Kunal Kishore Borawke, Pune V. Income-tax Officer,

ITA 723/PUN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0563 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 18-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Value adopted by valuation officer; Business income; Cost of acquisition; Date of conversion; Fair market value
• Section: 45(2); 54F; 131

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 723 /PN/201 6 / ASSESSM ENT YEAR : 20 1 0 - 1 1 KUNAL KISHORE BORAWKE, SHRINIWAS GARDEN, OPP. POLICE GROUND, 1145/17, SHIVAJI NAGAR, PUNE 411016 . / APPELLANT PAN: A FYPB2628G VS. THE INCOME TAX OFFICER , WARD 3 (1), PUNE . / RESPONDENT WARD 3 (1), PUNE . / RESPONDENT / APPELLANT BY : S MT. DEEPA KHARE / RESPONDENT BY : S HRI HITENDRA NINAWE / DATE OF HEARING : 0 6 . 1 0 .201 6 / DATE OF PRONOUNCEMENT: 14 . 1 0 .201 6 / ORDER PER SUSHMA CHOWLA , J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 1 , PUNE , DATED 0 5 . 0 2 .20 1 6 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL : - ITA NO. 723 /PN/20 1 6 KUNAL KISHORE BORAWKE 2 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING VALUATION OF LAND ON CONVERSION INTO STOCK U/S 45(2) AT RS.89,07,486/ - AS AGAINST RS.1,04,24,000/ - CLAIMED BY THE APPELLANT ON THE BASIS OF REGISTERED VALUERS R EPORT. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING COMPARABLE INSTANCES QUOTED BY THE APPELLANT THAT SHOWED THAT THE VALUATION MADE BY THE REGISTERED VALUER WAS REASONABLE AND HAD TO BE ACCEPTED. 3. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN ADOPTING CAPITAL GAINS AT RS.13,68,580/ - AND BUSINESS PROFITS AT RS.18,18,432/ - AS AGAINST RS.28,85,094/ - AND RS.3,01,918/ - RESPECTIVELY AS CLAIMED BY THE APPELLANT. 3. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND OF APPEAL WHICH REA DS AS UNDER: - WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO WAS JUSTIFIED IN ADOPTING THE FAIR MARKET VALUE OF LAND ON THE DATE OF CONVERSION U/S 45(2) ON THE BASIS OF DVO REPORT WHICH WAS OBTAINED ON THE BASIS OF INVALID REFERENCE AS PER SECTION 55A AND FAILED TO APPRECIATE THAT THE REFERENCE U/S 55A CAN BE MADE ONLY WHEN THE VALUE ADOPTED BY ASSESSEE IS LESS THAN THE FAIR MARKET VALUE. IN THE FACE OF SEC 55A OF THE ACT, IT IS NOT PERMISSIBLE TO REFER THE ISSUE OF VALUATION TO THE DE PARTMENTAL VALUATION OFFICER IN TERMS OF SECTION 131 OF THE ACT. THE VALUE IS CLAIMED BY THE ASSESSEE ON THE BASIS OF REGISTERED VALUERS REPORT MAY KINDLY BE ACCEPTED. 4. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ADDIT IONAL GROUND OF APPEAL RAISED IS PURELY LEGAL AND HENCE, MERITS TO BE ADMITTED. 5. THE ISSUE RAISED BY WAY OF ADDITIONAL GROUND OF APPEAL IS AGAINST THE ADOPTION OF MARKET VALUE OF LAND ON THE DATE OF CONVERSION UNDER SECTION 45(2) OF THE ACT ON THE BASIS OF DVO REPORT, WHERE THE VALUE ADOPTED BY THE ASSESSEE WAS HIGHER AS AGAINST THE REPORT OF DVO. THE ISSUE RAISED BY WAY OF ADDITIONAL GROUND OF APPEAL IS PURELY LEGAL AND DOES NOT REQUIRE ANY INVESTIGATION INTO FACTS AND CONSEQUENTLY, THE SAME IS ADMITTE D FOR ADJUDICATION. 6. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD DECLARED INCOME FROM LONG TERM CAPITAL GAINS. THE ASSESSEE ITA NO. 723 /PN/20 1 6 KUNAL KISHORE BORAWKE 3 HAD PURCHASED THE PLOT OF LAND IN THE YEAR 1996 - 97 FOR RS. 76,500/ - AND THE SAME PLOT WA S CONVERTED INTO BUSINESS ASSET DURING THE FINANCIAL YEAR 2008 - 09. THE VALUATION OF THE SAID PLOT AS PER REGISTERED VALUER ON THE DATE OF CONVERSION WAS RS. 1,04,24,000/ - . THE ASSESSEE DECLARED THE INCOME ON THE SAID CONVERSION OF PLOT SINCE THE FLATS CON STRUCTED IN THE BUILDING WERE SOLD IN ASSESSMENT YEAR 2010 - 11. THE ASSESSEE HAD DECLARED BUSINESS PROFIT OF RS.3,01,918/ - BY TAKING MARKET VALUE OF PLOT ON CON VERSION OF ASSET AT RS.1,04,24,000/ - . THE ASSESSING OFFICER MADE REFERENCE TO THE GOVERNMENT AP PROVED VALUER TO DETERMINE THE FAIR MARKET VALUE DURING THE FINANCIAL YEAR 2008 - 09, WHICH WAS ARRIVED AT RS.72,85, 432/ - . THE DIFFERENCE BETWEEN THE VALUE SHOWN BY THE ASSESSEE AND VALUE AS COMPUTED BY THE DVO I.E. RS. 35,55,818/ - WAS ADDED AS BUSINESS INCO ME AND CAPITAL GAINS OF RS. 28,85,094/ - WAS REDUCED TO NIL. 7. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER. HOWEVER, SLIGHT VARIATION WAS ACCEPTED IN THE COMPUTATION OF CAPITAL GAINS AND THE BUSINESS INCOME. 8. THE ASSESSEE IS IN APPEAL AGAINST TH E ORDER OF CIT(A). 9. THE ISSUE RAISED BY WAY OF ADDITIONAL GROUND OF APPEAL IS AGAINST THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE DVO, UNDER WHICH THE VALUE WORKED OUT BY THE DVO WAS LESSER THAN THE VALUE DECLARED BY THE ASSESSEE. THE LEARNED AU THORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. PUJA PRINTS (2014) 360 ITR 697 (BOM) , WHEREIN IT IS HELD THAT THE REFERENCE TO ITA NO. 723 /PN/20 1 6 KUNAL KISHORE BORAWKE 4 DVO UNDER SECTION 55A OF THE ACT HAS T O BE MADE WHEN VALUE OF PROPERTY DISCLOSED BY THE ASSESSEE IS LESS THAN FAIR MARKET VALUE AND NOT VICE - VERSA. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 11. ON PERUSAL OF RECORD AND A FTER HEARING BOTH THE LEARNED AUTHORIZED REPRESENTATIVES, THE ISSUE RAISED BY WAY OF ADDITIONAL GROUND OF APPEAL IS AGAINST THE VALUATION ASSESSED BY THE DEPARTMENTAL VALUATION OFFICER. THE ASSESSEE WAS OWNER OF LAND WHICH WAS CONVERTED INTO BUSINESS ASSE T IN THE FINANCIAL YEAR 2008 - 09 . THE SAID ASSET WAS THEREAFTER, DEVELOPED AND SOLD IN ASSESSMENT YEAR 2010 - 11 AND THE ASSESSEE OFFERED LONG TERM CAPITAL GAINS ON CONVERSION OF ASSET IN THE INSTANT ASSESSMENT YEAR. THE ASSESSEE ALSO OFFERED BUSINESS PROFI TS ON SALE OF FLATS. THE ASSESSEE HAD DEBITED MARKET VALUE OF PLOT AS PER THE VALUATION DETERMINED BY THE REGISTERED VALUER ON THE DATE OF CONVERSION AT RS.1,04,24,000/ - . THE ASSESSEE THEREAFTER, COMPUTED THE LONG TERM CAPITAL GAINS AT RS. 1,01,27,180/ - A ND AFTER CLAIMING EXEMPTION UNDER SECTION 54F OF THE ACT, THE TAXABLE LONG TERM CAPITAL GAINS WERE SHOWN AT RS. 28,85,094/ - . THE COST OF ACQUISITION OF SAID PROPERTY WHICH WAS PURCHASED BY THE ASSESSEE IN 1996 - 97 WAS RS.76,500/ - . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE VALUATION WAS WITHOUT ANY BASIS SINCE NO SALES INSTANCES WERE TAKEN AND HENCE REFERENCE WAS MADE TO THE DVO, WHO VIDE REPORT DATED 18.03.2013 DETERMINED THE FAIR MARKET VALUE AT RS. 72,85,432/ - BY ADOPTING THE RATE OF RS.15,400/ - PER S Q. MTR INSTEAD OF RS.22,000/ - PER SQ. MTR. THE ASSESSEE IS AGGRIEVED BY THE SAID ORDER OF ASSESSING OFFICER IN ADOPTING MARKET VALUE OF THE SAID PLOT ON A LESSER FIGURE THAN AS DECLARED. THE CONTENTION OF ASSESSEE IS THAT THE REFERENCE MADE TO THE DVO BY THE ASSESSING ITA NO. 723 /PN/20 1 6 KUNAL KISHORE BORAWKE 5 OFFICER, WHEREIN THE FAIR MARKET VALUE OF PROPERTY WAS DETERMINED AT A LOWER FIGURE THAN THAT DECLARED BY THE ASSESSEE IS NOT CORRECT, SINCE NO SUCH REFERENCE UNDER SECTION 55A OF THE ACT CAN BE MADE . IN THIS REGARD, I FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. PUJA PRINTS (SUPRA), WHEREIN IT HAS BEEN HELD THAT WHERE THE ASSESSING OFFICER REFERRED THE ISSUE OF VALUATION TO THE DVO ONLY BECAUSE IN HIS VIEW, THE VALUATION OF THE PROPERTY AS ON 01.04.1981 AS MADE BY THE RESPONDENT - ASSESSEE WAS HIGHER THAN THE FAIR MARKET VALUE, THUS, IN SUCH CASES, INVOCATION OF SECTION 55A OF THE ACT WAS NOT JUSTIFIED. THE HONBLE HIGH COURT FURTHER HELD THAT THE AMENDMENT TO SECTION 55A OF THE ACT IN 2012 WAS MADE EFFECT IVE FROM 01.07.2012 AND HENCE, WAS TO BE APPLIED PROSPECTIVELY. IT WAS FURTHER HELD THAT WHERE THE ISSUE WAS COVERED BY SECTION 55A [CLAUSE (A)] OF THE ACT, RESORT COULD NOT BE MADE TO THE RESIDUARY CLAUSE PROVIDED IN SECTION 55A(B)(II) OF THE ACT. THE C BDT CIRCULAR DATED 25.11.1972 WAS HELD TO BE NOT APPLICABLE. 12. FOLLOWING THE ABOVE SAID PROPOSITION AS LAID DOWN BY THE JURISDICTIONAL HIGH COURT AND APPLYING THE SAME TO THE FACTS OF THE PRESENT CASE, IN THE INSTANT CASE ALSO, REFERENCE WAS MADE TO T HE VALUATION OFFICER IN ORDER TO DETERMINE THE FAIR MARKET VALUE AS ON DATE OF CONVERSION ON THE PRETEXT THAT THE FAIR MARKET VALUE AS DECLARED BY THE ASSESSEE WHICH WAS BACKED BY REGISTERED VALUER REPORT, WAS HIGHER, WHICH IS NOT CORRECT. 1 3 . THE ISSUE A RISING IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. PUJA PRINTS (SUPRA) , WHICH IN TURN HAS BEEN FOLLOWED BY THE TRIBUNAL IN MRS. ANJALI BHARAT KABRA VS. ITO IN ITA NO.547/PN/2013, RELATING TO ASSESSMENT YEAR 2009 - 10, ORDER DATED 26.08.2016 . ACCORDINGLY, THERE IS NO MERIT IN SUBSTITUTION OF FAIR MARKET VALUE ITA NO. 723 /PN/20 1 6 KUNAL KISHORE BORAWKE 6 SUBMITTED BY THE DVO SINCE IN THE PRE - AMENDED PROVISIONS OF SECTION 55A OF THE ACT, THE VALUE LESSER THAN THE VALUE DECLARED BY THE ASSESS EE CANNOT BE ADOPTED BY WAY OF REFERENCE UNDER SECTION 55A OF THE ACT. REVERSING THE ORDER OF CIT(A), THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. SINCE THE ADDITIONAL GROUND OF APPEAL IS DECIDED IN FAVOUR OF ASSESSEE, OTHER GROUNDS OF APPEAL BECOME ACADEMIC. 1 4 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 14 TH DAY OF OCTOB ER , 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 14 TH OCTO BER , 201 6 . / PUNE ; DATED : 14 OCTO BER , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1 , PUNE ; 4. / THE PR. CIT - 2 , PUNE ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE