ITO 2(1)(1), MUMBAI V. B.R. HERMAN & MOHATTA (I) P. LTD, MUMBAI

ITA 6427/MUM/2010

• Counselvise Citation: 642719914 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-05-2012
• Assessment Year: misc
• Appeal Filed On: 31-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN VARMA
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value; Valuation report
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI G.E. VEERABHADRAPPA, PRESIDENT AND SHRI S.S. GODARA, JUDICIAL MEMBER ITA NO.6427/M/2010 ASSESSMENT YEAR: 2007-08 ITO 2(1)(1), AAYAKAR BHAVAN, ROOM NO. 575, 5 TH FLOOR, MUMBAI 400 020. VS. M/S. B.R. HERMAN & MOHTTA (INDIA) P. LTD., JASH CHAMBER, SIR P.M. ROAD, MUMBAI 400 001. PAN:AAACB5221F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAVIN VARMA RESPONDENT BY: SHRI PRAKASH K JOTWANI DATE OF HEARING: 9.5.2012 DA TE OF ORDER: 15.6.2012 O R D E R PER S.S. GODARA, J.M: THIS REVENUES APPEAL HAS BEEN PREFERRED AGAINST TH E ORDER OF LD. CIT (A) DATED 24.6.2010 FOR ASSESSMENT YEAR 2007-08. 2. FROM THE GROUNDS RAISED, THE ONLY SUBSTANTIVE GR OUND READS AS UNDER: THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 70,57,31,976/- AND DIRECTED THE AO TO ACCEPT THE LONG TERM CAPITAL LOS S OF RS. 2,21,100/- DECLARED BY THE APPELLANT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D SOLD ITS KOLKATA PLOT IN SEPTEMBER, 2006 FOR RS. 3.5 CRORES WITH STRUCTURES ETC. IN ASS ESSMENT PROCEEDINGS, IT STATED THAT PLOT WAS ACQUIRED ON 1.4.1981 FOR RS. 3,73,000/- (ENCLOS ED VALUERS REPORT IN SUPPORT) AND ALSO 2 ITA NO.6427/M/2010 DECLARED LONG TERM CAPITAL LOSS OF RS. 2.21 LACS. THE ASSESSING OFFICER CAME TO EXFACIE CONCLUSION THAT SINCE THE VENDEE IN QUESTION HAD NO T PAID ANY VALUE WITH REGARD TO STRUCTURE ETC., THE ASSESSEE WAS NOT ENTITLED TO INCLUDE IT I N VALUE OF STRUCTURE AS COST OF ASSET. 4. THE AO MADE A REFERENCE TO THE STAMP VALUATION A UTHORITY, KOLKATA U/S 50C(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER TO BE REFERRE D AS THE ACT) SEEKING INFORMATION OF ASSESSABLE VALUE OF PLOT. AS THERE WAS NO RESPONSE TO THE AO AGAIN MADE ASKED DISTRICT VALUATION OFFICER (DVO), KOLKATA TO DETERMINE PLOT S VALUE WHO SUBMITTED REPORT ON 29.12.2009 DETERMINING THE VALUE OF THE PLOT AS RS. 73.93 CRORES. 5. FOLLOWING THE VALUERS REPORT, THE AO SOUGHT ASS ESSEES EXPLANATION ABOUT PLOTS VALUE, WHO SUBMITTED THAT AS IT WAS ENCROACHED UPON BY LOCAL MAFIAS AND SUBJECT MATTER OF LITIGATION, SO, THERE WAS NO BUYER. THE ASSESSEE A LSO SUPPORTED ALREADY SUBMITTED VALUATION REPORT DATED 26.12.2009. THE AO DID NOT ACCEPT THE SAID VALUE AND WENT BY THE DVOS COMPUTATION OF THE PLOTS VALUE OF RS. 73.93 CRORES . IN ASSESSMENT ORDER DATED 31.12.2009, AO CALCULATED LONG TERM CAPITAL GAIN AS RS. 70,57,3 1,976/-. 6. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A) WHO HAS ACCEPTED ITS ARGUMENTS BY OBSERVING AS UNDER: I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE AR AN D MATERIAL ON RECORD. IT IS NOTICED THAT THE PROPERTY IN QUESTIO N WAS TRANSFERRED BY AN AGREEMENT ON STAMP PAPER OF RS. 6,00,000/- BUT WAS NOT REGISTERED. I FIND THAT THE APPELLANT ENTERED INTO AN AGREEMENT FOR SA LE OF PROPERTY IN JANUARY, 2000 WITH DHANVARSHA MARKING PVT. LTD. FOR CARRYING DEVELOPMENT OF THE PROPERTY. THE AGREEMENT WAS TERMINATED FOR WANT OF NON-DEVELOPMENT AND THE DHANVARSHA MARKING PVT. LTD. FILED CASE IN THE HIGH COURT AGAINST THE APPELLANT. THE APPELLANT, THEREAFTER, ON 03/10/200 0 SOLD THE PROPERTY TO M/S. ABHIYAN MERCHANTS FOR RS. 3,01,00,000/- AS IS WHERE IS BASIS. THE ABHIYAN 3 ITA NO.6427/M/2010 MERCHANTS DID NOT PERFORM AND CHEQUES FROM THEM WER E DISHONOURED. 867 COTTAHS OF THE PROPERTY WAS ENCUMBERED AND OCCUPIED BY LOCAL MAFIAS AND ANTI-SOCIAL ELEMENTS AND IT BECAME DIFFICULT FOR TH E APPELLANT TO ENTER THE PREMISES. THE APPELLANT APPROACHED DR. SAJIDA BANO BY AN MOU DATED 18.10.2004 TO CLEAR THE PREMISES OF 867 COTTAHS FRO M MAFIAS AND ILLEGAL OCCUPANTS. DR. SAJIDA BANO, INSPITE OF BEING INFLU ENTIAL AND POWERFUL, FAILED TO CLEAR THE PROPERTY FROM LOCAL MAFIAS. THE APPEL LANT ALSO FILED CASES AGAINST ILLEGAL OCCUPANTS AND THE CASES ARE PENDING IN THE COURTS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE IT IS TO BE CONCLUDED THA T THIS IS NOT A NORMAL SALE IN THE OPEN MARKET BUT A DISTRESS SALE AS THE ASSES SEE WAS UNABLE TO FIND A PURCHASER WHO CAN GIVE HIM MARKET PRICE FOR THE PRO PERTY AS THE PROPERTY WAS OCCUPIED BY MAFIAS AND ILLEGAL OCCUPANTS. IT IS ALSO TO BE NOTED THAT PROVISIONS OF SEC. 50C CANNOT BE INVOKED. SECTION 50C EMBODIES THE LEGAL FICTION BY WHICH THE VALUE ASSESSED BY THE STAMP DUTY AUTHORITIES IS CONSIDERED AS THE FULL VA LUE OF CONSIDERATION FOR THE PROPERTY TRANSFERRED. THE LEGAL FICTION CONFINED T O RESTRICTED OPERATION CANNOT BE WIDENED TO INCLUDE ALL THE CASES WHERE SUCH PRO PERTY HAS NOT BEEN VALUED BY THE STAMP DUTY AUTHORITIES. THE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS. AMARCHAND N. SHROFF (1963) 48 ITR 5 9 HAS HELD THAT LEGAL FICTIONS ARE ONLY FOR A DEFINITE PURPOSE AND THEY A RE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND SHOULD NOT BE EXTENDED B EYOND THE LEGITIMATE FIELD. SIMILAR VIEW HAS BEEN REITERATED BY THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS. MOTHER INDIA REFRIGERATION INDUSTRI ES (P) LTD. (1985) 155 ITR 711. THE VALUE OF SIMILAR OTHER PROPERTY VALUED BY STAMP DUTY AUTHORITY CANNOT BE ADOPTED UNDER SECTION 50C TO SUBSTITUTE T HE SALE VALUE OF THE PROPERTY UNDER CONSIDERATION. THE APPLICATION OF S ECTION 55DA BY WHICH THE ASSESSING OFFICER GOT THE PROPERTY VALUED AND ADOPT ED THE REPORT OF THE DVO AS THE SOLE BASIS FOR MAKING IMPUGNED ADDITION WAS WHOLLY INVALID. THE ONUS WAS ON THE REVENUE TO ESTABLISH THAT THE SALE CONSI DERATION DECLARED BY THE APPELLANT WAS UNDERSTAND WITH SOME CLINCHING EVIDEN CE. THE HONBLE SUPREME COURT IN THE CASE OF K.P. VARGHESE VS. ITO (1981) 131 ITR 597 HELD THAT THE BURDEN LIES ON THE REVENUE TO SHOW THAT T HERE IS UNDERSTATEMENT OF THE CONSIDERATION. IT WAS HELD THAT TO THROW THE BURDEN OF SHOWING THAT 4 ITA NO.6427/M/2010 THERE IS NO UNDERSTATEMENT OF THE CONSIDERATION, ON THE ASSESSEE WOULD BE TO CASE ON ALMOST IMPOSSIBLE BURDEN UPON HIM TO ESTABL ISH A NEGATIVE, NAMELY, THAT HE DID NOT RECEIVE ANY CONSIDERATION BEYOND TH AT DECLARED BY HIM. SIMILAR VIEW WAS TAKEN IN THE CASE OF CIT VS. SHIVA KAMIN CO (P) LTD (1986) 159 ITR 71 (SC) PROVIDING THAT UNLESS THERE IS EVI DENCE THAT MORE CONSIDERATION THAN WHAT WAS STATED IN THE DOCUMENT OF TRANSFER WAS RECEIVED, THE DECLARED SALE CONSIDERATION WAS TO BE ACCEPTED. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY OTHER MATERIAL TO SHO W THAT THE SALE CONSIDERATION DECLARED BY THE ASSESSEE IS UNDERSTAT ED. IN MY CONSIDERED VIEW THE ADDITION WAS WRONGLY MADE. I, THEREFORE, DELET E THE ADDITION OF RS. 70,57,31,976/- AND DIRECT THE ASSESSING OFFICER TO ACCEPT THE LONG TERM CAPITAL LOSS OF RS. 2,21,100/- DECLARED BY THE APPE LLANT. 7. OPENING HIS ARGUMENTS, LEARNED DR BEFORE US HAS MADE REFERENCE TO THE PAPER BOOK PAGE NO.1 (COMPRISING STATEMENT OF TOTAL INCOME) WH EREIN ASSESSEE HAD DECLARED LONG TERM CAPITAL LOSS TO THE TUNE OF RS. 2,21,100/-. FURTHE R, HE ALSO TOOK US TO PAGE NO.3 (WORKING OF LONG TERM CAPITAL GAIN OF SALE DECLARED BY THE ASSE SSEE) CONTAINING FAIR MARKET VALUE OF LAND AS ON 1.4.1981 (PER APPROVED VALUER) @ RS. 66.90 LA CS AND SUBMITTED THAT IN THE SAID COMPUTATION, THE ASSESSEE HAD DECLARED FULL VALUE O F CONSIDERATION AS RS. 3.45 CRORES. THEREAFTER, HE HAS REFERRED TO FINDINGS IN DVO REPO RT AT PAGE NO.118 WHEREIN, IT HAS BEEN STATED THAT ASSESSEE COULD NOT BE SERVED NOTICE DUE TO NON-AVAILABILITY OF POSTAL ADDRESS AND REASONS FOR COMPUTATION OF PLOTS VALUE AS RS. 73.9 3 CRORES. 7.1. IN THE LIGHT THEREOF, THE LEARNED DR HAS SUBMI TTED AO HAD ARRIVED AT CONCLUSION OF UNDER VALUATION BY ASSESSEE IN COMPUTING THE LONG T ERM CAPITAL LOSS IN QUESTION AFTER MAKING ENQUIRY. PER LEARNED DR, IN UPSETTING THE FINDINGS OF THE AO, THE LD. CIT (A) HAS ERRED IN HOLDING THAT THERE IS NO MATERIAL ON RECORD TO SUPP ORT THE VALUATION ON THE PART OF THE ASSESSEE AND ALSO CONTENDED THAT IF IT IS SO REQUIR ED IN VIEW OF THE FACT THAT THE ASSESSEE COULD NOT BE SERVED BY DVO BEFORE SENDING THE VALUA TION REPORT IN QUESTION, THE CASE IN 5 ITA NO.6427/M/2010 HAND BE REMITTED BACK TO THE AO SO THAT THE ASSESSE E COULD ALSO BE ASSOCIATED WITH FOR DETERMINING THE APPROPRIATE VALUE OF PLOT IN QUESTI ON. 8. OPPOSING THE ARGUMENTS, LEARNED AR HAS SUBMITTED BEFORE US THAT AGREEMENT IN QUESTION WAS EXECUTED IN SEPTEMBER 2006 FOR CONSIDE RATION OF RS. 3.5 CRORES AND ITS AUTHENTICITY HAS NOT BEEN DISPUTED BY THE REVENUE A ND THERE IS NO DISPUTE SO FAR AS THE VALUE OF THE PLOT AS ON 1.4.1981 IS CONCERNED. THE ONLY ISSUE IS REGARDING VALUATION OF THE AGREEMENT (REGARDING PLOT) EXECUTED IN THE YEAR 200 6 WHEREIN THE REVENUE HAS DECLARED THE VALUE AS RS. 73.93 CRORES AS OPPOSED TO THE ASS ESSEES VALUATION OF RS. 3.5 CRORES. 9. CONTINUING THE SUBMISSIONS, THE LEARNED AR HAS R EFERRED TO SEC. 50C(1) OF THE ACT AND STATED THAT THE WORD ASSESSABLE HAS BEEN INTRODUCED BY THE FINANCE ACT, 2009 APPLICABLE W.E.F. 1.10.2009, WHEREAS THE AY IN HAND IS AY 2007-08 AND DATE OF AGREEMENT IS OF SEPTEMBER 2006. PER LEARNED AR, SINCE THE WORD ASSESSABLE WAS NOT THERE AT THE TIME OF EXECUTION OF AGREEMENT NOR AT THE TIME OF A Y IN HAND, THEREFORE, THE CASE IN HAND CANNOT BE HELD TO BE GOVERNED BY THE SAID PROVISION AND THE INSTANT CASE DOES NOT FALL UNDER SEC. 50C(1) (SUPRA) SO AS TO REFER THE CASE TO DVO FOR VALUATION. 10. THEREFORE, LEARNED AR HAS REFEREED TO CASE LAW AS WELL I.E. ITA NO. 6320/M/2010 IN THE CASE OF ACIT VS. MUNSON TEXTILES, ITAT MUMBAI, ORDER DATED 3.2.2012; 122 TTJ (LUCKNOW) 515 CARLTON HOTEL (P) LTD. VS. ACIT AND N AVANEET KUMAR THAKKAR VS. ITO (298 ITR 42) (JD) WHEREIN IT HAS BEEN HELD THAT IN THE A BSENCE OF A REGISTERED INSTRUMENT OF TRANSFER OF PROPERTY, SEC. 50C OF THE ACT CANNOT BE INVOKED. THE LEARNED AR HAS ALSO MADE US TO PERUSE THE AGREEMENT IN QUESTION WHICH IS AT PAGE NO. 122 TO 143 OF THE PAPER BOOK IN THIS REGARD TO CLARIFY THAT THE SAME IS NOT A REGIS TERED INSTRUMENT OF TRANSFER. 11. RELYING ON THE SAID MATERIAL, LEARNED AR HAS VE HEMENTLY CONTENDED THAT SINCE THE AGREEMENT IN HAND IS UNREGISTERED AND THEREFORE SEC . 50C IS NOT APPLICABLE AS THE WORD 6 ITA NO.6427/M/2010 ASSESSABLE HAS BEEN INCORPORATED LATER ON (SUPRA). THEREFORE, THE LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO. 12. WE HAVE HEARD BOTH THE LEARNED REPRESENTATIVES. SINCE FACTS ARE NOT IN DISPUTE, THE SAME NEED NOT BE REITERATED HERE. THE ONLY ISSUE I NVOLVED IS THAT OF THE VALUE OF THE PROPERTY IN HAND REGARDING WHICH UNREGISTERED AGREE MENT HAS BEEN EXECUTED IN SEPTEMBER 2006. BEFORE WE MAY PROCEED FURTHER, IT IS RELEVAN T TO REPRODUCE SEC. 50C AS UNDER: 50C. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILD ING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED [OR ASSESSABLE] BY ANY AUTHORI TY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE STAM P VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR ASSESSED [OR ASSESSABLE] SHALL, FOR THE PURPOSE S OF SECTION 48 , BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACC RUING AS A RESULT OF SUCH TRANSFER. 13. WE FIND THAT THE WORD ASSESSABLE HAS BEEN INCORPORATED ONLY W.E.F. 1.10.2009 (FINANCE ACT 2009 W.E.F. 1.10.2009). THE SAME CANN OT BE MADE OPERATIVE FOR EARLIER ASSESSMENT YEARS I.E. AY 2007-08 IN HAND. THE ASS ESSMENT PROCEEDINGS BEFORE THE SAID POINT OF TIME HAVE TO GOVERNED BY THE WORDS ADOPTED OR ASSESSED. 14. EVEN OTHERWISE ALSO, THE LD COORDINATE BENCH IN CASES OF CARLTON HOTEL ETC. (SUPRA) HAD RIGHTLY HELD THAT SEC. 50C OF THE ACT IS NOT AP PLICABLE IN CASES OF UNREGISTERED AGREEMENTS, OPERATIVE PART OF THE SAME READS AS UND ER: ONE OF THE RELEVANT INGREDIENTS FOR INVOKING SECTI ON 50C IS THAT THERE IS A PAYMENT OF STAMP DUTY IN RESPECT OF TRANSFER O F CAPITAL ASSET BEING LAND OR BUILDING OR BOTH. THE EVENT WHICH PRECEDES ADOPT ION OF VALUATION DONE BY STAMP VALUATION AUTHORITY IS THE REGISTRATION OF A SALE RECORDING TRANSFER OF CAPITAL ASSET FOR WHICH THERE IS A PAYMENT OF STAMP DUTY. PAYMENT OF STAMP DUTY IS REQUIRED ONLY WHEN TRANSFER OF CAPITAL ASSE T IS REGISTERED UNDER THE REGISTRATION ACT. IF PAYMENT OF STAMP DUTY FOR THE PURPOSES OF THE TRANSFER IS NOT REQUIRED, THEN THERE IS NO OCCASION TO LOOK INT O OTHER CONDITIONS AS 7 ITA NO.6427/M/2010 MENTIONED IN SECTION 50C. THEREFORE, IN THOSE CASES OF TRANSFER WHERE AGREEMENT OR SALE DEED IS NOT REGISTERED AND STAMP DUTY IS NOT PAID, OR CAPITAL GAIN IS SIMPLY CHARGED BY DEEMING CERTAIN T RANSACTION AS TRANSFER AS PER OTHER PROVISIONS OF THE ACT OR SOME TRANSACTION S OF TRANSFER ARE NOT REGISTERED OR ARE NOT LEGALLY REQUIRED TO BE REGIST ERED UNDER THE REGISTRATION ACT, SECTION 50C CANNOT BE PUT INTO OPERATION . NAVANEET KUMAR THAKKAR VS. ITO (2007) 112 TTJ (JD) 76 : 110 TTJ 525 (JD) APPRO VED. 15. THE ASSESSEE HAS ADOPTED / ASSESSED THE VALUE O F THE CONSIDERATION AS RS. 3.5 CRORES. ALTHOUGH THE LD. CIT (A) HAS APPLIED K.P. VARGHESE CASE (SUPRA), BUT IN OUR OPINION, ONCE SEC. 50C ITSELF IS NOT APPLICABLE QUA THE FACT S OF THE INSTANT CASE, THERE IS NO OTHER PROVISION IN THE ACT WHICH COULD GOVERN THE PECULIA R CIRCUMSTANCES IN HAND. THEREFORE, WE HOLD THAT THE LD. CIT (A) HAS NOT COMMITTED ANY IRR EGULARITY IN DELETING THE ADDITION, MADE BY THE AO. 16. IN VIEW OF OUR ABOVE DISCUSSION, WE FIND NO MER IT IN THE APPEAL. ACCORDINGLY, IT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.6.2012 SD/- SD/- (G.E. VEERABHADRAPPA) (S. S. GODARA) PRESIDENT JUDICIAL MEMBER DATE : 15.6.2012 AT :MUMBAI OKK COPY TO : 1. ITO 2(1)(1), MUMBAI. 2. M/S. B.R. HERMAN & MOHTTA (INDIA) P. LTD., MUMBAI. 3. THE CIT(A)-4, MUMBAI. 4. THE CIT, MUMBAI CONCERNED 5. THE DR B BENCH, ITAT, MUMBAI. // TRUE COPY// 8 ITA NO.6427/M/2010 BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI