The Income-tax Officer, Srinagar V. M/s. Ali Shah, Srinagar

ITA 537/ASR/2011

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5748 (ITAT-AMRITSAR)
• Duration Of Justice: 6 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 03-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S NEGI
• Keywords: Opportunity of being heard; Cost of acquisition; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI N.K. CHOUDHRY, JUDICIAL MEMBER ITA NO.537/ASR/2011 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER, WARD-3(1), SRINAGAR. VS. M/S ALI SHAH, 3 NIGEEN ROAD, SRINAGAR. PAN: AAFFA1339R (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI UPENDER BHAT, CA DEPARTMENT BY : SHRI S.S. NEGI DATE OF HEARING : 22.02.2018 DATE OF PRONOUNCEMENT : 22.02.2018 ORDER PER R.S. SYAL, VP: THIS APPEAL FILED BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 20.08.2011 IN RELATION TO THE ASSESSM ENT YEAR 2006-07. ITA NO.537/ASR/2011 2 2. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSIN G OFFICER COMPUTED AND TAXED CERTAIN AMOUNT AS CAPITAL GAIN B Y INVOKING THE PROVISIONS OF SECTION 45(4) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED `THE ACT). THE LD. CIT(A) ALLOWED CERTAIN RELIEFS AND THE REVENUE APPROACHED THE TRIBUNAL. THE APPEAL OF THE REVENUE GOT ACCEPTED BY THE TRIBUNAL VIDE ITS ORDER DATED 11.07 .2012. THE ASSESSEE WENT TO THE HON'BLE HIGH COURT. VIDE ITS JUDGMENT DATED 25.05.2017, THE HON'BLE HIGH COURT HAS REMITTED THE MATTER OF V ALUATION OF TWO PROPERTIES VIZ., SAIDAKADAL RESIDENTIAL HOUSE AND G ULMARG LAND/HUT TO THE TRIBUNAL WITH CERTAIN DIRECTIONS, WHICH WE WILL ADVERT TO AT THE APPROPRIATE STAGE. EX CONSEQUENTI, WE ARE TAKING UP THE ISSUE IN PURSUANCE OF THE DIRECTIONS GIVEN BY THE HON'BLE HI GH COURT. 3. FIRSTLY, WE WILL ESPOUSE THE SAIDAKADAL PROPERTY. T HE ASSESSING OFFICER CHARGED LONG-TERM CAPITAL GAIN ON TRANSFER OF THE ASSET BY TREATING IT AS A DISTRIBUTION TO ITS PARTNERS U/S 4 5(4) OF THE ACT AND ADOPTING THE FAIR MARKET VALUE AT RS.1.30 LAC AND C OST OF ACQUISITION AS ON 01.04.1981 AT RS.18 LAC. THE ASSESSEE ARGUED BEF ORE THE LD. CIT(A) ITA NO.537/ASR/2011 3 THAT THE FAIR MARKET VALUE OF THE LAND AS ON 1.4.1 981 AMOUNTING TO RS.6.40 LAC WAS IN ADDITION TO THE FAIR MARKET VALU E OF THE BUILDING AS ON 1.4.1981 AT RS.18 LAC. THE LD. CIT(A) GOT CONVINC ED WITH THE ASSESSEES SUBMISSIONS AND, ACCORDINGLY, INDEXED TH E FAIR MARKET VALUE OF RS.24.40 LAC (RS.18.00 LAC PLUS RS.6.40 LAC) AS ON 1.4.1981, BEING THE COST OF ACQUISITION, TO RS.1.21 CRORE. THAT IS HOW , HE COMPUTED CAPITAL GAIN AT RS.8.43 LAC FROM THE TRANSFER OF THIS PROPE RTY. THE TRIBUNAL, VIDE PARA 7.1 OF ITS ORDER NOTICED THAT VALUE OF RS.18 L AC WAS A COMBINED FIGURE, CONSISTING OF BOTH THE LAND AND BUILDING. IT FURTHER OBSERVED THAT: THE ASSESSEE HAD NEVER OBJECTED TO THE VALUE TAKEN BY THE A.O. DURING ASSESSMENT PROCEEDINGS EVEN AFTER SHOW CAUSE WAS GI VEN TO THE ASSESSEE. IT WENT ON TO FURTHER OBSERVE THAT: THE ASSESSEE DID NOT EXERCISE OPTION FOR THE FAIR MARKET VALUE AS ON 01. 04.1981 OR THE COST OF RESIDENTIAL HOUSE AS ON 01.04.1981 DURING THE ASSES SMENT PROCEEDINGS IN SPITE OF THE FACT OPTION GIVEN VIDE SHOW CAUSE LETT ER DATED 26.12.2008. THAT IS HOW, THE TRIBUNAL TOOK THE COST OF ACQUISIT ION AT RS.18 LAC. THE ASSESSEE ASSAILED THIS FINDING BEFORE THE HON'BLE H IGH COURT, WHICH FOUND THE ABOVE FINDINGS CONTAINED IN PARA 7.1 OF T HE TRIBUNAL ORDER AS ITA NO.537/ASR/2011 4 INCONSISTENT, BY NOTICING THAT THE ASSESSEE HAD CAT EGORICALLY SAID THAT IT HAD DECIDED TO EXERCISE THE OPTION OF THE FAIR MARK ET VALUE AGAINST THE BOOK VALUE. THIS IS THE REASON WHICH LED THE HON'B LE HIGH COURT TO REMIT THE MATTER TO THE TRIBUNAL WITH REGARD TO TH IS PROPERTY. 4. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RELEVA NT MATERIAL ON RECORD. AT THIS JUNCTURE, WE WANT TO CLARIFY THAT INSOFAR AS THE CHARGEABILITY TO TAX BY TREATING THE TRANSACTION AS COVERED U/S 45(4) OF THE ACT IS CONCERNED, THE SAME HAS ATTAINED FINALIT Y BY THE EARLIER ORDER OF THE TRIBUNAL, WHICH PART HAS NOT BEEN DISTURBED BY THE HONBLE HIGH COURT. THERE ARE TWO ISSUES IN SO FAR AS THE DETERM INATION OF CAPITAL GAIN ON THE TRANSFER OF THE SAIDAKADAL PROPERTY IS CONCE RNED. 5. FIRST IS THE FAIR MARKET VALUE AS ON 01.04.1981 TAK EN BY THE LD. CIT(A) AT RS.24.40 LAC AS AGAINST RS.18 LAC TAKEN B Y THE ASSESSING OFFICER. THE CASE OF THE ASSESSEE IS THAT THE FAIR MARKET VALUE OF THE BUILDING AS ON 1.4.1981 AT RS.18 LAC IS EXCLUSIVE O F THE FAIR MARKET VALUE OF THE LAND AT RS.6.40 LAC. AS AGAINST THIS, WE FI ND THE ASSESSING OFFICER HAS TAKEN A CONSOLIDATED FAIR MARKET VALUE OF THE L AND AND BUILDING AS ON ITA NO.537/ASR/2011 5 1.4.1981 AT RS.18 LAC ON THE BASIS OF SOME VALUATIO N REPORT. ON A PERTINENT QUERY, THE LD. AR COULD NOT DRAW OUR ATTE NTION TO THE SAID REPORT OF THE REGISTERED VALUER FOR ASCERTAINING IF RS.18 LAC WAS ONLY TOWARDS THE BUILDING OR FOR BOTH THE LAND & BUILDIN G. UNDER THESE CIRCUMSTANCES, WE REMIT THE MATTER TO THE FILE OF A SSESSING OFFICER FOR EXAMINING THE REGISTERED VALUERS REPORT AND OTHER CONNECTED MATERIAL FOR ASCERTAINING IF VALUE OF LAND IS PART OF RS.18 LAC OR IT IS INDEPENDENT. IN CASE IT IS FOUND FROM SUCH MATERIAL THAT THE VAL UE OF BUILDING ALONG WITH LAND AS ON 01.04.1981 IS RS.18 LAC, THEN, THER E IS NO NEED FOR INCREASING RS.6.40 LAC TOWARDS THE VALUE OF LAND AS ON 01.04.1981 AND VICE VERSA . 6. THE SECOND ISSUE IN THIS REGARD IS THE INDEXATIO N OF SUCH VALUE OF LAND AND BUILDING. THERE CANNOT BE ANY DISPUTE THAT ONCE VALUE AS ON 01.04.1981 IS TAKEN, SUCH COST OF ACQUISITION NEEDS TO BE INDEXED UPWARDS FOR COMPUTING THE AMOUNT OF LONG-TERM CAPIT AL GAIN. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO FIRSTLY, CONSIDER THE FAIR MARKET VALUE OF THE LAND AND BUILDING AS ON 01.04.1981 AND , THEREAFTER, APPLY ITA NO.537/ASR/2011 6 INDEXATION FOR DETERMINING THE TOTAL AMOUNT OF CAPI TAL GAIN FROM THIS PROPERTY. NEEDLESS TO SAY, THE ASSESSEE WILL BE GI VEN AN OPPORTUNITY OF HEARING IN SUCH PROCEEDINGS. 7. THE OTHER ISSUE IS REGARDING THE VALUATION OF GULM ARG LAND/HUT. THE TRIBUNAL NOTED IN PARA 3.3 OF ITS ORDER THAT NO FAI R MARKET VALUE IN RESPECT OF GULMARG HUT WAS GIVEN AND NO VALUATION REPORT RE GARDING THIS PROPERTY WAS FURNISHED BY THE ASSESSEE. IT IS DISC ERNIBLE FROM THE ASSESSMENT ORDER THAT THE SAID PROPERTY WAS DISMANT LED AND A NEW PROPERTY WAS CONSTRUCTED OVER THE PIECE OF LAND. H OWEVER, MR. AADIL MAQBOOL, A PARTNER OF THE ASSESSEE FIRM APPEARED BE FORE THE ASSESSING OFFICER ON 26.12.2008 AND ON FURTHER DISCUSSION WIT H HIM, THE VALUE OF GULMARG HUT AT THE TIME OF TRANSFER WAS TAKEN AT RS .5 LAC. THEREAFTER, THE TRIBUNAL NOTICED ON THE LAST PAGE OF ITS ORDER THAT THE CONSTRUCTION OF HOTEL WAS BEING CARRIED OUT. THE HON'BLE HIGH COUR T HAS REFERRED TO PARA 7.1 OF THE TRIBUNAL ORDER IN PARA 4 OF ITS JUD GMENT AND OBSERVED THAT THE FINDING RECORDED BY THE TRIBUNAL ABOUT THE ASSE SSEE NOT OBJECTING TO THE VALUE TAKEN BY THE ASSESSING OFFICER WAS NOT CO RRECT. WE FIND THAT ITA NO.537/ASR/2011 7 PARA 7.1 OF THE TRIBUNAL ORDER DEALS WITH THE SAIDA KADAL PROPERTY AND NOT GULMARG HUT. SINCE THE HON'BLE HIGH COURT HAS REMI TTED THE MATTER OF VALUATION OF GULMARG LAND/HUT ALSO TO THE TRIBUNAL, IN OUR CONSIDERED OPINION, THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE ASSESSING OFFICER DECIDES THE QUESTION OF COMPUTATION OF CAPI TAL GAIN FROM THE TRANSFER OF GULMARG LAND/HUT U/S 45(4) OF THE ACT A FRESH, AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 22.02.201 8. SD/- SD/- [N.K. CHOUDHRY] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 22 ND FEBRUARY, 2018. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, AMRITSAR.