SHRI HIREN KUMAR JAIN, Khandwa V. THE ACIT, Khandwa

ITA 393/IND/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5947 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 01-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Earning of tax free income
• Section: 50C; 14A

Judgement Text

HIREN KUMAR JAIN ITA NO. 393/IND/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO.393/IND/2015 A.Y. 2010-11 HIREN KUMAR JAIN KHANDWA PAN ABJPJ 7663G ::: APPELLANT VS ASSTT.COMMR. OF INCOME TAX CIRCLE KHANDWA ::: RESPONDENT APPELLANT BY SHRI PRAKASH JAIN RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 8.6.2016 DATE OF PRONOUNCEMENT 2 0 .6.2016 O R D E R THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 30.1.2015 OF THE LEARNED CIT(A )-II, INDORE. HIREN KUMAR JAIN ITA NO. 393/IND/2016 2 2. GROUND NO. 1 OF THE APPEAL IS THAT THE LEARNED CIT( A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER U/S 14A OF THE ACT AMOUNTING T O RS.11,255/-. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAVING INVESTMENT IN PARTNERSHIP FIRM HAS BEEN RECEIVING INT EREST AND REMUNERATION FROM THE SAID FIRM. THE ASSESSING OFFICER, THEREFORE, BY INVOKING PROVISIONS OF SECTI ON 14A READ WITH RULE 8D, CALCULATED THE DISALLOWANCE @ 0.50 O N AVERAGE INVESTMENT OF RS. 22,51,032/-. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. NOW THE ASSESSEE HAS COME UP IN APPEAL BEFORE ME. 4. BEFORE ME, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE AGAINST THE EXEMPT INCOME EARNED FROM THE INVESTMENT MADE IN PARTNERSHIP FIRM WHICH IS EVIDENT FROM HIREN KUMAR JAIN ITA NO. 393/IND/2016 3 THE ASSESSMENT ORDER ITSELF. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS SETTLED LAW THAT WHEN NO EXPENDITURE IS INCURRED FOR EARNING EXEMPT INCOME, NO DISALLOWANCE COULD BE MADE U/S 14A OF THE ACT. IN SUPP ORT OF THIS PROPOSITION, THE LEARNED COUNSEL FOR THE ASSE SSEE RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PVT. LTD. VS. CIT; (20 15) 372 ITR 0694 (DELHI). ON THE OTHER HAND, THE LEARNED DR R ELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SID ES. I HAVE ALSO GONE THROUGH THE JUDGMENT OF THE HON'BLE DE LHI HIGH COURT RELIED UPON BY THE LEARNED COUNSEL FOR T HE ASSESSEE. I, THEREFORE, DIRECT THE ASSESSING OFFICE R TO DECIDE THIS ISSUE AFRESH IN THE LIGHT OF THE JUDGMENT OF TH E HON'BLE DELHI HIGH COURT (SUPRA). HIREN KUMAR JAIN ITA NO. 393/IND/2016 4 6. GROUND NO. 2 OF THE APPEAL RELATES TO CONFIRMING TH E ADDITION OF RS.51,000/- ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS. 7. THE ASSESSING OFFICER OBSERVED THAT THE HOUSEHOLD WITHDRAWALS FOR FAMILY OF THREE MEMBERS OF THE ASSESSE E HAS BEEN AN AMOUNT OF RS.11,750/- PER MONTH WHEREAS KEEPING IN VIEW THE LIVING STANDARD AND COST OF BASIC N EEDS, THE SAME WAS NOT SUFFICIENT. THE ASSESSING OFFICER, THEREFORE, ESTIMATED RS. 20,000/- PER MONTH AS HOUSEH OLD EXPENSES AND MADE AN ADDITION OF RS. 99,000/- ON THIS ACCOUNT. ON APPEAL, THE LEARNED CIT(A) GRANTED RELIEF OF RS.48,000/- AND MAINTAINED THE ADDITION OF RS.51,000/- AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBU NAL. 8. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES , I FIND THAT THE LEARNED CIT(A) WAS REASONABLE IN HIS APPROACH. I, THEREFORE, CONFIRM THE FINDINGS OF THE LEARNED CIT(A). HIREN KUMAR JAIN ITA NO. 393/IND/2016 5 9. GROUND NO. 3 IS THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.4,02,833/ - WHICH WAS MADE U/S 50C OF THE ACT. 10. THE FACTS, IN BRIEF, ARE THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE ALONG WITH TWO OTHERS CO- OWNERS NAMELY PARAMJEET SING NARANG AND BHANU KUMAR PATEL EACH HAVING 1/3 RD SHARE SOLD AGRICULTURAL LAND 2 KMS AWAY FROM THE MUNICIPAL LIMIT OF KHANDWA TO SHRI ANAND MAHESHWARI FOR A CONSIDERATION OF RS. 4,90,000/- OUT OF WHICH THE JOINT CO-OWNERS INCURRED EXPENSES OF RS. 10,000 BEING COST OF TRANSFER , THUS THE NET CONSIDE RATION WORKS OUT TO RS. 4,80,000 AND SHARE OF EACH CO-OWNER WORKS OUT TO RS. 1,60,000 WHICH IS ADOPTED BY THE ASSESSEE FOR WORKING OUT THE CAPITAL GAIN IN THE RETURN OF INCOME. THE STAMP AUTHORITY ADOPTED THE CIRCLE RATE OF LAND FOR LEVY OF STAMP DUTY AT RS. 16,88,550/-. THE ASSESSING OFFICER ACCORDINGLY TOOK 1/3 RD SHARE OF ASSESSEE HIREN KUMAR JAIN ITA NO. 393/IND/2016 6 AS THE SALES CONSIDERATION FOR WORKING OUT CAPITAL GAIN AT RS. 5,62,833. AGGRIEVED BY THE ORDER OF THE LD. A.O ., THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A) WHO DISM ISSED THE APPEAL OF THE ASSESSEE ON THIS GROUND. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 11. BEFORE ME, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS AND S O ALSO DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE HAS BEEN OBJECTING THE LEVY OF CAPITAL GAIN ON THE BASIS OF CIRCLE RATE ADOPTED BY THE STAMP AUTHORITY FOR LEVY OF STAMP AND REGISTRATION CHARGES WHICH WILL BE CLEAR FR OM THE ASSESSMENT ORDER AND APPELLATE ORDER ITSELF. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS A SETTLED LAW THAT WHEN AN OBJECTION TO THE VALUE ADOPTE D TO BE CONSIDERED FOR COMPUTING THE CAPITAL GAIN IS RAISED, IT IS THE DUTY OF THE ASSESSING OFFICER TO MAKE REFERENCE TO THE DVO. IN SUPPORT OF THIS, THE LEARNED COUNSEL FOR TH E HIREN KUMAR JAIN ITA NO. 393/IND/2016 7 ASSESSEE RELIED UPON THE JUDGMENT OF THE HON'BLE MADR AS HIGH COURT IN THE CASE OF APPADURAJ VIJAYARAGHAVAN V/S JCIT (2014) 369 ITR 486 (MAD.) WHEREIN IT WAS HELD AS UNDER :- IT IS SEEN FROM THE RECORDS FILED BEFORE THIS COURT THAT THE ASSESSEE OBJECTED TO THE ASSESSING OFFICER ADOPTING THE GUIDELINE VALUE RELATING TO THE PROPERTY SOLD FOR T HE SALE CONSIDERATION OF RS. 25,60,000 AS AGAINST THE GUIDE LINE VALUE ADOPTED BY THE ASSESSING OFFICER AT RS. 39,63 ,900. IN THE OBJECTION LETTER FIELD BY THE ASSESSEE ON DECEM BER, 15, 2011, THE ASSESSEE SPECIFICALLY POINTED OUT THAT TH E SALE WAS MORE IN THE NATURE OF DISTRESS SALE AND REQUESTED T O CONFIRM THE ACTUAL SALE CONSIDERATION FOR THE PURPOSE OF WO RKING OUT CAPITAL GAINS. THE ASSESSING OFFICER REJECTED THE C LAIM UNDER SECTION 50C OF THE INCOME TAX ACT, 1961( HEREINAFTE R CALLED AS THE ACT ) FOR THE PURPOSE OF WORKING OUT LONG TERM CAPITAL GAINS. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE AS SESSEE, WHEN SPECIFIC OBJECTION WAS MADE BY THE ASSESSEE AS TO THE ASSESSING OFFICER ADOPTING THE MARKET VALUE UNDER S ECTION 50C(2) OF THE ACT, THE ASSESSING OFFICER OUGHT TO H AVE REFERRED THE VALUATION OF THE CAPITAL ASSET TO THE VALUATION OFFICER , WHEREAS THE AUTHORITIES BELOW REFERRED TO SECTION 50C(1) OF THE ACT ALONE WITHOUT ADVERTING TO SECTIO N 50C(2) OF THE ACT. A READING OF THE ORDER OF THE ASSESSING OFFICER SH OWS THAT HAVING FOUND SUCH AN OBJECTION, THE ASSESSING OFFIC ER COMMITTED SERIOUS ERROR IN NOT ADVERTING TO SECTION 50C(2) OF THE ACT, THE ERROR PROCEEDED THROUGH OUT BEFORE EVE RY APPALLATE FORUM, WE DO NOT FIND ANY JUSTIFICATION I N THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL TAKING THE VIE W THAT HIREN KUMAR JAIN ITA NO. 393/IND/2016 8 THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSE E HAD DISPUTED THE SALE CONSIDERATION OF RS. 39,63,900 AD OPTED FOR THE PURPOSE OF STAMP DUTY FOR THE PURPOSE OF WORKIN G OUT CAPITAL GAINS. IN SUCH VIEW OF THE MATTER , THE MAT TER IS RESTORED TO THE FILES OF THE ASSESSING OFFICER TO W ORK OUT CAPITAL GAINS BY INVOKING SECTION 50C(2) OF THE ACT .; WE FIND THAT IN THE PRESENT CASE , A CLAIM HAS BEE N MADE BY THE ASSESSEE AND THAT WAS RECORDED BY THE ASSESSING OFFICER AND, THEREFORE , THE PROVISION OF SECTION 50C(2) OF THE INCOME TAX ACT GETS ATTRACTED . EVEN THOUGH THE ASSESSEE H AD MADE AN OBJECTION FOR INVOKING SECTION 50C(1) , THE ASSE SSING OFFICER HAD NOT REFERRED THE VALUATION TO THE VALUA TION OFFICER AS PER SECTION 50C(2) OF THE INCOME TAX ACT, WHICH WAS CONFIRMED BY THE TRIBUNAL. IN THE WEBSTER DICTIONAR Y, THE MEANING TO THE WORD CLAIM IS GIVEN AN ASSERT , HENCE , MERE ASSERTION BY THE ASSESSEE IS SUFFICE. HENCE , THE INCOME-TAX ACT , WE ARE OF THE VIEW THAT THE ASSESS EE HAS MADE OUT A CASE FOR CONSIDERATION AS CLAIMED IN TER MS OF SUB SECTION (2) OF SECTION 50C, WHICH HAS NOT BEEN DON E. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CAS E OF SUNIL KUMAR AGRAWAL V/S COMMISSIONER OF INCOME TAX SILIGURI, (2015) 372 ITR 0083 (CAL.) WHEREIN IT WAS HELD AS UNDER:- FOR THE AFORESAID REASONS, WE ARE OF THE OPINION THAT THE VALUATION BY THE DEPARTMENTAL VALUATION OFFICER , CONTEMPLATED UNDER SECTION 50C, IS REQUIRED TO AVOI D MISCARRIAGE OF JUSTICE. THE LEGISLATURE DID NOT INT END THAT THE HIREN KUMAR JAIN ITA NO. 393/IND/2016 9 CAPITAL GAIN SHOULD BE FIXED MERELY ON THE BASIS OF THE VALUATION TO BE MADE BY THE DISTRICT SUB REGISTRAR FOR THE PURPOSE OF STAMP DUTY. THE LEGISLATURE HAS TAKEN CA RE TO PROVIDE ADEQUATE MACHINERY TO GIVE A FAIR TREATMENT TO THE CITIZEN / TAXPAYER. THERE IS NO REASON WHY THE MACH INERY PROVIDED BY THE LEGISLATURE SHOULD NOT BE USED AND THE BENEFIT THEREOF SHOULD BE REFUSED. EVEN IN A CASE W HERE NO SUCH PRAYER IS MADE BY THE LD. ADVOCATE REPRESENTIN G THE ASSESSEE, WHO MAY NOT HAVE BEEN PROPERLY INSTRUCTED IN LAW, THE ASSESSING OFFICER, DISCHARGING A QUASI JUD ICIAL FUNCTION, HAS THE BOUNDEN DUTY TO ACT FAIRLY AND TO GIVE A FAIR TREATMENT BY GIVING HIM AN OPTION TO FOLLOW THE COU RSE PROVIDED BY LAW. FOR THE AFORESAID REASONS, THE ORDER UNDER CHALLEN GE IS SET ASIDE . THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF S.MUTHURAJA V/S CIT (2014) 369 ITR 0483 (MAD.) WHER EIN THE HONBLE HIGH COURT HELD AS UNDER :- AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE A SSESSEE, WHEN SPECIFIC OBJECTION WAS MADE BY THE ASSESSEE AS TO THE ASSESSING OFFICER ADOPTING THE MARKET VALUE, UNDER SECTION 50C (2) OF THE ACT, THE ASSESSING OFFICER OUGHT TO HAVE REFERRED THE VALUATION OF THE CAPITAL ASSET TO THE VALUATION OFFICER, WHEREAS , THE AUTHORITIES BELOW REFERRED T O SECTION 50C(1) OF THE ACT ALONE WITHOUT ADVERTING TO SECTI ON 50C(2) OF THE ACT. HIREN KUMAR JAIN ITA NO. 393/IND/2016 10 IN VIEW OF THE ABOVE DECISIONS, THE LEARNED COUNSEL F OR THE ASSESSEE PRAYED THAT THE ORDERS OF THE AUTHORITIES BEL OW BE SET ASIDE AND THE ADDITION MAY KINDLY BE DELETED. IN T HE ALTERNATIVE, THE LEARNED COUNSEL FOR THE ASSESSEE PRAY ED THAT THE ADDITION MADE BY THE A.O. BE RESTORED BACK TO THE ASSESSING OFFICER TO REFER THE MATTER TO DVO AND ASSE SS THE CAPITAL GAIN ACCORDING TO VALUE ESTIMATED BY THE DVO. 12. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 13. I HAVE HEARD BOTH THE SIDES. AFTER CONSIDERIN G THE ARGUMENTS OF BOTH THE SIDES, I AM OF THE VIEW THAT IT IS A FIT CASE TO BE SENT BACK TO THE ASSESSING OFFICER WITH TH E DIRECTION TO REFER THE MATTER TO DVO AND ASSESS THE CAP ITAL GAIN ACCORDING TO THE VALUE ESTIMATED BY THE DVO. I ORD ER ACCORDINGLY. HIREN KUMAR JAIN ITA NO. 393/IND/2016 11 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN OPEN COURT ON 20 TH JUNE, 2016 SD/- (D.T. GARASIA) JUDICIAL MEMBER 20 TH JUNE, 2016 DN/- HIREN KUMAR JAIN ITA NO. 393/IND/2016 12