ACIT 22(2), MUMBAI V. POOJA ASHOK SAID, MUMBAI

ITA 3981/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7456 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 25-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Assessee Lawyers: MARLOAN REGO
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Valuation report
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C,MUMBAI BEFORE SHRI D.MANMOHAN, VICE PRESIDENT & SHRI A.L.GEHLOT, (A.M) ITA NO.3981/MUM/09(A.Y.2006-07) THE ACIT 22(2), 4 TH FLOOR, TOWER 6, VASHI RAILWAY STN.BLDG., VASHI, NAVI MUMBAI 400 703 (APPELLANT) VS. MRS. POOJA ASHOK SAID, 702, SAFAL HIGHTS-1 MOTI BAUG, NEAR MAITRY PARK, SION TROMBAY ROAD, CHEMBUR, MUMBAI 71. PAN: AMPHS 4939B (RESPONDENT) APPELLANT BY : SHRI VIVEK BATRA RESPONDENT BY : SHRI MARLOAN REGO ORDER PER A.L.GEHLOT, A.M, THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGA INST THE ORDER OF THE LD. CIT(A) XXII, MUMBAI DATED 6/3/2009 RELATING TO ASS ESSMENT YEAR 2006-07. THE EFFECTIVE GROUND RAISED BY THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.57,94,110/- MADE BY THE A.O BEIN G DIFFERENCE IN THE VALUE OF COST OF ACQUISITION OF LAND AS ON 1/4/1981. 2. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE A.O NOTICED THAT THE ASSESSEE HAS SOLD AN AGRIC ULTURAL LAND FOR A TOTAL CONSIDERATION OF RS.2,32,40,000/- AND HAD COMPUTED THE LONG TERM CAPITAL GAIN TAKING THE VALUE OF AGRICULTURAL LAND AS ON 1/4/1 981 AT RS. 12,18,000/- ON THE BASIS OF THE VALUE ARRIVED AT AFTER VALUATION DONE BY THE GOVERNMENT APPROVED VALUATION IN KEEPING WITH SECTION 50(2)(B)(I) OF TH E INCOME TAX ACT, 1961. THE ITA NO.3981/MUM/09(A.Y.2006-07) 2 A.O WAS OF THE VIEW THAT THE VALUE OF AGRICULTURAL LAND AS ON 1/4/1981 HAD WRONGLY BEEN TAKEN BY THE ASSESSEE AS HAS BEEN DON E AS PER VALUE OF RESIDENTIAL LAND RATE AND NOT AGRICULTURAL LAND RAT E. THE A.O DID NOT ACCEPT THE VALUATION REPORT OF REGISTERED VALUER BASIS ON WHI CH THE ASSESSEE ADOPTED THE FAIR MARKET VALUE OF THE SAID LAND AS ON 1/4/1981. THE REASONS GIVEN BY THE AO FOR NOT ADOPTING THE ASSESSEES VALUE OF LAND AS ON 1/4/1981 REPRODUCED BY THE LD. CIT(A) IN HIS ORDER AT PAGE -2 IS AS UNDER:- 1.TILL THE DATE OF TRANSFER, THE LAND WAS AGRICU LTURAL AND NOT RESIDENTIAL. 2. NOT ONLY THE LAND WAS AGRICULTURAL BUT ALSO TIL L TRANSFER DATE IT SITUATED IN NO DEVELOPMENT ZONE. 3. IN THE VALUATION REPORT IT IS MENTIONED THAT THE LAND IS SITUATED 7 KMS. AWAY FROM HADAPSAR. HADAPSAR WAS WITHIN THE LIMITS OF PUNE MUNICIPAL CORPORATION. IT DOES NOT MEAN THAT THIS LAND WAS A LSO WITHIN THE LIMITS OF PMC IN 1981. 4. THE VALUER HIMSELF ADMITS THAT THERE WERE NO SAL E INSTANCES AVAILABLE IN RESPECT OF ANY NEARBY LAND IN 1981. THIS FACT ITSE LF PROVE THAT THERE WERE NO POTENTIALITY FOR RESIDENTIAL PURPOSE IN 1981. 5. THE VALUER DID NOT JUSTIFY THE REASON AS TO WHY THE PROPOSE TO DERIVE AT THE RATE OF OPEN PLOT OF LAND BY DEVELOPMENT METHOD . 6. THE SALE INSTANCE WHICH WAS QUOTED FOR SUPPORTIN G THE VALUE, WAS OF RESIDENTIAL LAND AND NOT AGRICULTURAL LAND. NOT ON LY THE ABOVE BUT ALSO IT WAS OF 1984 AT HADAPSAR AND NOT NEAR BY THE LAND. 7. THE SECOND SALE INSTANCE WHICH WAS QUOTED WAS OF MOHAMMEDWADI, PUNE AND NOT NEARBY THE LAND. IT IS ALSO NOTICED T HAT THIS INSTANCES IS RELATED TO FLAT RATES AND NOT LAND RATES. 8. THE THIRD SALE INSTANCE WHICH IS QUOTED IN LETTE R DATED 23.12.2008 ARE ALSO OF 1985 AND NOT OF 1981. THE DISTANCE OF THIS LAND FROM ASSESSEES LAND IS NOT MENTIONED. IN ABSENCE OF THE ABOVE FAC T, HOW CAN WE COMPARE THE SALE INSTANCE WITH ASSESSEES LAND. THE A.O FURTHER NOTICED THE FAIR MARKET VALUE OF T HE SAID LAND BY THE STAMP VALUE AUTHORITY ON 21/12/2005 WAS RS. 1,97,568/-. THE A.O ADOPTED A METHOD OF REVERSE INDEXATION AND DETERMINED THE FAIR MARKET V ALUE OF THE SAID AS ON 1/4/1981 AT RS. 39,752/-. THE A.O ACCORDINGLY RECO MPUTED THE CAPITAL GAIN ITA NO.3981/MUM/09(A.Y.2006-07) 3 3. THE LD. CIT(A) DELETED THE ADDITION OBSERVING TH AT THE A.O HAS WRONGLY REJECTED THE FAIR VALUE OF THE LAND AS ON 1/4/1981 DECLARED BY THE ASSESSEE AT RS. 12,18,000/- SUPPORTED BY THE REPORT OF THE REGI STERED VALUER. HE FURTHER OBSERVED THAT THE A.O DID NOT REFER THE CASE FOR VA LUATION UNDER SECTION 55A OF THE ACT BUT HAD PROCEEDED TO DETERMINE THE VALUE BY PROCESS OF REVERSE INDEXATION TAKING THE STARTING POINT TO CALCULATE THE FAIR MARKET VALUE OF THE LAND AS ON 1/4/ 1981. THE LD. CIT(A) WAS OF THE VIEW TH AT THIS ACTION OF THE AO CANNOT BE ACCEPTED AS NO SUCH REVERSE INDEXATION METHOD HA S BEEN PROVIDED OR RECOMMENDED. IT IS ALSO OBSERVED BY THE CIT(A) TH AT IF AO IS IN DISAGREEMENT WITH THE VALUE DECLARED BY THE ASSESSEE HE HAS THE LIBERTY TO REFER THE CASE TO THE VALUATION OFFICER. THE CIT(A) REJECTED THE AO S CONTENTION THAT THERE WAS A LACK OF TIME AS THE LIMITATION DATE OF THE ASSESSME NT PREVENTED REFERENCE TO THE VALUATION OFFICER UNDER SECTION 55A OF THE ACT. TH E CIT(A) DID NOT ACCEPT THE SAID CONTENTION OF THE AO. THE CIT(A) HAS ALSO NOTICED THAT SINCE THE AO HAS NOT REFERRED THE MATTER TO THE VALUATION OFFICER NOW TH E AO CANNOT TAKE RECOURSE TO THIS METHOD OR REQUEST THE SAME ONCE HE HAS DETERMI NED VALUE OF CAPITAL ASSETS OF THE ASSESSEE AND COMPLETED THE ASSESSMENT. THE CIT(A) HELD THAT THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RALLIS INDIA LTD. VS. DCIT (2006) 154 TAXMAN 73 (BOM) IS SQUARELY APPLICA BLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. THE CIT(A) HAS ALSO RELIED UP ON THE JUDGMENT OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF BHOLA NA TH MAJUMDAR VS. ITO (1996) 221 ITR 608(GAUHATI). THE CIT(A) HAS ALSO EXAMINED THE ISSUE ON MERIT AND NOTICED THAT THE VALUATION REPORT BASIS ON WHICH TH E ASSESSEE HAS TAKEN VALUE OF THE AGRICULTURAL LAND AT RS.12,18,000/- AS ON 1/4/1 981, THE VALUER HAS DESCRIBED ITA NO.3981/MUM/09(A.Y.2006-07) 4 THE PROPERTY AS AGRICULTURAL LAND IN NO DEVELOPME NT ZONE AREA. HE FURTHER STATED THAT THE PROPERTY IS SITUATED MAINLY IN THE AGRICULTURAL AREA, THEREBY CLEARLY DECLARING THE LAND TO BE AGRICULTURE. THE CIT(A) H AS ALSO NOTED THAT THE REGISTERED VALUER HAS ADOPTED A METHOD OF VALUATION CALLED COMPARING SALE INSTANT METHOD. THE CIT(A) FURTHER NOTED THAT T HE REGISTERED VALUER HAS TAKEN INTO CONSIDERATION PROPERTIES THAT WERE SOLD OR REN TED OUT IN THE NEARBY DISTRICT AND WHICH WERE AGRICULTURAL LAND. THE CIT(A) WAS OF THE VIEW THAT THE REGISTERED VALUER HAS REASONABLE COME TO THE CONCLUSION REGARD ING THE FAIR VALUE OF AGRICULTURAL LAND AS ON 1/4/1981. THE CIT(A) HAS A LSO NOTICED THAT THE VALUATION ADOPTED BY THE A.O AS ON 1/4/1981 IS NOT ON THE BAS IS OF ESTABLISHED PRINCIPLE OF VALUATION AS REQUIRED. THE CIT(A) AGREED WITH THE CONTENTION OF THE ASSESSEE THAT ADOPTION OF THE VALUE ARRIVED AT BY THE STAMP DUTY AUTHORITIES IN SECTION 50C OF THE ACT IS APPLICABLE ONLY WHEN THERE IS A DIS PUTE REGARDING COST OF CONSIDERATION RECEIVED. THE CIT(A) NOTED THAT THE AO WAS NOT JUSTIFIED IN ADOPTING THE STAMP DUTY MARKET VALUATION OF THE LAN D FOR CALCULATING THE FAIR MARKET VALUE OF THE LAND IN RESPECT TO COST OF ACQU ISITION. THE CIT(A) AGREED WITH THE VALUATION REPORT AS SUBMITTED BY THE ASSES SEE AND REJECTED THE COMPUTATION AS MADE BY THE A.O. 4. THE LD. D.R RELIED UPON THE ORDER OF AO AND SUBM ITTED THAT THE A.O HAS CORRECTLY CALCULATED THE FAIR MARKET VALUE OF THE L AND AS ON 1/4/1981 ON THE BASIS OF THE VALUE SHOWN BY STAMP VALUATION AUTHORITY IN 2005 AND ON THE BASIS OF REVERSE INDEXATION PROCESS TO ARRIVE AT THE VALUE A S ON 1/4/1981. THE LD. D.R FURTHER SUBMITTED THAT THE A.O HAS EXERCISED HIS IN HERITANCE POWER TO VALUE THE ITA NO.3981/MUM/09(A.Y.2006-07) 5 SAID LAND AS ON 1/4/1981. THE LD. D.R SUBMITTED TH AT THE METHOD ADOPTED BY THE AO IS ONLY POSSIBLE METHOD OF VALUATION FOR THE SAI D LAND AS ON 1/4/1981. HE FURTHER SUBMITTED THAT THE AO HAS ALREADY REJECTED THE VALUATION OF THE REGISTERED VALUER SUBMITTED BY THE ASSESSEE BY GIVING VARIOUS REASONS. THE ALTERNATE SUBMISSION OF THE LD. D.R WAS THAT TO DETERMINE THE FAIR MARKET VALUE AS ON 1/4/1981 IF THE MATTER IS REQUIRED TO BE REFERRED T O VALUATION OFFICER U/S.55A BY THE AO, THE MATTER MAY BE SENT BACK TO THE FILE OF THE AO. THE LD. D.R SUBMITTED THAT THE ORDER OF THE CIT(A) MAY BE SET ASIDE AND T HE ORDER OF THE A.O MAY BE RESTORED. 5. THE LD. A.R ON THE OTHER HAND, RELIED ON THE OR DER OF CIT(A) AND SUBMITTED THAT THE CIT(A) HAS ELABORATELY DISCUSSED ALL ASPECT OF THE MATTER AND HELD THAT THE METHOD ADOPTED BY THE AO WAS NOT IN A CCORDANCE WITH LAW. THE LD. D.R RELIED ON THE JUDGMENT OF THE HONBLE GAUHATI HIGH COURT IN THE CASE OF BHOLA NATH MAJUMDAR (SUPRA) AND CONTENDED THAT THE MATTER CANNOT BE SENT TO AO FOR REFERRING THE MATTER TO THE VALUATION OFFICE R. THE LD. A.R SUBMITTED THAT THE ORDER OF THE CIT(A) MAY BE CONFIRMED. 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH T HE PARTIES AND PERUSED THE RECORDS CAREFULLY. THE ADMITTED FACTS OF THE CASE ARE THAT THE FAIR MARKET VALUE AS ON 1/4/1981 ADOPTED BY THE ASSESSEE FOR CA LCULATION OF CAPITAL GAIN AT RS. 12,18,000/- IS SUPPORTED BY THE REPORT OF THE R EGISTERED VALUER. THE SAID LAND WAS PURCHASED BEFORE 1/4/1981. FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN UNDER 48 & 49 THE COST OF ACQUISITION IS TO BE DETE RMINED IN ACCORDANCE WITH SECTION 55 OF THE ACT. SECTION 55(2)(B) PROVIDES T HAT WHERE THE CAPITAL ASSETS BECAME CAPITAL OF THE ASSESSEE BEFORE THE FIRST DAY OF APRIL, 1981, MEANS THE ITA NO.3981/MUM/09(A.Y.2006-07) 6 COST OF ACQUISITION OF THE ASSETS TO THE ASSESSEE O R THE FAIR MARKET VALUE OF THE ASSETS ON THE FIRST DAY OF APRIL, 1981 AT THE OPTIO N OF THE ASSESSEE. IN THE CASE UNDER CONSIDERATION THE ASSESSEE HAS OPTED THAT SAI D OPTION TO TAKE FAIR MARKET VALUE OF THE ASSETS AS ON 1/4/1981. HERE IMPORTANT QUESTION TO BE SEEN IS THAT WHAT IS FAIR MARKET VALUE AND HOW IT IS TO BE CALCU LATED. SECTION 55A PROVIDES THAT WITH A VIEW TO ASCERTAIN THE FAIR MARKET VALUE OF CAPITAL ASSETS FOR THE PURPOSE OF CHAPTER IV, THE A.O MAY REFER THE VALUA TION OF THE CAPITAL ASSETS TO VALUATION OFFICER UNDER THE FOLLOWING CIRCUMSTANCES :- ( A ) IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY A REGISTERED V ALUER, IF THE [ASSESSING] OFFICER IS OF OPINION THAT THE VALUE SO CLAIMED IS LESS THAN ITS FAIR MARKET VALUE ; ( B ) IN ANY OTHER CASE, IF THE [ASSESSING] OFFICER IS OF OPINION ( I ) THAT THE FAIR MARKET VALUE OF THE ASSET EXCEEDS T HE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MORE THAN SUCH PERCEN TAGE OF THE VALUE OF THE ASSET AS SO CLAIMED OR BY MORE THAN SU CH AMOUNT AS MAY BE PRESCRIBED IN THIS BEHALF ; OR ( II ) THAT HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT IS NECESSARY SO TO DO 7. FROM THE PROVISIONS OF CHAPTER IV, COMPUTATION O F INCOME FROM CAPITAL GAIN WE FIND THAT THE SCHEME OF THE ACT FOR COMPUT ATION OF CAPITAL GAIN IN CASES WHERE PROPERTIES HAVE BEEN PURCHASED BEFORE 1/4/198 1, THE COST OF ACQUISITION OF THE ASSETS TO THE ASSESSEE OR THE FAIR MARKET VALUE AS ON 1/4/1981 THE OPTION IS GIVEN TO THE ASSESSEE TO ADOPT EITHER OF THE VALUAT ION. IF THE ASSESSEE OPTED FAIR MARKET VALUE AS ON 1/4/1981 AND AO IS NOT SATISFIED WITH THAT FAIR MARKET VALUE THE AO IS EMPOWERED UNDER SECTION 55A TO REFER THE VALUATION OF CAPITAL ASSETS TO VALUATION OFFICE. IN THE CASE UNDER CONSIDERATION THE AO INSTEAD OF REFERRING THE VALUATION OF CAPITAL ASSET TO VALUATION OFFICER ADO PTED HIS OWN METHOD, WHICH IS ITA NO.3981/MUM/09(A.Y.2006-07) 7 NOT IN ACCORDANCE WITH LAW, THEREFORE, THE SAME CAN NOT BE UPHELD. WE ARE ALSO OF THE VIEW THAT WHEN THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1/4/1981 OPTED BY THE ASSESSEE IS SUPPORTED BY A TECHNICAL PERSON , I.E. A REGISTERED VALUER THE AO CANNOT KEEP ASIDE SUCH TECHNICAL REPORT UNLESS S OME CONTRARY TECHNICAL OPINION IS PUT ON RECORD AND POINT OUT THE DEFECTS IN THE TECHNICAL OPINION TAKEN BY THE ASSESEE ON THE BASIS OF REGISTERED VALUER. IT IS IMPORTANT TO NOTE HERE THAT THE A.O IS NOT A TECHNICAL EXPERT IN THIS LINE, TH EREFORE, HE IS NOT EMPOWERED TO KEEP ASIDE THE OPINION OF TECHNICAL EXPERTISE IN TH E VALUATION REPORT BY REGISTERED VALUER AND ADOPT HIS OWN ARBITRARY METHOD. IN THE LIGHT OF THE ABOVE DISCUSSIONS, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION, THEREFORE, HIS ORDER IS CONFIRMED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON THE 22 ND DAY OF MARCH, 2010. SD/- SD/- (D.MANMOHAN) (A.L.GEHLOT) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED. 22 ND MARCH, 2010. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY 22 MUMBAI 4. THE CIT(A)- XXII 5. THE D.RC BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.3981/MUM/09(A.Y.2006-07) 8 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 17/03/2010 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 18/03/2010 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER ITA NO.3981/MUM/09(A.Y.2006-07) 9