ACIT, New Delhi V. M/s. Prince Gutka Ltd., Noida

ITA 43/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81822 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 11-08-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 04-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANOJ KUMAR CHOPRA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value; Valuation report; Competent authority
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SMT. DIVA SINGH, J .M. AND SHRI J.SUDHAKAR REDDY, A.M. ITA NO. 43/DEL/2012 ASSESSMENT YEAR : 2005-06 ACIT VS. M/S. PRINCE GUTKA LTD. CENTRAL CIRCLE-1, ROOM NO. 322, D-37, SE CTOR-63 IIIRD FLOOR, ARA CENTRE, NO IDA JHANDEWALAN EXTN. PAN AAACP3965A NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI MANOJ KUMAR CHOPRA, SR. DR DEPARTMENT BY:- SH. RAJESH JAIN, CA O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF LD.CIT(APPEALS)-III, DELHI DT. 3.10.2011 FOR THE AS SESSMENT YEAR 2005-06. 2. FACTS IN BRIEF : THE ASSESSEE IS A COMPANY AND IT IS FILED ITS RE TURN OF INCOME ON 24.5.2007. THE ISSUE THAT ARISES FOR OUR CONSIDERATION IS BROUGHT OUT AT PARA 3 AND PARA 4 OF THE ASSTT ORDER WHICH I S EXTRACTED FOR YOUR READY REFERENCE :- 3. THE ASSESSEE COMPANY HAS SUBMITTED THAT IT I S ENGAGED IN THE BUSINESS OF MANUFACTURING OF SUPARI AND MOUTH-FRES HNERS UP TO ASSTT. YEAR 2004-05. THE COMPANY STOPPED ITS PRODUCTION IN OCTOBER, 2003. DURING THE YEAR UNDER CONSIDERATION THE COMPANY HAS SOLD ITS FACTORY NO. A-44 SITUATED AT SECTOR-6 NOIDA UP FOR TOTAL CO NSIDERATION OF RS. 30,50,000/- AS PER SALE DEED EXECUTED ON 22/12/2004 . 4. THE SALE DEED WAS GOT REGISTERED FROM COMPETE NT AUTHORITY I.E. SUB REGISTRAR WHILE REGISTERING THE ABOVE SAID DOCUMENT S THE SUB REGISTRAR ADOPTED VALUE OF FACTORY LAND BUILDING AT RS. 46,50 ,400/-. AS PER PROVISIONS OF SECTION 50-C OF THE I.T. ACT, FOR CAL CULATION OF CAPITAL GAIN ITA NO. 43/DEL/2012 AYS 2005-06 ACIT VS. M/S. PRINCE GUTKA LTD. PAGE 2 OF 5 THE VALUE ADOPTED BY COMPETENT AUTHORITY BE TREATED AS SALE CONSIDERATION. 3. REPLY FILED BY THE ASSESSEE THAT T HE VALUATION OF THE ASSESSEE IS SUPPORTED BY THE REPORT OF REGISTERED VALUER AND T HE VALUE ADOPTED BY THE SUB REGISTRAR FOR THE PURPOSE OF STAMP DUTY DOES NO T REFLECT THEIR CORRECT VALUE WAS REJECTED BY THE AO. ON APPEAL THE FIRST A PPELLATE AUTHORITY ALLOW THIS CLAIM OF THE ASSESSEE. AGGRIEVED THE REVENUE I S IN APPEAL ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 16,00,400/- MADE BY THE AO U/S 50C OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF LONG TERM CAPITAL GAIN. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT IT IS COM PULSORY FOR THE AO TO REFER THE PROPERTY FOR VALUATION BEFORE MAKING A DDITION U/S 50C OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF LONG TERM CA PITAL GAIN. 4. WE HAVE HEARD SHRI MANOJ KUMAR CHOPRA, SR. D R ON BEHALF OF THE ASSESSEE AND SHRI RAJESH JAIN THE LD. COUNSEL ON B EHALF OF THE REVENUE. 