(A) I S ENHANCED BY 6 TIMES ESTIMATE RATE OF LAND WOULD BE RS. 12000/- WHICH HA S TO BE FURTHER ENHANCED BY ITA NO. 3180/DEL/2012 25 RS. 2000/- PER SQ. METRE FOR THE REASONS OF THE SIT UATION AND SUBJECT ADVANTAGES AND AS SUCH THE MARKET RATE ESTIMATED BY THE REGIST ERED VALUER AT RS. 14,500/- PER SQ. YARD WOULD BE JUSTIFIED AND SAME CANNOT BE RECORDED AS NOT REPRESENTING THE FAIR MARKET VALUE OF THE LAND AS ON 1.4.81. WE FIND THAT THE LD. CIT(A) HAS PROCEEDED ON THEORETICAL CONSIDERATION TO ARRIVE AT A VALUE OF RS. 4000 PER SQ. METRE. THE REGISTERED VALUER ON THE OTHER HAND IS A N EXPERT OF THE FIELD AND IF THE LD. CTI(A) WAS NOT AGREEABLE TO THE VALUE OF THE PR OPERTY SHOWN BY HIM AS ON 1.4.81 THE LD. CIT(A) SHOULD HAVE EXAMINED HIM OR S HOULD HAVE CALLED FOR A REPORT FROM SOME OTHER EXPERTS, ESPECIALLY WHEN IN THE ORIGINAL ASSESSMENT THE AO HAD ACCEPTED THE VALUE OF THE PROPERTY AS ON 1.4 .81 DETERMINED BY THE REGISTERED VALUER. THE AO EVEN IN HIS REPORT DATED 21.10.2011 FURNISHED TO THE LD. CIT(A) (PAGE NO. 233 OF THE PAPER BOOK) HAS HIM SELF ADMITTED THAT HE HAD GONE THROUGH THE VOLUMINOUS REGISTER IN THE OFFICE OF THE SUB REGISTRAR BUT NO ENTRY RELATING TO THE SALE OF PROPERTY IN WEST END C OLONY (PREVIOUSLY KNOWN AS DIPLOMATIC ENCLAVE EXTENSION HOUSING BUILDING SOCIETY LTD.) WAS FOUND. IT IS ALSO WORTH NOTING THAT INCREASE OF 15.05 TIMES IN THE VA LUE OF PROPERTY FROM 1981 TO THE DATE OF SALE I.E. 1.8.2007 AT RS. 21,50,000/- A GAINST INCREASE OF 5.51 TIMES IN COST INFLATION INDEX U/S 48 OF THE ACT IS REASONABL E WHEREAS IF THE BASIS ADOPTED BY THE LD. CIT(A) IS TAKEN AS CORRECT, THEN THE INC REASE IS OF 47-52 TIMES WHICH APPARENTLY IS UNREASONABLE. AGAIN AT PAGE NO. 19 O F THE FIRST APPELLATE ORDER THE LD. CIT (A) HAS OBSERVED THAT THE ALLEGED FAIR MARK ET VALUE OF RS. 1,15,56,500/- OF THE LAND AS ON 1.4.81 IS 547 TIMES THE PURCHASE CONSIDERATION OF RS. 21116/- ITA NO. 3180/DEL/2012 26 IN 1966. AT PAGE NO. 20 SHE HAS OBSERVED THAT THE V ALUE OF RS. 4000/- PER SQ. METRE IS TWICE AS MUCH AS THE NOTIFIED RATE OF THE GOVT. OF INDIA OF THAT YEAR AND 126 TIMES OF THE PURCHASE PRICE OF RS. 21,116/- IN 1966. WE FIND SUBSTANCE IN THE CONTENTION OF THE LD. AR THAT IF INCREASE OF 54 7 TIMES IS UNREASONABLE AS PER THE LD. CIT(A) THEN ON WHAT BASIS SHE HAS JUSTIFIED THE INCREASE OF 126 TIMES AS REASONABLE. UNDER THESE CIRCUMSTANCES WE FIND THAT THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.81 DETERMINED AT RS.14,500/- PER SQ. YARD BY THE REGISTERED VALUER, AN EXPERT, ON THE BASIS OF LOCAL ENQURIES W HICH REMAINED UNREBUTTED AS HE WAS NOT EXAMINED NOR OPINION OF OTHER EXPERT WAS SOUGHT BY THE LD. CIT(A) TO DEVIATE JUSTIFIABLY THEREFROM, IS MORE REASONABL E THAN THE VALUE ESTIMATED BY THE LD. CIT(A) ON THE BASIS OF APPLYING A MULTIPLIE R TO SOME UNKNOWN SALE INSTANCES OF DIFFERENT LOCALITY. WE THUS DO NOT FIN D REASON TO DEVIATE FROM THE VALUE DETERMINED BY THE REGISTERED VALUER ACCEPTED BY THE AO IN THE ASSESSMENT. THUS THERE WAS NO SATISFACTORY REASON OR BASIS WITH THE LD. CIT(A) TO REDUCE THE VALUE OF THE PROPERTY AS ON 1.4.81 DETERMINED BY TH E APPROVED VALUER. WE THUS WHILE SETTING ASIDE FIRST APPELLATE ORDER IN THIS R EGARD RESTORE THE ASSESSMENT ORDER ON THE ISSUE. 27. SO FAR AS RESTRICTION OF COST OF IMPROVEME NT BY 50% I.E FROM RS. 16,08,000/- BY THE LD. CIT(A) IS CONCERNED, IT HAS ALSO BEEN QUESTIONED BY THE ASSESSEE IN GROUND NO. 5 OF THE APPEAL. THE REGISTE RED VALUER HAD CERTIFIED THAT SUCH IMPROVEMENT TO THE PROPERTY WERE EXISTING PRIO R TO 1.4.81 ON WHICH DATE THE VALUE OF THE SAME HAS BEEN ESTIMATED AT RS. 16, 00,000/-. THE COST OF ITA NO. 3180/DEL/2012 27 CONSTRUCTION WAS ESTIMATED AT RS. 13,41,600/-. THE AO ACCEPTED THE COST OF IMPROVEMENT DETERMINED AT RS. 16,00,000/- CONSISTIN G OF RS. 5,00,000/- ON BOUNDARY WALL, RS. 1,50,000/- ON FANCY CAR PARKING, RS. 6,50,000/- ON SWIMMING POOL AND RS. 3,00,000/- ON GRASSY LAWN . THE LD. CI T(A) HAS RESTRICTED THE CLAIMED COST OF IMPROVEMENT BY 50% I.E. RS. 8,00,00 0/-. SHE HAS HOWEVER ACCEPTED THE COST OF CONSTRUCTION OF THE HOUSE AT R S. 11,20,180/- AS ADOPTED BY THE AO. LD. CIT(A) HAS TRIED TO JUSTIFY HER ACTION ON THE BASIS THAT IN 1981 PLOTS OF LAND OF 300-400 SQ. YARDS WITH CONSTRUCTED HOUSE S THEREON, WERE SOLD IN THE ANAND NIKETAN AND SHANTI NIKETAN AREAS FOR PRICES V ARYING BETWEEN RS.13,41,600/- AND RS. 4,80,000/- HENCE ASSESSEES FANCY CAR PORCH ETC. COST MORE THAN THE CHEAPEST OF THE PLOTS OF LAND WITH HO USE AND THE SWIMMING POOL OR EVEN THE BOUNDARY WALL COST MORE THAN THE MOST E XPENSIVE HOUSE HOLD IN THE SAME AREA. SHE THUS ARRIVED AT THE CONCLUSION THAT THE LUMPSUM ESTIMATION OF COST OF IMPROVEMENT IS HIGHLY INFLATED. HAVING GONE THROUGH THE VALUATION REPORT OF THE APPROVED VALUER WHO IS ADMITTEDLY AN EXPERT OF THE SUBJECT, WE FIND THAT THE REGISTERED VALUER HAS DETERMINED THE COST OF IM PROVEMENT AT RS. 16,00,000/- ON SOME BASIS. HE HAS VALUED 350 FT LONG COMPOUND / BOUNDARY WALL AT RS. 5,00,000/- ON THE BASIS THAT IT IS DECORATED WITH S TONE WORK, ORNAMENTAL GRILL OF 5 FT HIGH, ORNAMENTAL DECORATED BOUNDARY GATES ETC.. HE HAS ESTIMATED COST OF FANCY CAR PORCH AT RS. 1,50,000/- ON THE BASIS THAT IT IS A FANCY CAR PARKING FULLY MADE OF HIGH CLASS TEAK DECORATED WOOD WORK FITTED WITH EXCELLENT LIGHTS ETC. VALUE OF SWIMMING POOL HAS BEEN DETERMINED AT RS. 6 ,50,000/- ON THE BASIS THAT ITA NO. 3180/DEL/2012 28 IT IS EQUIPPED WITH FILTRATION PLANT, PLANTING TANK , CHANGING ROOMS ETC. HE HAS VALUED GRASSY LAWNS AT RS. 3,00,000/- ON THE BASIS THAT IT IS FITTED WITH IMPORTED FITTINGS AND STATUTES ETC. IN ABSENCE OF REBUTTAL O F THESE FINDING OF THE APPROVED VALUER WE FIND THAT THERE WAS NO BASIS FOR THE LD. CIT(A) TO DEVIATE FROM THE VALUE OF IMPROVEMENT COST DETERMINED BY THE APPROVE D VALUER WHO HAD VALUED IT ON THE VISIT OF THE SITE. LD. CIT(A) WAS THUS NOT J USTIFIED IN DISTURBING THE ASSESSMENT ORDER BASED ON THE EXPERT OPINION IN THI S REGARD. WE THUS WHILE SETTING ASIDE FIRST APPELLATE ORDER ON THE ISSUE, RESTORE THE ASSESSMENT ORDER. THE GROUND NOS. 1,3,4,4.1 TO 4.4, 5 AND 6 ARE THUS ALLOWED. 28. IN THE RESULT APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 2.12.2012. SD/- SD/- (SHAMIM YAHYA) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE : *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT