ITO 21(1)(4), MUMBAI V. REVUBAI P DORGE, MUMBAI

ITA 5601/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59663 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 03-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 09-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: VISHWAS V MEHENDALE
• Keywords: Capital asset; Opportunity of being heard; Cost of acquisition; Fair market value
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND PRAMOD KUMAR (A M ) ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) INCOME TAX OFFICER, WARD-21(1)(4), ROOM NO.606, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA- KURLA- COMPLEX, BANDRA (E), MUMBAI 400051 MS.REVUBAI P DORGE, 6, ANKUR HANUMAN ROAD, CROSS ROAD NO.2, VILE PARLE (E), MUMBAI-400057, PAN: ALFPD1765M APPELLANT V/S RESPONDENT DATE OF HEARING : 3.1.2012 DATE OF PRONOUNCEMENT : 11.1.2012 APPELLANT BY : SHRI C.G.K.NAIR RESPONDENT BY : SHRI VISHWAS V.MEHE NDALE O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 8.4.2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIVIDUAL DERIVES INCOME FROM CAPITAL GAIN AND OTHER SOURCES, FILED RETURN DECLARING TOTA L INCOME AT RS.2,40,320/- INCLUDING LONG TERM CAPITAL GAINS OF RS.2,40,108/-. HOWEVER, THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.83,71,170/- ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 2 INCLUDING THE ADDITION ON CAPITAL GAIN OF RS.83,70,958/- AND DISALLOWANCE OF DEDUCTION OF RS.1,00,000/- BEING 1/4 TH OF RS.4,00,000/- ON ACCOUNT OF EXPENDITURE ON TRANSFER OF CAPITAL ASSET, VIDE O RDER DATED 31.12.2009 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ON APPEAL, THE LD . CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE ON BOTH THE ISSUES. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 4. GROUND NO.1 READS AS UNDER : 1.(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CTT(A) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 55A(B)(II) OF THE IT ACT INVOKED BY THE ASSESSEE IS INVALID AS PER LAW. IN DOING SO, THE LD.CIT(A) HAS ERRED IN HIS OPINION THAT: THE REFERENCE TO THE VALUATION OFFICER CAN BE MADE ONLY AT THE TIME OF SALE OF THE ASSET AND REFERENCE TO DVO IN RESPECT OF DETERMINING COST OF ACQUISITION CAN BE DONE ONLY IN THE ABSENCE OF REPORT OF REGISTERED VALUER. 5. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE HAS SOLD A PROPERTY JOINTLY OWNED WITH OTHER FOUR C O- ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 3 OWNERS FOR A TOTAL CONSIDERATION OF RS.98,00,000/-. THE ASSESSEE ADOPTED THE FAIR MARKET VALUE AS ON 1.4.1981 FOR RS.16,26,121/-. THE AO REFERRED THE DETERMINATION OF FAIR MARKET VALUE OF THE PROPERTY TO DISTRICT VALUATION OFFICER U/S 55A((B)(I). SUCH VAL UE WAS TO BE DETERMINED ON THE DATE OF SALE ON 17.3.20 07 AND ALSO ON 1.4.1981. THE DISTRICT VALUATION OFFICE R VIDE HIS REPORT DATED 29.12.2009 HAS ARRIVED AT THE FOLLOWING VALUATIONS: (I) VALUE AS ON 17.3.2007 FOR RS.3,64,48,403/- (II) VALUE AS ON 1.4.1981 FOR RS.5,71,208/- AFTER GIVING THE OPPORTUNITY TO THE ASSESSEE IN THI S REGARD WHEREIN THE ASSESSEE HAS OBJECTED TO THE VALUATIONS ADOPTED BY THE DVO AND HAS NOTED VARIOU S REASONS FOR THE SAME, THE AO COMPUTED THE ASSESSEE S SHARE OF CAPITAL GAINS AMOUNTING TO RS.83,70,958/ - BY TAKING THE SALE CONSIDERATION AT RS.3,64,48,403/ - AND COST OF ACQUISITION BEING FAIR MARKET VALUE AS ON 1.4.1981 AT RS.5,71,208/-. ON APPEAL, THE LD. CIT(A ) AFTER RELYING ON VARIOUS DECISIONS NAMELY (A) HIABE N JAYANTILAL SHAH V/S ITO (310 ITR 31)(GUI.), (B) MS . RUBAB M. KAZERANI V/S JCIT (97 TTJ (MUMBAI) (TM)698), (C) ITO V/S SMT. LALITABEN B. KAPADIA (11 5 ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 4 TTJ (MUM) 938), (D) SMT. KRISHNABAI TINGRE V/S IT O (101 ITD 317)(MUM), (E) SAJJANKUMAR HARLALKA V/S JCIT (284 ITR 156)(AT) AND (F) URMILA BAWA V/S ACI T (11 SOT 661)(DEL) HELD THAT THE REFERENCE MADE U/S 55A IS INVALID AND ACCORDINGLY DIRECTED THE AO TO ADOPT THE SALE CONSIDERATION VALUE AS SHOWN BY THE APPELLANT AND TAKE THE FAIR MARKET VALUE AS ON 1.4.1981 AT RS.16,26,121/- FOR THE VALUE GIVEN BY THE DVO. 6. AT THE TIME OF HEARING, THE LD. DR WHILE RELYING ON THE ORDER OF THE AO SUBMITS THAT IN VIEW OF THE DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRIBUN AL IN THE CASE OF VIJAYKUMAR N.SHAH V/S DEPUTY ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 16(2), MUMBAI (2009) 29 SOT 338 (MUM.) AND ICBI (INDIA) (P.) LTD. V/S JCI SPL.RANGE-1,BANGALORE (2008) 166 TAXMAN 123 (BANG.)(MAG.), THE AO WAS JUSTIFIED IN MAKING REFERENCE TO THE VALUATION OFFICER AND IN ADOPTING THE SAME WHILE DETERMINING THE INCOME FRO M CAPITAL GAIN. HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE AO BE RESTORED. ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 5 7. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITS THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF ONE OF THE CO- OWNERS OF THE PROPERTY IN INCOME TAX OFFICER V/S M S. PUSHPALATA R. KAWARE IN ITA NO. 5600/MUM./2010 (AY: 2007-08) DATED 30.12.2011, WHEREIN THE TRIBUNAL HAS UPHELD THE ORDER OF THE LD. CIT(A) I N HOLDING THAT THE REFERENCE MADE U/S 55A WAS INVALI D. HE, THEREFORE, SUBMITS THAT THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE TR IBUNAL IN THE CASE OF ONE OF THE CO-OWNERS OF THE PROPERTY NAMELY MS. PUSHPALATA R. KAWARE(SUPRA) HAS UPHELD THE ORDER OF THE LD. CIT(A) VIDE FINDINGS RECORDED IN PARAGRAPH 3 OF ITS ORDER WHICH ARE REPRODUCED BELOW : 3. SINCE THE COMMISSIONER (APPEALS) HAS FOLLOWED THE DECISION OF JURISDICTIONAL TRIBUNAL, WHICH PROPOSITION WAS ALSO UPHELD BY THE HON'BLE JURISDICTIONAL HIGH COURT, WE SEE NO INFIRMITY IN THE ORDER. CONSEQUENTLY, THE ORDER PASSED BY THE ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 6 COMMISSIONER (APPEALS) IS UPHELD. REVENUE FAILS ON THIS GROUND. 9. IN BOTH CASES RELIED ON BY THE LD. DR, THE TRIBUNAL HELD THAT THE AO IS EMPOWERED TO MAKE REFERENCE UNDER SUB-CLAUSE (II) OF SECTION 55A(B), EVEN IN CASES WHERE FMV CLAIMED BY THE ASSESSEE IS HIGHER THAN ACTUAL FAIR MARKET VALUE, IF CONDITIONS SPECIFIED IN SAID SUB-CLAUSE (II) RELATING TO HAVI NG REGARD TO ASSET AND OTHER RELEVANT CIRCUMSTANCES IS MET. 10. WHEREAS IN THE CASE BEFORE US IN THE CASE OF CO- OWNER OF THE PROPERTY MS. PUSHPALATA R. KAWARE(SUPRA), THE TRIBUNAL HAS UPHELD THE ORDER OF THE LD. CIT(A) FOLLOWING THE DECISIONS OF THE CO- ORDINATE BENCHES OF THE TRIBUNAL AND BY THE HONB LE JURISDICTIONAL HIGH COURT. THEREFORE, THE DECISION S RELIED BY THE LD. DR ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 11. IN CIT VS. DAULAL MOHTA HUF IN INCOME TAX APPEAL NO.1031 OF 2008 THEIR LORDSHIPS OF HONBLE JURISDICTIONAL HIGH COURT ON THE FOLLOWING QUESTION S ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 7 A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HONBLE ITAT WAS RIGHT IN LAW IN REVERSING THE DECISION OF THE CIT(A) ON VALUATION OF LAXMI NIWAS PROPERTY AT RS. 1,35,40,000/- MADE BY THE DVO AS AGAINST THE VALUATION DONE BY THE GOVERNMENT APPROVED VALUER WHICH WAS AT RS. 2,13,31,000/-? B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HONBLE TRIBUNAL WAS RIGHT IN LAW TO OBSERVE THAT THE A.O WAS NOT JUSTIFIED IN MAKING A REFERENCE UNDER SEC. 55A OF THE ACT TO THE DVO FOR DETERMINATION OF THE FAIR MARKET VALUE OF THE PROPERTY? HAVE OBSERVED AND HELD AS UNDER:- 4. THE TRIBUNAL IN ITS ORDER DATED 23 RD JULY, 2004 HAS CATEGORICALLY OBSERVED THUS: 5. THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE DVO U/S. 55A IS BAD IN LAW UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS ISSUE, IN OUR CONSIDERED OPINION, IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JUDGMENT IN THE CASE OF RUBAB M. KAZERANI REPORTED IN 91 ITD 429 (MUM) . FURTHER THE ASSESSEE ALSO COVERED BY THE THIRD MEMBER DECISION OF THE PUNE BENCH OF THE TRIBUNAL, THE CASE OF KRISHNABHAI TINGORE VS. ITO REPORTED IN 101 ITD 317 (PUNE) (TM) WHEREIN IT HAS BEEN HELD THAT REFERENCE TO DVO CAN ONLY BE MADE IN CASES WHERE THE VALUE OF CAPITAL ASSET SHOWN BY THE ASSESSEE IS LESS THAN ITS FAIR MARKET VALUE OF LAND AS ON 1 ST APRIL, 1981 SHOWN BY THE ASSESSEE ON THE BASIS OF APPROVED VALUERSS REPORT BEING MORE THAN ITS FAIR MARKET VALUE, REFERENCE UNDER S. 35A WAS NOT VALID. RESPECTFULLY FOLLOWING THE PROPOSITIONS LAID DOWN THESE TWO CASES BY ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 8 THE COORDINATE BENCHES WE UPHOLD THE CONTENTION OF THE ASSESSEE AND HOLD THAT THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE DVO U/S. 55A IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE IS BAD IN LAW. THUS, ON THE SOLE GROUNDS OF APPEAL OF THE ASSESSEE HAS TO BE ALLOWED. 6. BEFORE PASSING, WE HAVE TO MENTION THAT THE ASSESSEE HAS SUBMITTED THE ARGUMENTS. AS ON THE BASIS OF THE LEGAL ASPECTS ITSELF WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, WE REFRAIN FROM UNDERTAKING THIS ACADEMIC EXERCISE OF DISPOSING THIS CASE ON MERITS. 5. IN VIEW THEREOF THERE IS NO MERIT IN THE APPEAL. APPEAL STANDS DISMISSED. 12. IN SMT. PRITINIDHI N. KARVE V/S ITO WARD 21(1)(4) IN ITA NO.4531/MUM/2009 (A.Y. 1998-99) DATED 9.7.2010, THE TRIBUNAL AFTER CONSIDERING TH E PROVISIONS OF SECTION 55A(A) AND THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT (SUPRA) HAS HEL D THAT THE REFERENCE MADE BY THE AO TO THE DVO U/S 55A(A) UNDER THE PECULIAR FACTS AND CIRCUMSTANCES O F THE CASE IS BAD IN LAW. 13. IN NATIONAL TEXTILE CORPORATION LTD. (M.P.) V/S CIT (2011) 338 ITR 371 (MP) IT HAS BEEN OBSERVED AN D HELD (PAGE 371) : HELD ACCORDINGLY, THAT THE TRIBUNAL HAD NO JURISDICTION TO COMMENT UPON THE DECISION OF THE ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 9 JURISDICTIONAL HIGH COURT AND IN PARTICULAR THE MANNER IN WHICH IT WAS RENDERED NOR HAD JURISDICTION TO IGNORE THE DECISION. IT WAS FOR THE REASON THAT, FIRSTLY, IT WAS A DECISION RENDERED BY THE JURISDICTIONAL HIGH COURT. SECONDLY, THE TRIBUNAL WAS FUNCTIONING IN THE SAME STATE AND SUBORDINATE TO THE HIGH COURT. THIRDLY, THE TRIBUNAL HAD NO JURISDICTION TO HOLD THAT THE DECISION OF THE HIGH COURT WAS PER INCURIAM. THOUGH THE TRIBUNAL DID NOT SAY SO IN SO MANY WORDS IN EFFECT IT AMOUNTED TO SUCH A DECLARATION. FOURTHLY, THE TRIBUNAL HAD ALSO NO JURISDICTION TO FIND FAULT WITH THE DECISION OF THE JURISDICTIONAL HIGH COURT SO AS TO AVOID ITS BINDING EFFECT. 14. RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO - ORDINATE BENCHES OF THE TRIBUNAL INCLUDING THE DECISION OF THE TRIBUNAL IN ASSESSEES CO-OWNERS CASE IN RESPECT OF THE SAME PROPERTY AND THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT WHICH IS BIN DING ON THE TRIBUNAL WE ARE INCLINED TO UPHOLD THE FIND INGS OF THE LD. CIT(A) IN DIRECTING THE AO TO ADOPT THE SALE CONSIDERATION VALUE AS SHOWN BY THE ASSESSEE AS ON 1.4.1981 AMOUNTING TO RS.16,26,121/- FOR THE VALUE GIVEN BY THE DVO. THE GROUNDS TAKEN BY THE REVENU E ARE, THEREFORE, REJECTED. 15. GROUND NO. 1(II) AND 2 READ AS UNDER : II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DIRECTING THE A.O, TO ALLOW THE DEDUCTION OF LAWYERS FEE OF RS. 1 LAC INCURRED BY ASSESSEE. ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 10 IN DOING SO, THE CIT(A) HAS NOT TAKEN INTO ACCOUNT THE FACT THAT THE ASSESSEE DID NOT FURNISH ANY DOCUMENTARY EVIDENCE BEFORE THE AO, AT THE TIME OF ASSESSMENT IN SUPPORT OF HER CLAIM. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 16. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT TH E AO IN THE ABSENCE OF ANY DOCUMENTARY PROOF HAS DISALLOWED THE CLAIM OF THE ASSESSEE FOR THE DEDUCT ION OF LAWYER FEES OF RS.4,00,000/-, THE ASSESSEES SHA RE BEING RS.1,00,000/- FROM THE SALE PROCEEDS OF THE PROPERTY. ON APPEAL, THE LD. CIT(A) WHILE ACCEPTI NG THE CLAIM OF THE ASSESSEE AS GENUINE DIRECTED THE AO TO ALLOW THE CLAIM OF THE ASSESSEE OF RS.1,00,000/- . 17. AT THE TIME OF HEARING, ON THE ISSUE OF DEDUCTI ON OF LAWYER FEES, BOTH THE PARTIES HAVE AGREED THAT IN VIEW OF THE ORDER OF THE TRIBUNAL IN THE CASE OF TH E PUSHPALATA R. KAWARE(SUPRA), THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH. 18. AFTER CAREFULLY HEARING THE PARTIES, WE FIND TH AT THE TRIBUNAL IN THE CASE OF THE CO-OWNER OF THE PROPERTY HAS RESTORED BACK THE ISSUE TO THE FILE OF THE ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 11 AO FOR ALLOWABILITY OF DEDUCTION OF LAWYERS FEES O F RS.1,00,000/- INCURRED BY THE ASSESSEE. FOLLOWING T HE SAME VIEW, WE SET ASIDE THE ORDER PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK T HE MATTER TO THE FILE OF THE AO TO DECIDE THE SAME AF RESH IN THE LIGHT OF THE DIRECTIONS GIVEN BY THE TRIBUNA L (SUPRA) AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. 19. IN THE RESULT, THE REVENUES APPEAL STANDS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JAN.,2012. SD SD (PRAMOD KUMAR ) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 11 TH JANUARY,2012 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. ITA NO.5601/MUM/2010 (ASSESSMENT YEAR: 2007-08) 12 BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI