KHEMCHAND S. CHAWLA, MUMBAI V. ITO 7(2)(4), MUMBAI

ITA 6685/MUM/2010

• Counselvise Citation: 668519914 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 17-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: A K LAL
• Keywords: Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI R.S. SYAL (AM) AND SHRI S.S. GODARA (JM ) ITA NO.6685/M/2010 ASSESSMENT YEAR: 2005-06 SHRI KHEMCHAND S. CHAWLA, 10-B, CENCED APARTMENT, 318 UNION PART, PALI HILL ROAD, KHAR (WEST), MUMBAI -400 052. PAN ADZPC4499D VS. ITO 7(2)(4), 618, AAYAKAR BHAVAN, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K. LAL RESPONDENT BY: SHRI V. V. SHASTRI DATE OF HEARING: 25.4.2012 DATE OF PRONOUNCEMENT:2.5.2012 O R D E R PER S.S. GODARA, J.M: IN THE INSTANT APPEAL THE ASSESSEE HAS CHALLENGED T HE ORDER OF LD. CIT (A)-13, MUMBAI DATED 22.5.2010. 2. SO FAR AS GROUNDS RAISED IN THE APPEAL ARE CONCE RNED, THERE ARE TWO GROUNDS. GROUND NO. 1(I) & (II) AND GROUND NO.2. GROUND NO.2 IS GE NERAL IN NATURE. GROUND NO.1 CHALLENGES THE IMPUGNED ORDER CONFIRMING ASSESSING OFFICERS ASSES SMENT OF THE MARKET VALUE OF THE ASSESSEES FLAT SOLD AT RS. 645 PER SQ.FT. AS ON 1. 4.1981 N PLACE OF RS. 800 PER SQ.FT. SHOWN BY THE ASSESSEE ON THE BASIS OF THE VALUATION REPORT O F A REGISTERED VALUER REGARDING CALCULATION OF LONG TERM CAPITAL GAINS. 2 ITA NO.6685/M/2010 3. GROUND NO.1(I) & (II):- BRIEF HISTORY OF THE INSTANT GROUND BEFORE US IS T HAT ON 9.12.2005, THE ASSESSEE FILED RETURN. IN THE PREVIOUS YEAR REL EVANT TO THE AY IN HAND, THE ASSESSEE HAD SOLD HOUSE PROPERTY IN QUESTION AT RS. 1,30,00,000/-. I T WAS SOLD ON 3.6.2004. HE HAD 50% SHARE IN THE FLAT. THE REST OF 50% SHARE BELONGED TO HIS WIFE. 4. AS IT TRANSPIRES FROM THE ASSESSMENT ORDER DATED 20.12.2007, THE ASSESSEE PURCHASED NEW FLAT AT PALL HILL ROAD, KHAR, MUMBAI FOR RS. 85 ,00,000/- ON 12.6.2004 TO THE EXTENT OF 50% SHARE. IN THE ASSESSMENT PROCEEDINGS, HE ALSO FILE D VALUATION REPORT FROM GOVERNMENT APPROVED CHARTERED ENGINEER DATED 2.12.2005 SHOWING VALUE OF THE FLAT AS RS. 8,50,000/- AS ON 1.4.1981 PURCHASED BY THE ASSESSEE. 5. REGARDING COMPUTATION OF LONG TERM CAPITAL GAINS , THE ASSESSEE COMPUTED THE FLAT PRICE PURCHASED IN THE YEAR 1981 AS RS. 8,50,000/-. SECR ETARY OF THE CONCERNED SOCIETY ALSO INFORMED THE ASSESSING OFFICER THAT ONE OF SUCH FLAT WAS TRA NSFERRED IN THE YEAR 1979 FOR RS. 4,50,000/-. HOWEVER, THE ASSESSING OFFICER HELD THAT THE ASSESS EE HAD PURCHASED THE FLAT IN QUESTION ON 12.3.1977 FOR RS. 1,70,000/- WHOSE VALUE MULTIPLIED BY FIVE TIMES IN FOUR YEARS. THEREFORE, REFERRING TO COST INFLATION INDEX CHART, THE ASSESS ING OFFICER ESTIMATED THE VALUE OF THE FLAT AS RS. 5,25,000/- ONLY. ACCORDINGLY, COMPUTED TAXABLE CAPITAL GAIN AS RS. 6,60,365/-. 6. THE ASSESSEE PREFERRED APPEAL AGAINST THE ASSESS MENT ORDER BEFORE THE LD. CIT (A). VIDE IMPUGNED ORDER, THE LD. CIT (A) COMPUTED THE A VERAGE RATE OF THE FLAT IN QUESTION AS RS. 645 PER SQ.FT. AS ON 1.4.1981 TOTAL RS. 6,90,150/- BY OBSERVING AS UNDER: INDEX IS ONLY ONE F THE CRITERIA FOR DETERMINING / ESTIMATING THE VALUE OF FLAT. HOWEVER, OTHER ECONOMIC FACTORS / MARKET CONDITIONS ALSO DO DETERMINE THE MARKET OF THE FLAT. 3 ITA NO.6685/M/2010 THE AVERAGE RATE PER SQ.FT AS PER THE VALUERS REPOR T COMES TO RS. 800 PER SQ.FT = RS. 8,56,000/- = RS. 800/- PER SQ.FT 1070 SQ.FT AND THE RATE PER SQ.FT AS ESTIMATED BY THE AO =5,25,000/- = RS. 490/- PER SQ.FT 1070 SQ.FT THEREFORE, THE AVERAGE OF THE AFORESAID RATES I.E., RS. 800 PER SQ.FT + RS. 490 PER SQ.FT CAN BE TAKEN AS THE REASONABLE RA TE / SQ.FT FOR ESTIMATING THE FAIR MARKET VALUE AS ON 1.4.1981 WHI CH WOULD ACCORDINGLY COME TO RS. 1070 X RS. 645 =6,90,150/-. THE AO WILL ACCORDINGLY COMPUTE THE CAPITAL GAINS TAKING THE FA IR VALUE OF THE FLAT AS ON 1.4.1981 AT RS. 6,90,150/-. 6.1. HENCE, THE ASSESSEE HAS RAISED THE ABOVE GROUN D BEFORE US. 7. IN SUPPORT OF THE GROUNDS, THE LEARNED AR HAS TA KEN US TO PAPER BOOK COMPRISING OF COMPUTATION OF TOTAL INCOME, LONG TERM CAPITAL GAIN S, CONTENTS OF VALUATION REPORT BY REGISTERED VALUER, REMAND REPORT SUBMITTED BY THE ASSESSING OF FICER AS WELL AS INDIAN VALUERS DIRECTORY EXTRACTS COUPLED WITH THE SIGHT PLAN. 8. RELYING ON THE VALUERS DIRECTORY, SL.NO.6, PAGE 13 OF THE PAPER BOOK, THE LEARNED AR HAS SUBMITTED THAT AS PER THE SAID DIRECTORY RESIDE NTIAL UNIT WITHOUT LIFT AS ON 1.4.1981 WAS RS. 800 PER SQ.FT. WHEREAS THE ASSESSEES FLAT IN QUES TION HAD TWO LIFTS. MEANING THEREBY THAT THE FLAT IS COSTLIER. FURTHER SUBMITTED THE AT REGARDI NG SAME LONG TERM CAPITAL GAINS, HIS WIFES COMPUTATION HAS BEEN ACCEPTED BY THE AO IN PROCEEDI NGS U/S 143(1) OF THE INCOME TAX ACT (HEREINAFTER TO BE REFERRED AS THE ACT). 9. IN SUPPORT OF THE VALUATION REPORT SUBMITTED BY THE GOVERNMENT APPROVED VALUER, LD. AR HAS VEHEMENTLY ARGUED THAT PER DECISION OF LEARN ED COORDINATE BENCH OF ITAT MUMBAI IN 4 ITA NO.6685/M/2010 ITA NO.5347/M/2008, IT HAS BEEN HELD THAT THE SAID INDIAN VALUERS DIRECTORY IS A RELIABLE SOURCE AS THE SAID RATES WERE ADOPTED BY THE GOVERNMENT OF MAHARASTRA FOR OFFICIAL PURPOSES. TAKING CUE FROM THE SAID OBSERVATIONS AS WELL AS RATES ADO PTED BY THE HONBLE COORDINATE BENCH (SUPRA), THE LEARNED AR HAS SUBMITTED THAT THE ASSE SSEE HAD SUCCESSFULLY DISCHARGED HIS ONUS BEFORE THE ASSESSING OFFICER AS WELL AS LD. CIT (A) WHICH HAD NOT BEEN CONTROVERTED BY ANY MATERIAL ON RECORD. HENCE, PRAYED FOR ACCEPTANCE O F THE GROUND. 10. ON THE OTHER HAND, LEARNED DR HAS RELIED ON THE IMPUGNED ORDER OF LD. CIT (A). PRAYED FOR REJECTION OF THE GOUND. 11. WE HAVE HEARD BOTH THE LEARNED REPRESENTATIVES. ALSO PERUSED THE RECORD REFERRED TO. FACTS ARE NOT IN DISPUTE. IT IS EVIDENT FROM THE P APER BOOK THAT IN SUPPORT OF THE RATES COMPUTED BY THE ASSESSEE, HE HAD RELIED ON THE GOVE RNMENT VALUERS REPORT BASED ON VALUERS DIRECTORY (AS THE RATES STOOD ON 1.4.1981). THE SA ID RATES HAVE BEEN ADOPTED BY THE LEARNED COORDINATE BENCH (SUPRA). THE REVENUE BEFORE US HA S NOT PRODUCED ANYTHING SO AS TO CONTROVERT THE SAID ADOPTION OF RATES BY THE LEARNE D BENCH. NOR ANY OTHER CRITERIA HAS BEEN HIGHLIGHTED. FACED WITH THIS SITUATION, WE ARE CONS TRAINED TO HOLD THAT THE GOVERNMENT APPROVED VALUER HAD RIGHTLY ASSESSED THE VALUE OF T HE FLAT IN QUESTION OWNED BY THE ASSESSEE AS ON 1.4.1981 AS RS. 800 PER SQ.FT, TOTAL RS. 8.50 LA CS. 12. SO FAR AS THE IMPUGNED ORDER OF THE LD. CIT (A) , IT IS CLEAR THAT THE LEARNED LOWER APPELLATE AUTHORITY HAS ALSO ERRED IN TAKING OUT TH E AVERAGE OF RATES WITHOUT ANY REASON IN SUPPORT ; WHAT SO EVER. 12.1. MOREOVER, THE FACT THAT THE ASSESSING OFFICER HAS ACCEPTED THE SAME VERY VALUATION ADOPTED TO BY THE WIFE OF THE ASSESSEE (WHO ALSO OW NED 50% SHARE OF THE FLAT SOLD AS WELL AS 5 ITA NO.6685/M/2010 FLAT PURCHASED) U/S 143(1) OF THE ACT WITHOUT CALLI NG ANY EXPLANATION ETC., IS ALSO A VERY VITAL FACTOR WHICH CANNOT BE LOST SIGHT OF. HENCE, IN OU R CONSIDERED OPINION, THE ASSESSEE APPELLANT HAS RIGHTLY DETERMINED THE VALUE OF THE FLAT AS R S. 800 PER SQ.FT AS IT EXISTED ON 1.4.1981 LEADING TO HIS CALCULATION OF LONG TERM CAPITAL GAI NS. 13. ACCORDINGLY, WE ACCEPT THE INSTANT APPEAL. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF MAY, 2012. SD/- SD/- (R.S. SYAL) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL ME MBER DATE : 2.5.2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CONCERNED 5. THE DR A BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI.