MANILAL MALSHI SHAH, MUMBAI V. ITO 18(2)(3), MUMBAI

ITA 4177/MUM/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101119 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Salary income; Fair market value; Right to appeal
• Section: 50C; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC BEFORE SHRI B.R. BASKARAN , A M AND SHRI LALIT KUMAR , J M ITA N O. 4 1 77 /MUM/ 201 5 ASSESSMENT YEAR 20 1 1 - 1 2 , MANILAL MALSHI SHAH, 13/17 KANCHAN BHAVAN, D.A. LANE , KALBADEVI MUMBAI - 400002 VS. ITO WD 18(2)(3) 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT, MUMBAI APPLICANT RESPONDENT APPELLANT BY S HRI ASHOK MEHTA ( A R) REVENUE BY S HRI . AIRIJU JAIKARAN ( D R) DATE OF HEARING : 19 - 0 8 - 201 5 DAT E OF PRONOUNCEMENT : 23 - 09 - 2015 ORDER PER LALIT KUMAR , J .M. 1 . THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 25.05.2015 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 29 , MUMBAI, FOR THE ASSESSMENT YEAR 201 1 - 1 2 , ON THE FOLLOWING GROUNDS OF APPEAL : 1) THE LD CIT(A) ERRED IN NOT FOLLOWING THE JUDGMENT OF ITAT PUNE IN CASE OF RAHUL CONSTRUCTIONS 38 DTR 19 WHICH WAS BASED ON THE SUPREME COURT JUDGMENT IN CASE OF C.B. GAUTAM 108 CTR 304 BY STATING THAT LIMIT OF 10 % IS SET BY ITAT AND NO SUCH LIMIT IS PROVIDED IN LAW. 2) THE LD CIT(A) ERRED IN APPLYING THE JUDGMENT OF ASIF ABDUL KADIR FAZLANI (2013) 36 CCH 234 WITHOUT CONSIDERING THE FACT AND THE LEGAL POINT IN THE SAID JUDGMENT WAS COMPLETELY DIFFERENT FROM THE ASSESSES CASE. 2 IT A NO. 4177 /MUM/201 5 3) TH E ASSESSING OFFICER ERRED IN MAKING ADDITION U/S 50 C IN SPITE OF THE FACT THAT THE DIFFERENCE IN VALUATION IS LESS THAN 10 0/0 AND THE CIT(A) HAS ALSO ERRED IN AGREEING WITH THE ADDITION MADE BY THE ASSESSING OFFICER. 4) THE ASSESSEE CRAVES TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL. 2. IN A NUTSHELL THE ISSUE URGED BEFORE US IS ABOUT THE APPLICATION OF PROVISIONS OF SECTION 50 C IN RESPECT OF A PROPERTY SOLD BY ASSESSEE. 3. THE ASSESSEE IS AN INDIVIDUAL , IN THE ASSESSMENT YEAR 2011 - 12, HE WAS ENGAGED IN THE BUSINESS OF DEALING IN PAPER AND PAPER BOND FROM HIS PRO. C ONCERN M/S. DELUX PAPER MART. THE ASSESSEE HAS SHOWN INCOME FROM SALARY, HOUSE PROPERTY, CAPITAL GAINS, BUSINESS INCOME AND INCOME FROM OTHER SOURCES. THE ASSESSEE HAS F ILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.8,24,410/ - ON 29.09.2011. THE SAID RETURN WAS PROCESSED U/S.143(1) OF THE I.T. ACT, 1961. THE CASE WAS SELECTED FOR SCRUTINY. 4. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, IN PARA 4 RECORDS THE RE ASON AND REPLY OF THE ASSESSEE, FOR THE ADDITION, WHICH IS REPRODUCED HEREIN BELOW; 3 IT A NO. 4177 /MUM/201 5 '4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS SEEN THAT THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAINS AT RS.92,250/ - FROM SALE OF SHOP. THE SHORT TERM CAPITAL G AIN WAS WORKED OUT BY THE ASSESSEE TAKING RS.90,00,000/ - ASSESSEE THE SALES CONSIDERATION WHEREAS MARKET VALUE OF THE SHOP WAS RS. 95,50,498/ - . THEREFORE, THE ASSESSEE WAS ASKED VIDE ORDER SHEET NOTING DATED 21.11.13 ASSESSEE TO WHY THE VALUE OF STAMP DUT Y AT RS.95,50,498/ - SHOULD NOT BE ADOPTED FOR WORKING OUT THE SHORT TERM CAPITAL GAINS U/S 50C. ......... . THE ASSESSEE HAS SOLD THE SHOP AND HAS ENTERED INTO A AGREEMENT WITH A THIRD PARTY.THE PRICE WAS NEGOTIATED AND WAS AGREED AT 90 ,00,000 / - .THE SAID PROPERTY WAS PURCHASED AND SOLD WITHIN A SHORT PERIOD AND THE ASSESSEE WAS DONE THE SAME AT MARKET VALUE.THE VALUE AS PER STAMP DUTY IS R S.95,50,498/ - THIS IS DUE TO THE REASON THAT THE STAMP DUTY READY RECKNOR DOES NOT TAKE INTO ACCOUNT THE MARKET CONDIT IONS OF EACH AND EVERY SHOP BUT TAKES THE AREA RATE. THE PROPERTY WAS PURCHASED AND SOLD IN A VERY SHORT TIME AS IT WAS NOT SUITABLE TO THE ASSESSEE'S BUSINESS AND DIFFERENCE IN RATES IS LESS THAN 10 % WHICH CLEARLY SHOWS THAT THE AGREEMENT VALUE IS THE MA RKET VALUE. BESIDES, THE PROCESS OF DETERMINING THE MARKET VALUE IS A PROCESS WHICH IS DEPENDENT ON THE FACTS OF EACH CASE. WE STATE THAT WE DO NOT AGREE WITH THE VALUE AS PER STAMP DUTY VALUE. WE HAVE 4 IT A NO. 4177 /MUM/201 5 TO PLEAD THAT THE RATE AS PER THE AGREEMENT MAY PLEASE BE ACCEPTED . 5. THE ASSESSEE'S REPLY WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND THE OFFICER CALCULATED SHORT TERM CAPITAL GAIN ON THE BASIS OF VALUATION FIXED BY S TAMP VALUATION OFFICER IN TERMS OF SECTION 50C OF THE ACT , SINCE THE SALE CONSIDE RATION MENTIONED IN THE AGREEMENT WAS LESS THAN THE VALUE F I XED FOR STAMP DUTY PURPOSES. THE ASSESSEE HELD 50% SHARE IN THE PROPERTY. THE ASSESSEE HAD DECLARED STCG AT RS 1992250/ - . THE ASSESSING OFFICER ENHANCED THE STCG TO RS 2267499 / RESULTING IN AN ADD IT I ON O F RS.2,75,250/ - TO THE TOTA L INCOME UNDER THE HEAD CAPITAL GAINS. 6. THE ASSESSEE AGGRIEVED FROM THE ORDER PASSED BY THE A O AND HAD FILED THE APPEAL BEFORE LD. CIT(A), HOWEVER, THE LD. CIT(A) VIDE ORDER DATED 25.05.2015 UPHELD THE ORDER PASSED BY THE A O , HENCE THE SHORT QUESTION ARISES FOR CONS I DERATION IN THE PRESENT APPEAL IS 'WHETHER THE VALUATION OF THE PROPERTY AS PER STAMP DUTY VALUATION IS REQUIRED TO BE TAKEN AS SALE CONSIDERATION OR NOT ? '. 7. WE HAVE HEARD RIVAL SUBMISSION AND PERUS ED MATERIAL ON RECORD AND DOCUMENT AND EVIDENCES SUBMITTED BEFORE THE TRIBUNAL . SINCE THE 5 IT A NO. 4177 /MUM/201 5 DISPUTE REVOLVES AROUND SECTION 50C OF THE INCOME TAX ACT, THE SAME IS EXTRACTED: SECTION 50C. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED [OR ASSESSABLE] BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE 'STAMP VALUATION AUTHORITY') F OR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED [OR ASSESSABLE] SHALL, FOR THE PURPOSES OF SECTION 48 , BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TR ANSFER (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB - SECTION (1), WHERE (A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER THAT THE VALUE ADOPTED 2 [OR ASSES SED OR ASSESSABLE] BY THE STAMP VALUATION AUTHORITY UNDER SUB - SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER ; (B) THE VALUE SO ADOPTED 2 [OR ASSESSED OR ASSESSABLE] BY THE STAMP VALUATION AUTHORITY UNDER SUB - SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT, THE ASSESSING OFFICER MAY REF ER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUB - SECTIONS (2), (3), (4), (5) AND (6) OF SECTION 16A , CLAUSE (F) OF SUB - SECTION (1) AND SUB - SECTIONS (6) A ND (7) OF SECTION 23A , SUB - SECTION(5) OF SECTION 24, SECTION 34AA , SECTION 35 AND SECTION 37 OF THE WEALTH - TAX ACT, 1957 (27 OF 1957), SHALL, WITH NECESSARY MODIFICATIONS, APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY 6 IT A NO. 4177 /MUM/201 5 THE ASSESSING OFFICER UNDER SUB - SECTION (1) OF SECTION 16A OF THAT ACT. EXPLANATION 3 [1]: FOR THE PURPOSES OF THIS SECTION, 'VALUATION OFFICER' SHALL HAVE THE SAME MEANING AS IN CLAUSE (R) OF SECTION 2 OF THE WE ALTH - TAX ACT, 1957 (27 OF 1957). 4 [EXPLANATION 2. -- FOR THE PURPOSES OF THIS SECTION, THE EXPRESSION 'ASSESSABLE' MEANS THE PRICE WHICH THE STAMP VALUATION AUTHORI TY WOULD HAVE, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE, ADOPTED OR ASSESSED, IF IT WERE REFERRED TO SUCH AUTHORITY FOR THE PURPOSES OF THE PAYMENT OF STAMP DUTY.] (3) SUBJECT TO THE PROVISIONS CONTA INED IN SUB - SECTION (2), WHERE THE VALUE ASCERTAINED UNDER SUB - SECTION (2) EXCEEDS THE VALUE ADOPTED 2 [OR ASSESSED OR ASSESSABLE] BY THE STAMP VALUATION AUTHORITY R EFERRED TO IN SUB - SECTION (1), THE VALUE SO ADOPTED 2 [OR ASSESSED OR ASSESSABLE] BY SUCH AUTHORITY SHALL BE TAKEN AS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER.] 8. IN THIS REGARD, LD.AR RELIED UPON THE DECISION RENDERED BY THE CO - ORDINATE BENCH OF ITAT PUNE IN THE CASE OF RAHUL CONSTRUCTIONS VS. DCIT IN ITA NO.1543/PN/2007 DATED 12 TH JANUARY, 2010 WHEREIN IT WAS HELD THAT IF THE DIFFERENCE BETWEEN THE SALE CONSIDERATION SHOWN IN CONVEYANCE DEED AND STAMP DUTY VALUATION IS LESS THAN 10%, THE SAID DIFFERENCE SHOULD BE IGNORED. ACCORDINGLY HE SUBMITTED THAT THE SALE CONSIDERATION SHOWN BY THE ASSESSEE BE ACCEPTED. THE JUDGM ENT OF RAHUL CONSTRUCTION HA HELD AS UNDER : 7 IT A NO. 4177 /MUM/201 5 HELD: AS PER THE PROVISIONS OF S. 50C(1) THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORI T IES IN RESPECT OF TRANSFER OF A CAPITAL ASSET SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRU ING AS A RESULT OF TRANSFER I F SUCH VALUE IS MORE THAN THE VALUE OF CONSIDERATION RECEIVED BY (HE ASSESSEE . AS PER THE PROVISIONS OF SUB - SO (2) OF THE SAID SECTION IF THE ASSESSEE ' CLAIMS BEFORE THE AO THAT SUCH VAL UATION BY THE STAMP VALUATION AUTHORITI ES UNDER SUB - SO (1) EXCEEDS THE FMV OF THE PROPERTY AS ON THE 'DATE OF TRANSFER THE A O MA Y REFER THE VALUATION OF THE CAPITAL ASSET TO THE OVA. AS PER THE SAID SUB - SECTION WHERE ANY SUCH REFERENCE IS MADE THE VARIOUS PROVISIONS OF WT ACT AS MENTIONED IN SU B - SO (2) SHALL, WITH NECESSARY MODIFICATIONS, APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE AO UNDER SUB - SO (1) OF S. 16A OF THE WT ACT. SEC. 23A(1)(I) OF THE WT ACT, INTER ALIA CONFERS RIGHT OF APPEAL TO THE CIT( A) TO ANY PERSON OBJECTING TO ANY ORDER OF THE OVA UNDER S. 35 HAVING THE EFFECT OF ENHANCING THE VALUATION OF ANY ASSET OR REFUSING TO ALLOW THE CLAIM MADE BY THE ASSESSEE UNDER THE SAID SECTION. A COMBINED READING OF THE ABOVE PROVISIONS SHOWS THAT THE VALUATION ADOPTED BY THE OVA IS SUBJECT TO APPEAL AND THE SAME IS NOT FINAL. IN THE INSTANT C ASE AS AGAINST THE VALUE OF RS. 28,73,000 ADOPTED BY THE STAMP VALUATION AUTHORITIES, THE OVA HAS DETERMINED THE FMV ON THE DATE OF TRANSFER AT RS. 20,55,000. THIS ITSELF SHOWS THAT THERE IS WIDE VARIATION BETWEEN THE TWO VALUES. FURTHER THE VALUE ADOPTED BY THE OVA IS ALSO BASED ON SOME ESTIMATE. THE DIFFERENCE BETWEEN THE SALE CO NSIDERATION SHOWN BY THE ASSESS EE AT RS. 19,00,000 AND THE FMV DETERMINED BY THE DVO A T RS.20,55,000 IS ONLY RS. 1,55,000 WHICH IS LESS THAN 10 PER CENT. 9. IN THE ALTERNATIVE, THE LD.AR SUBMITTED THAT THE MATTER BE REMANDED BACK TO THE ASSESSING OFFICER FOR MAKING REFERENCE TO DVO IN TERMS OF SECTION 50C(2). IN THIS REGARD HE PLACES RE LIANCE ON THE HONBLE MADRAS HIGH COURT IN THE CASE OF S. MUTHURAJA V. CIT {2013}37TAXMANN.COM 352 (MADRAS) HAS HELD AS UNDER : 8 IT A NO. 4177 /MUM/201 5 5.AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE , WHEN SPECIFIC OBJECTION WAS MADE BY THE ASSESSEE AS TO THE A SSESSING 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 TO SECTION 50C(1) OF THE ACT ALON E WITHOUT ADVERTING TO SECTION 50C(2) OF THE ACT. 6. A READING OF THE ORDER OF THE ASSESSING OFFICER SHOWS THAT HAVING FOUND SUCH AN OBJECTION, THE ASSESSING OFFICER COMMITTED SERIOUS ERROR IN NOT ADVERTING TO SECTION 50C(2) OF THE ACT, THE ERROR PROCEED ED THROUGHOUT BEFORE EVERY APPELLATE FORUM, WE DO NOT FIND ANY JUSTIFICATION IN THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL TAKING THE VIEW THAT THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAD DISPUTED THE SALE CONSIDERATION OF RS.39,63,900/ - A DOPTED FOR THE PURPOSE OF STAMP DUTY FOR THE PURPOSES OF WORKING OUT CAPITAL GAINS. IN SUCH VIEW OF THE MATTER, THE MATTER IS RESTORED TO THE FILES OF THE ASSESSING OFFICER TO WORK OUT CAPITAL GAINS BY INVOKING SECTION 50C(2) OF THE ACT. 10. IT IS NOT I N DISPUTE THAT THE PRICE WAS NEGOTIATED AND WAS AGREED FOR THE SALE OF SHOP AT RS.90,00,000/ - . IT IS ALSO NOT IN DISPUTE THAT THE VALUE AS PER STAMP DUTY VALUATION AUTHORITY WAS OF RS.95,50,498/ - . IT IS ALSO NOT IN DISPUTE THAT THE AO WHILE CALCULATING THE SHORT TERM CAPITAL GAIN UNDER SECTION 50C(2), HAS NOT REFERRED THE MATTER TO THE DVO(DISTRICT VALUATION OFFICER ) FOR ASSESSING THE FULL VALUE CONSIDERATION OF THE PROPERTY. MOREOVER THE ASSESSEE VIDE HIS OBJECTION DATED 02 - 12 - 2013HAS SUBMITTED THAT WE STATE THAT WE DO NOT AGREE WITH THE VALUE AS PER STAMP DUTY VALUE. WE HAVE TO PLEAD THAT THE RATE AS PER THE AGREEMENT MAY PLEASE BE ACCEPTED .' 9 IT A NO. 4177 /MUM/201 5 11 . IN VIEW OF THE JUDGMENT REFERRED ABOVE AND IN VIEW OF FAILURE OF THE ASSESSING OFFICER TO REFER THE MATT ER TO DVO FOR THE PURPOSES OF DETERMINING THE FULL VALUE CONSIDERATION OF THE PROPERTY UNDER SECTION 50C(2)OF THE ACT , WE HEREBY RESTORE THE MATTER TO ASSESSING OFFICER TO WORK OUT THE CAPITAL GAIN BY INVOKING SECTION 50C(2) OF THE ACT. THE APPEAL IS DI SPOSED OF IN THE ABOVE TERMS. 12 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPT, 2015. ( B.R. BASKARAN ) ( LALIT KUMAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER [ MUMBAI, DATED 23.09. 201 5 . PATEL COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED , MUMBAI 5 . THE DR BENCH, SMC 6 . MASTER FILE [[[[[[ // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI