Shri Sorathia Jayantibhai Shamjibhai, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-5(2), RAJKOT-GUJARAT

ITA 564/RJT/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2395 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMAL I MEHTA RESPONDE
• Assessee Lawyers: R B SHAH
• Keywords: Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 54F

Judgement Text

I.T.A. NO.: 564/RJT/2012 ASSESSMENT YEAR: 2009 - 10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT . [CORAM: PRAMOD KUMAR , AM AND RAJPAL YADAV, JM ] I.T.A. NO. 564 /RJT/ 2012 ASSESSMENT YEAR: 2009 - 10 SHRI SORATHIA JA YA NT I BHAI SHAMJIBHAI, C/O R.B. SHAH, ADVOCATE A - 201, THE IMPERIAL HEIGHTS, OPP . BIG BAZAR, 150 FT. RING ROAD, RAJKOT. . ......... ...... .... APPELLANT PAN /GIR BPFPS 1966A VS. INCOME - TAX OFFICER, WARD - 5(2), RAJKOT. . . RESPONDENT APPEARANCES BY: R. B. SHAH ........... FOR THE APPELLANT VIMAL I. MEHTA .......... F OR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 9 TH OCTOBER, 2015 DATE OF PRONOUNCING THE ORDER : 4 TH JANUARY, 2016 O R D E R PER PRAMOD KUMAR , AM : BY WAY OF THIS APPEAL THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED CIT(A) S ORDER DATED 22 ND AUGUST, 2012, IN THE MATTER OF ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009 - 10. 2. IN GROUND NO.1 & 2, WHICH WE WILL TAKE UP TOGETHER, THE ASSESSEE HAS RAISED THE FOLLOWI NG GRIEVANCES : - I.T.A. NO.: 564/RJT/2012 ASSESSMENT YEAR: 2009 - 10 PAGE 2 OF 5 1. THE LOWER AUTHORITIES HAVE ERRED IN NOT CONSTRUING PROPERLY THE PROVISIONS OF SEC.55A WHEN IN FACT THEY WERE NOT APPLICABLE DURING THE YEAR UNDER APPEAL. 2. THE LD. CIT(A) - IV, RAJKOT HAS ERRED IN UPHOLDING THE ESTIMATION OF FAIR MARKET VALU E OF THE LAND AS PER THE DEPARTMENTAL VALUER INSTEAD OF THE FAIR MARKET VALUE OF RS.30,03,337/ - ARRIVED AT BY THE GOVERNMENT APPROVED VALUER OF THE APPELLANT, DESPITE THE ITO HAD NO SUCH POWERS U/S 55A BEFORE 01/07/2012. 3. THE ASSESSEE BEFORE US IS AN IN DIVIDUAL AND HE IS ONE OF THE CO - OWNERS OF INHERITED AGRICULTURAL LAND, WHICH WAS SOLD ON 17.10.2008 FOR A SALE CONSIDERATION OF RS.1,61,56,000/ - . ON SALE OF THIS LAND, THE ASSESSEE RECEIVED RS.23,08,000/ - . THE ASSESSEE INVESTED, ON 13.4.2010, RS.24,11,000 / - IN A RESIDENTIAL HOUSE. ON THESE FACTS, THE ASSESSEE CLAIMED DEDUCTION U/S 54F LEADING VIRTUALLY TO TAX EXEMPTION OF CAPITAL GAINS IN HIS HANDS. THE ASSESSING OFFICER, HOWEVER, REJECTED THE CLAIM OF DEDUCTION UNDER SECTION 54F ON THE GROUND THAT THE INV ESTMENT IN HOUSE PROPERTY WAS MADE ON 13 TH APRIL, 2010, WHICH WAS WELL BEYOND THE STATUTORY TIME LIMIT OF ONE YEAR FROM THE RECEIPT OF SALE CONSIDERATION WHICH WAS ACTUALLY RECEIVED ON 17 TH OCTOBER, 2008. HE THUS BROUGHT TO TAX THE ENTIRE RECEIPT AS CAPITA L GAIN, I.E. RS.23,08,000/ - . AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). IT WAS INTER ALIA SAID TO HAVE BEEN SUBMITTED BY THE ASSESSEE THAT THE FAIR MARKET VALUE OF THE LAND, AS ON 1.4.1981, WAS RS.31,03,000/ - - AS PER THE GOVERNMENT VALUER. WHEN COST OF ACQUISITION IS COMPUTED ON THIS BASIS AND IS INDEXED ACCORDINGLY, NOTHING REMAINS TO BE TAXED AS CAPITAL GAIN VIDE REMAND REPORT DATED 25.7.2012, WHILE THE ASSESSING OFFICER DID ACKNOWLEDGE THE REFERENCE TO VALUATION REPORT SUBMITTED B Y THE ASSESSEE, HE STATED THAT ....ON GOING THROUGH THE ASSESSMENT ORDER UNDER SECTION 143(3) DATED 30.12.2011 IN THE CASE OF THE BROTHER OF THE ASSESSEE...ON THE SAME ISSUE, THE VALUE SHOWN BY THE ASSESSEE, AS PER APPROVED VALUER, WAS NOT ACCEPTED (AND) REFERENCE WAS MADE TO THE VALUATION OFFICER .....SUFFICE TO NOTE THAT IN THIS BACKGROUND, LD. CIT(A) REJECTED THE SAID PLEA OF THE ASSESSEE. THE QUANTUM OF ADDITION WAS REDUCED TO RS.10,10,221/ - BUT THAT ASPECT OF THE MATTER IS FOR THE REASONS WE WILL SET OUT LATER, NOT REALLY RELEVANT. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. I.T.A. NO.: 564/RJT/2012 ASSESSMENT YEAR: 2009 - 10 PAGE 3 OF 5 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. AS LD. CO UNSEL FOR THE ASSESSEE RIGHTLY POINTS OUT, UNTIL THE TIME SECTION 55A(2)(A) WAS AMENDED BY THE FINANCE ACT, 2012, THE ASSESSING OFFICER DID NOT HAVE ANY POWER TO REFER THE VALUATION TO THE DEPARTMENTAL VALUATION OFFICER IN A SITUATION IN WHICH THE ASSESSEE CLAIMED VALUE OF AN ASSET WHICH WAS HIGHER THAN THE VALUE IN THE OPINION OF THE ASSESSING OFFICER. IN OTHER WORDS, THE REFERENCE COULD BE MADE TO THE DVO ONLY WHEN THE VALUE CLAIMED WAS A VALUE LOWER THAN WHAT THE ASSESSING OFFICER OPINED IT TO BE. WHILE ON THIS ISSUE, WE MAY REFER TO HON BLE JURISDICTIONAL HIGH COURT S VIEW, IN THE CASE OF HIABEN JAYANTILAL SHAH VS. ITO [(2009) 310 ITR 31 (GUJ)] AS FOLLOWS : - 10. UNDER CLAUSE (A) OF SEC. 55A OF THE ACT UNDER THE ASSESSING OFFICER IS ENTITLED TO MAKE THE REFERENCE TO THE VALUATION OFFICER IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY THE REGISTERED VALUER, IF THE ASSESSING OFFICER IS OF THE OPINION THAT THE VALUE SO CLAIMED IS LESS THAN THE FA IR MARKET VALUE. IN ANY OTHER CASE, AS PROVIDED UNDER CLAUSE (B) OF SEC. 55A OF THE ACT, THE ASSESSING OFFICER HAS TO RECORD AN OPINION THAT (I) THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE BY MORE THAN SUCH PERCENTAGE OR BY MORE THAN SUCH AN AMOUNT AS MAY BE PRESCRIBED; OR (II) HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT IS NECESSARY TO MAKE SUCH A REFERENCE. 11. AS CAN BE SEEN FROM THE COMMUNICATION DATED - NIL (ANNEXURE - D) FROM RESPONDENT NO. 2 - D.V.O. TO THE PETITIONER IN SO FAR AS THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 IS CONCERNED, THE PETITIONER HAD CLAIMED THE SAME AT A SUM OF RS. 6,25,000/ - AS PER REGISTERED VALUER'S REPORT. THEREFORE, THE ASSESSING OFF ICER WAS REQUIRED TO FORM AN OPINION THAT THE VALUE SO CLAIMED IS LESS THAN THE FAIR MARKET VALUE. THE ESTIMATED VALUE PROPOSED BY THE D.V.O. IS SHOWN AT RS. 3,97,000/ - , WHICH IS LESS THAN THE FAIR MARKET VALUE SHOWN BY THE ASSESSEE AS ON 1.4.1981. THEREFO RE, CLAUSE (A) OF SEC. 55A OF THE ACT CANNOT BE MADE APPLICABLE. CLAUSE (B) OF SEC. 55A OF THE ACT CAN BE INVOKED ONLY IN ANY OTHER CASE, NAMELY WHEN THE VALUE OF THE ASSET CLAIMED BY THE ASSESSEE IS NOT SUPPORTED BY AN ESTIMATE MADE BY A REGISTERED VALUER . IN THE FACTS OF THE PRESENT CASE, CLAUSE (B) OF SEC. 55A OF THE ACT ALSO CANNOT BE INVOKED. THEREFORE, THERE IS NO QUESTION OF HAVING RECOURSE TO SUB - CLAUSE (II) OF CLAUSE (B) OF SEC. 55A OF THE ACT. I.T.A. NO.: 564/RJT/2012 ASSESSMENT YEAR: 2009 - 10 PAGE 4 OF 5 12. THERE IS ONE MORE ASPECT OF THE MATTER. FOR INVOK ING SEC. 55A OF THE ACT, THERE HAS TO BE A CLAIM MADE BY THE ASSESSEE, BEFORE THE ASSESSING OFFICER CAN RECORD OPINION EITHER UNDER CLAUSE (A) OR CLAUSE(B) OF SEC. 55A OF THE ACT TO MAKE A REFERENCE TO THE VALUATION OFFICER. THE FACTS OF THE PRESENT CASE G O TO SHOW THAT THE REFERENCE WAS MADE ON 26.4.1996, WHEREAS, THE RETURN OF INCOME HAD BEEN FILED BY THE ASSESSEE ONLY ON 27.8.1996. HENCE, ON THE DATE OF MAKING THE REFERENCE BY THE ASSESSING OFFICER, NO CLAIM WAS MADE BY THE ASSESSEE AND THE ASSESSING OFF ICER COULD NOT HAVE FORMED ANY OPINION AS TO EXISTENCE OF PRESCRIBED DIFFERENCE BETWEEN THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE AND THE FAIR MARKET VALUE. THEREFORE ALSO, PROVISIONS OF SEC.55A OF THE ACT COULD NOT HAVE BEEN RESORTED TO BY THE ASS ESSING OFFICER. 13. THE RECORD OF THE PETITION DOES NOT INDICATE AS TO WHAT WAS THE OPINION FORMED BY THE ASSESSING OFFICER BEFORE MAKING REFERENCE TO THE D.V.O. IT IS ONLY FROM THE UNDATED COMMUNICATION OF THE D.V.O. THAT ONE GATHERS THAT THE VALUER HAS UNDERTAKEN ESTIMATION OF THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 AND 28.12.1995. HOWEVER, IN THE AFFIDAVIT - IN - REPLY THE ASSESSING OFFICER HIMSELF STATES TO ASCERTAIN THE FAIR MARKET VALUE OF THE PROPERTY, A REFERENCE WAS MADE BY THIS OFFICE T O THE VALUATION OFFICER ON 26.4.1996, SINCE ACCORDING TO THIS OFFICE THE VALUE DECLARED BY THE ASSESSEE AS ON THE DATE OF EXECUTION AND REGISTRATION OF THE SALE DEED WAS LOWER BY MORE THAN 25%. THE PETITIONER FILED RETURN ON 27.8.1996 FOR ASSESSMENT YEAR 1 996 - 97 AND THE FAIR MARKET VALUE AS ON 1.4.1981 WAS SHOWN AT RS. 6,25,000/ - . THE CAPITAL GAIN WAS WORKED OUT AT RS. 17,43,750/ - TAKING THE SALE VALUE OF THE PROPERTY AT RS. 17,50,000/ - AS PER THE BANAKHAT DATED 9.11.1994. IN THE ABOVE BACKGROUND OF FACTS I T IS HUMBLY SUBMITTED THAT SINCE THE CAPITAL GAIN IS REQUIRED TO BE WORKED OUT ON THE FAIR MARKET VALUE OF THE PROPERTY ON THE DATE OF THE SALE DEED, THE RESPONDENT NO. 1 HAS ACTED WITHIN JURISDICTION FOR MAKING REFERENCE TO THE VALUATION OFFICER UNDER THE PROVISIONS OF SECTION 55A OF THE ACT. 14. THEREFORE, IT IS APPARENT THAT THE ASSESSING OFFICER HAD, AT NO POINT OF TIME, FORMED AN OPINION THAT THE FAIR MARKET VALUE, IN SUBSTITUTION OF THE COST OF ACQUISITION, AS CLAIMED BY THE ASSESSEE WAS REQUIRED TO BE DISTURBED BECAUSE PRESCRIBED PARAMETERS WERE FULFILLED. IN FACT, AS CAN BE SEEN FROM THE AFFIDAVIT - IN - REPLY THE ONLY GROUND ON WHICH REFERENCE WAS MADE TO THE VALUATION OFFICER WAS THAT THE VALUE DECLARED BY THE ASSESSEE AS ON THE DATE OF THE EXECUTION AND REGISTRATION OF THE SALE - DEED WAS LOWER BY MORE THAN 25%. THERE IS NO PROVISION IN THE ACT WHICH PERMITS THE ASSESSING OFFICER TO DISTURB THE SALE CONSIDERATION, AT LEAST SECTION 55A OF THE ACT CANNOT BE INVOKED FOR THE SAID PURPOSE. 6. THE VALUATIO N, AS PER THE DVO CANNOT THEREFORE BE ADOPTED IN THIS CASE. ADOPTING THE FAIR MARKET VALUE AS ON 1.4.1981, ON THE BASIS OF APPROVED VALUER S REPORT REFERRED TO IN THE CIT(A) S ORDER, WE FIND THAT FMV AS ON 1.4.1981, IN RESPECT TO ASSESSEE S SHARE IN AGRICU LTURAL LAND, WAS ONLY RS.4,29,000/ - . IT IS INDEXED VALUE (ADOPTING THE MULTIPLIER OF 5.82 AS TAKEN BY THE AO) COMES TO RS.24,96,780/ - , WHICH IS LESS THAN THE SALES CONSIDERATION OF I.T.A. NO.: 564/RJT/2012 ASSESSMENT YEAR: 2009 - 10 PAGE 5 OF 5 RS.23,08,000. AS SUCH, THERE WERE NO TAXABLE CAPITAL GAINS ON THE FACTS OF THIS CASE. THE QUESTION OF DEDUCTION U/S 54F IS, GIVEN THE ABOVE FINDING, PURELY ACADEMIC. IN VIEW OF THESE DISCUSSIONS, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.10,10,221/ - , AS SUSTAINED BY THE CIT(A), IN RESPECT OF LONG TERM CAPITAL G AIN. 7. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED TODAY ON 4 TH DAY OF JANUARY, 2016 SD/ - SD/ - ( R AJPAL YADAV ) ( PRAMOD KUMAR ) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 4 TH DAY OF JANUARY, 2016 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT ( 3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAJKOT