Vimlaben A. Dudakia, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-2(2)(1), RAJKOT-GUJARAT

ITA 58/RJT/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6861 (ITAT-RAJKOT)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 23-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R K TAKWANI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 50C; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV , JUDICIAL MEMBER ./ ITA NO . 58 / RJT / 20 1 7 / ASS TT. YEAR : 200 7 - 0 8 VI M LABEN AMRUTLAL DUDAKIYA C/O. CHAVDA MANDAP SERVICE 7/RAGHUVIRPARA GAREDIYAKUVA ROAD RAJKOT 360 001. VS ITO, WARD - 2(2)(1) RAJKOT. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI R.K. TAKWANI, AR REVENUE BY : SHRI PRAVIN VERMA, DR / DATE OF HEARING : 01 / 1 1 /201 7 / DATE OF PRONOUNCEMENT: 02 / 1 1 /201 7 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF LD.CIT(A) - 2 , RAJKOT DATED 5.12.2016 PASSED FOR THE ASSTT.YEAR 200 7 - 0 8 . 2. ASSESSEE HAS TAKEN SEVEN GROUNDS OF APPEAL, BUT HER GRIEVANCE REVOLVES AROUND A SINGLE ISSUE AS TO WHAT COULD BE THE CAPITAL GAIN ASSESSABLE IN THE HANDS OF THE ASSESSEE ON TRANSFER OF HER CAPITAL ASSET. 3. BRIEF FACTS OF THE CASE ARE THAT MOTHER OF THE ASSESSEE HAD PURCHASED A PROPERTY ON 14.11.1961 THROUGH A SALE DEED. SHE EXPIRED IN THE YEAR 1991. THE ASSESSEE INHERITED THE PROPERTY THROUGH SUCCESS ION CERTIFICATE ON 6.3 .1998. SHE HAS SOLD THE PROPERTY ON 26.2.2007 FOR A CONSIDERATION OF RS.6.00 LAKHS. MOTHER OF THE ASSESSEE HAS PURCHASED THIS PROPERTY FOR A CONSIDERATION OF RS.8,727/ - . ITA NO .58 /RJT/201 7 2 ACCOR DING TO T HE ASSESSING OFFICER, SHE DID NOT FILE RETURN OF HER INCOME, AND AFTE R RECEIVING THIS INFORMATION, A NOTICE UNDER SECTION 147 WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THAT SHE HAS FILED HER RETURN OF INCOME. THE ASSESSEE HAS CALCULATED A LOSS ON THE TRANSFER OF LONG TERM CAPITAL ASSETS. THE ASSESSEE HAD ADOPTED A SUM O F RS. 1,15,000/ - AS COST INVOLVED IN FOR RENOVATION AND REPAIRS. SHE ADDED COST OF ACQUIS I TION IN THE HANDS OF HER MOTHER TO RS.8,727/ - . THUS TOTAL COST OF ACQUI SI TION ADOPTED BY THE ASSESSEE WAS AT RS.1,23,727/ - . SINCE THE PROPERTY IS ACQUIRED BY MOTHER OF THE AS S ESSEE PRIOR TO 1.4.1987, SHE TOOK THE COST OF ACQUISITION AS ON 1.4.1981 AT RS.1,23,727/ - ; APPLIED INDEXATION AND WORKED OUT THE COST ACQUISITION AS ON THE DATE OF SALE AT RS.6,42,143/ - . WHEN THE SALE CONSIDERATION DEBITED TO THE COST OF ACQUIS ITION, A LOSS OF RS.42,143/ - WAS DETERMINED BY THE ASSESSEE. THIS STAND OF THE ASSE S SEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. HE ADOPTED DEEMED SALE CONSIDERATION OF RS.7,31,969/ - WHICH IS THE VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY FOR TH E PURPOSE OF STAMP DUTY. WITH HELP OF SECTION 50C, THE LD.AO REPLACED THE ACTUAL SALE CONSIDERATION WITH THIS DEEMED SALE CONSIDERATION. HE DID NOT ALLOW THE ASSESSEE THE COST OF IMPROVEMENT AND TOOK THE COST OF ACQUISITION IN THE HANDS OF THE ASSESEE S MOTHER I.E. AT RS.8,727/ - . THE LD.AO HAS APPLIED INDEXATION ON THIS AMOUNT AND WORKED OUT COST OF ACQUISITION ON THE DATE OF SALE AT RS.45,293/ - . HE REDUCED THIS AMOUNT FROM THE ALLEGED DEEM E D SALE CONSIDERATION OF RS.7,31,969/ - AND WORKED OUT THE LONG TERM CAPITAL GAIN OF RS.6,86,676/ - IN THE HANDS OF THE ASSESSEE. 4 . DISSATISF I ED WITH THIS WORKING, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), SHE HAS FILED CERTIFICATE OF THE REGISTERED VALUER WHO HAS DETERMINE D THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 AT RS.93,000/ - . THE LD.CIT(A) DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE. SHE ADOPTED THE VALUE OF RS.75,000/ - I.E. THE VALUE CALCULATED IN THE INHERITANCE CERTIFICATE. ON THIS VALUE, SHE WORKED OUT INDEXATION AND DET E RMINED THE COST OF ITA NO .58 /RJT/201 7 3 ACQUISITION AT RS.1,17,560/ - . THE LD.CIT( A ) DEBITED THIS AMOUNT FROM THE DEEM E D SALE CONSIDERATION ADOPTED WITH THE HELP OF SEC T ION 50C AND WORKED OUT A CAPITAL GAIN OF RS.6,14,319/ - (RS.7,31,969 MINUS RS.1,17,56 0). 5 . WITH THE ASSIST ANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE LD. C OUN S EL FOR THE ASSESSEE HAS RAISED TWO FOLD SUBMISSIONS. I N HIS FIRST FOLD OF SUBMISSIONS, HE SUBMITTED THAT SECTION 55(2)(B)(II) AUTHORIZE THE AS SESSEE TO EXERCISE AN OPTION FOR ADOPTING FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981. HE ALSO POINTED OUT ON THE STRENGTH OF HON BLE BOMBAY HIGH COURT S DECISION IN THE CASE OF CIT VS. MANJULA J. SHAH, INCOME TAX APPEAL NO.3378 OF 2010 AS WELL AS ON THE STRENGTH OF HON BLE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT VS. GAUTAM MANUBHAI AMIN, TAX APPEAL NO.699 OF 2013 THAT AS PER SECTION 49 (1) COST OF ACQUISITION OF THE ASSET IS TO BE DEEMED TO BE THE COST AT WHICH PREVIOUS OWNER OF THE ASSET ACQUI RED IT. HE POINTED OUT THAT IN CASE OF AN INHERITANCE THE COST OF ACQUISITION IS TO BE TAKEN FROM THE DATE ON WHICH PREVIOUS OWNER HAS ACQUIRED ASSET VIZ. IN THE CASE OF THE ASSESSEE, THE COST OF ACQUISITION IS TO BE TAKEN FROM 14.11.1961 WHEN THE MOTHER OF THE ASSESSE E HAS PURCHASED THE ASSET. SINCE THIS PURCHASE WAS PRIOR TO 1.4.1981 AND SECTION 55(2)(B)(II) AUTHORISE THE ASSESSEE TO EXERCISE AN OPTION WHETHER TO ADOPT FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 OR COST OF A CQUIS I TION INCLUDING IMPROVEMENT. THE ASSESSEE HAS CLAIMED EXPENSES TOWARDS RENOVATION/REPAIRS. IF THAT IS BEING NOT GRANTED, THEN AS PER REGISTERED VALUER S CERTIFICATE, FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 WAS RS.93,000/ - . THE ASSESSEE DESERVES TO BE ADOPTED T HIS VALUE AND IF INDEXATION IS APPLIED, THEN THE COST OF ACQUISITION WOULD BE RS.4,82,670/ - . 6 . IN HIS NEXT FOLD OF CONTENTIONS, HE SUBMITTED THAT THE ASSESSING OFFICER HAS ADOPTED THE VALUE OF THE PROPERTY AS EQUIVALENT TO THE VALUE ITA NO .58 /RJT/201 7 4 DETERMINED FOR THE PU RPOSE OF PAYMENT OF STAMP DUTY. THE ASSESSEE HAS APPLIED UNDER SECTION 50C(2) BEFORE THE LD.CIT(A) FOR REFERRING THE DETERMINATION OF THE VALUE OF THE PROPERTY TO THE DVO WHICH HAS NOT BEEN DONE BY THE LD.CIT(A). ALTERNATIVELY, HE CONTENDED THAT IF ADOPT ION OF THE FMV AS ON 1.4.1981 EQUIVALEN T TO THE VALUATION OF THE REGISTERED VALUER IS BEING ACCEPTED, THEN THE ASSES S EE WILL NOT PRESS THE ALTERNATIVE CONTENTION OF REMITTING THE ISSUE TO THE ASSESSING OFFICER FOR FINDING OUT FAIR MARKET VALUE FOR THE PURP OSE OF DETERMINATION OF SALE CONSIDERATION AS PROVIDED IN SECTION 50C(2) OF THE INCOME TAX ACT. THE DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 7 . ON DUE CONSIDERATION OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT A CONJOINT READING OF SECTIONS 49(1) AND 55(2)(B)(II) OF THE ACT WOULD INDICATE THAT THE ASSESSEE IS AUTHORIZED TO ADOPT THE COST OF ACQUISITION FROM THE DATE AND EQUIVALENT TO THE COST AT WHICH THE PREVIOUS OWNER OF THE ASSET ACQUIRED IT. THIS CONTROVER SY HAS BEEN SILENCED BY THE HON BLE GUJARAT HIGH COURT AS WELL AS HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GAUTAM MANUBHAI AMIN (SUPRA) AND CIT VS. MANJULA J. SHAH (SUPRA). SECTION 55(2)(B)(II) WOULD FURTHER AUTHORIZE THE ASSESSEE TO EXERCISE AN O PTION FOR ADOPTING THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 BECAUSE THE DATE OF AC Q UIS I TION IN HER CASE WOULD BE 14.11.1961 WHEN HER MOTHER ACQUIRED THE ASSET. THE FAIR MARKET VALUE HAS BEEN DETERMINED BY THE REGISTERED VALUER AT RS.93,000/ - . TH E RE IS NO OTHER EVID E N CE ON THE RECORD CONTRARY TO THIS VALUATION. THE ASSESSING OFFICER HAS NOT REFERRED THE AS S ET FOR VALUATION TO THE DVO. THUS, THERE IS NO CHOICE TO REJECT THIS VALUATION. THEREFORE, WE TAKE THE FAIR MARKET VALUE AS COST OF ACQUI SITION AS ON 1.4.1981 AND AFTER APPLYING INDEXATION, VALUE WOULD COME OUT TO RS.4,82,670/ - . TAKING INTO CONSIDERATION THE ABOVE MATERIAL, WE ALLOW THE APPEAL OF THE ASSESSEE PARTLY, AND DIREC T THE ASSESSING OFFICER TO RE - COMPUTE THE LONG TERM CAPITAL GAIN ASSESSABLE IN ITA NO .58 /RJT/201 7 5 THE HANDS OF THE ASSESSEE BY ADOPTING THE COST OF ACQUISITION AT RS.4,82,670/ - . THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8 . IN THE RESULTS, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE CO URT ON 2 N D NOVEMBER, 201 7 AT RAJKOT . S D / - S D / - ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( RAJPAL YADAV) JUDICIAL MEMBER