M/s. Veenus Theatre, CHENNAI V. ACIT, Pondicherry

ITA 368/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64143 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 22-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR SHRI ANIRUDH RA
• Keywords: Capital asset; Fair market value; Valuation report
• Section: 133A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH CHENN AI BEFORE SHRI ABRAHAM P.GEORGE ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER .. ITA NO.368/MDS./2012 ASSESSMENT YEAR:2005-06 M/S.VENUS THEATRE, NO.213, MAHATMA GANDHI ROAD, MUTHIALPET, PONDICHERRY 605 003. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, PONDICHERRY. PAN AAFFV 0779 C (APPELLANT) (RESPONDENT) ITA NO.369/MDS./2012 ASSESSMENT YEAR:2005-06 (LATE) SHRI M MURUGESAN MUDALIAR, REP. BY L/H SHRI M BALASUBRAMANIAN, NO.213, MAHATMA GANDHI ROAD, MUTHIALPET, PONDICHERRY 605 003. VS. THE INCOME TAX OFFICER, WARD I, PONDICHERRY. PAN ALCPM 5284 H (APPELLANT) (RESPONDENT) ITA. 368 TO 370 /MDS/12 2 ITA NO.370/MDS./2012 ASSESSMENT YEAR:2007-08 SHRI M BALASUBRAMANIAN, NO.213, MAHATMA GANDHI ROAD, MUTHIALPET, PONDICHERRY 605 003. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, PONDICHERRY. PAN ANNPD 2069 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.SRIDHAR ADVOCATE RESPONDENT BY : SHRI ANIRUDH RAI, CIT DR DATE OF HEARING : 06.08.12 DATE OF PRONOUNCEMENT : 22.0 8.12 O R D E R PER ABRAHAM P.GEORGE ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE RESPECTIVE ASSESS EES AGAINST ORDERS DATED 23.01.2012 OF CIT(A)-XII, CHEN NAI-34 FOR THE IMPUGNED ASSESSMENT YEARS. SINCE ISSUE ARISING IN THESE APPEALS ARE COMMON, THESE ARE DISPOSED OF THROUGH A CONSOLIDATED ORDER. ITA. 368 TO 370 /MDS/12 3 2. DURING A SURVEY PROCEEDINGS UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN THE PR EMISES OF SHRI M.BALASUBRAMANIAN, ONE OF THE ASSESSEES HERE, IT WA S NOTED BY THE REVENUE THAT HE HAD SOLD ONE PROPERTY CALLED M/ S.RENUKA THEATRE DURING THE PREVIOUS YEAR ENDING 31.03.2007. IN THE SAME SURVEY, IT WAS ALSO FOUND THAT M/S.VENUS THEATRE, A LSO ONE OF THE ASSESSEES, HAD SOLD THE THEATRE DURING PREVIOUS Y EAR ENDING 31.03.2005. THE SALE OF M/S.VENUS THEATRE WAS FOR A CONSIDERATION OF ` 81,98,880/- AND VALUE SHOWN IN THE SALE DEED WAS ` 43,70,000/-. SALE CONSIDERATION FOR M/S.RENUKA T HEATRE WAS ` 2,95,50,000/- INCLUDING ON-MONEY RECEIPT. ON THE VERY SAME DATE, THERE WAS A SIMILAR SURVEY IN THE PREMIS ES OF LATE SHRI M.MURUGESA MUDALIAR AS WELL, WHO IS ALSO ASSE SSEE HERE. IN SUCH SURVEY, IT WAS NOTICED THAT SAID SHRI M. MU RUGESA MUDALIAR HAD SOLD A PLOT AT 233, THIRUVALLUVAR NAG AR, SARAM, PONDICHERRY MEASURING 25,824 SFT. FOR A CONSIDERATI ON OF ` 52,50,000/- DURING THE PREVIOUS YEAR ENDING 31.03.2 005. 3. OUT OF THE THREE ASSESSEES, M/S.VENUS THEATRE HAD NOT FILED ANY RETURN OF INCOME FOR ASSESSMENT YEAR 2005 -06 AND THEREFORE, A NOTICE UNDER SECTION 148 WAS ISSUED T O IT. SHRI M.BALASUBRAMANIAN HAD FILED HIS RETURN OF INCOME FO R ASSESSMENT ITA. 368 TO 370 /MDS/12 4 YEAR 2007-08 ON 31.03.2009, WHICH INTER ALIA SHOWED THE CAPITAL GAINS ARISING OUT OF THE SALE OF M/S.RENUKA THEATRE ALBEIT AT A LOWER AMOUNT. LATE M.MURUGESA MUDALIAR HAD ALSO F ILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 WHEREI N LONG TERM CAPITAL GAINS OF ` 13,26,000/- WAS SHOWN. PURSUANT TO THE NOTICE UNDER SECTION148 OF THE ACT, M/S.VENUS THEATRE FIL ED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 WHEREIN CAPITAL GAINS OF ` 22,95,696/- WAS SHOWN. 4. WHILE WORKING OUT THE CAPITAL GAINS, ALL THE A SSESSEES RELIED ON REPORTS OF REGISTERED VALUER FOR DETERMINING THE FAIR MARKET VALUE (FMV) AS ON 01.04.1981. ASSESSING OFFICER D URING THE COURSE OF ASSESSMENT PROCEEDINGS OBTAINED FROM THE REGISTRATION DEPARTMENT OF THE TAMIL NADU STATE, GU IDELINE VALUE FOR THE RESPECTIVE PROPERTIES. HE COULD OBTAIN SUC H GUIDELINE VALUE ONLY FOR 01.04.1985, AND HE WORKED OUT THE F AIR MARKET VALUE OF PROPERTY AS ON 01.04.1981, BASED ON A BACK WARD APPLICATION OF COST INFLATION INDEX. IN OTHER WORD S TO THE GUIDELINE VALUE AS ON 01.04.1985, HE APPLIED THE RATIO OF 100 TO THE INDEX OF THE RELEVANT PREVIOUS YEAR TO ARRIVE AT THE VALUE AS ON 01.04.1981. ASSESSING OFFICER SUBSTITUTED THE FMV AS ON 01.04.1981, BASED ON SUCH WORK-OUT AND RECOMPUTED T HE CAPITAL ITA. 368 TO 370 /MDS/12 5 GAINS. THIS RESULTED IN SUBSTANTIAL ADDITION TO TH E RETURNED CAPITAL GAINS. 5. ALL THE ASSESSEES MOVED IN APPEAL BEFORE THE CI T(A) PRIMARILY AGAINST THE FMV AS ON 01.04.1981 CONSIDE RED BY THE A.O. AS PER ASSESSEES, GUIDELINE VALUE MENTIONED BY THE SUB- REGISTRAR WAS NOT A MEASURE OF THE MARKET PRICE AN D COULD NOT BE CONSIDERED FOR THE PURPOSE OF COMPUTATION OF CAPITA L GAINS. ACCORDING TO THE ASSESSEES, IT HAD ESTIMATED THE FM V AS ON 01.04.1981 BASED ON AN APPROVED VALUERS REPORT A ND WITHOUT ANY REASON, SUCH REPORT WAS REJECTED BY THE ASSESSI NG OFFICER. COPIES OF APPROVED VALUERS REPORT WERE FILED BEFOR E THE LD. CIT(A). RELYING ON SEC.2(22B) OF THE ACT, ASSESS EE SUBMITTED BEFORE THE CIT(A) THAT THE INGREDIENTS NECESSARY FO R FIXING FMV WERE NOT RIGHTLY CONSIDERED BY THE ASSESSING OFFICE R. HOWEVER, LD. CIT(A) WAS NOT FULLY AGREEABLE TO THE CONTENTI ON OF THE ASSESSEE. ACCORDING TO HIM, APPROVED VALUERS REPOR T FURNISHED BY THE ASSESSEES WERE VERY VAGUE AND BRIEF. APPR OVED VALUER HAD SIMPLY MENTIONED PLINTH AREA & RATE/SQ.FT., FOR THE BUILDING IN THE PLOT, BUT NEVER GAVE ANY DETAILS AS TO HOW THE RATES WERE ARRIVED AT. ACCORDING TO LD. CIT(A), THE VALUE FIX ED BY THE APPROVED VALUER WAS HIGHLY INFLATED, SINCE THE LAND S WERE IN ITA. 368 TO 370 /MDS/12 6 AGRICULTURAL NATURE IN 1981. THEREFORE, ACCORDING TO HIM, PRICES FIXED BY THE APPROVED VALUER CONSIDERING THE LAND TO BE COMMERCIAL PROPERTIES, COULD NOT BE ACCEPTED. IN H IS OPINION, ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE VA LUATION REPORT FILED BY THE ASSESSEE FOR JUSTIFYING THE FMV AS ON 01.04.1981. NEVERTHELESS, HE ALSO HELD THAT THE REVERSE INDEXI NG ADOPTED BY THE ASSESSING OFFICER ARRIVING AT FMV AS ON 01.04.1 981 FROM THE SUB-REGISTRY FIXED VALUE AS ON 01.01.1985, WAS NOT AN ACCURATE OR RELIABLE ONE. ACCORDING TO HIM, THE VALUE FIXED BY SUB-REGISTRY, THOUGH IT CONSIDERED THE MARKET PRICES, MIGHT NOT B E A REALISTIC AND SCIENTIFIC. HE THEREFORE DEVISED A FORMULA FO R ARRIVING AT THE FMV AS ON 01.04.1981 AND THUS READ AS UNDER:- GUIDELINE VALUE AS ON 1.4.81 X ACTUAL SALE CON SIDERATION SHOWN BY ASSESSEE GUIDELINE VALUE AS ON DATE OF SALE APPLYING THIS PRINCIPLE, HE WORKED OUT THE FMV AS O N 01.04.1981AND RE-WORKED THE CAPITAL GAINS ACCORDING LY. 6. NOW BEFORE US, LD. AUTHORISED REPRESENTATIVE OF ASSESSEE SUBMITTED THAT REVERSE INDEXATION METHOD ADOPTED BY THE ASSESSING OFFICER FOR ARRIVING AT THE FMV AS ON 01. 04.1981 WAS RIGHTLY HELD TO BE IMPROPER BY THE LD. CIT(A). NEV ERTHELESS, ACCORDING TO HIM, LOWER AUTHORITIES HAD WITHOUT AN Y REASON, ITA. 368 TO 370 /MDS/12 7 REJECTED THE APPROVED VALUERS REPORT FOR FMV AS O N 01.04.1981. ONLY FINDING OF CIT(A) WAS THAT APPROVED VALUERS R EPORT WAS VAGUE AND BRIEF. ACCORDING TO HIM, GUIDELINE VALUE OF SUB-REGISTRY FIXED BY SUB-COLLECTOR (REVENUE AND STAMPS) AT THE BEST HAD ONLY AN EVIDENTIARY VALUE, BUT WAS NEVER CONCLUSIVE WIT H REGARD TO THE FMV. SUCH FMV WORK-OUT BASED ON GUIDELINE RATES, WAS ADOPTED EVEN FOR THE BUILDING STANDING ON THE LAND. FORMULA ADOPTED BY THE CIT(A) WAS FLAWED, SINCE IT DID NOT HAVE A STATUTORY PRESCRIPTION. ACCORDING TO HIM, THE ONLY VALUE AVAILABLE IN SUPPORT OF THE FMV AS ON 01.04.1981 WAS THE REGI STERED VALUERS REPORT SUBMITTED BY THE ASSESSEES AND THER EFORE, IT SHOULD NOT HAVE BEEN GIVEN A GO-BY WITHOUT VALID RE ASONS. LD. A.R. RELIED ON THE DECISIONS OF HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF HINDUSTAN MOTORS LTD. VS. APPROPRIAT AU THROITY [2001] 249 ITR 424 AND THULASIMANI AMMAL VS. CIT & ANOTHER [2000] 158 CTR (MAD.) 05. 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRO NGLY SUPPORTED THE ORDERS OF CIT(A) AND SUBMITTED THAT T HE CIT(A) HAD GIVEN CONSIDERABLE RELIEF TO THE ASSESSEE BY REWOR KING THE FMV AS ON 01.04.1981. ACCORDING TO HIM, LD. CIT(A) HAD APPLIED A FORMULA, WHICH GAVE A REASONABLE ESTIMATE OF FMV AS ON ITA. 368 TO 370 /MDS/12 8 01.04.1981. IN ANY CASE, FIXATION OF FMV WAS A SUB JECTIVE EXERCISE, WHEN ALL RELEVANT DATA WERE NOT AVAILABLE . IN SUCH CIRCUMSTANCES APPLICATION OF THE FORMULA FOLLOWED B Y THE CIT(A) COULD NOT BE FAULTED WITH. 8. WE HAVE HEARD THE COUNSEL AND ALSO CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ORDERS OF THE CIT(A) IN ALL THESE CASES WOULD CLEARLY SHOW THAT ASSESSEES HAD SUBMITT ED REPORT OF THE REGISTERED VALUE IN SUPPORT OF THE FMV AS ON 01 .04.1981, ADOPTED BY IT FOR THE PURPOSE OF COMPUTING CAPITAL GAINS. IN THE CASE OF ASSESSEE LATE SHRI M.MURUGESA MUDALIAR, IT HAS NEVERTHELESS BEEN MENTIONED BY THE ASSESSING OFFIC ER THAT REGISTERED VALUERS REPORT WAS NOT PRODUCED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BUT IN CASE OF OTHER ASSESSEES, NOTHING ON THESE LINES IS MENTIONE D BY THE ASSESSING OFFICER. LD. CIT(A) HAD REJECTED REGIS TERED VALUERS REPORT FOR FIXING THE FMV AS ON 01.04.1981 FOR A RE ASON THAT SUCH REPORT WAS VAGUE. ASSESSEES HAVE NOT PRODUCED A C OPY OF SUCH VALUATION REPORT BEFORE US ALSO. IN THE FORMULA AD OPTED BY THE CIT(A) FOR ARRIVING AT THE ESTIMATE OF FMV AS ON 01 .04.1981, WHICH HAS BEEN REPRODUCED BY US PARA - 5 ABOVE, NUMERATOR IS GUIDELINE VALUE AS ON 01.04.1981. HOWEVER, WHEN AP PLYING THE ITA. 368 TO 370 /MDS/12 9 FORMULA, IN THE NUMERATOR HE HAS TAKEN AS GUIDELINE VALUE, AS THE SAME VALUE ADOPTED BY THE ASSESSING OFFICER, BY MAK ING BACKWARD APPLICATION OF COST INFLATION INDEX ON GUI DELINE VALUE AS ON 01.04.1985. THUS, THE CIT(A) AFTER HOLDING THAT BACKWARD INDEXATION WAS NOT PROPER FOR ARRIVING AT GUIDELINE VALUE ON 01.04.1981, AGAIN USED THE SAME FIGURE IN THE NUME RATOR OF HIS OWN FORMULA. ALL THE AUTHORITIES BELOW, IN OUR OPI NION, HAD GIVEN A GO-BY TO PROVISION IN THE ACT RELATING TO THE FMV. SECTION 2(22B) OF THE ACT, WHICH DEFINES FMV READS AS UNDER:- SEC.2( 22B )]FAIR MARKET VALUE, IN RELATION TO A CAPITAL ASSET, MEANS ( I ) THE PRICE THAT THE CAPITAL ASSET WOULD ORDINARILY FETCH ON SALE IN THE OPEN MARKET ON THE RELEVANT DATE ; AND ( II ) WHERE THE PRICE REFERRED TO IN SUB-CLAUSE ( I ) IS NOT ASCERTAINABLE, SUCH PRICE AS MAY BE DETERMINED IN ACCORDANCE WITH THE RULES MADE UNDE R THIS ACT THUS WHAT IS TO BE SEEN IS THE PRICE THAT A CAPITAL ASSET WOULD FETCH IF IT WAS SOLD IN OPEN MARKET AS ON 01.04.198 1. IF IT IS NOT SO ASCERTAINABLE, IT SHOULD BE FIXED IN ACCORDANCE WITH RULES MADE UNDER THE ACT. NO DOUBT THERE WOULD ALWAYS BE SOME SORT OF ESTIMATION, WHEN SUCH FMV IS FIXED, SINCE DATA FOR FIXING THE FMV AS ON 01.04.81 MAY NOT BE ALWAYS AVAILABLE. NEVER THELESS TAKING THE GUIDELINE VALUE AS ON 01.04.1985 AND BAC KWARD INDEXING SUCH VALUE WILL NOT BE APPROPRIATE. SIMIL ARLY APPLICATION ITA. 368 TO 370 /MDS/12 10 OF A FORMULA AS DONE BY LD.CIT(A) WHICH IS NOT HAVI NG THE STATUTORY EDICT ALSO MAY NOT BE APPROPRIATE. ASSES SING OFFICER WAS IN OUR OPINION DUTY BOUND TO GET FROM THE OFFIC E OF SUB REGISTRY THE FMV AS ON 01.04.1981 FOR THE SAME OR ANY ADJACENT PROPERTY AND THEREAFTER MAKE APPROPRIATE ADJUSTMENT S THEREON TO REFLECT THE FAIR MARKET PRICE. WE ARE OF THE OPINI ON THAT THE MATTER THEREFORE, REQUIRES A REVISIT BY THE ASSESSING OFFI CER. WE THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELO W AND REMIT THE ISSUE OF CAPITAL GAINS BACK TO THE FILE OF THE ASSE SSING OFFICER FOR CONSIDERATION AFRESH. ASSESSEE SHALL FILE EVIDEN CE IN SUPPORT OF ITS FMV AS ON 01.04.1981 BEFORE THE ASSESSING OFFIC ER. THEREAFTER, ASSESSING OFFICER SHALL PROCEED AS PER LAW. 9. IN THE RESULT, APPEALS OF ASSESSEES ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY, THE 22 ND AUGUST, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P.GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED 22 ND AUGUST, 2012. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE