Raj Kumar Khosla, Noida V. ITO, Noida

ITA 694/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3524 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 20-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 15-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI NAOREM
• Keywords: Fair market value; Corroborative evidences; Valuation report; Capital Gains
• Section: 143(3); 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI I.P.BANSAL, JM AND SHRI R.C.SHARMA, AM ITA NO.694/DEL/2010 ASSESSMENT YEAR : 2006-07 SHRI RAJ KUMAR KHOSLA, 1380, SECTOR-37, NOIDA. PAN NO.AIQPK5347N. VS. INCOME TAX OFFICER, WARD-3, NOIDA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANU MONGA, ADVOCATE. RESPONDENT BY : MS.BANITA DEVI NAOREM, SR.DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 2.12.2009 FOR THE AY 2006-07, IN THE MATTER OF ORDE R PASSED U/S 143(3) OF THE IT ACT. 2. VARIOUS GROUNDS HAVE BEEN TAKEN IN THE APPEAL, B UT THE CRUX OF THE ISSUE REVOLVES AROUND NOT ACCEPTING ASSESSEES CONTENTION FOR COMPUTATION OF CAPITAL GAIN ON THE BASIS OF VALUATION REPORT OF PROPERTY A S ON 1.4.1981 AND FOR NOT GIVING BENEFIT OF DEDUCTION CLAIMED U/S 54(2) BY DEPOSITIN G THE AMOUNT OF LONG TERM CAPITAL GAIN IN STATE BANK ACCOUNT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A RETIRED ARMY OFFICER AND SEN IOR CITIZEN FILED HIS RETURN OF INCOME ON 3.7.2006 IN WARD NO.3, NOIDA DECLARING TO TAL INCOME OF RS.4,12,600/-. THE ASSESSEE SHOWED NIL CAPITAL GAIN ON SALE OF HIS 1/4 TH SHARE IN ANCESTRAL PROPERTY ITA-694/DEL/2010 2 AT 33 POORVE MARG, VASANT VIHAR, NEW DELHI FOR A TO TAL CONSIDERATION OF RS.2,28,75,000/-. HE SHOWED NIL CAPITAL GAIN ON TH E PLEA OF INVESTMENT OF RS.94.50 LAKHS IN A PLOT AT DLF CITY PHASE IV, GURG AON AND DEPOSIT OF REST CAPITAL AMOUNT IN BANK OF RS.25 LAKHS IN A CAPITAL GAIN ACC OUNT. WHILE WORKING OUT THE CAPITAL GAIN EARNED ON SALE OF PROPERTY, THE ASSESS EE HAS TAKEN VALUE OF PROPERTY AT RS.22,750/- PER SQ.YARD AS ON 1.4.1981 ON THE BASIS OF APPROVED VALUE REPORT. HOWEVER, THE AO HAS TAKEN THE VALUE OF PROPERTY AT RS.5,000/- PER SQ.MTR. AS DETERMINED BY THE CHIEF ENGINEER OF ITS VALUATION D EPARTMENT. ACCORDINGLY, INCOME ON SALE OF PROPERTY WAS ASSESSED AT RS.1,99, 27,800/-. THE AO ALSO DECLINED EXEMPTION U/S 54(2) WITH REGARD TO PURCHAS E OF RESIDENTIAL PLOT FOR CONSTRUCTION OF HOUSE AT DLF CITY AND ALSO DEPOSIT OF RS.25 LAKHS IN CAPITAL GAIN ACCOUNT SCHEME ON 19.4.2006, WHICH HE FAILED TO UTI LIZE. THE AO OBSERVED THAT ASSESSEE HAS NOT CONSTRUCTED HOUSE PROPERTY WITHIN A PERIOD OF THREE YEARS ON THE SAID PLOT NOR UTILIZED THE AMOUNT DEPOSITED IN CAPI TAL GAIN ACCOUNT, THEREFORE EXEMPTION CLAIMED U/S 54 CANNOT BE ALLOWED. THE AO ALSO OBSERVED THAT ASSESSEE HAD SHOWN LEGAL FEE OF RS.19,05,000/- PAID TO ADVOC ATE JUST ONE DAY BEFORE THE ASSESSMENT GETS TIME BARRED. THE AO STATED THAT TH ERE WAS NO TIME TO INVESTIGATE THE AUTHENTICY OF THE EXPENSES AND THE FEE BEING CH ARGED BY THE ADVOCATE IN SUCH CASES. HE OBSERVED THAT ASSESSEE COULD HAVE ENGAGE AN ADVOCATE CHARGING REASONABLE FEE, HENCE A JUSTIFIABLE FEE OF RS.19,00 0/- WAS CONSIDERED FOR ALLOWING AS A DEDUCTION WHILE ARRIVING AT NET CAPITAL GAIN C HARGEABLE TO TAX. ACCORDINGLY, ASSESMNET ORDER WAS PASSED CALCULATING CAPITAL GAIN IN RESPECT OF 1/4 TH SHARE OF THE ASSESSEE AT RS.1,94,17,199/-, WHICH WAS ADDED TO TH E ASSESSEES INCOME. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED BOTH THE ADDITIONS AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SOLD 1/4 TH SHARE IN HIS ANCESTRAL PROPERTY AND COMPUTED CAPIT AL GAIN ITA-694/DEL/2010 3 THEREON AT NIL BY TAKING THE FAIR MARKET VALUE OF T HE PROPERTY AS ON 1.4.1981 AT RS.22,750/- PER SQ.YARD. THE VALUATION SO TAKEN BY THE ASSESSEE WAS ON THE BASIS OF REPORT OF REGISTERED VALUER. HOWEVER, THE AO DE PUTED THE DVO WHO HAS ARRIVED AT THE FAIR MARKET VALUE AS ON 1.4.1981 AT RS.5,000/- PER SQ.YARD AND AFTER GIVING BENEFIT OF INDEXATION RECOMPUTED THE CAPITAL GAIN ACCORDINGLY. THE AO HAS ALSO STATED LAND RATE OF DELHI DEVELOPMENT AUTHORIT Y AS APPLICABLE ON 1.4.1981 OF VASANT VIHAR WHICH WAS AT RS.940/- PER SQ.MTR. THE REPORT FURNISHED BY THE REGISTERED VALUER DID NOT INDICATE THE SALE INSTANC E ON THE BASIS OF WHICH HE HAS ADOPTED THE FAIR MARKET VALUE OF THAT LOCALITY, WHE REAS AS PER THE CIRCULAR ISSUED BY THE OFFICE OF CHIEF ENGINEER, INCOME-TAX DEPARTMENT DATED 21.7.1986 INDICATES FAIR MARKET VALUE IN METROPOLITAN DELHI W.E.F. 1.9. 1985, AND THE RATE OF LAND AT VASANT VIHAR WAS RS.5,000/- PER SQ.MTR. AND RS.9,00 0/- PER SQ.MTR. FOR COMMERCIAL USE. CONTENTION OF LEARNED AR BEFORE US WAS THAT S INCE THE PROPERTY WAS ON THE MAIN 80 FT. WIDE ROAD, THE FAIR MARKET VALUE WAS MU CH MORE THAN THE CIRCLE RATE AND THE PROPERTY IS INHABITED BY FOREIGN EMBASSIES OF SEVERAL COUNTRIES AND RICH CLASS OF SOCIETY LIKE BIG BUSINESSMEN AND INDUSTRIA LISTS, SO PROPERTY VALUE SHOULD NOT BE TAKEN AS DECIDED BY THE LOCAL AUTHORITIES OR ANY GOVERNMENT AUTHORITIES BUT IT SHOULD BE FAIR MARKET VALUE. THIS CONTENTION OF THE ASSESSEE IS REQUIRED TO BE CONSIDERED, HOWEVER AT THE VERY SAME TIME, THE ASSE SSEE IS REQUIRED TO FILE SUPPORTING EVIDENCE FOR THE SAME INDICATING THE BAS IS FOR ARRIVING AT FAIR MARKET VALUE AS EVIDENCED BY THE TRANSACTION OF SIMILAR PR OPERTY ENTERED IN ITS NEIGHBOR. HOWEVER, IN THE INSTANT CASE BEFORE US, THE VALUER HAS NOT BROUGHT ANY COGENT MATERIAL ON RECORD TO SUBSTANTIATE THE VALUE OF RS. 22,750/- AS ARRIVED AT BY HIM. THE ASSESSEE HAS FILED DIFFERENT VALUATION REPORTS ON DIFFERENT OCCASIONS. AT THE FIRST INSTANCE, COMPUTATION OF LONG TERM CAPITAL WA S BASED ON VALUATION OF PROPERTY BY A REGISTERED VALUER AS ON 1.4.1987 BY ADOPTING T HE RATE OF LAND AT RS.35,000/- PER SQ.YARD. HOWEVER, LATER ON, THE ASSESSEE FILED VALUATION REPORT BY THE SAME VALUER VALUING HOUSE PROPERTY BY TAKING VALUE AS ON 1.4.1981 AT RS.22,750/- PER SQ.YARD. THE AO FURTHER OBSERVED THAT ON 30.12.200 8, THE ASSESSEE FILED ANOTHER ITA-694/DEL/2010 4 VALUATION REPORT ADOPTING THE RATE OF LAND AT RS.10 ,500/- PER SQ.YARD. ALL THESE INDICATE THAT EVEN THE VALUER WAS NOT SURE AS TO TH E VALUATION ARRIVED AT BY HIM AND THE BASIS FOR THE SAME. IN THE FITNESS OF THINGS, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR MAKING DETAILED MARKET ENQUIRY W ITH REGARD TO RATES AT WHICH TRANSACTION FOR SALE AND PURCHASE OF PROPERTY IN TH E SAME AREA KEEPING INTO ACCOUNT THE SPECIAL FEATURE OF THE PROPERTY AS INDICATED BY THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO PLACE A COPY OF SALE DEEDS IN RESP ECT OF SIMILAR TRANSACTION HAVING BEEN ENTERED IN RESPECT OF NEARBY PROPERTY TO SUBST ANTIATE ITS CLAIM OF HIGHER VALUE OF PROPERTY AS ON 1.4.1981. WE DIRECT ACCORDINGLY. 5. WITH REGARD TO ASSESSEES CLAIM FOR EXEMPTION U/ S 54(2) FOR PURCHASE OF RESIDENTIAL PLOT FOR RS.94.50 LAKHS FOR CONSTRUCTIO N OF HOUSE THEREON AND ALSO DEPOSIT OF BALANCE AMOUNT OF RS.25 LAKHS IN THE CAP ITAL GAIN ACCOUNT, WE FOUND THAT AMOUNT OF RS.25 LAKHS WAS DULY DEPOSITED BY TH E ASSESSEE IN THE CAPITAL GAIN ACCOUNT ON 19.4.2006, WHICH WAS MUCH PRIOR TO THE L AST DATE OF FILING RETURN FOR THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION. THE A O DECLINED THE EXEMPTION ON THE PLEA THAT DURING STATUTORY PERIOD AMOUNT OF DEP OSIT WAS NOT UTILIZED FOR CONSTRUCTION OF HOUSE. HOWEVER, FAILURE OF THE ASS ESSEE TO UTILIZE THE SAID AMOUNT OF DEPOSIT IS TO BE SEEN AS PER THE PROVISIONS OF S UB-SECTION (1) AND IF THE ASSESSEE FAILS TO UTILIZE THE SAME AS PER LAW, THEN THE AMOU NT NOT SO UTILIZED SHALL BE CHARGED U/S 45 AS THE INCOME OF THE PREVIOUS YEAR IN WHICH PERIOD OF THREE YEARS FROM THE DATE OF TRANSACTION OF ORIGINAL ASSETS EXPIRES. WE ARE THEREFORE INCLINED TO AGREE WITH THE CONTENTION OF LEARNED AR THAT NON-UTILIZAT ION OF THE AMOUNT WITHIN THE PERIOD OF THREE YEARS IS TO BE SEEN FOR DECLINING T HE CLAIM OF DEDUCTION ONLY AFTER EXPIRY OF THREE YEARS AND NOT IN THE RELEVANT ASSES SMENT YEAR IN WHICH ASSESSEE HAS DULY DEPOSITED THE AMOUNT IN THE CAPITAL GAINS TAX ACCOUNT BEFORE LAST DATE OF FILING THE RETURN. IN THE INTEREST OF JUSTICE AND FAIR PL AY, WE RESTORE THIS GROUND ALSO BACK TO THE FILE OF THE AO FOR VERIFYING ALL THE RELEVAN T DETAILS WITH REGARD TO INVESTMENT IN NEW RESIDENTIAL PLOT AS WELL AS DEPOSIT IN THE B ANK ACCOUNT UNDER CAPITAL GAINS ITA-694/DEL/2010 5 TAX SCHEME AND ITS UTILIZATION THEREAFTER IF ANY WI THIN THE STATUTORY PERIOD AS STIPULATED IN THE RELEVANT PROVISIONS OF SECTION 54 AND FOR DECIDING THE SAME AS PER LAW. WE DIRECT ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES, IN TERMS INDICATED HEREINABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 23 RD JULY, 2010. SD/- SD/- (I.P.BANSAL) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23.07.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-694/DEL/2010 6