MADHO SINGH, Jaipur V. ITO, Jaipur

ITA 558/JPR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1993 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Cost of acquisition; Fair market value; Reassessment proceedings
• Section: 234B; 147; 148; 144

Judgement Text

ITA NO.558/JP/2016 SHRI MADHO SINGH VS ITO, WARD- 7(2), JAIPUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 558/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 SHRI MADHO SINGH 183, GIRNAR COLONY, SHIV MARG, GANDHI PATH, VAISHALI NAGAR, JAIPUR CUKE VS. THE ITO WARD- 7(2) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: FYTPS 6913 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI S.L.JAIN, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY :SHRI R.A. VERMA, ADDL. CIT LQUOKBZ DH RKJH[K@ DATE OF HEARING : 5/10/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 5 /10/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 31-03-2016 FOR THE ASSESSMENT YEARS 2 009-10 RAISING THEREIN FOLLOWING GROUNDS:- 1. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ER RED IN LAW AND FACTS IN ISSUING NOTICE U/S 148 ON THE BASIS OF INFORMATION PROVIDED BY ITO WARD- 7(2) AND WITHOUT VERIFYING THE CORRECTNES S OF THE INFORMATION AND THEREFORE REASSESSMENT PROCEEDINGS IS ABSOLUTEL Y BAD IN LAW AND WITHOUT JURISDICTION AND FURTHER AO NOT RECORDED HI S SATISFACTION. 2. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ERRE D IN LAW AND FACTS IN MAKING REASSESSMENT U/S 147 WITHOUT PR OPERLY AND VALID ITA NO.558/JP/2016 SHRI MADHO SINGH VS ITO, WARD- 7(2), JAIPUR 2 SERVICE OF NOTICE ISSUED U/S 148 ON THE APPELLANT W HICH IS PERQUISITE CONDITION OF LAW. 3. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ERRE D IN LAW AND FACTS IN ISSUING NOTICE U/S 148 WITHOUT RECORDI NG REASONS. AO MUST RECORD THE REASONS BEFORE ISSUING THE NOTICE U/S 14 8. 4. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ERRE D IN LAW AND FACTS IN FRAMING THE REASSESSMENT ORDER WITHOUT SERVING REASONS IF RECORDED U/S 148(2) TO THE APPELLANT AND THEREFORE, ASSESSMENT IS MADE WITHOUT JURISDICTION AND DESERVES TO BE QUASHED (A) GKN DRIVERSHAFTS (INDIA) VS ITO 259 ITR 19(SC) (B) CIT VS VIDESH SANCHAR NIGAM LTD, 340 ITR 66 CIT VS TREND ELECTRONIC (BOM.) (HC) 5. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ERRE D IN LAW AND FACTS IN PASSING EX-PARTE ASSESSMENT ORDER U/S 144 OF THE I.T. ACT, 1961 WITHOUT ENSURING THE SERVICE OF SHOW CAUSE NOT ICE AND ANY OTHER NOTICES AS MENTIONED IN HIS ASSESSMENT ORDER TO THE ASSESSEE 6. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ERRE D IN LAW AND FACTS IN NOT TAKING THE SANCTION U/S 151 OF THE I.T. ACT BEFORE ISSUE OF NOTICE U/S 148 FROM THE JCIT. 7. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ERRE D IN LAW AND FACTS IN TAKING THE COST OF PLOT AS ZERO RECEIV ED AS COMPENSATION BY THE APPELLANT IN LIE OF ACQUISITION OF AGRICULTURE LAND INSTEAD OF DLC RATE OF THE PLOT AT THE TIME OF THE AWARD OF ALLOTMENT O F THE SAID PLOT TO THE ASSESSEE IN COMPUTING THE CAPITAL GAIN. 8. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ERRE D IN LAW AND FACTS IN TAKING ABOVE SALE CONSIDERATION UNDER SHORT TERM CAPITAL GAIN AND TAKING THE SALES CONSIDERATION AT RS. 22,50,000 /- WITHOUT CONSIDERING THE PROVISION OF LAW AND FACTS OF THE CASE AND ESTI MATING THE SHORT TERM CAPITAL GAIN AT RS. 22,50,000/- AND CONSIDERING THE COST OF THE PLOT AT ZERO WITHOUT ANY BASIS OR GROUND. 9. THAT THE LD. AUTHORITIES BELOW HAVE GROSSLY ERRE D IN LAW AND FACTS IN LEVYING INTEREST U/S 234A, 234B AND 23 4C OF THE ACT. ITA NO.558/JP/2016 SHRI MADHO SINGH VS ITO, WARD- 7(2), JAIPUR 3 2.1 APROPOS GROUND NO. 1 TO 6 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) ARE AS UNDER:- 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDING OF THE AO AND SUBMISSIONS OF THE APPELLANT. GROUND NO. 1,2,3 & 4 ARE RELATING TO ISSUE OF NOTICE U/S 1 48, NON-SERVICE OF NOTICE AND PASSING THE ASSESSMENT ORDER EX-PARTE U/S 144. THE FACTS OF THE CASE ARE THAT THE AO WAS IN POSSES SION OF AN INFORMATION THAT THE APPELLANT HAS SOLD A PLOT IN S EZ AJMER ROAD, JAIPUR IN THE YEAR 2008-09 AND HAS NOT FILED ANY INCOME TAX RETURN AND THEREFORE, HAS ESCAPED THE TAX ON TH E SALE OF SUCH PLOT. THE AO ISSUED THE NOTICE AND COMMENCED PROCEE DINGS U/S 148. DURING THE COURSE OF APPEAL HEARING, THE A/R OF THE APPELLANT HAS MADE WRITTEN SUBMISSIONS THAT THE AO HAS ISSUED THE NOTICE U/S 148 WITHOUT ANY BASIS OR GROUND AND HAS COMMENCED THE REASSESSMENT PROCEEDINGS WITHOUT ENSU RING THE SERVICE OF NOTICE U/S 148 ON THE APPELLANT. THE AO HAS PASSED THE ORDER U/S 144 WITHOUT MAKING THE SERVICE OF NOT ICE. THE MATTER WAS REMANDED TO THE FILE OF THE AO WHO H AS SENT HIS REMAND REPORT DATED 25-02-2016 AND 31-03-2 016. IN HIS REMAND REPORT THE AO HAS CONFIRMED THE REASO NS FOR ISSUE OF NOTICE U/S 148 AND THE SERVICE OF NOTI CE WHICH HAS BEEN DULY MADE ON THE ASSESSEE ON 28-03-2014. AS PE R THE AO THE NOTICE U/S 148 WAS RIGHTLY ISSUED AND DULY SERV ED ON THE ASSESSEE AND THEREFORE, THE REASSESSMENT PROCEEDIN GS WERE INITIATED. I HAVE CONSIDERED THE FACTS OF THE ABOVE GROUNDS OF APPEAL RAISED BY THE APPELLANT AND HAVE ALSO CONSID ERED THE REMAND REPORT OF THE AO. THE AO FOUND THAT A SALE O F PLOT OF RS.20LACS HAS BEEN MADE BY THE APPELLANT FOR WHICH NO INCOME TAX RETURN HAS BEEN FILED NOR ANY TAX HAS BEEN PAI D THEREON. THE AO HAS THEN SENT THE NOTICE ON 20-03-2014 AND HAS A LSO SERVICED ON28-03-2014 THROUGH NOTICE SERVER ON THE ADDRESS ITA NO.558/JP/2016 SHRI MADHO SINGH VS ITO, WARD- 7(2), JAIPUR 4 WHICH WAS ON RECORD OF THE AO. THE REASSESSMENT PRO CEEDINGS INITIATED BY THE AO ARE THEREFORE, VALID AND I REJE CT THE GROUNDS OF APPEAL RAISED BY THE APPELLANT. 2.2 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE, IT IS NOTED THAT THE AO HAS C ONFIRMED THE REASONS FOR ISSUE OF NOTICE U/S 148 OF THE ACT AND SERVICE OF THE NOTICE HAS BEEN MADE TO THE ASSESSEE ON 28-03-2014. DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE COULD NOT CONTROVERT THE FINDINGS OF THE LD. CIT(A) ON THE IS SUE IN QUESTION. THE RELEVANT OBSERVATION OF THE LD. CIT(A) IS AS UNDER:- THE AO FOUND THAT A SALE OF PLOT OF RS.20 LACS HA S BEEN MADE BY THE APPELLANT FOR WHICH NO INCOME TAX RETU RN HAS BEEN FILED NOR ANY TAX HAS BEEN PAID THEREON. THE A O HAS THEN SENT THE NOTICE ON 20-03-2014 AND HAS ALSO SERVICED ON 28-03- 2014 THROUGH NOTICE SERVER ON THE ADDRESS WHICH WAS ON RECORD OF THE AO. THE REASSESSMENT PROCEEDINGS INITIATED B Y THE AO ARE THEREFORE, VALID AND I REJECT THE GROUNDS OF AP PEAL RAISED BY THE APPELLANT. TAKING INTO CONSIDERATION THE FACTS, CIRCUMSTANCES OF THE CASE AND THE REMAND REPORT OF THE AO, I CONCUR WITH THE FINDINGS OF THE LD. CIT(A) WHO HAS RIGHTLY OBSERVED THAT THE REASSESSMENT PROCEEDINGS INITIATE D BY THE AO ARE VALID. IN THIS VIEW OF THE MATTER, THE GROUND NO. 1 TO 6 OF THE AS SESSEE ARE DISMISSED. 3.1 THE GROUND NO. 7 AND 8 OF THE ASSESSEE ARE REGA RDING TAKING THE COST OF PLOT AT ZERO AS IT WAS RECEIVED IN COMPENSATION BY THE A SSESSEE IN LIEU OF AGRICULTURAL LAND. IN THIS GROUND OF APPEAL, THE LD. CIT(A) HAS DIRECTED THE AO TO ALLOW THE COST ITA NO.558/JP/2016 SHRI MADHO SINGH VS ITO, WARD- 7(2), JAIPUR 5 OF ORIGINAL ASSET AFTER DUE VERIFICATION AND COMPUT E THE LONG TERM CAPITAL GAIN ACCORDINGLY, BY OBSERVING AS UNDER:- 5.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO AND SUBMISSION OF THE APPELLANT. THE FACTS OF TH IS GROUND ARE THAT THE APPELLANT RECEIVED A PLOT OF LAND IN SPECIAL ECONOM IC ZONE (SEZ) FROM STATE GOVERNMENT AS COMPENSATION AGAINST THE COMPULSORY A CQUISITION OF AGRICULTURE LAND FOR THE DEVELOPMENT OF SPECIAL ECONOMIC ZONE I N THIS STATE. THE ABOVE PLOT WAS SOLD OUT BY THE APPELLANT IN THE YEAR 2008-09 F OR WHICH NO INCOME TAX RETURN WERE FILED BY THE APPELLANT NOR ANY TAX WAS PAID. T HE AO HAS THEREFORE INITIATED REASSESSMENT PROCEEDINGS AND ESTIMATED THE INCOME O N SALE OF SUCH PLOT BY TAKING THE COST OF PLOT AS ZERO AS THE APPELLANT HAS NOT I NCURRED ANY COST FOR THE ABOVE PLOT. DURING THE COURSE OF APPEAL THE A/R OF THE APPELLAN T HAS SUBMITTED IN HIS WRITTEN SUBMISSIONS THAT THE ABOVE PLOT AT BHAMORIY A SEZ WAS ALLOTTED TO THE ASSESSEE/APPELLANT OUT OF THE COMPENSATION AGAINST THE COMPULSORY ACQUISITION OF THE AGRICULTURE LAND BY THE STATE GOVERNMENT FOR TH E DEVELOPMENT OF SPECIAL ECONOMIC ZONE IN JAIPUR. THE COMPENSATION RECEIVED AGAINST THE COMPULSORY AC QUISITION OF AGRICULTURE LAND IS EXEMPT U/S 10(37) OF THE IT ACT WHICH MAY BE IN CASH, KIND, LAND ETC. WHEN COMPENSATION RECEIVED IS GIVEN BY WA Y OF THE ALLOTMENT OF LAND, THE MARKET PRICE WHICH MAY BE THE DLC RATE OF SUCH LAND WILL BE DEEMED TO BE THE COST OF SUCH LAND AND IN ASCERTAINING THE CAPIT AL GAIN THE DLC RATE AT THE TIME OF THE ALLOTMENT OF SUCH LAND SHALL BE TAKEN AS COS T OF SUCH PLOT OR LAND. IN THE PRESENT CASE THE COMPENSATION HAS BEEN PAID BY MAKING ALLOTMENT OF A PLOT IN SEZ IN SEPTEMBER, 2007 TO THE ASSESSEE AN D THE DLC RATE OF MARKET RATE OF THE ABOVE PLOT IS RS. 22,50,000 AT THE TIME OF A LLOTMENT OF THE ABOVE PLOT TO THE ASSESSEE. THE ABOVE PLOT WAS SOLD OUT BY THE ASSESSEE IN THE NEXT YEAR FOR RS. 20,00,000 BUT THE DLC RATE OF THE ABOVE LAND WAS RS . 22,50,000 AT THE TIME OF SALE. HENCE THERE WAS NO CAPITAL GAIN ACCRUED OR EA RNED BY THE ASSESSEE/APPELLANT, IN THE ASSESSMENT YEAR 2009-10. IN AGHOSH V/S CIT (1983) 141 ITR 45 CALCUTTA THE HO NBLE HIGH COURT HAS HELD IN THE ABOVE CASE THAT THE MARKET VALUE OF THE DEBENTURES CONVERTED AT THE TIME OF CONVERSION OF DEBENTURES INTO SHARES SHALL BE TAKEN THE COST OF THE SHARES. IN VIEW OF THE ABOVE FACTS AND DISCUSSION IT APPEAR S THAT THE COMPENSATION WHICH MAY BE IN CASH OR IN KIND OR IN THE FORM OF L AND PLOT ETC., RECEIVED AGAINST THE COMPULSORY ACQUISITION OF AGRICULTURE LAND IS E XEMPT U/S 10(37) OF THE IT ACT ITA NO.558/JP/2016 SHRI MADHO SINGH VS ITO, WARD- 7(2), JAIPUR 6 WHEN THE COMPENSATION IS GIVEN BY CENTRAL GOVERNMEN T OR RBI AND NOT BY STATE GOVERNMENT. IN CASE THE COMPENSATION IS RECEIVED IN THE FORM OF PLOT OF LAND, THE COST INCURRED FOR ACQUIRING THE ORIGINAL ASSET I.E. THE LAND UNDER ACQUISITION IS SHIFTED AS COST TO THE NEW PLOT ALLOTTED AGAINST SU CH ACQUISITION. IN THIS CASE THE AO HAS NOT ALLOWED ANY COST AGAINST THE PLOT SOLD D URING THE YEAR WHICH IS PATENTLY WRONG. HE SHOULD HAVE ALLOWED THE COST OF ORIGINAL ASSET AS COST OF ACQUISITION AGAINST THE SALE PRICE TO COMPUTE/ARRIV E AT THE AMOUNT OF CAPITAL GAINS FOR THE YEAR UNDER APPEAL. THE FACTS OF THE CASE LA W RELIED UPON ARE DISTINGUISHABLE AND THUS COULD NOT BE APPLIED IN THE PRESENT CASE. ACCORDINGLY THE AO IS DIRECTED TO ALLOW THE COST OF ORIGINAL ASSET AFTER DUE VERIFICATION AND COMPUTE THE LONG TERM CAPITAL GAIN ACCORDINGLY. 3.2 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED THAT THE AGRICULTURAL LAND OF T HE ASSESSEE WAS ACQUIRED COMPULSORILY AND COMPENSATION THEREFROM IS EXEMPT A S PER SECTION 10(37) OF THE ACT. THE ASSESSEE HAS BEEN ALLOTTED THE PLOT OF LAN D BY JDA ON 2-05-2008 IN LIEU OF COMPENSATION FOR COMPULSORY ACQUISITION OF AGRICULT URE LAND. THEREFORE, NO CAPITAL GAIN WAS PAYABLE AT THE TIME OF ACQUISITION OF PLOT AS PER PROVISIONS SECTION 10(37) OF THE ACT. THIS PLOT WAS TRANSFERRED WITHIN ONE Y EAR. THEREFORE, ONLY SHORT TERM CAPITAL GAIN COULD BE TAXED IN THE HANDS OF THE ASS ESSEE. IT IS NOTED THAT THE LD. CIT(A) HAS GIVEN DIRECTION TO THE AO TO ALLOW THE C OST OF ORIGINAL ASSET AFTER DUE VERIFICATION AND COMPUTE THE LONG TERM CAPITAL GAIN ACCORDINGLY WHICH IS NOT AS PER LAW. THE CORRECT WORKING OF SHORT TERM CAPITAL GAIN SHALL BE THE DIFFERENCE BETWEEN FAIR MARKET VALUE AS ON 2-05-2008 AND THE SALE VALU E.THE AO IS DIRECTED TO ASCERTAIN THE FAIR MARKET VALUE ON THE BASIS OF DL C RATE OF THE AREA WHERE THE PLOT WAS LOCATED WHICH WAS RECEIVED AS COMPENSATION FROM THE GOVERNMENT ON ACCOUNT ITA NO.558/JP/2016 SHRI MADHO SINGH VS ITO, WARD- 7(2), JAIPUR 7 OF COMPULSORILY ACQUISITION OF AGRICULTURAL LAND. T HE DIFFERENCE BETWEEN THE DLC RATE ON THE DATE OF ACQUISITION AND THE VALUE OF T HE SALE CONSIDERATION SHALL ATTRACT THE SHORT TERM CAPITAL GAIN. THUS THE GROUND NO. 7 AND 8 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 4.0 THE GROUND NO. 9 OF THE ASSESSEE IS REGARDING L EVYING INTEREST U/S 234A, 234B & 234C OF THE ACT WHICH ARE MANDATORY AND CONS EQUENTIAL IN NATURE. 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5/10/20 17. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 5 /10/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI MADHO SINGH,JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 7(2), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 558/JP/2016 ) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR