SALEMOHAMMED PADAMSEE & CO., MUMBAI V. ASST CIT 13(1), MUMBAI

ITA 739/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3651 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 10-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Recovery proceedings; Business income; Rectification of order; Principle of natural justice; Cost of acquisition; Tangible material; Fair market value; Valuation report; Revised return
• Section: 139(5); 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , BEFORE SHRI C.N. PRASAD , JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO .739/MUM/2013 ( / ASSESSMENT YEAR: 2008 - 09 ) M/S SALE MOHD. PADMSEE AND CO., 12, NEW INDIA INDL. ESTATE , MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI - 400093 / VS. ASSTT. COMMISSIONER OF INCOME TAX - 13(1), MUMBAI - . ( / APPELLANT) : ( / RESPONDENT ) ./ I.T.A. NO.2671/MUM/2013 ( / ASSESSMENT YEARS: 2009 - 10) M/S SALE MOHD. PADMSEE AND CO., MUMBAI. / VS. JT.COMMISSIONER OF INCOME TAX (OSD) 13(1), MUMBAI . ./ ./ PAN : ABVFS7235F ( / APPELLANT) : ( / RESPONDENT ) ./ I.T.A. NO.3276/MUM/2013 ( / ASSESSMENT YEAR: 2009 - 10) INCOME TAX OFFICER - 20(3)(2), ROOM NO.607, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI - 400012 / VS. M/S SALE MOHD. PADMSEE AND CO., MUMBAI. ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : SHRI M K KULKARNI / REVENUE BY : SHRI LOVE KUMAR / DATE OF HEARING : 16.1 .2016 / DATE OF PRONOUNCEMENT : 09 . 0 3 .2016 / O R D E R PER RAJESH KUMAR, A. M: THE APPEAL BY THE ASSESSEE FOR AY - 2008 - 09 IS DIRECTED AGAINST THE ORDER OF LD.CIT(A) DATED 28.11.2012 AND CROSS APPEALS FOR THE ASSESSMENT YEAR 2009 - 10 ARE DIRE CTED AGAINST THE ORDER DATED 28.1.2013. SINCE ISSUE INVOLVED IN ALL THESE APPEALS PERTAIN TO THE COMMON ISSUE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 2. FIRST WE SHALL TAKE UP T HE APPEAL BEARING ITA NO.739/MUM/2013. THE COMMON ISSUE RAISED IN ALL THESE GROUNDS BY THE ASSESSEE IS AG AINST THE UPHOLDING THE REJECTION OF RECTIFICATION APPLICATION FILED BY THE ASSESSEE U/S 154 OF THE INCOME TAX ACT, 1961(THE ACT) IN ORDER TO CORRE CT THE MISTAKE WHICH HAD OCCURRED DUE TO OFFERING THE CAPITAL GAIN OF RS.3,02,93,202/ - WHICH WAS WRONGLY OFFERED TO TAX IN THIS YEAR INSTEAD OF AY 2009 - 10. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 24.9.200 8 DECLARING TOTAL INCOME AT RS.3,02,93,202/ - BY WAY OF CAPITAL GAIN ON SALE OF LAND. THE RETURN WAS PROCESSED U/S 143(1) ON 8.10.2010 AND A DEMAND OF RS.87,65,930 / - WAS RAISED. THE ASSESSEE DID NOT PAY THE SAID DEMAND BUT MOVED AN APPLICATION FOR RECT IFICATION U /S 154 OF THE ACT ON 1.11.2010 REQUESTING FOR RECTIFICATION OF MISTAKE COMMI TT ED IN THE RETURN OF INCOME BY OFFERING FOR TAX THE CAPITAL GAIN ON SALE OF LAND IN THE CURRENT YEAR WHICH RELATED THE SUBSEQUENT YEAR I.E AY 2009 - 10. 4 . THE AO CAME TO THE CONCLUSION THAT THE MISTAKE U/S 154 OF THE ACT C OULD BE RECTIFIED ONLY, IF SUCH MISTAKE WAS NOT LIABLE FOR DEBATE OR DISCUSSION AND COULD EASILY BE RECTIFIED ON THE FACTS PRIMA FACIE. THE AO HELD THAT THERE WAS NO MISTAKE WHICH WAS PROPOSED TO BE RECTIFIED U/S 154 OF THE ACT AS THE ASSESSEE ITSELF HAS DECLARED LONG TERM CAPITAL GAINS (LTCG) OF RS.3,02,93,202/ - IN THE RETURN OF INCOME WHICH WAS ACCEPTED AS ON PROCESSING U/S 143(1) AND THUS REJECTING THE PETITION OF THE ASSESSEE THAT T HE SALE DEED WAS EXECUTED IN APRIL 2008 AND FURTHER HELD THAT SUCH ISSUE WAS A MATTER OF DEBATE AND DELIBERATION AND NOT A APPARENT MISTAKE FROM RECORD. IN PARA 6 OF THE RECTIFICATION APPLICATION, THE ASSESSEE RAISED THE CONTENTION THAT INCLUSION OF CAPI TAL GAIN IN AY 2008 - 09 WAS WRONG FOR THE REASON OF INCORRECT CALCULATION OF LTCG AS 3 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 FAIR MARKET VALUE (FMV) AS ON 1.4.1981 WAS NOT TAKEN INTO CONSIDERATION FOR THE PURPOSE OF INDEXING . BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APP EAL BEFORE THE LD. CIT(A), WHO ALSO DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND ALSO SUBMISSIONS MADE BY THE ASSESSEE. AS ALREADY MENTIONED IN THE PRE PARAS, THE ASSESSEE FILED APPLICATI ON ON 04/11/2010 SEEKING RECTIFICATION ORDER PASSED BY THE ASSESSING OFFICER U/S.143(1). IT IS SEEN FROM THE SUBMISSIONS MADE BY THE ASSESSEE THAT IT FILED RETURN OF INCOME FOR THE A.Y.2008 - 09 ADMITTING THE LONG TERM _CAPITAL GAIN OF RS.3,02,393,202/ - . THI S RETURN WAS FILED U/S.139(1) ON 24/09/2008. SUBSEQUENTLY, THE ASSESSEE SUBMITTED THAT THE LTCG WAS WRONGLY CALCULATED IN FACT THE TAXABILITY OF THE LTCG WOULD ARISE IN THE IMMEDIATE SUCCEEDING ASSESSMENT YEAR I.E. 2009 - 10, THE ASSESSEE FURTHER MADE SUBMI SSIONS THAT FOR THE A.Y.2009 - 10, THE ASSESSEE FILED ORIGINAL RETURN OF INCOME AND ALSO FILED REVISED RETURN OF INCOME INCORPORATING CHANGES IN THE COMPUTATION OF CAPITAL GAINS AND ARRIVED AT CAPITAL LOSS OF RS.21,08,907/ - . THUS, THE ASSESSEE CONTENDED THA T, IT FILED RETURN OF INCOME FOR THE A.Y.2008 - 09 INCORPORATING THE CAPITAL GAINS IN THE A.Y.2008 - 09 INSTEAD OF A.Y.2009 - 1O. THE ASSESSING OFFICER IN HIS ORDER U/S.154 OBSERVED THAT THERE WAS NO MISTAKE IN THE INTIMATION SENT TO THE ASSESSEE AS HE HIMSELF D ECLARED LTCG WHICH WAS ACCEPTED AS SUCH. HE FURTHER POINTED OUT THAT THESE FACTS REQUIRED TO BE DELIBERATED AND THE SAME DID NOT COME UNDER THE PURVIEW OF RECTIFICATION OF /S. 154. CONSIDERING THE ABOVE FACTS, IT IS TO BE SEEN WHETHER IT IS RECTIFIABLE MIS TAKE OR NOT. TO APPRECIATE THE FACT THE PROVISIONS OF SECTION 154 ARE VERY MUCH NECESSARY TO BE SEEN. SUB - SECTION 1 OF SECTION 154 READS AS UNDER: [(1) WITH A VIEW TO RECTIFYING ANY MISTAKE APPARENT FROM THE RECORD AN INCOME TAX AUTHORITY' REFERRED TO IN SECTION 116 MAY; - (A) AMEND ANY ORDER PASSED BY IT UNDER THE PROVISIONS OF THIS ACT: [B) AMEND ANY INTIMATION OR DEEMED INTIMATION UNDER SUB - SECTION (1) OF SECTION 143/} [(C) AMEND ANY INTIMATION UNDER SUB - SECTION (1) OF SECTION 4 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 200A.] IT CAN BE SEEN FROM THE PROVISIONS THAT AUTHORITY MENTIONED U/S 116 OF IT.ACT, 1961 MAY AMEND ORDERS PASSED BY THEM TO RECTIFYING ANY MISTAKE APPARENT FROM RECORD. VARIOUS DECISIONS OF HON'BLE HIGH COURT AND SUPREME COURT HAVE OBSERVED THAT A MISTAKE APPARENT FROM THE RECORD IS A MISTAKE THAT IS MANIFEST, PLAIN OR OBVIOUS, A MISTAKE THAT CAN BE REALIZED WITHOUT A DEBATE OR DISSERTATION. A MISTAKE WHICH CAN BE DISCOVERED BY A PROCESS OF ELUCIDATION OR ARGUMENT OR A DEBATE, CA NNOT BE CONSIDERED TO BE A MISTAKE APPARENT FROM THE RECORD. FURTHER, IT IS ALSO TO BE POINTED OUT THAT THE HON'BLE SUPREME COURT IN THE CASE OF ITO VS. VOLKART BROS (82 ITR 50) OBSERVED AS UNDER: 'A MISTAKE APPARENT FROM THE RECORD MUST BE AN OBVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG - DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY BE CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD', THUS, AS PER THE P ROVISION OF THE ACT, AND ALSO INTERPRETATION GIVEN BY THE HON'BLE HIGH COURTS AND SUPREME COURT AN ORDER CAN BE RECTIFIED WHEREIN THE MISTAKE HAS OCCURRED WHICH IS APPARENT FROM RECORD. THEREFORE, THE INTIMATION U/S.143(1) CAN NOT BE AMENDED U/S.154 AS RIG HTLY POINTED OUT BY THE ASSESSING OFFICER. IN BRIEF, THE APPEAL OF THE ASSESSEE CANNOT BE UPHELD FOR THE FOLLOWING REASONS: I ) THE ASSESSEE HIMSELF FILED RETURN OF INCOME - THERE IS NO INFORMATION OF FILING ANY REVISED RETURN OF INCOME FOR THE A.Y.2008 - 09 . II) THE ASSESSEE FILED REVISED RETURN OF INCOME FOR THE IMMEDIATE SUCCEEDING ASSESSMENT YEAR I.E. 2009 - 10 BASED ON WHICH THE ASSESSEE SOUGHT TO AMEND THE ORDER U/S.143(1) FOR THE A.Y.2008 - 09 - WHICH IS NOT POSSIBLE AS PER THE PROVISIONS OF THE ACT. III) THERE HAS BEEN NO MISTAKE APPARENT FROM THE RECORD 5 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 WHICH CAN BE AMENDED. FURTHER, IN THE ASSESSEE'S CASE, THE ISSUE IS WITH REGARD TO THE ARRIVING OF F.M.V. AS ON 01/04/1981, THE ASSESSEE ARRIVED AT CERTAIN VALUE AS ON 01/04/1981 AND FILED ORIGIN AL RETURN FOR A.Y.2008 - 09 & 2009 - 10. LATER ON IN ITS OPINION, IT FELT THAT THE SAID CAPITAL GAIN AROSE ONLY IN A.Y. 2009 - 10, THEN IT FILED REVISED RETURN FOR A.Y.2009 - 10 REVISING THE VALUE OF FMV AS ON 01/04/1981. THE A.O. DID NOT ACCEPT THE REVISED VALUAT ION OF THE ASSESSEE AND HE PASSED A SPEAKING ORDER U/S.143(3) FOR THE A.Y.2009 - 10, ON THIS ALSO, THE ASSESSEE IS IN APPEAL. THUS, FROM THE ABOVE FACTS, IT CAN BE NOTICED THAT THE ISSUE IS CLEARLY A DEBATABLE ISSUE AND THE SAME CANNOT BE SUBJECT MATTER OF A MENDMENT U/S.154. FOR THE ABOVE REASONS, THIS GROUND OF THE ASSESSEE OBJECTING TO THE RECTIFICATION ORDER PASSED BY THE ASSESSING OFFICER IS DISMISSED 5 . THE LD. AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD SOLD ITS LAND IN THE MONTH OF APRIL, 2008 F OR A TOTAL CONSIDERATION OF RS.3,05,00,000/ - WHICH WAS ACQUIRED BY THE ASSESSEE EVEN PRIOR TO 1.4.1981 FOR A SUM OF RS.9897/ - ON 29.11.1965. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE ENTERED INTO AN AGREEMENT FOR DEVELOPMENT WITH M/S TARUNIKA GAUR HOUSING AND CONSTRUCTION CO.LTD ON 4.4.2007 AND RECEIVED A SUM OF RS.3,05,00,000/ - AS A CONSIDERATION. HOWEVER, DUE TO SOME DISPUTE, THE MATTER WAS REFERRED TO ARBITRATION IN DISTRICT COURT AS ACCORDING TO THE DEVELOPERS THE TITLE OF THE ASSET WAS NO T CLEAR. THEREAFTER, THE ASSESSEE REACHED A OUT OF COURT COMPROMISE WITH THE BUILDER VIDE DEED DATED 29.9.2007 AND BOTH THE CONTRACTING PARTIES MUTUALLY AGREED TO CANCEL THE ORIGINAL AGREEMENT AND TWO SALE DEED S WERE EXECUTED ON 17.4.2008 AND THE MONEY O F RS.3,05,00,000/ - ALREADY RECEIVED WAS APPROPRIATED TOWARDS THE SALE CONSIDERATION S . THUS, THE CAPITAL GAIN AROSE TO THE ASSESSEE IN THE ASSESSMENT YEAR 2009 - 10 AND NOT IN THE AY 2008 - 09 AS WAS WRONGLY RETURNED BY THE ASSESSEE. IN THE AY 2009 - 10 THE AS SESSEE REVISED HIS RETURN OF INCOME U /S 139(5) OFFERING THE CAPITAL GAIN ON THE SAID LAND FOR TAXATION. UPON REALIZATION OF THE MISTAKE, THE ASSESSEE FILED RECTIFICATION 6 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 APPLICATION U/S 154 BEFORE THE AO TO RECTIFY THE MISTAKE COMMITTED BY THE ASSESSEE B Y OFFERING THE AMOUNT OF CAPITAL GAIN TO TAX IN THE ASSESSMENT YEAR 2008 - 09 WHICH WAS OFFERED FOR TAXATION IN THE AY 2009 - 10 CORRECTLY AND THUS THE AO WAS GROSSLY MISTAKEN AND ERRED IN REJECTING THE RECTIFICATION APPLICATION U/S 154 OF THE ACT ON THE GROUND THAT THE ISSUE INVOLVED WAS DEBATABLE AND INVOLVED LONG DRAWN DISCUSSION AND WAS NOT PRIMA FACIE APPARENT MISTAKE FROM RECORD, WHEREAS, AS A MATTER OF FACT , THE INCOME FROM LONG TERM CAPITAL LOSS ON SALE OF PROPERTY COULD NOT BE TAXED TWICE AS WAS DONE IN THE CASE OF THE ASSESSEE. THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL FOR BOTH THE YEARS . IT IS SETTLED LAW THAT THE INCOME UNDER THE ACT COULD BE TAXED ONCE ONLY AND NOT TWICE. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITTED BEFOR E US THAT THE ORDER PASSED BY THE LD. CIT(A) BE QUASHED AND AS IT WAS WRONG IN LAW AND PRAYED THAT THE AO BE DIRECTED TO RECTIFY THE MISTAKE AS THE SAID LONG TERM CAPITAL LOSS STANDS OFFERED TO TAX IN THE ASSESSMENT YEA R 2009 - 10. 6 . ON THE OTHER HAN D, THE LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. HE ALSO SUBMITTED THAT THE ASSESSEE ITSELF HA D OFFERED THE INCOME FOR TAXATION IN THE ASSESSMENT YEAR 2008 - 09 AND REQUESTED FOR UPHOLDING THE ORDER OF LD.CIT(A). 7 . WE HAVE CONSIDERED THE RIVAL SUB MISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE SOLD ITS TWO PLOTS OF LAND TO THE DEVELOPER M/S TARUNIKA GAUR HOUSING AND CONSTRUCTION CO. LTD ON 4.4.2007 FOR A TOTAL CONSIDERATION OF RS.3,05,00,000/ - WHICH WAS ACQUIRED BY THE ASSESSEE AT RS. 9,897/ - ON 29.11.1965. WE FURTHER NOTE THAT THE DEAL WENT INTO LITIGATION UPON THE DISPUTE BY THE DEVELOPER WHICH WAS SETTLED OUT OF COURT VIDE DEED DATED 29.9.2007 AND ALL THE PREVIOUS UNDERSTANDING AS PER THE AGREE MENT DATED 4.4. 2007 WERE CANCELLED AND THE REGULAR SALE DEED S WAS EXECUTED ON 17.4.2008 BY APPROPRIATING 7 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 CONSIDERATION ALREADY RECEIVED RS.3,05,00,000 UNDER SALE DEED S . THUS, THE ASSESSEE FILED RETURN IN THE CURRENT YEAR I.E AY 2008 - 09 OFFERING THE INCOME ON LTCG EVE N WITHOUT CLAIMING THE BENEFIT OF FMV AVAILABLE AS ON 1.4.1981 AND INDEXATION THEREON. THE RETURN WAS PROCESSED BY THE AO AND THE DEMAND OF INCOME TAX OF RS.87,65,930/ - WAS RAISED. THE ASSESSEE MOVED AN APPLICATION FOR RECTIFICATION ON 0 1.11.2010 U/S 154 OF THE ACT WHEN THE RECOVERY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE. ON THE BASIS OF THE ABOVE FACTS, WE ARE IN AGREEMENT WITH THE ARGUMENT OF THE LD.AR THA T THE CAPITAL GAIN AROSE IN THE ASSESSMENT YEAR 2009 - 10 AND NOT IN THE AY 2008 - 09 AS AL L THE PR EVIOUS AGREEMENT S AN D MEMORANDUM OF UNDERSTANDING S WERE CANCELLED UNDER OUT OF COURT COMPROMISE AND ACCORDINGLY SALE DEED S WERE EXECUTED ON 17.4.2008. WE ALSO NOTE THAT THE ASSESSEE HAD OFFERED THE SAME CAPITAL GAIN /LOSS IN THE AY 2009 - 10 BY FI LING REVISED RETU RN OF INCOME. IN OUR OPINION THE SAME CAPITAL GAIN /LOSS CANNOT BE TAXED TWICE FIRSTLY IN AY 2008 - 09 AND SECONDLY IN AY 2009 - 10 . WE ARE, THEREFORE, OF THE OPINION THAT THE INCOME OFFERED BY THE ASSESSEE IN THE CURRENT YEAR I.E AY 2008 - 09 UNDER THE HEAD CAPITAL GAIN BE RECTIFIED AS THE SAID INCOME ACCRUED AND WAS A SSESSED IN THE AY 2009 - 10. THE BOTH THE AUTHORITIES BELOW HAD FAILED TO APPRECIATE THAT IF THE SAME INCOME WAS ASSESSED TO TAX IN TWO ASSESSMENT YEARS IT WOULD BE BAD IN L AW AND ALSO WOULD BE A MISTAKE APPARENT LIABLE FOR RECTIFICATION U/S 154 OF THE ACT REGARDLESS OF THE FACT THAT IT MIGHT HAD HAPPENED BE DUE TO ASSESSEES MISTAKE. ACCORDI NGLY WE DELETE LTCG OF RS.3,02,93,202/ - FROM THE CURRENT YEAR RS.3,02,93,202/ - AS APPARENT MISTAKE FROM RECORDS AND DIRECT THE AO ACCORDINGLY. 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 8 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 9 . NOW, WE SHALL TAKE UP THE APPEAL BEARING ITA N O.3276/MUM/2013 BY THE REVENUE . THE ONLY ISSUE RAISED IN THE APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.1,20,00,000/ - BY THE LD. CIT(A) AS MADE BY THE AO UNDER THE HEAD INCOME FROM OTHER SOURCES . 10 . THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.7.2009 DECLARING NET LOSS OF RS.11,5 3,864/ - . SUBSEQUENTLY, THE SAID RETURN WAS REVISED DECLARING INCOME OF RS.34,18,599/ - PRIOR TO ISSUE OF NOTICE U/S 143(2) OF THE ACT. S TATUTORY NOTICES U/S 143(2) AND 143(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE AO FOUND THAT THE OUT OF TOTAL SALE CONSIDERATION OF RS.3 ,05,00,000/ - , THE ASSESSEE FILED DETAILS AND SALE DEED ONLY IN RESPECT OF ONE SALE DEED QUA PLOT NO 68 SOLD FOR RS.1,85,00,000/ - . THE ASSESSEE WAS AGAIN ASKED TO FURNISH THE DETAI LS WHICH WERE REPLIED BY THE ASSESSEE VIDE ITS LETTER DATED 10.12.2011 BY SUBMITTING THAT THERE WERE TWO DEEDS I.E. ONE FOR SALE OF PROPERTY AT SURVEY NO.68 ADMEASURING 1 HECTOR AND 27 GUNTAS FOR A CONSIDERATION OF RS.1,85,00,000/ - AND ANOTHER FOR SALE OF PROPERTY AT SURVEY NO.132 ADMEASURING 81 GUNTAS FOR A CONSIDERATION OF RS.1,20,00,000/ - . THE AO OBSERVED THAT THE SALE OF PROPERTY AT SURVEY NO.132 ADMEASURING 81 GUNTAS WAS NOT MENTIONED IN THE REVISED RETURN FOR THE REASONS NOT KNOWN. IN THE R EVISED RETURN, THE ASSESSEE HAS MENTIONED ONLY ONE AGREEMENT DATED 17.4.2008. THE ASSESSEE WAS REQUESTED TO FURNISH THE COPY OF AGREEMENT. THE AO ULTIMATE LY ADDED THE SALE CONSIDERATION IN RESPECT OF SECOND PROPERTY AMOUNTING TO RS.1,20,00,000/ - AS INC OME FROM OTHER SOURCES FOR THE REASONS AS INCORPORATED IN PARA 5.10 OF THE ASSESSMENT ORDER. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAD DULY SHOWN THE RECEIPT OF RS.1,20,00,000/ - FROM SALE OF PLOT AT SURVEY NO. 132 ON MUMBAI - PUNE HIGHWAY AND OFFERED THE GAIN/LOSS IN 9 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 RESPECT OF THE SAID AMOUNT ALONG WITH THE GAIN/LOSS IN RESPECT OF RECEIPT OF RS.1,85,00,000/ - I.E. SALE OF PLAT AT NO.68 ON MUMBAI - PUNE HIGHWAY IN THE COMPUTATION OF INCOME FILED ALONG WITH THE RETU RN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED FOR THE DETAILS IN RESPECT OF THE SALE DEED OF PLOT AT SURVEY NO.132 WHICH WAS SOLD AT RS.1,20,00,000/ - BUT THE ASSESSEE COULD NOT PRODUCE THE SAME. HENCE, THE AO TAXED AN AMOUNT OF RS.1 ,20,00,000/ - UNDER THE HEAD INCOME FROM OTHER SOURCES . THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD FURNISHED THE SALE DEED IN RESPECT OF PL O T AT SURVEY NO.132. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAD FILED A COPY OF SALE DEED F ROM WHICH IT IS CLEAR THAT THE ASSESSEE HAD RECEIVED A SALE CONSIDERATION OF RS.1,20,00,000 / - FOR SALE OF PLOT AT SURVEY NO.132 AND THEREFORE THE SAME COULD NOT BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES , BUT ITS TAXABILITY HAD TO BE CONSIDERED UNDER THE HEAD CAPITAL GAINS. THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE SUBJECT TO QUANTIFICATION THAT THE SAME WOULD BE DEALT WITH UNDER HEAD CAPITAL GAIN AND ACCORDINGLY DELETED THE ADDITION UNDER THE HEAD INCOME FROM OTHER SOURCES AND TREATE D THE SAME UNDER THE HEAD INCOME FROM CAPITAL GAINS. AGGRIEVED BY THE DECISION OF THE LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 11 . BEFORE US, T HE LD. DR SUBMITTED THAT THE ASSESSEE DID NOT FILE A COPY OF THE SALE DEED IN RESPECT OF PLO T AT SURVEY NO.132 AND THE AMOUNT INVOLVED IN THE SAID TRANSACTION WAS RS.1,20,00,000/ - AND THEREFORE, THE AO HAD NO OPTION BUT TO ADD THE SAME TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD. DR FURTHER POINTED OU T THAT THE SALE DEED IN RESPECT OF PLOT IN DISPUTE WAS PRODUCED BEFORE THE LD. CIT(A) WHO DID NOT SEEK COMMENTS OF THE AO ON THE SAME THEREBY COMMITTED VIOLATION OF PROVISIONS OF RULE 46A OF THE INCOME TAX RULES, 1962 (THE RULES) AND ACCORDINGLY, THE LD. DR REQUESTED THE BENCH TO SET 10 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE AO FOR EXAMINATION OF DOCUMENTS. 12 . ON THE CONTRARY, THE LD.AR VEHEMENTLY , OPPOSED THE ARGUMENTS OF THE LD. DR ON THE GROUND THAT FULL AMOUNT OF SA LE CONSIDERATION IN RESPECTS OF BOTH THE PLOTS WAS FULLY DISCLOSED IN THE RETURN OF INCOME AND CAPITAL LOSS WAS CALCULATED ACCORDINGLY. THE LD. AR SUBMITTED THE THE LD. CIT(A) WAS RIGHT IN DECISION IN DELETING THE ADDITION FROM THE HEAD INCOME FROM OTHE RS SOURCES AND DIRECTED THE REVENUE TO CONSIDER IT AS UNDER HEAD INCOME FROM CAPITAL GAINS AND THEREFORE, THERE WAS NO NEED FOR SETTING ASIDE THE ORDER OF LD. CIT(A). THE LD. AR FINALLY SUBMITTED THAT THE ORDER OF THE LD. CIT(A) BE UPHELD. 13. WE HA VE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD AVAILABLE BEFORE US. WE FIND THAT THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS COULD NOT FILE THE SALE DEED IN RESPECT OF PLOT AT SURVEY NO.132 ON MUMBAI - PUNE HIGHWAY WHICH WAS DULY SH OWN BY ASSESSEE IN THE REVISED RETURN OF INCOME FILED U/S 139(5) OF THE ACT . THE DETAILS OF SALE CONSIDERATION S FROM BOTH THE PLOTS AT SURVEY NO.68 AND 132 WERE SHOWN WHILE CALCULATI NG THE CAPITAL L OSS IN THE REVISED RETURN OF INCOME . THE LD. CI T(A) ALLOWED THE APPEAL OF THE ASSESSEE SUBJECT TO QUANTIFICATION BY HOLDING THAT THE SAME WOULD BE CONSIDERED UNDER THE HEAD CAPITAL GAINS AND ACCORDINGLY DELETED THE ADDITION OF RS.1,20,00,000/ - . HOWEVER, WE FIND MERIT IN THE GROUND AS RAISED BY T HE REVENUE TO SET ASIDE THE PROCEEDINGS TO THE FILE OF THE AO IN VIEW OF THE VIOLATION OF RULE 46A OF THE RULES. IN OUR VIEW, THE LD.CIT(A) HAS RIGHTLY DELETED THE ADDITION UNDER THE HEAD INCOME FROM OTHERS SOURCES AND THEREFORE THE ORDER OF LD. CIT( A) DO ES NOT REQUIRE ANY INTERFERENCE AT OUR END. HOWEVER, IN ORDER TO MEET PRINCIPLE OF NATURAL JUSTICE WE ARE OF T HE 11 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 OPINION THAT THE MATTER BE RESTORED TO THE FILE OF THE AO FOR A LIMITED PURPOSE OF EXAMIN ING THE SALE DEED AND DELETE THE ADDITION ACCOR DINGLY. WE, THEREFORE, SET ASIDE THE ORDER OF LD.CIT(A) AND THE RESTORE THE ISSUE TO THE FILE OF THE AO FOR THIS LIMITED PURPOSES WITH A DIRECTION TO EXAMINE THE SALE DEED AFTER AFFORDING THE REASONABLE OPPORTUNITY TO THE ASSESSEE AND DELETE THE ADDITIO NS ACCORDINGLY . 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 15. NOW, WE SHALL TAKE UP THE APPEAL BEARING NO. ITA NO.2671/MUM/2013. T HE ISSUE RAISED IN THE GROUND NO.1 IS AGAINST THE CONFIRMATION OF ADDITION UNDE R THE HEAD INCOME FROM HOUSE PROPERTY OF RS.2 3,21,775/ - BY ESTIMATI NG THE RENT OF PROPERTY AT RS. 28,23, 840/ - . 16. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DISCLOSED RENTAL INCOME OF RS.15,808/ - AND CLAIMED WATER TAX OF RS.4,92,982/ - AND PROPERTY T AX OF RS.54,532/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD LET OUT ITS PROPERTIES TO ONE MOHAN DYEING AND PRINTING AND MONICA VAZIRALI AND TOTAL LET OUT AREA TO THESE TWO PERSONS WAS APPROXIMATELY 5000 SQ.FT . THE AO FURTHER OBSERVED THAT 5 FLATS WERE OCCUPIED BY THE PARTNER S OF THE ASSESSEE - COMPANY AND HIS RELATIVES/FAMILY MEMBERS THE CARPET AREA AREA OF WHICH WAS 7844 SQ.FT.. THUS IN ALL THE AREA OCCUPIED BY THE PERSONS OTHER THAN THE ASSESSEE WAS 13,344 SQ. FTS . IN RESPECT OF THE TOTAL AREA OCCUPIED BY THE PARTNER S AND TENANTS , THE AO OBSERVED THAT THE RENT SHOWN BY THE ASSESSEE WAS VERY MEAGER AND THE MARKET RENT IN THE KHAR ARE IS ABOUT RS.40,000 TO RS. 45,000/ - PER MONTH AND CAME TO THE CONCLUSION THAT THE MARKET RATE PER ST.FT WAS RANGING BETWEEN RS.30 TO RS.50 PER SQ.FT. ACCORDINGLY, RENT 12 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 FROM THE PROPERTY WAS WORKED AT RS.2,35,320/ - PER MONTH . THE ASSESSEE WAS GIVEN SHOW CAUSE NOTICE AS TO WHY THE INCOME FROM RENT OF THE PROPERTY SHOULD NOT BE CALCU LATED AT THE MARKET RATE AND THUS, ADDED THE NEWLY ASSESSED RENTAL INCOME TO THE TOTAL INCOME OF THE ASSESSEE AS INCOME FROM HOUSE PROPERTY AT RS.23,21,775/ - WHICH WAS ARRIVED AT BY ADDING WATER CHARGES RS.492.982/ - AND AFTER ALLOWING STATUTORY DEDUCTION IN RESPECT OF SECTION 24 OF THE ACT AS CALCULATED BELOW :. ANNUAL RENT RECEIVED/RECEIVABLE RS.28,23,840/ - ADD: WATER CHARGES RS.4,92,982/ - TOTAL RS.33,16,822/ - LESS 30% FOR REPAIRS U/S 24 RS.9,95,047 INCOME FROM HOUSE PROPERTY RS.23,21,775/ - BEING AGGRIEVED BY THE ESTIMATION OF RENTAL INCOME BY THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO IN TURN DISMISSED THE APPEAL OF THE ASSESSE E ON THE GROUND THAT THE ASSESSEE HAD CONFERRED UNDUE BENEFITS ON ITS RELATIVES AND PARTNERS BY NOT ONLY LETTING OUT THE RESIDENTIAL PROPERTY IN KHAR, MUMBAI BUT HA D INCURRED EXTRA EXPENSES FOR MAINTAINING THE SAME. THE OBSERVATIONS OF THE LD. CIT(A) IS REPRODUCED BELOW : 4.3.1 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE ASSESSEE. ASSESSEE HAS SUBMITTED THAT THE A.O. ERRED IN ESTIMATING THE RENT RECEIVED AT RS. 28,23,840/ - TO COMPUTE THE INCOME FROM HOUSE PROPERTY AT RS. 23,21,775/ - AND ESTIMATION OF RENT AT RS. 28,23,840/ - IN ABSENCE OF EVIDENCE IS INCORRECT AND THE PROPERTY INCOME AS RETURNED BE ACCEPTED. 4.3.2 IT IS OBSERVED FROM THE RECORDS THAT ASSESSEE OWNED SEVEN FLATS ADMEASURING 13,344 SQUARE FEET IN UNION PAR K BUILDING LOCATED IN KHAR , MUMBAI AND ASSESSEE HAD DISCLOSED RENTAL INCOME OF RS.15,808/ - AND CLAIMED WATER CHARGES OF RS. 4,94,282/ - AND PROPERTY TAX OF RS. 54,532/ - AS DEDUCTION AGAINST IT. ASSESSING OFFICER MADE INQUIRIES IN THE AREA AND FOUND TH AT RENT FOR A TWO BED ROOM FLAT IN KHAR AREA RANGED BETWEEN RS. 40,000/ - TO RS. 45,000/ - PER MONTH AND THEREFORE WORKED OUT RENT RECEIVABLE IN RESPECT OF SEVEN FLATS AT RS. 2 / 35,320/ - PER MONTH AND TOTAL RENT RECEIVABLE FOR 13 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 12 MONTHS AT RS. 28 / 23,840/ - AND WORKED OUT INCOME FROM HOUSE PROPERTY AT RS. 23,21,775/ - (28,23,840 + 4,92 / 982 - 9,95,047) AFTER ADDING BACK WATER CHARGES OF RS. 4,92,982/ - AND ALLOWING DEDUCTION FOR REPAIRS OF RS. 9,95,047/ - AGAINST ESTIMATED RENTAL INCOME OF RS.28,23,840/ - . ASSES SEE HAS OBJECTED AGAINST THE ESTIMATION OF GROSS RENTAL INCOME AT RS. 28,23,840/ - AND COMPUTATION OF HOUSE PROPERTY INCOME AT RS. 23,21,775/ - . 4.3. 3 IT IS S QUITE CLEAR FROM THE FACTS OF THE CASE THAT ASSESSEE HAS LET OUT I TS VALUABLE ASSETS CONSISTING O F SEVEN FLATS AT UNION PARK, KHAR,MUMBA I FOR PALTRY SUMS AND DISCLOSED AL I NCOME OF RS. 15,808/ - ONLY. SECTION 23 OF I T. ACT, 1961 SPEAKS ABOUT RENT RECE IVED OR RECEIVABLE, WHICHEVER IS HIGHER, AND WHEN MARKET INQUIRIES REVEALED THAT MAR KET R ENT WAS MUCH HIGHER THAN THE RENT RECEIVED BY THE ASSESSEE IN RESPECT OF SEVEN FLATS LET OUT TO PARTNERS AND PERSONS RELATED/KNOWN TO ASSESSEE, ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 23 OF I T. ACT, 1961 AND RECALCULATED THE INCO ME FROM HOUSE P ROPERTY AT RS.23,21,775/ - . THESE SEVEN FLATS ARE GIVEN ON TO PERSONS RELATED TO PARTNERS OF FIRM AND PARTNERS OF FIRM FOR A NOMINAL RENT OF RS. 1/ - PER SQUARE FOOT AS AGAINST RS. 40/ - PER SQUARE FOOT PREVAILING IN THE AREA AND IN ADDITION INCURS EXPENDITURE OF RS. 4,94,282/ - ON WATER CHARGES AND PROPERTY TAX OF RS 54,532/ - . THUS ASSESSEE HAS CONFERRED UNDUE BENEFITS ON ITS RELATIVES AND PARTNERS BY NOT ONLY LETTING OUT THE RESIDENTIAL PROPERTY IN KHAR, MUMBAI HAS INCURRED EXTRA EXPENSES FOR MAINTAINING THE S AME. IN LIGHT OF THESE FACTS IT H ELD THAT ASSESSING OFFICER WAS RIGHT IN ESTIMATING THE RENTAL INCOME AT RS. 28,23, ,840/ - ON THE BASIS OF MARKET INQUIRIES AND CALCULATING THE INCOME FROM HOUSE PROPERTY AT RS, 23,21,775/ - . THEREFORE, ASSESSEE'S APPEAL ON THI S GROUND IS REJECTED ADDITIONS MADE BY THE ASSESSING OFFICER ARE UPHELD. THIS GROUND OF APPEAL IS DISMISSED . AGGRIEVED BY THE DECISION OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 1 7 . THE LD. AR SUBMITTED BEFORE US THAT THE ADDITION MADE BY THE AO WAS PURELY ON THE BASIS OF ESTIMATION WHICH WAS WRONGLY UPHELD BY THE LD. CIT(A). THE LD.AR SUBMITTED THAT THE FLATS WERE LET OUT TO THOSE PERSONS WHO WERE NOT RELATED OF THE ASSESSEE LONG TIME BACK AND RENT OF RS.15,808 / - WAS RECEIVED WAS DULY S HOWN IN THE RETURN OF INCOME AND THE 14 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 LD AR ALSO SUBMITTED THAT THE SAID INCOME WAS ACCEPTED BY THE DEPARTMENT IN THE EARLIER YEARS UNDER THE HEAD OB BUSINESS INCOME . THE LD. AR FURTHER SUBMITTED THAT THE METHOD ADOPTED BY THE AO IN ESTIMATING THE RENTAL INCOME OF THE ASSESSEE WAS TOTALLY WRONG AND UNFOUNDED. THE AO EVEN HAD NOT BOTHER TO FIND OUT RENT OF THE COMPARABLE PROPERT IES IN THE NEARBY VICINITY WHERE THE FLATS WERE RENTED BY THE ASSESSEE DID NOT BRING ON RECORD ANY TANGIBLE MATERIAL EVEN BEFORE ESTIMATION OF RENT. THE LD. COUNSEL ALSO SUBMITTED THAT THE RENT OF THE PROPERTY WAS ACCEPTED IN THE EARLIER YEARS BY THE DEPARTMENT. THE LD. AR FINALLY SUBMITTED THAT THE ADDITION AS MADE OF RS.23,21,775/ - BY ESTIMATING THE RENT AT RS. 2 8,23,840/ - B E DELETED AS BEING BASED ON ESTIMATION AND CONJECTURES WITHOUT ANY BASIS OR BRING ON RECORDS ANY COGENT MATERIALS AND THE AO BE DIRECTED TO ASSESS THE INCOME FROM PROPERTY AS IN THE EARLIER YEARS . 1 8 . ON THE CONTRARY, THE LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 19 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD AVAILABLE BEFORE US. WE FIND THAT THE RENT FROM THE RENTAL PROPERTIES LOCATED IN KHAR AREA HAVE BEEN SHOWN AT RS.15 , 808/ - AND WATER CHARGES RS.4,94,282/ - AND PROPER TY TAX RS.54,532/ - WERE CLAIMED IN RESPECT OF THE SAID PROPERTY. T HE AO FURTHER OBSERVED THAT THE FIVE FLATS WERE OCCUPIED BY THE PARTNER AND THEIR FAMILY MEMBERS. THE AO ESTIMATED THE RENT IN RESPECT OF RENTED PROPERTY AT RS.30 TO 50 SQ. FT. AND THUS ARRIVED AT NOTIONAL INCOME OF RS. 28,23,840/ - WHICH WAS INCREASED BY WATER CHARGES OF RS.4,94,982/ - AND FROM THE TOTAL RENTAL CHARGES ALLOWED STANDARD DEDUCTION OF 30% U/S 24 OF THE ACT AND WORKED OUT THE TOTAL INCOME FROM HOUSE PROPERTY AT RS.23.,21 , 775 / - WHICH WAS CONFIRMED BY THE LD.CIT(A) ON THE GROUND THAT LOW RENT WAS CHARGED BY THE ASSESSEE FROM THE PARTNERS AND HIS FAMILY MEMBERS. AS IT IS CLEAR FROM THE ABOVE THE AO HAS FAILED TO PROVE /BRING ON RECORD BY ANY COGENT EVIDENCE THAT THE RENT OF 15 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 COM PARABLE PROPERTIES IN THE VICINITY WHERE THE ASSESSEES PROPERTY WAS LOCATED AND WE FIND THAT THE ESTIMATION OF RENT BY AO IS A PURELY GUESS WORK AND BASED ON ESTIMATION, CONJECTURE AND SURMISES , WHICH IN OUR OPINION, CANNOT BE SUSTAINED. WE, THEREFOR E, DELETE THE ADDITION BY ALLOWING THE APPEAL OF THE ASSESSEE AND THE AO IS DIRECTED ACCORDINGLY. 2 0 . GROUND S NO. 2 TO 5 IS AGAINST THE ENHANCEMENT OF ASSESSMENT BY TAKING LONG TERM CAPITAL GAINS OF RS.3,00,35,936/ - AS COMPUTE D BY THE LD. CIT(A) AFTER TAKING FAIR MARKET VALUE AS ON 1.4.1981 AT RS.7 9,736 / - . 21 . THE FACTS IN BRIEF ARE THAT THE ASSESSEE VIDE AGREEMENT DATED 4.4.2007 ENTERED INTO AN AGREEMENT WITH DEVELOPER M/S TARUNIKA GAUR HOUSING AND CONSTRUCTION CO. LTD FOR A TOTAL CONSIDERATION OF R S.3 ,05,00,000 IN RESPECT OF PLOT AT SURVEY NO.68 AND 132 ON MUMBAI PUNE HIGHWAY. HOWEVER, THE AGREEMENT COULD NOT SEE THE LIGHT OF THE DAY AS THE MATTER WAS REFERRED TO ARBITRATION IN THE DISTRICT COURT ON THE GROUND THAT THE TITLE OF THE LAND WAS NOT CL EAR. THE PARTIES TO THE AGREEMENT COMPROMISED THE MATTER OUT OF COURT AND AS PER THE DEED DATED 29.9.2007 ALL ORIGINAL AGREEMENTS WERE CANCELLED AND ACCORDINGLY TWO SALE DEED S WERE EXECUTED ON 17.4.2008 FOR THE TWO PLOTS ONE FOR RS. 1,85,00,000/ - IN RE SPECT OF PLOT NO 68 AND ANOTHER FOR RS. 1,20,00,000/ - FOR PLOT NO 132 . THE MONEY RECEIVED AGAINST THE EARLIER AGREEMENT W WAS ADJUSTED TOWARDS THE SALE CONSIDER ATION FIXED IN THE NEW SALE DEED S AND THUS THE ASSESSEE CLAIMED THAT THE LONG TERM CAPITAL LOS S FROM THE SAID LAND AROSE IN THE ASSESSMENT YEAR 2009 - 10 AND ACCORDINGLY REVISED THE RETURN U/S 139(5) OF THE ACT WITHIN TIME LIMIT STIPULATED IN THE SAID SECTION. THE ASSESSEE WORKED OUT THE CALCULATION OF CAPITAL GAINS ON THESE TWO PLOTS BY TAKIN G INDEX COST OF ACQUISITION OF THE SAID LAND AT RS.3,26, 0 890 7 / - THEREBY CALCULATED THE CAPITAL LOSS OF RS.21 , 08 , 907/ - . THE 16 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 FAIR VALUE OF LAND AS ON 1.4.1981 WAS ADOPTED AT RS.56,02,905/ - ON THE BASIS OF REVERSE VALUATION METHOD BY TAKING THE SALES C ONSIDERATION . THE AO CALCULATED THE FMV AS ON 01.04.1981 BY TAKING THE VALUE OF RS.40 LAKHS AS PER THE STAMP DUTY AUTHORITY BY REVERSE VALUATION METHOD AT RS.3,02,93,202/ - IT IS WORTH MENTIONING THAT THE ASSESSEE ITSELF WHILE FILING RETURN OF INCO ME FOR THE ASSESSMENT YEAR 2008 - 09, WRONGLY SHOWED RS.3,02,93,202/ - AS CAPITAL GAIN ON THE SAID TWO PLOTS OF LAND WHICH WAS WRONGLY CALCULATED BY TAKING THE PURCHASE COST AS ON 29.11.1965 AS FMV ON 01.04.1981 AND INDEXING THE SAME. THE ASSESSEE ALSO CLAIMED INDEXING IN RESPECT OF A BUILDING AT RS. 1,55,828/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAD SOLD TWO PLOTS IN SURVEY ONE PLOT IN NO.68 AND ANOTHER PLOT AT SURVEY NO. 132 FOR A CONSIDERATION OF RS.1 ,85,00,000/ - AND RS.1,20,00,000/ - . THE ASSESSEE FURNISH ED S ALE DEED ONLY IN RESPECT OF PLOT AT SURVEY NO.68 WHICH WAS SOLD FOR A CONSIDERATION OF RS.1,85,00,000/ - AND COULD N OT PRODUCE THE SALE DEED IN RESPECT OF PLOT AT SURVEY NO.132 AN D THUS, THE AO C ALCULATED THE CAPITAL GAINS AT RS.1,61,49,622/ - IN RESPECT OF PLOT AT SURVEY NO.68 AFTER SUBTRACTING INDEX COST OF ACQUISITION OF RS.23,50,378/ - AS CALCULATED BY THE AO IN PARA 5.9 OF THE ASSESSMENT ORDER WHILE THE SALE CONSIDERATION IN RESPECT OF PLO T AT SURVEY NO.132 OF RS.1,20,00,000/ - UNDER THE HEAD INCOME FROM OTHER SOURCES . THE AO REJECTED THE CAPITAL LOSS AS COMPUTED BY THE ASSESSEE AT RS.21,08,907/ - AND THE PLOT AREA WAS TAKEN AS 1,38,303 SQ.FT. AND THUS TOTAL COST AS ON 1.4.1981 WAS CAL CULATED AT RS. 4,03,845/ - WHICH WAS INDEX COST OF RS.23,5 0 ,378/ - . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE HAS F ILED AN APPEAL BEFORE THE LD.CIT(A) WHO IN TURN DELETED THE ADDITION MADE UNDER THE INCOME FROM OTHER SOURCES AT RS.1,20,00,000/ - BY TA XING THE SAME UNDER THE HEAD CAPITAL GAINS. THE LD. CIT(A) BROUGHT THE ENTIRE SALE CONSIDERATION TO TAX UNDER THE HEAD CAPITAL GAINS BY TAKING THE INDEXED COST OF ACQUISITION AT 17 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 RS.4,64,063/. - AND THUS WORKED OUT LTCG AT RS.3 ,00 ,3 5,936 / - . THE LD. CIT(A) REJECTED THE FMV AS TAKE N BY THE ASSESSEE AS ON 1.4.1981 A S CALCULATED ON THE BASIS OF REVERSE VALUATION METHOD STATING THE SAME TO BE NOT RECOGNIZED IN THE ACT . THE LD. CIT(A) FURTHER OBSERVED THAT ON 19.12.2012, THE AUTHORIZED SIGNATORY SHRI S G KOSH TI, APPEARED FOR THE HEARING AND HE HAS INFORMED THAT THE FAIR MARKET VALUE AS ON 1.4.1981 SHOULD HAVE BEEN ARRIVED AT BY APPLYING THE PROGRESSIVE WORKING METHOD INSTEAD OF REVERSE CALCULATION METHOD. IN RESPONSE , THE ASSESSEE FILED COPY OF THE CORRESP ONDENCE BETWEEN DEPARTMENT VALUATION OFFICER WHICH INDICATES THAT THE VALUATION OFFICER HAD ISSUED A SHOW CAUSE NOTICE DATED 28.6.2012 ASKING THE ASSESSEE TO GIVE HIS REPLY, WHICH WAS REPLIED BY THE ASSESSEE ON 16.7.2012. IN THE SHOW CAUSE NOTICE THE V ALUATION OFFICER FOR THE DEPARTMENT GIVEN A SHOW CAUSE NOTICE TO THE ASSESSEE PROPOSING THE FAIR MARKET VALUE AT RS.82,080/ - . THEREAFTER THE LD. CIT(A) ISSUED NOTICE TO THE ASSESSEE FOR ENHANCEMENT OF THE ASSESSMENT OF INCOME IN APPELLATE PROCEEDINGS , WHICH WAS REPLIED BY THE ASSESSEE BY FILING VARIOUS OBJECTIONS INCLUDING THE S AID VALUATION TAKEN BY THE VALUATION OFFICER IN THE SURVEY NO.2 2 1/1, 194/2B AND 141 /22 AND 555. WHEREAS THE ASSESSEES PROPERT Y LOCATED AT SURVEY NO.68/1 AND 132/1, THERE WAS NO PROXIMITY OF THE PROPERTIES AS COMPARED BY THE VALUATION OFFICER AND THEREFORE THE VALUE ASSESSED BY THE VALUATION OFFICER WAS UNFAIR. T HE LD. CIT(A) ADOPTED THE VALUATION AS CALCULATED BY HIM AS PER PROGRESSIVE VA LUATION METHOD AT RS.7973 6 / - AS ON 1.4.1981. IT WAS FURTHER MENTIONED BY THE LD.CIT(A) THAT HE HAD NOT CONSIDERED THE FIGURE OF VALUATION OFFICER FOR COMPUTING THE CAPITAL GAINS , AS IT IS NEARER TO THE CALCULATION MADE ABOVE AT RS.79,736/ - , THEREBY HOLDING THAT RS.79779/ - AS ON 1.4.19 81 BY REJECTING THE CONTENTION OF THE ASSESSEE AND ALSO OF THE AO . 18 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 2 2 . THE LD CIT(A ) IN PARA NO 5.3.16 OBSERVED THAT THE FMV AS CALCULATED BY HIM ON THE BASIS OF PROGRESSIVE METHOD RS. 79,736/ - WAS NEAR TO THE VALUE AS PROPOSED BY THE VALUATION OF FICER HOWEVER THE VALUE DETERMINED BY THE VALUATION OFFICER WAS NOT TAKEN AS IT HAD NOT REACHED FINALITY . THUS CALCULATED THE INDEXED COST AT RS. 4,64,063/ - BY TAKING THE FMV AS ON 1.4.1981 AT RS. 79,736/ - AND THEREBY CALCULATING THE CAPITAL GAIN AT RS. 3,00,35,936/ - 2 3 . THE LD.AR SUBMITTED BEFORE US THAT THE ASSESSEE HAD RIGHTLY CALCULATED THE FMV OF THE TWO PLOTS SOLD DURING THE YEAR BY TAKING SALES CONSIDERATION AS THE CURRENT MARKET VALUE AND APPLYING THE REVERSE VALUATION METHOD TO ASCERTAIN THE FMV AS ON 1.4.1981.HE RAISED STRONG OBJECTIONS TO THE FMV AS CALCULATED BY THE CIT(A) ON THE BASIS OF PROGRESSIVE METHOD WHICH HAD NO SCIENTIFIC BASIS AND FURTHER JUSTIFYING THE SAID VALUATION BY OBSERVING THAT THE SAME IS CLOSE TO FMV AS PROPOSED BY THE VALUATION OFFICER BUT HE WAS NOT TAKING THE VALUE AS PROPOSED BY THE VALUATION OFFICER AS THE SAID VALUATION REPORT HAD NOT REACHED FINALITY. THE LD COUNSEL ALSO ARGUED REVERSE VALUATION METHOD IS A RECOGNIZED METHOD OF VALUATION .FINALLY THE AR PRA YED BEFORE US THAT VALUATION AS CALCULATED BY REVERSE VALUATION METHOD BE DIRECTED TO BE FOLLOWED.THE DR PER CONTRA RELIED ON THE ORDER OF CIT(A) AND REQUESTED FOR UPHOLDING THE SAME 2 4 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL S ON RECORDS AND AFTER GOING THROUGH THE ORDERS OF AUTHORITIES BELOW, WE FIND THAT THE TWO PLOTS NO 132 & NO 68 WERE GIVEN TO M/S TARUNIKA GAUR HOUSING AND CONSTRUCTION LTD FOR A CONSIDERATION OF RS. 30,5,00,000/ - ( PLOT NO 132 FOR RS. 1,20,00,000/ - AN D PLOT NO 68 FOR RS. 1,85,00,000/ - ) VIDE AGREEMENT DATED 4 TH APRIL,2007 WHICH COULD NOT SEE THE LIGHT OF THE DAY AS THE DEVELOPERS TOOK THE MATTER TO THE ARBITRATION IN THE DISTRICT COURT ON 19 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 THE GROUND THAT THE TITLE OF THE LAND WAS NOT CLEAR. PENDING TH E ADJUDICATION BY THE COURT , BOTH THE PARTIES REACHED A OUT OF COURT SETTLEMENT CANCELLING ALL THE PREVIOUS COMMITMENTS AND AS A RESULT OF THE SAID SETTLEMENT TWO SALE DEEDS WERE EXECUTED ON 07.04.2008 FOR EACH OF THE PLOT SEPARATELY AND THE LONG TER M CAPITAL LOSS AROSE ON THE SAID SALE WAS RETURNED BY FILING A REVISED RETURN U/S 139(5) OF THE ACT WHILE MOVING A RECTIFICATION APPLICATION IN PRECEDING PREVIOUS YEAR REQUESTING THE AO TO RECTIFY THE LONG TERM GAIN ON THESE PLOTS WHICH WAS WRONGLY RETURNED IN THE AY 2008 - 09 AT RS. 3,02,93,202/ - WHICH WAS ALSO WRONGLY CALCULATED BY INDEXING THE COST OF RS. 9,897/ - AT WHICH THE LAND WAS PURCHASED ON 29.11.1965 AND ALSO THE INDEXING THE COST OF BUILDING RS. 50,969.55 . THE ISSUE INVOLVED IN THE AY 2008 - 09 STANDS ADJUDICATED IN ITA NO 739/MUM/2013 ABOVE IN WHICH AO IS DIRECTED TO RECTIFY AND DELETE THE INCOME TAKEN UNDER THE HEAD INCOME FROM OTHER RESOURCES IN AY 2008 - 09 AS THE SAME INCOME CAN NOT BE TAXED TWICE ONCE AY 2008 - 09 AND TH EN IN AY 2009 - 10. NOW COMING TO THE YEAR UNDER CONSIDERATION THE DISPUTE AROSE AS TO THE FMV AS ON 1.4.1981 TO BE TAKEN FOR THE PURPOSE OF CALCULATING THE LONG TERM CAPITAL GAIN. THE ASSESSEE TOOK THE FMV ON 1.4.1981 AT R S. 56,02,905/ - AND THE INDEXED C OST WAS CALCULATED BY APPLYING THE INDEX AT RS. 3,26,08,907/ - RESULTING IN TO LONG TERM - CAPITAL LOSS OF RS.21,08,907/ - AND THE AO BY TAKING THE FMV BY TAKING RS. 40,00,000/ - AS THE FMV ON THE DATE OF SALE AND CALCULATING THE FMV AS ON 1.4 .1981 RS. 6,61,415/ - FOR BOTH THE PLOTS. BOTH THE ASSESSEE AS WELL AS THE AO CALCULATED THE FMV ON THE BASIS OF REVERSE VALUATION METHOD. THE AO HOWEVER CONSIDERED PLOT NO 68 ONLY FOR THE PURPOSE OF CAPITAL GAIN AND CALCULATED THE SAME AT RS. 1,61,49,6 22/ - WHILE TREATING THE SALES CONSIDERATION OF RS. 1,20,00,000/ IN RESPECT THE OTHER PLOT UNDER THE HEAD INCOME FROM OTHER SOURCES ON THE GROUND OF NON FURNISHING THE SALE DEED IN RESPECT THEREOF. THE MATTER WAS ALSO REFERRED TO VALUATION OFFICER 20 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 BY THE A O WHICH WAS NOT RECEIVED TILL THE DATE OF ASSESSMENT AND ALSO TILL THE DATE OF DECISION OF F IRST APPELLATE AUTHORITY. THE CIT(A) CALCULATED THE FMV FOLLOWING THE METHOD PROGRESSIVE METHOD AT RS.79,736/ - OBSERVING THAT THE VALUE CALCULATED BY HIM WAS CLOSE TO VALUE OF RS. 82,080/ - AS PROPOSED BY THE VALUATION OFFICER HOWEVER BUT HAD NOT TAKEN THAT VALUE AS IT HAD NOT REACHED FINALITY. THE CIT(A) CONFRONTED THE ASSESSEE WITH THE SALES INSTANCES AS PER THE PROPOSED VALUATION REPORT AND CALCULATED THE CAPITAL GAIN AT RS. 3,00,35,936/ - BY TAKING THE FMV AT RS. 79,936/ - AS ON 1.4.1981 AND BASED ON THAT INDEXED COST AT RS. 4,64,063/ - AND THUS ENHANCED THE ASSESSMENT ACCORDINGLY. NOW THE ISSUE BEFORE US HOW TO DETERMINE THE CAPITAL GAIN IN THESE CIRCUMS TANCES WHEN ASSESSEE , AO AND CIT(A) HAD TAKEN DIFFERENT METHOD OF VALUATION TO IN ORDER TO ASCERTAIN THE FMV ON 1.4.1981. IT WAS ALSO POINTED OUT THAT THERE WAS A BUILDING IN THE PLOTS SOLD. UNDER THE PRESENT CIRCUMSTANCES AND FACTS, WE ARE OF THE VIEW THAT THE ENDS OF JUSTICE WOULD BE MET IF THE ASSESSEE IS SUPPLIED THE COPY OF FINAL VALUATION REPORT BY THE VALUATION OFFICER AND AFTER ALLOWING THE OPPORTUNITY TO THE ASSESSEE THE MATTER IS DECIDED AFRESH AND DE NOVA AS PER LAW . WE THEREFORE SET ASIDE THE MATTER TO THE FILE OF AO WITH THE DIRECTION TO SUPPLY A COPY OF THE VALUATION REPORT TO THE ASSESSEE AND AFTER ALLOWING REASONABLE OPPORTUNITY DECIDE THE MATTER AFRESH AS PER LAW. 25 . THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 26 . IN SUM AND SUBSTANCE, ITA NO.739/MUM/2013 IS ALLOWED, THE APPEAL BEARING NO.3276/MUM/2013 IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL NO. 2671/MUM/2013 IS ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9TH MARCH , 201 6 21 ITA 739/MUM/2013,3276/ MUM/2013 ITA NO.2671/MUM/2013 SD SD ( C.N. PRASAD ) ( RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 09. 0 3 .201 6 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI