JTCIT 24(2), MUMBAI V. S.B. THAKKAR (HUF), MUMBAI

ITA 4586/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3756 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-04-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS PARMINDER
• Keywords: Capital asset; Business income; Fair market value; Valuation report
• Section: 263; 143(3)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . , , ! ! ! ! '# $% '# $% '# $% '# $% , ,, , & & & & ' ' ' ' BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 4586/MUM./2011 ( &) * !+* / ASSESSMENT YEAR : 200809 ) DY. COMMISSIONER OF INCOME TAX CIRCLE24(2), PRATYAKSHAKAR BHAVAN BANDRA (E), MUMBAI 400 051 .. ,- / APPELLANT ) V/S MR. S.B. THAKKAR (HUF) 67A, VITHAL NAGAR CHS ROAD NO.12 NS JVPD SCHEME JUHU, MUMBAI 400 049 .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AAAHT0788G &) *1# 2 3 / REVENUE BY : MRS. PARMINDER 4! 2 3 / ASSESSEE BY : NONE )! 2 # / DATE OF HEARING 18.04.2013 $ 5+ 2 # / DATE OF ORDER $ $ $ $ / ORDER '# $% '# $% '# $% '# $% , ,, , & & & & 6 6 6 6 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL IS PREFERRED BY THE REVENUE CHAL LENGING THE IMPUGNED ORDER DATED 25 TH MARCH 2011, PASSED BY THE LEARNED COMMISSIONER (AP PEALS) XXXIV, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ), FOR THE A.Y. 200809. MR. S.B. THAKKAR (HUF) 2 2. THE SOLE DISPUTE IN THIS APPEAL IS WITH REGARD TO T HE DIRECTION OF THE LEARNED COMMISSIONER (APPEALS) TO DELETE THE ADDITI ON OF ` 30,03,122, WHICH WAS BASED ON DVOS REPORT BY HOLDING THAT THE ASSES SING OFFICER HAS NO JURISDICTION TO REFER THE MATTER TO THE VALUATION O FFICER UNDER SECTION 55A IGNORING THE FACT THAT THE FAIR MARKET VALUE OF THE PROPERTY DIFFERS BY MORE THAN 15%. 3. FACTS IN BRIEF : THE ASSESSEE WAS 1/4 TH OWNER OF THE PLOT BEARING CTS NO.480/481/1, HAVING AREA OF 298479.26 SQ.FT. SITUA TED AT RANISATI MARKET, MALAD (EAST). THE ASSESSEE AND OTHER COOWNERS HAD ENTERED INTO A DEVELOPMENT AGREEMENT DATED 14 TH OCTOBER 2003, WITH M/S. K. RAHEJA UNIVERSAL PVT. LTD. AFTER CONVERTING THE LAND INTO STOCKINTRADE IN THE FINANCIAL YEAR 200304 AND VALUED THE SAME AT ` 7,37,50,000. DURING THE YEAR, THE ASSESSEE HAS OFFERED SALE PROCEEDS OF CON STRUCTED AREA TOWERA AND TOWERB TO BE TAXED UNDER THE HEAD BUSINESS INCOME . SIMULTANEOUSLY, THE ASSESSEE HAS ALSO OFFERED THE I NCOME UNDER THE HEAD CAPITAL GAIN ON TRANSFER OF LAND SHOWN IN THE CLOSING STOCK AS PER THE PROVISIONS OF SECTION 45(2). FOR THE PURPOSE OF COS T OF ACQUISITION, THE ASSESSEE HAS TAKEN THE VALUE OF THE SAID PROPERTY A S ON 1 ST APRIL 1981 AT ` 190 PER SQ.FT. THE FAIR MARKET VALUE WAS TAKEN AT ` 5,67,11,059 AND INDEXED COST FOR PURCHASE HAS BEEN SHOWN AT ` 1,05,29,163. AS A RESULT, LONG TERM CAPITAL LOSS WAS WORKED OUT AT ` 5,83,942. IN ORDER TO VERIFY THE GENUINENESS OF THE MARKET VALUE AS ON 1 ST APRIL 1981, THE ASSESSING OFFICER MADE A REFERENCE TO THE DVO UNDER SECTION 55A. THE DVO, VI DE HIS REPORT DATED 21 ST DECEMBER 2010, TOOK THE VALUE OF THE PROPERTY AS ON 1 ST APRIL 1981 AT ` 3,73,74,000 INSTEAD OF 5,67,11,059. DETAILED OBJECT IONS WERE MADE BEFORE THE ASSESSING OFFICER WHICH, HOWEVER, WAS REJECTED AND, AS A RESULT, ADDITION OF ` 30,03,122, WAS MADE IN THE COMPUTATION OF LONG TER M CAPITAL GAINS BASED ON THE VALUATION REPORT SUBMITTED BY THE DVO. 4. BEFORE THE LEARNED COMMISSIONER (APPEALS), THE ASSE SSEE SUBMITTED THAT THE REFERENCE UNDER SECTION 55A TO THE DVO WAS NOT MADE IN ACCORDANCE WITH THE PROVISIONS OF LAW, AS ALL THE C ONDITIONS REQUIRED FOR MAKING REFERENCE TO THE DVO UNDER SECTION 55A WAS S ERIOUSLY LACKING IN THIS MR. S.B. THAKKAR (HUF) 3 CASE. THE LEARNED COMMISSIONER (APPEALS) ALLOWED TH E ASSESSEES GROUND AFTER OBSERVING AND HOLDING AS UNDER: I HAVE GONE THROUGH THE CONTENTS OF IMPUGNED ASSESS MENT ORDER, GROUNDS OF APPEAL AND WRITTEN SUBMISSIONS AND ARGUMENTS OF THE APPELLANTS AUTHORISED REPRESENTATIVE ON THIS ISSUE, INCLUDING THE CASE LA WS, I FIND FORCE IN THE ARGUMENTS AND SUBMISSIONS OF THE LD. AUTHORIZED REP RESENTATIVE ON THIS ISSUE THAT THE ASSESSING OFFICER HAS NO JURISDICTION U/S 55A(A) OF THE LT. ACT, 1961 TO REFER THE VALUATION AS ON 01/04/1 981 TO THE DVO IN CASE WHERE HE IS NOT OF THE OPINION THAT THE FMV DISCLOSED BY THE APPELL ANT IS LOWER THAN THE ACTUAL FMV AS ON 1.4.19811. THE APPELLANT HAS RELIED ON MA NY OF THE DECISIONS BUT I FIND THAT APPELLANTS CASE IS SQUARELY COVERED BY T HE DECISION OF HONBLE THIRD MEMBER IN THE CASE OF MS. RUBAB M. KAZERANI V/S JCI T, [2004] 91 ITD 429(MUM.)TM THE RELEVANT PORTION OF THE SAME IS RE DUCED FOR THE PURPOSES OF CLARITY AS UNDER: IT DOES NOT TALK ABOUT EXCESS FAIR MARKET VAUE, IN THE PRESENT CASE WHAT I FIND IS THAT THE CIT HAS MENTIONED THAT THE FAIR MARKET VALUE DISCLOSED BY THE ASSESSEE AT RS. 1 CRO RE AS ON 1.4.1981 AS PER THE VALUATION REPORT FURNISHED BY T HE ASSESSEE WAS ON THE HIGHER SIDE. THE CIT OR THE ASSESSING OF FICER ASSUMES POWER UNDER THE SUB-CLAUSE (A) OF SECTION 5 5A ONLY WHEN IN HIS OPINION THE FAIR MARKET VALUE DISCLOSED BY THE ASSESSEE IS LESS. THEREFORE NEITHER THE ASSESSING O FFICER 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 VALUERS REPORT IS ON A HIGHER SIDE I.E. R S. I CRORE IN THIS CASE. AS SUCH, INVOKING JURISDICTION UNDER SEC TION 263 ON THE ABOVE BASIS IS ILLEGAL. 3.2 IN VIEW OF THE ABOVE THE APPEAL IS ALLOWED ON T HIS ISSUE AND THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE CAPITAL GAINS BY ACCEPTING THE DISCLOSED VALUATION OF THE PROPERTY AS ON 1.4.1981. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RE LIED UPON THE FINDINGS OF THE ASSESSING OFFICER AND SUBMITTED THA T REFERENCE WAS RIGHTLY MADE BY THE ASSESSING OFFICER TO DETERMINE THE FAIR MARKET VALUE AS ON 1 ST APRIL 1981 AND SUCH A REPORT OF THE DVO WAS BINDING ON THE ASSESSING OFFICER. 6. NONE APPEARED ON BEHALF OF THE RESPONDENT ASSESSEE. 7. WE HAVE CAREFULLY GONE THROUGH THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS OF THE LEARNED COMMISSIONER (APPEALS). FOR MAKING A REFERENCE TO THE DVO, THE ASSESSING OFFICER HAS TO FORM AN OPINI ON THAT THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET A S CLAIMED BY THE ASSESSEE BY MORE THAN 15%. THE ASSESSEE HAD SHOWN THE VALUE AS ON 1 ST APRIL 1981, MR. S.B. THAKKAR (HUF) 4 BASED ON THE DETAIL WORKING WHICH HAS NOT BEEN FOUN D TO BE WRONG BY THE ASSESSING OFFICER. THE ASSESSEE HAS TAKEN THE RATE OF ` 190 PER SQ.FT. AS ON 1 ST APRIL 1981, BASED ON CERTAIN EVIDENCE. THE ASSESSI NG OFFICER, WITHOUT ANY MATERIAL ON RECORD, OR FORMING ANY OPINION AS TO WH Y THE VALUE SHOWN BY THE ASSESSEE AS ON 1 ST APRIL 1981, WAS INCORRECT OR WAS LESS THAN FAIR MA RKET VALUE, HAS MADE A REFERENCE TO THE DVO. THE SCOPE O F REFERENCE TO THE DVO UNDER SECTION 55A HAS COME UP FOR CONSIDERATION IN NUMBER OF CASES BEFORE THE HONBLE HIGH COURTS AS WELL AS BY THE VARIOUS B ENCHES OF THE TRIBUNAL. THE LEARNED COMMISSIONER (APPEALS) HAS RELIED UPON THE DECISION OF THIRD MEMBER IN MS. RUBAB M. KAZERANI V/S JT. CIT, [2004] 91 ITD 429 (MUM.), WHEREIN THIS ASPECT HAS BEEN DEALT IN DETAIL. THE T RIBUNAL, MUMBAI BENCH, IN ITO V/S PRATAP M. INDULKAR, IN ITA NO.1142/MUM./201 0, VIDE ORDER DATED 23 RD JULY, 2004 , AFTER RELYING UPON THE JUDGMENT OF HON'BLE JURISDI CTIONAL HIGH COURT IN CIT V/S DAULAL MOHTA (HUF), ITA NO.10 3 OF 2008, JUDGMENT DATED 22 ND SEPTEMBER 2008, GUJARAT HIGH COURT JUDGMENT AND TH E ALSO DECISION OF SARALA N. SAKARANEY V/S ITO, [2010] 46 DTR (TRIB.) (MUM.) 2008, HELD AS UNDER: 4. THE TRIBUNAL IN ITS ORDER DATED 23 RD JULY, 2004 HAS CATEGORICALLY OBSERVED THUS :- THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE DVO U/S. 55A IS BAD IN LAW UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS ISSUE, IN OUR CONSIDERED OPINION IS COVERED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JUDGEMENT I N THE CASE OF RUBAB M. KAZERANI REPORTED IN 91 ITD 429 (MUM)(T M). FURTHER THE ASSESSEE ALSO COVERED BY THE THIRD MEMB ER DECISION OF THE PUNE BENCH OF THE TRIBUNAL, THE CAS E OF THE KRISHNABAI TINGORE VS. ITO REPORTED IN 101 ITD 317 (PUNE)(TM) WHEREIN IT HAS BEEN HELD THAT REFERENCE TO DVO CAN ONLY BE MADE IN CASES WHERE THE VALUE OF CAPITAL ASSET SHOW N BY THE ASSESSEE IS LESS THAN ITS FAIR MARKET VALUE OF LAND AS ON 1 ST APRIL, 1981 SHOWN BY THE ASSESSEE ON THE BASIS OF A PPROVED VALUERS REPORT BEING MORE THAN ITS FAIR MARKET VAL UE, REFERENCE UNDER SECTION 55A WAS NOT VALID. RESPECTFULLY FOLLO WING THE PROPOSITIONS LAID DOWN THESE TWO CASES BY THE COORD INATE BENCHES WE UPHOLD THE CONTENTION OF THE ASSESSEE AN D HOLD THAT THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE DVO U/S. 55A IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE IS BAD IN LAW. THUS, ON THE SOLE GROUNDS OF APPEAL, OF THE ASSESSEE HAS TO BE ALLOWED. BEFORE PASSING, WE HAVE TO MENTION THAT THE ASSESSE E HAS SUBMITTED THE ARGUMENTS. AS ON THE BASIS OF THE LEG AL ASPECTS MR. S.B. THAKKAR (HUF) 5 ITSELF WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE, WE REFRAIN FROM UNDERTAKING THIS ACADEMIC EXERCISE OF DISPOSING THIS CASE ON MERITS. 5. IN VIEW THEREFORE IS NO MERIT IN THE APPEAL. APP EAL STANDS DISMISSED. 13. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF H IABEN JAYANTILAL SHAH(SUPRA) HAS HELD ON THIS ISSUE AS FO LLOWS :- UNDER CL. (A) OF S. 55A THE AO IS ENTITLED TO MAKE THE REFERENCE TO THE VALUATION OFFICER IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH TH E ESTIMATE MADE BY THE REGISTERED VALUER, IF THE AO IS OF THE OPINION THAT THE VALUE SO CLAIMED IS LESS THAN THE FAIR MARKET V ALUE. IN ANY OTHER CASE, AS PROVIDED UNDER CL. (B) OF S. 55A, TH E AO HAS TO RECORD AN OPINION THAT (I) THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE AS SESSEE BY MORE THAN SUCH PERCENTAGE OR BY MORE THAN SUCH AN A MOUNT AS MAY BE PRESCRIBED; OR (II) HAVING REGARD TO THE NAT URE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT IS NECES SARY TO MAKE SUCH A REFERENCE. AS CAN BE SEEN FROM THE COMMUNICA TION DATED NIL FROM DVO TO THE PETITIONER INSOFAR AS THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1ST APRIL, 1981 IS CONC ERNED, THE PETITIONER HAD CLAIMED THE SAME AT A SUM OF RS. 6,2 5,000 AS PER REGISTERED VALUERS REPORT. THEREFORE, THE AO W AS REQUIRED TO FORM AN OPINION THAT THE VALUE SO CLAIMED IS LES S THAN THE FAIR MARKET VALUE. THE ESTIMATED VALUE PROPOSED BY THE D VO IS SHOWN AT RS. 3,97,000, WHICH IS LESS THAN THE FAIR MARKET VALUE SHOWN BY THE ASSESSEE AS ON 1ST APRIL, 1981. THEREF ORE, CL. (A) OF S. 55A CANNOT BE MADE APPLICABLE. CLAUSE (B) OF S. 55A CAN BE INVOKED ONLY IN ANY OTHER CASE, NAMELY WHEN THE VALUE OF THE ASSET CLAIMED BY THE ASSESSEE IS NOT SUPPORTED BY AN ESTIMATE MADE BY A REGISTERED VALUER. IN THE FACTS OF THE PRESENT CASE, CL. (B) OF S. 55A ALSO CANNOT BE INVO KED. THEREFORE THERE IS NO QUESTION OF HAVING RECOURSE T O SUB-CL. (II) OF CL. (B) OF S. 55A OF THE ACT. 14. IN VIEW OF THE AFORESAID DECISIONS, WE ARE OF T HE VIEW THAT REFERENCE BY THE ASSESSING OFFICER TO THE DVO U/S. 55A FOR VALUATION OF FMV OF THE PROPERTY AS ON 1.4.1981 IS NOT VALID FOR THE REASONS THAT FMV DECLARED BY THE ASSESSEE AS PE R GOVERNMENT REGISTERED VALUERS REPORT WAS MORE THAN THE FMV AS ESTIMATED BY THE DVO. SINCE DETERMINATION OF THE FMV AS ON 1.4.1981 WAS BASED ON THE REPORT OF THE DVO, THE SA ME IS HELD TO BE INVALID. CONSEQUENTLY, ESTIMATION OF THE FMV OF THE PROPERTY AS ON 1.4.1981 AS MADE BY THE ASSESSEE IS DIRECTED TO BE ACCEPTED. GROUND NO. 1 OF THE ASSESSEES IS ALLOW ED. 5. IT IS THUS CLEAR FROM THE AFORESAID DECISION TH AT SECTION 55A COULD BE INVOKED ONLY IF THE LD. ASSESSING OFFICER IS OF THE OPINION THAT THE VALUE DECLARED BY THE ASSESSEE IS LESS THAN THE FAIR MARK ET VALUE OF THE ASSET. IN THE ASSESSS CASE, THE LD. ASSESSING OFFICER HAS MA DE THIS REFERENCE BECAUSE HE FELT THAT THE VALUE OF THE PROPERTY AS ON 1/4/19 81 DECLARED BY THE ASSESSEEE 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 T HE CIT(A) AND DISMISS THE APPEAL BY THE REVENUE . MR. S.B. THAKKAR (HUF) 6 8. THUS, IN VIEW OF THE AFORESAID DECISION AND THE DEC ISION RELIED UPON BY THE LEARNED COMMISSIONER (APPEALS), WE DO NOT FIND ANY REASON TO DEVIATE FROM SUCH A FINDING AND, ACCORDINGLY, CONFIRM THE O RDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) ON THIS SCORE. THUS, THE GROUNDS RAISED BY THE REVENUE IS TREATED AS DISMISSED. 9. 1 #7 4! 2 14 ) 4# 89 : 9. IN THE RESULT, REVENUES APPEAL IS TREATED AS DI SMISSED. $ 2 5+ ; <)7 10 TH MAY 2013 2 = : ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH MAY 2013 SD/- . .. . B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- '# '# '# '# $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, <) <) <) <) DATED : 10 TH MAY 2013 $ 2 .&#'> ?>+# / COPY OF THE ORDER FORWARDED TO : (1) &) *1# / THE ASSESSEE; (2) 4! / THE REVENUE; (3) @ () / THE CIT(A); (4) @ / THE CIT, MUMBAI CITY CONCERNED; (5) >!C= .&#&) , , / THE DR, ITAT, MUMBAI; (6) =D* E / GUARD FILE. /># .&# / TRUE COPY $) / BY ORDER . 4. FG / PRADEEP J. CHOWDHURY !1H &)4 F! / SR. PRIVATE SECRETARY I / 8 4 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI