ITO 16(1)(2), MUMBAI V. R V SHETH & OTHERS, MUMBAI

ITA 4865/MUM/2011

• Counselvise Citation: 486519914 RSA 2011
• Duration Of Justice: 2 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Assessee Lawyers: NITESH JOSHI
• Keywords: Sale consideration of property below Jantri Value; Fair market value; Valuation report; Surrender of tenancy right
• Section: 154; 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI . . , ! , ' # BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 4865 / / 2011 A.Y. 2007-08 ITA NO. : 4865/MUM/2011 (ASSESSMENT YEAR: 2007-08) ITO -16(1)(2), MATRU MANDIR, MUMBAI -400 007 VS R.V. SHETH & OTHERS, NO. 63, KAMAL BUILDING, WALKESHWAR ROAD, MUMBAI -400 006 .: PAN: AAFFR 9990 R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KISHAN VYAS RESPONDENT BY : SHRI NITESH JOSHI ! /DATE OF HEARING : 01-08-2013 '# ! / DATE OF PRONOUNCEMENT : 07-08-2013 ' O R D E R ! , : PER VIVEK VARMA, JM: THE APPEAL IS FILED BY THE DEPARTMENT AGAINST THE ORDER O F CIT(A) 27, MUMBAI, DATED 21.02.2011, WHEREIN, THE FOLLOWING GROUN DS HAVE BEEN TAKEN: 1. THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE R EFERENCE MADE BY THE A.O. TO THE VALUATION OFFICER U/S 50C OF THE I.T. ACT WA S ILLEGAL AND THEREFORE, THE SUBSEQUENT ORDER U/S 154 OF THE I.T. ACT MADE B Y THE A.O., WAS VITIATED WITHOUT APPRECIATING THE FACT THAT THE ASS ESSEE HAD NOT CHALLENGED THE ASSESSMENT ORDER WHEREIN THE A.O., H AD STATED THAT REFERENCE U/S 50C WAS MADE TO THE VALUATION OFFICER AND THE WORKING OF THE CAPITAL GAIN WAS SUBJECT TO RECTIFICATION U/ S 154 OF THE I.T. ACT ON RECEIPT OF THE VALUATION REPORT. 2. THE LD. CIT(A) HAS ERRED IN ACCEPTING THE CONTEN TION OF THE ASSESSEE WHICH WAS MADE AT THE APPELLATE STAGE FOR THE FIRST TIME THAT THE REFERENCE MADE BY THE A.O., U/S 50C OF THE I.T. ACT WAS INCORRECT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NEITHER RAISED ANY OBJECTION DURING THE ASSESSMENT PROCEEDINGS NOR DUR ING THE RECTIFICATION R.V. SHETH & OTHER S ITA 4865/MUM/2011 2 PROCEEDINGS AND IN FACT THE ASSESSEE HAD ACCEPTED T HE PROPOSED RECTIFICATION ON THE ABSIS (BASIS) OF VALUATION REP ORT DURING THE RECTIFICATION PROCEEDINGS. 3. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THA T THE ASSESSEE HAD INITIALLY ACCEPTED THE ACTION OF THE A.O. , AND SUB SEQUENTLY CHALLENGED THE SAME IN APPEAL AND HENCE, THE LD. CIT(A) HAS ER RED IN ADMITTING THE APPEAL WITHOUT GIVING ANY OPPORTUNITY TO THE A.O., TO EXPLAIN THE CASE. THEREFORE, THE ORDER OF LD. CIT(A) IS BAD IN LAW. 2. THE APPEAL IS BEING AGITATED AGAINST THE ORDER PASSE D BY THE AO U/S 154 OF THE INCOME TAX ACT, 1961. 3. THE FACTS ARE THAT THE ASSESSEE HAD SURRENDERED H IS TENANCY RIGHTS IN SHOPS NO. G 2 & G 3 LOCATED IN FORT CHAMBERS, FORT FOR A CONSIDERATION RECEIVED BY HIM, WHICH COMPRISED OF RS. 65 LACS AND RS. 35 LACS TO BE PUT ON ESCROW ACCOUNT IN VIEW OF BMC LIABILITIE S, ON 25.05.2006. THE ASSESSEE ACQUIRED THE TENANCY RIGHTS FROM BOMBAY SANTOSH BHUWAN ON 08.12.1977 FOR A CONSIDERATION OF RS. 5,28,520/-. 4. THE AO TO REWORK OUT THE SURRENDER VALUE OF TENANC Y RIGHTS, INVOKED RECTIFICATION PROCEEDINGS U/S 154 AND REWORKED OU T THE SURRENDER VALUE AT RS. 1,19,43,000/-, IN PLACE OF RS. 1,00,00,00 0/-, AS SHOWN BY THE ASSESSEE. IN THE APPEAL BEFORE THE CIT(A), T HE AO WAS DIRECTED TO NOT TO APPLY THE VALUE TAKEN BY THE VALUAT ION OFFICER. THE DR CHALLENGED THE ORDER OF THE CIT(A), WHEREIN, THE CIT(A) HA D ACCEPTED THE CONTENTIONS OF THE ASSESSEE WITH REGARD TO SECTION 154. 5. AT THE INSTANT MOMENT, THE AR SUBMITTED THAT WHETHE R AT ALL, THE AO WAS CORRECT TO INCREASE THE VALUE FROM 1.00 CROR E TO 1.19 CRORES AND WHETHER AT ALL PROVISIONS OF SECTION 50C ARE APPLICABLE. 6. IN SO FAR AS APPLICABILITY OF SECTION 50C IS CONCERNED, THE CIT(A) HELD, AT THE FIRST INSTANCE, THE AGREEMENT FOR SURRENDER OF TENANCY RIGHTS WAS NOT REGISTERED BEFORE THE SUB REGISTER OF STAMPS AN D ASSURANCES. THE AGREEMENT NOT HAVING BEEN REGISTERED, THERE IS NO V ALUE THAT WAS ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORIT IES, WHICH HAS TO BE CONSIDERED AS FULL VALUE OF CONSIDERATION U/S 50 C OF THE ACT. IT IS ONLY W.E.F. 1.10.2009 UNREGISTERED SALE AGREEMENTS WERE ALSO BROUGHT INTO THE PURVIEW OF SECTION 50C. IN VIEW OF THE ABOVE, T HE IMPUGNED R.V. SHETH & OTHER S ITA 4865/MUM/2011 3 TRANSACTION IS NOT COVERED BY THE PROVISIONS OF SEC TION 50C AND THEREFORE, THE AO CANNOT MAKE A REFERENCE FOR VALUA TION OF THE PROPERTY UNDER THE PROVISIONS OF SECTION 50C. SECONDLY, AS S EEN FROM THE AOS LETTER DATED 17.11.2009 ADDRESSED TO THE VALUATION OFFICER ALONG WITH THE PROFORMA NS -1 THEREOF, THE VALUATION OF THE PR OPERTY AS ON 1.4.1981 WAS NOT SOUGHT BY THE AO. THIRDLY, ANY REFERENCE IN RESPECT OF VALUATION OF THE PROPERTY AS ON 1.4.1981 CAN BE MADE U/S. 50A OF THE I.T. ACT ONLY AND NOT U/S 50C OF THE I.T. ACT. THE REFERENCE U/S 50C OF THE ACT IS LIMITED ONLY IN RESPECT OF THE VALUE OF THE TRANSFE RRED PROPERTY AS ON THE DATE OF ITS TRANSFER AND SECONDLY SUCH REFERENCE CA N BE MADE ONLY WHEN THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITIE S IS OBJECTED TO BY THE ASSESSEE, AND NOT OTHERWISE. IN THE ABOVE BACK GROUND, THE VALUE OF THE PROPERTY AS ON 1.4.81 FURNISHED BY THE VALUATIO N OFFICER BY WAY OF HIS ORDER DATED 22.12.2009, U/S 50C OF THE ACT RECE IVED BY THE AO ON 5.1.2010 IS ILLEGAL. ACCORDINGLY, AOS ACTION IN RE LYING THE ASSESSMENT U/S 154 OF THE ACT HAVING REGARD TO THE SAID VALUAT ION REPORT IS ALSO VITIATED. THEREFORE, WITHOUT GOING INTO THE ISSUE T HAT PROVISIONS OF SECTION 50C DO NOT MANDATE THE AO TO REFER THE MATT ER TO VALUATION OFFICER IN RESPECT OF VALUE OF TENANCY RIGHTS PER S E, I HOLD THAT THE IMPUGNED TRANSACTION ITSELF IS NOT COVERED BY THE P ROVISIONS OF SECTION 50C AND FURTHER HAVING REGARD TO THE ABOVE DISCUSSI ON, I ALLOW THE APPEAL ON THIS ISSUE. ACCORDINGLY, THE AO IS DIRECT ED NOT TO CONSIDER THE FMV OF THE PROPERTY AS ON 1.4.1981 AS GIVEN BY THE VALUATION OFFICER IN HIS VALUATION REPORT DATED 22.12.2009 FOR THE PURPO SE OF COMPUTING CAPITAL GAINS FROM THE IMPUGNED TRANSACTION. 7. THIS ISSUE ALSO BECAME A SUBJECT MATTER OF APPEAL BEFOR E COORDINATE BENCH AT MUMBAI IN THE CASE OF KISHORE SHARAD GAITONDE VS ITO, IN ITA NO. 1561/MUM/2009, WHEREIN IT WAS HELD THAT PROVISIONS OF SECTION 50C DOES NOT APPLY ON TENANCY RIG HTS. THE COORDINATE BENCHES FOLLOWED THE DECISIONS OF THE HONBLE S UPREME COURT IN 155 ITR 171, CIT VS. MOTHER INDIA REFRIGERATION I NDUSTRIES LTD., REPORTED IN 155 ITR 171, WHEREIN THE RATIO DECIDED WAS, SCOPE OF LEGAL FICTION IS CONFINED FOR THE PURPOSE FOR WHICH IT IS INTROD UCED AND THE CASE OF ORISSA SATE WAREHOUSING CORP. VS CIT, REPORT ED IN 257 ITR 589. 8. ON THE OTHER ISSUE, AS TO HOW THE AO INCREASE THE S URRENDER CONSIDERATIONS FROM 1.00 CRORE TO 1.19 CRORES, IN OUR OPINIO N, CANNOT BE THE SUBJECT MATTER OF RECTIFICATION. 9. ON THE RAISING OF THIS ISSUE, A QUERY WAS RAISED BY TH E BENCH, AS TO WHY NOT THE ASSESSEE DID NOT AGITATE, IT WAS SUBMITTE D THAT TO AGITATE, THE PERSON HAS TO BE AGGRIEVED AND TILL THE RECT IFICATION R.V. SHETH & OTHER S ITA 4865/MUM/2011 4 PROCEEDINGS, THE ASSESSEE WAS NOT AGGRIEVED. IN SUCH A SITUATION THERE WAS NO AGITATION. NOW THAT THE AO PROCEEDED ON AN ENTIR ELY DEBATABLE FIELD OF INCREASE OF VALUE, THE ISSUE, AS PER JUDICIAL PRECEDEN TS IS OUT OF THE SCOPE OF RECTIFICATION. 10. WE HAVE HEARD THE ARGUMENTS OF EITHER SIDE AND WE A RE OF THE VIEW THAT THE ISSUE RAKED UP BY THE AO, BY THE INCREASE OF VALUATION CAN NOT BE THE SCOPE OF RECTIFICATION. 11. WE, THEREFORE, SUSTAIN THE ORDER OF THE CIT(A), WHEREIN, T HE CIT(A) HAS DIRECTED THE AO TO NOT TO CONSIDER THE FMV A S ON 1.4.1981 AS GIVEN BY THE VALUATION OFFICER. 12. THE GROUNDS BEING INTERCONNECTED ARE DISPOSED OFF VID E OUR OBSERVATION HEREINABOVE. 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST, 2013. SD/- SD/- ( . . ) ( ! ) (R.S. SYAL) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 7 TH AUGUST, 2013 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) ' '( ( ) - 27, MUMBAI / THE CIT (A)-27, MUMBAI. 4) ' '( 16 , MUMBAI / THE CIT16, MUMBAI, 5) *+, - , ' ! - , ./ / THE D.R. D BENCH, MUMBAI. R.V. SHETH & OTHER S ITA 4865/MUM/2011 5 6) , 0 COPY TO GUARD FILE. '12 / BY ORDER / / TRUE COPY / / [ 3 / 4 5 ' ! - , ./ DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *784 . . * CHAVAN, SR. PS