IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 644/BANG/2010 ASSESSMENT YEAR : 2003-04 SHRI ARUN K .THIAGARAJAN, NO.37, KANAKAPURA ROAD, BASAVANGUDI, BANGALORE 560 004. : APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), BANGALORE. : RESPONDENT APPELLANT BY : SHRI S. SUKUMAR, ADVOCATE RESPONDENT BY : SMT. SWATHI S. PATIL, CIT-II(DR) O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER . THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT (A)-II, BANGALORE, IN ITA NO: 146/DC-3(1)/CIT(A)-II , BANGALORE, DATED: 15.3.2010 FOR THE ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE HAS RAISED GROUNDS RUNNING INTO EI GHTEEN NUMBERS IN AN EXHAUSTIVE, NARRATIVE AND ILLUSTRATIV E MANNER UNDER THREE CAPTIONS, NAMELY, (I) VALIDITY OF ASSESSMENT U/S 147 OF THE ACT ; (II) MERITS ITA NO.644/BANG/10 PAGE 2 OF 27 & (III) DENIAL OF EXEMPTION U/S 54 OF THE ACT. HOWEVER, ON A CLOSE SCRUTINY OF THE SAME, THE GRIEVANCES OF THE ASSESSE E, AS ENUMERATED, ARE AS UNDER: (I) THE CIT (A) ERRED IN JUSTIFYING THE VALIDITY OF RE- OPENING THE ASSESSMENT U/S 147 OF THE ACT; (II) THE CIT(A) ERRED IN UPHOLDING THE STAND OF THE AO W HO WAS NOT JUSTIFIED IN ADOPTING THE GUIDELINE RATE DETERMINED BY THE SUB- REGISTRAR FOR THE PURPOSE OF STAMP DUTY FOR COMPUTI NG CAPITAL GAINS ON THE BASIS OF PROVISO TO S.50C OF THE ACT; & (III) THE CIT(A) ERRED IN REJECTING THE CLAIM OF EXEMPTIO N U/S 54 OF THE ACT OF INVESTMENT OF CAPITAL GAINS IN TWO RESID ENTIAL PROPERTIES. 3. THE ISSUE, IN BRIEF, IS THAT THE ASSESSEE, AN I NDIVIDUAL, FURNISHED HIS RETURN OF INCOME ADMITTING INCOME OF RS.1.68 CRORES BEING RECEIPTS FROM SALARY, HOUSE PROPERTY, STCG, LTCG, O THER SOURCES ETC. THE RECORDS DO NOT INDICATE WHETHER THE RETURN OF I NCOME WAS PROCESSED EITHER U/S 143(1) OR 143(3) OF THE ACT. THIS VERY FACT HAS ALSO BEEN HIGHLIGHTED BY THE CIT(A) IN HIS IMPUGNED ORDER WHI CH IS UNDER CHALLENGE. 4. THE AO HAD RESORTED TO ISSUE A NOTICE U/S 148 O F THE ACT ON 17.3.2008 ON THE BASIS OF EXAMINATION OF RECORDS, I T WAS NOTICED THAT THE ASSESSEE HAD NOT DISCLOSED HIS TRUE INCOME CHARGEAB LE TO TAX ETC., THOUGH, THE ASSESSEE IN HIS COMMUNICATION DT.31.3.0 8 REQUIRED THE AO TO TREAT HIS RETURN OF INCOME FURNISHED ORIGINALLY AS THE RETURN OF INCOME FURNISHED IN COMPLIANCE TO THE SAID NOTICE AND SIMU LTANEOUSLY SOUGHT FOR THE REASONS RECORDED FOR THE ISSUANCE OF NOTICE U/S 148 OF THE ACT. ITA NO.644/BANG/10 PAGE 3 OF 27 4.1. THE REASON FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT, ACCORDING TO THE AO, IN BRIEF, IS THAT THE ASSESSEE OWNED A RESIDENTIAL PROPERTY AT CHETPET, CHENNAI WHICH WAS SOLD FOR AN APPARENT CONSIDERATION OF RS.2.68 CRORES THROUGH A REGISTERED SALE DEED DT .9.10.2002, ACCORDING TO WHICH, THE MARKET VALUE WAS STATED TO BE AT RS.2,68 ,89,375/-. ON THE BASIS OF THE SALE CONSIDERATION OF RS.2.68 CRORES, THE AS SESSEE APPEARED TO HAVE WORKED OUT THE LTCG TAXABLE AT RS.15.44 LAKHS, AFTE R CLAIMING EXEMPTION U/S 54 OF THE ACT FOR THE TWO PROPERTIES CLAIMED TO HAVE BEEN PURCHASED ON TWO DIFFERENT LOCALITIES AT BANGALORE BEING INVESTM ENTS. 4.2. CONTRARY TO THE ASSESSEES CLAIM, THE STAND OF THE AO WAS THAT THE ASSESSEE CLAIMED IN HIS ORIGINAL RETURN TH E SALE CONSIDERATION OF THE SUBJECT PROPERTY AT RS.2.68 CRORES AS AGAINST THE G UIDANCE VALUE OF RS.4.62,56,000/-. 4.3. THE ASSESSEE VIDE HIS LETTER DT: 31.3.2008 [S OURCE: P 10 OF PB AR] SOUGHT THE REASONS RECORDED IN TERMS OF S.148 (2) OF THE ACT FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT WHICH WAS FUR NISHED TO THE ASSESSEE VIDE AOS LETTER DT: 11.8.2008. THE ASSESSEES A.R , VIDE HIS COMMUNICATION DATED 25.11.2008 AMONG OTHERS, HAD ST ATED THAT IT HAS ALSO BEEN NOTICED THAT ONE OF THE RECORDED REASONS FOR ISSUE OF NOTICE U/S 147 IS AS PER THE SUB-REGISTRAR OFFICE, THE GUIDANCE VALU E OF THE SAID PROPERTY IS RS.4,62,56,000/-. IT IS REQUESTED THAT THE BASIS OF VALUATION AND ALL THE RELATED DOCUMENTS FOR ARRIVING AT SUCH GUIDANCE VAL UE BE MADE AVAILABLE TO THE ASSESSEE, SO THAT HE WOULD BE ABLE TO PRESENT H IS CASE AFTER TAKING INTO ITA NO.644/BANG/10 PAGE 4 OF 27 CONSIDERATION ALL THE FACTS AND EVIDENCE RELIED UPO N BY YOU FOR COMMENCING THE RE-ASSESSMENT PROCEEDINGS 4.4. THE AO IN HIS COMMUNICATION DATED: 25.11.2008 [P 15 OF PB AR] HAD STATED THAT THE INFORMATION AS TO THE SALE OF THE ABOVE PROPER TY WAS RECEIVED IN THIS OFFICE AS PER LETTER OF THE AC IT, CENTRAL CIRCLE IV(1), CHENNAI DT.6.12.07. IN THE SAID LETTER, IT HAS BEE N REPORTED THAT AS PER THE SUB-REGISTRARS OFFICE, THE GUIDELINE VALUE OF THE SAID PROPERTY WAS OF RS.4,62,56,000/- AS AGAINST RS.2,68,89,375/- BEING THE SALE CONSIDERATION OF THE PROPERTY SOLD. 4.5. THIS HAS BEEN OBJECTED TO BY THE ASSESSEES A R BY HIS LETTER DATED 27.11.2008 ADDRESSED TO THE AO. 4.6. THE AO, IN HIS IMPUGNED ORDER U/S 143(3) ( SIC ) 143(3) R.W.S.147 OF THE ACT DATED: 24.12.2008, HAD OBSERVE D THUS: 4. THE OBJECTIONS FILED BY THE ASSESSEES REPRESEN TATIVE ARE CONSIDERED. IN VIEW OF THE ASSESSEES OBJECTIONS, THE MATTER HAS B EEN REFERRED TO THE DISTRICT VALUATION OFFICER..CHENNAI THROUGH THIS OFFICE LE TTER DATED 25.11.2008 SEEKING THE FAIR MARKET VALUE OF THE PROPERTY SOLD AS REQUIRED UNDER SUB- SECTION 2 OF SECTION 50C OF THE I.T.ACT 1961. .HOWEVER, THE VALUATION REPORT IS YET TO BE RECEIVED AND THE SAME IS AWAITED. THE LIKELY DATE OF THE RECEIPT OF THE VALUATION REPORT AS REGA RD THE FAIR MARKET VALUE FROM THE DVO IS UNCERTAIN AS ON DATE. BUT, THE ASS ESSMENT PROCEEDINGS ARE BOUND TO BE COMPLETED ON OR BEFORE 31.12.2008. THE REFORE, THE FAIR MARKET VALUE FOR THE PURPOSE OF ASSESSMENT IS TO BE ADOPTE D ON THE BASIS OF THE GUIDANCE VALUE AS PRESCRIBED THE STAMP VALUATION AU THORITIES. THE GUIDANCE VALUE OF THE PROPERTY SOLD HAS BEEN REPORT ED AT RS.4,62,56,000/- BY THE ACIT, C-IV(1) CHENNAI THROUGH HIS LETTER DT:6.1 2.2007THE GUIDANCE VALUE SO REPORTED AT RS.4,62,56,000/- IS A DOPTED SUBJECT TO VALUATION REPORT, AS AN ABUNDANT PRE-CAUTIONARY MEA SURE IN THE INTEREST OF REVENUE. ITA NO.644/BANG/10 PAGE 5 OF 27 5 . AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE, AMONG OT HERS, WITH THE CIT (A) FOR RELIEF. AFTER CONSIDERATION O F THE FORCEFUL CONTENTIONS OF THE ASSESSEE AND ALSO THE REMAND REPORT OF THE AO, THE OBSERVATIONS OF THE LD. CIT (A) ON THE ISSUES ARE EXTRACTED AS UNDER: I. ACTION U/S 147/148 OF THE ACT: EXTENSIVELY QUOTING THE DECISION OF THE HONBLE APE X COURT IN THE CASE OF ACIT V. RAJESH JHAVERY STOCK BROKERS P. LTD. REPORT ED IN (2007) 291 ITR 500, IT WAS OBSERVED THUS: 3.5. FROM THE JUDICIAL PRONOUNCEMENT BY THE HONB LE SUPREME COURT ON THIS ISSUE, IT CAN BEEN THAT THE ONLY REQUIREMEN T OF LAW FOR INITIATION OF PROCEEDINGS U/S 147 IS THAT THERE MUST BE REASON TO JUSTIFY THE BELIEF THAT THERE IS ESCAPEMENT AND SUPPRESSION OF INCOME AND THERE IS NO NEED TO DISCLOSE THE REASONS IN THE NOTICE. THE SOURCES OF REASONS TO BELIEVE AND THE MATERIALS FOR THE BELIEF FORMED IS GIVEN IN THE LETTER IN F.N.CEN- IV(I)-07-08 DATED: 6/12/2007 FROM THE ACIT, CENTRAL CIRCLE IV(1), CHENNAI-34, STATING THAT AS PER THE SUB-REGISTRARS OFFICE, THE GUIDELINE VALUE OF THE PROPERTY AT DOOR NO.77, HARRINGTON ROA D, CHETPET, CHENNAI WAS RS.4,62,56,000/-. 3.6 THEREFORE, IN MY CONSIDERED VIEW, THE ISSUE OF NOTICE U/S 148 FOR REOPENING THE ASSESSMENT U/S A147 OF THE ACT IS VAL ID. II. VALIDITY OF ASSESSMENT WITHOUT PASSING AN ORD ER ON THE ASSESSEES OBJECTION FOR ACTION U/S 147/148: AFTER PERUSING THE AOS LETTER DT: 25.11.2008 TO TH E ASSESSEE AND ALSO HIS REMAND REPORT DATED: 7.8.2009, THE CIT (A) WAS OF THE VIEW THAT 3A.3. (II) IN VIEW OF THE FACTS STATED ABOVE, THER E IS SUFFICIENT COMPLIANCE ON THE PART OF THE AO WITH THE LEGAL REQ UIREMENTS. THERE IS, THEREFORE, NO MERIT IN THE APPELLANTS OBJECTIONS. ITA NO.644/BANG/10 PAGE 6 OF 27 6. DISILLUSIONED WITH THE REASONING OF THE CIT (A ), THE ASSESSEE HAS COME UP WITH THE PRESENT APPEAL. THE LONG DRAW N SUBMISSIONS OF THE LD. A R ARE SUMMARIZED AS UNDER: (I) THE JUSTIFICATION FOR RE-OPENING OF THE ASSESSMENT WAS BASED ON AN ERROR OF FACT WHICH WAS INDICATIVE OF THE FACT THAT THE PROCEEDINGS HAVING BEEN INITIATED BY THE AO WITHOUT DUE ENQUIRY ; - IT WAS THE DUTY OF THE AO TO MAKE NECESSARY ENQUIRI ES AND DRAW PROPER CONCLUSIONS BEFORE ISSUE OF NOTICE U/S 148 AND IN THE ABSENCE OF SUCH ENQUIRY, THERE WAS NO JUSTIFICA TION FOR REOPENING OF THE ASSESSMENT; - RELIES ON THE CASE LAWS: (A) CIT V. KALAPPA 167 ITR 22 (KAR) (B) HINDUSTAN LEVER V. R.B.WADKAR 268 ITR 332 (BOM) (C) CIT V. KELVINATOR OF INDIA LTD. 320 ITR 561 (SC) (D) PRASHANT S.JOSHI V. ITO 324 ITR 154 ( BOM) (E) CIT V. SMT.PARAMJIT KAUR (2009) 311 ITR 38 (P & H) (II) THE AO DOES NOT HAVE ANY VALID BASIS FOR FIXING THE GUIDANCE VALUE OF THE PROPERTY AT RS.4,62,56,000/- TO ARRIVE AT A CONCLUSION THAT INCOME ASSESSABLE TO TAX HAD ESCAPED ASSESSMENT, TH AT HE HAD NOT MENTIONED PARTICULARS OR THE BASIS OF THIS VALUATI ON EITHER IN THE NOTE RECORDING THE REASONS FOR RE-OPENING ASSESSMEN T NOR IN THE ORDER UNDER DISPUTE WHICH AGAIN WAS INDICATIVE THAT NO ENQUIRY WAS MADE BY THE AO BEFORE RECORDING SATISFACTION; (III) THE CIT(A) HAD RELIED ON THE RULING OF THE SC IN TH E CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS (P) LTD [291 ITR 50 0 (SC)] WHICH WAS PRIMARILY TO CONSIDER THE PROPOSITION THAT AN O RDER U/S 143(1)(A) CANNOT BE TREATED AS AN ASSESSMENT SO AS TO BAR JURISDICTION EITHER FOR A REGULAR ASSESSMENT OR REA SSESSMENT WHERE THE CONDITIONS THEREFOR WERE OTHERWISE SATISFIED. THIS DECISION HAD ABSOLUTELY NO RELEVANCE TO THE FACTS ON HAND (IV) IN THE ABSENCE OF ANY MATERIAL ON RECORD OR RATIONA L BELIEF, DUE TO THE FACT THAT THE REASONS REMAINED UNDISCLOSED OR T HAT THE REASON WAS NO MANIFEST REGARDING THE PROCESS OF REASONING BY THE AO HAD ARRIVED AT A BELIEF THAT INCOME LIABLE TO TAX H AD ESCAPED ASSESSMENT, THE ASSESSMENT WAS INVALID AS HELD BY T HE ITAT, HYDERABAD B BENCH JASTI RAMA RAO V ITO (2010) 130 TTJ (HYD)(UO) 66; ITA NO.644/BANG/10 PAGE 7 OF 27 - THE AO HAD BASED HIS BELIEF OF ESCAPEMENT OF INCOME ON SOME INFORMATION RECEIVED FROM HIS COUNTERPART AND APART FROM THIS, HAD NOT RELIED UPON ANY OTHER FACT TO DETERMINE DE EMED CONSIDERATION FOR PURPOSES OF DETERMINATION APPLIC ATION OF S.50C(1) - RELIES ON THE RULING OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT V. B.N.KESHAV IN ITA NO:21 OF 2008 DT: 3.4.2008 - THE DEPARTMENTAL SLP AGAINST THE ABOVE DECISION WAS DISMISSED AND, THUS, THE RULING OF THE HONBLE COUR T HAD BECOME FINAL AND THE ASSESSEES CASE FALLS SQUARELY ON THE ABOVE MENTIONED DECISION OF THE JURISDICTIONAL H.C AND, HENCE THE NOTICE ISSUED U/S 148 WAS INVALID; (V) A MERE LETTER FROM ANOTHER DEPARTMENTAL OFFICER INF ORMING THE AO ABOUT THE FACT OF PROPERTY SALE BY THE ASSESSEE WO ULD NOT BY ITSELF CONSTITUTE A GROUND FOR REASON TO BELIEF THAT INC OME HAD ESCAPED ASSESSMENT. THE NEED FOR THE AO TO DO FURTHER INVE STIGATION TO GET TOGETHER ALL OTHER ATTENDANT FACTS BEFORE FORMING A N OPINION HAS BEEN STATED AS A REQUIREMENT BY THE APEX COURT IN A N ANALOGOUS DECISION; - THE ACTION OF THE AO IN RE-OPENING THE ASSESSMENT SOLELY ON THE BASIS OF A LETTER FROM ANOTHER OFFICER WITHOUT ANY FURTHER ENQUIRY WAS INAPPROPRIATE AND THE NOTICE U/S 148 WAS INVALI D; (VI) THE AO HAD ADOPTED THE VALUE AT RS.4.62 CRORES SUBJ ECT TO VALUATION REPORT AND, THUS, THE AO WAS NOT SURE OF THE VALUE OF CONSIDERATION TO BE ADOPTED AND, THUS, THE REOPENIN G OF THE ASSESSMENT AND ADOPTION OF THE VALUE WITHOUT ANY BA SIS FOR THE PURPOSES OF DETERMINING CAPITAL GAINS WAS NOT SUSTA INABLE; - THE INCOME-TAX RETURN PRESCRIBED UNDER THE I.T.RULE S DOES NOT PROVIDE FOR REPORTING THE GUIDELINE VALUE AND, THUS , THE ASSESSEE CANNOT BE FAULTED WITH FOR NOT FURNISHING THE REQUIRED PARTICULARS; (VII) THE ASSESSEE VIDE HIS LETTER DT: 25.11.08 AND 27.11 .08 HAD OBJECTED TO THE VALIDITY OF THE REASONS FOR REOPENING THE AS SESSMENT. THE AO, WITHOUT PASSING A SPEAKING ORDER ON THE OBJECTI ONS OF THE ASSESSEE, HAD CONCLUDED THE ASSESSMENT WHICH WAS CO NCEDED BY THE REVENUE THAT THERE WAS NO SPEAKING ORDER OF THE AO AS WAS EVIDENT FROM THE REMAND REPORT; - RELIES ON THE CASE LAWS: ITA NO.644/BANG/10 PAGE 8 OF 27 (A) ALLANA COLD STORAGE LTD. V. ITO 287 ITR 1 (BOM) (B) VIDYASAGAR V. ITO & ANOTHER 305 ITR 124 (P & H) (C) K.S.SURESH V. DCIT (2005) 279 ITR 61 (MAD) - THE CIT(A)HAD MERELY RELIED ON THE