S.Duraiswamy, CHENNAI V. ITO, CHENNAI

ITA 3488/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4546 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 23-02-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2016
• Court: TRIBUNAL
• Department Lawyers: M GOPIKRISHNA JT
• Assessee Lawyers: G BASKAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Reassessment proceedings
• Section: 50C; 147; 144

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D/SMC, CHENNAI , BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER ./ITA NO.3488/MDS/2016 ! ' #$' / ASSESSMENT YEAR : 2007-08 S.DURAISAMY, NO.29/2, AKBARABATH 1 ST STREET, KODAMBAKKAM, CHENNAI 600 024. [PAN: AUOPD 5974A] ( %& /APPELLANT) VS. INCOME TAX OFFICER, NON CORPORATE WARD-13(3), CHENNAI 600 034. ( '(%& /RESPONDENT) %& ) * /APPELLANT BY : SHRI G.BASKAR, ADVOCATE '(%& ) * /RESPONDENT BY : SHRI M.GOPIKRISHNA, JT. CIT + # ) , /DATE OF HEARING : 23.02.2017 -$ ) , /DATE OF PRONOUNCEMENT : 19.05.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE OR DER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-14, CHENNAI (CIT(A) FOR S HORT) DATED 27.06.2016, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASS ESSMENT U/S. 144 R/W S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) DA TED 30/3/2015 FOR ASSESSMENT YEAR (AY) 2007-08. 2 ITA NO.3488 /MDS/2016 (AY 2007-08) S.DURAISAMY V. IT O 2. THE APPEAL IS DELAYED BY A PERIOD OF 88 DAYS . THE CONDONATION PETITION ACCOMPANYING THE APPEAL MEMO STATES THAT THE ASSESS EE, NOT CONVERSANT WITH THE PROVISIONS OR THE PROCEDURE UNDER THE ACT, WAS NOT AWARE OF THE FIRST APPELLATE AUTHORITY HAVING DECIDED AGAINST HIM, AND THAT IT W AS ONLY ON RECEIVING A PHONE CALL FROM THE ASSESSING OFFICER (AO) THAT HE APPROA CHED HIS CHARTERED ACCOUNTANT (CA), WHO IN TURN DIRECTED HIM TO THE CO UNSEL, SH. G. BASKAR, ADVOCATE, WHO HAD REPRESENTED HIM BEFORE THE LD. CI T(A), AND WHO ADVISED FILING AN APPEAL, WHICH WAS DONE FORTHWITH. THE ASS ESSEE WAS PRESENT IN PERSON AT THE TIME OF HEARING, WHICH WAS HEARD FIRST ON AD MISSION. AS EXPLAINED, THE ASSESSEE IS A SEMI-LITERATE PERSON, EARNING BARELY ENOUGH TO SUSTAIN HIMSELF AND HIS FAMILY. FOR A PERSON OF SUCH MODEST MEANS, HARD PUT TO MEET THE CHALLENGES OF DAY TO DAY LIFE, IT IS NOT DIFFICULT TO UNDERSTA ND THAT THE INCOME TAX MATTERS ARE FAR REMOVED FROM HIS DAILY CONCERNS, AND THE PU RPORT OF THE IMPUGNED ORDER MAY HAVE BEEN LOST ON HIM. IT IS NOT SURPRISING THA T HE FAILED TO COMMUNICATE THE SAME TO HIS CA. AS A BROWSE OF THE APPEAL SHOWS, TH E ASSESSEE AND HIS THREE SIBLINGS RECEIVED RS. 2 LACS EACH ON THE SALE OF AN INHERITED PROPERTY, AND IN RESPECT OF WHICH HE GETS SADDLED WITH A DEMAND OF R S. 2.37 LACS ON ACCOUNT OF APPLICATION OF SECTION 50C OF THE ACT. WHY, DESPITE BEING NOT IN THE POSSESSION OF THE PROPERTY FOR OVER SEVERAL DECADES PRIOR TO I TS SALE, WITH THE TENANT ALSO CLAIMING PROTECTION OF THE TENANCY LAW, THE ASSESSE E, AGAIN, ON ACCOUNT OF LACK OF PROPER LEGAL ADVICE, FAILS TO MOVE THE AO FOR RE FERENCE TO THE VALUATION OFFICER (VO) U/S. 50C(2), A COURSE CONTEMPLATED BY LAW UNDER SUCH A SITUATION. IN MY VIEW, IN FACE OF SUCH A SKEWED STATE OF AFFAI RS, THE SUBSTANTIAL CAUSE OF JUSTICE SURELY WARRANTS AN ADMISSION OF THE APPEAL FOR BEING DECIDED ON MERITS. THE APPEAL WAS ACCORDINGLY ADMITTED, AND HEARING IN THE MATTER PROCEEDED WITH. 3. THE SOLE ISSUE ARISING IN THIS APPEAL IS IF THE AO OUGHT TO HAVE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, MADE A REFEREN CE TO THE VO UNDER SECTION 3 ITA NO.3488 /MDS/2016 (AY 2007-08) S.DURAISAMY V. IT O 50C(2) OF THE ACT, I.E., SUO MOTU , WITHOUT THE ASSESSEE ASKING OR REQUIRING HIM TO DO SO. THE BACKGROUND FACTS LEADING TO THE AFORE-SA ID IS THAT THE ASSESSEE DURING THE RELEVANT YEAR SOLD, ALONG WITH THREE OTHERS, BE ING HIS TWO BROTHERS AND A SISTER, 2505 SQ. FT. OF LAND TO ONE, SH. P. RAJAMAN ICKAM, FOR RS. 8 LACS, AS AGAINST THE STAMP VALUATION THEREOF AT RS. 24,56,653/-, AS STATED IN THE SALE DOCUMENT (AT PB PGS. 1 TO 18) ITSELF. THE ASSESSEE ON BEING SHOW CAUSED FOR THE APPLICATION OF S. 50C IN VIEW OF THE SAID DIFFERENCE (VIDE NOTICE DATED 16/6/2014) IN THE REASSESSMENT PROCEEDINGS, EXPLAINED VIDE LETTER DAT ED 11/9/2014 THAT A GROUND RENT AGREEMENT IN RESPECT OF THE SUBJECT LAND WAS E XECUTED BY HIS LATE GRAND- FATHER (MATERNAL) IN 1948 IN FAVOUR OF ONE, P. MUTH USAMY MUDALIAR, FATHER OF THE TRANSFEREE (P. RAJAMANICKAM). THE ASSESSEE HAD INHERITED THE LAND UNDER REFERENCE (CAPITAL ASSET) ON THE DEATH OF HIS MOTHE R, RADHA BAI AMMAL, IN 1998 (THE SALE DEED THOUGH REFERS TO THE DATE OF HER DEA TH AS 04/4/1980), WHO HAD BEEN BEQUEATHED THE SAME BY HIS GRAND-FATHER, WHO EXPIRE D IN 1959. FURTHER, HIS FATHER (SH.K.V. SIVAPADAM MUDALIAR) HAD ISSUED A LE GAL NOTICE FOR EVICTION TO THE TRANSFEREE IN 1992, TO WHICH THE NOTICEE RESPON DED BY STATING THAT IT COULD NOT BE AS HE WAS ENTITLED TO RIGHT IN THE PROPERTY UNDER THE CITY TENANTS PROTECTION ACT. THAT HIS FATHER COULD NOT PURSUE TH E MATTER FURTHER FOR WANT OF RESOURCES AND OTHER CONSTRAINTS, NOR COULD HE AND H IS SIBLINGS AND, ACCORDINGLY, THEY ACQUIESCED TO SELL THE SAME AT THE NEGOTIATED PRICE OF RS. 8 LACS, WHICH IS THE ONLY SUM ACTUALLY RECEIVED ON THE IMPUGNED SALE . THE COPY OF THE GROUND RENT AGREEMENT (WHICH THOUGH IS IN VERNACULAR), AS WELL AS THE NOTICE ISSUED BY HIS FATHER AND THE REPLY THERETO, WERE ENCLOSED ALO NG WITH (PB PGS. 1-20, 22-31). THE AO, HOWEVER, PROCEEDED TO COMPUTE THE CAPITAL G AINS CHARGEABLE U/S. 45 BY ADOPTING THE STAMP VALUATION AS THE DEEMED SALE CON SIDERATION U/S. 50C(1), ALLOWING CREDIT FOR THE COST OF ACQUISITION, SUBSTI TUTING THE STAMP VALUATION AS ON 01/4/1981 (THOUGH THE ASSESSMENT ORDER MENTIONS THE SAID DATE AS 01/1/1981) AS THE FAIR MARKET VALUE AS ON THAT DATE, AFTER INDEXI NG IT FOR THE CHANGE IN THE COST 4 ITA NO.3488 /MDS/2016 (AY 2007-08) S.DURAISAMY V. IT O INFLATION INDEX OVER THE INTERIM PERIOD, AS REQUIRE D U/S.48, BRINGING THE ASSESSS ONE-FOURTH SHARE THEREIN TO TAX. THE ASSESSMENT, ON BEING CONTESTED IN APPEAL, WAS CONFIRMED BY THE LD. CIT(A), IN WHOSE VIEW THE PROTECTION UNDER THE CITY TENANTS PROTECTION ACT IS AVAILABLE ONLY WHERE THE TENANT HAD PUT UP A SUPERSTRUCTURE ON THE DEMISED LAND, SO THAT THE SAM E WAS NOT APPLICABLE IN THE INSTANT CASE OF SALE OF LAND. EVEN OTHERWISE, THE A CT IS A SELF CONTAINED CODE IN ITSELF, AND BEING A CENTRAL ACT SHALL PREVAIL OVER A STATE LEGISLATION IN CASE OF ANY INCONSISTENCY OR CONFLICT BETWEEN THE TWO. ALL THE FACTS NARRATED ABOVE FLOW FROM THE DOCUMENT S FORMING PART OF THE RECORD AND HAVE, IN ANY CASE, NOT BEEN DISPUTED BY THE REVENUE. IT IS THUS CLEAR THAT THE PROPERTY IS NOT IN THE POSSESSION OF THE T RANSFERORS AND, RATHER, IN THE POSSESSION OF THE TRANSFEREE OR HIS LINEAL ASCENDAN T/S, I.E., THROUGH WHOM HE CLAIMS THE SAME, FOR NEARLY 58 YEARS (NOVEMBER, 194 8 TO JULY, 2006) PRIOR TO ITS SALE. POSSESSION, IT IS COMMON KNOWLEDGE, IS A PRIME CONSIDERATION OR FACTOR IN REALIZING THE SALE POTENTIAL OF A PROPERTY. THIS IS ALL THE MORE SO IN THE INSTANT CASE AS THE POSSESSION (TO THE TRANSFEREE/S) HAD BE EN LEGALLY DELIVERED. HOW, THEN, ONE MAY ASK, COULD THE STAMP VALUATION BE REG ARDED AS A SURROGATE FAIR MARKET VALUE, WHICH THE LAW DEEMS. THE PRESUMPTION OF A CONDITION OF FREE SALE, ABSENT IN THE INSTANT CASE, IS IMPLICIT THEREIN . TRUE, THE SALE DEED REFERS TO THE SUBJECT PROPERTY BEING A LAND. THIS IS UNDERSTAND ABLE AS WHAT WAS TRANSFERRED IS ONLY LAND; THE SUPER-STRUCTURE CLEARLY BELONGING TO THE TENANT. IT IS IN FACT HIGHLY DOUBTFUL THAT THE TENANT/S HAD BEEN RETAININ G THE LAND FOR SEVERAL DECADES NOW WITHOUT PUTTING IT TO USE, AS ITS DESCRIPTION A S LAND WOULD SUGGEST, PARTICULARLY CONSIDERING THAT HE SEEKS TO INVOKE TH E TENANCY LAW PROTECTING HIS RIGHTS. THE VALIDITY OF THE CLAIMS AND COUNTER CLAI MS QUA THE INTER SE RIGHTS OF THE PARTIES COULD ONLY BE DETERMINED ON BEING SUBJE CT TO THE JUDICIAL PROCESS, WHICH HAS NOT BEEN THE CASE; THE TRANSFERORS BEING NOT RESOURCEFUL ENOUGH TO UNDERTAKE THE SAME. THIS, HOWEVER, DOES NOT DETRACT FROM THE FACT THAT THE 5 ITA NO.3488 /MDS/2016 (AY 2007-08) S.DURAISAMY V. IT O SUBJECT PROPERTY IS HEAVILY ENCUMBERED AND, FURTHER , THAT THE ASSESSEE HAS OBJECTED, FOR THAT REASON, TO THE ADOPTION OF THE S TAMP VALUATION AS THE DEEMED TRANSFER CONSIDERATION. A CONDITION THAT THE LAW EN VISAGES U/S. 50C(2), PROVIDING FOR A REFERENCE BY THE ASSESSING AUTHORITY TO THE V O. THE INGREDIENTS OF THE SAID PROVISION ARE MET. THE AO WAS THUS OBLIGED IN LAW T O REFER THE VALUATION OF THE SUBJECT PROPERTY TO THE VO. TRUE, S. 50C(2) EMPLOYS THE WORD MAY, SUGGESTING A DISCRETION IN THE MATTER VESTED WITH THE AO. THE SAME IS TO BE INTERPRETED AS A JUDICIAL DISCRETION, TO BE EXERCISED WITH REFERENCE AND REGARD TO THE FACTS OF THE CASE. IT SURELY DOES NOT MEAN THAT THE AO, WHERE OT HERWISE SATISFIED ABOUT THE NEED FOR SUCH A REFERENCE OR WHERE THE CONDITIONS T HEREFOR ARE MET, MUST NOT DO SO THE PURPOSE AND INTENT BEING TO ARRIVE AT THE FAIR MARKET VALUE OF THE SUBJECT PROPERTY, I.E., THE PROPERTY THAT IS THE SUBJECT MA TTER OF SALE. IN FACT, THE BOARD, AS FAR BACK AS IN 1955, VIDE CIRCULAR NO.14 (XL-35) DA TED 11/04/1955, COMMUNICATED TO ITS FIELD OFFICERS THE NEED TO ASSI ST THE ASSESSEES IN DETERMINING THEIR CORRECT LIABILITY TO TAX, WHICH IS THE WHOLE PURPORT OF THE EXERCISE OF ASSESSMENT UNDER THE ACT, INSTRUCTING THEM TO DO SO WHERE THEY FIND THAT CLAIM/S, TO WHICH AN ASSESSEE IS OTHERWISE ENTITLED, HAD NOT BE PRESSED. BENEVOLENT CIRCULARS ARE BINDING ON THE REVENUE AUTHORITIES EV EN WHERE THEY DIGRESS FROM THE STRICT LANGUAGE OF THE ACT ( NAVNIT LAL C. JAVERI V. AAC [1965] 56 ITR 198 (SC)), WHILE HERE THE ASSESSEE MAKES OUT A STRONG C ASE, CLEARLY AND LOUDLY, FOR THE NON ADOPTION OF THE STAMP VALUATION AS THE DEEM ED TRANSFER CONSIDERATION. IT WAS THUS, IN MY CLEAR VIEW, INCUMBENT ON THE AO TO REFER THE MATTER; THE ASSESSEES RIGHTS IN THE LAND BEING NOT ABSOLUT E, TO THE VO FOR DETERMINING THE FAIR MARKET VALUE OF THE SUBJECT PROPERTY (AS O N THE DATE OF TRANSFER); IT BEING AGAIN APPARENT (FROM THE SALE DEED) THAT THE ASSESS EE HAD NOT OBJECTED TO THE STAMP VALUATION. THE STAMP DUTY BEING BORNE BY THE BUYER (TRANSFEREE), THE TRANSFEROR IS NOT IMPACTED BY IT NOR HAS ANY LOCUS STANDI IN THE MATTER. AGAIN, THE AO FAILING TO DO SO, THE LD. CIT(A), WHOSE POWERS U NDER THE ACT ARE CO- 6 ITA NO.3488 /MDS/2016 (AY 2007-08) S.DURAISAMY V. IT O TERMINUS WITH THE ASSESSING AUTHORITY, OUGHT TO HAV E DIRECTED SO, UPON OBSERVING THE ASSESSING AUTHORITY TO HAVE OMITTED TO DO WHAT THE LAW ENJOINED HIM TO. THAT THIS QUESTION WAS NOT PUT UP BEFORE THE LD. CIT(A), BEFORE WHOM THE MATTER WAS ARGUED ONLY ON OTHER ASPECTS OF THE MATTER (AND AS IS INDEED BEFORE THE TRIBUNAL VIDE GD. 3), IS, AGAIN, NO CONSTRAINT ON HIS POWER TO DO SO; RATHER, ONLY EMPHASIZES THE NEED FOR PROPER LEGAL ASSISTANCE IN THE JUSTICE DELIVERY SYSTEM. AND, FURTHER, THAT AN ASSESSEE SHOULD NOT SUFFER FO R WANT THEREOF, WHICH IS INDEED THE PURPORT OF THE BOARD CIRCULAR DATED 11/4/1955 ( SUPRA). . THE IMPUGNED ORDER IS ACCORDINGLY SET ASIDE, AND TH E MATTER RESTORED TO THE FILE OF THE AO FOR REFERENCE TO THE VO U/S. 50C (2), AND A DECISION ON MERITS, PER A SPEAKING ORDER, AFTER ALLOWING THE ASSESSEE A FAIR OPPORTUNITY TO PRESENT AND STATE HIS CASE, BOTH BEFORE THE VO AS WELL AS H IMSELF. I DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON MAY 19, 2017 AT CHENNAI . SD/- ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, . /DATED, MAY 19, 2017. EDN / ) '!,01 21$, /COPY TO: 1. %& /APPELLANT, 2. '(%& /RESPONDENT, 3. + 3, ( )/CIT(A), 4. + 3, /CIT, 5. 1#45 '!,! /DR & 6. 5 ' 6 /GF