ITO 15(2)(2), MUMBAI V. RHODA KHURSIAGRA, MUMBAI

ITA 3604/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92793 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-02-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 21-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: AJAY R SINGH
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Valuation report; Capital receipt
• Section: 50C; 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' D ' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI SANJAY ARORA , ACCOUNTANT MEMBER ITA NO. 3604/MUM/2012 (ASSESSMENT YEAR: 2004 - 05 ) INCOME TAX OFFICER - 15(2)(2) VS. SHRI RHODA KHURSIAGRA ROOM NO. 110, 1ST FLOOR MATRU MANDIR, TARDEO MUMBAI 400007 6, MADONA, N.S. ROAD - 1 JUHU SCHEME, VILE PARLE (W) MUMBAI 400056 PAN - ALEPP3123C APPELLANT RESPONDENT APPELLANT BY: SHRI LOVE KUMAR RESPONDENT BY: SHRI AJAY R. SINGH DATE OF HEARING: 03.06. 2015 DATE OF PRONOUNCEMENT: 03.06.2015 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A) - 26, MUMBAI AND IT PERTAINS TO A.Y. 2004 - 05. 2. FOLLOWING GROUNDS WERE URGED BEFORE US: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) IS ERRED IN RESTRICTING THE ADDITION OF ` 70 LAKHS MADE BY THE ASSESSING OFFICER AS LONG TERM CAPITAL GAINS AND NOT APPRECIATING THE FACTS THAT THE STAMP DUTY VALUATION AT ` 30.03 LA KHS DID NOT PERTAIN TO THE VALUATION OF THE SAID TWO FLATS RECEIVED BY THE ASSESSEE FROM THE DEVELOPER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATION THE FACTS THAT THE STAMP DUTY VALUATION AT RS. 30.03 LAKHS PERTAINED TO THE TRANSFER OF DEVELOPMENT RIGHTS BY THE OWNER AND NOT THE TWO FLATS RECEIVED BY THE OWNER FROM DEVELOPER IN LIEU OF DEVELOPMENT RIGHTS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOL DING THAT THE RIGHT TO CONSTRUCT THE ADDITIONAL FLOORS UNDER THE DCR, 1991 WAS ACQUIRED WITHOUT INCURRING ANY COST, THE ASSESSEE WAS NOT CHARGEABLE TO TAX IN RESPECT OF TRANSFER OF THESE RIGHTS. ITA NO. 3604/MUM/2012 SHRI RHODA KHURSIAGRA 2 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE STATED IN BRI EF. ASSESSEE WAS EMPLOYED WITH M/S. MINIMAX LTD. TILL 1990 AND THEREAFTER HE WAS NOT HAVING ANY TAXABLE INCOME. ASSESSEE OWNED A PLOT OF LAND BEING A S ANCESTRAL PROPERTY SITUATED IN VILE PARLE (E) WHICH CONSISTED OF GROUND + 2 FLOORS OF RESIDENTIAL BUILDIN G. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE HE WAS TITLE HOLDER OF THE PROPERTY SINCE 1967. UPON ENACTMENT OF DEVELOPMENT CONTROL REGULATIONS, 1991 HE BECAME ENTITLED TO AD DITIONAL FSI AND FOR SELLING THE SAID ADDITIONAL FSI ASSESSEE ENTERED INTO AN AGREEMENT DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2004 - 05. AS PER THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE DEVELOPERS, ASSESSEE RECEIVED TWO FLATS AS CONSIDERATION FOR TRANSFER OF DEVELOPMENT RIGHTS. THE STAMP DUTY AUTHORITIES VAL UED THIS TRANSACTION AT ` 30,03,000/ - . 4. ASSESSEE FILED THE RETURN OF INCOME DECLARING RENTAL INCOME ON THE PROPERTY AND ALSO SUBMITTED THAT TH ERE IS NO TAXABLE CAPITAL GAIN IN THE HANDS OF THE ASSESSEE BECAUSE AS PER THE DEVELOPMENT AGREEMENT ASSESSEE RECEIVED TWO FLATS, WHICH ARE OTHERWISE EXEMPT UNDER SECTION 54F OF THE ACT. IN OTHER WORDS, THE ENTIRE GAIN ON TRANSFER RIGHTS WAS INVESTED IN THE NEW RESIDENTIAL HOUSE IN THE REDEVELOPED BUILDING. 5. THE AO WAS OF THE OPINION THAT THE VALUATION MADE BY THE STAMP VALUATION AUTHORITIES IS NOT CORRECT AND ESTIMATED THE VALUE OF EACH FLAT AT ` 35 LAKHS AND ACCORDINGLY MADE AN ADDITION OF ` 70 LAKHS BY REJECTING THE CONTENTION OF THE AS SESSEE THAT HE IS ENTITLED TO EXEMPTION UNDER SECTION 54. IT MAY BE NOTED THAT WITH REGARD TO VALUATION OF THE PROPERTY THE AO REFERRED IT TO THE DVO BUT NO VALUATION REPORT WAS OBTAINED TILL COMPLETION OF THE ASSESSMENT. THE AO HAS ALSO NOT GIVEN ANY BASI S ON WHICH HE ESTIMATED THE VALUE OF THE PROPERTY AT ` 70 LAKHS. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). PLACING RELIANCE UPON SEVERAL DECISIONS OF THE ITAT MUMBAI BENCHES IT WAS CONTENDED THAT EVEN UNDER SECTION 50 C OF THE ACT THE VALUE OF THE PROPERTY CANNOT BE IN EXCESS OF THE VALUE ADOPTED BY THE STAMP DUTY AUTHORITIES AND , AT ANY RATE , THE AO HAS NO BUSINESS TO ESTIMATE THE VALUE AND ALSO REJECT THE ITA NO. 3604/MUM/2012 SHRI RHODA KHURSIAGRA 3 CLAIM OF EXEMPTION UNDER SECTION 54F OF THE ACT BESIDES THE FACT THA T THE COST OF ACQUI SITION OF FSI BEING NIL IT IS NOT ASSESSABLE TO CAPITAL GAIN TAX. 7. THE LEARNED CIT(A) EXAMINED THE ISSUE THOROUGHLY TO NOTICE THAT THE PLEA OF THE ASSESSEE DESERVES ACCEPTANCE. IN THIS REGARD HE OBSERVED, IN PARA 4.2 OF HIS ORDER AS UNDER: - 4.2 I HAVE CAR EFULLY CONSIDERED THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER, REMAND REPORT AS WELL AS THE SUBMISSIONS OF THE APPELLANT. AS REGARDS, THE ESTIMATED VALUATION OF THE TWO FLATS BY THE AO AT RS.70 LAKHS AS AGAINST VALUATION DONE BY THE STAMP AUTHORITIES AT RS.30,03,000/ - , IT IS NOTED THAT THE AO HAS MADE A WILD GUESS IN ESTIMATING THE VALUATION OF THE TWO FLATS, WHICH IS MORE THAN DOUBLE OF THE STAMP AUTHORITY VALUATION. IN THE REMAND REPORT ALSO, THE AO COULD NOT GIVE ANY REASON AT ALL FOR SUCH HIGH ESTIMA TION. EVEN FOR THE PURPOSE OF TAXATION OF THE CAPITAL GAIN, IF AN ASSESSEE APPARENTLY DISCLOSES LESS PRICE, THEN ALSO, THE SALE CONSIDERATION CAN BE ENHANCED UPTO THE MAXIMUM LIMIT OF STAMP DUTY VALUATION U/S. 50C OF THE I.T. ACT. ANY FURTHER ENHANCEMENT O F CONSIDERATION IS NEITHER LEGALLY PERMISSIBLE NOR JUSTIFIED IN ABSENCE OF SOLID REASONS. IN THE INSTANT CASE, THE AO HAS NOT GIVEN ANY REASON AT ALL THEREFORE, HIS ESTIMATION CAN NOT BE HELD JUSTIFIED AT ALL. OTHERWISE ALSO, I DO NOT AGREE WITH THE CONTEN TION OF THE APPELLANT THAT FACTS OF THIS CASE ARE ALMOST SIMILAR TO THE FACTS OF THE CASE OF SHRI ISHVERLAL MANMOHANDAS KANAKIA (SUPRA), WHERE JURISDICTIONAL ITAT, MUMBAI HAS CATEGORICALLY HELD THAT IN A DEVELOPMENT AGREEMENT WITH THE DEVELOPER, THE RECEIP T BY THE ASSESSEE IS A CAPITAL RECEIPT, WHICH CANNOT BE BROUGHT TO TAX AS PER THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF B.C. SRINIVASS SHETTY. THE ITAT HAS RENDERED THIS DECISION IN THE LIGHT OF THE DECISION OF THE HON'BLE APEX COURT. T HEREFORE, FOLLOWING THE DECISION OF THE JURISDICTIONAL ITAT, IT IS HELD THAT IN THE INSTANT CASE ALSO THERE IS NO SCOPE FOR TAXING THE CAPITAL GAIN IN THE HANDS OF THE APPELLANT. ACCORDINGLY, THE ADDITION MADE BY THE AO DESERVES TO BE DELETED. 8. AGGRIEVED, R EVENUE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING THE LEARNED COUNSEL SUBMITTED THAT EVEN AS ON DATE THE VALUATION REPORT WAS NOT OBTAINED FROM THE VALUATION OFFICER AND EVEN THE AO HAS NO BASIS FOR COMPUTING THE VALUE OF THE FLAT AT ` 35 LAKHS, WHICH IS BEYOND THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITIES. HE ALSO SUBMITTED THAT WHEN THERE IS NO COST OF ACQUISITION OF FSI THERE CANNOT BE ANY CAPITAL GAINS ON SALE OF SUCH FSI AND EVEN ON THAT COUNT THE FIRST APPELLATE AUTHORITY CORRE CTLY APPRECIATED THE PLEA OF THE ASSESSEE, BY RELYING UPON THE DECISION OF THE ITAT ITA NO. 3604/MUM/2012 SHRI RHODA KHURSIAGRA 4 MUMBAI BENCHES, WHICH IN TURN WAS APPROVED BY THE H.C. IN THE CASE OF CIT VS. SAMBHA J I NAGAR CO - OPERATIVE HOUSING SOCIETY LTD. 273 CTR 430. 9. THE LEARNED D.R., ON THE OTHER H AND, RELIED UPON THE ORDER PASSED BY THE AO. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RECORD. IT IS NOT UNDERSTANDABLE AS TO WHY THE REVENUE HAS PREFERRED THE APPEAL. TO FILE AN APPEAL THE POWER IS NOT GIVEN TO THE AO BUT IT IS VESTED IN THE COMMISSIONER OF INCOME TAX TO GIVE AUTHORISATION TO THE AO TO FILE AN APPEAL WHICH HAS TO BE DONE WITH UTMOST SINCERITY AND WITH AN OPEN MIND. IN THE INSTANT CASE THE APPEAL APPEARS TO HAVE BEEN FILED IN A ROUTINE FASHION IN AS MUCH AS THE AO HAS NO BASIS FOR VALUING EACH FLAT AT ` 35 LAKHS, WHICH IS MORE THAN DOUBLE THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITIES. EVEN AS ON DATE THE VALUATION REPORT HAS NOT BEEN OBTAINED FROM THE DVO. UNDER THESE CIRCUMSTANCES IT IS DIFFICULT TO FATHOM AS TO HO W A RESPONSIBLE OFFICER SUCH AS COMMISSIONER OF INCOME TAX HAS APPROVED THE REQUEST OF THE AO TO PREFER AN APPEAL AGAINST THE ORDER OF THE CIT(A). WE TAKE THIS OPPORTUNITY TO ADVICE ALL THE COMMISSIONERS NOT TO GRANT AUTHORISATION IN CASES WHERE THERE IS N O CHANCE OF WINNING AN APPEAL. IN FACT WE CALLED FOR THE RECORD TO VERIFY AS TO THE REASONS GIVEN BY THE AO WHICH MIGHT HAVE PROMPTED THE LEARNED COMMISSIONER TO GIVE HIS AUTHORISATION. THE RECORD WAS NOT MADE AVAILABLE TO US. BE THAT AS IT MAY, IN THE PEC ULIAR FACTS AND CIRCUMSTANCES OF THE CASE THE AO HAS NOT MADE OUT ANY CASE UNDER SECTION 50C OF THE ACT OR UNDER ANY OTHER PROVISIONS OF THE ACT TO MAKE AN ADDITION WHEREAS THE LEARNED CIT(A) HAS GIVEN COGENT REASONS TO DELETE THE ADDITION ON BOTH THE COUN TS. WE, THEREFORE, APPROVE THE ORDER PASSED BY THE CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JUNE, 2015. SD/ - SD / - ( SANJAY ARORA ) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 3 RD JUNE, 2015 ITA NO. 3604/MUM/2012 SHRI RHODA KHURSIAGRA 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 26 , MUMBAI 4. THE CIT 15 , MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.