REMAND REPORT FO R SUSTAINING JURISDICTION AND HAD FAILED TO DISCHARGE HIS RESPONSIBILITY TO CONSIDER THE OMISSION OF THE AO T O PASS A SPEAKING ORDER ON THE OBJECTIONS RAISED BY THE ASSE SSEE; - THE ASSESSMENT WAS BOUND BY LIMITATION AND THE REAS ONING OF THE AO HAD NO BASIS AS HE HAD AMPLE TIME AT HIS DIS POSAL TO DISPOSED OFF THE ASSESSEES OBJECTION; - RELIES ON IN THE CASE OF KARNATAKA GOLF ASSOCIATIO N V. DDIT (2005) 275 ITR 297 (KAR) ON MERITS : (VIII) THE AO WAS NOT JUSTIFIED IN ADOPTING THE GUIDANCE V ALUE FOR THE PURPOSE OF DETERMINING THE CG IN TERMS OF S.50C. T HE BASIS OF ADOPTING THE GUIDANCE VALUE HAD NOT BEEN MADE KNOWN TO THE ASSESSEE DURING THE PROCEEDINGS. AS THERE WAS NO IN FORMATION THAT THE ASSESSEE HAD RECEIVED ANY AMOUNT OVER AND ABOVE THE CONSIDERATION SPECIFIED IN THE SALE DEED, S.147 HAD NO APPLICATION K.P.VERGHESE V. ITO 131 ITR 597 (SC) - RULED T HAT IN SUCH A SITUATION SALE CONSIDERATION AS MENTIONED IN THE S ALE DEED HAD TO BE ADOPTED; - VALUATION PRESCRIBED BY ANY STATE AGENCY FOR THE PU RPOSE OF STAMP DUTY WOULD NOT IPSO FACTO BE A SUBSTITUTE FOR THE ACTUAL CONSIDERATION IN THE ABSENCE OF ANY ADMISSIBLE ADDI TIONAL EVIDENCE CIT V. CHANDANI BHOCHAR 323 ITR 510 ( P & H); (IX) THE CIT(A) HAD OVERLOOKED THE FACT THAT THE DVO HAD ADOPTED THE VALUE OF LAND AT 2220/SFT WHEREAS THE VALUE DID NOT EXCEED RS.1542/SFT BASED ON SEVEN SALE INSTANCES IN THE AREA THE DOCUMENTARY EVIDENCES FURNISHED BEFORE THE CIT(A) H AD BEEN IGNORED; (X) THE PROCEEDS OF SALE OF RESIDENTIAL PROPERTY WAS IN VESTED IN TWO RESIDENTIAL HOUSES WHEREIN THE AO HAD DENIED THE DE DUCTION U/S 54 ON THE SECOND HOUSE CITING THE FINDING OF THE HO NBLE TRIBUNAL IN ITA NO: 530/BANG/2007 DT.30.4.2008 IN THE CASE O F RAJALAKSHMI - RELIES ON THE JURISDICTIONAL H.C IN THE CASE OF C IT V. D.ANAND BASAPPA 309 ITR 329 (KAR) ITA NO.644/BANG/10 PAGE 9 OF 27 6.1. TO DRIVE HOME HIS WELL-KNITTED SUBMISSIONS, THE LD. A R HAD FURNISHED TWO VOLUMINOUS PAPER BOOKS (I) CONT AINING 1 276 PAGES WHICH AMONG OTHERS CONSIST OF COPIES OF (A) VARIOUS JUDICIAL PRONOUNCEMENTS; (B) SALE INSTANCES IN THE VICINITY ETC., AND (II) CONTAINING 1 134 PAGES WHICH CONSIST OF INTER ALIA COPIES OF T HE CORRESPONDENCES WITH THE AO, FIRST APPELLATE AUTHORITY ETC. 6.2. ON THE OTHER HAND, THE LD. DR WAS VERY SPECIF IC IN HER URGE THAT THE ASSESSEE HAD FAILED TO DECLARE THE TRUE IN COME CHARGEABLE TO TAX WHICH NECESSITATED ON THE PART OF THE AO FOR ISSUAN CE OF NOTICE U/S 148 OF THE ACT WHICH CULMINATED IN CONCLUDING THE ASSESSME NT IN BRINGING TO TAX THE INCOME FROM LTCG AT RS.2.96 CRORES. AFTER DUE CONSIDERATION OF THE PROS AND CONS OF THE ISSUE, THE LD. CIT (A) HAD DIR ECTED THE AO TO RECOMPUTE THE VALUE OF THE SUBJECT PROPERTY AT RS.4 .06 CRORES IN A JUDICIOUS MANNER WHICH, ACCORDING TO THE LD. D R, REQUIRES TO BE SUSTAINED. DURING THE COURSE OF HEARING, THE LD. D. R FURNISHED PHOTO STAT COPIES OF (I) COMMUNICATION RECEIVED FROM THE ACIT, CENTRAL CIRCL E-IV(1), CHENNAI WITH REGARD TO GUIDE LINE VALUE OF THE SUBJECT PROPERTY & (II) REASONS RECORDED FOR ISSUE OF NOTICE U/S 148 OF THE ACT ETC. 7. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS, ATTENTIVELY PERUSED THE RELEVANT RECORDS, THE VOLUMINOUS DOCUME NTARY EVIDENCES PRODUCED IN THE SHAPE OF PAPER BOOKS BY THE ASSESSE E AND ALSO THE BRIEF NOTE OF THE LD. D.R. ITA NO.644/BANG/10 PAGE 10 OF 27 7.1. THE ASSERTION OF THE AO REVOLVED AROUND THE F ACT THAT THE GUIDANCE VALUE OF THE PROPERTY SOLD AT CHENNAI WAS RS.4,62,56,000/- WHICH WAS INFORMED BY HIS COUNTERPART AT CHENNAI. HOWEVE R, THE ASSESSEE HAD ADMITTED THE SALE CONSIDERATION OF ONLY RS.2,68,89, 375/- AS PER THE SALE DEED EXECUTED WHICH GOT REGISTERED ON 9.10.2002 BEF ORE THE SUB-REGISTRAR, PERIAMET, CHENNAI WHEREIN THE LAND VALUE HAS BEEN F IXED AT RS.2560/CENT/SFT AND BUILDING VALUE WAS FIXED AT R S.39.43 LAKHS [P 47 OF PB] AND ON THE BASIS OF WHICH EXTRA STAMP DUTY OF R S.18.28 LAKHS WAS LEVIED AND DULY COLLECTED BY THE STAMP DUTY AUTHORI TY [SOURCE: P 90 OF PB AR]. THIS VERY FACT HAS NOT BEEN DISPUTED BY THE ASSESSEE. 7.2. THE REASONING OF THE AO FOR THE ISSUANCE OF N OTICE U/S 148 OF THE ACT WAS HOTLY CONTESTED BY THE ASSESSEE THROUGH HIS A.R. THE ASSESSING OFFICER DID ACKNOWLEDGE THE OBJECTIONS FI LED BY THE ASSESSEES REPRESENTATIVE WHICH HAS ALSO BEEN TAKEN DUE COGNIZ ANCE AND OBSERVED, IN BRIEF, IN THE IMPUGNED ORDER THAT IN VIEW OF THE ASSESSEES OBJECTIONS, THE MATTER HAS BEEN REFERRED TO THE DISTRICT VALUATION OFFICERTHROUGH THIS OFFICE LETTER DATED 25.11.2008 SEEKING THE FAIR MAR KET VALUE OF THE PROPERTY SOLD AS REQUIRED UNDER SUB-SECTION 2 OF SECTION 50C OF THE I.T. ACT 1961 . THUS , IN OUR FIRM VIEW, THE AO CONSIDERED THE OBJECTIONS OF THE ASSESSEE ON THE BASIS OF WHICH THE ISSUE WAS REFERRED TO THE DVO FOR FMV OF THE SUBJECT PROPERTY, THOUGH THE SAME HAD NOT BEEN DEAL T WITH AS PER THE PROCEDURES LAID DOWN BY THE HONBLE SUPREME COURT I N GKN DRIVESHAFTS CASE CITED SUPRA. IN ESSENCE, THE AO HAD TAKEN DUE NOTE OF THE ASSESSEES OBJECTION AND, ACCORDINGLY, REFERRED THE ISSUE TO T HE DVO FOR VALUATION AND, ITA NO.644/BANG/10 PAGE 11 OF 27 THUS, THE AO, IN OUR CONSIDERED VIEW, HAD ACTED IN A FAIR MANNER KEEPING THE RULING OF THE HONBLE SUPREME COURT CITED SUPRA IN VIEW. 7.3. THE AO HAD FORMED AN OPINION ON THE BASI S OF THE ASSERTION OF THE SUB-REGISTRAR THAT THE LAND VALUE FIXED AT RS.2560/ CENT/SFT REFERRED ABOVE AND THAT THE CG ARISING FROM THE SALE TRANSACTION H AD NOT BEEN DECLARED AS INCOME AND THAT HE HAD, THEREFORE, REASON TO BELIEV E THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF S.147 OF THE ACT AND SO ON SO FORTH. 7.4. HOWEVER, THE ASSESSEE HAS BEEN SEEKING SANCT UARY IN THE FINDING OF THE HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT V. KALAPPA 167 ITR 22 (KAR) (DIVISION BENCH) TO THE E FFECT THAT THE AO HAD FAILED TO MAKE THE NECESSARY ENQUIRIES AND DRAW PRO PER INFERENCE AS TO WHETHER THE INCOME RETURNED IS CORRECT OR NOT ETC. 7.5. WITH DUE RESPECTS, WE HAVE DULY PERUSED THE HONBLE COURTS OBSERVATIONS ON THE ISSUE. IN THIS REGARD, WE WOULD LIKE TO POINT OUT THAT IN THE PRESENT CASE THE AO RECEIVED DISCREET I NFORMATION FROM HIS COUNTERPART AT CHENNAI TO THE EFFECT THAT THE SUBJE CT PROPERTY WAS REGISTERED ON 9.10.2002 BEFORE THE SUB-REGISTRAR PE RIYAMET, CHENNAI AND AS PER THE SALE DEED, THE SALE CONSIDERATION WAS RS .2.68 CRORES WHEREAS THE GUIDELINE VALUE OF THE SAID PROPERTY WAS RS.4.6 2 CRORES (AS PER THE SUB-REGISTRARS OFFICE]. ON A GLIMPSE OF THE RETURN OF INCOME FURNISHED ORIGINALLY BY THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE HAD DISCLOSED LTCG OF RS.23.13 LAKHS BASED ON THE SALE CONSIDERA TION OF SUBJECT PROPERTY AT RS.2.68 CRORES (AS PER SALE DEED). THU S, THE AO HAD REASON TO ITA NO.644/BANG/10 PAGE 12 OF 27 BELIEVE THAT THE ASSESSEE HAD FAILED TO DECLARE THE TRUE INCOME CHARGEABLE TO TAX WHICH CULMINATED FOR THE ISSUANCE OF NOTICE U/S 148 OF THE ACT. THUS, IN OUR CONSIDERED VIEW, THE AO WAS WITHIN HIS REALM TO TAKE RECOURSE UNDER THE PROVISIONS OF S.148 OF THE ACT. WITH DUE REGAR DS, WE AFFIRM THAT THE FINDING OF THE JURISDICTIONAL HIGH COURT CITED SUPR A RELIED ON BY THE ASSESSEE IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE ISSUE ON HAND. 7.6. WE HAVE ALSO ATTENTIVELY PERUSED YET ANOTHER FINDING OF THE JURISDICTIONAL HONBLE HIGH COURT IN ITA NOS: 2 1 & 22 OF 2008 DATED: 3.4.2008 IN THE CASE OF CIT V. B.N.KESHAV [ON WHICH THE ASSESSEE HAD PLACED STRONG RELIANCE] WHEREIN THE HONBLE COURT D EALT WITH PRIMARILY THE ISSUANCE OF NOTICE U/S 148 OF THE ACT. AFTER DUE P ERUSAL OF THE SAID NOTICE, THE HONBLE COURT OBSERVED THUS 8. CRITICAL EXAMINATION OF THE SAID NOTICE SHOWS T HAT MOST OF THE RELEVANT PLACES HAVE BEEN LEFT BLANK. NOTHING HAS BEEN MENT IONED IN THE NOTICE WHICH WOULD HAVE CONVEYED THE NECESSARY INFORMATION TO TH E ASSESSEE TO HAVE ACTED PURSUANT TO THE SAID NOTICE. REQUIREMENT OF SENDING NOTICE UNDER SECTION 148 OF THE ACT IS THAT BEFORE MAKING ASSESS MENT, REASSESSMENT OR RE- COMPUTATION UNDER SECTION 147, THE ASSESSING OFFICE R SHALL SERVE ON THE ASSESSEE A NOTICE REQUIRING HIM TO FURNISH WITHIN S UCH PERIOD AS MAY BE SPECIFIED IN THE NOTICE, A RETURN OF HIS INCOME OR THE INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER T HIS ACT DURING THE PREVIOUS YEAR CORRESPONDING TO THE RELEVANT ASSESSM ENT YEAR, IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANN ER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED; AND THE PRO VISIONS OF THIS ACT, SO FAR AS MAY APPLY, ACCORDINGLY, AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139 OF THE ACT. 9. THUS, IN OUR CONSIDERED OPINION, THE MATERIAL F ACTS WHICH WERE REQUIRED TO BE MENTIONED IN THE NOTICE ISSUED TO THE ASSESSE E UNDER SECTION 148 OF THE ACT, WERE ALTOGETHER MISSING. OBVIOUSLY, ASSESSEE WAS REQUIRED TO IMAGINE EVERYTHING TO HIMSELF TO HAVE ACTED PURSUANT TO THE NOTICE ISSUED TO HIM. ITA NO.644/BANG/10 PAGE 13 OF 27 7.6.1. AFTER EXTENSIVELY QUOTING VARIOUS JUDICIAL PRONOUNCEMENTS ON A SIMILAR ISSUE, THE HONBLE COURT WAS PLEASED TO O BSERVE THUS 15. THIS BEING THE LEGAL POSITION, WE HAVE NO DOUB T IN OUR MIND THAT ONCE NOTICE ISSUED UNDER SECTION 148 OF THE ACT ITSELF I S HELD TO BE INVALID AND ILLEGAL, ALL SUBSEQUENT PROCEEDINGS, WOULD AUTOMATI CALLY FALL AND NO COGNIZANCE THEREOF CAN BE TAKEN. 7.7. WITH HIGHEST REGARDS, WE WOULD LIKE TO POINT OUT THAT THE ISSUE REVOLVED AROUND BEFORE THE HONBLE COURT WAS THE CO NTENTS OF THE NOTICE U/S 148 OF THE ACT AND NOT THE ISSUANCE OF NOTICE ITSELF. IN THE CASE ON HAND, THE ASSESSEE HAD OBJECTED TO THE REASONS RECO RDED FOR THE ISSUANCE OF NOTICE U/S 148 OF THE ACT. WE ARE, THEREFORE, O F THE CONSIDERED VIEW THAT THE ASSESSEE CANNOT TAKE REFUGE UNDER THIS CASE LAW TO HIS ADVANTAGE. 7.8. LET US HAVE A GLIMPSE OF THE REASONS RECORDED BY THE AO ON 17.3.2008 WHICH IS EXTRACTED AS UNDER: THE ASSESSEE HAD SOLD A HOUSE PROPERTY FOR A SALE CONSIDERATION OF RS.2,68,89,375/- AND THE SAID PROP ERTY WAS REGISTERED ON 9.10.2002 BEFORE THE SUB-REGISTRAR, P ERIAMET, CHENNAI. AS PER THE SUB-REGISTRARY OFFICE, THE GUI DELINE VALUE OF THE SAID PROPERTY IS RS.4,62,56,000/-. THE CAPITAL GAIN ARISING FROM SALE TRANSACTION HAS NOT BEEN DECLARED AS INCO ME FOR THE AY 2003-04. I HAVE THEREFORE REASON TO BELIEVE THAT I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT, 1961. ACCORDING LY, NOTICE U/S 148 IS ISSUED. 7.9. IN THIS CONNECTION, WE SHALL, WITH DUE RESPECTS, QUOTE THE RULING OF THE HONBLE SUPREME COURT IN THE CASE OF ASST. CIT V. RAJESH JHAVARI STOCK BROKERS P. LTD (291 ITR 500) WHEREIN THE HON BLE COURT, AFTER ANALYZING THE ISSUE IN DEPTH, WAS PLEASED TO OBSERV E THUS THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL 1, 1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE ITA NO.644/BANG/10 PAGE 14 OF 27 PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTION . UNDER THE OLD PROVISIONS OF SECTION 147, SEPARATE CLAUSES (A) AND (B) LAID D OWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. TO CONFER JURISDIC TION UNDER SECTION 147(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED: FIRST LY THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME TAX HAVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REA SON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BO TH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASS ESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS IF THE ASSESSING OFFICER F OR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T IT CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS, HOWEVER, TO BE NOT ED THAT BOTH THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBI T OF THE PROVISO TO SECTION 147 7.10. IN A NUT-SHELL, THE AO WAS WITHIN HIS D OMAIN TO REASON TO BELIEF THAT THERE WAS AN ESCAPEMENT OF INCOME CHARGEABLE T O TAX AND ALSO ISSUANCE OF NOTICE U/S 148 OF THE ACT AND, THUS, W E ARE IN TOTAL AGREEMENT WITH THE AVERMENT OF THE LD. CIT (A) THAT IN VIEW O F THE AOS STAND, THERE IS SUFFICIENT COMPLIANCE ON THE PART OF THE AO WITH TH E LEGAL REQUIREMENTS. 7.11. TURNING OUR ATTENTION TO THE ASSESSE ES ARGUMENTS ON THE MERITS OF THE ISSUE, WE FIND THAT THE ASSESSEES A.R, IN HIS LETTER DT: 9.3.2010 ADDRESSED TO THE LD. CIT (A) ON THE VALUAT ION REPORT OF THE DVO [P 92 OF PB AR], SUBMITTED THAT THE ASSESSEE HAD SOLD HIS PROPERTY COMPRISING OF 1 4341 SFT OF LAND AND AN OLD 60 YEAR OLD BUILDING THEREON FOR A COMPOSITE CO NSIDERATION OF RS.2,68,89,375/-. IN ORDER TO ARRIVE AT THE LAND S ALE VALUE, THE BUILDING SALVAGE VALUE HAS TO BE ADOPTED AS RS.80,000/- ON T HE BASIS OF THE ACCEPTED VALUATION GUIDELINES. THE UNIT SALE VALUE OF THE L AND BEING A COMPONENT OF THE ASSESSEES PROPERTY SOLD, WORKS OUT TO RS.1,869 PER SFT [I.E., RS.26809375 DIVIDED BY 14341 SFT.] ASSESSEES SUBMISSION IN RESPECT OF LAND: ITA NO.644/BANG/10 PAGE 15 OF 27 A TABLE OF COMPARATIVE SALE INSTANCES IS ENCLOSED A S AN ANNEXURE. THESE SEVEN SALE INSTANCES REFER TO LAND SITUATED AT HARR INGTON ROAD, CHENNAI THE SAME ROAD IN WHICH THE PROPERTY SOLD BY THE ASS ESSEE IS SITUATED. THE PERIOD DURING WHICH THE COMPARATIVE SALE HAS TAKEN PLACE IS ALSO PROXIMATE WITH OCTOBER, 2002, THE MONTH IN WHICH THE ASSESSEE SOLD HIS PROPERTY. AS MAY BE SEEN FROM THE ANNEXURE, THE RATE AT WHICH TH E LAND WAS SOLD RANGED FROM RS.1358/SFT TO RS.1542/SFT. THE AVERAGE RATE OF SALE PER SFT WORKS OUT TO RS.1472/- CONSIDERING THAT THE PROPERTY SOLD BY TH E ASSESSEE WAS A CORNER PLOT AS PER THE ACCEPTED METHODOLOGY, A PREMIUM OF 10% IS ADOPTED IN THE COMPARABLE SALE INSTANCES TO MAKE THE COMPARISON JU STIFIABLE. THUS, THE REVISED UNIT RATE OF THE COMPARABLE TRANSACTIONS WO RKS OUT TO 110% OF 1472 =RS.1619. AS COMPARED TO THIS, THE UNIT SALE PRICE OF THE ASSESSEES PROPERTY IS RS.1869. THE DVO HAS FIXED THE LAND RAT E OF RS.2220/SFT WITHOUT DISCLOSING THE BASIS FOR SUCH DETERMINATION. THIS APPEARS TO BE EXCESSIVE. HENCE, THE VALUE AS DECLARED BY THE ASSESSEE MAY KI NDLY BE CONSIDERED AS FAIR MARKET VALUE. ASSESSEES SUBMISSION IN RESPECT OF BUILDING: THE DVO HAS MENTIONED THAT HE HAS INSPECTED THE PRO PERTY ON 9.9.2009. HE HAS FAILED TO MENTION THAT THE OLD BUILDING NO LONG ER EXISTS; AND THAT A NEW BUILDING HAS BEEN CONSTRUCTED BY THE PURCHASER. TH E DVO HAS BROKEN UP THE ESTIMATED BUILDING COST UNDER VARIOUS HEADS AND HAS ARRIVED AT A VALUE OF RS.3184102. THE VALUATION REPORT IS SILENT AS TO HOW HE HAS ARRIVED AT THIS FIGURE WITHOUT THE BUILDING BEING AVAILABLE FO R INSPECTION. THE SALVAGE VALUE OF THE BUILDING HAS BEEN DETERMIN ED BY THE DVO AT RS.7,00,000. THE AGE OF THE BUILDING WAS 60 YEARS AS IS EVIDENT FROM THE RECORDS. WE UNDERSTAND THAT AS PER VALUATION GUIDE LINES, IF THE AGE OF THE BUILDING IS OVER 50 YEARS, ONLY A NOMINAL SALVAGE V ALUE, OF SAY 2.5% IS TO BE ADOPTED. IN THIS CONTEXT, THE SALVAGE VALUE OF 22% ADOPTED BY THE DVO IS EXCESSIVE. IT IS REQUESTED THAT THE VALUE OF BUILD ING ADOPTED BY THE DVO BE CONSIDERED AS EXCESSIVE AND A NOMINAL SALVAGE VALUE OF RS.80000 BE CONSIDERED AS BEING FAIR MARKET VALUE 7.12. AFTER TAKING INTO ACCOUNT THE STRONG OBJECTI ON MADE BY THE ASSESSEE IN ADOPTING THE GUIDANCE VALUE AT RS.4 ,62,56,000/-, THE CIT(A) HAD OBSERVED THAT THE AO HAD COMPUTED THE LO NG TERM CAPITAL GAINS ARISING OUT OF THE SALE OF PROPERTY IN ACCORDANCE W ITH THE PROVISIONS OF S.50C OF THE ACT, ADOPTING THE GUIDANCE VALUE PRESC RIBED BY THE STAMP ITA NO.644/BANG/10 PAGE 16 OF 27 VALUATION AUTHORITY, CHENNAI. AFTER ELABORATELY QU OTING THE DECISIONS OF THE HONBLE TRIBUNAL, (I) AMRITSAR BENCH IN THE CAS E OF PUNJAB POLY JUTE CORPORATION [313 ITR (AT) 178]; AND (II) LUCKNOW B ENCH IN THE CASE OF JITENDRA MOHAN SAXENA V. ITO [305 ITR (AT) 62], THE CIT(A) HAD GIVEN HIS FINDING THAT 4.7. IN THE PRESENT CASE, THE PROPERTY WAS REGISTE RED AT RS.2,68,89,375/- WHEREAS THE AO ADOPTED THE SALE CONSIDERATION AT RS .4,62,56,000/-. HOWEVER, AFTER EXAMINING THE DETAILS AND DOCUMENTS FURNISHED AT THE TIME OF APPEAL HEARING, THE DIFFERENCE IN VALUE OF THE PROP ERTY ADOPTED BY DIFFERENT AUTHORITIES IS AS UNDER: (I) TOTAL SALE CONSIDERATION AS PER SALE DEED DT.9.10.2002 RS.2,68,89,375 (II) VALUE OF THE PROPERTY ADOPTED BY THE AO RS.4,62,56,000 (III VALUE OF PROPERTY DETERMINED BY DVO RS. 3,25,38,000 (IV) VALUE OF PROPERTY AS PER STAMP DUTY AUTHORITY RS.4,06,56,735 4.8. IN MY VIEW, SECTION 50C COMES INTO PLAY ONLY W HEN THERE IS VALUATION AT A HIGHER VALUE FOR STAMP VALUATION PURPOSES BY THE STATE AUTHORITY THAN DECLARED BY THE ASSESSEE CONCERNED IN THE SALE DEED . WHEN SUCH A DIFFERENCE IS NOTICED, VALUATION ADOPTED BY THE STAMP VALUATIO N AUTHORITY HAS TO BE SUBSTITUTED FOR THE SALE CONSIDERATION OF SUCH PROP ERTY MENTIONED IN THE SALE DEED. IN THE PRESENT CASE, THE PROPERTY WAS REGIST ERED FOR A TOTAL CONSIDERATION OF RS.2,68,89,375/- WHEREAS THE VALUA TION ADOPTED BY THE STAMP VALUATION AUTHORITY IS RS.4,06,56,735/-. APP LYING THE RATIO OF THE DECISION OF THE HONBLE ITAT, LUCKNOW IN THE CASE O F JITENDRA MOHAN SAXENA (SUPRA), THE AO IS DIRECTED TO RECOMPUTED T HE VALUE OF THE PROPERTY AT RS.4,06,56,735/-. 7.13. THIS HAS BEEN VEHEMENTLY CONTESTED BY THE LD. A.R DURING THE COURSE OF HEARING BEFORE US. (I) THE AO WAS NOT JUSTIFIED IN ADOPTING THE GUIDANCE V ALUE FOR THE PURPOSE OF DETERMINING THE CG IN TERMS OF S.50C. T HE BASIS OF ADOPTING THE GUIDANCE VALUE HAD NOT BEEN MADE KNOWN TO THE ASSESSEE DURING THE PROCEEDINGS. AS THERE WAS NO IN FORMATION THAT THE ASSESSEE HAD RECEIVED ANY AMOUNT OVER AND ABOVE THE ITA NO.644/BANG/10 PAGE 17 OF 27 CONSIDERATION SPECIFIED IN THE SALE DEED, S.147 HAD NO APPLICATION K.P.VERGHESE V. ITO 131 ITR 597 (SC) - RULED T HAT IN SUCH A SITUATION SALE CONSIDERATION AS MENTIONED IN THE S ALE DEED HAD TO BE ADOPTED; - VALUATION PRESCRIBED BY ANY STATE AGENCY FOR THE PURPOSE OF STAMP DUTY WOULD NOT IPSO FACTO BE A SUBSTITUTE FOR THE ACTUAL CONSIDERATION IN THE ABSENCE OF ANY ADMISSIBLE ADDI TIONAL EVIDENCE CIT V. CHANDANI BHOCHAR 323 ITR 510 ( P & H); (II) THE CIT(A) HAD OVERLOOKED THE FACT THAT THE DVO HAD ADOPTED THE VALUE OF LAND AT 2220/SFT WHEREAS THE VALUE DID NOT EXCEED RS.1542/SFT BASED ON SEVEN SALE INSTANCES IN THE AREA THE DOCUMENTARY EVIDENCES FURNISHED BEFORE THE CIT(A) H AD BEEN IGNORED; (III) THE PROCEEDS OF SALE OF RESIDENTIAL PROPERTY WAS IN VESTED IN TWO RESIDENTIAL HOUSES WHEREIN THE AO HAD DENIED THE DE DUCTION U/S 54 ON THE SECOND HOUSE CITING THE FINDING OF THE HO NBLE TRIBUNAL IN ITA NO: 530/BANG/2007 DT.30.4.2008 IN THE CASE O F RAJALAKSHMI - RELIES ON THE JURISDICTIONAL H.C IN THE CASE OF C IT V. D.ANAND BASAPPA 309 ITR 329 (KAR) 8. WE HAVE CONSCIENTIOUSLY PERUSED THE SUBMIS SIONS OF THE ASSESSEE AS WELL AS THE REASONING OF THE LD. CIT (A). AT TH E OUTSET, WE WOULD LIKE TO POINT OUT THAT THE CIT (A) HAD NOT APPLIED HIS MIND WHILE DEALING WITH THE ISSUE. WHEN THE ASSESSEE, AT THE INITIAL STAGE OF ASSESSMENT PROCEEDINGS, OBJECTED TO THE ADOPTION OF THE GUIDELINE VALUE PRE SCRIBED BY THE STAMP VALUATION AUTHORITIES [SVA], THE AO HAD RATHER DUTI FULLY REFERRED THE ISSUE TO THE DISTRICT VALUATION OFFICER [DVO] AS REQUIRED SU B-SECTION 2 OF S.50C OF THE ACT. 8.1. IN THIS RESPECT, LET US HAVE A GLIMPSE O F WHAT THE PROVISIONS OF S.50C OF THE ACT SAY? SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION I N CERTAIN CASES. ITA NO.644/BANG/10 PAGE 18 OF 27 50C. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRU ING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING L AND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTH ORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRED TO A S THE STAMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUT Y 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 CONSIDERA TION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (1) WHERE- (A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER TH AT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORIT Y UNDER SUB- SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PR OPERTY AS ON THE DATE OF TRANSFER; (B) . THE ASSESSING OFFICER MAY REFER THE VALUATION OF TH E CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUB-SECTION (2), (3), (4), (5) AND (6) OF SECTION 1 6A (3) SUBJECT TO THE PROVISIONS CONTAINED IN SUB-SECT ION (2), WHERE THE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY REFERRED TO IN SUB-SE CTION (1), THE VALUE SO ADOPTED OR ASSESSED BY SUCH AUTHORITY SHALL BE TAK EN AS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. 8.2. AT THIS JUNCTURE, WE RECALL THE FINDING OF THE HONBLE ITAT, LUCKNOW BENCH IN THE CASE OF JITENDRA MOHAN SAXENA V. ITO R EPORTED IN 305 ITR (AT) 62 WHEREIN, THE HONBLE BENCH, AFTER DULY ANAL YZING THE INTENTION OF THE LEGISLATURE IN INTRODUCING SECTION 50C OF THE A CT, WAS PLEASED TO OBSERVE THUS WHERE THE ASSESSEE DOES NOT OBJECT TO THE VALUATIO N MADE BY THE STAMP VALUATION AUTHORITY, THEN THAT VALUATION WOULD BE A DOPTED AND WHERE HE OBJECTS AND, ACCORDINGLY, THE ASSESSING OFFICER MAK ES A REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER, IF THE VALUATION BY THE DEPARTMENTAL VALUATION OFFICER IS HIGHER THAN THE VALUE ADOPTED BY THE STAMP VALUATION ITA NO.644/BANG/10 PAGE 19 OF 27 AUTHORITY, THEN ACCORDING TO SUB-SECTION (3), THE V ALUATION AS DONE BY THE STAMP VALUATION AUTHORITY WILL BE ADOPTED AS THE SA LE CONSIDERATION. THE EXPRESSION SHALL USED IN THE SECTION CANNOT BE CO NSIDERED AS MAY. WHERE SECTION 50C IS INVOKED, THERE IS NO SCOPE FOR ANY D ISCRETION AND THE ASSESSING OFFICER IS DUTY BOUND TO ADOPT THE VALUAT ION MADE BY THE STAMP VALUATION AUTHORITY, IF IT IS HIGHER THAN THE SALE CONSIDERATION SHOWN B Y THE ASSESSEE. HOWEVER, SUB-SECTION (3) DOES PROVIDE SOME LATITUDE . WHERE THE VALUATION MADE BY THE DEPARTMENTAL OFFICER IS HIGHE R, THEN THE VALUATION BY THE STAMP VALUATION AUTHORITY WILL BE ADOPTED FOR T HE SALE CONSIDERATION DECLARED, BUT, WHERE THE VALUATION MADE BY THE DEPARTMENTAL VALUAT ION OFFICER IS LESS THAN THE VALUATION MADE BY THE STAM P VALUATION AUTHORITY, THEN HE MAY ADOPT SUCH FAIR MARKET VALUE TO BE FULL VALUE OF CONSIDERATION. 8.3. IN THE INSTANT CASE, THE DVO HAD DETERMIN ED THE VALUE OF SUBJECT PROPERTY AT RS.3,25,38,000/- AS AGAINST THE VALUE OF PROPERTY AS PER STAMP DUTY AUTHORITY AT RS.4,06,56,735/-. WHILE FAITHFULLY APPLYING THE RATIO OF THE FINDING OF THE LUCKNOW TRIBUNAL CITED SUPRA, THE LD . CIT (A) MADE A FAUX PAS IN DIRECTING THE AO TO RE-COMPUTE THE VALUE OF THE PROPERTY AT RS.4,06,56,735/- ( SVAS VALUE) AS AGAINST RS.3,25,38,000/- (SIC) RS.3,25,37,000/- ( FINALLY VALUED BY DVO). HOWEVER, THE HONBLE TR IBUNAL HAD MADE IT ABUNDANTLY CLEAR AND IN FACT OBSERVED THAT [ AT THE COST OF REPETITION ] WHERE THE VALUATION MADE BY THE DEPARTMENTAL VALUAT ION OFFICER IS LESS THAN THE VALUATION MADE BY THE STAM P VALUATION AUTHORITY, THEN HE MAY ADOPT SUCH FAIR MARKET VALUE TO BE FULL VALUE OF CONSIDERATION. WHEN THE VALUE FIXED BY THE DVO IS LESS THAN THE VA LUE ADOPTED BY DOCUMENT REGISTERING AUTHORITIES, WE ARE OF THE VIEW THAT NECESSARILY THE VALUE FIXED BY THE DVO WILL HAVE TO BE TAKEN AS THE BASE VALUE, OTHERWISE THE VERY PURPOSE OF REFERENCE TO D VO WOULD IN REALITY BECOME AN EMPTY FORMALITY. THEREFORE, PLACING THE DVOS VALUATION AS THE BASE VALUE, THE APPELLATE AUTHORITIES WILL HAVE TO EXAMINE THE ITA NO.644/BANG/10 PAGE 20 OF 27 REASONABLENESS OF THE VALUE FIXED BY THE DVO, SINCE VALUATION OF THE DVO IS JUSTICIABLE BEFORE THE APPELLATE AUTHORITIES, TH OUGH BINDING ON THE AO [SEE 228 ITR 590 (DEL) AND 238 ITR 343]. 8.4. FURTHER, WHILE DEALING WITH THE ISSUE, THE LD. CIT (A) HAD NEITHER ADDRESSED TO THE OBJECTIONS RAISED BY THE ASSESSEE S AR [P.92 OF PB AR] WITH REGARD TO THE PROPERTY VALUED BY THE DVO NOR T AKEN COGNIZANCE OF THE SAME. ON A CAREFUL PERUSAL OF THE ASSESSEES OBJEC TIONS, THE FOLLOWING CRUCIAL POINTS EMERGE: (I) WHEN THE DVO APPEARS TO HAVE VISITED THE SUBJECT PR OPERTYS PREMISES ON 9.9.2009, THE ASSESSEE ALLEGES THAT THE OLD BUILDING (I.E., THE SUBJECT PROPERTY) WAS NOT EXISTED AS A N EW BUILDING HAD ALREADY BEEN CONSTRUCTED BY THE PURCHASER; (II) ACCORDING TO THE ASSESSEE, THE DVO HAD BROKEN UP TH E ESTIMATED BUILDING COST UNDER VARIOUS HEADS AND HAD ARRIVED A T A VALUE OF RS.31.84 LAKHS. - HOW THE DVO ARRIVED AT THIS FIGURE WITHOUT THE SUBJ ECT BUILDING WAS IN NON-EXISTENCE IS ANYBODYS GUESS? (III) ACCORDING TO THE ASSESSEE, THE DVO HAD DETERMINED T HE SALVAGE VALUE AT RS.7 LAKHS. - YET AGAIN, THE POINTED QUESTION BEING POSED IS HOW DID THE DVO MANAGE TO DETERMINE THE SALVAGE VALUE AT RS.7 L AKHS WITHOUT THE SUBJECT PROPERTY WAS IN EXISTENCE? (IV) THE ASSESSEE IN HIS [THROUGH HIS A.R] SUBMISSION AV ERRED THAT THE SUBJECT BUILDING WAS MORE THAN 60 YEARS OLD AND THA T IF THE AGE OF THE BUILDING WAS MORE THAN 50 YEARS, ONLY A NOMINA L SALVAGE VALUE WAS TO BE ADOPTED, AND IT WAS FERVENTLY SUBMI TTED THAT RS.80000/- BEING SALVAGE VALUE WORKED OUT WOULD MEE T THE END OF JUSTICE. ITA NO.644/BANG/10 PAGE 21 OF 27 8.5. WE HAVE DULY PERUSED THE COPY OF THE L ETTER OF THE ASSESSEE DATED: 26.9.2009 ADDRESSED TO THE DVO WHEREIN, INTE R ALIA, IT WAS ASSERTED THAT - I HAVE ALREADY SUBMITTED TO YOU NEARLY 7 COMPARATI VE SALE INSTANCES OF TRANSACTIONS THAT HAVE BEEN TAKEN PLACE DURING THE RELEVANT PERIOD AND EVEN THOUGH THE PROPERTIES WERE SOLD AT RATES RANGING FR OM RS.1358/- PER SQ. FT TO RS.1542/- PER SQ. FT THE DISTRICT REVENUE OFFICER ( STAMPS), CHENNAI-1 HAS ADOPTED RATE OF RS.1850/- PER SQ. FT AS THE LAND RA TES FOR ALL THE TRANSACTIONS MENTIONED IN THE FOREGOING. THEREFORE, I REQUEST YOU TO KINDLY ADOPT RS.1850/- PER SQ. FT AS THE RATE FOR LAND AS ON VAL UATION DATE. HOWEVER, IF YOU FEEL THAT THE SUBJECT PROPERTY IS SLIGHTLY LARG ER IN AREA THAN THE AREA OF COMPARATIVE SALE INSTANCES QUOTED, YOU MAY KINDLY D ECREASE THE VALUE BY ABOUT 5% DUE TO LESS MARKETABILITY OR LIMIT IT TO R S.1850/- PER SQ. FT WHICH APPEARS TO BE REASONABLE AND FAIR. FOR READY REFER ENCE, I ONCE AGAIN SUBMITTING HEREWITH THE COMPARATIVE SALE INSTANCES WHICH HAVE TAKEN PLACE IN HARRINGTON ROAD DURING THE RELEVANT PERIOD, WHER EIN THE DISTRICT REVENUE OFFICER (STAMPS), CHENNAI 1 HAS ADOPTED R S.1850/- SQ. FT.. 8.5.1 THOUGH, THE DVO, IN HI S FINAL REPORT DATED 30.9.2009, ACKNOWLEDGED THE ASSESSEES LETTER CITED SUPRA AND OBSERVED THAT HAVING CONSIDERED THE EVIDENCE PRODUCED BY THE ASSESSEE AND TAKING INTO ACCOUNT ALL RELEVANT MATERIALS GATHERED BY ME, THE FAIR MARKET VALUE OF THE PROPERTY AT DOOR NO.77, HARRINGTON ROAD, CHETPET, CHENNAI 31 AT RS.3,25,37,000/- (RUPEES THREE CRORE TWENTY FIVE LA KHS THIRTY SEVEN THOUSAND ONLY AS PER ANNEXURE A ENCLOSED. 8.5.2. WE HAVE CRITICALLY EXAM INED THE ANNEXURE A APPENDED TO THE REPORT, WHEREIN HE HAD WORKED OUT THE VALUE OF LAND COST THUS: 14341 SFT X 2220/SFT = 31837020 + 700000 (ANTICIPA TED SALVAGE VALUE OF THE BUILDING ON DISMANTLED MATERIALS) = RS.3,25,37, 000/-. THE MOOT QUESTION LINGERING IN OUR MINDS WAS WHETHER THE DVO DID CONSIDER THE SALE INSTANCES WHICH TOOK PLACE IN THE VICINITY OF THE SUBJECT PROPERTY CITED BY THE ASSESSEE AND IF SO, THE OUT OF THE SAME? ITA NO.644/BANG/10 PAGE 22 OF 27 8.5.3. THE SWEEPING REMARK OF THE DVO IN HI S FINAL REPORT THAT HAVING CONSIDERED THE EVIDENCE PRODUCED BY THE ASSESSEE AND TAKING INTO ACCOUNT ALL RELEVANT MATERIALS GATHERED BY ME, THE FAIR MARKET VALUE OF THE PROPERTY AT RS.3,25,37,000/- ONLY AS PER ANNEXURE A ENCLOSED WOULD NOT, IN OUR CONSIDERED VIEW, SUFFICE . GLANCING AT THE DVOS NOTICE DT: 24.9.2009 CALLING UPON THE ASSESSEE TO STATE HIS OB JECTIONS, IF ANY, TO THE ESTIMATION OF FMV AT RS.3,25,38,000/- AND HIS FINAL ORDER DT.30.9.2009, ONE COULD FAIRLY ASSUME THAT THERE WAS ABSOLUTELY NOT A NY MATERIAL CHANGE EXCEPT THE DVOS GESTURE OF ALLOWING A DISCOUNT OF RS.1,000/- ONLY ON FMV. 8.5.4. TURNING OUR ATTENTION TO THE ASSESS EES STRONG OBJECTION TO THE DVOS PROPOSAL TO ADOPT THE VALUE OF LAND COST AT R S.2220/SFT, WE FIND THAT THE ASSESSEE HAD CITED ALMOST SEVEN SALE INSTANCES WHICH TOOK PLACE IN THE VICINITY AROUND THE RELEVANT PERIOD, THE DETAILS OF WHICH, FOR BETTER APPRECIATION OF FACTS, ARE LISTED OUT AS UNDER: SL.NO PROPERTY ADDRESS DOCUMENT NO. DATE OF REGISTRATION RATE ADOPTED BY THE SVA 01 13 TH AVENUE, HARRINGTON ROAD 1807/13.9.2002 RS.1850/SFT 02 13 TH AVENUE, HARRINGTON ROAD 711/28.3.2003 RS.1850/SFT 03 13 TH AVENUE, HARRINGTON ROAD 710/28.3.2003 RS.1850/SFT 04 13 TH AVENUE, HARRINGTON ROAD 680/27.3.2003 RS.1850/SFT 05 13 TH AVENUE, HARRINGTON ROAD 671/27.3.2003 RS.1850/SFT ITA NO.644/BANG/10 PAGE 23 OF 27 06 13 TH AVENUE, HARRINGTON ROAD 682/27.3.2003 RS.1850/SFT 07 13 TH AVENUE, HARRINGTON ROAD 683/27.3.2003 RS.1850/SFT 8.5.5. HOWEVER, LOOKING AT THE SEQUENCE O F EVENTS, WE FAIRLY ASSUME THAT THE DVO HAD FAILED TO TAKE COGNIZANCE OF THE P REVAILING MARKET VALUE AT THE RELEVANT PERIOD AND ALSO THE LAND VALUE ADOP TED BY THE SVA FOR REGISTRATION PURPOSES AT RS.1850SFT. NO REASON WH ATSOEVER WAS ADDUCED FOR ADOPTING THE EXORBITANT VALUE OF LAND COST AT R S.2220/SFT WHEN THE SVA ITSELF (BEING GUIDELINE RATE) HAD ADOPTED THE MODER ATE RATE OF RS.1850/SFT EVEN THOUGH IN THE SALE DEEDS - SEVEN SALE INSTANCE S CITED BY THE ASSESSEE - THE VALUE OF LAND COST TAKEN IN THE RANGES OF RS. 1359/SFT 1543/SFT. THUS, ONE COULD FAIRLY ASSUME THAT DVO WAS NOT JUSTIFIED IN ARRIVING AT THE VALUE OF LAND COST AT RS.2220/SFT OF THE SUBJECT PROPERTY WITHOUT ASSIGNING ANY VALID REASON OR COMPARATIVE SALE INSTANCE TO DRIVE HOME HIS POINT. 8.5.6. IN THIS CONNECTION, WE CALL THE A SSESSEES SUBMISSION BEFORE THE CIT (A) WITH REGARD TO PROPERTY VALUATION BY TH E DVO [SOURCE: P 92 OF PB AR] WHEREIN THE ASSESSEE HIMSELF (THROUGH HIS AR) HAD AVERRED THUS A TABLE OF COMPARATIVE SALE INSTANCES IS ENCLOSED AS AN ANNEXURE. THESE SEVEN SALE INSTANCES REFER TO LAND SITUATED AT HARR INGTON ROAD, CHENNAI THE SAME ROAD IN WHICH THE PROPERTY SOLD BY THE ASS ESSEE IS SITUATED. THE PERIOD DURING WHICH THE COMPARATIVE SALE HAS TAKEN PLACE IS ALSO PROXIMATE WITH OCTOBER, 2002, THE MONTH IN WHICH THE ASSESSEE SOLD HIS PROPERTY. AS MAY BE SEEN FROM THE ANNEXURE, THE RATE AT WHICH TH E LAND WAS SOLD RANGED FROM RS.1358/SFT TO RS.1542/SFT. THE AVERAGE RATE OF SALE PER SFT WORKS OUT TO RS.1472/- CONSIDERING THAT THE PROPERTY SOLD BY TH E ASSESSEE WAS A CORNER PLOT AS PER THE ACCEPTED METHODOLOGY, A PREMIUM OF 10% IS ADOPTED IN THE ITA NO.644/BANG/10 PAGE 24 OF 27 COMPARABLE SALE INSTANCES TO MAKE THE COMPARISON JU STIFIABLE. THUS, THE REVISED UNIT RATE OF THE COMPARABLE TRANSACTIONS WO RKS OUT TO 110% OF 1472 =RS.1619. AS COMPARED TO THIS, THE UNIT SALE PRICE OF THE ASSESSEES PROPERTY IS RS.1869. THE DVO HAS FIXED THE LAND RATE OF RS.2220/SFT WIT HOUT DISCLOSING THE BASIS FOR SUCH DETERMINATION. THIS APPEARS TO BE EXCESSIVE. HENCE, THE VALUE AS DECLARED BY THE ASSESSEE MAY KI NDLY BE CONSIDERED AS FAIR MARKET VALUE. 8.5.7. TAKING INTO ACCOUNT ALL THESE FACTS AND THE CIRCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PARAGRA PHS, ALSO (I) THE SALE INSTANCES IN THE VICINITY DURING THE RELEVANT PERIO D PUT FORTH BY THE ASSESSEE; (II) THAT THE SUBJECT PROPERTY BEING A CO RNER PLOT, THE ASSESSEE HAD WORKED OUT THE SALE PRICE OF THE SUBJECT PROPER TY AT RS.1869/SFT; AND (III) THAT THE DVO HAD FIXED THE LAND RATE AT RS.22 20/SFT [WITHOUT ASSIGNING ANY BASIS OR COMPARISON/CITING ANY SALE INSTANCES I N THE VICINITY AT THE RELEVANT PERIOD FOR ADOPTING SUCH FMV], WE ARE OF THE CONSIDERED VIEW THAT THE VALUE OF LAND COST AT RS.1869/SFT WOULD MEET TH E END OF JUSTICE WHICH WORKS OUT TO 14341 SFT X 1869 = RS.2,68,03,329/-. FURTHER, THE DVO HAD ARRIVED AT THE ANTICIPATED SALVAGE VALUE OF THE BUI LDING ON DISMANTLED MATERIALS AT RS.7 LAKHS AS AGAINST RS.80000/- CLAIM ED BY THE ASSESSEE DURING THE YEAR 2009 WHEREAS THE SUBJECT PROPERTY W AS SOLD AWAY SOME TIME IN 2002 WHICH WAS SUBSEQUENTLY DEMOLISHED AND A NEW BUILDING CAME UP. CONSIDERING THE ELAPSE OF TIME, THE DVO HAD FA ILED TO GIVE A WORKING TO ARRIVE AT A SALVAGE VALUE OF RS.7 LAKHS AND THE PLEADING OF THE ASSESSEE, WE ARE OF THE CONSIDERATE VIEW THAT THE S ALVAGE VALUE OF THE BUILDING COULD REASONABLY BE TAKEN AT RS.3 LAKHS. 8.6. IN TAKING INTO ACCOUNT ALL THE FACTS NAR RATED SUPRA AND ALSO IN CONFORMITY WITH THE FINDING OF THE HONBLE TRIBUNAL , LUCKNOW BENCH CITED ITA NO.644/BANG/10 PAGE 25 OF 27 SUPRA, THIS BENCH IS OF THE UNANIMOUS VIEW THAT THE FOLLOWING WORKING WOULD MEET THE END OF JUSTICE LAND COST AS WORKED OUT SUPRA RS.2,68,03 ,329 ADD: SALVAGE VALUE AS DETERMINED ABOVE 3,00,000 --------------------- VALUE OF PROPERTY IS DETERMINED AT RS. 2.71.03.329 8.6.1. THE AO IS, THEREFORE, DIRECTED TO RE -COMPUTE THE VALUE OF THE PROPERTY AT RS.2,71,03,330/- AS AGAINST RS.4,06,56,735/- AS DIRECTED BY THE FIRST APPELLATE AUTHORITY IN HIS IMPUGNED ORDER WHICH IS UNDER CHALLENGE. IT IS ORDERED ACCORDINGLY. 8.8. BEFORE PARTING WITH THE ISSUE, WE WOUL D LIKE TO POINT OUT THAT THE HONBLE LUCKNOW BENCH IN ITS FINDING CITED SUPRA OP INED THAT IF THE VALUATION MADE BY THE DVO IS LESS THAN THE GUIDELINE RATE OF THE SVA, THEN THE AO MAY ADOPT SUCH FAIR MARKET VALUE TO BE FULL VALUE O F CONSIDERATION. THOUGH THIS BENCH HAD APPLIED THE RATIO OF THE LUCKNOW BEN CH IN DECIDING THE ISSUE IN PRINCIPLE, THE VALUE OF LAND COST HAS SIN CE BEEN WORKED OUT AT RS.2,71,03,330/- AS AGAINST THE FMV DETERMINED BY T HE DVO FOR THE REASONS RECORDED IN THE FORE-GOING PARAGRAPH. 9. THE ASSESSEES ANOTHER GROUSE WAS F OR THE DENIAL OF EXEMPTION U/S 54 OF THE ACT FOR TWO RESIDENTIAL PROPERTIES. THE CONTENTION OF THE ASSESSEE, IN BRIEF, THAT HE HAD INVESTED THE SALE P ROCEEDS OF A RESIDENTIAL PROPERTY IN TWO RESIDENTIAL BUILDINGS AND THAT THE AO WAS NOT JUSTIFIED IN DENYING THE DEDUCTION U/S 54 OF THE ACT ON THE SECO ND BUILDING, RELYING ON ITA NO.644/BANG/10 PAGE 26 OF 27 THE FINDING OF THE HONBLE TRIBUNAL IN THE CASE OF SMT. RAJALAKSHMI IN ITA NO:530/B/2007 DATED: 30.4.2008. HE HAD PLACED STRO NG RELIANCE ON THE RULING OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. D.ANAND BASAPPA REPORTED IN 309 ITR 329 (KAR). 9.1. WITH DUE RESPECTS, WE HAVE PERUSED THE FINDING OF THE HONBLE COURT, THE RELEVANT PORTION OF WHICH IS EXTRACTED A S UNDER: THE CONTENTION OF THE REVENUE IS THAT THE PHRASE ' A' RESIDENTIAL HOUSE WOULD MEAN ONE RESIDENTIAL HOUSE AND IT DOES NOT AP PEAR TO THE CORRECT UNDERSTANDING. THE EXPRESSION 'A' RESIDENTIAL HOUSE SHOULD BE UNDERSTOOD IN A SENSE THAT BUILDING SHOULD BE OF RESIDENTIAL I N NATURE AND 'A' SHOULD NOT BE UNDERSTOOD TO INDICATE A SINGULAR NUMBER. THE CO MBINED READING OF SECTIONS 54(1) AND 54F OF THE INCOME-TAX ACT DISCLO SES THAT, A NON RESIDENTIAL BUILDING CAN BE SOLD, THE CAPITAL GAIN OF WHICH CAN BE INVESTED IN A RESIDENTIAL BUILDING TO SEEK EXEMPTION OF CAPITAL GAIN TAX. HOWEVER, THE PROVISO TO SECTION 54 OF THE INCOME-TAX ACT, LAYS D OWN THAT IF THE ASSESSEE HAS ALREADY ONE RESIDENTIAL BUILDING, HE IS NOT ENT ITLED TO EXEMPTION OF CAPITAL GAINS TAX, WHEN HE INVESTS THE CAPITAL GAIN IN PURCHASE OF ADDITIONAL RESIDENTIAL BUILDING. WHEN A HINDU UNDIVIDED FAMILY'S RESIDENTIAL HOUSE I S SOLD, THE CAPITAL GAIN SHOULD BE INVESTED FOR THE PURCHASE OF ONLY ONE RES IDENTIAL HOUSE IS AN INCORRECT PROPOSITION. AFTER ALL, THE HINDU UNDIVID ED FAMILY PROPERTY IS HELD BY THE MEMBERS AS JOINT TENANTS. THE MEMBERS KEEPIN G IN VIEW THE FUTURE NEEDS IN EVENT OF SEPARATION, PURCHASE MORE THAN ON E RESIDENTIAL BUILDING, IT CANNOT BE SAID THAT THE BENEFIT OF EXEMPTION IS TO BE DENIED UNDER SECTION 54(1) OF THE INCOME-TAX ACT. ON FACTS, IT IS SHOWN BY THE ASSESSEE THAT THE APAR TMENTS ARE SITUATED SIDE BY SIDE. THE BUILDER HAS ALSO STATED THAT HE HAS EFFEC TED MODIFICATION OF THE FLATS TO MAKE IT AS ONE UNIT BY OPENING THE DOOR IN BETWE EN TWO APARTMENTS. THE FACT THAT AT THE TIME WHEN THE INSPECTOR INSPECTED THE PREMISES, THE FLATS WERE OCCUPIED BY TWO DIFFERENT TENANTS IS NOT THE GROUND TO HOLD THAT THE APARTMENT IS NOT A ONE RESIDENTIAL UNIT. THE FACT T HAT THE ASSESSEE COULD HAVE PURCHASED BOTH THE FLATS IN ONE SINGLE SALE DEED OR COULD HAVE NARRATED THE PURCHASE OF TWO PREMISES AS ONE UNIT IN THE SALE DE ED IS NOT THE GROUND TO HOLD THAT THE ASSESSEE HAD NO INTENTION TO PURCHASE THE TWO FLATS AS ONE UNIT. ITA NO.644/BANG/10 PAGE 27 OF 27 9.2. ON A CLOSE READING OF THE RULING OF THE HONBLE COURT, WE FIND THAT THE HONBLE COURT WAS MAGNANIMOUS IN ITS ENDEA VOUR THAT THOSE SAID APARTMENTS WERE SITUATED SIDE BY SIDE AND DUE TO MO DIFICATION EFFECTED, BY OPENING THE DOOR IN BETWEEN THE TWO APARTMENTS , TH E TWO FLATS WILL BECOME AS ONE UNIT WHEREAS IN THE PRESENT CASE, THE ASSESSEE HAD INVESTED IN TWO RESIDENTIAL PROPERTIES SITUATED (I) ONE AT KORAMANG ALA AND (II) ANOTHER AT FAR OFF DOMLUR II STAGE WHICH, IN ANY STRETCH OF IMAGI NATION, CANNOT BE CATEGORIZED AS ONE UNIT TO TAKE SANCTUARY OF THE HO NBLE COURTS RULING REFERRED SUPRA. WE ARE, THEREFORE, IN TOTAL AGREEMENT WITH THE LD. CIT (A)S REASONING IN THIS REGARD . IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF SEPTEMBER, 2010. SD/- SD/- ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 17 TH SEPTEMBER, 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.