LATE SHRI YASHWANT VAISHAMPAYAN, MUMBAI V. ITO WD 26(1)(1), MUMBAI

ITA 4063/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93265 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 27-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 21-05-2013
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: M P MAKHIJA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Valuation report; Surrender of tenancy right
• Section: 50C; 148; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI . . , , BEFORE : SHRI R.C.SHARMA, AM & SHRI VIJAY PAL RAO , JM ./ ITA NO. 4063 / MUM/20 13 ( / ASSESSMENT YEAR :200 7 - 0 8 ) LATE SHRI YASHWANT VAISHAMPAYAN, THROUGH HIS LEGAL HIS MR. HIMANSHU VAISHAMPAYAN, ROOM NO.3, GROUND FLOOR, SURESH ANNEX, OPP. SINDHUDURG HOTEL, RAM MARUTI ROAD, DADAR (W), MUMBAI - 4 00028 VS. ITO 26 (1)( 1 ), MUMBAI ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI M.P.MAKHIJA /REVENUE BY : SHRI LOVE KUMAR / DATE OF HEARING : 27 /0 4 / 2015 / DATE OF PRONOUNCEMENT 22/07 / 2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR 2007 - 08, IN THE MATTER OF ORDER PASSED U/S.14 3 (3) /147 OF THE I.T.ACT . 2 . IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED FOR ADDITION MADE ON ACCOUNT OF LONG TERM CAPITAL GAINS ON SALE OF PREMISES. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT SHRI YASHWANT VAISHAMPAYAN , NOW DECEASED, REPRESENTED BY SMT. SHARDDHA VASHAMPAYAN AS LEGAL HAIR, HEREINAFTER CALLED AS THE ASSESSEE USED TO BE A TENANT OF - SHRI VIBHAKAR D. DADARKAR OF 'ANAND NIWAS ', SITUATED AT GANESH PETH LANE, OFF. N .C. ITA NO. 4063 /1 3 2 KELKAR ROAD, DADAR, MUMBAI, VIDE LEASE DE ED DATED 19.04.1990. THE ASSESSEE HOWEVER SURRENDERED HIS TENANCY RIGHT IN FAVOUR OF THE DEVELOPER BUILDARCH LAND DEVELOPER PVT.LTD. VIDE AGREEMENT DATED 15.11.2002 AND IN LIEU OF SURRENDER OF TENANCY RIGHT, THE ASSESSEE GOT FLAT NO.402, A - WING, 4TH FLOOR, SAN KAR APARTMENT CO - OP. HSG. SOCIETY LTD. ADMEASURING 405 SQ.FT. THE ASSESSEE SOLD THIS FLAT VIDE DEED DATED 03.05.2006 FOR CONSIDERATION OF RS.30,00,000/ - . HOWEVER, THE MARKET VALUE OF THIS FLAT WAS ESTIMATED AT RS.34,87,500/ - BY STAMP VALUATION AUTHORIT Y NAMELY SUB - REGISTRAR AND THE ASSESSEE PAID THE STAMP DUTY ACCORDINGLY. THE ASSESSEE HAD EXPIRED IN THE MONTH OF FEBRUARY - 2010. HE DID NOT FILE ANY RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. HOWEVER, WHEN THIS FACT CAME TO THE NOTICE OF THE AO, HE ISSUED A NOTICE U/S. 148 OF THE ACT ON 15.12.2009. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED THAT DEEMED COST OF THIS FLAT AT RS 30,00,000/ - AND ACCORDINGLY THE ASSESSEE SUBMITTED THAT THERE WAS CAPITAL LOSS OF RS.1,527/ - ON SALE OF THIS FLAT. HOWEVER, THE AO NOTICED THAT THE MARKET VALUE OF THE TENANCY RIGHT WAS VALUED BY TH E SUB - REGISTRAR AT RS.2,57,676/ - , AS ON 15. 11 .2002. HE ACCORDINGLY WORKED OUT THE INDEX E D COST AT RS.2,88,842/ - AND COMPUTED THE CAPITAL GAINS AT RS.31,98,658 / - (3487500 288842 ) . 4. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO AFTER HAVING THE FOLLOWING OBSERVATION : - 8. I HAVE CONSIDERED THE FACTS OF THE CASE. AS STATED ABOVE, THE ASSESSEE SURRENDERED TENANCY RIGHTS VIDE AGREEMENT DATED 1 5.11.2002 IN FAVOUR OF BULDARCH LAND DEVELOPER PVT. LTD. WHO CONSTRUCTED A RESIDENTIAL COMPLEX THERE AND ALLOTTED FLAT NO.402 HAVING 405 SQ.FT. FREE OF COST. THE ASSESSEE HAS ADOPTED THE COST OF ACQUISITION OF THIS FLA T AS ON 15.11. 2002 AT RS.24,87 ,500 / - ON THE ITA NO. 4063 /1 3 3 BASIS OF VALUATION REPORT OF THE APPROVED 'VALUER AND HAS COMPUTED ,THE INDEX E D COST AT RS.34,89,026/- AND THUS WORKED OUT CAPITAL LOSS OF RS.L,527 / - . HOWEVER, AS PER THE AGREEMENT DATED 15.11.2002 WHICH WAS REGISTERED WITH SUB - REGISTRAR AS ON 16.11 .2002, THE MARKET VALUE OF SURRENDER OF TENANCY RIGHT WAS TAKEN AT RS.2,57 ,676 / - BY SUB- REGISTRAR. THE AO HAS ADOPTED THIS VALUE FOR COMPUTATION OF CAPITAL GAINS. THE ASSESSEE HOWEVER, VEHEMENTLY OPPOSED TO THIS IDEA. HE SAYS THAT WHAT HAS BEEN SOLD IS A N APARTMENT AND NOT THE TENANCY RIGHTS AND THEREFORE, THE COST OF ACQUISITION OF THE APARTMENT SHOULD BE ADOPTED. IN THIS REGARD, HE RELIED UPON THE VALUATION OF FLAT DONE BY THE VALUATION OFFICER OF INCOME - TAX DEPARTMENT, WHO VALUED THE COST OF THIS AS ON 01.01.2002 AT RS.25,76,000 / - . THE ASSESSEE ALSO RELIED UPON THE HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS.STAR CHEMICALS (BOM) PVT.LTD. 9. I HAVE CONSIDERED THE FACTS OF THE CASE. THE PROVISION OF SECTION 50C OF THE LT. ACT SAY THAT, APPR OPRIATE SALE CONSIDERATION SHOULD BE ADOPTED WHILE COMPUTING THE CAPITAL GAIN AND IN CASE THE SALE CONSIDERATION SHOWN BY THE ASSESSEE IS LESSER THAN THE VALUE ADOPTED BY THE SUB - REGISTRAR OR STAMP VALUATION AUTHORITY, ON WHICH STAMP DUTY IS PAID, THEN SUC H VALUE MAY BE ADOPTED FOR COMPUTATION OF CAPITAL GAIN. SECTION 50C OF THE I T.ACT DOES NOT DISCUSS ANYTHING IN TERMS OF THE COST OF ACQUISITION OF THE ASSET. IT SIMPLY DEALS WITH THE SALE CONSIDERATION AS ON THE DATE OF SALE. NOW, COMING TO THE COST OF ASS ETS, WHAT THE ASSESSEE OWNED WAS ONLY TENANCY RIGHT AND WHAT HE HAS SURRENDERED AS ON 15.11.2002 IS THE TENANCY RIGHT, THE VALUE OF WHICH HAS BEEN WORKED OUT BY THE SUB - REGISTRAR AT RS. 2,53,676/ - . THE ASSESSEE GOT FLAT NO.402 IN LIEU OF SUCH SURRENDER. AC CORDINGLY, THE COST OF THIS ASSET TO THE ASSESSEE IS NOTHING BUT THE COST OF SURRENDER OF TENANCY RIGHT, WHICH WAS WORKED OUT BY THE SUB - REGISTRAR AT RS . 2,57,676 / - . WHAT HAPPENED AS ON 15. 11 .2002 WAS ONLY CHANGE IN THE NATURE OF ASSET, OWNED BY THE ASSESSE E AND REAL TRANSFER HAS TAKEN PLACE ONLY ON 03.05.2006 WHEN THE ASSESSEE HAS SOLD THIS FLAT. ACCORDINGLY, THE COST OF ACQUISITION OF THIS ASSET SHOULD BE ADOPTED AT RS.2,57,676/ - AS ON IS.11.2002 AND THERE AFTER THE ASSESSEE MAY BE GIVEN THE BENEFIT OF IND EXATION. THIS IS WHAT PRECISELY HAS BEEN DONE BY THE AO WHILE COMPLETING THE ASSESSMENT. ONE IMPORTANT POIN T I WOULD LIKE TO HIGHLIGHT HERE IS THAT THE ASSESSEE EVEN FAILED TO DISCLOSE THIS TRANSACTION BEFORE THE INCOME - TAX DEPARTMENT ON HIS OWN AND EVEN D ID NOT FILED HIS TAX RETURN FOR THIS YEAR. THIS ISSUE CAME TO THE NOTICE OF THE AO PROBABLY T HROUGH AIR INFORMATION AND THERE AFTER A NOTICE U/S.148 WAS ISSUED BY THE AO. HAD THIS INFORMATION NOT COME T O THE NOTICE OF THE AO, THIS ENTIRE TRANSACTION WOULD HAVE GONE UNNOTICED AND UNTAXED. IF THE ASSESSEE FEELS THAT HE SHOULD BE GIVEN BENEFIT OF VALUE OF THE FLAT AS ON 15.11.2002 TOWARDS THE COST OF ACQUISITION, THE ISSUE COMES BEFORE US IS WHETHER THE ASSESSEE ON HIS OWN OFFERED DIFFERENCE OF VALUE OF FLAT A ND THAT OF VALUE OF TENANCY RIGHT AS ON 15.11.2002, TO THE CAPITAL GAIN, ON HIS OWN. HAD THE ASSESSEE DONE SO, HE PROBABLY COULD HAVE BEEN GIVEN THE BENEFIT OF MARKET VALUE OF THE FLAT AS ON 15.11.2002. HOWEVER, THE ASSESSEE CHOSE TO CONCEAL THE ENTIRE ITA NO. 4063 /1 3 4 TRA NSACTION. NOW THE ASSESSEE CANNOT CLAIM BENEFIT OF FMV OF THE FLAT SOLD, AS ON 15.11.2002. ONE HAS TO SEE THE KIND OF GAIN HAPPENED TO THE ASSESSEE IN THIS ENTIRE TRANSACTION. IN FACT, IN REAL TERMS, THE ENTIRE SALE VALUE OF RS. 34,87,500/ - IS A PROFIT ACC RUED TO THE ASSESSEE. THE BENEFIT WHICH THE ASSESSEE MAY BE GIVEN AT THE MOST IS THE COST OF SURRENDER OF TENANCY RIGHT AS ON 15.11.2002, WHICH IS RS.2,57,676/ - AS HAS BEEN ALLOWED BY THE AO. 10. THE ASSESSEE MAY ARGUE FURTHER HERE THAT THIS ENTIRE TRANS ACTION SHOULD BE CONSIDERED IN TWO PARTS. FIRSTLY, WHEN THE TENANCY RIGHT WAS SURRENDERED AS ON 15.11.2002 I.E. AY 2003 - 04 AND SECOND PHASE WHEN THE FLAT SOLD DURING AY 2007 - 08. I FEEL THAT IF THE ASSESSEE WANTS SUCH BENEFIT, THEN FIRSTLY HE SHOULD HAVE FI LED HIS INCOME - TAX RETURN FOR AY 2003 - 04, AND ALSO FOR AY 2007 - 08, VOLUNTARILY, ON HIS OWN DISCLOSING THE ABOVE TRANSACTIONS AND SHOULD HAVE PAID DUE TAXES ON CAPITAL GAIN ACCRUED. HOWEVER, THE ASSESSEE HAS NOT DONE SO AND THEREFORE, THERE IS NO MERIT IN T HE CLAIM OF THE ASSESSEE THAT SUCH TRANSACTION SHOULD BE TAXED IN TWO PHASES. OTHERWISE, ALSO ASSESSMENT FOR AY 2003 - 04 CANNOT BE REOPENED NOW BECAUSE OF LIMITATION INVOLVED AND THEREFORE CAPITAL GAIN HAS TO BE CONSIDERED IN A COMPOSITE WAY IN AY 2007 - 08, WHICH HAS BEEN DONE BY THE AO. I ACCORDINGLY FEEL THAT THERE IS NO INFIRMITY IN THE ORDER OF THE AO. 11. THE ASSESSEE IN THIS REGARD HAS RELIED UPON THE DECISION OF HON'BLE MU M BAI HIGH COURT IN THE CASE OF STAR CHEMICALS (BORN) PVT. LTD. IN THAT CASE, T HE ISSUE INVOLVED WAS RELATING TO ADVERSE POSSESSION OF THE PROPERTY BY THE ASSESSEE WHICH DID NOT INVOLVE ANY ACQUISITION COST AND THEREFORE, THE HO N 'BLE HIGH COURT CONFIRMED THE ORDER OF THE CIT(A) THAT CAPITAL GAIN TAX IN THE SAID CASE WOULD NOT ARISE. HOWEVER, IN THE PRESENT CASE, THE VALUE OF TENANCY RIGHTS SURRENDERED HAS BEEN V E RY CLEARLY VALUED BY THE SUB - REGISTRAR AT RS.2,57,676/ - AS ON 15.11.2002 AND THEREFORE, I AM OF THE OPINION THAT RATIO OF THE HON'BLE MUMBAI HIGH COURT DECISION IN THE CASE OF STAR CHEMICALS (BORN) PVT. LTD. WILL NOT BE APPLICABLE. THE ASSESSEE HAS FURTHER RELIED UPON THE FOLLOWING JUDGEMEN TS . 1. SMT. SUSHILABEN KANTILAL SHAH VS. CFT (1994) 208 ITR 912(GUJ.) 2. C I T VS. ABRAR ALVI (2001) 247 ITR 312(BOM) 3. DY.CIT VS. SMT. L EELAVATI S. MEHTA (2010) 133 TTJ (MUMBAI) 633 4. CIT VS. RAJA MALWINDER SINGH (2011) 334 FTR 48 (P&H)(FB) 13. AS FAR AS THE DECISION OF HO N 'BLE MUMBAI HIGH COURT IN THE CASE OF SMT. LEELAVATI S. MEHTA AS MENTIONED ABOVE IS CONCERNED, THAT JUDGMENT APPEA RS TO BE IN FAVOUR OF THE DEPARTMENT AND AGAINST THE ASSESSEE AND THEREFORE, IT DOES NOT HELP THE ASSESSEE'S CASE IN ANY WAY. AS FAR AS OTHER JUDGMENTS' ARE CONCERNED, THE FACTS ARE DISTINGUISHABLE. ACCORDINGLY, CONSIDERING THE FACTS OF THE CASE, I HOLD TH AT THE DECISION TAKEN BY THE AO IN RESPECT OF COST OF ACQUISITION OF ASSET AS VALUE OF TENANCY RIGHT SURRENDERED AT RS.2,57,676/ - APPEARS TO BE JUSTIFIED AND THEREFORE, THE ORDER PASSED BY THE AO IS UPHELD AND THE GROUND OF APPEAL OF THE ASSESSEE IN THIS R EGARD IS REJECTED. ITA NO. 4063 /1 3 5 5. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT ON SURRENDER OF TENANCY RIGHT ASSESSEE GOT A FLAT FROM BUILDER. THE TENANCY RIGHT WAS VALUED BY THE SUB REGISTRAR AT RS. 2,57,676/ - FOR THE PURPOSE OF STAMP DUTY. WHILE COMPUTING CAPITAL GAINS T HE AO AFTER GIVING BENEFIT OF INDEXATION VALUED THE SAME AT RS. 2,88,842/ - , AFTER REDUCING THE SAME FROM THE SALE PRICE OF RS. 34,87,500/ - , DETERMINED THE LONG TERM CAP ITAL GAINS AT RS. 31,98,658/ - . THE CONTENTION OF ASSESSEE THAT PROVISIONS OF SECTION 50C SHOULD BE APPLIED TO THE VALUE OF FLAT OBTAINED ON SURRENDER OF TENANCY RIGHT AS ON 15 - 11 - 2002 HAS NO SUBSTANCE, INSOFAR AS PROVISIONS OF SECTION 50C IS TO BE APPLIED F OR TAKING VALUE OF PROPERTY AS PER REGISTRARS VALUATION AT THE TIME OF SALE. SECTION 50C IS NOT APPLICABLE FOR ARRIVING AT THE REGISTRARS VALUE OF ASSETS AS ON THE DATE OF PURCHASE. AS PER THE PROVISIONS OF SECTION 48 OF THE ACT, THE INCOME CHARGEABLE UN DER THE HEAD CAPITAL GAINS IS TO BE COMPUTED BY DEDUCTING FROM THE VALUE OF CONSIDERATION RECEIVED AS A RESULT OF TRANSFER OF CAPITAL ASSET , THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMENT THEREOF. THE WORDS VALUE OF CONSIDERATION DE NOTE THE ACTUAL CONSIDERATION SO PAID UNLESS COVERED BY ANY OF THE PROVISIONS OF SECTION 49 OF THE ACT, WHICH LAYS DOWN COST WITH REFERENCE TO CERTAIN MODES OF ACQUISITION LIKE SUCCESSION, INHERITANCE, DISTRIBUTION OF ASSETS ON THE DISSOLUTION OF FIRMS, DI STRIBUTION OF ASSET ON LIQUIDATION OF A COMPANY ETC. IT IS NOT THE CASE OF THE ASSESSEE THAT ASSET HAS BEEN ACQUIRED THE ASSET BY ANY OF THE MODES SPECIFIED U/S.49. ACCORDINGLY, THERE IS NO JUSTIFICATION FOR VALUING THE REGISTRARS VALUE OF ASSETS AS ON DA TE OF PURCHASE AS PER PROVISIONS OF ITA NO. 4063 /1 3 6 SECTION 50C OF THE IT ACT. SECTION 50C IS APPLICABLE FOR ARRIVING AT A SALE PRICE AS PER REGISTRARS VALUE WHEN THE SALE PRICE STATED IN THE SALE DEED IS LOWER THAN THE REGISTRARS VALUE. THE DETAILED FINDING HAS BEEN GI VEN BY THE CIT(A) AT PARA 8 TO 13 WHILE ARRIVING AT THE CONCLUSION THAT COST OF ACQUISITION OF ASSETS IS THE VALUE OF TENANCY RIGHT SURRENDERED AND VALUED AT RS. 2,57,676/ - . THE CIT(A) HAS DEALT WITH VARIOUS JUDICIAL PRONOUNCEMENTS CITED AT BAR BY THE LD. A R AND HELD THAT THES E ARE DISTINGUISHABLE ON FACTS. NOTHING WAS PLACED BEFORE US SO AS TO PERSUADE US TO DEVIATE FROM THE CONCLUSION ARRIVED AT BY THE LOWER AUTHORITIES. ACCORDINGLY, WE CONFIRM THE ACTION OF THE CIT(A) FOR TAKING THE VALUE OF TENANCY SURRE NDERED AS DETERMINED BY THE REGISTRAR AT THE TIME OF ITS REGISTRATION AT RS. 2,57,676/ - . 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 22/07/ 201 5 . SD/ - SD/ - ( ) ( VIJAY PAL RAO ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 22/07 /2015 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//