KAVITA POLYMERS, PUNE V. ACIT, CENTRAL CIRCLE 2(2), PUNE

ITA 52/PUN/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5532 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 14-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Fair market value; Valuation report; Capital Gains
• Section: 154; 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.52/PUN/2020 िनधाᭅरण वषᭅ / Assessment Year: 2015-16 Kavita Polymers, S-196, MIDC, Bhosari, Pune- 411026. PAN : AADFK1774G Vs. ACIT, Central Circle- 2(2), Pune. Appellant Respondent आदेश / ORDER PER S. S. GODARA, JM: This assessee’s appeal for assessment year 2015-16 arises against the CIT(A)- 12, Pune’s order dated 28.10.2019 passed in case no. PN/CIT(A)-12/10475/2017-18 involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short “the Act”. Case called twice. None appears at assessee’s behest. It is accordingly proceeded ex-parte. 2. The assessee’s sole substantive grievance raised herein challenges correctness of both the lower authorities’ action making section 50C addition of long and short term capital gains amounting Assessee by : None Revenue by : Shri Arvind Desai Date of hearing : 13.06.2022 Date of pronouncement : 20.06.2022 ITA No.52/PUN/2020 2 to Rs.9,01,28,703/- and Rs.1,60,38,394/-; respectively, totalling to Rs.10,61,67,097/-. The CIT(A)’s lower appellate discussion affirming the Assessing Officer’s action to this effect reads as under :- “3.1 I have considered to the submissions of the appellant. The brief facts of the case are that the assessee during the relevant financial year sold a plot of Industrial land at Pimpri Industrial Area, comprising of both land and building to M/s Wellmade Locking Systems Pvt. Ltd for a total consideration of Rs. 9 crores. However, the stamp duty value as per the ready reckoner was Rs. 11,00,43,000/-. The assessee filed its return of income declaring the total consideration of Rs. 9 crores towards the capital gains arising out of sale of this industrial plot, based on the Valuation Report of a Government Approved Valuer. The Assessing Officer did not agree with the Valuation Report of the Government Approved Valuer and referred the industrial plot for fresh valuation to the Departmental Valuation Officer (DVO). However, the report of the DVO was not received in time and therefore, the Assessing Officer had computed the capital gains based on the Stamp Duty Value at Rs. 11,00,43,000/-. Subsequent to the completion of the assessment order, the DVO report was received wherein the total value of the subject property was valued Rs. 9.14 crores. During the appellate proceedings, the appellant inform and submitted the DVO’s report. Further, he also informed that the Assessing Officer had wrongly rectified the computation of the capital gains arising out of the property on account of the DVO’s report u/s 154 of the IT Act. The appellant is an appeal against the order u/s 154 on the ground that the same could not be rectified, as it was not a mistake apparent from record. However, whether or not the Assessing Officer was correct in rectifying the assessment order u/s 154 is not the subject matter of this appeal and therefore, is not being discussed any further. However, since the appellant has produced the DVO report during the appellate proceedings the same is being taken cognizance of for the purpose of the present appeal proceedings. Though, the difference between the sale consideration declared in the return of income and that of the DVO was only Rs. 0.14 crores, the DVO however, valued the land at Rs. 5,09,25,600/- as against the value of Rs. 7,50,00,000/- and the building at Rs. 4,04,86,900/- as against the value of Rs. 1,83,40,500/- adopted by the assessee respectively in its return of income. Though, the difference in the total valuation of the property by the DVO and the assessee is only 1.55%, however, in terms of the computation of short term gains for the building there is a substantial difference. As per the assessee’s computation the short term capital gains on the building worked out to only Rs. 1,26,97,894/-, whereas as ITA No.52/PUN/2020 3 per the DVO’s valuation the short term capital gain now stand with Rs. 3,81,84,796/-, which is a substantial difference of 66.7%. Further, the long term capital gains on the land gets reduced on account of DVO’s report from Rs. 7,34,26,203/- to Rs. 4,93,51,803/-. But the overall tax liability is enhanced greatly on account of higher short term capital gains arising on account of DVO’s report. In view of the above facts and increased liability on account of capital gains on the sale of the property the assessee was show caused as to why his computation capital gains on account of sale of industrial property should not be enhanced vide this office letter dated 16.10.2019. In response the appellant vide its letter dated 18.10.2019 had several objections. Firstly, that the difference between the DVO’s valuation and that of the Approved Valuer was only 1.57% and therefore, argued that any difference in valuation which is less than 10% should be ignored as per judicial precedents. Secondly, the provisions of section 50C of the IT Act do not apply to sale of lease hold property. Thirdly, that the DVO was incorrect in adopting the wrong fair market value for the said property. I have gone through the objections raised by the appellant. The argument of the appellant that the difference in the valuation of the property between the DVO and the Approved Valuer is only 1.57% is incorrect. In the case of valuation of the building the valuation difference is more than 120%. Further, the total capital gains tax liability on account of revised computation based on the DVO's report is substantially higher than what was declared by the assessee in its ROI. The appellant is also incorrect in stating that provisions of section 50C do not apply to lease hold lands. In the present case the assessee has been allotted the land by the Maharashtra State Government and has all the benefits of non-lease hold land, such as right to transfer the property at fair market value without any restrictions. Lastly, the department cannot differ with the valuation of the DVO’s report unless the appellant points out substantial mistakes in the procedure adopted by the DVO in valuation of the property. It is pertinent to note that, at the time of valuation, the DVO had dealt with the objections raised by the appellant. Therefore, in view of the above discussions the AO is directed to recompute the capital gains based on the DVO’s report. Accordingly, the grounds of the appellant are dismissed and the income of the assessee enhanced as stated above.” 3. Mr. Desai vehemently argued in the light of (2013) 152 TTJ 482 (Mumbai) Shavo Norgren (P.) Ltd. Vs. DCIT that the learned lower authorities have rightly made the impugned addition qua transfer of the assessee’s leasehold rights in issue after invoking ITA No.52/PUN/2020 4 section 50C of the Act. He could hardly pinpoint the assessee’s title over the capital assets herein turning out to be plot no.S-196 at MIDC Area, Pune. That being the case, we find that case law CIT vs. Greenfield Hotels & Estates (P.) Ltd. (2017) 77 taxmann.com 308 (Bombay) holds that such a leasehold rights hardly come within the legislative expression “being land or building or both” specified 50C(1) of the Act. We therefore adopt the very reasoning herein as well to reverse the learned lower authorities’ action qua the instant former addition of long term capital gains. The assessee succeeds in his instant former grievance. 4. The facts also remains that the instant appeal raised the latter issue of short term capital gains addition on account of transfer of factory building of Rs.1,60,38,394/-. The Revenue could not dispute that the learned lower authorities had never made any statutory reference to the DVO which has been held to be mandatory in Sunil Kumar Agarwal vs. CIT (2015) 372 ITR 83 (Calcutta). Their lordships hold that such reference has to be mandatorily made even if the assessee concerned does not raise any objection to this effect. We therefore restore the assessee’s instant latter substantive grievance back to the Assessing Officer regarding ITA No.52/PUN/2020 5 its “building” valuation issue to be decided afresh as per law within three effective opportunities of hearing. Ordered accordingly, 5. This assessee’s appeal is partly allowed in above terms. Order pronounced on this 20 th day of June, 2022. Sd/- Sd/- (DR. DIPAK P. RIPOTE) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 20 th June, 2022. Sujeet (DOC) आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-12, Pune. 4. The Pr. CIT Central, Pune. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.