TRIMURTY COLONIZERS AND BUILDERS PRIVATE LIMITED, JAIPUR V. ITO, WARD-6(2), JAIPUR

ITA 65/JPR/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6258 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 13-01-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Earning of tax free income; Fair market value; Valuation report; Rule 8D
• Section: 43CA; 14A; 48

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES A JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 65/JP/2020 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2014-15 TRIMURTY COLONIZERS AND BUILDERS PRIVATE LIMITED, 601 GEETA ENCLAVE, VINOBA MARG, C- SCHEME, JAIPUR CUKE VS. ITO, WARD 6(2), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACT6613K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. ROHAN SOGANI (CA) JKTLO DH VKSJ LS @ REVENUE BY : MS. CHANCHAL MEENA (ADDL. CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 21/09/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23/09/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), AJMER DATED 19.11.2019 WHEREIN THE ASSESSEE HAS TAK EN FOLLOWING GROUNDS OF APPEAL:- (1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO IN MA KING ADDITION U/S 43CA OF RS. 7,84,600/-. THE ACTION OF LD. CIT(A) I S ILLEGAL, UNJUSTIFIED AND ARBITRARY AND AGAINST THE FACTS OF THE CASE. R ELIEF MAY PLEASE BE GRANTED BY DELETING THE SAID ADDITION OF RS. 7,84, 600/-. (2) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD. AO IN MA KING DISALLOWANCE OF RS. 2,98,890/- BY INVOKING PROVISION OF SECTION 14 A OF THE INCOME TAX ACT, 1961. THE ACTION OF THE LD. CIT(A) IS ILLEGAL , UNJUSTIFIED AND ITA NO. 65/JP/2020 TRIMURTY C OLONIZERS AND BUILDERS PRIVATE LIMITED, JAIPUR VS. ITO, JAIPUR 2 ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIE F MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE OF RS.2, 98,890/-. 2. REGARDING GROUND NO. 1, THE LD AR SUBMITTED THAT DURING THE RELEVANT PREVIOUS YEAR, ASSESSEE COMPANY SOLD A PIECE OF LAN D SITUATED AT SUNRISE CITY, NIWARU, JAIPUR FOR TOTAL CONSIDERATION RS. 9, 00,000/-. SINCE THERE WERE CERTAIN IRREGULARITIES, THE LAND WAS SOLD BY THE AS SESSEE COMPANY AT RS. 9,00,000/- WHEREAS THE DLC VALUE AS PER THE PRE SCRIBED RATES WAS RS. 16,84,600/-. THE ASSESSEE COMPANY ALSO GOT THE LAND VALUED FROM THE A REGISTERED VALUATION OFFICER WHO HAS VALUED THE LAN D AT RS. 8,76,000/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE VALUATION REPORT, OBTAINED FROM THE REGISTERED VALUER SUBSTANTIATING THE PRICE AT W HICH THE LAND WAS SOLD WAS SUBMITTED BEFORE THE ASSESSING OFFICER. SUCH VALUAT ION REPORT FACTORED IN THE VARIOUS REASONS FOR THE LOWER SALES VALUE OF THE LA ND VIS--VIS ITS DLC VALUE. THE LD. AO REFERRED THE MATTER APROPOS THE VALUATIO N OF THE LAND TO THE DEPARTMENTAL VALUATION OFFICER (DVO) IN TERMS OF THE PROVISIONS OF SECTION 43CA, R.W. SECTION 50C(2) OF THE ITA. THE DVO DID N OT TAKING COGNIZANCE OF THE VARIOUS FACTORS, AS CONSIDERED IN THE VALUATION REPORT, QUA REDUCED VALUATION OF THE LAND. THE DVO DETERMINED THE VALUE OF LAND BY SIMPLY CONSIDERING ITS DLC VALUE. THE LD. AO ON RECEIVING THE REPORT OF DVO AND WITHOUT PROPER APPLICATION OF MIND CONSIDERED THE D LC VALUE FOR DETERMINING THE GAIN ON SALE OF LAND AND ADDED RS. 7,84,600 IN THE HANDS OF ASSESSEE COMPANY BY INVOKING THE PROVISIONS OF SECTION 43CA OF THE ACT AND WHICH HAS BEEN CONFIRMED BY THE LD CIT(A) AND AGAINST THE SAI D FINDINGS, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT IN ORDER TO SUBSTANTIATE THE VALUE OF THE LAND, AS DETERMINED B Y THE REGISTERED VALUATION OFFICER, VARIOUS PHYSICAL AND OTHER ATTRIBUTES OF T HE LAND WERE PUT FORTH, ITA NO. 65/JP/2020 TRIMURTY C OLONIZERS AND BUILDERS PRIVATE LIMITED, JAIPUR VS. ITO, JAIPUR 3 WHICH WERE ALSO SUBMITTED TO THE DVO. HOWEVER, SUCH FACTORS WERE TOTALLY IGNORED BY THE DVO, FOR THE PURPOSE OF VALUING THE LAND. THE LD. AO WITHOUT APPLICATION OF MIND, CONSIDERED THE VALUE OF THE LA ND AT DLC VALUE, AS ALSO DETERMINED BY THE DVO IN HIS REPORT. IF THE ASSESSE E, AS IN THE PRESENT CASE, IS ABLE TO PUT FORTH PHYSICAL AND OTHER ATTRIBUTES OF THE LAND WHICH RESULTED IN FETCHING VALUE LOWER THAN THE DLC VALUE OF ITS SALE , THEN LD. AO IS DUTY BOUND TO CONSIDER THOSE ATTRIBUTES. IF THE LD. AO IS OF T HE VIEW THAT THOSE FACTORS WERE NOT CONSIDERED BY THE DVO IN ITS REPORT THEN T HE LD. AO CAN CONSIDER THOSE FACTORS AND DETERMINE THE TRUE VALUE OF THE L AND. THE LD. AO IS NOT ALWAYS OBLIGATED TO FOLLOW THE REPORT OF DVO AND HA S TO APPLY HIS OWN INDEPENDENT MIND TO THE FACTS AND CIRCUMSTANCES PER SISTENT TO THE SALE TRANSACTIONS AND IN SUPPORT, RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- CIT V. RAMESHWAR PRASAD KACHOLIA (DBITA 51/2014 DAT ED 15.10.2015 RAJ HIGH COURT) DCIT V. BAJAJ CHEMICALS [2017] 59 ITR(T) 132 (KOLKA TA - TRIB.) CHANDRA BHAN AGARWAL VS. ACIT [2012] 51 SOT 440 (KO LKATA) ITO VS. MS. KUMUDINI VENUGOPAL [2011] 48 SOT 182 (C HENNAI)(URO) SURESH C. MEHTA [2013] 158 TTJ 821 (MUMBAI-TRIB.) 4. IT WAS SUBMITTED THAT IN THE PRESENT CASE, PHYSI CAL AND OTHER ATTRIBUTES OF THE LAND, SOLD BY THE ASSESSEE, HAS NOT BEEN CHA LLENGED BY THE TAXING AUTHORITY NOR HAVE THEY BEEN FOUND TO BE FALSE. UND ER SUCH CIRCUMSTANCES, THE LD. AO WAS DUTY BOUND TO CONSIDER THE VALUE ADO PTED BY THE ASSESSEE COMPANY AND THE ACTUAL SALES CONSIDERATION. 5. THE LD DR IS HEARD WHO HAS SUPPORTED THE FINDIN GS OF THE AO. IT WAS SUBMITTED THAT ONCE THE MATTER HAS BEEN REFERRED TO THE DVO AND DVO DETERMINES A PARTICULAR VALUE OF THE LAND, THE AO I S DUTY BOUND TO FOLLOW THE ITA NO. 65/JP/2020 TRIMURTY C OLONIZERS AND BUILDERS PRIVATE LIMITED, JAIPUR VS. ITO, JAIPUR 4 REPORT OF THE DVO WHO IS A TECHNICAL EXPERT IN THE MATTER OF VALUATION. IT WAS FURTHER SUBMITTED THAT THE AO HAS APPLIED THE L OWER OF THE DVO AND THE STAMP DUTY VALUATION AND THE ADDITION OF THE DIFFER ENTIAL AMOUNT OVER AND ABOVE THE DECLARED SALE CONSIDERATION IS IN CONFORM ITY WITH THE PROVISIONS OF SECTION 43CA OF THE ACT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE MATTER REGARDING DETERMINATION OF FAIR MARKET VALUE OF COMMERCIAL PLOT NO. CM 77, SUNRISE CITY, NIWARU, JA IPUR AS ON THE DATE OF SALE WAS REFERRED TO THE DVO. THE DVO AFTER CONSID ERING THE SALE DEED OF THE PROPERTY, SITE PLAN, VALUATION REPORT AS FURNIS HED BY THE ASSESSEE AND AFTER PHYSICALLY INSPECTING THE PROPERTY HAD DETERM INED A PRELIMINARY ESTIMATE OF THE VALUATION OF THE PROPERTY AND THE S AME WAS SHARED WITH THE ASSESSEE VIDE LETTER DATED 21.12.2016 IN ORDER FOR THE ASSESSEE TO EXAMINE THE SAME AND SUBMIT ANY OBJECTIONS, IF ANY BY 23.12 .2016. IN RESPONSE, THE ASSESSEE HAD CHOSEN NOT TO RAISE ANY OBJECTIONS FOR REASONS BEST KNOWN TO THE ASSESSEE AND HAS NOT EVEN RESPONDED TO SUCH COM MUNICATION SENT BY THE DVO. THEREAFTER, THE DVO DETERMINED THE FAIR M ARKET VALUE OF THE PROPERTY AT RS 16,84,600/- AS AGAINST RS 9,00,000 D ECLARED BY THE ASSESSEE AND A VALUATION REPORT DATED 28.12.2016 WAS ISSUED AND SHARED WITH THE ASSESSEE AND THE AO. THEREAFTER, THE AO ON RECEIPT OF THE VALUATION REPORT ISSUED A SHOW-CAUSE AS TO WHY THE VALUE SO DETERMIN ED BY THE DVO SHOULD NOT BE APPLIED AND IN RESPONSE, THE ASSESSEE HAD FI LED A WRITTEN SUBMISSION ON 29.12.2016 OBJECTING TO THE VALUATION SO DETERMI NED BY THE DVO. THE AO THEREAFTER, CONSIDERING THE DIFFERENTIAL BETWEEN TH E DECLARED SALE CONSIDERATION AND LOWER OF THE STAMP DUTY AND DVO V ALUATION, MADE THE ADDITION OF RS 7,84,600 INVOKING THE PROVISIONS OF SECTION 43CA OF THE ACT. WE THEREFORE FIND THAT THE ASSESSEE DIDNT RAISE AN Y OBJECTIONS BEFORE THE ITA NO. 65/JP/2020 TRIMURTY C OLONIZERS AND BUILDERS PRIVATE LIMITED, JAIPUR VS. ITO, JAIPUR 5 DVO WHERE HE SHARED THE PRELIMINARY ESTIMATE WITH T HE ASSESSEE FOR REASONS BEST KNOWN TO IT AND HAS RAISED ITS OBJECTIONS FOR THE FIRST TIME BEFORE THE AO ON RECEIPT OF THE DVO REPORT AND THE SECONDLY, THE AO HAS PROCEEDED TO FOLLOW THE REPORT THE DVO. WE THEREFORE DONOT FIND ANY INFIRMITY IN THE ACTION OF THE DVO AS THE ASSESSEE FAILED TO RAISE A NY OBJECTIONS BEFORE HIM. SECONDLY, WE ALSO DONOT FIND ANY INFIRMITY IN THE A CTION OF THE AO IN FOLLOWING THE REPORT OF THE DVO. ONCE THE AO HAS REFERRED TH E MATTER TO THE DVO FOR HIS EXPERT OPINION AND THE LATTER HAS SUBMITTED HIS REPORT, THE AO IS DUTY BOUND TO FOLLOW THE SAID REPORT AND DOESNT HAVE AN Y DISCRETION IN THAT REGARD. THE AO CANNOT ENTERTAIN ANY OBJECTIONS SO R AISED BY THE ASSESSEE AGAINST THE VALUATION SO DETERMINED BY THE DVO. TH EREFORE, WE ARE UNABLE TO ACCEDE TO THE CONTENTION SO ADVANCED ON BEHALF O F THE ASSESSEE THAT THE AO IS NOT ALWAYS OBLIGATED TO FOLLOW THE REPORT OF DVO AND HAS TO APPLY HIS OWN INDEPENDENT MIND TO THE FACTS AND CIRCUMSTANCES PERSISTENT TO THE SALE TRANSACTION. WE HAVE ALSO GONE THROUGH THE DECISION S RELIED UPON BY THE LD A/R AT THE BAR AND FIND THAT NONE OF THE DECISIONS SUPPORT THE CONTENTION SO ADVANCED ON BEHALF OF THE ASSESSEE. IN THE RESULT, THE GROUND OF APPEAL IS DISMISSED. 7. REGARDING GROUND NO. 2, BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS , ON NOTICING THE FACTS THAT ASSESSEE COMPANY HAS INVESTMENT, AMOUNTING TO RS.2,77,63,530/- IN VARIOUS COMPANIES, MADE DISALLOWANCE OF RS. 2,98,89 0/- U/S 14A R/W RULE 8D, AND WHICH HAS BEEN CONFIRMED BY THE LD CIT(A). 8. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT ASSESSEE COMPANY EARNED EXEMPT INCOME OF RS. 5,635/- AGAINST WHICH LD. AO DISALLOWED RS. 2,98,890, UNDER SECTION 14A, BY INVO KING RULE 8D. IT IS A SETTLED PROPOSITION THAT DISALLOWANCE UNDER SECTION 14A CANNOT IN ANY WAY EXCEED THE EXEMPT INCOME AND IN SUPPORT, RELIANCE W AS PLACED ON THE FOLLOWING DECISIONS:- ITA NO. 65/JP/2020 TRIMURTY C OLONIZERS AND BUILDERS PRIVATE LIMITED, JAIPUR VS. ITO, JAIPUR 6 CARAF BUILDERS & CONSTRUCTIONS (P.) LTD. [2019] 261 TAXMAN 47 (DELHI) PRAGATHI KRISHNA GRAMIN BANK [2018] 256 TAXMAN 349 (KARNATAKA) M/S MAHINDRA WORLD CITY (JAIPUR) LTD. (ITA NO. ITA 697/JP/2018 DATED 4.09.2019) 9. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. FOLLOWING THE SETTLED LEGAL PROPOSITION AND VARIOUS DECISIONS CITED SUPRA, THE DISALLOWANCE U/S 14A R/W RULE 8D IS REST RICTED TO THE EXTENT OF DIVIDEND INCOME CLAIMED EXEMPT BY THE ASSESSEE AMOU NTING TO RS 5,635/- AND THE REMAINING ADDITION IS HEREBY DIRECTED TO BE DELETED. THE GROUND IS THUS PARTLY ALLOWED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISPO SED OFF IN LIGHT OF ABOVE DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 23/09/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/09/2020 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- TRIMURTY COLONIZERS & BUILDERS PVT. LTD, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD 6(2), JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 65/JP/2020} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR