BHAWANISHANKAR H SHARMA, MUMBAI V. ASST CIT CEN CIR 24 & 26, MUMBAI

ITA 5561/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79320 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 26-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREETAM SINGH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Valuation report
• Section: 50C; 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , ! BEFORE SHRI SANJAY ARORA, AM AND DR. S. T. M. PAVA LAN, JM ' # I.T.A. NO. 5561/MUM/2013 ( / ASSESSMENT YEAR: 2007-08) BHAWANISHANKAR H. SHARMA SHARMA BUNGLOW, BEHIND LACK CASTLE BUILDING, HIRANANDANI COMPLEX, POWAI, MUMBAI-400 076 # VS. ASST. CIT, CENTRAL CIRCLE-24 & 26, MUMBAI $ #'%' ./PAN/GIR NO. ANVPS 9315 F ( $& /APPELLANT ) : ( '($& / RESPONDENT ) $&)* / APPELLANT BY : SHRI RAKESH JOSHI '($&)* / RESPONDENT BY : SHRI PREETAM SINGH + ,)- / DATE OF HEARING : 16.07.2014 DATE OF ORDER : 21.07.2014 '.# O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-39, MUMBAI (CIT(A) FOR SH ORT) DATED 14.06.2013, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) R/W S. 153A OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR TH E ASSESSMENT YEAR (A.Y.) 2007-08 VIDE ORDER DATED 29.12.2011. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, RETURNED LONG TERM CAPITAL GAINS (LTCG) AT RS.605.32 LACS ON THE SALE OF DEVELOPMENT RIGHTS IN LAND DURING T HE YEAR TO ONE, M/S. SUPREME HOUSING & HOSPITABILITY LTD., A COMPANY IN WHICH HE WAS A 2 ITA NO. 5561/MUM/2013 (A.Y. 2007-08) BHAWANISHANKAR H. SHARMA VS. ASST. CIT DIRECTOR, FOR CONSIDERATION OF RS.43.849 CRORES . THE STAMP VALUATION, I.E., THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY (SVA), PER THE DEVELOPMENT AGREEMENT, WAS HOWEVER OBSERVED BY THE ASSESSING OFFICER (A.O.) TO BE, AT RS.133.12 CR. , MUCH HIGHER. THE ASSESSEE OBJECTING THERETO, THE MATTER WAS REFE RRED BY THE ASSESSING OFFICER (A.O.) TO THE DEPARTMENTAL VALUATION OFFICER (DVO) U/S.50C(2) , ALSO FORWARDING ALONG WITH THE COPY OF THE VALUATION REPORT (FROM THE REGISTERED V ALUER) FURNISHED BY THE ASSESSEE IN SUPPORT OF HIS CLAIMS. HOWEVER, AS THE SAID REPORT WAS NOT RECEIVED IN TIME; THE ASSESSMENT GETTING TIME BARRED, THE A.O. COMPLETED THE ASSESSMENT BY DEEMING THE STAMP VALUATION AS THE FULL VALUE OF THE CONSIDERATION RE CEIVED OR ACCRUING AS A RESULT OF TRANSFER, I.E., IN TERMS OF SECTION 50C(1). THE ASSESSEE CARR IED THE MATTER IN APPEAL, RAISING THE FOLLOWING GROUNDS: 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN REP LACING THE SALE CONSIDERATION TO THE STAMP DUTY VALUATION INVOKING PROVISIONS OF SECTION 50C WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT TRANSFERRED THE ENTIRE LAND BUT MERELY GRANTED DEVELOPMENT RIGHT ON PART OF THE LAND. 2. THE LEARNED ASSESSING. OFFICER HAS ERRED IN NO T CONSIDERING THE COST OF ACQUISITION OF THE LAND AS ON 01.04.1981 AND TREATI NG THE COST OF ACQUISITION OF THE DEVELOPMENT RIGHT AS ON 01.04.19 81 AGAINST SALE VALUE OF ENTIRE LAND. THE LD. CIT(A) FOUND THE DVOS VALUATION, SINCE REC EIVED, AT RS.48.695 CR., TO BE LOWER THAN THE STAMP VALUATION. SHE, ACCORDINGLY, DIRECTE D THE ADOPTION OF THE DVOS VALUATION VIDE HER ORDER DATED 11.02.2013. THE A.O., WHILE GI VING APPEAL EFFECT THERETO ON 08.03.2013, ADOPTED THE COST OF LAND AS ON 01.04.19 81 AT RS.608.78 LACS , I.E., AS RETURNED BY THE ASSESSEE, WHILE SUBSTITUTING THE TRANSFER CO NSIDERATION AT RS.48.695 CR., I.E., AS DIRECTED. IT WAS SUBSEQUENTLY OBSERVED BY THE LD. C IT(A) THAT SHE HAD INADVERTENTLY OMITTED TO DISPOSE OF THE ASSESSEES GROUND NO. 2 B EFORE HER. THE ASSESSEE, ON BEING REQUIRED BY HER TO SUBMIT ITS CASE IN ITS RESPECT, STATED THAT HE DID NOT WISH TO PRESS THE SAID GROUND. IN HER OPINION, HOWEVER, AS THE DVOS VALUATION HAD BEEN DIRECTED FOR BEING ADOPTED FOR THE SALE (TRANSFER) CONSIDERATION, IT W OULD, BY LOGICAL CONCLUSION, EXTEND TO THE COST OF THE ACQUISITION AS ON 01.04.1981 AS DETERMI NED BY THE DVO, AS WELL; BOTH THE 3 ITA NO. 5561/MUM/2013 (A.Y. 2007-08) BHAWANISHANKAR H. SHARMA VS. ASST. CIT VALUES BEING ONLY TOWARD DETERMINING THE LTCG ON TH E SAME ASSET (REFER PARA 3 OF THE IMPUGNED ORDER). AGGRIEVED, THE ASSESSEE IS IN APPE AL. 3. THE ASSESSEES CASE BEFORE US WAS THAT THE A.O. HAD NO LEGAL COMPETENCE TO REFER DETERMINATION OF THE FAIR MARKET VALUE (FMV) AS ON 01.04.1981, WHICH AT THE OPTION OF THE ASSESSEE IS TO SUBSTITUTE FOR THE COST OF ACQUI SITION OF THE RELEVANT ASSET WHERE ACQUIRED PRIOR TO THAT DATE, TO THE DVO U/S.55A IN-AS-MUCH A S THE SAME COULD ONLY BE WHERE THE ESTIMATE OF THE REGISTERED VALUER, IN THE OPINION O F THE A.O., IS LOWER THAN THE FMV AS ON THE RELEVANT DATE. THE AMENDMENT, RELAXING THE SAID CONDITION, SO THAT REFERENCE COULD BE MADE FOR ANY VARIANCE, I.E., LOWER OR HIGHER, STAND S MADE BY FINANCE ACT, 2012, W.E.F. 01.07.2012. THIS PROPOSITION HAD FOUND AFFIRMATION BY THE HONBLE JURISDICTIONAL HIGH COURT PER ITS DECISION IN THE CASE OF CIT VS. POOJA PRINTS [2014] 360 ITR 697 (BOM). REFERENCE U/S.55A BEING BAD IN LAW, WOULD CONSTRAIN THE A.O. IN ADOPTING THE DVOS VALUATION FOR THE FMV OF THE CAPITAL ASSET AS ON 01 .04.1981. THE DECISION BY THE LD. CIT(A) IS, THUS, I.E., IN TERMS OF THE SAID BINDING DECISION, BAD IN LAW. THE REVENUE, ON THE OTHER HAND, WOULD SUPPORT THE ORDER BY THE LD. CIT(A). 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 THE FIRST THING THAT STRIKES US IN THE MATTER I S IF THERE HAS BEEN ANY REFERENCE BY THE A.O. TO THE DVO U/S.55A OF THE ACT IN-AS-MUCH AS TH ERE IS NO MENTION THEREOF IN THE ASSESSMENT ORDER, WHICH BEARS REFERENCE ONLY TO THA T U/S.50C(2). THE POSITION, HOWEVER, STANDS CLARIFIED WITH REFERENCE TO PARA 6 OF THE AP PELLATE ORDER DATED 11.02.013, WHICH BEARS REFERENCE TO THE DVOS REPORT DATED 27.12.201 2 U/S.55A R/W S. 16A(5) OF THE WEALTH TAX ACT, 1957. SURELY, THEREFORE, THERE IS N O QUESTION OF THERE BEING NO REFERENCE BY THE AO U/S.55A TO THE DVO, WHO, AS IT APPEARS, M ADE A COMBINED REPORT QUA REFERENCE U/SS.50C(2) AND 55A TO HIM. THE NEXT QUESTION IS THE DATE ON WHICH REFERENCE U/ S.55A WAS MADE BY THE A.O. THERE IS NO MENTION THEREOF IN ANY ORDER PASSED BY THE REVENUE AUTHORITIES. HOWEVER, IN- AS-MUCH AS THE ASSESSMENT ORDER STANDS PASSED ON 29 .12.2011 , THE SAME WOULD ONLY BE DURING THE YEAR 2011. THIS BECOMES RELEVANT AS A RE FERENCE, WHERE THE VALUE ADOPTED BY 4 ITA NO. 5561/MUM/2013 (A.Y. 2007-08) BHAWANISHANKAR H. SHARMA VS. ASST. CIT THE ASSESSEE IS CONSIDERED BY THE A.O. AS HIGHER TH AN THE FMV (AS ON THE RELEVANT DATE), COULD BE VALIDLY MADE, AS CLARIFIED BY THE HONBLE JURISDICTIONAL HIGH COURT IN POOJA PRINTS (SUPRA), ONLY AFTER 30.06.2012. THE DVOS REPORT DATED 27.12.2012, IN-AS-MUCH AS IT RELATES TO THE DETERMINATION OF FMV OF LAND AS O N 01.04.1981, THUS, COULD NOT BE TAKEN COGNIZANCE OF; THE REFERENCE IN ITS RESPECT TO THE DVO BEING BAD IN LAW. 4.2 THE APEX COURT, PER ITS CONSTITUTION BENCH DECI SION IN POORAN MAL VS. DIRECTOR OF INSPECTION (INVESTIGATION) [1974] 93 ITR 505 (SC), AFTER AN EXTENSIVE REVIEW O F JUDICIAL PRECEDENTS, CLARIFIED THAT ADMISSIBILITY OF EVIDENC E UNDER THE INDIAN JURISPRUDENCE LIES IN ITS RELEVANCY, SO THAT IT WOULD BE, WHERE SO, ADMIS SIBLE, UNLESS OF-COURSE THERE IS AN EXPRESS OR IMPLIED PROHIBITION IN THE CONSTITUTION OR THE LAW. EVIDENCE OBTAINED AS A RESULT OF AN ILLEGAL SEARCH OR SEIZURE WAS ACCORDINGLY HEL D AS NOT LIABLE TO BE SHUT OUT. AS SUCH, IN ITS VIEW, EVEN ASSUMING THE SEARCH OR SEIZURE WA S IN CONTRAVENTION OF THE PROVISIONS OF S. 132 OF THE ACT, STILL THE MATERIAL OBTAINED THER EBY WAS LIABLE TO BE USED BY THE INCOME AUTHORITIES FOR THE PURPOSE OF ASSESSMENT, AND DECL INED TO GRANT WRIT OF PROHIBITION IN RESTRAINT OF SUCH USE. IN OUR VIEW, THEREFORE, THE DVOS REPORT IS A VALID PIECE OF EVIDENCE; RATHER, AN EXPERTS OPINION, WHICH COULD BE RELIED UPON, OF-COURSE AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY TO MEET THE SA ME, FOR THE PURPOSE OF ASSESSMENT THE WHOLE PREMISE BEING TO ASCERTAIN THE FMV AS ON 01.04.1981, A MATTER OF FACT, LIABLE TO BE DETERMINED BY THE A.O. IN ASSESSMENT, SO THAT TH ERE IS NOTHING SACROSANCT ABOUT THE VALUE AS ADOPTED BY THE ASSESSEE. IN FACT, THE A.O. HAS ALL THE POWER TO QUESTION THE SAME, AND DISTURB IT IN ONE OR MORE RESPECTS, ALBEIT FOR GOOD AND SOUND REASONS, REDUCED IN WRITING. THE A.O., HOWEVER, BEING NOT A TECHNICAL P ERSON, THE LAW PROVIDES FOR HIS ASSISTANCE IN THE MATTER BY THE VALUATION OFFICER ( VO), MAKING IT ALSO INCUMBENT ON THE APPELLATE AUTHORITIES TO, IN APPELLATE PROCEEDINGS, EXTEND OPPORTUNITY TO THE VO. THE APEX COURT IN THE CASE OF SARASWATI INDUSTRIAL SYNDICATE VS. CIT [1999] 237 ITR 1 (SC) HAS HELD THAT THE ADJUDICATING AUTHORITY CANNOT COMMENT ON TECHNICAL MATTERS DE HORS THE MATERIAL ON RECORD. THE LAW ITSELF, PER SECTIONS 23 A AND 24 OF THE WTA, REQUIRES THAT THE OBJECTIONS BY THE ASSESSEE TO THE VALUATION BY THE VALUATION OFFICER ARE TO BE ADJUDICATED 5 ITA NO. 5561/MUM/2013 (A.Y. 2007-08) BHAWANISHANKAR H. SHARMA VS. ASST. CIT UPON AFTER HEARING THE VALUATION OFFICER, A TECHNIC AL EXPERT. THE SAME SENTIMENT STANDS EXPRESSED BY THE APEX COURT IN THE CASE OF CIT V. BHARTI CELLULAR LTD . [2011] 330 ITR 239 (SC). SO, HOWEVER, THE ISSUE BEFORE US IS SQUARELY COVERE D BY THE DECISION BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF POOJA PRINTS (SUPRA). THE FOREGOING ASPECTS STAND HIGHLIGHTED BY US ONLY WITH A VIEW OF THEIR CONSIDE RATION, IN A PARTICULAR CASE, BY THE HONBLE HIGH COURT, WHOSE DECISION IS BINDING ON US . WE, THEREFORE, RESPECTFULLY FOLLOWING THE SAID DECISION, HOLD THAT NO ADJUSTMENT TO THE V ALUE AS ON 01.04.1981, AS RETURNED BY THE ASSESSEE, COULD BE MADE WITH REFERENCE TO THE D VOS REPORT DATED 27.12.2012. 4.3 THERE IS ANOTHER ASPECT/S OF THE MATTER. THE LD . CIT(A) HAS DECIDED THIS ISSUE PURPORTEDLY IN DECIDING THE ASSESSEES GROUND NO. 2 (SUPRA) BEFORE HER. THE SAME ONLY REFERS TO WHETHER THE COST OF ACQUISITION TO BE SET OFF IS TO BE OF THE COST OF LAND OR OF DEVELOPMENT RIGHTS THEREIN, WHICH, IN FACT, AS PROJ ECTED BY THE ASSESSEE PER ITS GROUND NO. 3 BEFORE US, WAS NOT PRESSED BEFORE THE LD. CIT(A). THE FIRST APPELLATE AUTHORITY ENJOYS CO-TERMINUS POWERS (WITH THE ASSESSING AUTHORITY), SO THAT HE CAN, NOTWITHSTANDING THE ASSESSMENT ORDER AND THE ASSESSEES GROUNDS BEFORE HIM, SUBJECT AN ASPECT OF ASSESSMENT TO SCRUTINY, AND ADJUDICATE THEREON. IN THE PRESENT CASE, THE ASSESSEES CLAIM WITH REGARD TO THE CAPITAL ASSET TRANSFERRED BEING DEVELOPMENT RIGHTS (IN LAND), AND NOT LAND ITSELF, WAS, AS IT APPEARS, PRINCIPALLY TO PRECLUDE INVOCAT ION OF SECTION 50C, APPLICABLE ONLY IN CASE OF A LAND AND/OR BUILDINGS, APPLICATION OF WHICH PROVISION HAS BEEN ACCEPTED BY THE ASSESSEE , AND WHICH PERHAPS LED TO HIS NOT PRESSING HIS GRO UND NO. 2 BEFORE THE LD. CIT(A). HOWEVER, ONE THING IS CLEAR: THE FMV AS ON 01.04.1981 AS WELL AS ON THE TRANSFER DATE (26.05.2006) HAVE TO BE RECKONED WITH REFERENC E TO THE SAME CAPITAL ASSET. AND IT CANNOT BE THAT THE COST OF LAND IS SET OFF AGAINST THE SALE OF DEVELOPMENT RIGHTS AND VICE-A- VERSA. TO THIS EXTENT, THE ARGUMENT OF THE LD. CIT( A) IS UNEXCEPTIONAL, AND COULD BE ADVANCED BY HER IRRESPECTIVE OF THE FACT THAT THE A SSESSMENT ORDER DID NOT CONSIDER IT OR THE ASSESSEE DID NOT PROSECUTE THE SAME BEFORE HER. IT IS PERHAPS THIS THAT LED HER TO STATE OF THE FMV AS ON 01.04.1981 BEING REQUIRED TO BE AD OPTED AS A LOGICAL CONCLUSION. BOTH 6 ITA NO. 5561/MUM/2013 (A.Y. 2007-08) BHAWANISHANKAR H. SHARMA VS. ASST. CIT THE VALUATION REPORT BY THE REGISTERED VALUER AS WE LL AS THE DEVELOPMENT AGREEMENT IS NOT BEFORE US. AGAIN, PER HIS GROUNDS BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE CONTENDS OF HAVING SOLD ONLY A PART OF THE LAND. CL EARLY, IF THAT BE SO, ONLY THE PROPORTIONATE COST (OR FMV AS ON 01/4/1981) WOULD S TAND TO BE ALLOWED SET OFF OF, IN COMPUTING THE LTCG. THE IMPUGNED ORDER IS SILENT ON THIS ASPECT OF THE MATTER. WE MAY ALSO CLARIFY, IF ONE IS NEEDED, THAT THE IMPUGNED O RDER, THOUGH TITLED AS ORDER OF RECTIFICATION, IS ESSENTIALLY AS MUCH AN ORDER U/S . 250(6) AS THE EARLIER ORDER DATED 11.02.2013 BY THE LD. CIT(A). THE ONLY MISTAKE TH EREIN IS THAT IT DID NOT CONSIDER AND DISPOSE OF THE ASSESSEES GROUND # 2 RAISED BEFORE HER. THE SCOPE THEREOF, THEREFORE, IS NOT LIMITED TO CORRECTING MISTAKES, EITHER OF FACT OR O F LAW OR BOTH, IN THE SAID ORDER. 4.4 IN VIEW OF THE FOREGOING, WE UNDER THE CIRCUMST ANCES, CONSIDER IT FIT AND PROPER, EVEN AS OBSERVED DURING HEARING, THAT TO THIS LIMIT ED EXTENT THE MATTER WOULD HAVE TO TRAVEL BACK TO THE FILE OF THE FIRST APPELLATE AUTH ORITY. THE SALE VALUE HAVING CRYSTALLIZED (AT RS. 48.695 CR.), IT IS THE VALUE OF THE SAME AS SET, BOTH QUANTITATIVELY AND QUALITATIVELY, VALUE OF WHICH HAS BEEN ACCEPTED, THAT, AS ON 01.04 .1981, SHALL STAND TO BE SET OFF THERE- AGAINST IN COMPUTING THE LTCG ARISING TO THE ASSESS EE ON ITS TRANSFER. THE ASSESSEE NOT AGITATING ITS GD. # 1 BEFORE US, WE, EXCEPT TO THE LIMITED EXTENT AFORE-SAID, ACCEPT THE ASSESSEES CASE. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED ON THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 16, 2014 AT THE CONCLUSION OF THE HEARING. SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + /, MUMBAI; 0 DATED : 21.07.2014 # ROSHANI , SR. PS 7 ITA NO. 5561/MUM/2013 (A.Y. 2007-08) BHAWANISHANKAR H. SHARMA VS. ASST. CIT ! ' #$%& ' &$ # COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT 3. '' + 1- 2 3 / THE CIT(A) 4. '' + 1- / CIT CONCERNED 5. 45 6'-78 ' 789 + /, / DR, ITAT, MUMBAI 6. 6 :; , # GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , + /, / ITAT, MUMBAI