SHREYAS V. DESAI, MUMBAI V. DCIT CIR 19(1), MUMBAI

ITA 446/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100691 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 08-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIPUL B JOSHI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Charitable institution; Cost of acquisition; Fair market value; Valuation report
• Section: 50C; 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K.BILLAIYA, ACCOUNTANT MEMBER ITA NO. 446 /MUM/20 12 (ASSESSMENT YEAR: 200 7 - 0 8 ) SHRI SHREYAS V. DESAI, 1 ST FLOOR, HEMKUNJ, 6 TH ROAD, SANTACRUZ (E), MUMBAI - 400055. APPELLANT PAN: AAEPD0914G VS. DEPUTY COMMISSIONER OF INCOME - TAX 19 ( 1 ), MUMBAI. RESPONDENT APPELLANT BY : SHRI VIPUL B.JOSHI. RESPONDENT BY: SHRI RAVINDER SINDHU, (DR). DATE OF HEARING: 1 2 /08/2015 DATE OF PRONOUNCEMENT : : 21 /08/2015 O R D E R PER VIJAY PAL RAO, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30/11/2011 OF THE CIT(A) - 22 , MUMBAI, FOR THE ASSESSMENT YEAR 200 7 - 0 8 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: ITA NO. 446/MUM/2012 SHRI SHREYAL V.DESAI PAGE 2 OF 8 1. RE.: NON ADMISSION OF ADDITIONAL GROUND RAISED 1.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 22, MUMBAI ['ID. CIT (A)'], ERRED IN REFUSING TO ADMIT THE ADDITIONAL GROUND RAISED BEFORE HIM BY THE APPELLANT CHALLENGING THE ACTION OF THE ASSESSING OFFICER ['THE A.O.'] IN ADOPTING THE STAMP DUTY VALUATION OF THE PROPERTY AS THE FULL VALUE OF CONSIDERATION, BY APPLYING THE PROVIS ION OF S. 50C (1) OF THE INCOME TAX ACT, 1961 ['THE ACT'] 1.2 WHILE DOING SO, THE CIT (A) FAILED TO APPRECIATE THAT THE ADDITIONAL GROUND WAS NOT TAKEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS SOLELY DUE TO OVERSIGHT AND THAT THE A.O. WAS ALSO DUTY BOUN D TO ENSURE THAT THE CORRECT TAX LIABILITY OF THE APPELLANT WAS DETERMINED AND THE APPELLANT WAS NOT FORCED TO PAY MORE TAXES THAN WHAT WERE LEGITIMATELY DUE FROM HIM. 1.3 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, NO SUCH REJECTION WAS CALLED FOR. 2. ADOPTION OF STAMP DUTY VALUATION U/S. 50C (I) 2.1 THE A.O. ERRED IN ADOPTING THE STAMP DUTY VALUATION OF THE PROPERTY AS THE FULL VALUE OF CONSIDERATION RECEIVED BY APPLYING THE PROVISION OF S. 50C (1) OF THE INCOME TAX ACT, 1961 ['THE ACT'] 2.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE FAIR MARKET VALUE OR THE STAMP DUTY VALUE OF THE PROPERTY, WHICHEVER IS LESS, SHOULD BE ADOPTED AS THE FULL VALUE OF CONSIDERATION U/. 50C (2) OF THE ACT. 3. VIDE APPLICATION DATED 2/1/2015, ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND WHICH READS AS UNDER: ITA NO. 446/MUM/2012 SHRI SHREYAL V.DESAI PAGE 3 OF 8 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE COMPUTATION OF EXEMPTION U/S 54F IS NOT IN ACCORDANCE WITH LAW. 4 . THE ASSESSEE INHERITED A PLOT OF LAND ADMEASURING 300.10 SQ.MTRS. AT ANDHERI, MUMBAI. ON 23/10/2003, ASSESSEE ALONG WITH OTHER CO - OWNERS, AGREED TO GRANT DEVELOPMENT RIGHT WITH RESPECT TO THE PLOT TO THE TRUSTEES OF ST. LAWRENC E EDUCATION SOCIETY, A PUBLIC CHARITABLE TRUST, AT THE RATE OF RS.451/ - SQ.FT. FOR A TOTAL CONSIDERATION OF RS.1,28,25,272/ - . THE PARTIES HAVE ALSO EXECUTED MOU AND RECEIVED PART PAYMENTS. SUBSEQUENTLY, ASSESSEE AND OTHER CO - OWNERS RECEIVED OTHER PART PAY MENTS FROM THE DEVELOPER FROM TIME TO TIME WHICH WERE SHOWN BY THE ASSESSEE AS EARNEST MONEY IN HIS ACCOUNT. FOR THE YEAR ENDING 31/3/2006, ASSESSEE SHOWED RS.24,73,488.50 AS ADVANCE AGAINST SALE OF LAND. IN THE MEAN TIME, IT CAME TO THE NOTICE OF THE PA RTIES THAT SOME PART OF THE LAND WAS ENCROACHED UPON AND THEREFORE THE SALE CONSIDERATION WAS ACCORDINGLY REDUCED TO RS.1,18,78,578/ - AS AGAINST THE ORIGINAL AGREED AMOUNT OF RS.1,28,25,272/ - . FINALLY A DEED OF CONVEYANCE W AS EXECUTED ON 29/12/2006 WHICH R ELATES TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN THE RETURN OF INCOME, ASSESSEE COMPUTED LONG - TERM CAPITAL GAIN BY ADOPTING SALE CONSIDERATION COMING TO HIS SHARE AT RS.34,73,488.50. THE ASSESSEE COMPUTED LONG - TERM CAPITAL GAIN AFTER TAKING INTO ACC OUNT INDEXED COST OF ACQUISITION AS ITA NO. 446/MUM/2012 SHRI SHREYAL V.DESAI PAGE 4 OF 8 WELL AS TAKING THE BENEFIT U/S 54F AT RS.26,98,448.25 AND DECLARED CAPITAL GAINS TAX LIABILITY AT NIL. IN THE COURSE OF ASSESSMENT PROCEEDINGS, AO ASKED THE ASSESSEE TO GIVE DETAILS REGARDING CAPITAL GAINS. THE AO ASKE D THE ASSESSEE TO COMPUTE CAPITAL GAIN BY APPLYING PROVISIONS OF SEC.50C. ACCORDINGLY, ASSESSEE REVISED THE COMPUTATION OF CAPITAL GAIN BY SUBSTITUTING STAMP DUTY VALUE AT RS.2.08 CRORE AS AGAINST THE AGREED CONSIDERATION OF RS.1,18,78,576/ - . THE AO HAS MADE ADDITION BY TAKING INTO CONSIDERATION THE STAMP DUTY VALUATION AS FULL VALUE CONSIDERATION AND ALSO RESTRICTED THE DEDUCTION U/S 54F ONLY TO THE EXTENT OF THE ACTUAL AMOUNT INVESTED IN THE NEW ASSET. 5. THE ASSESSEE CHALLENGED THE ACTION O F THE AO BEFORE THE CIT(A) AND RAISED AN ADDITIONAL GROUND REGARDING APPLICABILITY SEC.50C AND ADOPTING STAMP DUTY VALUATION AS FULL VALUE CONSIDERATION BY IGNORING THE FACT THAT SOME PART OF THE LAND WAS ENCROACHED UPON BY THE ENCROACHERS AND THEREFORE TH E PROPER VALUE SHOULD HAVE BEEN TAKEN BY CONSIDERING THE VA LUATION REPORT OF THE APPROVED V ALUER FILED BY THE ASSESSEE. THE CIT(A) HAS REJECTED THE ADDITIONAL GROUND BY ASSIGNING THE REASON S THAT THE ASSESSEE HAS NOT RAISED THIS OBJECTION BEFORE THE AO AN D RATHER ACCEPTED THE STAMP DUTY VALUATION AS FULL VALUE CONSIDERATION IN THE REVISED COMPUTATION OF CAPITAL GAIN. ITA NO. 446/MUM/2012 SHRI SHREYAL V.DESAI PAGE 5 OF 8 6. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE REVISED COMPUTATION OF CAPITAL GAIN WAS FURNISHED BY THE ASSESSEE AS IT WAS ASKED BY THE AO. HE FURTHER SUBMITTED THAT THE ORIGINAL CONSIDERATION WAS AGREED BETWEEN THE PARTIES AT RS.1,28,25,272/ - AND AFTER THE FACT OF ENCROACHMENT OF LAND CAME TO THE NOTICE OF THE PARTIES, THE CONSIDERATION WAS REDUCED TO RS.1,18,78,576/ - . T HOUGH THE RATE OF RS.451/ - PER SQ.MTR. WAS NOT CHANGED BUT REDUCTION IN THE SALE CONSIDERATION WAS ONLY BECAUSE OF THE REDUCED AREA OF THE LAND BECAUSE OF ENCROACHMENT. THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS BROUGHT ON RECORD CERTAIN GLARING FACTS TO SHOW THAT THE VALUE OF THE LAND IS IMPACTED BY THE ENCROACHMENT AND SEVERAL OTHER FACTORS AND THEREFORE THE STAMP DUTY VALUATION CANNOT BE ADOPTED AS THE FULL VALUE CONSIDERATION WHEN THE PARTIES HAVE AGREED TO REDUCE THE SALE CONS IDERATION ON THIS ACCOUNT. HE HAS THUS PLEADED THAT THE ASSESSEE HAS ALREADY FILED A VALUATION REPORT FOR VALUING THE PROPERTY IN QUESTION AND THE AO HAS ADOPTED THE STAMP DUTY VALUATION WITHOUT CONSIDERING THE VALUATION REPORT FURNISHED BY THE ASSESSEE OR REFERRING TO THE MATTER TO THE DVO FOR THE PURPOSE OF PROPER VALUATION . HE HAS ASSERTED THAT THIS MATTER MAY BE REMITTED TO THE RECORD OF THE AO FOR RE FERRING TO THE DVO FOR DETERMINATION OF THE FMV OF THE PROPERTY. 7. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE ASSESSEE ITSELF HAS ACCEPTED THE STAMP DUTY VALUATION ITA NO. 446/MUM/2012 SHRI SHREYAL V.DESAI PAGE 6 OF 8 BEFORE THE AO AND FURNISHED THE REVISED COMPUTATION OF CAPITAL GAIN. THEREFORE, THE CIT(A) HAS RIGHTLY REJECTED THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. IN REJOINDER, THE LEARNED AR OF THE ASSESSEE POINTED OUT THAT EVEN IN THE REVISED COMPUTATION OF CAPITAL GAIN, ASSESSEE HAS CLAIMED FULL AMOUNT OF EXEMPTION U/S 54F BECAUSE THE ENT IRE SALE RECEIPT HAS BEEN INVESTED BY THE ASSESSEE IN THE NEW ASSET. THEREFORE, THE ADDITION MADE AS PER THE DEEMING PROVISION WILL ALSO BE COVERED UNDER THE BENEFIT OF SECTION 54 F WHEN THE ASSESSEE HAS INVESTED THE ENTIRE AMOUNT ACTUALLY RECEIVED BY THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. WE FIND THAT AS PER THE AGREEMENTS AS WELL AS THE CONVEYANCE DEED, THE UNDISPUTED FACT HAS EMERGED IS THAT CERTAIN PART OF THE LAND IN QUESTION WAS ENCROACHE D UPON BY THIRD PARTIES AND ACCORDINGLY THE VENDORS, INCLUDING THE ASSESSEE AS WELL AS THE PURCHASER AGREED TO REDUCE THE SALE CONSIDERATION IN PROPORTION TO THE LAND ENCROACHED UPON BY THE ENCROACHERS. THOUGH THE ASSESSEE HAS FURNISHED REVISED COMPUTATI ON OF CAPITAL GAIN AND CLAIMED EXEMPTION UP TO THE FULL AMOUNT OF CAPITAL GAIN U/S 54F, HOWEVER, THE AO HAS ADOPTED ONLY ONE PART OF THE REVISED COMPUTATION TO THE EXTENT OF ADOPTING STAMP DUTY VALUATION AS FULL VALUE CONSIDERATION. THE CLAIM U/S 54F OF ITA NO. 446/MUM/2012 SHRI SHREYAL V.DESAI PAGE 7 OF 8 T HE ACT WAS REJECTED TO THE EXTENT OF THE ADDITION MADE BY THE AO AS PER DEEMING PROVISIONS OF SEC.50C. THE ASSESSEE RAISED AN ADDITIONAL GROUND REGARDING APPLICATION OF 50C AND VALUATION ADOPTED BY THE AO AS PER THE STAMP DUTY VALUATION. WE FIND THAT AS PER SUB - SEC.(2) OF SEC.50C , IF THE ASSESSEE RAISES AN OBJECTION AND CLAIM THAT THE VALUE ADOPTED OR ASSESSED BY THE VALUATION AUTHORITIES EXCEEDS FMV OF THE PROPERTY AS ON THE DATE OF TRANSFER, THE AO MAY REFER THE VALUATION OF THE CAPITAL ASSET TO THE VAL UATION OFFICER. THE CIT(A) HAVING CO - TERMINUS POWER WITH THAT OF THE AO, OUGHT TO HAVE REFERRED THE FMV OF THE LAND IN QUESTION TO THE DVO WHEN THE ASSESSEE HAS POINTED OUT CERTAIN FACTORS WHICH HAVE DIMINISHED THE VALUE OF THE PROPERTY IN QUESTION. THE CIT(A) HAS REJECTED THE CLAIM OF THE ASSESSEE ON TECHNICAL GROUND. IT IS PERTINENT TO NOTE THAT WHEN THE ASSESSEE HAS BROUGHT OUT CERTAIN FACTS WHICH MAY HAVE THE IM PACT O N THE VALUE OF THE PROPERTY IN QUESTION, THEN THE FMV OF THE PROPERTY OUGHT TO HAVE B EEN DETERMINED BY REFERRING THE SAME TO THE DVO. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTERESTS OF JUSTICE, WE ARE OF THE VIEW THAT FMV OF THE LAND IN QUESTION IS REQUIRED TO BE DETERMINED BY THE DVO AFTER CONSIDERING THE ADVERSE FACT POI NTED OUT BY THE ASSESSEE AS WELL AS THE VALUATION REPORT OF THE APPROVED VALUER FURNISHED BY THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO FOR RE - ADJUDICATION OF THE SAME AFTER REFERRING THE ITA NO. 446/MUM/2012 SHRI SHREYAL V.DESAI PAGE 8 OF 8 VALUATION OF THE CAPITAL ASSET IN Q UESTION TO THE VALUATION OFFICER. 10. AS REGARDS THE OTHER GROUNDS AND ADDITIONAL GROUND RAISED BY THE ASSESSEE, THE SAME ARE CONSEQUENTIAL TO THE MAIN ISSUE OF DETERMINATION OF THE FMV OF THE PROPERTY AS PER THE PROVISIONS OF SEC.50C(2) OF THE ACT. ACCO RDINGLY, THE OTHER ISSUES RAISED BY THE ASSESSEE ARE KEPT OPEN. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. P PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2015. SD/ - SD/ - ( N.K.BILLAIYA) (VIJAY PAL RAO) ACCOUNANT MEMBER JUDICIAL MEMBER EKSRINIVASULU, SR.PS COPY TO: 1. A PPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, MUMBAI. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL MUMBAI