Appeal Details
Counselvise Citation
[2022] 105 COUNSELVISE.COM (IT) 1832 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-05-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Assessment Year
2015-2016
Appeal Filed On
21-04-2019
Judgement Text
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “ए” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH ी एन.के.सैनी, उपा य एवं ी स ु धांश ु ीवा%तव, या'यक सद%य BEFORE: SHRI. N.K.SAINI, VP & SHRI. SUDHANSHU SRIVASTAVA, JM ITA NO.517/Chd/2019 Assessment Year : 2015-16 Shri Daljit Singh Gujral House No. 1528, Sector 36D Chandigarh The ACIT, Circle-4(1) Chandigarh PAN NO: !"#$ % Appellant &' % Respondent ( ) * + Assessee by : Shri Yogesh Monga, C.A , * + Revenue by : Smt. Priyanka Dhar, JCIT - . * ) / Date of Hearing : 11/05/2022 0123 * ) / Date of Pronouncement : 19/05/2022 आदेश/Order PER N.K. SAINI, VICE PRESIDENT This is an appeal by the Assessee against the order of the Ld. CIT(A)-2, Chandigarh dt. 27/03/2019. 2. Following grounds have been raised by the Assessee: 1. That the order of Learned Assessing Officer is bad, and against law and facts. 2. That the learned Assessing Officer has wrongly made addition under section 56(2)(vii)(b) of the Income Tax Act, 1961 on account of difference in stamp duty value and purchase price of the property. The Learned Assessing officer has made the additions without appreciating the fact that the price which the assessee paid for the purchase of the property is the correct fair market value and the stamp duty value adopted by the stamp valuation authority exceeds the fair market value on the date of transfer. 3. That the appellant craves leave to add, amend, alter or withdraw any ground of appeal before final hearing. 2 3. Facts of the case in brief are that the assessment in this case was completed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’) on 22/12/2017 at an income of Rs. 1,30,58,890/- against the returned income of Rs. 97,67,890/- by making an addition of Rs. 32,91,000/- under section 56(2)(vii)(b) of the Act. 4. During the course of assessment proceedings the assessee raised the objection under section 50C of the Act claiming that the price which the assessee had paid for the purchase of the property was correct fair market value and the stamp duty value adopted by the stamp valuation authority exceeds the fair market value on the date of transfer. The AO made a reference to the valuation officer to determine the fair market value of the property on the date of its sale and to determine as to whether the stamp duty value determined by the stamp value authority was excessive in comparison to the fair market value of the property. Thereafter Distt. Valuation Officer vide his letter no. 305 dated 30/01/2018 ascertained the fair market value of the property in question at Rs. 1,75,41,900/- as compared to collector rate of Rs. 1,94,91,000/-. The AO worked out the relief of Rs. 19,49,100/- to the assessee as per the following computation: As per Assessment order As per the DVO’s report Relief Purchase of half share in Unit No. A403 at Elante Offices, Plot No. 178-178A, Industrial & Business Park, Phase-1, Chandigarh Consideration amount declared by the assessee Rs. 1,62,00,000/- (1/2 of 3,24,00,000/-) Collector Rate- Rs. 1,94,91,000/- (as per report of the DVO) Addition works out – Rs. 32,91,000/- (i.e. 1,94,91,000-1,62,00,000) Purchase of half share in Unit No. A403 at Elante Offices, Plot No. 178-178A, Industrial & Business Park, Phase-1, Chandigarh Consideration amount declared by the assessee Rs. 1,62,00,000/- (1/2 of 3,24,00,000/-) Collector Rate- Rs. 1,75,41,900/- (as per report of the DVO) Addition works out – Rs. 13,41,900/- (i.e. 1,75,41,900-1,62,00,000) Rs. 19,49,100/- (i.. 32,91,000-13,41,900) Accordingly the earlier addition made of Rs. 32,91,000/- was reduced to Rs. 13,41,900/- by passing the order dt. 13/02/2018 under section 154 of the Act. 3 5. Being aggrieved the assessee carried the matter to the Ld. CIT(A) against the original assessment order dt. 22/12/2017 wherein the addition of Rs. 32,91,000/- was made by the AO and submitted as under; "The Learned Assessing Officer had wrongly has made addition, amounting to Rs 32,91,000/-, u/s 56 (2) (vii) (b) of the Act on account of difference in stamp duty value and purchase price of the property without appreciating the fact that the price which the assessee had paid for the purchase of the property is the correct fair market value and the stamp duty value adopted by the stamp valuation authority exceeds the fair market value on the date of transfer. During the assessment year under consideration the assessee had purchased one commercial property jointly with his wife at Elante, industrial Area, Phase 1, Chandigarh. The collector rate of the property was Rs.389.82 Lakhs whereas the property was purchased by the assessee and his wife at a consideration of Rs.324.00 Lakhs. Therefore the Ld. Assessing Officer, while referring the valuation to the DVD on objection being raised by the assessee at the time of assessment proceedings, passed provisional assessment order and made addition amounting to Rs. 32.91 Lakhs (i.e. 50% of the difference between collector rate and purchase price) by invoking the provision of Section 56(2)(vii)(b) of the Act. Thereafter, on being referred, the DVO assessed the Fair Market Value of the said property at Rs. 175.42 Lakhs (i.e. 50% value of the property). Therefore, the net difference between the fair market value and the purchase price of the property comes to Rs. 13.42 Lakhs only and which is just 8.28% at which the property is purchased by the assessee and therefore the provisions of Section 56(2)(vii)(b) of the Act shall not be applied in the instant case. 5.1 The reliance was placed on the decision of the ITAT Chandigarh Bench in the case of ACIT, Circle, Sangrur Vs. M/s Standard Combines Pvt. Ltd. and the decision dt. 22/10/2008 reported at 1 SET 102 (2009) of the Hon’ble Patna High Court in the case of Bimla Singh Vs. CIT. 5.2 During the course of appellate proceedings the Ld. CIT(A) asked the assessee further information, the relevant part of which was as under: "2. It is seen from the assessment records and submissions made during the appellate proceedings that the claims are being made to the finding of the AO that rectification shall be made under section 155(15) of the Act. The said section clearly connotes that the same would be relevant in cases where capital gains arise which is not the case in the instant, matter. In this regard the following may be clarified: (i) How can provisions of section 155(15) be invoked in the absence of any capital gains arising out of the impugned transaction? 4 (ii) How does the same become a matter of appeal when the issue relates to rectification ? 5.3 In response, the assessee submitted to the Ld. CIT(A) as under: "while framing the assessment order of the assessee u/s 143(3) of the Act, AO had made addition of Rs.32.91 Lakhs u/s 56(2)(vii)(b) of the Act, on account of difference in purchase rate and stamp duty value of property, to the returned income of the assessee but on the other hand he had also referred the matter to DVO to determine the fair value of the property on the date of sale. The learned assessing officer had also mentioned in his assessment order that if the fair market value of the property is more/less than the stamp duty value of the property, then he will accordingly rectify the order. However, the assessing officer while framing the assessment order had wrongly mentioned the Section 155(15), i.e. on the basis of which he will make the rectification in his order if there is any variation in the value determined by the DVD. However, in this regard we wish to submit that since we are in appeal against the addition being made u/s 56(2)(vii)(b) to the returned income of the assessee by the AO in its order passed u/s 143(3) of the Act and since the net difference between the fair market value and the purchase price of the property is just 8.28%, you may kindly ignore the wrong section being mentioned by the learned assessing officer and allow the relief in the instant case". 5.4 The Ld. CIT(A) after considering the submissions of the assessee observed that the AO calculated the collector rate of the property at Rs. 3,89,82,000/- where as the assessee had purchased the property in joint name at Rs. 3,24,00,000/- the difference between the collector rate and the purchase price of the property came to Rs. 65,82,000/-, the assessee’s share i.e; 50% of the total difference of Rs. 65,82,000 came to Rs. 32,91,000/-. As the collector rate of the property was far in excess of purchase price, the AO invoked the provision of section 56(2)(vii)(b) of the Act. The Ld. CIT(A) further observed that the case laws is relied by the assessee were distinguishable as they predominantly pertained to the differences arising from cost of construction of house property whereas the impugned property was commercial which was readymade fit for outright purchase and there was no scope of personal expenditure or cost apportionable to personal supervision nor was the construction spread over a period of seven years as in the case of Bimla Singh Vs. CIT(supra). He, therefore sustained the addition. 5 6. Now the assessee is in appeal. 7. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that no addition was made in the hands of the co-owner and that the difference in valuation after the order passed by the AO under section 154 of the Act was 8.28% i.e less than 10% therefore, no addition was called for. The reliance was placed on the following case laws: • Krishna Enterprises Vs. Addl. CIT 2016 (12) TMI ITAT Mumbai • Dy. CIT Vs. Mahalxmi Rope Works Ltd. 2019(3) TMI ITAT 1889 Mumbai • Geetika Sachdev Vs. ITO in ITA No. 6638/Del/2018 (ITAT Delhi) 8. In her rival submissions the Ld. Sr. DR strongly supported the impugned order passed by the Ld. CIT(A) and submitted that the case of the co-owner was not assessed under section 143(3) of the Act rather intimation was issued under section 143(1) of the Act. It was further submitted that the case laws relied by the Ld. Counsel for the assessee are distinguishable on facts. It was also submitted that during the year under consideration there was no change in the collector rate. 9. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is not in dispute that original difference in valuation adopted by the AO by taking into consideration the valuation worked out by the DVO was at Rs. 65,82,000/- and the 50% share of the assessee came to Rs. 32,91,000/-. However, later on the AO passed the order dt. 13/02/2018 under section 154 of the Act when the DVO by considering the objection of the assessee worked out the difference at Rs. 13,41,900. The total consideration for the property was declared by the assessee at Rs. 3,24,00,000/- and his 50% share was at Rs. 1,62,00,000/- while the DVO worked out the valuation of assessee’s share at Rs. 1,75,41,900/-, thus, the 6 difference in valuation determined by the DVO and declared by the assessee was 8.28% which was less than 10%. 9.1 On a similar issue, the ITAT Delhi Bench ‘SMC’ in ITA No. 6638/Del/2018 for the A.Y. 2014-15 in the case of Geetika Sachdeva Vs. ITO vide order dt. 02/12/2019(supra) held that the addition confirmed by the Ld. CIT(A) was not tenable since the difference between the sale consideration shown by the assessee and fair market value submitted by the DVO was less than 10% in the said case earlier decision dt. 12/01/2019 of the ITAT Pune Bench ‘B’ in the case of Rahul Constructions Vs. DCIT in ITA No. 1543/Pn/2007 was followed wherein it was held as under: “We have considered the rival submissions made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee received an amount of Rs. 19,00,000 as sale consideration on account of sale of basement Nos. 2 and 3 at Rahul Chambers. There is also no dispute to the fact that the stamp valuation authorities have adopted the value at Rs. 28,73,000 for the purpose of stamp duty. There is also no dispute to the fact that on being objected by the assessee for substitution of the same figure under s. 50C(2) of the Act, the AO referred the matter to the DVO who determined the FMV of the property on the date of sale at Rs. 20,55,000. We find that the learned CIT(A) upheld the action of the AO in substituting the value determined by the DVO on the ground that the assessee has not objected to the valuation either before the DVO or before the AO or even before him. Further, according to him, as per the provisions of s. 50C, the AO is bound to take the valuation as per the stamp valuation authorities and he is not empowered to go beyond the valuation made by the stamp valuation authorities. However, since the AO has already adopted the FMV determined by the DVO he upheld the action of the AO. It is the submission of the learned counsel for the assessee that the assessee can challenge the valuation determined by the DVO as per the provisions of s. 50C(2) of the Act. However, according to the learned Departmental Representative once the matter is referred to the DVO and the value determined by the DVO is less than the value adopted by the stamp valuation authorities, the AO has no other option but to adopt the value so determined by the DVO. We find the provisions of s. 50C read as under: "50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the 'stamp valuation authority') for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of s. 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-so (1), where- (a) the assessee claims 7 before any AO that the value adopted or assessed by the stamp valuation authority under sub-so (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub-so (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, Court or the High Court, the AO may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-ss. (2), (3), (4), (5) and (6) of s. 16A, cl. (i) of sub-s. (1) a sub-ss. (6) and (7) of s. 23A, sub- S. (5) of S. 24, S. 34AA, S. 35 and S. 37 of the WT Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the AO under sub-so (1) of s. 16A of that Act. Explanation: For the purposes of this section, 'Valuation Officer' shall have the same meaning as in cl. (r) of s. 2 of the WT Act, 1957 (27 of 1957). (3) Subject to the provisions contained in sub-s. (2), where the value ascertained under sub-so (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-so (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer." A bare reading of the above provisions shows that as per the provisions of S. 50C(1) the value ado ted by the stamp valuation authorities in respect of transfer of a capital asset shall be deemed to be the full value of consideration received or accruing as a result of transfer if such value is more than the value or consideration received by the assessee. As per the provisions of sub-so (2) of the said section if the assessee claims before the AO that such valuation by the stamp valuation authorities under sub-so (l) exceeds the FMV of the property as on the date of transfer the AO may refer the valuation of the capital asset to the DVO. As per the said sub-section where any such reference is made the various provisions of WT Act as mentioned in sub-so (2) referred above shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the AO under sub-so (1) of S. 16A of the WT Act. We find the provisions of S. 16A of the WT Act deal with reference to the Valuation Officer by the AO. Similarly S. 23A(l)(i) inter alia confers right of appeal to the CIT(A) to any person objecting to any order of the DVO under S. 35 having the effect of enhancing the valuation of any asset or refusing to allow the claim made by the assessee under the said section. We find the provisions of S. 23A(6) and S. 23A(7) and S. 24(5) of the WT Act read as under: "23A(6) If the valuation of any asset is objected to in any appeal under cl. (a) or cl. (i) of sub-so (1) the CWT(A) shall,- (a) in case where such valuation has been made by a Valuation Officer under S. I6A, give such Valuation Officer an opportunity of being heard; (b) in any other case on request being made in this behalf by the AO, give an opportunity of being heard to any Valuation Officer nominated for the purpose by the AO." (a) at the hearing of an appeal, allow an appellant to go into any ground of appeal not specific in the grounds of appeal; (b) before disposing of- any-appeal, make such further enquiry as he thinks fit or cause further enquiry to be made by the AO or, as the case may be, by the Valuation Officer." "23A(7). The CWT(A) may, "24(5) The Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and any such orders may include an order enhancing the assessment or penalty: Provided that if the valuation of any asset is objected to, the Tribunal shall,- (a) in a case where such valuation has been made by Valuation Officer under S. 16A, also give such Valuation Officer an opportunity of being heard; (b) in any other case, 8 on a request being made in this behalf by the AO, give an opportunity of being heard also to any Valuation Officer nominated for the purpose by the AO : Provided further that no order enhancing an assessment or penalty shall be made unless the person affected thereby has been given a reasonable opportunity of showing cause against such enhancement." A combined reading of the above provisions shows that the valuation adopted by the DVO is subject to appeal and the same is not final. In the instant case we find that as against the value of Rs. 28,73,000 adopted by the stamp valuation authorities, the DVO has determined the FMV on the date of transfer at Rs. 20,55,000. This itself shows that there is wide variation between the two values. Further, the value adopted by the DVO is also based on some estimate. We find that the difference between the sale consideration shown by the assessee at Rs. 19,00,000 and the FMV determined by the DVO at Rs. 20,55,000 is only Rs. 1,55,000 which is less than 10 per cent. The Courts and Tribunals are consistently taking a liberal approach in favour of the assessee where the difference between the value adopted by the assessee and the value adopted by the DVO is less than 10 per cent. We find that the Pune Bench of the Tribunal in the case of Asstt. CIT vs. Harpreet Hotels (P) Ltd. vide ITA Nos. 1156- 1160/Pn/2000 and relied on by the learned counsel for the assessee had dismissed the appeal filed by the Revenue where the CIT(A) had deleted the unexplained investment in house construction on the ground that the difference between the figure shown by the assessee and the figure of the DVO is hardly 10 per cent. Similarly, we find that the Pune Bench of the Tribunal in the case of ITO vs. Kaaddu Jayghosh Appasaheb, vide ITA No. 441IPnl2004 for the asst. yr. 1992- 93 and relied on by the learned counsel for the assessee following the decision of the J&K High Court in the case of Honest Group of Hotels (P) Ltd. vs. CIT (2002) 177 CTR (J&K) 232 had held that when the margin between the value as given by the assessee and the Departmental valuer was less than 10 per cent, the difference is liable to be ignored and the addition made by the AO cannot be sustained. Since in the instant case such difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference is bound to occur, we are of the considered opinion that the AO in the instant case is not justified in substituting the sale consideration at Rs. 20,55,000 as against the actual sale consideration of Rs. 19,00,000 disclosed by the assessee. We, therefore, set side the order of the CIT(A) and direct the AO to take Rs. 19,00,000 only as the sale consideration of the property. 17. The grounds raised by the assessee are accordingly allowed.” 9.2 A similar view has been taken by the ITAT, Mumbai Bench in the case of Dy. CIT Vs. Mahalxmi Rope Works Ltd. 2019(3) TMI 1889 wherein it was held as under: After hearing both the parties and perusing the material on record including the impugned order of Ld. CIT(A), we observe that in this case the assessee has disputed the fair market value of Rs. 7,21,41,500/- as per AIR information and requested before Ld. CIT(A) to refer the valuation of the property to DVO to ascertain the FMV. The Id CIT(A), accordingly, referred the matter to AO on 9 16.02.2016 and a final valuation report was received by the office of Ld. CIT(A) on 23.06.2016 dated 13.06.2016 according to which the FMV was Rs. 5,15,29,600/-. The Ld. CIT(A) deleted the addition on the ground that difference between the fair market value as per DVO report and agreement value comes to around Rs. 25,83,278/- which is 5.8% approximately and Ld. CIT(A) by relying on the decision of Hon'ble Supreme Court in the case of C.B. Gautam 65 taxmann 440 SC and decision of the Bombay Tribunal in the case of Krishna Enterprises vs. ACIT in ITA No.5402/M/2014 (supra) decided the issue in favour of the assessee by holding that the difference between the fair market value as per DVO and the value as per agreement is around 5.8% which is not to be considered for making addition under section 50C and thus deleted the addition of ? 2,31,95,180/-. We do not find any infirmity in the order of Ld. CIT(A) or any reason to deviate from the finding of the Ld. CIT(A). Accordingly, we uphold the order of Ld. CIT(A) by dismissing the appeal of the Revenue. We therefore considering the totality of the fact as discussed herein above and by respectfully following the aforesaid decisions of the Coordinate Bench at Delhi and Mumbai delete the addition made by the AO and sustained by the Ld. CIT(A). 10. In the result appeal of the assessee is allowed. (Order pronounced in the open Court on 19/05/2022 ) Sd/- Sd/- स ु धांश ु ीवा%तव एन.के.सैनी, (SUDHANSHU SRIVASTAVA) ( N.K. SAINI) या'यक सद%य/ JUDICIAL MEMBER उपा य / VICE PRESIDENT AG Date: 19/05/2022 1 4 * & )5 6 7 6 ) Copy of the order forwarded to : 1. % The Appellant 2. &' % The Respondent 3. - 8) CIT 4. - 8) 9 : The CIT(A) 5. 6 ; ग & ) = > / = > ?@A गB DR, ITAT, CHANDIGARH 6. ग A C . Guard File
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