Smt Parvati Ramani, Secunderabad V. ITO, Ward-8(3), Range-8, Hyderabad, Hyderabad

ITA 46/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6573 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-04-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 08-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.46/HYD/2015 : ASSESSMENT YEARS 2005-06 SMT. PARVATI RAMANI, HYDERABAD (PAN AAFPP 1664 A) V/S INCOME - TAX OFFICER, WARD, 8(3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C.DEVDAS RESPONDENT BY : SHRI B.KURMI NAIDU DR DATE OF HEARING 19.4.2016 DATE OF PRONOUNCEMENT 13.5.2016 O R D E R PER D.MANMOHAN, VICE PRESIDENT : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) I II, HYDERABAD AND IT PERTAINS TO ASSESSMENT YEAR 2005-06. 2. ASSESSEE IS AN INDIVIDUAL BY STATUS AND WAS ENG AGED IN MEDICAL PROFESSION. DURING THE PREVIOUS YEAR RELEVA NT TO ASSESSMENT YEAR 2005-06, ASSESSEE SOLD A PROPERTY AT CHENNAI F OR A CONSIDERATION OF RS.45 LAKHS, WHICH WAS ORIGINALLY ACCEPTED BY TH E ASSESSING OFFICER IN THE PROCEEDINGS UNDER S.143(3) OF THE ACT. LATER ON, IT WAS REOPENED BY ISSUING A NOTICE UNDER S.148 AND THE VA LUE OF THE PROPERTY WAS ADOPTED AT RS.61,28,849. THE ASSESSMEN T PROCEEDINGS WERE CHALLENGED BEFORE THE CIT(A) AND THEREAFTER BE FORE THE ITAT, CHENNAI. THE CHENNAI BENCH OF ITAT DIRECTED THE AS SESSING OFFICER TO REFER THE MATTER TO THE DEPARTMENTAL VALUATION OFFI CER SO AS TO DETERMINE THE APPROPRIATE VALUE OF THE PROPERTY. AC CORDINGLY, THE ITA NO.46/HYD/2015 SMT. PARVATI RAMANI, HYDERABAD 2 ASSESSING OFFICER REFERRED THE MATTER TO THE DVO, W HO IN TURN, DETERMINED THE VALUE OF THE PROPERTY AT RS.55,22,00 0. IT MAY BE NOTICED THAT THE SALE BY THE ASSESSEE TOOK PLACE ON 1.11.2004, WHEREAS THE DVO RELIED UPON A SALE INSTANCE DATED 2 0.2.2004, I.E. APPROXIMATELY NINE MONTHS PRIOR TO THE DATE OF SALE IN ASSESSEES CASE. ASSESSEE FILED OBJECTIONS BEFORE THE DVO ON THE GRO UND THAT FOR DETERMINATION OF THE MARKET VALUE, HE SHOULD HAVE T AKEN INTO CONSIDERATION SALE INSTANCES WHICH IS PROXIMATE TO THE ACTUAL DATE OF SALE. IN OTHER WORDS, SALE INSTANCE WHICH IS MORE THAN SIX MONTHS PRIOR TO THE ACTUAL DATE OF SALE SHOULD NOT HAVE BE EN TAKEN INTO CONSIDERATION, SINCE IT DOES NOT REFLECT THE TRUE M ARKET VALUE OF THE PROPERTY. IT WAS ALSO CONTENDED THAT THE DVO SHOUL D NOT HAVE TAKEN INTO CONSIDERATION THE ESCALATION AT 2% PER MONTH ( INCREASE OF 16% FOR 8 MONTHS). 3. THE DVO REJECTED THE CONTENTIONS OF THE ASSESS EE ON THE GROUND THAT INCREASE AT 2% PER MONTH FROM THE COMPA RABLE SALE INSTANCE IS PERMISSIBLE UNDER RULES. THE LAND RATE IN THE COMPARABLE SALE INSTANCE IS RS.2,154.74 PER SQ. FT. AND UPON MAKING ADJUSTMENT FOR TIME FACTOR, AT THE RATE OF 2% PER MONTH, THE D VO DETERMINED THE LAND VALUE AT RS.2,499.50 PER SQ. FT. ACCORDINGLY, THE DVO DETERMINED THE VALUE OF THE PROPERTY AT RS.55,22,000 WHEN THE SAME WAS FORWARDED TO THE ASSESSING OFFICER, AS PER THE STAT UTORY PRESCRIPTION, THE ASSESSING OFFICER HAS GIVEN A FURTHER OPPORTUNI TY TO THE ASSESSEE TO EXPLAIN AS TO WHY THE VALUE OF THE PROPERTY SHOU LD NOT BE TAKEN AS PER THE REPORT OF THE DVO IT DESERVES TO BE NOTICE D THAT THE STATUTE PRESCRIBES THE ASSESSING OFFICER TO GIVE AN OPPORTU NITY TO THE ASSESSEE, WHICH CANNOT BE TREATED AS AN EMPTY FORMALITY. IT I MPLIES THAT IN GENUINE CEASES, THE ASSESSING OFFICER IS DUTY BOUND TO REDETERMINE THE VALUE. IN OTHER WORDS, IF THE DVO HAS NOT FOLLOWED PROPER PROCEDURE, THE ASSESSING OFFICER IS DUTY BOUND TO REDETERMINE THE VALUE. IN FACT, ITA NO.46/HYD/2015 SMT. PARVATI RAMANI, HYDERABAD 3 THE ASSESSING OFFICER HAD GIVEN THE ASSESSEE AN OPP ORTUNITY TO EXPLAIN AS TO WHY THE VALUE ADOPTED BY THE DVO SHOULD NOT B E TAKEN INTO CONSIDERATION. IN RESPONSE THE ASSESSEE SUBMITTED T HAT INCREASE OF 16% ESCALATION IS NOT BASED ON ANY RULE OF VALUATIO N. 4. THE ASSESSING OFFICER OBSERVED THAT THE DVO CO NSIDERED THIS VERY EXPLANATION, AND HE IS COMPETENT IN THE MATTER OF VALUATION, AND HENCE, HE IS DUTY BOUND TO ADOPT THE VALUE DETE RMINED BY THE DVO AND ACCORDINGLY PROCEEDED TO DETERMINE THE INCO ME IN THE PROCEEDINGS UNDER S.143(3) READ WITH S.254 OF THE A CT. 5. AGGRIEVED, ASSESSEE CHALLENGED IN APPEAL BEFOR E THE CIT(A) THAT THE CHENNAI BENCH OF THE TRIBUNAL MERE LY REMANDED THE MATTER TO THE ASSESSING OFFICER FOR RECOMPUTING THE LONG TERM CAPITAL GAINS AFTER MAKING REFERENCE TO THE DVO; IT IMPLIE S THAT THE ASSESSEE HAS A RIGHT TO CHALLENGE THE MODE OF DETERMINATION OF VALUE BY THE DVO. IN THIS REGARD, IT WAS CONTENDED THAT THE DVO AS WELL AS THE ASSESSING OFFICER WERE NOT JUSTIFIED IN DETERMININ G THE VALUE OF THE PROPERTY ON THE BASIS OF ONLY ONE COMPARABLE SALE INSTANCE WHICH TOOK PLACE ON 20.2.2004, AND THAT TOO AFTER MAKING ADJUS TMENT FOR TIME FACTOR AT THE RATE OF 2% PER MONTH, WHICH HAS NO BA SIS. IF THIS ADJUSTMENT FOR TIME FACTOR WAS NOT CONSIDERED, THE VALUE OF THE PROPERTY WOULD BE RS.48,42,147, WHICH IS WITHIN THE PERMISSIBLE LIMIT OF 15% DIFFERENCE BETWEEN THE SALE CONSIDERATION VA LUE AND THE COMPARABLE SALE INSTANCE. IT WAS ALSO CONTENDED TH AT THE DVO AS WELL AS THE AO SHOULD NOT HAVE TAKEN INTO ACCOUNT COMPA RABLE SALE INSTANCE WHICH IS NOT PROXIMATE TO THE DATE OF ACTU AL SALE IN THE CASE OF THE ASSESSEE. 5.1 THE CIT(A) MERELY CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY OBSERVING THAT THE ASSESSING OFFICER AD OPTED THE VALUE OF ITA NO.46/HYD/2015 SMT. PARVATI RAMANI, HYDERABAD 4 THE PROPERTY AS DETERMINED BY THE DVO, WHICH IN TUR N WAS BASED ON THE DIRECTION OF THE ITAT AND HENCE THERE IS NO NE ED TO INTERFERE WITH THE ORDER OF THE ASSESSING OFFICER; OVERLOOKING THE FACT THAT THE DIRECTION OF THE ITAT WAS MERELY TO REFER THE MATTE R TO THE DVO, BUT THERE IS A STATUTORY RIGHT TO THE ASSESSEE TO CHALL ENGE THE METHOD FOLLOWED BY THE DVO NOT ONLY DURING THE PROCESS OF DETERMINATION OF THE VALUE OF THE PROPERTY BY THE DVO BUT ALSO BEFO RE THE ASSESSING OFFICER. 6. SINCE THE ASSESSEE IS AGGRIEVED BY THE ORDER O F THE LEARNED CIT(A), SECOND APPEAL WAS PREFERRED BEFORE THE TRIB UNAL. THOUGH THERE ARE EIGHT GROUNDS IN TOTAL IN THE GROUNDS OF APPEAL ANNEXED TO FORM 36, GROUND NO.8 IS GENERAL IN NATURE AND GROUN D NO.7 IS NOT CONTESTED, SINCE NO EVIDENCE COULD BE PLACED IN SUP PORT OF ITS CONTENTION, AND THUS, THE ONLY ISSUE THAT REMAINS T O BE CONSIDERED IS AS TO WHETHER THE VALUE OF THE PROPERTY DETERMINED BY THE DVO AND ADOPTED BY THE ASSESSING OFFICER IS BASED ON THE ES TABLISHED PRINCIPLES OF VALUATION OR NOT. 7. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T THOUGH THE DVO HAS STATED THAT 2% INCREASE PER MONTH IS AS PER RULES, NOWHERE THE SO CALLED RULE WAS MENTIONED AND EVEN T HE ASSESSING OFFICER AND THE CIT(A) COULD NOT LAY THEIR HANDS ON THE SAID RULE, DESPITE THE FACT THAT THE ASSESSEE HAS STRONGLY CHA LLENGED THE ACTION OF THE DVO BY SPECIFICALLY MENTIONING THAT THERE IS NO SUCH RULE TO INCREASE THE VALUE @ 2% PER MONTH FROM THE DATE OF SALE INSTANCE ADOPTED. IN THIS REGARD, THE LEARNED COUNSEL FILED A PAPER BOOK CONSISTING OF 23 PAGES ALONGWITH BRIEF NOTE TO SUBM IT THAT THE ITAT PUNE BENCH OBSERVED THAT VALUATION IS ALWAYS A MAT TER OF ESTIMATION WHERE SOME DIFFERENCE IS BOUND TO OCCUR AND THE ASS ESSING OFFICER IS NOT JUSTIFIED IN SUBSTITUTING THE VALUE DETERMINED BY THE DVO FOR SALE ITA NO.46/HYD/2015 SMT. PARVATI RAMANI, HYDERABAD 5 CONSIDERATION DISCLOSED BY THE ASSESSEE, AND HE HAS TO TAKE INTO CONSIDERATION THE RELEVANT FACTS TO ADOPT PROPER VALUE (38 DTR 19 RAHUL CONSTRUCTIONS V/S. DCIT). SIMILARLY, IN AN UN REPORTED DECISION (ACIT V/S. SUVARNA REKHA ITA NO.743/HYD/2009 DATE D 29.10.2010) ITAT BENCH A; , HYDERABAD OBSERVED THAT NO ONE I S EXPECTED TO VALUE THE PROPERTY ACCURATELY AND EVEN AFTER REFER ENCE TO THE VALUATION OFFICER, IF THE VALUE ESTIMATED BY THE DV O EXCEEDS THE VALUE ADOPTED BY THE STAMP DUTY VALUATION AUTHORITY, THEN THE ASSESSING OFFICER HAS TO TAKE THE VALUE OF STAMP DUTY VALUATI ON AUTHORITY AS THE FULL VALUE OF THE CONSIDERATION FOR THE PURPOSES OF COMPUTING THE CAPITAL GAINS, IF THE DIFFERENCE IS WITHIN A REASON ABLE MARGIN, I.E. LESS THAN 10%. SIMILARLY, IN ANOTHER UNREPORTED JUDGMEN T (RUPA KALA SRINIVAS V/S. ITO), ITAT HYDERABAD A BENCH, OBSE RVED THAT IF THE DVO HAS TO CONSIDER COMPARABLE INSTANCE, THEN HE HAS TO CONSIDER THE SALE INSTANCE, WHICH IS PROXIMATE TO THE DATE W HEN ASSESSEE SOLD PROPERTY, BUT HE CANNOT TAKE COMPARABLE INSTANCE OF SALE WHICH HAS HAPPENED 7 TO 8 MONTHS AFTER THE DATE OF SALE OF T HE PROPERTY. LEARNED COUNSEL SUBMITTED THAT THE SAME RULE APPLIE S HERE ALSO, AS THE DVO HAS TAKEN INTO CONSIDERATION A SALE INSTANCE WH ICH WAS APPROXIMATELY NINE MONTHS PRIOR TO THE DATE OF ACTU AL SALE OF THE PROPERTY BY THE ASSESSEE. ADDED TO THAT, THE DVO I NCREASED THE VALUE AT THE RATE OF 2% FROM FEBRUARY, 2004 TO 1.11.2004, WHICH IS STATED TO BE AS PER THE PRINCIPLES OF VALUATION, BUT NO SUCH RULE WAS FURNISHED EITHER BY HIM OR BY THE ASSESSING OFFICER. IN FACT, THE CIT(A) HAD NOT EVEN CONSIDERED THAT ASPECT, SINCE HE WAS OF THE V IEW THAT THE VALUE ADOPTED BY THE DVO BEING BASED ON THE DIRECTION OF THE ITAT, HE CANNOT INTERFERENCE. LEARNED COUNSEL SUBMITS THAT T HIS APPROACH IS CONTRARY TO THE SETTLED PRINCIPLES OF LAW. 8. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT THERE ARE NO SALE INSTANCES IN THE N EAR PAST AND IN ITA NO.46/HYD/2015 SMT. PARVATI RAMANI, HYDERABAD 6 DECEMBER THERE WAS TSUNAMI, WHICH HAD EFFECT ON THE VALUES OF PROPERTIES AND HENCE THE DVO WAS JUSTIFIED IN TAKIN G INTO CONSIDERATION THE SALE INSTANCE, WHICH IS CLOSE TO THE DATE OF AC TUAL SALE; THOUGH IT WAS ABOUT NINE MONTHS PRIOR TO THE DATE OF ACTUAL S ALE. HE THUS STRONGLY SUPPORTED THE ORDERS PASSED BY THE TAX AUT HORITIES. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. THE DVO HAD TAKEN INTO CONSIDER ATION A SALE INSTANCE WHICH WAS ALMOST NINE MONTHS PRIOR TO THE ACTUAL DATE OF SALE IN THE PRESENT CASE, WHEREAS THE ITAT HYDERABAD BEN CHES CONSISTENTLY HELD THAT A COMPARABLE SALE INSTANCE SHOULD BE PROX IMATE TO THE DATE OF ACTUAL SALE, AS OTHERWISE, IT WOULD NOT REFLECT THE TRUE MARKET VALUE, PARTICULARLY, WHEN THE PERIOD OF DIFFERENCE IS MORE THAN SIX MONTHS. ADDED TO THAT, THE DVO SOUGHT TO DETERMINE THE RATE BY ESCALATING THE SALE INSTANCE RATE AT 2% PER MONTH, BUT FAILED TO F URNISH ANY BASIS EXCEPT MERELY STATING THAT IT IS AS PER RULES. SINC E THE ASSESSEE HAS A RIGHT TO RAISE AN OBJECTION EVEN BEFORE THE ASSESSI NG OFFICER, THE SAME ISSUE WAS RAISED BEFORE THE ASSESSING OFFICER, BUT EVEN THE ASSESSING OFFICER IN FACT COULD NOT POINT OUT AS TO WHICH RU LE COMPELS THEM TO ADOPT 2% ESCALATION WHICH WORKS OUT TO 24% PER ANNU M. EVEN THE INCOME-TAX DEPARTMENT, WHILE APPLYING COST INFLATIO N INDEX METHOD, DOES NOT ADOPT 24% PER ANNUM TOWARDS ESCALATION IN PRICE, AND HENCE, TO OUR MIND, THE METHOD ADOPTED BY THE DVO A ND THE ASSESSING OFFICER HAS NO BASIS PARTICULARLY WHEN THE METHOD A DOPTED WAS NOT SUBSTANTIATED BY FURNISHING ANY RULE. THE VERY FACT THAT THE ASSESSING OFFICER HAS CALLED UPON THE ASSESSEE TO RAISE HIS O BJECTIONS PRESUPPOSE THAT THE ASSESSING OFFICER IS NOT BOUND BY THE DVO S REPORT AND HE HAS GOT A DUTY TO REDETERMINE THE VALUE, BUT THE ASSESS ING OFFICER CHOSE TO PROCEED AS IF HE IS BOUND BY THE DVOS REPORT, WHIC H SPEAKS OF ITSELF. ON THE TOP OF IT, THE LEARNED COMMISSIONER- (APPEAL S) WAS OF THE OPINION THAT THE ITAT. CHENNAI BENCH HAS DIRECTED T HE ASSESSING ITA NO.46/HYD/2015 SMT. PARVATI RAMANI, HYDERABAD 7 OFFICER TO ADOPT DVOS REPORT (EVEN IF IT IS WRONG) , OVERLOOKING THE LEGAL POSITION THAT THE DVOS REPORT CANNOT BE TREA TED AS SACROSANCT AND IT IS AMENABLE TO ADJUSTMENT, IF THE ASSESSEE I S ABLE TO RAISE PROPER OBJECTIONS . IN THE INSTANT CASE, THE ASSES SEE HAS RELIED UPON VARIOUS ORDERS OF THE ITAT TO INDICATE THAT THE VAL UE DETERMINED SHOULD BE BASED UPON A SALE INSTANCE WHICH SHOULD BE PROXI MATE TO THE DATE OF ACTUAL SALE. THE ASSESSEE HAS ALSO RAISED AN OBJ ECTION WITH REGARD TO THE INCREASE IN SALE INSTANCE RATE BY 2% PER MONTH, BUT EVEN TILL DATE, REVENUE COULD NOT POINT OUT AS TO WHAT IS THE SANCT ITY OF THAT METHOD BEING FOLLOWED BY THE DVO. HAVING REGARD TO THE CI RCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE DVO COMPLETELY F AILED IN HIS DUTY TO APPROPRIATELY MAKE THE VALUATION. EVEN IF SALE IN STANCE RATE IS TAKEN INTO CONSIDERATION, THE DIFFERENCE BETWEEN THE SALE INSTANCE RATE AND THE RATE DECLARED BY THE ASSESSEE IS WITHIN THE PER MISSIBLE LIMITS, AND THEREFORE, IN THE LIGHT OF THE ORDERS OF THE ITAT P LACED BEFORE US, THE ASSESSING OFFICER HAS NOT MADE OUT A CASE FOR ADOPT ING THE VALUE DETERMINED BY THE DVO. IN THE CIRCUMSTANCES, WE DE LETE THE ADDITION MADE BY THE ASSESSING OFFICER, ACCEPTING THE SALE VALUE DECLARED BY THE ASSESSEE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 13 TH MAY, 2016 SD/- SD/- (B.RAMAKOTAIAH) (D.MANMOHAN) ACCOUNTANT MEMBER. VICE PRESIDENT DT/- 13 TH MAY, 2016 ITA NO.46/HYD/2015 SMT. PARVATI RAMANI, HYDERABAD 8 COPY FORWARDED TO: 1. SMT. PARVATI RAMANI, C/O. M/S. SEKHAR & CO., CHARTERED ACCOUNTANTS, 133/4, RASHTRAPATI ROAD, HY DERABAD 2. INCOME TAX OFFICER WARD 8(3), HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) III , HYDERABAD COMMISSIONER OF INCOME - TAX II , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.