5. ON A CAREFUL CONSIDERATION OF THE FACTS AND C IRCUMSTANCES OF THE CASE, A PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF T HE AUTHORITIES BELOW AS WELL AS CASE LAWS CITED WE HOLD AS FOLLOWS :- THE LD. CIT(A) HAS HELD AS FOLLOWS : 7. FROM THE ASSESSMENT ORDER IT IS NOTED THAT TH E AO HAS ADOPTED THE SALE CONSIDERATION OF THE IMPUGNED PROPERTY AT RS. 46,50,400/- FOR COMPUTATION OF CAPITAL GAINS UNDER PROVISION OF S. 50C. THIS SALE CONSIDERATION IS BASED ON THE CIRCLE RATE OF LAND A ND BUILDING CONSTRUCTED THEREON AS MENTIONED IN THE TRANSFER DE ED REGISTERED WITH THE SUB REGISTRAR NOIDA ON 28.12.04. THUS AS PER TH IS DEED THE STAMP DUTY HAS BEEN PAID ON THE MARKET VALUE AS PER THE N OIDA REGISTRATION AUTHORITIES, WHILE THE ACTUAL VALUE PAID AS SALE CO NSIDERATION IN RS. 30,50,000/- AS MENTIONED ON PAGE NO. 1 ON TOP OF TH E SALE DEED AS ITA NO. 43/DEL/2012 AYS 2005-06 ACIT VS. M/S. PRINCE GUTKA LTD. PAGE 3 OF 5 WELL AS ON PAGE NO. 3 WHERE THE DETAILS OF THE PAYM ENTS MADE IN CHEQUE ARE MENTIONED AND ALSO THE FACT THAT THERE I S NO BALANCE DUE TOWARDS THE TRANSFEREE TO BE PAID TO THE TRANSFEROR . THE ARGUMENT OF THE ASSESSEE IS THAT THE ABOVE DIFFERENCE BETWEEN T HE MARKET VALUE FOR STAMP DUTY PURPOSES AND THE ACTUAL SALE CONSIDERATI ON IS ON ACCOUNT OF THE VALUATION OF SUPER STRUCTURE BUILT ON THE PL OT WHICH WAS A 20 YEAR OLD BUILDING THE VALUE OF WHICH HAS BEEN TAKEN AT RS. 23,43,224/- BY THE NOIDA AUTHORITY AS AGAINST THE V ALUE OF THE BUILDING AT RS. 5,61,200/- AS PER THE VALUATION REP ORT DATED 30.11.04, SUBMITTED BY THE ASSESSEE. IT HAS BEEN CONTENDED TH AT THE CIRCLE RATE OF BUILDING AT RS. 23,43,224/- ADOPTED BY THE NOIDA REGISTERING AUTHORITY WITHOUT CONSIDERING THE LIFE OF THE BUILD ING IS ARBITRARY AND THAT THE ASSESSEE COMPANY HAD OBJECTED BEFORE THE A O AGAINST THE SUBSTITUTION OF CIRCLE RATE OF SUPER STRUCTURE OF F ACTORY BUILDING AS AGAINST THE ACTUAL CONSIDERATION RECEIVED IN TERMS OF SECTION 50C OF THE I.T. ACT. THE ARGUMENT MADE BY THE APPELLANT IS THAT UPON FIL ING OF HIS OBJECTION U/S 50C (2) THE AO SHOULD HAVE REFERRED T HE VALUATION OF THE ASSETS TO THE VALUATION OFFICER, IN ACCORDANCE WITH SECTION 55A OF THE IT ACT. IN SUPPORT OF HIS ARGUMENT THE APPELLANT HA S RELIED ON THE OBSERVATIONS OF DELHI ITAT IN CASE OF MANJU RANI JA IN ITA NO. 2270/D/2007 DATED 17.4.2008, COPY OF WHICH HAS BEEN FILED. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE ASSES SEE HAD INDEED OBJECTED TO THE ADOPTION OF CIRCLE RATE VALUE OF BU ILDING AT RS. 23,43,224/- ON BASIS OF NOIDA REGISTERING AUTHORITY AND HAD ALSO SUBMITTED THE VALUATION REPORT FROM THEIR OWN VALUE R WHO HAD VALUED THIS PROPERTY AT RS. 6 LACS. A COPY OF THE ASSESSEE S VALUATION REPORT WERE ALSO FILED BEFORE THE AO. NOW IN TERMS OF SECT ION 50C (2) OF THE I.T. ACT, IT WAS INCUMBENT ON PART OF THE AO TO HAV E REFERRED THE VALUATION OF THE CAPITAL ASSETS TO THE VALUATION OF FICER AS THE ASSESSEE HAD CLAIMED THAT THE VALUE ADOPTED FOR PURPOSES OF STAMP DUTY EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER. IN FACT SECTION 50C(3) FURTHER LAYS DOWN THAT IF THE VALUE SO ASCERTAINED BY THE VALUATION OFFICER EXCEEDS THE ST AMP VALUE, THEN IN THAT CASE THE STAMP VALUE ALONE WOULD BE ADOPTED. T HIS BY NECESSARY IMPLICATION WOULD MEAN THAT IF THE VALUE ASCERTAINE D BY THE VALUATION OFFICER IS LOWER THAN THE VALUE ADOPTED FOR THE PUR POSES OF PAYMENT OF STAMP DUTY, IT IS THE VALUE DETERMINED BY THE VALUA TION OFFICER WHICH WOULD BE ADOPTED AS THE VALUE OF THE PROPERTY, FOR PURPOSES OF DETERMINING THE FULL VALUE OF CONSIDERATION IN TERM S OF SECTION 50C OF THE ACT. THUS ON A COMBINED READING OF SUB SECTION (1), (2) & (3) OF SECTION 50C, WHICH IS A SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES FOR THE PURPOSES OF COMPUTING INCOME FROM CAPITAL GAINS., THERE IS NO DOUBT IN MY MIND THAT AS PER THE PROCEDURE INGRAINED IN THIS SECTION IT IS A MANDA TORY LEGAL REQUIREMENT ON PART OF THE AO TO REFER THE PROPERTY FOR VALUATION TO THE ITA NO. 43/DEL/2012 AYS 2005-06 ACIT VS. M/S. PRINCE GUTKA LTD. PAGE 4 OF 5 VALUATION OFFICER ONCE THE VALUE ADOPTED FOR STAMP DUTY PURPOSE IS OBJECTED TO BY THE ASSESSEE. THE WORD MAY REFERRE D TO IN S. 50C (2), IN THE SCHEME OF THINGS HAS TOBE CONTEXTUALLY READ AS SHALL AND THEREFORE REFERENCE TO THE VALUATION OFFICER IS COM PULSORY IN CASE WHERE OBJECTION IS RAISED BY THE ASSESSEE. SINCE THIS HAS NOT BEEN FOLLOWED IN THE CASE I AM CONSTRAINT TO HOLD THAT THE ADDITION MADE BY ADOPTING THE SALE CONSIDERATION AT RS. 46,50,400/- BEING NOT IN ACCORDANCE WITH LAW IS NOT SUSTAINABLE. IN THIS CONNECTION TH E AO IN HIS REMAND REPORT HAS SUBMITTED THAT THE SUBJECT PROPERTY HAS ALREADY BEEN DEMOLISHED AND THEREFORE THERE IS NO QUESTION OF MA KING A FRESH VALUATION THROUGH THE VALUATION OFFICER AT THIS STA GE. THE AO HAS ALSO SUBMITTED THAT THE SUBJECT PROPERTY BEFORE DEMOLITI ON WAS SOLD BY SH. MANPREET CHAUDHARY FOR A TOTAL CONSIDERATION OF RS . 70 LACS AND THAT THE VALUE OF CONSTRUCTION WAS ADOPTED BY THE REGIST RAR NOIDA AT RS. 32,54,960/- AS ON 3.4.07. THUS POINT BEING MADE IS THAT IN VIEW OF THE SUBSEQUENT VALUE OF THE SAME CONSTRUCTED PROPERTY B EING HIGHER AND WHICH HAS BEEN ACCEPTED BY THE SUBSEQUENT SELLER TH E EARLIER VALUATION IN 2004 BY THE NOIDA REGISTRATION AUTHORI TY AT RS.23,43,224/- SHOULD BE TAKEN AS TRUE AND CORRECT. I AM NOT INCLINED TO ACCEPT THIS SUBMISSION OF THE AO AS SECTION 50C IS A DEEMING PROVISION AND IT IS TRITE LAW THAT SUCH PROVISIONS ARE TOBE STRICTLY INTERPRETED AND ADDITIONS TO INCOME WHILE INVOKING SUCH PROVISIONS CAN BE MADE ONLY UPON FOLLOWING THE ESTABLISHED PRO CEDURE IN LAW AND IT CANNOT BE BASED ON SUBSEQUENT EVENTS AND INFEREN CES DRAWN THEREUPON. ACCORDINGLY, THE AO IS DIRECTED TO RECOM PUTE THE CAPITAL GAINS IN TERMS OF THE ABOVE FINDINGS. 6. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CON TROVERT THE FACTUAL FINDINGS OF THE FIRST APPELLATE AUTHORITY. THE LEGA L POSITION IS THAT ONCE THE ASSESSEE OBJECTS TO ADOPTION OF MARKET VALUE AS PER SUB-REGISTERED VALUE UNDER SECTION 50C, AO IS DUTY BOUND TO REFER THE V ALUATION OF THE CAPITAL ASSET TO THE DEPARTMENTAL VALUATION OFFICER. THIS H AS NOT BEEN DONE IN THE CASE ON HAND. THE ASSESSEE HAD FILED THE VALUATION REPORT OF A REGISTERED VALUER IN SUPPORT OF THE MARKET VALUE ADOPTED BY HI M. MOREOVER IN THE PECULIAR FACTS OF THE CASE, THE QUESTION OF REFERRI NG CAPITAL ASSET TO THE DEPARTMENTAL VALUATION OFFICER AT THIS POINT TO TIM E DOES NOT ARISE, AS THE PROPERTY HAS ALREADY BEEN DEMOLISHED. UNDER THESE F ACTS AND ITA NO. 43/DEL/2012 AYS 2005-06 ACIT VS. M/S. PRINCE GUTKA LTD. PAGE 5 OF 5 CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE FIRST APPELLATE AUTHORITY. WE UPHOLD THE SAME AND DISMISS THIS APPE AL OF THE REVENUE. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER, 2014. SD/- SD/- (DIVA SINGH) ( J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 17 TH OCTOBER, 2014 *VEENA COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR