ITO, Jaipur V. M/S KANHAIYA LAL RANBEER SINGH BENGANI, Jaipur

ITA 498/JPR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59533 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 24-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHRI
• Assessee Lawyers: MANI PRABHA
• Keywords: Sale consideration of property below Jantri Value; Gift; Fair market value; Valuation report
• Section: 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.498/ JP/2011 ASSESSMENT YEAR : 2005-06 PAN: AABHK 3375 F THE ITO VS. M/S. KANHAIYA LAL RANBEER SINGH BENG ANI (HUF) WARD- 2 (2) A-6, JAYANTI BAZAR, M.I. ROAD JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) DEPARTMENT BY : SHRI VINOD JOHRI ASSESSEE BY : MANI PRABHA DATE OF HEARING: 30-01-2012 DATE OF PRONOUNCEMENT: 31-01-2012 ORDER PER N.L. KALRA, AM:- THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-1, JAIPUR DATED 15-03-2011 FOR THE ASSESSMENT YEAR 2005-06. 2.1 THE FIRST GROUND OF APPEAL OF THE REVENUE IS T HAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO TAKE THE FAIR MARKET VALUE ON T HE DATE OF SALE AT RS. 64,76,356/- VALUED BY THE DVO AS AGAINST RS. 77,84,062/- ADOPTE D BY THE AO. 2.2 THE ASSESSEE SOLD THE PROPERTY FOR RS. 54.00 LA CS BUT IT WAS REGISTERED AT RS. 77,84,062/-. THE AO ISSUED THE SHOW CAUSE NOTICE AS TO WHY THE SALE VALUE OF RS. 77,84,062/- OF THIS PLOT BE NOT ADOPTED AS CONSIDER ATION FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN IN VIEW OF THE PROVISION OF SECTION 50 C OF THE ACT. THE ASSESSEE FILED THE VALUATION REPORT OF THE REGISTERED VALUER. 2.3 DURING THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A), THE AO WAS DIRECTED TO REFER THE VALUATION OF PROPERTY TO THE DVO FOR ASCERTAINING THE FAIR MARKET 2 VALUE AS ON 01-04-1981 AS WELL AS FULL VALUE OF THE CONSIDERATION. THE DVO HAS DETERMINED THE FAIR MARKET VALUE ON THE DATE OF SAL E AT RS. 64,76,356/-. IT IS MENTIONED IN SECTION 50C(2) THAT IN CASE THE ASSESSEE CLAIMS BEF ORE THE AO THAT THE VALUE ADOPTED OR ASSESSED BY STAMP VALUATION OFFICER EXCEEDS FAIR MA RKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER THEN THE AO MAY REFER THE VALUATI ON TO THE VALUATION OFFICER. THE PROVISIONS OF SECTION 16A OF WEALTH TAX ACT ARE APP LICABLE. IT IS NOT THE CASE OF THE REVENUE BEFORE US THAT THE LD. CIT(A) WAS NOT LEGAL LY RIGHT IN DIRECTING THE AO TO REFER THE PROPERTY TO THE VALUATION CELL FOR DETERMINING THE FAIR MARKET VALUE ON THE DATE OF TRANSFER. ONCE THE REFERENCE IS MADE U/S 50C(2) OF THE ACT THEN THE VALUATION AS MADE BY THE DVO IS BINDING ON THE AO AS PER SECTION 16 A OF THE WEALTH TAX ACT. 2.4 THE LD. CIT(A) HAS DIRECTED THE AO TO REFER THE VALUATION TO VALUATION CELL AND THEREFORE, SUCH REFERENCE IS U/S 50C(2) OF THE ACT. 2.5 WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT TH E VALUATION SO MADE BY THE DVO WAS BINDING ON THE AO AND THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO ADOPT THE VALUATION AT RS. 64,76,356/- . THUS WE FI ND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). 3.1 THE SECOND GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO TAKE THE FAIR MARKET VALUE AS O N 01-04-1981 AS TAKEN BY THE DVO WITHOUT ANY CORRECTION/ ADJUSTMENT ON ACCOUNT OF E NCUMBRANCE OF RENTED PROPERTY AND THE INDIVIDUAL PROPERTY. 3.2 WE HAVE HEARD BOTH THE PARTIES. THE VALUATION O F THE PROPERTY AS ON 01-04-1981 CAN BE REFERRED U/S 55A OF THE ACT. THIS REFERENCE IS TO BE MADE FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN AND THE REFERENCE IS ALS O TO BE MADE BY THE AO. IT IS NOT THE 3 CASE OF THE REVENUE THAT THE LD. CIT(A) WAS NOT LEG ALLY RIGHT IN DIRECTING THE AO TO REFER THE PROPERTY TO THE VALUATION CELL. ONCE REFERENCE HAS BEEN MADE U/S 55A THEN THE PROVISION OF SECTION 16A OF THE WEALTH TAX ACT ARE APPLICABLE AND THEREFORE, SUCH VALUATION IS BINDING ON THE AO. THUS THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE AO TO TAKE THE FAIR MARKET VALUE AS ON 01-04-1981 AS DETE RMINED BY THE VALUATION OFFICER . 4.1 THE THIRD GROUND OF APPEAL OF THE REVENUE IS T HAT THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 40,214/- ON ACCOUN T OF INTEREST. 4.2 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT AS SESSEE HAS NOT MADE BORROWINGS IN THE YEAR UNDER CONSIDERATION. THE BORROWINGS ARE OL D AND THEREFORE, THERE WAS NO NEED TO PROVE THE NEXUS. THE LD. CIT(A) HAS DELETED THE DIS ALLOWANCE AFTER OBSERVING AS UNDER:- AS NO FRESH BORROWINGS HAVE BEEN MADE IN THE YEAR UNDER CONSIDERATION AND IT IS NOT THE CASE OF AO THAT IN EARLIER YEARS ON THIS ACCOUNT ANY DISALLOWANCE WAS MADE, THE DISALLOWANCE MADE BY AO ON THE BASIS OF ASSUMPTION THAT BORROWED FUNDS COULD HAVE BEEN USED IN GIVING INTEREST FREE ADVANCE OR GIFTS CANNOT BE UPHELD. TH E AO IS, THEREFORE, DIRECTED TO DELETE THE ADDITION OF RS.40,214/-. 4.3 WE HAVE HEARD BOTH THE PARTIES. IN CASE THERE H AS BEEN NO DISALLOWANCE OF INTEREST IN EARLIER YEAR AND THERE HAS BEEN NO FRESH BORROWI NGS THEN DISALLOWANCE OF INTEREST CANNOT BE MADE. WE THEREFORE, UPHOLD THE ORDER OF T HE LD. CIT(A). 5.1 THE FOURTH GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO EXCLUDE 1/3 RD SHARE OF THE DECEASED SHRI RANBEER SINGH BENGANI O UT OF COMPUTATION OF CAPITAL GAIN TRADING ADDITION. 5.2 WE HAVE HEARD BOTH THE PARTIES. THE LD. CIT(A) AFTER CONSIDERING THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BABU BHAI AND NANU BHAI, HUF , 220 4 ITR 334 HAS ALLOWED THE RELIEF. BEFORE US, NO DECIS ION OF ANY OTHER HON'BLE HIGH COURT HAS BEEN CITED IN SUPPORT THE CONTENTIONS RAISED BY THE REVENUE. HENCE, WE FEEL THAT THE LD. CIT(A) WAS JUSTIFIED IN GIVING RELIEF. FOR READ Y REFERENCE, WE REPRODUCE PARA 7 OF THE LD. CIT(A)S ORDER TO MAKE THE ISSUE CLEAR. IT WAS SUBMITTED THAT ON DEATH OF KARTA OF HUF HI S INDIVIDUAL SHARE SHOULD GET REDUCED AND ONLY BALANC E AMOUNT MAY BE CONSIDERED FOR THE PURPOSE OF CAPITAL GAIN TAX IN T HE HANDS OF HUF. RELIEANCE WAS PLACED ON THE DECISION OF GUJARAT H.C . IN THE CASE OF CIT VS. BABU BHAI AND NANU BHAI, HUF 220 ITR 334 (GUJ). THIS WAS FOLLOWED IN CIT VS. DHARAMPAL SINGH, HUF 280 ITR 62 9 AND CIT VS. MEERA PREM SUNDER 280 ITR 360. AS THIS GROUND OF AP PEAL WAS RAISED FIRST TIME; REMAND REPORT OF AO WAS CALLED FAR. THE AO IN HIS REMAND REPORT HAS CONTESTED ADMISSION OF ADDITIONAL GROUND OF APPEAL ON THE GROUND THAT THE APPELLANT HIMSELF HAS OFFERED WHOLE AMOUNT OF SALE CONSIDERATION IN THE H ANDS OF HUF IN THE RETURN OF INCOME AND NO SUCH GROUND WAS RAISED DURI NG THE ASSESSMENT PROCEEDINGS. THAT IN THE RETURN OF INCOME FILED IN THE CAPACITY OF HUF, THERE WAS NO MENTION OF TRANSFER OF SHARES BETWEEN MEMBERS DUE TO DEATH OF ONE OF THE COPARCENERS. THE PROPERTY PERTAINS TO HUF WHICH IS AN INDEPENDENT ASSESSMENT AND THE DISPUTE OF MEMBERS I NTER SE DOES NOT AFFECT ITS TAX LIABILITY. ALSO THAT THERE WAS NO DI SPUTE BETWEEN THE MEMBERS OF PRESENT HUF. THE DEATH OF SHRI RANVEER SINGH BEN GANI, DOES NOT HAVE ANY AFFECT ON THE CONTINUITY OF ASSESSEE HUF. THE ARS SUBMISSION AS WELL AS REMAND REPORT OF THE AO IS CONSIDERED. AS THE ADDITIONAL GROUND OF APPEAL RAIS ED IS PURELY LEGAL, THE SAME IS ADMITTED. SHRI RANVEER SINGH BENGANI, HUF INHERITED THE PROPE RTY UNDER QUESTION AS THEIR SHARE ON PARTITION OF HIS F ATHER HUF. SHRI RANVEER SINGH BENGANI WAS KARTA OF HUF TILL HIS DEATH. SHRI RANVEER SINGH 5 BENGANI, HUF CONSISTED OF SELF, HIS WIFE, TWO SONS AND DAUGHTER. HE DIED IN 1993. COPARCENERS PROPERTY WAS TRANSFERRED ON A CCOUNT OF SALE AFTER THE DEATH OF ONE OF THE COPARTNERS OF HUF AND PROVISION S OF SECTION 6 OF HINDU SUCCESSION ACT ARE ATTRACTED. ON DEATH OF SHR I RANVEER SINGH BENGANI, HIS ELDEST SON BECAME KARTA OF HIS HUF. TH E HONBLE GUJARAT H.C. IN THE CASE OF CIT VS. BABU BHAI AND NANU BHAI , HUF, THE CASE RELIED UPON BY THE AR, HAS HELD THAT THE CAPITAL GA IN TO THE EXTENT IT WAS ATTRIBUTABLE TO THE EXTENT OF THAT INTEREST WHICH H AS DEVOLVED BY SUCCESSION PARTAKING OF DIFFERENT CHARACTER HAS TO BE EXCLUDED WHILE COMPUTING CAPITAL GAIN ACCRUED TO THE HUF. RESPECTFULLY FOLLO WING THE DECISION OF GUJARAT H.C. THE AO IS, THEREFORE, DIRECTED TO EXCL UDE 1/3 RD SHARE OF THE DECEASED SHRI RANVEER SINGH BENGANI OUT OF COMPUTAT ION OF CAPITAL GAIN TAX. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31-0 1-2012. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 31 /01/2012 *MISHRA COPY FORWARDED TO :- 1. THE ITO, WARD- 2 (2), JAIPUR 2. M/S. KANHAIYA LAL RANVEER SINGH BENGANI, HUF , JAIPUR 3. THE LD. CIT(A) 4 THE LD. CIT BY ORDER 5 THE LD.DR 6 THE GUARD FILE (ITA NO. 498/JP /11) A.R, ITAT, JAIPUR 6