DCIT 24(2), MUMBAI V. SURATCHANDRA B. THAKKAR -HUF, MUMBAI

ITA 424/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0457 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 20-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Capital asset converted into stock in trade; Capital asset; Business income; Depreciation; Fair market value; Valuation report; Revised return
• Section: 45(2); 54F; 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI RAJENDRA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 424 / MUM/ 20 1 4 ( / ASSESSMENT YEAR: 2009 - 10 ) DCIT 24(2) C - 13, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN BANDRA (E) MUMBAI PIN: 400051 / VS. SURAT CHANDRA B. THAKKAR - HUF 67 - A, VITHAL NAGAR CHS RD 12, JVPD SCHEME JUHU MUMBAI PIN: 400049 ./ ./ PAN/GIR NO. : AAAHTO 788 G ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 22 .03.2017 / DATE OF PRONOUNCEMENT : 31. 05 .2017 / O R D E R PER AMARJIT SINGH, J M: THE REVENUE HAS FILED THE PRESENT A PPEAL AGAINST THE ORDER DATED 25 .1 1 .2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 34 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 2009 - 10 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - (I) 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSING OFFICER HAD NO JURISDICTION TO REFER THE CASE FOR VALUATION TO THE ASSESSEE BY : SHRI VISHW AS MUNDHE (DR) REVENUE BY: NONE M/S. SURAT CHANDRA B. T HAKKAR HUF 2 DVO TO VALUE THE FAIR MARKET VALUE AS ON 01,04.1981 IGNORING THE FACT THAT THE HON'BLE HI GH COURT OF DELHI IN THE CASE OF A.C.C. LTD: V/S DVO (2012) 357 ITR 160 (DELHI) HAS UPHELD THE ASSESSING OFFICER'S POWER TO REFER THE MATTER OF VALUATION TO THE DVO'. (II) 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND MATTER MAY BE DECIDED ACCORDING TO LAW. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY . 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME SHOWING TOTAL INCOME TO THE TUNE OF RS .10 ,24,87,079/ - ON 27,09,2009. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT ON 12.08.2010 . A REVISED RETURN OF INCOME WAS ALSO FILED ON 17.03.2011 WHEREIN THE ASSESSEE HAS MADE A NOTE OF INVESTMENT OF UNDER SECTION U/S 54F. THE RETURNED INCOME REMAINED UNCHA NGED IN THE REVISED RETURN OF INCOME. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S 143(2) OF THE ACT DATED 19.08.2010 WAS ISSUED AND SERVED UPON THE ASSESSEE . THEREAFTER, THE CASE WAS ASSIGNED TO THE PRESENT CHARGE(WHO PASSED THE ASSESSMENT ORDER) U/S120(4)(B) OF THE ACT VIDE ORDER DATED 16.06.2011 OF CIT.24, MUMBAI. THEREAFTER, NOTICE U/S 142(1) OF THE ACT DATED 30.06.2011 WAS ISSUED AND SERVED UPON THE ASSESSEE. DURING THE YEAR UNDER ASSESSMENT , THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CONSTRUCTING AND DEVELOPING OF PROPERTIES THROUGH A DEVELOPMENT AGREEMENT WITH M/S. K. RAHEJA UNIVERSAL PVT. LTD. WHEREIN THE ASSESSEE AND HIS TWO BROTHERS(CO - PARCENERS) WERE OWNERS OF THE LAND. THE ASSESSEE AS KARTA OF HUF WAS 1/4 TH OWNER IN PLOT OF LAND BEARING CTS NO.480 &480/1 HAVING AREA OF 298479.26 SQ.FT SITUATED AT RANI SATI MARG. MALAD (E). THE ASSESSEE AND OTHER CO - OWNERS HAD ENTERED M/S. SURAT CHANDRA B. T HAKKAR HUF 3 IN TO DEVELOPMENT AGREEMENT ON 14.10.2003 WITH K. RAHEJA UNIVERSAL PVT. LTD. ( REFERRED AS DEVELOPER HEREAFTER) 1 ST FLOOR, CONSTRUCTION HOUSE - B OPPOSITE KHAR TELEPHONE EXCHANGE, KHAR (W), MUMBAI 52. ACCORDINGLY, THE SALE PROCEEDS WERE TO B E SHARED IN THE RATIO 45.5% BY THE LAND OWNERS AND 54.5% BY THE DEVELOPER. THE PROJECT SHALL BE NAMED RAHEJA TIPCO PLAZA FOR COMMERCI AL COMPONENT AND RAHEJA TIPCO ENCLAVE FOR RESIDENTIAL COMPONENT. THE TOTAL AREA OF PROPERTY FOR WHICH DEVELOPMENT AGREEMENT WAS SIGNED , WAS 298479.26 SQ.FT.(ASSESSEE HAD 25% SHARE IN THIS PROPERTY) AND ASSESSEE OFFERED CAPITAL GAIN FOR TAXATION PROPORTION TO LAND USED FOR TOWER NO. C AND D FOR 10093.23 SQ.FT., WORKED OUT IN PROPORTION OF FSI. T HE INCOME CORRESPONDING TO WHICH HAS BEEN OFFERED FOR TAXATION UNDER THE HEAD BUSINESS INCOME DURING THE YEAR. THE SALE PROCEEDS OF FLATS GET CREDITED TO ASSESSEES S YSTEMIZED ESCROW ACCOUNT AS 1/4 TH OF 45.5% OF TOTAL SALE CONSIDERATION OF THE PROJECT (RESIDENTIAL UNIT) 4. DURING THE YEAR , OF 2003 - 04 THE ASSESSEE HAS CONVERTED THE LAND INTO STOCK IN TRADE ON A VALUE OF RS. 7,37,50,000/ - AND TREATED IT AS HIS BUSINESS AS SET . DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HAS OFFERED THE SALE PROCEEDS OF TOWER NO. C AND TOWER NO. D AS BOTH THESE TOWERS HAD BEEN COMPLETED DURING THE YEAR UNDER CONSIDER ATION, OCCUPANCY CERTIFICATE HAD BEEN RECEIVED IN RESPECT OF THE SE TWO TOWERS AND POSSESSION HAD BEEN HANDED OVER. THE SALE PROCEED WAS OFFERED FOR TAXATION UNDER THE HEAD BUSINESS INCOME. SIMULTANEOUSLY, THE ASSESSEE OFFERED FOR TAXATION THE INCOME UNDER THE HEAD CAPITAL GAIN ON TRANSFER OF LAND SHOWN IN THE CLOSING STOCK AS PER THE PROVISIONS OF SECT ION 45(2) OF THE I.T. ACT, 1961. I N THE RATIO OF FSI OF LAND SOLD DURI NG THE YEAR UNDER CONSIDERATION, THE ASSESSEE M/S. SURAT CHANDRA B. T HAKKAR HUF 4 FILED DETAILED WORKING OF LONG TERM CAPITAL VIDE LETTER 18.10.2011. THE ASSESSEE SHOWED THE VALUE OF THE SAID P ROPERTY AS ON 01.04.1981 AT RS. 190 PER SQ.FT AND THE FAIR MARKET VALUE AT RS.5,67,11,059/ - AND ACCORDINGLY INDEX COST FOR PURCHASE HAS BEEN SHOWN AT RS.1,11,76,629/ - THEREBY SHOWING LONG TERM CAPITAL LOSS AT RS .11,82,153. THE AO OBSERVED THAT THE VALUATIO N OF THE PRO PERTY AT ON 01.04.1981 HAD GOT DONE ON HIGHER VALUE HENCE REFERENCE WAS MADE TO THE DISTRICT VALU ATION OFFICER (DVO). DVO VIDE H IS LETTER DATED 21.12.2010 ASSESSED VALUATION OF THE PROPERTY AS ON 01.04.1981 TO THE TUNE OF RS. 373.74 LAKHS IN RES PECT OF THE AREA 298479.26 Q.FT. WHICH C OMES TO THE RS. 125.12 PER SQ.FT. THUS THE LONG TERM CAPITAL GAIN ON THE SALE OF THE LAND IN CASE OF THE ASSESSEE HUF WAS WORKED OUT AT RS. 26 , 20 , 597 AS AGAINST LOSS OF RS. 1182153 . THE LONG TERM CAPITAL GAIN WAS TREAT ED AS NIL AFTER ALLOWING THE DEDUCTION U/S 54F OF THE ACT. THEREAFTER, DISALLOWING THE 25% OF THE MOTOR - CAR EXPENSES AND DEPRECIATION ON ACCOUNT OF MOTOR - CAR , THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RSW. 10 , 25 , 58 , 010/ - . FEELING AGGRIEVED THE ASSESSEE FILED THE PRESENT APPEAL BEFORE THE CIT(A) - 34, MUMBAI WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1: - 5 . UNDER THIS ISSUE, THE REVENUE HAS CHALLENGED THE ORDER OF THE CIT(A ) IN WHICH THE CIT(A) HAS ARRIVED AT THIS CONCLUSION THAT THE AO HAD NO JURISDICTION TO THE REFER THE CASE TO DVO FOR THE VALUATION OF FAIR MARKET VALUE AS ON 01.04.1981 . THE LEARNED REPR ESENTATIVE OF THE REVENUE HAS ARGUED THAT THE CIT(A) HAS PASSED THE ORDER IN VIOLATION M/S. SURAT CHANDRA B. T HAKKAR HUF 5 OF LAW SETTLED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF ACC LTD. VS. DVO (2012) 357 ITR 160 . THE ASSESSING OFFICER HAS A POWER TO REFER THE MATTER FOR VALUATION TO THE DVO AND ACCORDINGLY T HE ASSESSING OFFICER WAS ENTITLED TO A SSES S THE LONG TERM/ SHORT TERM GAIN THEREFORE THE FINDING OF THE CIT(A) IS WRONG WHICH CURTAIL ED THE POWER OF THE AO WHICH AND ACCORDINGLY THE FINDING OF THE CIT(A) IS LIABLE TO BE SET ASIDE . HOWEVER, ON THE OTHER HAND, NO ONE IS PRESENT. BEFORE GOING FURTHER , IT IS NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD: - 3.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND IMPUGNED ASSESSMENT ORDER ON THIS ISSUE THIS ISSUE HAD COME UP IN, APPEAL IN THE APPELLANT'S OWN CASE FOR THE A Y 2008 - 09 BEFORE MY PREDECESSOR AND THE CIT(A) VIDE ORDER NO CIT(A) - 34/JT 327/2010 - 11 DATED 28 01 2010 HAS ALLOWED THE APPEAL OF THE APPELLANT ON THIS ISSUE AND THE ASSESSING OFFICER WAS DIRECTE D TO RECOMPUTE THE CAPITAL GAIN S BY ACCEPTING THE DISCLOSED VALU ATION OF THE PROPERTY AS ON 1.41981 BY OBSERVING AND HOLDING AS UNDER: - 'I HAVE GON E THROUGH THE CONTENTS OF IMPUGNED ASSES SMENT ORDER, GROUNDS OF APPEAL AND WRITTEN SUBMISSIONS AND ARGUMENTS F THE APPELLANT'S AUTHORIZED REPRESENTATIVE ON THIS ISSUE, INCLU DING THE CASE LAWS, I FIND FORCE IN THE ARGUMENTS AND SUBMISSIONS OF THE UAP. ON THIS ISSUE THAT THE ASSESSING OFFICER HAS NO JURISDICTION ULS.55A( AS OF THE INCOME TAX ACT, 1961 TO REF E R THE VALUATION AS OR 1.4.1981 TO THE DV6 IN CASE WHERE HE IS NOT OF TH E OPINION THAT THE FMV DISCLOSED BY THE APPELLANT IS LOWER THAN THE ACTUAL FMV AS ON 1.4.1981. THE APPELLANT HAS RELIED ON MANY OF THE DECISIONS BUT I FIND THAT APPELLANT'S CASE SQUARELY C OVERED BY THE DECISION OF HON'BL E THIRD MEMBER IN THE CASE OF 'MS.RU B B M KAZERANI V. JCIT(2004) 91 I TD M/S. SURAT CHANDRA B. T HAKKAR HUF 6 429(MUM)TM THE RELEVANT PORTION OF THE SAME IS REPRODUCED, FOR THE PURPOSE OF CLARITY AS UNDER: - . 'IT DOES NOT TALK ABOUT EXCESS FAIR MARKET VALUE, IN THE PRESENT CASE WHAT:! FIND IS THAT THE CIT HAS MENTIONED THAT THE F AIR MARKET' VALUE DISCLOSED BY THE ASSESSEE AT T1 CRORE AS' ON 1.4.1981 AS PER 'THE VALUATION REPORT FURNISHED BY THE ASSESSEE WAS ON THE HIGHER SIDE. I.E. , THE CIT OR THE ASSESSING OFFICER ASSUMES' POWER UNDER THE SUB CLAUSE(A) OF SECTION 55A ONLY WHEN IN HIS OPINION THE FAIR MARKET VALUE DISCLOSED BY THE ASSESSEE IS LESS. THEREFORE , NEITHER THE ASSESSING OFFICER NOR THE CIT CAN ASSUME POWER TO GIVE SUCH A DIRECTION WHERE THE VALUE OF THE PROPERTY DISCLOSED BY THE ASSESSEE BASED ON THE APPROVED VALUER'S RE PORT IS ON A HIGHER SIDE I.E. I C RORE IN THIS CASE. AS SUCH, I NVOKING JURISDICTION U1S.263 ON THE ABOVE BASIS IS ILLEGAL.' 3.2. IN VIEW' OF THE ABOVE, THE APPEAL IS ALLOWED ON THIS ISSUE ' AND THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE CAPITAL GAIN S BY ACCEPTING THE DISCLOSED VALUATION OF THE PROPERTY AS ON 1.4.1981.' 3.4. THE DEPARTMENT HAD PREFERRED AN APPEAL AGAINST THE ABOVE ORDER OF THE' C.IT(A) BEFORE THE ITAT, E' BENCH, MUMBAI AND THE HON. ITAT HAD DISMISSED THE REVENUE'S APPEAL BY OBSERVING 1AS UNDER: - 'IT IS CLEAR FROM THE AFORESAID DECISION THAT SECTION 55A COULD BE INVOKED ONLY IF THE LD.AO IS OF THE OPINION THAT HE VALU E DECLARED BY THE AS SESSEE IS LESS THAN THE FAIR MARKET VALUE OF THE ASSET. IN THE ASSESSEE'S CASE, THE LD.AO HAS MADE TH IS REFERENCE BECAUSE HE FELT THAT THE VALUE OF THE PROPERTY AS ON 1.4.19081 DECLARED BY THE ASSESSEE IS MORE THAN THE FAIR MARKET VALUE. THUS, THE CONDITION OF CLAUSE (A) OF SECTION 55A IS NOT SATISFIED. RESPECTFULLY FOLLOWING, THE DECISION OF THE TRIBUNAL REFERRED TO ABOVE WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL BY THE REVENUE. THU S, IN VIEW OF THE AFORESAID DECISION AND THE DECISION RELIED UPON BY THE LEARNED CIT(APPEALS), WE DO NOT FIND ANY REASON TO DEVIATE FROM SUCH A FINDING AND, ACCO RDINGLY, CONFIRM THE ORDER M/S. SURAT CHANDRA B. T HAKKAR HUF 7 PASSED BY THE LEARNED COMMISSIONER (APPEALS) ON THIS SCORE. THUS THE GROUNDS RAISED BY THE REVENUE IS TREATED AS DISMISSED' 3 . 5, RESPECTFULLY FOLLOWING THE DECISION OF THE CIT(A) VID E ORDER DATED 28.1 .2010 AND HON'BLE ITAT, 'E, B ENCH IN ITA NO 4586/MUM/2011 DATED 10.5.2013, THE APPEAL OF THE APPELLANT IS ALLOWED ON THIS ISSUE AND THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE CAPITAL GAINS BY ACCEPTING THE DISCLOSED VALUATION OF THE. PROPERTY AS ON 1 .4.1981 I.E. R.190/ - PER SQ . FT . 6 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING , I T CAME INTO NOTICE THAT THIS MATTER CONTROVERSY HAS ALREADY CAME BEFORE THE ITAT IN THE ASSESSEES OWN CASE FOR THE AY.2008 - 09 . IT IS NOTICED THAT IT IS NOT A MATTER TO CURTAIL THE POWER OF THE AO BUT IT IS NECESSARY FOR THE AO TO ARRIVE AT CONCLUSION THAT THE VALUE OF THE PROPERTY DECLARED BY THE ASSESSEE IS LESS THAN THE FAIR MARKET VALUE. WHEN THERE IS NO REASON TO FORWARD THE MATTER TO THE DVO THEN FORWARDING THE MATTER DOES NOT ITSELF JUSTIFIABLE. T HE CIT(A) HAS PASSED THE ORDER ON THE BASIS OF THE FINDING OF THE ITAT IN THE ASSESSES OWN CASE IN ITA NO.4586/MUM/2011 DATED 10.05.2013 (E) BENCH. WE FOUND NOTHING MATERIAL TO DEVIATE THE FINDING OF THE CIT(A) ON THIS ISSUE THEREFORE, IN THE SAID CIRC UMSTANCES WE ARE OF THE VIEW , THAT THE CIT(A) HAS PASSED THE ORDER JUDICIOUSLY AND INCORRECTLY WHICH IS NOT REQUIRED TO INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS BEING DECIDED IN FAVOUR OF THE ASSESSEE. ISSUE NO.2: - M/S. SURAT CHANDRA B. T HAKKAR HUF 8 7 . THIS ISSUE N OWHERE RAISED ANY CONTROVERSY HOWEVER, THE SAME IS FORMAL IN NATURE AND NOWHERE REQUIRED ANY ADJUDICATION. 8 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MAY , 2017 . SD/ - SD/ - ( RAJENDRA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 31ST M AY , 2017 V.P.SINGH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI