ITO RG 23(1)(4), MUMBAI V. RABINDER H. CHHABRA (HUF), MUMBAI

ITA 5511/MUM/2012

• Counselvise Citation: 551119914 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 31-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBHODH L RATNAPARKHI
• Keywords: Retrospective amendment; Question of law; Cost of acquisition; Fair market value
• Section: 54F

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE S/SHRI P.M.JAGTAP (AM) AND SANJAY GARG, (JM) . . , , , ./I.T.A.NO.5511/MUM/2012 ( / ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER - CIR.23(1)(4), C-10, 1ST FLOOR, ROOM NO.105, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400051. / VS. SHRI RABINDER H CHHABRA (HUF) 2102, TAKSHSHILA, NARMAL NAGAR, MULUND GOREGAON LINK RD., MULUND (W), MUMBAI-400078. ./ ./PAN/GIR NO. : AAAHR08332B ( $ / APPELLANT) .. ( %&$ / RESPONDENT) CROSS-OBJECTION NO.235/MUM/2013 IN ./I.T.A.NO. 5511/MUM/2012 ( / ASSESSMENT YEAR:2007-08) SHRI RABINDER H CHHABRA (HUF) 2102, TAKSHSHILA, NARMAL NAGAR, MULUND GOREGAON LINK RD. MULUND (W), MUMBAI-400078. / VS. INCOME TAX OFFICER - WD .23( 1)( 4 ), C-10, 1ST FLOOR, ROOM NO.105, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400051. $ /CROSS-OBJECOR ) ( %&$ / RESPONDENT) $ / REVENUE BY : SHRI P.K.SINGH %&$ ( /ASSESSEE BY SHRI SUBHODH L. RATNAPARKHI ( + / DATE OF HEARING : 20.5.2014 ( + /DATE OF PRONOUNCEMENT : 23. 5.2014 I.T.A.NO. 5511/MUM/2012 CROSS-OBJECTION NO.235/MUM/2013 2 / O R D E R PER P.M.JAGTAP,AM: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LD. CIT(A)- 36, MUMBAI DATED 21.6.2012 AND THE SAME IS BEING DI SPOSED OF ALONG WITH CROSS-OBJECTION NO.235/MUM/2013. I.T.A.NO.5511/MUM/2012 2. THE SOLITARY ISSUE RAISED IN THE APPEAL OF THE REVENUE IS WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF LONG TERM CAPITAL GAIN (LTCG) BY ADOPTING LOWER COST OF ACQUISITION AS ON 1.4.1981 ON THE BASIS OF DVOS REPORT, HOLDING THA T THE REFERENCE MADE BY THE AO TO THE DVO U/S 55A OF THE INCOME TAX ACT, 18961 (THE ACT) ITSELF WAS BAD IN LAW. 3. THE ASSESSEE IN THE PRESENT CASE IS A HUF WHO FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 31.3.2009 DECLA RING TOTAL INCOME OF RS.1,000,720. IN THE SAID RETURN, THE LONG TERN C APITAL LOSS OF RS.7,97,583/- WAS SHOWN BY THE ASSESSEE ARISING FROM THE SALE OF ITS 20% SHARE IN THE PROPERTY KNOWN AS M/S ALFA ENGINEERING WORKS SITU ATED AT 221, STATION ROAD, BHANDUP (W), MUMBAI-400078. THE WORKING OF THE S AID LONG TERM CAPITAL LOSS WAS GIVEN BY THE ASSESSEE AS UNDER : SALE CONSIDERATION RS.4,75,00,000/ LESS -COST OF ACQUISITION FAIR MARKET VALUE (FMV) - AS ON 1.4.1981 RS.99,20, 600/- (AS PER REGISTERED VALUERS REPORT) INDEXED COST OF ACQUISITION = 99,20,600/- X 519 = 5,14,87,940/- 100 LONG TERM CAPITAL LOSS RS.39,87,914/- ASSESSEES SHARE AT 20% RS.7,97,583/- I.T.A.NO. 5511/MUM/2012 CROSS-OBJECTION NO.235/MUM/2013 3 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A R EFERENCE WAS MADE BY THE AO TO THE DVO FOR THE PURPOSE OF DETERMINING TH E FMV OF THE ASSESSEES PROPERTY AS ON 1.4.1981 AND IN ITS REPORT DATED 21. 12.2009 SUBMITTED TO THE AO, THE DVO ESTIMATED THE FMV OF THE ASSESSEES PRO PERTY AS ON 1.4.1981 AT RS.14,21,424/-. THE AO ALSO NOTED THAT THE VALU E OF THE PROPERTY VIZ ALFA ENGINEERING WORKS WAS ADOPTED AND ASSESSED FOR THE PURPOSE OF PAYMENT OF STAMP DUTY AT RS.4,77,18,000/- AS AGAINST AGREEME NT VALUE OF RS.4,75,00,000/-. ALTHOUGH THE ASSESSEE RAISED CE RTAIN OBJECTIONS IN RESPECT OF VALUATION ESTIMATED BY THE DVO, THE AO DID NOT FIND THE SAME TO BE SUSTAINABLE AND ADOPTING THE SALE CONSIDERATION AT RS.4,77,18 ,000/- AND THE FMV OF THE PROPERTY AS ON 1.4.1981 AT RS.14,21,424/- AS ESTI MATED BY THE DVO, THE LONG TERM CAPITAL GAINS ARISING FROM THE SALE OF ASSESSE ES SHARE IN THE PROPERTY WAS WORKED OUT BY THE AO AT RS.31,67,607/- AFTER ALL OWING DEDUCTION U/S 54F OF THE ACT AS UNDER : SALE CONSIDERATION RS.4,77,18,000/- LESS : INDEX COST OF ACQUISITION 1421424 X 519 = RS.73,77,191/- 100 LONG TERM CAPITAL GAIN RS.4,03,40,809/- ASSESSEES SHARES IN THE TOTAL LTCG @ 20% RS.80, 68,162/- LESS DEDUCTION U/S 54F BEING FLAT PURCHASED RS.49 ,00,555/- LONG TERM CAPITAL GAIN RS.31,67,607/- ======== 5. THE ADDITION MADE BY THE AO ON ACCOUNT OF LTCG WAS DISPUTED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(A) . DURING THE COURSE OF APPELLANT PROCEEDINGS BEFORE THE LD. CIT(A), AN AD DITIONAL GROUND WAS RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF REFERENCE MADE BY THE AO TO THE DVO I.T.A.NO. 5511/MUM/2012 CROSS-OBJECTION NO.235/MUM/2013 4 U/S 55A OF THE ACT AND THE FOLLOWING SUBMISSIONS WE RE MADE IN SUPPORT THEREOF ON BEHALF OF THE ASSESSEE : THE APPELLANT HAS TAKEN AN ADDITIONAL GROUND OF AP PEAL WHEREIN IT HAS CHALLENGED THE VERY REFERENCE TO THE DVO BY THE AO UNDER SECTION 55A OF THE ACT. THE APPELLANTS ARGUMENT REGARDING THE S AME IS THAT UNDER CLAUSE (A) OF SECTION 55A, THE AO IS ENTITLED TO MA KE THE REFERENCE IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE APPELLANT IS IN ACCORDANCE WITH THE ESTIMATE MADE BY THE REGISTERED VALUER AND THE AO IS OF THE OPINION THAT THE VALUE OF SO CLAIMED IS L ESS THAN THE FAIR MARKET VALUE. WHILE IN CLAUSE (B), THE AO HAS TO RECORD AN OPINION THAT THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET BY MORE THAN SUCH PERCENTAGE OR BY MORE THAN SUCH AN AMOUNT AS MAY BE PRESCRIBED OR HAVING REGARD TO THE NATURE OF THE ASSET AND OTH ER RELEVANT CIRCUMSTANCES, IT IS NECESSARY TO MAKE SUCH A REFER ENCE. THE APPELLANT HAD CLAIMED THE VALUE OF THE PROPERT Y AS PER THE REGISTERED VALUERS REPORT. THEREFORE, THE CASE FALLS UNDER C LAUSE (A) OF SECTION 55A AND THE AO WAS REQUIRED TO FORM AN OPINION THE VALU E CLAIMED BY THE APPELLANT AS PER THE REGISTERED VALUERS REPORT WAS LESS THAN THE FAIR MARKET VALUE. HOWEVER, THE ESTIMATED VALUE PROPOSE D BY THE DVO WAS LESS THAN THE FAIR MARKET VALUE SHOWN BY THE APPELL ANT AS ON APRIL, 1981 AND HENCE CLAUSE (A) WAS NOT APPLICABLE. THE APPEL LANTS CASE ALSO DID NOT FALL IN CLAUSE (B) AND HENCE THE REFERENCE WAS BAD IN LAW. TO BUTTRESS THE ABOVE PROPOSITIONS, THE APPELLANT R ELIED ON THE FOLLOWING CASES : DAULAT MOTA HUF V/S ITO (ITA NO. 322/M/2007; AY 20 03-04, ITAT B BENCH DECIDED ON JULY 23, 2007) WHEREIN IT WAS HELD THAT AO ASSUMES POWER UNDER CLAUSE (A) OF SECTION 55A ONLY WHEN IN HIS OPINION FAIR MARKET VALUE DISCLOSED BY THE APPELLANT IS LESS AND HENCE THE REFERENCE WAS HELD TO BE INVALID . THE TRIBUNAL IN THIS CASE FOLLOWED THE FOLLOWING DECISIONS: MS. RUBAB M. KAZERANI V/S JCIT [2004] 91 ITD 429 (MUM.)(TM) SMT. KRISHNABAI TINGRE V/S INCOME-TAX OFFICER [2006 ] 101 ITD 317 (PUNE) THE HONBLE HIGH COURT OF BOMBAY HAS DISMISSED THE APPEAL OF THE REVENUE AGAINST THE ITATS ORDER IN THE CASE OF DAULAT MOTA VIDE ITA NO 1031 OF 2008 DT 22-SEPTEMBER 2008. NO SLP HAS BEEN FILED AGAINST THAT ORDER. I.T.A.NO. 5511/MUM/2012 CROSS-OBJECTION NO.235/MUM/2013 5 THE APPELLANT ALSO PLACED RELIANCE ON THE CASE OF HIABEN JAYANTILAL SHAH V/S INCOME-TAX OFFICER DECIDED BY THE HONBLE GUJARAT HIGH COURT VIDE SPECIAL CIVIL APPLICATION NO. 9293 OF 1997. THE APPELLANT THEREFORE ARGUED THAT IN VIEW OF THE ABOVE DECISIONS, THE REFERENCE U/S 55A TO THE DVO IS ITSELF BAD IN LAW. THE APPELLANT PRAYED THAT HENCE THE VALUATION ADOP TED BY THE DVO BE DELETED AND THE ADDITION MADE BY THE AO SHOULD BE DELETED 6. THE ABOVE SUBMISSIONS MADE BY THE ASSESSEE ON TH E ISSUE RAISED IN ADDITIONAL GROUND WERE FORWARDED BY THE LD.CIT(A) TO THE AO FOR THE LATTERS COMMENTS AND AFTER TAKING INTO CONSIDERATION THE C OMMENTS OFFERED BY THE AO IN THE REMAND REPORT AS WELL AS SUBMISSIONS MADE O N BEHALF OF THE ASSESSEE, THE LD CIT(A) PROCEEDED TO DECIDE THE ISSUE RAISED BY THE ASSESSEE IN THE ADDITIONAL GROUND CHALLENGING THE VALIDITY OF REFE RENCE MADE BY AO TO DVO U/S 55A OF THE ACT. IN THIS REGARD, HE TOOK NOTE OF THE SPECIFIC PROVISIONS CONTAINED IN SECTION 55A OF THE ACT AND FOUND THAT THE SAME C OULD BE INVOKED ONLY IF THE AO WAS OF THE OPINION THAT THE VALUE DECLARED BY TH E ASSESSEE IS LESS THAN ITS FMV. HE NOTED THAT THE REFERENCE IN THE CASE OF T HE ASSESSEE WAS HOWEVER MADE BY THE AO TO THE DVO BECAUSE HE FELT THAT THE VALUE OF PROPERTY AS ON 1.4.1981 DECLARED BY THE ASSESSEE ON THE BASIS OF R EGISTERED VALUERS REPORT IS ACTUALLY MORE THAN ITS FMV. HE HELD THAT THE COND ITION STIPULATED IN CLAUSE (A) OF SECTION 55A THUS WAS NOT SATISFIED AND RELYING INTER ALIA ON THE DECISION OF TRIBUNAL IN THE CASE OF DAULAT MOTA HUF V/S ITO (I TA NO. 322/M/2007; AY 2003-04, ITAT B BENCH DECIDED ON JULY 23, 2007), HE HELD THAT THE REFERENCE MADE BY THE AO TO THE DVO U/S 55A OF THE ACT ITSE LF WAS BAD IN LAW. ACCORDINGLY, HE DIRECTED THE AO TO DELETE THE ADDIT ION MADE ON ACCOUNT OF LTCG I.T.A.NO. 5511/MUM/2012 CROSS-OBJECTION NO.235/MUM/2013 6 BASED ON THE REPORT OF THE DVO. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. THE LD. REPRES ENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S PUJA PRINTS (2014) 265 CTR (BOM) 124, WHEREIN THE SIMILAR ISSUE WAS RAISED BY WAY OF THE FOLLOW ING QUESTION OF LAW FOR THE CONSIDERATION OF THEIR LORDSHIPS : (A)WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE ITAT WAS RIGHT IN HOLDING THAT THE REFE RENCE MADE BY THE AO TO THE VALUATION OFFICER PER SE IS BAD IN LA W? FURTHER, WHETHER THE ITAT WAS JUSTIFIED IN OBSERVING THAT TH E REFERENCE TO THE DVO U/S. 55A OF THE IT ACT 1961 IS TO BE MADE W HEN THE VALUE OF THE PROPERTY DISCLOSED BY THE ASSESSEE IS LESS THAN THE FAIR VALUE AND NOT VICE VERSA THEREBY IGNORING THE PROVISIONS OF SECTION 55A(B)(II) OF THE ACT 1961 AND PARAGRAPH 26 TO 28 OF CIRCULAR NO.96 DATED 25.11.1972 OF THE CBDT? 8. THE HONBLE BOMBAY HIGH COURT DECIDED THE ISSUE INVOLVED IN THE ABOVE QUESTION IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE IMPUGNED ORDER DATED 18 FEBRUARY, 2011 ALLOWING THE RESPONDE NT-ASSESSEE'S APPEAL HOLDING THAT NO REFERENCE TO THE DEPARTMENTAL VALUA TION OFFICER CAN BE MADE UNDER SECTION 55A OF THE ACT, ONLY FOLLOWS THE DECISION OF THIS COURT IN THE MATTER OF DAULAL MOHTA HUF ( SUPRA ). THE REVENUE HAS NOT BEEN ABLE TO POINT OUT HOW THE AFORESAID DECISION IS INA PPLICABLE TO THE PRESENT FACTS NOR HAS THE REVENUE POINTED OUT THAT THE DECI SION IN DAULAL MOHTA HUF ( SUPRA ) HAS NOT BEEN ACCEPTED BY THE REVENUE. ON THE AFOR ESAID GROUND ALONE, THIS APPEAL NEED NOT BE ENTERTAINED. HOWEVER, AS SUBMISSIONS WERE MADE ON MERITS, WE HAVE INDEPENDEN TLY EXAMINED THE SAME. I.T.A.NO. 5511/MUM/2012 CROSS-OBJECTION NO.235/MUM/2013 7 7. WE FIND THAT SECTION 55A(A) OF THE ACT VERY CLEARL Y AT THE RELEVANT TIME PROVIDED THAT A REFERENCE COULD BE MADE TO THE DEPA RTMENTAL VALUATION OFFICER ONLY WHEN THE VALUE ADOPTED BY THE ASSESSEE WAS LESS THEN THE FAIR MARKET VALUE. IN THE PRESENT CASE, IT IS AN UN DISPUTED POSITION THAT THE VALUE ADOPTED BY THE RESPONDENT-ASSESSEE OF THE PRO PERTY AT RS.35.99 LAKHS WAS MUCH MORE THAN THE FAIR MARKET VALUE OF R S.6.68 LAKHS EVEN AS DETERMINED BY THE DEPARTMENTAL VALUATION OFFICER. I N FACT, THE ASSESSING OFFICER REFERRED THE ISSUE OF VALUATION TO THE DEPA RTMENTAL VALUATION OFFICER ONLY BECAUSE IN HIS VIEW THE VALUATION OF T HE PROPERTY AS ON 1981 AS MADE BY THE RESPONDENT-ASSESSEE WAS HIGHER THEN THE FAIR MARKET VALUE. IN THE AFORESAID CIRCUMSTANCES, THE INVOCATI ON OF SECTION 55A( A ) OF THE ACT IS NOT JUSTIFIED. 8. THE CONTENTION OF THE REVENUE THAT IN VIEW OF THE AMENDMENT TO SECTION 55A( A ) OF THE ACT IN 2012 BY WHICH THE WORDS 'IS LESS TH EN THE FAIR MARKET VALUE' IS SUBSTITUTED BY THE WORDS ' 'IS AT VARIANCE WITH ITS FAIR MARKET VALUE' IS CLARIFACTORY AND SHOULD BE GIVEN R ETROSPECTIVE EFFECT. THIS SUBMISSION IS IN FACE OF THE FACT THAT THE 2012 AME NDMENT WAS MADE EFFECTIVE ONLY FROM 1 JULY 2012. THE PARLIAMENT HAS NOT GIVEN RETROSPECTIVE EFFECT TO THE AMENDMENT. THEREFORE, T HE LAW TO BE APPLIED IN THE PRESENT CASE IS SECTION 55A( A ) OF THE ACT AS EXISTING DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2006-07. AT THE REL EVANT TIME, VERY CLEARLY REFERENCE COULD BE MADE TO DEPARTMENTAL VAL UATION OFFICER ONLY IF THE VALUE DECLARED BY THE ASSESSEE IS IN THE OPINIO N OF ASSESSING OFFICER LESS THAN ITS FAIR MARKET VALUE. 9. THE CONTENTION OF THE REVENUE THAT THE REFERENCE T O THE DEPARTMENTAL VALUATION OFFICER BY THE ASSESSING OFFICER IS SUSTA INABLE IN VIEW OF SECTION 55A( A ) ( II ) OF THE ACT IS NOT ACCEPTABLE. THIS IS FOR THE REA SON THAT SECTION 55A( B )OF THE ACT VERY CLEARLY STATES THAT IT WOULD APPLY IN ANY OTHER CASE I.E. A CASE NOT COVERED BY SECTION 55A( A ) OF THE ACT. IN THIS CASE, IT IS AN UNDISPUTABLE POSITION THAT THE ISSUE IS COVERED BY SECTION 55A( A ) OF THE ACT. THEREFORE, RESORT CANNOT BE HAD TO THE RESIDUA RY CLAUSE PROVIDED IN SECTION 55A( B )( II ) OF THE ACT. IN VIEW OF THE ABOVE, THE CBDT CIRCUL AR DATED 25 NOVEMBER 1972 CAN HAVE NO APPLICATION IN T HE FACE OF THE CLEAR POSITION IN LAW. THIS IS SO AS THE UNDERSTANDING OF THE STATUTORY PROVISIONS BY THE REVENUE AS FOUND IN CIRCULAR ISSUED BY THE C BDT IS NOT BINDING UPON THE ASSESSEE AND IT IS OPEN TO AN ASSESSEE TO CONTEND TO THE CONTRARY. 9. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WEL L AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF THE CASE OF CIT V/S PUJA PRINTS(SUPRA) DECIDED BY THE HONBLE BOMBAY HIGH COURT, WE RESPE CTFULLY FOLLOW THE DECISION OF JURISDICTIONAL HIGH COURT RENDERED IN THE SAID CASE AND UPHOLD THE IMPUGNED ORDER OF LD. CIT(A) DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF LTCG I.T.A.NO. 5511/MUM/2012 CROSS-OBJECTION NO.235/MUM/2013 8 RELYING ON THE REPORT OF DVO BY HOLDING THAT THE R EFERENCE MADE BY AO TO THE DVO U/S 55A OF THE ACT ITSELF WAS BAD IN LAW. TH E APPEAL FILED BY REVENUE IS ACCORDINGLY DISMISSED. CROSS-OBJECTION NO.235/MUM/2013 10. KEEPING IN VIEW OUR DECISION RENDERED ABOVE, WHILE DISMISSING THE APPEAL OF THE REVENUE, UPHOLDING THE IMPUGNED ORD ER OF LD. CIT(A) DELETING THE ADDITION MADE BY AO ON ACCOUNT OF LTCG ON THE BAS IS OF DVOS REPORT, THE ISSUES RAISED IN THE CROSS-OBJECTION FILED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS. THE CROSS-OBJECTION FILED BY THE ASSE SSEE IS ACCORDINGLY DISMISSED. 11. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS CROSS-OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2014 ( / 0 23RD MAY, 2014 ( SD SD ( / SANJAY GARG ) ( . . / P.M.JAGTAP) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: ON THIS 23RD DAY OF MAY , 2014 . . ./ SRL , SR. PS ! '#%& '& / COPY OF THE ORDER FORWARDED TO : 1. $ / THE APPELLANT /APPLICANT 2. %&$ / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 5. 7 %9 , + 9 , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) + 9 , /ITAT, MUMBAI