Waqf Alal Aulad, Meerut V. Addl CIT, Meerut

ITA 706/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2282 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 26-11-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 26-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: O P SAPRA
• Keywords: Capital asset; Additional evidence; Fair market value; Valuation report; Set aside; Capital Gains
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL I.T.A. NOS. 705 & 706/DEL/2009 ASSESSMENT YEARS: 2003-04 & 2004-05 WAQF ALAL AULAD, VS. ADDITIONAL CIT, 107- KOTHI ATANAS, RANGE-2, MEERUT. MEERUT. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI O.P. SAPRA, ADV. RESPONDENT BY: MS. ANUSHA KHURA NA, DR ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANC E OF ASSESSEE AGAINST THE SEPARATE ORDERS OF EVEN DATE I.E. 16.12 .2008 PASSED BY THE LEARNED CIT(APPEALS) FOR ASSESSMENT YEAR 2003-04 AND 2004-0 5 RESPECTIVELY. IN ASSESSMENT YEAR 2004-05, LEARNED CIT(APPEALS) HAS N OT MDE ANY DETAILED DISCUSSION RATHER HE RELIED UPON THE ORDER PASSED I N ASSESSMENT YEAR 2003- 04, THEREFORE, FOR THE FACILITY OF REFERENCE WE ARE TAKING UP THE FACTS MAINLY FROM ASSESSMENT YEAR 2003-04. 2. THE COMMON GRIEVANCE OF ASSESSEE IN BOTH THE ASS ESSMENT YEARS RELATES TO VALUATION OF THE PROPERTIES SOLD BY IT I N THE ACCOUNTING PERIOD 2 RELEVANT TO ASSESSMENT YEARS 2003-04 AND 2004-05 FO R THE PURPOSE OF COMPUTATION OF CAPITAL GAINS. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A WAQF I.E. A PRIVATE TRUST. IT HAS FILED ITS RETURN OF INCOME ON 11.11.2 003 DECLARING NIL INCOME IN ASSESSMENT YEAR 2003-04 AND ON 27.9.2004 DECLARING AN INCOME OF RS.12,70,303 IN ASSESSMENT YEAR 2004-05. THE ASSESS EE HAD PURCHASED A PROPERTY BEARING NO.29 ELAHIGAJ (NEAR KESARGUNJ), M EERUT FOR A CONSIDERATION OF RS.2,386 VIDE SALE DEED DATED 19.8 .1943. THIS PROPERTY WAS SOLD BY THE ASSESSEE VIDE REGISTERED SALE DEED DATE D 18.7.2002 FOR A CONSIDERATION OF RS. 10 LACS TO THE EXISTING TENANT OVER THIS PROPERTY. THE SUB-REGISTRAR FOR THE PURPOSE OF AFFIXING THE STAMP DUTY FOR REGISTRATION OF THE PROPERTY VALUED IT AT RS.92 LACS AND DIRECTED T HE PARTIES TO PAY A STAMP DUTY ON THIS AMOUNT. SINCE THE SALES CONSIDERATION WAS DISCLOSED BY THE ASSESSEE AT RS. 10 LACS FOR THE PURPOSE OF INCOME-T AX ACT WHEREAS FOR THE PURPOSE OF STAMP DUTY, IT HAS BEEN VALUED AT RS.92 LACS. THE ASSESSING OFFICER FORMED AN OPINION THAT SEC. 50-C IS APPLICA TION TO THIS PROPERTY. THE ASSESSMENT WAS GOING TO BE TIME BARRED, THEREFORE, HE COMPUTED THE VALUE OF THE PROPERTY IN VIEW OF SEC. 50-C AT RS.92 LACS. DU RING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE REQUESTED THAT THE CASE MAY BE REFERRED 3 TO THE DVO. THE DVO HAS DETERMINED THE VALUE OF THE PROPERTY AT RS.45,68,300. THE ASSESSING OFFICER HAS PASSED AN O RDER UNDER SEC. 154 OF THE ACT ON 18.1.2007 AND ADOPTED THE VALUE OF PROPE RTY AT RS.45,68,300 AND COMPUTED THE CAPITAL GAINS. 4. DISSATISFIED WITH THE ORDER PASSED UNDER SEC. 14 3(3) DATED 27.1.2006, ASSESSEE CARRIED THE DISPUTE BEFORE THE LEARNED CIT (APPEALS). IT WAS CONTENDED THAT THE DVO OUGHT TO HAVE DETERMINED THE VALUE OF PROPERTY AS PER SCHEDULE-III OF THE WEALTH-TAX ACT APPENDED TO SEC.7(1) OF THE W.T. ACT. THE OTHER CONTENTION RAISED BY THE ASSESSEE WAS THA T THE DVO OUGHT TO HAVE DETERMINED THE VALUE OF THE PROPERTY BY RENT CAPITA LIZATION METHOD. LEARNED CIT(APPEALS) REJECTED BOTH THESE CONTENTIONS OF THE ASSESSEE. HE OBSERVED THAT CERTAIN SECTIONS OF THE W.T. ACT ARE REFERRED IN SEC. 50-C OF THE INCOME- TAX ACT, 1961 BUT THESE SECTIONS ARE PROCEDURAL ONE WHERE THEY PROVIDE THE METHOD OF VALUATION. ACCORDING TO THE LEARNED CIT(A PPEALS) UNDER THE W.T. ACT, THE METHOD OF VALUATION IS GOVERNED BY THE PRO VISIONS OF SEC. 7(1) OF THE W.T. ACT WHICH CONTEMPLATES THAT THE VALUATION HAS TO BE MADE IN ACCORDANCE WITH SCHEDULE-III OF THE W.T. ACT. HOWEV ER, IN SEC. 50-C OF THE ACT, NOWHERE A REFERENCE TO SEC. 7(1) OF THE W.T. A CT IS MADE. IT IS NOT PROVIDED IN THE INCOME-TAX ACT, 1961 THAT VALUE OF THE PROPERTY FOR THE 4 PURPOSE OF THE CAPITAL GAINS HAS TO BE DETERMINED A S PER SCHEDULE-III OF SEC. 7(1) OF THE W.T. ACT. ACCORDING TO THE LEARNED CIT( APPEALS), THE PROVISIONS OF SEC.50-C ARE MANDATORY WHICH STIPULATES THAT THE VALUE HAS TO BE TAKEN EITHER ON THE BASIS OF CIRCLE RATE OR ON THE BASIS OF DVOS REPORT. 5. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE IMPUG NING THE ORDERS OF LEARNED CIT(APPEALS) FILED AN APPLICATION UNDER RUL E 29 OF THE ITAT RULES, WHEREBY HE SOUGHT TO LED ADDITIONAL EVIDENCE IN THE SHAPE OF VALUATION REPORT GOT PREPARED FROM A REGISTERED VALUER. HE POINTED O UT THAT LEARNED DVO HAS NOT PROVIDED SUFFICIENT OPPORTUNITY TO REBUT THE VA LUATION WORKED OUT BY HIM. THE PROPOSED VALUATION WAS COMMUNICATED TO THE ASSESSEE AND ITS OBJECTIONS WERE INVITED ON 24.2.2006. LEARNED DVO H AS THEREAFTER SUBMITTED THE REPORT ON 29.3.2006. THUS, A SUFFICIE NT TIME WAS NOT GRANTED TO THE ASSESSEE FOR OBTAINING THE REPORTS FROM REGISTE RED VALUER AND FILING COUNTER OBJECTION ON THE REPORT. HE POINTED OUT THA T PROPERTY IS A TENANTED ONE. THE TENANTS ARE OCCUPYING IT SINCE ITS INCEPTI ON I.E. RIGHT FROM 1943. THE TENANTS ARE PROTECTED UNDER THE RENT RESTRICTION AC T AND THEY CANNOT BE EJECTED. IN SUCH CIRCUMSTANCES, THE PROPERTY DOES N OT COMMAND THE VALUE DETERMINED BY THE LEARNED DVO. HE PRAYED THAT THIS ISSUE BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATION. 5 6. LEARNED DR ON THE OTHER HAND RELIED UPON THE ORD ERS OF THE REVENUE AUTHORITIES BELOW. SHE MADE A REFERENCE TO THE PAGE NOS. 67 TO 75 OF THE PAPER BOOK WHEREIN COPY OF THE DVOS REPORT IS AVAI LABLE. SHE SUBMITTED THAT LEARNED DVO HAS CONSIDERED THE ENCUMBRANCES OF TENANCY OVER THE PROPERTY WHILE WORKING OUT FAIR MARKET VALUE OF THE PROPERTY ON THE DATE OF SALE. THEREFORE, NO FRUITFUL PURPOSE WILL BE SERVED BY SENDING THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATION. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. SECTION 50-C OF THE INCOME-TAX ACT, 1961 PROVIDES THAT WHERE THE CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TH E TRANSFER BY AN ASSESSEE OF A CAPITAL ASSETS, BEING LAND OR BUILDING OR BOTH, I S LESS THAN THE VALUE ADOPTED BY ANY AUTHORITY OF A STATE GOVERNMENT FOR THE PURP OSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THEN THE VALUE SO ADOPTED WOULD BE DEEMED TO BE FULL VALUE OF THE CONSIDERATION RECEIVED OR A CCRUING, AS A RESULT OF SUCH TRANSFER, FOR COMPUTING CAPITAL GAIN/LOSS OF THAT A SSESSEE. HOWEVER, THE ASSESSEE MAY DISPUTE THE ADOPTION OF SUCH VALUE AND IN THAT CASE, A REFUND WOULD BE MADE TO DVO AS PER SUB-SECTION (2) OF SECT ION 50-C. IN THE PRESENT CASE ACCORDING TO SEC.50-C THE REFERENCE TO DVO WAS MADE. THE PROPERTY CONSISTS 604.62 SQ. MTR. OF LAND. IT HAS A CONSTRUC TED AREA OF 390.45 SQ.MTR. AT 6 GROUND FLOOR AND 113.00 SQ.MTR. AT FIRST FLOOR. LEA RNED DVO WHILE WORKING OUT THE VALUE OF THIS PROPERTY HAS ADOPTED THE LAND AND BUILDING METHOD. HE ADOPTED THE RATE OF LAND AT 11000 PER SQ. MTR. WHIC H IS PROVIDED IN THE CIRCLE RATE FOR THE PURPOSE OF STAMP DUTY. IN THIS WAY, VA LUE OF THE LAND HAS BEEN WORKED OUT AT RS.66,50,820. THIS VALUE WAS FURTHER ENHANCED BY DEPRECIATED VALUE OF STRUCTURE AT RS.1,67,600. THUS, THE TOTAL VALUE WAS DETERMINED AT RS.68,18,420. HE GAVE A DEDUCTION AT 33% ON ACCOUNT OF ENCUMBRANCES OF TENANCY. THE VALUE HAS BEEN REDUCED DUE TO THIS REA SON BY RS.22,50,078 AND THE VALUE HAS BEEN WORKED OUT AT RS.45,68,300. ON D UE CONSIDERATION OF THIS REPORT, WE ARE OF THE OPINION THAT LEARNED DVO HAS NOT SPECIFIED THE REASONS FOR TREATING THE VALUE OF ENCUMBRANCES IN THE SHAPE OF TENANCY AT 33% OF THE TOTAL VALUE OF THE PROPERTY. THE PROPERTY HAS BEEN FETCHING A RENT OF RS.22,800 PER ANNUM ONLY. THE TENANTS ARE PROTECTED BY THE RENT RESTRICTION ACT OF THE STATE GOVERNMENT. THEY CANNOT BE EJECTED . ONE MAY HAS TO SEE WHETHER A PROPERTY GIVING AN INCOME OF RS.22,800 PE R ANNUM CAN FETCH THE VALUE OF MORE THAN RS.45 LACS. CAN ANY PRUDENT BUSI NESSMAN WOULD LIKE TO MAKE INVESTMENT IN SUCH A VENTURE OR ONE WOULD GO T O PURCHASE SUCH PROPERTY ONLY FOR PRIDE OF POSSESSION. THE DVO HAS NOT SPECIFIED WHY HE IS VALUING THE PROPERTY ON LAND AND BUILDING METHOD TH OUGH IT IS, IN HIS 7 DISCRETION TO VALUE THE PROPERTY EITHER BY LAND AND BUILDING METHOD OR BY RENT CAPITALIZATION METHOD BUT ANY OF SUCH METHODS SHOULD GIVE A FAIR MARKET VALUE OF THE PROPERTY. IN THE PRESENT CASE, THE TIM E SPAN OF ONE MONTH FOR REBUTTING HIS PROPOSED VALUATION TO OUR MIND IS ALS O NOT SUFFICIENT. TAKING INTO CONSIDERATION THE CUMULATIVE EFFECT OF ALL THE CIRCUMSTANCES, WE DEEM IT APPROPRIATE THAT DETERMINATION OF THE VALUE OF THE PROPERTY SOLD BY THE ASSESSEE REQUIRES MORE INVESTIGATION. THEREFORE, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR READJUDICATION. 8. THE FACTS IN ASSESSMENT YEAR 2004-05 ARE ALSO SI MILAR. WE SET ASIDE THE ISSUE IN THIS YEAR ALSO TO THE FILE OF THE ASSE SSING OFFICER FOR READJUDICATION. 9. IT IS NEEDLESS TO SAY THAT WHATEVER OBSERVATIONS MADE BY US IN DISPOSING OF BOTH THESE APPEALS SHALL NOT IMPAIR OR INJURE THE CASE OF ASSESSING OFFICER OR SHALL CAUSE ANY PREJUDICE TO T HE DEFENCE/EXPLANATION OF THE ASSESSEE. THE ASSESSING OFFICER SHALL PROVIDE D UE OPPORTUNITY OF HEARING TO THE ASSESSEE AND THE ASSESSEE WILL BE AT LIBERTY TO PRODUCE ANY EVIDENCE IN SUPPORT OF ITS EXPLANATION. 8 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON .12 .2009 ( K.G. BANSAL ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: /12/2009 MOHAN LAL COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR:ITAT ASSISTANT REGISTRAR