A.Narayana Rao, Visakhapatnam V. THE ITO, WARD - 1(2), Visakhapatnam

ITA 522/VIZ/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94086 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 25-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BENCH, VISHAKHAPATNAM BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.R.BASKARAN, ACCOUNTA NT MEMBE R I .T .A. NO.522 /VIZ /20 14 A SSESSMENT YEAR : 2009 - 2010 A. NARAYAN A RAO, PROP. KACHINS TAILOR, D.NO.30 - 15 - 67, DABAGARDENS, VISAKHAPATNAM VS. ITO, WARD - 1(2), VISAKHAPATNAM PAN/GIR NO. : AAMPA 1100 H APPELLANT ) .. RESPONDENT ) APPELLANT BY : G.V.N. HARI, ADV RESPONDENT BY : D KO MALI KRISHNA DATE OF HEARING : 22 /7 /2015 DATE OF PRONOUNCEMENT : 24 /7 /2015 O R D E R PER B.R.BASKARAN, AM : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 31 - 07 - 2014 PASSED BY LEARNED CIT(A), VISAKHAPATNAM FOR ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING ISSUES: - ( A ) DETERMINATION OF SALE CONSIDERATION UNDER SECTION 50C OF THE ACT. ( B ) REJECTION OF CLAIM FOR DEDUCTION OF RS.4,50,000/ - WHILE COMPUTING CAPITAL GAINS. 2. THE FACTS RELATING TO THE ISSUES CITED ABOVE ARE ST ATED IN BRIEF. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD A LAND FOR A SUM OF RS.21,00,000/ - . THE 2 I.T.A. NO.522/VIZ/2014 A SSESSMENT YEAR :2009 - 2010 VALUATION FOR STAMP DUTY PURPOSES WAS FIXED AT RS.35,33,600/ - (ROUNDED OFF TO RS.35,34,000/ - ) BY THE SUB REGISTRAR OFFICE. HENCE THE ASSESS ING OFFICER PROPOSED TO ADOPT THE SALE CONSIDERATION AT RS.35.34 LAKHS AS PER THE PROVISIONS OF SEC. 50C OF THE ACT. THE ASSESSEE OBJECTED TO THE SAME BY SUBMITTING THAT THE IMPUGNED LAND WAS SUFFERING FROM MANY ENCUMBRANCES AND HENCE HE WAS CONSTRAINED T O SELL THE SAME IN DISTRESS, WHICH LEAD TO RECEIPT OF LOWER SALE CONSIDERATION. ACCORDINGLY IT WAS CONTENDED THAT THE SALE CONSIDERATION SHOWN IN THE SALE AGREEMENT SHOULD BE ADOPTED FOR COMPUTING THE CAPITAL GAINS. IN VIEW OF THE OBJECTIONS RAISED BY TH E ASSESSEE, THE ASSESSING OFFICER REFERRED THE MATTER OF VALUATION TO THE DVO, WHO DETERMINED THE MARKET VALUE OF THE LAND AT RS.35.34 LAKHS. HENCE THE ASSESSING OFFICER COMPUTED THE CAPITAL GAINS BY ADOPTING THE SALE CONSIDERATION AS RS.35.34 LAKHS. 3 . THE ASSESSEE ALSO CLAIMED THAT HE HAD PAID A SUM OF RS.9.00 LAKHS IN AGGREGATE TO TWO PERSONS NAMED (A) MOHAMMED SUNIVULLA AND (B) SHRI PENTAKOTA PRASAD AND SMT. PENTAKOTTA VARALAKSHMI TO CLEAR THE ENCUMBRANCE. I.E., THE ABOVE SAID PERSONS HAD ALSO C LAIMED OWNERSHIP OVER THE PROPERTY AND HENCE THEIR CLAIM WAS SETTLED BY MAKING PAYMENT OF THE ABOVE SAID AMOUNT. HOWEVER, THE ASSESSEE COULD PRODUCE EVIDENCE FOR PAYMENT MADE TO SHRI PENTAKOTA PRASAD AND SMT. PENTAKOTTA VARALAKSHMI ONLY, THAT TOO TO THE E XTENT OF RS.4.00 LAKHS, AND HE EXPRESSED HIS INABILITY TO FURNISH THE EVIDENCE IN RESPECT OF PAYMENT MADE TO MOHAMMED SUNIVULLA. HENCE THE ASSESSING OFFICER ALLOWED DEDUCTION OF RS.4.00 LAKHS AND DISALLOWED THE BALANCE CLAIM OF RS.5.00 LAKHS. 4. IN T HE APPELLATE PROCEEDINGS, THE LEARNED CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON BOTH THE ABOVE SAID ISSUES AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3 I.T.A. NO.522/VIZ/2014 A SSESSMENT YEAR :2009 - 2010 5. THE LEARNED A.R INVITED OUR ATTENTION TO THE COPY OF DVOS REPORT, PARTI CULARLY PAGE 48 OF THE PAPER BOOK, AND SUBMITTED THAT THE DVO HAS TAKEN TWO CONTEMPORARY SALE INSTANCES FOR THE PURPOSE OF DETERMINING THE MARKET VALUE OF THE PROPERTY. THE FIRST INSTANCE OF SALE TOOK PLACE ON 16.08.2008 FOR AN AVERAGE VALUE OF RS.1,442/ - PER SQ. YARD AND THE SECOND INSTANCE OF SALE TOOK PLACE ON 07.8.2008 (PRIOR TO THE DATE OF FIRST INSTANCE OF SALE) FOR AN AVERAGE VALUE OF RS.2,800/ - PER SQ. YARD. THE LEARNED A.R SUBMITTED THAT THE DVO HAS TAKEN THE HIGHER VALUE OF RS.2,800/ - PER SQ. YAR D WITHOUT ASSIGNING ANY REASON AND ACCORDINGLY DETERMINED THE MARKET VALUE AT RS.35.34 LAKHS. THE LEARNED A.R FURTHER SUBMITTED THAT THE FACT THAT IMPUGNED LAND WAS SUFFERING FROM MANY ENCUMBRANCES WAS NOT DISPUTED BY THE REVENUE. HE SUBMITTED THAT THE P REVIOUS OWNER HAD SOLD THE VERY SAME LAND TO MANY OTHER PERSONS ALSO AND SUCH KIND OF PRACTICE WAS VERY MUCH PREVALENT IN THAT YEAR. THIS FACT WAS ALSO REPORTED IN NEWS PAPERS. HE FURTHER SUBMITTED THAT THE FACT THAT THE ASSESSEE HAD TO PAY COMPENSATION TO TWO PERSONS ALSO PROVES THIS FACT. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HIMSELF HAS ALLOWED DEDUCTION OF RS.4.00 LAKHS PAID BY THE ASSESSEE TO CLEAR THE ENCUMBRANCE. SINCE THE LAND WAS SUFFERING FROM ENCUMBRANCES, THE ASSESSEE WAS CONSTRAIN ED TO SELL THIS LAND AS A CASE OF DISTRESS SALE AT A PRICE LOWER THAN THE SRO RATES. HE FURTHER SUBMITTED THAT THE DVO REPORT ITSELF SHOWS THAT A LAND, WHICH IS FREE FROM ENCUMBRANCES, WAS SOLD AT RS.1,442/ - PER SQ.FT, WHICH WAS LOWER THAN THE SALE CONSID ERATION OBTAINED BY THE ASSESSEE. 6. THE LEARNED D.R, ON THE CONTRARY, RELIED UPON THE ORDER OF LEARNED CIT(A) AND SUBMITTED THAT THE ACT HAS PROVIDED A LEGAL FICTION IN THE PROVISIONS OF SEC. 50C OF THE ACT AND HENCE THE VALUE DETERMINED BY THE SRO/D VO WAS ADOPTED AS SALE CONSIDERATION IN TERMS OF THE PROVISIONS OF SEC. 50C OF THE ACT. 4 I.T.A. NO.522/VIZ/2014 A SSESSMENT YEAR :2009 - 2010 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. ADMITTEDLY, THE SALE CONSIDERATION OF RS.21.00 LAKHS DECLARED BY THE ASSESSEE WAS LOWER THAN THE VALUE DETERMINED BY THE SUB REGISTRAR FOR STAMP DUTY PURPOSES. HENCE THE ASSESSING OFFICER HAS PROPOSED TO ADOPT THE VALUE DETERMINED BY THE SUB REGISTRAR AS SALE CONSIDERATION IN TERMS OF SEC. 50C OF THE ACT. WHEN IT WAS OBJECTED TO BY THE ASSESSEE, THE ASSES SING OFFICER REFERRED THE MATTER OF VALUATION TO THE DVO IN TERMS OF SEC. 50C(2) OF THE ACT. SINCE THE VALUE DETERMINED BY THE DVO WAS SAME AS THAT OF THE SRO VALUE, THE ASSESSING OFFICER COMPUTED THE CAPITAL GAIN BY ADOPTING THE SALE CONSIDERATION AS RS. 35.34 LAKHS. 8. NOW, THE ASSESSEE IS QUESTIONING THE VALUATION DETERMINED BY THE DVO BEFORE US. THE ASSESSEE HAS SUBMITTED THAT THE IMPUGNED LAND WAS SUFFERING FROM ENCUMBRANCES AND HENCE HE WAS CONSTRAINED TO SELL THE LAND AT A LOWER PRICE. THE ASSESSEE HAS ALSO FURNISHED ENOUGH EVIDENCES TO SUBSTANTIATE HIS SUBMISSIONS AND IN FACT, THE ASSESSING OFFICER HIMSELF AS ALLOWED DEDUCTION OF RS.4.00 LAKHS, BEING THE AMOUNT PAID BY THE ASSESSEE TO ONE OF PERSONS WHO CLAIMED OWNERSHIP OVER THE LAND. HEN CE, IN OUR VIEW, THE EXISTENCE OF ENCUMBRANCES OVER THE PROPERTY WAS SUFFICIENTLY PROVED BY THE ASSESSEE. WE NOTICE THAT THE DVO HAS FOUND OUT TWO INSTANCES OF SALE FOR THE PURPOSE OF DETERMINING THE MARKET VALUE OF THE IMPUGNED LAND. THE FIRST INSTANCE O F SALE SHOWED A SALE VALUE OF RS.1,442/ - PER SQ. YARD AND THE SECOND INSTANCE OF SALE SHOWED A SALE VALUE OF RS.2,800/ - PER SQ. YARD. HOWEVER, WE NOTICE THAT THE DVO HAS CHOSEN TO ADOPT THE HIGHER VALUE WITHOUT GIVING PROPER REASONS. FURTHER WE NOTICE TH AT THE DVO DID NOT CONSIDER THE EFFECT OF ENCUMBRANCES ON THE MARKET VALUE, EVEN THOUGH HE HAS REFERRED TO THE SAME IN PARA 6.1 OF HIS REPORT AND ACCORDINGLY DID NOT ALLOW ANY DEDUCTION FOR SUCH ENCUMBRANCES, WHICH WOULD HAVE DEFINITELY AFFECTED THE SALE O F THE LAND. FURTHER, ONE OF THE SALE INSTANCES TAKEN BY THE DVO HIMSELF SHOWS THAT THE LAND IN THAT AREA FETCHED A PRICE OF RS.1,442/ - PER SQ. FT., WHICH WAS CLAIMED TO BE ENCUMBRANCE F R EE LAND. 5 I.T.A. NO.522/VIZ/2014 A SSESSMENT YEAR :2009 - 2010 9 . UNDER THESE SET OF FACTS, WE FIND NO JUSTIFICATION ON THE PART OF THE DVO TO ADOPT THE MARKET PRICE AT RS.2,800/ - PER SQ. YARD, THAT TOO WITHOUT ASSIGNING ANY REASONS. FURTHER, WE ARE OF THE VIEW THAT THE DVO SHOULD HAVE ALSO GIVEN A REASONABLE DEDUCTION TOWARDS ENCUMBRANCES SURROUNDING THE LAND. HENCE, ON A CONSPECTUS OF THE MATTER, WE ARE OF THE VIEW THAT THE MARKET VALUE OF THE IMPUGNED LAND MAY BE DETERMINED BY AVERAGING THE VALUES OF BOTH THE SALE INSTANCES TAKEN BY THE DVO AND GIVING FURTHER DEDUCTION OF 20% TOWARDS THE ENCUMBRANCES. IN OUR VIEW, THIS METHODOLOGY WOULD PUT THE ISSUE UNDER REST. ACCORDINGLY, THE MARKET VALUE OF LAND IS DETERMINED AS UNDER: - AVERAGE VALUE OF BOTH THE SALE INSTANCES = 50%(1442 + 2800) 2,121 LESS: - REBATE OF 20% FOR ENCUMBRANCES 424 --------- 1,697 OR SAY 1,700 ===== ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE MARKET VALUE OF THE LAND BY ADOPTING THE RATE OF RS.1,700/ - PER SQ. YA RD AND ADOPT THE SALE CONSIDERATION AS HIGHER OF THE (A) VALUE SO ARRIVED AT OR (B) RS.21.00 LAKHS, BEING THE AMOUNT DECLARED IN THE SALE AGREEMENT. WE ORDER ACCORDINGLY. THE ORDER OF LEARNED CIT(A) ON THIS ISSUE IS ACCORDINGLY SET ASIDE. 10 . THE NEXT ISSUE RELATES TO THE DISALLOWANCE OF RS.5.00 LAKHS CLAIMED BY THE ASSESSEE. ADMITTEDLY, THE ASSESSEE COULD NOT PROVE THE PAYMENT OF RS.5.00 LAKHS BEFORE THE TAX AUTHORITIES. BEFORE US ALSO, NO MATERIAL WAS PRODUCED TO SUBSTANTIATE THE 6 I.T.A. NO.522/VIZ/2014 A SSESSMENT YEAR :2009 - 2010 SAID CLAIM. H ENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. 11 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4 /7 /2015 . S D / - S D / - (D.MANMOHAN ) ( B.R.BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER DATED 2 4 / 7 /2015 B.K.PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : A. NARAYAN RAO, PROP. KACHINS TAILOR, D.NO.30 - 15 - 67, DABAGARDENS, VISAKHAPATNAM 2. THE RESPONDENT. ITO, WARD - 1(2), VISAKHAPATNAM 3. THE CIT(A) - VISHAKHAPATNAM 4. CIT - 1 , VISHAKHAPATNAM 5. DR, ITAT, VISHAKHAPATNAM 6. / GUARD FILE. BY ORDER, //TRUE COPY// ASST. REGISTRAR, ITAT, VISHAKHAPATNAM