REHMATULLA ABDUL HAMID MUKRI L/H OF LAT ABDUL HAMID MOHD YUSUF MUKRI, RAIGAD V. ACIT PANVEL CIRCLE, PANVEL

ITA 426/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8819 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHIMA GUPTA
• Keywords: Capital asset; Fair market value; Valuation report

Judgement Text

I.T.A NO. 426/ MUM/2010 REHMATULLA ABDUL HAMID MUKRI. 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH, MUMBAI [CORAM : N V VASUDEVAN JM, AND PRAMOD KUMAR AM] ITA NO.: 426/MUM/10 ASSESSMENT YEAR: 2006-07 REHMATULLA ABDUL HAMID MUKRI L/H OF LATE ABDUL HAMID MOHD YUSUF MUKRI AP PELLANT 275, MASJID MOHALLA URAN, DISTRICT RAIGARH 400 702 PAN : AEMPM9826Q VS. ASSISTANT COMMISSIONER OF INCOME TAX PANVEL CIRCLE, PANVEL RESPONDENT APPEARANCES: HARESH P SHAH, FOR THE APPELLANT ASHIMA GUPTA, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CALLED I NTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 15 TH OCTOBER 2009, IN THE MATTER OF ASSESSMENT UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED AS MANY AS FOURTEEN GRO UNDS OF APPEAL, BUT WHAT HAVE BEEN TERMED AS GROUNDS OF APPEAL ARE INFA CT ARGUMENTS IN SUPPORT OF THE SHORT GRIEVANCE OF THE ASSESSEE TO T HE EFFECT THAT THE CIT (A) ERRED IN CONFIRMING THE LONG TERM CAPITAL GAINS ON TRANSFER OF LAND AT I.T.A NO. 426/ MUM/2010 REHMATULLA ABDUL HAMID MUKRI. 2 RS 89,97,513, AS AGAINST LONG TERM CAPITAL GAINS OF RS 15,57,461 DISCLOSED BY THE ASSESSEE, BY REJECTING FAIR MARKET VALUE OF LAND OF RS 525 PER SQUARE METER, AS ON 1 ST APRIL 1981, ADOPTED BY THE ASSESSEE ON THE BASIS O F APPROVED VALUERS REPORT, AND SUBSTITUTING THE SAME BY RS 111 PER SQUARE METER ON THE BASIS OF COMPARABLE SALE INSTANCES. W E WILL TAKE UP ALL THESE GROUNDS OF APPEAL TOGETHER. 3. TO ADJUDICATE ON ASSESSEES GRIEVANCE, ONLY A FE W MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE WAS OWNER OF TWO PLOTS OF LAND AT BOKADIVRA (URAN), WHICH THE ASSESSEE HAD PURCHASED LONG AGO IN PRE- INDEPENDENCE DAYS, AND THESE PLOTS WERE ACQUIRED BY THE STATE GOVERNMENT. THE ASSESSEE HAS OFFERED CAPITAL GAINS ON TRANSFER OF THESE PLOTS BY THE GOVERNMENT. THE SHORT POINT OF DISPUTE IN THIS COMPUTATION OF CAPITAL GAINS IS THE FAIR MARKET VALUE OF THE LAND AS ON 1 ST APRIL 1981. WHILE THE ASSESSEE HAD ADOPTED THE FAIR MARKET VALU E OF THE LAND, ON THE BASIS OF APPROVED VALUERS REPORT, AT RS 525 PER SQ UARE METER, THE ASSESSING OFFICER DID NOT ACCEPT THE SAID VALUATION . HE WAS OF THE VIEW THAT THE VALUER HAS NO PROPER BASIS, AND IT IS VAL UED ON LOCATION, POTENTIALITY AND SITE CONDITIONS AND THAT THE RAT E ADOPTED BY THE VALUER IN RESPECT OF THESE LANDS PRIMA FACIE APPEARS TO BE AT HIGHER SIDE. THE ASSESSING OFFICER SIMPLY BRUSHED ASIDE THE VALUATIO N REPORT, AND REQUISITIONED INFORMATION FROM THE SUB REGISTRARS OFFICE ABOUT COMPARABLE SALES INSTANCES. HE COULD FIND TWO SALES INSTANCES- ONE ON 7 TH JUNE 1982 IN WHICH LAND WAS SOLD AT RS 119.60 PER S QUARE METER, AND THE OTHER ON 30 TH JULY 1982 IN WHICH LAND WAS SOLD AT RS 102 PER SQU ARE METER. HE ADOPTED THE AVERAGE OF THESE TWO RATES, WHICH WO RKED OUT TO RS 111 ( I.E. 120+102 DIVIDED BY 2), AS THE FAIR MARKET VALU E OF LAND AS ON 1 ST APRIL 1981. ON THE BASIS OF THIS FAIR MARKET VALUE OF T HE LAND, THE ASSESSING OFFICER RECOMPUTED THE LONG TERM CAPITAL GAINS. AS AGAINST LONG TERM CAPITAL GAIN OF RS 15,57, 461 ADOPTED BY THE ASSESS EE, THE RECOMPUTED CAPITAL GAIN WORKED OUT TO RS 89,97,513. AGGRIEVED , ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE I.T.A NO. 426/ MUM/2010 REHMATULLA ABDUL HAMID MUKRI. 3 IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US . 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS A LSO THE APPLICABLE LEGAL POSITION. 5. WE SEE MERITS IN PLEA OF THE ASSESSEE. WE HAVE N OTICED THAT IN THIS VERY CASE HONBLE HIGH COURT HAS AWARDED HIGHER COM PENSATION AT THE RATE OF RS 1,725 PER SQUARE METER TO THE ASSESSEE, AND T HIS COMPENSATION IS WITH RESPECT TO ACQUISITION AS ON 24 TH SEPTEMBER 1989. IT IS SOMEWHAT INCONGRUOUS TO SUGGEST THAT A LAND WHICH WAS WORTH RS 111 PER SQUARE METER IN 1981 CAN BE EXPECTED TO FETCH COMPENSATION OF OVER 15 TIMES THE 1981 PRICE AT RS 1,725 PER SQUARE METER IN 1989. TH E VALUATION ADOPTED BY THE ASSESSING OFFICER PROCEEDS ON SWEEPING GENER ALIZATIONS THAT THE RATE AT WHICH SALE INSTANCES HAVE BEEN RECORDED IN SUB REGISTRAR PANVELS OFFICE REFLECTS FAIR MARKET VALUE OF ALL LANDS IN T HAT AREA. THE ASSESSING OFFICER HAS SIMPLY BRUSHED ASIDE THE VALUATION REPO RT, AND PROCEEDED TO ADOPT THE RATE AT WHICH THESE, WHAT THE ASSESSING O FFICER TREATED AS, COMPARABLE SALES INSTANCES HAVE TAKEN PLACE. THERE IS NO DISCUSSION ABOUT PECULIARITIES OF THE PLOT OF LAND OWNED BY THE ASSE SSEE VIS--VIS THE LAND SOLD IN COMPARABLE SALES INSTANCES. THERE IS NO RE ASON, EXCEPT FOR ASSESSING OFFICERS HUNCH THAT THE FAIR MARKET VALU E DISCLOSED BY THE APPROVED VALUER IS PRIMA FACIE AT HIGHER SIDE, TO REJECT THE VALUATION REPORT. SUCH AN ACTION ON THE PART OF THE ASSESSIN G OFFICER CANNOT MEET ANY JUDICIAL APPROVAL, AND THE CIT(A) WAS CLEARLY I N ERROR IN UPHOLDING THE SAME. IN ANY CASE, A SALE INSTANCES, EVEN IF IT I S COMPARABLE, PER SE DOES NOT NECESSARILY REFLECT THE FAIR MARKET VALUE. AS AGAINST THIS TRANSACTION BETWEEN TWO PRIVATE PARTIES, A TRANSACTION INVOLVIN G GOVERNMENT, SUCH AS LAND ACQUISITION COMPENSATION, IS A BETTER GUIDE TO THE MARKET PRICES. WE CANNOT ALSO BE OBLIVIOUS TO THE FACT THAT MANY TRAN SACTIONS OF SALE OF PROPERTY UNDERSTATE THE VALUE OF CONSIDERATION- AND SUCH AN UNDERSTATEMENT OF CONSIDERATION WAS QUITE PREVALENT A PRACTICE THIRTY YEARS AGO I.E. AT THE RELEVANT POINT OF TIME, AND I T WAS FOR THIS REASON THAT I.T.A NO. 426/ MUM/2010 REHMATULLA ABDUL HAMID MUKRI. 4 LEGISLATIVE CHANGES, SUCH AS PROVIDING FOR COMPULSO RY ACQUISITION BY THE INCOME TAX AUTHORITIES AND PROVIDING FOR ADOPTING T HE CIRCLE RATE VALUATION IN COMPUTATION OF CAPITAL GAINS, HAD TO BE MADE. TH E COMPARABLE SALE INSTANCES CANNOT, THEREFORE, BE SOLE BASIS OF VALUA TION, EVEN AS THESE ARE IMPORTANT INPUTS IN THE PROCESS OF VALUATION WHICH NEED TO BE CONSIDERED ALONGWITH ALL OTHER RELEVANT FACTORS. ON THESE FACT S, THE ASSESSING OFFICER DID NOT HAVE ANY LEGALLY SUSTAINABLE REASONS TO DIS CARD THE APPROVED VALUERS REPORT JUST BECAUSE THERE WERE SOME SALE I NSTANCES, IN NEARBY AREA, SHOWING LOWER SALE PRICES OF LAND. 6. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE HOLD THAT THE CIT(A) DID INDEED ERR IN UPH OLDING THE ACTION OF THE ASSESSING OFFICER BY ADOPTING THE FAIR MARKET VALUE OF LAND, AS ON 1 ST APRIL 1981, AT RS 111 PER SQUARE METER. WE, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED REDUCTION IN FAIR MA RKET VALUE OF LAND AS ON 1 ST APRIL 1981. THE ASSESSEE GETS THE RELIEF ACCORDING LY. 7. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 19 TH DAY OF JANUARY, 2011. SD/- SD/- (N V VASUDEVAN) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI; 19 TH DAY OF JANUARY, 2011. COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER - , MUMBAI 4. COMMISSIONER (APPEALS) , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH, MUMBAI 6. GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI I.T.A NO. 426/ MUM/2010 REHMATULLA ABDUL HAMID MUKRI. 5