VIJAY C. KHANNA, MUMBAI V. ITO 14(1)(3), MUMBAI

ITA 6235/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1063 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Bench Allotted: F
• Assessment Year: 2005-2006
• Appeal Filed On: 02-12-2009
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Opportunity of being heard; Fair market value
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F BEFORE SHRI N.V. VASUDEVAN (JM) & SHRI B. RAMAKOTAI AH (AM) I.T.A.NO. 6235/MUM/2009 (ASSESSMENT YEAR : 2005-06 ) SHRI VIJAY C. KHANNA 1302, A WING SWEET HOMES C.H.S. LTD. S.V.P. NAGAR ANDHERI WEST MUMBAI-400 053. VS. ITO 14(1)-3 AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. APPELLANT RESPONDENT PAN/GIR NO. : AAHPK2734Q ASSESSEE BY : SHRI SAMEER DALAL DEPARTMENT BY : SHRI SANJAY GUPTA ORDER PER N.V. VASUDEVAN, JM :- THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 14.9.2009 OF LEARNED CIT(A)-25, MUMBAI RELATING TO A.Y. 2005-06. 2. THE ASSESSEE IS AN INDIVIDUAL. DURING THE PREVIO US YEAR, THE ASSESSEE SOLD FLAT AT SANTACRUZ AND DECLARED LONG T ERM CAPITAL GAIN ON SALE OF FLAT AT RS. 9,11,330/-. THE ASSESSEE OWNED HALF SHARE IN THE AFORESAID FLAT. AS PER THE AGREEMENT, THE FLAT WAS SOLD FOR CONSIDERATION OF RS. 20,00,000/-. CAPITAL GAIN WAS COMPUTED BY TH E ASSESSEE BY TAKING FIRST HALF SHARE NAMELY RS. 10,00,000/- AS FULL CON SIDERATION RECEIVED ON TRANSFER. THE PROPERTY WAS, HOWEVER, VALUED FOR THE PURPOSE OF STAMP DUTY AND REGISTRATION AT RS. 41,49,000/-. THE APPEL LANTS SHARE ON THE BASIS OF VALUE ADOPTED FOR STAMP DUTY AND REGISTRAT ION WOULD BE RS. 20,74,500/-. IN VIEW OF THE PROVISIONS OF SECTION 5 0C OF THE ACT, THE ASSESSING OFFICER ADOPTED FULL VALUE OF CONSIDERATI ON AS THE VALUE ADOPTED FOR THE PURPOSE OF STAMP DUTY AND REGISTRATION AND COMPUTED LONG TERM CAPITAL GAIN. BY DOING SO AND AFTER ALLOWING CLAIM OF THE ASSESSEE FOR SHRI VIJAY C. KHANNA 2 DEDUCTION U/S. 54EC OF THE ACT, TAXABLE LONG TERM C APITAL GAIN WAS DETERMINED AT RS. 11,10,165/-. 3. THE LEARNED CIT(A) CONFIRMED THE ORDER OF THE AS SESSING OFFICER GIVING RISE TO GROUND NO. 1&2 BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. BOTH BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE LEARNED CIT(A), THE ASSES SEE HAD TAKEN SPECIFIC PLEA DISPUTING THE VALUATION OF THE PROPERTY FOR TH E PURPOSE OF STAMP DUTY AND REGISTRATION. BEFORE THE ASSESSING OFFICER , IN A LETTER DATED 7.12.2007, THE ASSESSEE HAS SPECIFICALLY POINTED OU T SEVERAL FACTORS WHICH WILL GO TO REDUCE THE VALUE OF THE PROPERTY AND IT WAS ALSO HIGHLIGHTED THAT THE VALUATION FOR THE PURPOSE OF STAMP DUTY AN D REGISTRATION IS DETERMINED FOR A PARTICULAR AREA AS A WHOLE WITHOUT CONSIDERING THE DISADVANTAGE OF PARTICULAR PROPERTY LOCATED IN THAT AREA; AND THEREFORE, THAT SHOULD NOT BE CONCLUSIVE OF THE VALUE OF THE P ROPERTY. EVEN BEFORE LEARNED CIT(A), THE ASSESSEE HAD REITERATED ITS STA ND AS ABOVE. BEFORE LEARNED CIT(A), THE ASSESSEE HAS ALSO TAKEN A VERY SPECIFIC PLEA WHICH IS AS FOLLOWS :- WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT SUBM ITS THAT SECTION 50C(2) OF THE ACT FURTHER PROVIDES THAT WHE RE THE ASSESSEE CLAIMS THAT THE VALUE ADOPTED FOR THE STAMP DUTY PU RPOSE EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DAT E OF TRANSFER AND HE HAS NOT DISPUTED THE VALUE SO ADOPTED OR ASSESSE D IN ANY APPEAL OR PROVISION OR REFERENCE BEFORE ANY AUTHORI TY OR COURT, THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE RE LEVANT ASSET TO A DISTRICT VALUATION OFFICER (THE DVO) IN ACCORDANCE WITH SECTION 55A OF THE ACT. THUS, IN A GIVEN CASE, IF THE ASSES SING OFFICER DOES NOT AGREE WITH THE EXPLANATIONS OF THE ASSESSEE WIT H REGARD TO LOWER CONSIDERATION DISCLOSED BY HIM THEN HE SHOULD REFER THE MATTER TO DVO FOR GETTING ITS MARKET RATE ESTABLISH ED AS ON DATE OF THE SALE TO ARRIVE AT THE CORRECT SALE CONSIDERATIO N. THE APPELLANT SUBMITS THAT IF THE PROVISIONS OF SECTION 50C ARE R EAD IN THE SENSE THAT IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, HE MAY OR MAY NOT SEND THE MATTER FOR VALUATION TO THE DVO THEN, IN THAT CASE, THE PROVISIONS OF SECTI ON 50C(2) WOULD BE RENDERED REDUNDANT. THUS, THE WORD MAY USED IN T HIS SUB- SECTION SIGNIFIES THAT IN CASE THE ASSESSING OFFICE R IS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, HE SHOULD REF ER THE MATTER TO SHRI VIJAY C. KHANNA 3 THE DVO FOR VALUATION PURPOSE. RELIANCE IN THIS RE GARD IS PLACED ON THE FOLLOWING DECISIONS, COPIES OF WHICH ARE ENC LOSED AT PAGE NO. 9-34 OF THE PAPER BOOK. (I) RAVI KANT VS. ITO, 110 TTJ 297 (DEL) (II) MEGHRAJ BAID VS. ITO, 114 TTJ 841 (JD) (III) NAVNEET KUMAR THAKKAR VS. ITO, 110 ITD 525 (JD) (IV) ITO VS. SMT. MANJU RANI JAIN, 24 SOT 24 (DEL) 5. THESE SUBMISSIONS WERE HOWEVER NOT BEEN APPRECIA TED IN THE PROPER PROSPECTIVE BY LEARNED CIT(A). IT HAS BEEN H ELD BY MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. KALPATARU INDUS TRIES VS. ITO IN ITA NO. 5440/MUM/2007 IN A.Y. 2005-06 HELD AS FOLLOWS : - HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERE D THEIR RIVAL CONTENTIONS, WE FIND THAT THERE IS A TRANSFER OF LE ASE-HOLD RIGHTS BY THE ASSESSEE AND THE ASSESSEE ITSELF HAS OFFERED THE CA PITAL GAIN ON THE SAME. SECTION 50C OF THE INCOME TAX ACT IS A SPECIAL PROV ISION FOR DETERMINING THE FULL VALUE OF CONSIDERATION IN CERTAIN CASES. S UB-SEC[1] OF SEC.50C PROVIDES THAT WHERE THE CONSIDERATION RECEIVED OR A CCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEI NG LAND OR BUILDING OR BOTH, IS LESS THAN VALUATION ADOPTED OR ASSESSED BY STAMP VALUATION AUTHORITY FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED SHALL, F OR THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE C ONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. SUB-SEC.[ 2] THEREOF PROVIDES THAT WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SEC[1], WHERE THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSED BY STAMP VALUATION AUTHORITY UNDER SUB-SECTION [1] EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRAN SFER, AND THE VALUE SO ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORIT Y UNDER SUB-SEC[1] HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE ANY OTHER AUTHORITY, COURT OR THE HIGH COURT, THE AO MAY REFER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFIC ER AND WHERE ANY SUCH REFERENCE IS MADE, THE RELEVANT PROVISIONS OF THE W EALTH TAX ACT SHALL, WITH NECESSARY MODIFICATIONS, APPLY IN RELATION TO SUCH REFERENCE. THUS, IT CAN BE SEEN THAT WHEREVER THE CONSIDERATION RECEIVE D BY THE ASSESSEE IS LESS THAN THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY FOR STAMP DUTY PURPOSES, THE HIGHER VALUE IS TO BE ADOPTED AS THE CONSIDERATION FOR THE PURPOSES OF SEC.48. THE ONLY EXCEPTION TO THIS RULE IS THAT WHERE THE ASSESSEE CLAIMED THAT THE VALUE ADOPTED BY THE STAM P VALUATION AUTHORITY IS MORE THAN THE FAIR MARKET VALUE OF THE PROPERTY, THE AO CAN REFER THE MATTER TO THE DVO FOR VALUATION OF THE PROPERTY. TH US, IT CAN BE SEEN THAT THE ASSESSEE WHILE MAKING THE CLAIM BEFORE THE AO H AS TO SATISFY HIM THAT THE VALUATION ADOPTED BY THE STAMP VALUATION AUTHOR ITY IS NOT BASED ON SHRI VIJAY C. KHANNA 4 SOUND CRITERIA. IN SUCH A CASE, THE AO IS BOUND TO REFER THE MATTER TO THE DVO FOR ARRIVING AT THE FAIR MARKET VALUE OF THE PR OPERTY. AS CAN BE SEEN FROM THE LETTER DATED 11-12-06 OF THE ASSESSEE FILE D BEFORE THE AO, THE ASSESSEE HAS RELIED UPON TWO DECISIONS TO THE EFFEC T THAT THE VALUATION GIVEN IN THE STAMP DUTY READY RECKONER CANNOT BE UN IVERSALLY ADOPTED. IN SUCH CASES, IT IS NECESSARY FOR THE AO TO REFER THE MATTER TO THE DVO. IN THE CASES RELIED UPON BY THE LD. COUNSEL FOR THE AS SESSEE, THE ASSESSEES THEREIN HAVE GIVEN REASONS FOR ADOPTING A DIFFERENT VALUE THAN THE STAMP DUTY RATE SUCH AS THE LOCATION AND APPROACHING ROAD S OF THE PROPERTY AND ALSO COMPARABLE CASES AND IN SUCH CIRCUMSTANCES THE TRIBUNAL HAS HELD THAT THE WORD MAY USED IN SEC.50C SHOULD BE READ AS SHOULD AND THE AO HAS NO DISCRETION BUT TO REFER THE MATTER TO THE DVO FOR THE VALUATION OF THE PROPERTY. SINCE THE ASSESSEE HAS CLAIMED THA T THE CONSIDERATION RECEIVED BY HIM IS DIFFERENT FROM THE STAMP DUTY VA LUATION, WE FIND THAT THE DECISIONS ARE APPLICABLE TO THE FACTS OF THE CA SE BEFORE US. 6. THUS IF THE VALUATION AS ADOPTED FOR STAMP DUTY AND REGISTRATION, IF DISPUTED, THE AO HAS NO OTHER OPTION BUT TO REFE R THE MATTER TO THE DVO FOR VALUATION OF THE PROPERTY AND THEREAFTER DE TERMINE CAPITAL GAIN. RESPECTFULLY FOLLOWING THE AFORESAID ORDER, WE DIRE CT THAT THE ISSUE OF COMPUTATION OF CAPITAL GAIN BE REMANDED TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO THE AO TO REFER THE VALUATION OF THE PROPERTY TO DVO AND DETERMINE THE VALUE IN ACCORDANCE WITH L AW AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. FOR ST ATISTICAL PURPOSES, THIS GROUND NO. 1&2 IS TREATED AS ALLOWED. 7. IN GROUND NO. 3, THE ASSESSEE HAS PROJECTED HIS GRIEVANCE AGAINST ACTION OF THE REVENUE AUTHORITIES IN ESTIMATING REN TAL INCOME OF THE PROPERTY AT RASAYANI AT RS. 11,200/-. 8. THE ASSESSEE HAD NOT PROVIDED ANY OTHER MODE OF VALUATION OF ANNUAL VALUE OF THE AFORESAID PROPERTY FOR THE PURP OSE OF ASSESSMENT OF INCOME FROM HOUSE PROPERTY; AND THEREFORE WE ARE OF THE VIEW THAT THE REVENUE AUTHORITIES WERE JUSTIFIED IN ESTIMATING AN NUAL VALUE OF RS. 11,200/-. THE ASSESSEE HAS BROUGHT NO MATERIAL ON R ECORD TO JUSTIFY LESSER ANNUAL VALUE. CONSEQUENTLY, GROUND NO. 3 RAI SED BY THE ASSESSEE IS DISMISSED. SHRI VIJAY C. KHANNA 5 9. IN GROUND NO. 4, THE ASSESSEE HAS PROJECTED HIS GRIEVANCE AGAINST THE ORDER OF THE REVENUE AUTHORITIES DISALLOWING EX PENSES UNDER THE HEAD SALE AND CONVEYANCE OF RS. 18,000/- AND DEPRECIAT ION ON CAR AT RS. 13,042/-. THESE EXPENSES WERE CLAIMED BY THE ASSESS EE AGAINST THE INCOME DECLARED UNDER THE HEAD INCOME FROM OTHER S OURCES. THE DEDUCTION ON ACCOUNT OF DEPRECIATION WAS DISALLOWED FOR THE REASON THAT NO DETAILS REGARDING WORKING OF DEPRECIATION WAS FU RNISHED BY THE ASSESSEE. SIMILARLY, IN RESPECT OF SALARY AND CONVE YANCE EXPENSES ALSO, NO DETAILS HAVE BEEN FURNISHED BY THE ASSESSEE. EVE N BEFORE US, NO SUCH DETAILS WERE FURNISHED AND IN THE CIRCUMSTANCES, WE CONFIRM THE ORDER OF THE REVENUE AUTHORITIES AND DISMISS GROUND NO. 4 RA ISED BY THE ASSESSEE. 10. IN THE RESULT, APPEAL BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED ON 23 RD DAY OF JULY, 2010. SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 23 RD JULY, 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS