ITO 23(1)(3), MUMBAI V. LEGAL HEIRS OF LATE ETTIE B. DMELLO, MUMBAI

ITA 3466/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0180 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 12-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHAR
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Cost of acquisition; Fair market value
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'G' BENCH, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3466 /MUM/2017 (ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER - 23(1 )( 3 ) VS. L/H OF LATE ETTIE B. DMELLO ROOM NO. 108, 1 ST FLOOR MATRU MANDIR, TARDEO GRANT ROAD, MUMBAI -007 PLOT NO. 349, AVINASH PARK TPS III, 33 RD ROAD, BANDRA (W) MUMBAI 400050 PAN AABPD0058N APPELLANT RESPONDENT APPELLANT BY: SHRI V. VIDHYADHAR RESPONDENT BY: NONE DATE OF HEARING: 04.09.2017 DATE OF PRONOUNCEMENT: 04.09.2017 O R D E R PER BENCH THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-32, MUMBAI DATED 28.02.2017 FOR A.Y. 2007-08 ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN HOLDING THAT THE ASSESSEE SHOULD B E ALLOWED THE COST OF ACQUISITION AS ON 01.04.1981 AND ALSO INDEX ATION TO COMPUTE THE CAPITAL GAIN WHEREAS DURING THE ASSESSM ENT PROCEEDINGS THE ASSESSEE HAS FAILED TO FURNISH ANY SUPPORTIVE EVIDENCE IN RESPECT OF COST OF ACQUISITION OF PROPE RTY. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS IGNORED THE FACT THAT THE AO REFERRED TW O PROPERTIES FOR VALUATION. THE LD.CIT(A) HAS ACCEPTED THE VALUE DETERMINED BY DVO IN RESPECT OF FIRST PROPERTY AT RS.76,62,880 /- WHEREAS IN RESPECT OF SECOND PROPERTY, ALLOWED THE FMV DETERMI NED BY THE AO AT RS.28,55,072/- INSTEAD OF DVO'S VALUATION AT RS.75,29,236/-. ITA NO. 3466/MUM/2017 L/H OF LATE ETTIE B. DMELLO 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING THE INDEXATION BENEFIT TO THE ASSESSEE FROM THE DATE OF ACQUISITION OF PROPERTY B Y THE PREVIOUS OWNER RELYING UPON THE JUDGMENT OF HON'BLE JURISDIC TIONAL HIGH COURT IN THE CASE OF MANJULA J. SHAH (355 ITR 474) WITHOUT APPRECIATING THE FACT THAT REVENUE DEPARTMENT HAS N OT ACCEPTED THE DECISION OF THE JURISDICTIONAL HIGH COURT DECIS ION AND SLP HAS BEEN ADMITTED BY THE HON'BLE SUPREME COURT ON THIS ISSUE. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE EVEN THOUGH NOTICE HAD BEEN DULY ISSUED. WE, THEREFORE, DECIDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LEARNED D.R. 3. AFTER HEARING THE LEARNED D.R. AND GOING THROUGH TH E ORDERS OF THE TAX AUTHORITIES BELOW WE NOTED THAT THE ASSESSEE DU RING THE IMPUGNED ASSESSMENT YEAR SOLD TWO PROPERTIES UNDER DEVELOPME NT AGREEMENT DATED 21.07.2006 FOR RS.10 LAKHS AND UNDER DEED OF CONVEY ANCE DATED 21.07.2006 FOR RS.5 LAKHS. THE AO NOTED THAT IN RES PECT OF PROPERTY NO. 1 THE STAMP VALUATION OF THE PROPERTY WAS AT RS.1,97, 74,000/- WHICH WAS ADOPTED BY THE AO AS FULL VALUE OF CONSIDERATION UN DER SECTION 50C OF THE INCOME TAX ACT. FURTHER, IN RESPECT OF PROPERTY NO. 2 IN ADDITION TO THE CASH CONSIDERATION OF RS.5 LAKHS, THE ASSESSEE WAS ENTITLED TO TWO FLATS ADMEASURING 350 SQ.FT. OF CARPET AREA EACH IN THE P ROPERTY TO BE DEVELOPED. THE VALUE OF THE SAID TWO FLATS WERE DETERMINED BY THE AO AT RS.23,55,072/- AND ACCORDINGLY THE FULL VALUE OF TH E SECOND PROPERTY WAS TAKEN AT RS.28,55,072/-. IN RESPECT OF THE COST OF ACQUISITION THE AO NOTED THAT THE ONLY DOCUMENT EVIDENCING THE OWNERSHIP OF THE ABOVE PROPERTIES WAS THE WILL DATED 24.10.1997 WHICH DOES NOT INDICA TE THE COST OF ACQUISITION IN RESPECT OF BOTH THE PROPERTIES. THE AO, THEREFORE, DID NOT ALLOW ANY DEDUCTION TOWARDS THE COST OF ACQUISITION . THE AO THUS DETERMINED THE CAPITAL GAINS AT RS.2,11,29,072/- AN D OUT OF WHICH HE ALLOWED DEDUCTION UNDER SECTION 54EC FOR A SUM OF R S.15 LAKHS. THE MATTER WAS REFERRED TO THE DVO BUT THE REPORT OF TH E DVO WAS RECEIVED AFTER COMPLETION OF THE ASSESSMENT. THE ASSESSEE WE NT IN APPEAL BEFORE THE CIT(A). THE CIT(A) ASKED FOR THE REMAND REPORT OF T HE AO ON THE SUBMISSION MADE BY THE ASSESSEE. IT WAS NOTED BY TH E CIT(A) THAT THE DVO ITA NO. 3466/MUM/2017 L/H OF LATE ETTIE B. DMELLO 3 HAS DETERMINED THE VALUE OF THE FIRST AND SECOND PR OPERTY AS ON 21.07.2006 AT RS.76,62,880/- AND RS.75,29,236/-. TH E CIT(A) DIRECTED THE AO TO TAKE THE COST OF ACQUISITION AS ON 01.04.1981 AND APPLYING IN TO THE INDICATION. THUS WORKED OUT THE INDEXATION COST OF ACQUISITION FOR PROPERTY NO. 1 AT RS.17,83,000/- AND PROPERTY NO. 2 AT RS.25 ,42,000/- AS HE NOTED THAT THE ASSESSEE HAS ACQUIRED BOTH THESE PROPERTIE S UNDER WILL AS PER SECTION 49(III) OF THE INCOME TAX ACT THE COST OF A CQUISITION IN THE HANDS OF THE PREVIOUS OWNER SHALL BE DEEMED TO BE THE COST I N THE HANDS OF THE ASSESSEE. IN THIS REGARD THE CIT(A) REFERRED TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MANJULA J. SHAH 355 ITR 474. THE CIT(A) COMPARED THE SALE CONSIDERATION AS PER T HE AGREEMENT VALUATION TAKEN BY THE AO UNDER SECTION 50C AND THE VALUATION DETERMINED BY THE DVO IN THE FOLLOWING MANNER: - PARTICULARS CONSIDERATION AS PER AGREEMENT STAMP VALUATION DVO VALUATION PROPERTY 1 (CTS NO. 232, 232/1, 233, 235/1 & 239) 10,00,000 1,97,74,000 76,62,880 PROPERTY 2 (CTS NO. 236 & 236/1 5,00,000 PLUS COMPENSATION IN KIND BEING VALUE OF TWO FLATS AT RS.23,55,072 - 75,29,236 ON THIS BASIS HE DIRECTED THE AO TO TAKE THE FULL V ALUE OF CONSIDERATION OF PROPERTY NO. 1 AFTER LOOKING INTO THE OBJECTIONS OF THE ASSESSEE AT RS.76,62,880/- AND FOR PROPERTY NO. 2 RS.23,55,072/ - HAS TAKEN BY THE AO. THE CIT(A), THEREFORE, DID NOT MAKE ANY ENHANCE MENT IN THE VALUE OF THE CONSIDERATION FOR PROPERTY NO. 2 AS PER THE DVO REPORT. THE REVENUE HAS COME IN APPEAL BEFORE US. 4. THE LEARNED D.R. VEHEMENTLY RELIED UPON THE ORDER O F THE AO. WE HAVE DULY CONSIDERED THE SUBMISSIONS MADE BY THE LE ARNED D.R. ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. SO FAR AS THE ISSUE RELATED TO THE COST OF CONSTRUCTION TO THE PREVIOUS OWNER IS CONCE RNED WE NOTED THAT PROVISIONS OF SECTION 49(III) ARE EXPLICITLY CLAIME D AND THE COST OF ACQUISITION IN THE HANDS OF THE PREVIOUS OWNER SHAL L BE DEEMED TO BE THE ITA NO. 3466/MUM/2017 L/H OF LATE ETTIE B. DMELLO 4 COST IN THE HANDS OF THE ASSESSEE. IT IS NOT DENIED THAT THE ASSESSEE ACQUIRED THE PROPERTY BY WAY OF WILL DATED 24.10.19 97 WHICH WAS OWNED BY THE PREVIOUS OWNER PRIOR TO 01.04.1981. WE, THER EFORE, IN VIEW OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. MANJULA J. SHAH 355 ITR 474 DO NOT FIND ANY ILLEGALITY OR I NFIRMITY IN THE ORDER OF THE CIT(A) WHEN HE DIRECTED THE AO TO TAKE THE COST OF ACQUISITION AS ON 01.04.1981 AND APPLY THE INDEXATION FOR DETERMINING THE COST OF ACQUISITION WHICH WAS WORKED OUT FOR PROPERTY NO. 1 AT RS.17,83,000/- AND FOR PROPERTY NO. 2 AT RS.25,42,000/-. ACCORDING LY GROUNDS 1 AND 3 STAND DISMISSED. 5. NOW COMING TO GROUND NO. 2 OF REVENUE WE NOTED THAT UNDER SECTION 50C THE AO HAS REFERRED THE MATTER TO THE DVO. THE DVO DETERMINED THE VALUE OF FIRST PROPERTY AT RS.76,62,880/- BUT FOR P ROPERTY NO. 2 AT RS.75,29,236/-. WHILE COMPLETING THE ASSESSMENT THE AO HAS TAKEN THE SAME CONSIDERATION IN RESPECT OF PROPERTY NO. 1 AT RS.1,97,74,000/- WHILE IN RESPECT OF PROPERTY NO. 2 AT RS.28,55,072/-. THE CIT(A) DIRECTED THE AO TO TAKE THE VALUE OF PROPERTY NO. 1 AT RS.76,62,880 /- AS DETERMINED BY THE DVO. IN VIEW OF PROVISIONS OF SECTION 50C(2) R.W.S. 50C(3) IN OUR OPINION THE CIT(A) HAS CORRECTLY DIRECTED TO AO TO TAKE THE VALUE OF PROPERTY NO. 1 AT RS.76,72,880/- AS HAS BEEN DETERMINED BY THE DVO . SO FAR AS PROPERTY NO. 2 IS CONCERNED SINCE THE AO HAS NOT TAKEN THE V ALUE AT RS.75,29,236/- AS DETERMINED BY THE DVO BUT HAS TAKEN THE VALUE AT RS.28,55,072/-, WHICH IS LESS THAN THE VALUE AS DETERMINED BY THE D VO THE CIT(A) HAS NOT ENHANCED THE VALUE ALTHOUGH THE CIT(A) HAS POWER TO ENHANCE. THE CIT(A) HAS CONFIRMED THE ORDER OF THE AO TAKING THE VALUE OF SECOND PROPERTY AT RS.28,55,072/-. 6. THE LEARNED D.R. ALTHOUGH ARGUED TO ENHANCE VALUE T AKEN BY THE AO, ON OUR PART. TO TAKE THE VALUE OF PROPERTY NO. 2 A T RS.75,29,236/- WILL TANTAMOUNT TO ENHANCEMENT MADE BY THIS TRIBUNAL. TH IS TRIBUNAL, UNDER SECTION 254 DOES NOT HAVE THE POWER TO ENHANCE THE INCOME. WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A). ITA NO. 3466/MUM/2017 L/H OF LATE ETTIE B. DMELLO 5 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2017. SD/ - SD/ - (PAWAN SINGH) (P.K. BANSAL) JUDICIAL MEMBER VICE PRESIDENT MUMBAI, DATED: 4 TH SEPTEMBER, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -32, MUMBAI 4. THE PR. CIT - 23, MUMBAI 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.