Sh. Om Prakash Bangia, Ludhiana V. ITO, Ludhiana

ITA 743/CHANDI/2012

• Counselvise Citation: 74321514 RSA 2012
• Duration Of Justice: 2 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 16-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: NONEWRITTEN SUBMISSION
• Keywords: Capital asset; Question of law; Cost of acquisition; Fair market value; Valuation report
• Section: 2(14); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 743/CHD/2012 (ASSESSMENT YEAR: 2006-07) SH.OM PARKASH BANGIA, VS. THE INCOME TAX OFFICER , C/O M/S BHARAT PLANT WARD III(4), PROTECTORS & ENGINEERS, LUDHIANA. LUDHIANA. PAN NO. ABKPB7868C (APPELLANT) (RESPONDENT) APPELLANT BY : NONE(WRITTEN SUBMISSION) RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 22.06.2015 DATE OF PRONOUNCEMENT : 25.06.2015 O R D E R PER H.L.KARWA, VP : THIS APPEAL FILED BY THE ASSESSEE IS DIR ECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, LUDHIANA DATED 8.5.2012 RELATING TO A SSESSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED FOLLOWI NG GROUNDS : 2 1. THAT THE LD CIT (A), HAS ERRED IN LAW AND FACTS OF TH E CASE, BY CONFIRMING THE ORDER OF A.0.,WHILE NOT CONSIDERING RS 138000/- (RS ONE LAC THIRTY EIGHT THOUSAND ONLY), P AID TO HUDA, AS ENHANCEMENT CHARGES, CONSEQUENTLY LEADING TO HIGHER CAPITAL GAINS TO THAT EXTENT. 2. THAT THE LD CIT (A), HAS ERRED IN LAW AND FACTS OF TH E CASE, BY CONFIRMING THE ORDER OF A.O., WHILE TREATING THE ASSES SEE TO BE OWNER OF THE SAID PROPERTY FROM THE YEAR 1984, INSTEA D OF TREATING HIM THE ASSESSEE, HOLDING THE ASSET WITHIN M EANING OF SEC 2 (14) OF INCOME TAX ACT,1961, FROM 1969. 3. THAT THE LD CIT (A), HAS ERRED IN LAW AND FACTS OF TH E CASE, BY CONFIRMING THE ORDER OF A.O., WHILE NOT CONSIDERING TH E FMV (RS 245000/-) OF CAPITAL ASSET AS ON 01-04-1981, CONSEQUEN TLY LEADING TO HIGHER CAPITAL GAINS. 3. FIRSTLY, I WILL DECIDE GROUND NOS. 2 AND 3 OF T HE APPEAL IN THE SUCCEEDING PARAGRAPHS. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DECLARED LONG TERM CAPI TAL GAIN ON THE SALE OF PLOT BEARING NO.290, SECTOR 14, FARI DABAD, HARYANA. THE SAID PLOT OF LAND WAS ALLOTTED TO TH E ASSESSEE BY HARYANA URBAN DEVELOPMENT AUTHORITY (HEREINAFTER HUDA) ON 8.5.1969, VIDE ALLOTMENT LETTER NO.13808. THE ASSESSEE ACCEPTED THIS ALLOTMENT AND DEPOSITED THE WHOLE AM OUNT OF RS.8750/- ALONGWITH INTEREST BY 20.12.1974, AS PER THE TERMS OF THE ALLOTMENT LETTER. THE ASSESSEE ALSO MADE CE RTAIN PAYMENTS AS ENHANCEMENT CHARGES, THUS FULFILLING TH E TERMS OF THE ALLOTMENT. THE ASSESSING OFFICER OBSERVED THA T AS PER THE COPY OF POSSESSION SUPPLIED BY THE ASSESSEE, THE PO SSESSION OF 3 SAID LAND WAS TAKEN BY HIM ON 13.11.1984. THE ASS ESSEE GOT THE CONVEYANCE DEED EXECUTED IN HIS FAVOUR ON 27.9. 2005. THEREAFTER, THE ASSESSEE SOLD THE SAID PLOT ON 30.9 .2005 THROUGH AGREEMENT TO SELL IN FAVOUR OF SHRI S.C.VER MA S/O SHRI AMARNATH VERMA FOR A CONSIDERATION OF RS.14 LA CS. THE PURCHASER I.E. SHRI S.C. VERMA DEPOSITED RS.1,38,00 0/- WITH HUDA (RS.1,00,900/- BEING EXTENSION FEES, RS.23,300 /- BEING INCREASE IN PRICE AND RS.13,455/- BEING COMPOUNDIN G FEES AND RS.345/- IN CASH) ON BEHALF OF THE ASSESSEE AND PAID RS.12,62,000/- THROUGH DRAFT NO.965211 DATED 28.9.2 005 DRAWN ON UNION BANK OF INDIA, FARIDABAD. SINCE TH E ASSESSEE HAD SOLD THE ABOVE SAID PLOT, THERE WAS A QUESTION OF CAPITAL GAIN ARISING OUT OF SUCH SALE. THE ASSESS ING OFFICER HELD THAT AS PER THE PROVISIONS OF SECTION 53A OF T HE TRANSFER OF PROPERTY ACT, 1882, THE ASSESSEE BECAME THE OWNE R OF THE PLOT ON 13.11.1984, WHEREAS, THE ASSESSEE HAD ADOP TED THE INDEXED COST OF LAND BY ADOPTING THE COST OF LAND D URING THE FINANCIAL YEAR 1981-82. THE ASSESSING OFFICER HAS STATED THAT THE ASSESSEE HAD ADOPTED THE COST OF LAND AT RS.2,4 5,000/- DURING THE FINANCIAL YEAR 1981-82 ON THE BASIS OF R EPORT OF REGISTERED VALUER AND ACCORDINGLY, THE INDEXED COST AT THAT TIME WAS RS.12,17,650/-. FOR COMPUTATION OF CAPI TAL GAIN, THE ASSESSEE RELIED UPON THE PROVISIONS OF SECTION 55(2)(B)(I) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). TH E ASSESSEE CLAIMED THAT HE HAD ACQUIRED RIGHT OVER TH E SAID PROPERTY ON ALLOTMENT AND ON FULFILLMENT OF TERMS O F THE ALLOTMENT BEFORE 1.4.1981, THE ASSESSEE OBTAINED TH E VALUATION REPORT FROM THE REGISTERED VALUER, NAMED SHRI 4 PARAMJIT SINGH WITH RESPECT TO FAIR MARKET VALUE (HEREINAFTER FMV AS ON 1.4.1981) AS COST ON 1.4.1 981. BASED ON THE REPORT OF THE REGISTERED VALUER, THE A SSESSEE TOOK RS.2,45,000/- (FMV). FURTHER, COST INFLATION INDEX WAS APPLIED ON THIS VALUE TO FIND OUT THE INDEXED COST AS PER SECTION 48 OF THE ACT. THE ASSESSEE ALSO DEDUCTED RS.1,38,000/- AS COST OF IMPROVEMENT BEING EXTENSIO N CHARGES, PRICE INCREASE AND COMPOUNDING FEES PAID T O HUDA. AFTER THIS EXERCISE, THE NET CAPITAL GAIN WAS COMPU TED AT RS.44,350/-. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER CALLED FOR INFORMATION UNDER SEC TION 133(6) OF THE ACT FROM TEHSILDAR, BALLABHGARH REGARDING CO LLECTOR RATE AT THE TIME OF ALLOTMENT OF PLOT. THE TEHSILDAR C ONCERNED INFORMED THAT THERE WAS NO COLLECTOR RATE FIXED BY THE COLLECTOR, FARIDABAD BUT SUPPLIED COPY OF SALE DEED DATED 19.9.1980, AS PER WHICH A PLOT OF SAME SIZE AND LOC ATED IN SAME SECTOR OF FARIDABAD WAS SOLD FOR RS.25,900/-. THE ASSESSING OFFICER ACCORDINGLY, HELD THAT THE VALUE ESTIMATED BY THE REGISTERED VALUER WAS NOT CORRECT AND ADOPTE D THE ACTUAL COST OF LAND OF RS.17,406/- AND AFTER CALCUL ATING THE INDEXED COST OF ACQUISITION WITH REFERENCE TO FINAN CIAL YEAR 1984-85, THE TOTAL COST WAS WORKED OUT TO RS.69,206 /- AS AGAINST THE COST OF RS.12,17,650/- COMPUTED BY THE ASSESSEE. THE LONG TERM CAPITAL GAIN WAS ACCORDINGLY, COMPUTE D AT RS.13,30,794/-. 5 6. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LE ARNED CIT (APPEALS) AND THE LEARNED CIT (APPEALS) CONFIRMED T HE ORDER OF THE ASSESSING OFFICER, AND HENCE THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. IN THIS CASE, THE ASSESSEE HAS SUBMITTED BRIEF WRITTEN SYNOPSIS. SHRI S.K. MITTAL, LEARNED D.R F OR THE REVENUE HEAVILY RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES IN SUPPORT OF REVENUES CASE. IN THE INSTANT CASE, THE MAIN QUESTION INVOLVED IS THAT WHICH YEAR HAS T O BE TAKEN AS YEAR OF ACQUISITION OF ASSET. IT IS AN ADMITTE D FACT THAT THE ASSESSEE WAS ALLOTTED THE PLOT MEASURING 350 SQ.YD. AT TENTATIVE RATE PRICE OF RS.8750/- VIDE ALLOTMENT LE TTER NO.13808 DATED 8.5.1969. ON A PERUSAL OF THE SAID ALLOTMENT LETTER, PARTICULARLY PARA 5 OF THE ALLOTMENT LETTER , IT IS CLEAR THAT THE ASSESSEE COULD MADE THE WHOLE PAYMENT WITH IN 60 DAYS FROM THE DATE OF ISSUANCE OF THIS LETTER OR IN SIX ANNUAL EQUATED INSTALLMENTS WITH 7% INTEREST. THERE IS NO DISPUTE THAT THE ASSESSEE COMPLIED WITH THE TERMS OF ALLOTM ENT AND MADE FULL PAYMENT BY 20.12.1974 ALONGWITH INTEREST THEREON. THUS, THE ASSESSEE PAID THE WHOLE OF TENTATIVE PRIC E OF RS.8750/- BY 20.12.1974. FURTHER, THE ASSESSEE AL SO PAID RS.10,038/- AS ENHANCEMENT CHARGES IN COMPLIANCE TO CLAUSE 9 OF ALLOTMENT LETTER ON DIFFERENT DATES AS MENTION ED IN ALLOTMENT LETTER. AS PER CLAUSE 7 OF ALLOTMENT L ETTER, THE ASSESSEE WAS ENTITLED FOR POSSESSION EVEN AFTER PAY ING 25% OF 6 THE TENTATIVE SALE PRICE AND AS PER CLAUSE 8 OF THE ALLOTMENT LETTER, THE ASSESSEE WAS ENTITLED TO EXECUTE CONVEY ANCE DEED AFTER PAYING 75% OF THE TENTATIVE SALE PRICE. IN THE INSTANT CASE, THE ASSESSEE HAS PAID 25% OF THE AMOUNT BY 28 .7.1969. SO, THE ASSESSEE GETS ABSOLUTE RIGHT OVER THE PROPE RTY IN FINANCIAL YEAR 1969-70 ON FULFILLING THE TERMS OF T HE ALLOTMENT LETTER. THE ASSESSEE RELIED ON THE DECISION OF H ON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. K.RAMAKRISHANAN (2014) 110 DTR (DEL) 119. IN THE CASE OF K.RAMAKRISHANAN (SUPRA) THE FACTS OF THE CASE BEFORE THE HON'BLE HIGH COURT WERE THAT SHRI K.RAMAKRISHANAN (ASSESSEE) IN THAT CASE BOOKE D A PLOT WITH HUDA ON 18.6.1986 AND DEPOSITED THE EARNEST MO NEY. THE PLOT WAS ALLOTTED TO THE SHRI K.RAMAKRISHANAN O N 3.8.1999 AND BY 3.10.1999, HE HAD DEPOSITED 96% OF TENTATIVE COST OF THE PLOT. HOWEVER, SHRI K.RAMAKRISHANAN AC QUIRED THE POSSESSION OF THE PLOT ON 12.12.2005 AND SOLD THROU GH A REGISTERED DEED ON 9.1.2008. THE ASSESSING OFFICE R COMPUTED THE CAPITAL GAIN AS SHORT TERM CAPITAL GAIN BECAUSE HE TOOK THE DATE OF POSSESSION AS RELEVANT DATE. HOWEVER, THE ASSESSEE SUBMITTED THAT THE DATE OF ALLOTMENT OF PLOT TO HIM SHOULD BE TAKEN AS RELEVANT DATE. THE ASSESSEE FURTHER SUBMITTED THAT SINCE THE HE HAS COMPLIED WITH THE TERMS AND CONDITIONS OF THE A LLOTMENT LETTER AND PAID 96% OF THE TENTATIVE PRICE UPTO 3.10.1999, SO HE BECAME BENEFICIAL OWNER OF THE PLOT. HE ALSO GETS ABSOL UTE RIGHT IN THE PROPERTY. ON THESE FACTS, THE HON'BLE DELHI HIGH COURT CONCLUDED THAT PLOT HAVING BEEN BOOKED ON 18.6.1986 AND ASSESSEE H AVING PAID 96% OF THE COST BY 3.10.1999, THE SALE OF PLOT ON 9 .1.2008 GAVE RISE TO LONG TERM CAPITAL GAINS, THOUGH POSSESSION OF THE P LOT 7 WAS ACQUIRED ON 12.12.2005 . PARA 3 OF THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF K.RAMAKRIS HANAN (SUPRA) READS AS UNDER : IN THIS CASE THE ASSESSEE ACQUIRED POSSESSION OF THE PLOT ON 12 TH DECEMBER 2005 AND SOLD THROUGH A REGISTERED SALE DE ED DATED 09 TH JANUARY 2008. THIS COURT IS OF THE OPINION THAT HA VING REGARD TO THE FINDINGS RECORDED BY THE TRIBUNAL, THE ASSESSEE HAD A CQUIRED BENEFICIAL INTEREST IN THE PROPERTY AT LEAST 96% OF THE AMOUNT WAS PAID I.E. BY 03 RD OCTOBER 1999. THIS COURT IS SUPPORTED IN ITS FINDING BY A DIVISION BENCH RULING OF PUNJAB & HARYANA HIGH COURT IN MADHU KAUL VS. CIT (IT APPEAL NO 89 OF 1999 DECIDED ON 17 TH JANUARY 2014) REPORTED AT (2014) 108 DTR 91 (P&H). 8. FROM THE ABOVE DECISION OF THE HON'BLE DELHI HI GH COURT, IT IS CLEAR THAT IN CASE OF ALLOTMENT OF PLO T, HOLDING PERIOD COMMENCES FROM THE DATE OF ALLOTMENT. WHIL E HOLDING SO, THE HON'BLE DELHI HIGH COURT HAS REFERRED TO TH E DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF MRS.MADHU KAUL VS. CIT & ANOTHER (IT APPEAL NO. 89 OF 1999) (2014) 108 DTR (P&H) 91. THE HON'BLE JURISDICTION AL HIGH COURT IN THE CASE OF MRS.MADHU KAUL (SUPRA) HAS OB SERVED AS UNDER : 7. WE FIND NO DISTINCTION BETWEEN THE OPINION RECOR DED IN THE AFORESAID JUDGMENT AND THE CONTROVERSY IN THE PRESENT CASE. AD MITTEDLY, THE FLAT WAS ALLOTTED TO THE APPELLANT ON 7TH JUNE, 1986, VI DE LETTER CONVEYED TO THE ASSESSEE ON 30TH JUNE, 1986. THE ASSESSEE PA ID THE FIRST INSTALMENT ON 4TH JULY, 1986, THEREBY CONFERRING A R IGHT UPON THE APPELLANT TO HOLD A FLAT, WHICH WAS LATER IDENTIFIE D AND POSSESSION DELIVERED ON A LATER DATE. THE MERE FACT THAT POSSE SSION WAS DELIVERED LATER, DOES NOT DETRACT FROM THE FACT THAT THE ALLO TTEE WAS CONFERRED A RIGHT TO HOLD PROPERTY ON ISSUANCE OF AN ALLOTMENT L ETTER. THE PAYMENT OF BALANCE INSTALMENTS, IDENTIFICATION OF A PARTICULAR FLAT AND DELIVERY OF 8 POSSESSION ARE CONSEQUENTIAL ACTS, THAT RELATE BACK TO AND ARISE FROM THE RIGHTS CONFERRED BY THE ALLOTMENT LETTER. 9. IN THE ABOVE DECISION, THE HON'BLE JURISDICTION AL HIGH COURT HAS CATEGORICALLY HELD THAT THE ALLOTTEE GETS TITLE TO THE PROPERTY ON THE ISSUANCE OF AN ALLOTMENT LETTER AND THE PAYMENT OF INSTALMENTS IS ONLY A CONSEQUENTIAL ACTI ON UPON WHICH THE DELIVERY OF POSSESSION FLOWS . IN THE CASE OF MRS.MADHU KAUL (SUPRA), THE HON'BLE JURISDICTIONAL HIGH COURT HAS FOLLOWED ITS EARLIER DECISION RENDERED IN THE CASE OF VINOD KUMAR JAIN VS. CIT (2012) 344 ITR 501 (P&H), WHEREIN IT HAS BEEN HELD THAT THE ALLOTTEE GETS TITLE TO THE PROPERTY ON THE ISSUANCE OF AN ALLOTMENT LETTER AND THE PAYMENT OF INSTALMENTS IS ONLY A CONSEQUENTIAL ACTION UPON WH ICH THE DELIVERY OF POSSESSION FLOWS . I MAY OBSERVE HERE THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS IN THE CASE OF K.RAMAKRISHANAN (SUPRA) DECIDED BY THE HON'BLE DELH I HIGH COURT. IN THE ABOVE CASE, THE ASSESSEE HAD BOOKED A PLOT WITH HUDA ON 18.6.1986 AND HAD DEPOSITED THE EARNES T MONEY. IN THE INSTANT CASE ALSO, THE ASSESSEE WAS ALLOTTED A PLOT MEASURING 350 SQ.YD. IN SECTOR 14, FARIDABAD F OR RS.8750/- VIDE ALLOTMENT LETTER NO.13808 DATED 8.5. 1969. THE ASSESSEE ACCEPTED THIS ALLOTMENT AND DEPOSITED THE WHOLE AMOUNT OF RS.8750/- ALONGWITH INTEREST BY 20.12.197 4, AS PER THE TERMS OF THE ALLOTMENT LETTER ISSUED BY HUDA. FROM THE ABOVE DISCUSSION, IT IS CRYSTAL CLEAR THAT IN CASE OF ALLOTMENT OF PLOT HOLDING PERIOD COMMENCES FROM THE DATE OF A LLOTMENT AND NOT FROM THE DATE OF POSSESSION. IN THE INSTA NT CASE, THE ASSESSEE WAS ALLOTTED A SPECIFIC PLOT NO. I.E. 290 ON 8.5.1969 9 AND THE ASSESSEE FURTHER MADE FIRST INSTALLMENT ON 28.7.1969. THEREFORE, THE ASSESSEE WAS RIGHTFULLY HOLDING THE CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) OF THE AC T FROM THE DATE OF ALLOTMENT LETTER DATED 8.5.1969 IN THE LIGH T OF THE DECISIONS REFERRED TO ABOVE. ACCORDINGLY, I HOLD THAT THE ASSESSEE WAS HOLDING THE PLOT (ASSET) IN QUESTION F ROM THE DATE OF ALLOTMENT LETTER DATED 8.5.1969 WITHIN THE MEANING OF SECTION 2(14) OF THE ACT. 10. NOW THE NEXT QUESTION IS THAT WHICH VALUE HAS TO BE TAKEN AS COST OF ACQUISITION, I.E. RS.2,45,000/- BE ING FAIR MARKET VALUE AS ON 1.4.1981, AS VALUED BY THE REGIS TERED VALUER OR RS.17,406/- BEING COST OF ACQUISITION FOR RS.25,900/- BEING VALUE OF REGISTERED SALE DEED DAT ED 19.9.1980 OF SAME SIZE OF PLOT IN SAME SECTOR, AS P ROVIDED BY TEHSILDAR, BALLABHGARH. IN THE INSTANT CASE, THE ASSESSEE OBTAINED VALUATION REPORT FROM THE REGISTERED VALUE R SHRI PARAMJIT SINGH, WHO VALUED THE PROPERTY AT RS.2,45, 000/- AS ON 1.4.1981. NOW THE ISSUE IS AS TO WHETHER THE V ALUE TAKEN BY THE ASSESSING OFFICER FROM TEHSILDAR I.E. RS.25, 900/- OR THE VALUE OF REGISTERED VALUER I.E. RS.2,45,000/- HAS T O BE TAKEN AS FAIR MARKET VALUE AS ON 1.4.1981. THE ASSESSEE RELIED UPON THE DECISION OF THE HON'BLE KARNATAKA HIGH COU RT IN THE CASE OF SMT.KRISHNA BAJAJ VS. ACIT (2014) 100 DTR (KAR) 370, WHEREIN THE HON'BLE KARNATAKA HIGH COURT OBSERVED T HAT WHEN FAIR MARKET VALUE HAS BEEN DEFINED IN SECTION 2(22B ) OF THE ACT, SPECIFICALLY IN RELATION TO CAPITAL ASSET TO CALCUL ATE CAPITAL GAIN TAX, THE QUESTION OF RELYING ON DEFINITION UNDER AN Y OTHER ENACTMENT IS NOT PERMISSIBLE . THE RELEVANT OBSERVATIONS MADE 10 BY THE HON'BLE KARNATAKA HIGH COURT ARE REPRODUCED HEREINBELOW : 4. THE 'FAIR MARKET VALUE' HAS BEEN DEFINED UNDER SECTION 2(22B) OF THE INCOME TAX ACT (ACT' FOR BREVITY), WHICH RE ADS AS UNDER: '2(22B) 'FAIR MARKET VALUE', IN RELATION TO A CAPIT AL ASSET, MEANS- (I) THE PRICE THAT THE CAPITAL ASSET WOULD ORDINARIL Y FETCH ON SALE IN THE OPEN MARKET ON THE RELEVANT DATE; AND (II) WHERE THE PRICE REFERRED TO IN SUB-CLAUSE (I) IS NOT ASCERTAINABLE, SUCH PRICE AS MAY BE DETERMINED IN ACCORDANCE WITH T HE RULES MADE UNDER THIS ACT. ' 5. WHEN ONCE UNDER THE ACT, FAIR MARKET VALUE HAS B EEN DEFINED, SPECIFICALLY IN RELATION TO THE CAPITAL ASSET TO CA LCULATE THE CAPITAL GAIN TAX, THE QUESTION OF RELYING ON THE DEFINITION UNDER ANY OTHER ENACTMENT IS NOT PERMISSIBLE. A READING OF THE AFOR ESAID DEFINITION CLAUSE MAKES IT CLEAR THAT FAIR MARKET VALUE IS THE PRICE THAT THE CAPITAL ASSET WOULD ORDINARILY FETCH ON SALE IN THE OPEN MARKET ON THE RELEVANT DATE. THEREFORE, FOR LEVYING CAPITAL G AIN TAX UNDER THE ACT FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN T AX, THE FAIR MARKET VALUE, WHICH IS TO BE TAKEN INTO CONSIDERATI ON, IS THE PRICE THE PROPERTY WOULD FETCH ON SALE IN THE OPEN MARKET ON THE RELEVANT DATE. THE MATERIAL ON RECORD DISCLOSES THE GUIDELINE VALU E AS ON 1.4.1981 IN RESPECT OF THE PROPERTY IN DISPUTE WOULD WORK OU T TO RS.110/- PER SQ.FT. THE ASSESSEE WAS ASSESSED TO WEALTH TAX IN R ESPECT OF THE AFORESAID PROPERTY. THE MATERIAL PRODUCED BY HER SH OWS THE PROPERTY WAS VALUED AT RS.2,25,000/- AS ON 31.3.1992 I.E., T HE NET WEALTH ON WHICH THE WEALTH TAX WAS PAYABLE. THE WEALTH TAX AC T PROVIDES A MECHANISM, UNDER WHICH THE PROPERTY IS VALUED AND NE T WEALTH DETERMINED FOR THE PURPOSE OF PAYMENT OF WEALTH TAX . IT IS NOT A FAIR MARKET VALUE. THEREFORE, IN DETERMINI NG THE LAIR MARKET VALUE UNDER THE ACT, NEITHER THE GUIDELINE VALUE PRE SCRIBED FOR THE PURPOSE OF STAMP DUTY AND REGISTRATION UNDER THE KA RNATAKA STAMP ACT AND THE INDIAN REGISTRATION ACT NOR THE NET WEALTH V ALUE ARRIVED AT UNDER THE PROVISIONS OF THE WEALTH TAX ACT, CANNOT BE THE GUIDING FACTOR. THE 11 MARKET VALUE OF THE PROPERTY IS CERTAINLY FAR MORE TH AN THE GUIDELINE VALUE. SIMILARLY, THE VALUE OF THE PROPERTY, WHICH IS THE SUBJECT MATTER OF WEALTH TAX, IS ALSO FAR MORE THAN THE VALUE FOR WHIC H IT IS ASSESSED UNDER THE WEALTH TAX ACT. THEREFORE, THE AUTHORITIES WERE NOT JUSTIFIED IN RELYING ON THOSE TWO INADMISSIBLE PIECE OF EVIDENC E TO ARRIVE AT A FAIR MARKET VALUE. 6. THE GRIEVANCE IS THAT, WHEN THE ASSESSEE WAS CAL LED UPON TO PRODUCE A VALUATION REPORT FROM A DULY QUALIFIED VAL UATOR, SHE HAS FAILED TO PRODUCE THE SAME. IT IS TRUE THAT THE ASSESSEE COULD HAVE PRODUCED THE VALUATION REPORT TO SUBSTANTIATE THE VALUATION. BUT MERELY BECAUSE IT WAS NOT PRODUCED, NO A DVERSE INFERENCE COULD BE DRAWN. EVEN IN THE ABSENCE OF PRODUCTION OF SUCH REPORT, A DUTY WAS CAST ON THE AUTHORITIES TO ASSESS THE FAIR MARKE T VALUE INDEPENDENT OF THE EVIDENCE ADDUCED BY THE ASSESSEE. INSTEAD OF CALLING FOR PARTICULARS FROM THE SUB-REGISTRAR'S OFFICE ABOUT TH E GUIDELINE VALUE, THE ASSESSING OFFICER HIMSELF COULD HAVE REFERRED TH E MATTER TO A VALUATOR TO GET THE VALUATION DONE UNDER SECTION 53- A OF THE ACT, WHICH HE HAS NOT RESORTED TO . THE ASSESSEE HAS FILED A VA LUATION MEMO. IT IS IN THIS MEMO, SHE HAS GIVEN THE VALUATION OF THE PRO PERTY AT RS.2,25,.000/-ASON31.3.1992UNDERTHE WEALTH TAX ACT. AS STAGED EARLIER, THAT CANNOT BE THE BASIS. 7. ONE OTHER ASPECT, WHICH THE AUTHORITIES HAVE FAIL ED TO NOTICE IS, WHERE THE PROPERTY IS SITUATED AND ITS LOCATION. FR OM THE ADDRESS GIVEN ABOVE, IT IS CLEAR THAT THE PROPERTY IS SITUAT ED IN THE HEART OF BANGALORE CITY, IN A PRIME COMMERCIAL LOCALITY WHERE TH E VALUE OF THE PROPERTY HAS MULTIPLIED AUTOMATICALLY OVER THE YEAR S. IF THE PROPERTY WAS PURCHASED FOR RS.25,000/- IN 1964 AND THAT PROPE RTY WAS SOLD FOR RS.27,55,000/-IN 2000, EITHER ADOPTING A PROCEDURE FO R ESCALATION OR RE-ESCALATION, THE FAIR MARKET VALUE OF THE PROPERTY WOULD BE AROUND RS.2,75,000/- AS PUT FORTH BY THE ASSESSEE. 8. IN THAT VIEW OF THE MATTER, WE ARE OF THE VIEW T HAT THE AUTHORITIES COMMITTED A SERIOUS ERROR IN RELYING O N AN INADMISSIBLE EVIDENCE AND IN NOT TAKING INTO CONSIDERATION THE UNDISPUTED FACTS AS WELL AS THE MEMO OF CALCULATION FILED BY THE ASSESSE E, WHICH IS MORE 12 PROPER. THEREFORE, THE IMPUGNED ORDER CANNOT BE SU STAINED AND THE SAME IS REQUIRED TO BE SET ASIDE. HENCE, WE MAKE THE FOLLOWING ORDER: THE APPEALS IS ALLOWED. ALL THE IMPUGNED ORDERS ARE HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE. PARTIES TO BEAR THEIR OWN COSTS. 11. IN THE ABOVE CASE, THE HON'BLE HIGH COURT HAS CATEGORICALLY OBSERVED THAT EVEN IF THE ASSESSEE CO ULD NOT PRODUCE THE VALUATION REPORT FROM THE QUALIFIED VA LUER, NO ADVERSE INFERENCE COULD BE DRAWN. THE HON'BLE HI GH COURT FURTHER OBSERVED THAT EVEN IN THE ABSENCE OF PRODUC TION OF SUCH REPORT, A DUTY WAS CAST UPON THE AUTHORITIES T O ASSESS THE FAIR MARKET VALUE INDEPENDENT OF THE EVIDENCE P RODUCED BY THE ASSESSEE. INSTEAD OF CALLING FOR PARTICULA RS FROM THE OFFICE OF SUB REGISTRAR ABOUT THE GUIDELINE VALUE, THE ASSESSING OFFICER HIMSELF COULD HAVE REFERRED THE M ATER TO A VALUER UNDER SECTION 55A OF THE ACT TO GET THE VALU ATION DONE. THE FACTS OF THE ABOVE REFERRED TO CASE ARE SIMILAR IN RELATION TO DETERMINATION OF FAIR MARKET VALUE AS ON 1.4.198 1 WITHIN THE MEANING OF SECTION 2(22B) OF THE ACT WITH RESPE CT TO CASE IN HAND. THUS, KEEPING IN VIEW OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF SMT.KRISHNA BAJ AJ (SUPRA), IT CAN BE RATIONALLY INFERRED THAT THE VAL UE TAKEN FROM TEHSILDAR, BALLABHGARH CANNOT BE TAKEN AS FMV AS ON 1.4.1981. IT IS APPARENT FROM RECORDS THAT THE ASS ESSING OFFICER CALLED FOR AN INFORMATION UNDER SECTION 133(6) OF T HE ACT, FROM THE TEHSILDAR, BALLABHGARH REGARDING COLLECTOR RATE AT THE TIME OF ALLOTMENT OF PLOT. IN RESPONSE TO THE SAID QUERY, THE TEHSILDAR 13 INFORMED THAT THERE WAS NO COLLECTOR RATE FIXED BY THE COLLECTOR, FARIDABAD. HOWEVER, HE SUPPLIED A COPY OF SALE DEED DATED 19.9.1980, AS PER WHICH A PLOT OF SAME S IZE IN SAME SECTOR OF FARIDABAD WAS SOLD FOR RS.25,900/-. THE ASSESSING OFFICER HAS REJECTED THE VALUE ESTIMATED BY THE REGISTERED VALUER WITHOUT ASSIGNING ANY COGENT REAS ON AND ADOPTED ACTUAL COST OF LAND AT RS.17,406/-. AFTE R APPLYING THE INDEXED COST OF ACQUISITION WITH REFERENCE TO F INANCIAL YEAR 1984-85, THE TOTAL COST WAS WORKED OUT AT RS.69,206 /- AS AGAINST THE COST OF RS.12,17,650/- COMPUTED BY THE ASSESSEE. IT IS RELEVANT TO OBSERVE HERE THAT THE PLOT IS SIT UATED IN FARIDABAD IN A PRIME LOCATION WHERE THE VALUE OF TH E PROPERTY HAS MULTIPLIED AUTOMATICALLY OVER THE YEARS. IN M Y OPINION, IF THE PROPERTY WAS PURCHASED FOR RS.8750/- IN 1969 AND THAT PROPERTY WAS SOLD FOR RS.14 LACS IN THE YEAR 2005 I.E. AFTER 35 YEARS, EITHER ADOPTING A PROCEDURE FOR ESCALATION O R RE- ESCALATION, THE FAIR MARKET VALUE OF THE PROPERTY W OULD BE AROUND RS.2,45,000/- AS PER THE REGISTERED VALUER. THE ASSESSEE HAS SUBMITTED THAT IT IS AN OPEN SECRET WH ENEVER A PERSON IS ALLOTTED A PLOT FROM HUDA, IT IS AN OCCAS ION OF CELEBRATION FOR THE REASON THAT THERE IS VERY HIGH PREMIUM ASSOCIATED WITH IT. IT IS AN OCCASION WHICH CAN B E COMPARED WITH THE OCCASION OF WINNING A BIG AMOUNT IN LOTTER Y. LIKE IN LOTTERY, THERE IS ALWAYS VERY SMALL PROBABILITY OF ALLOTMENT OF PLOT IN SOMEBODYS FAVOUR. SO, IN THE GIVEN SET O F FACTS, IT CAN BE RATIONALLY CONSIDERED THAT THE VALUATION REP ORT OF THE VALUER IS QUITE REASONABLE. CONSIDERING THE DECI SION OF THE HON'BLE KARNATAKA HIGH COURT REFERRED TO ABOVE AND ALSO THE 14 FACTS OF THE PRESENT CASE, AS NARRATED HEREINABOVE, I HOLD THAT THE AUTHORITIES BELOW SHOULD HAVE ACCEPTED THE FMV (RS.2,45,000/-) OF CAPITAL ASSET AS ON 1.4.1981. ACCORDINGLY, I DIRECT THE ASSESSING OFFICER TO CONSIDER THE FMV OF PLOT AT RS.2,45,000/- AS ON 1.4.1981. 12. GROUND NO.1 OF THE APPEAL RELATES TO DEDUCTION OF RS.1,38,000/- CLAIMED BY THE ASSESSEE UNDER SECTION 48 OF THE ACT AS COST OF IMPROVEMENT. THE DETAIL OF THE AMO UNT OF RS.1,38,000/- IS AS UNDER : B-3) NOW THE THIRD QUESTION FOR CONSIDERATION IS TH AT WHETHER RS.1,38,000/- IS DEDUCTIBLE OR NOT ? RS.1,38,000/- WERE DEPOSITED DIRECTLY BY THE BUYE R WITH HUDA, THE DETAILS OF WHICH ARE AS UNDER: 1. RS.1,00,900/- AS EXTENSION FEES VIDE RECEIPT NO.297197 DATED 05.09.2005 PLACED ON PAGE NO 29 OF PAPER BOOK. 2. RS.23,300/- AS INCREASED PRICE VIDE RECEIPT NO.297196 DATED 05.09.2005 PLACED ON PAGE NO 29 OF PAPER BOOK. 3. RS.13,455/- AS COMPOUNDING FEES VIDE RECEIPT NO.297195 DATED 05.09.2005 PLACED ON PAGE NO 30 OF PAPER BOOK. 4. RS.345 IN CASH. RS.1,38,000/- TOTAL 15 13. THE ASSESSING OFFICER DENIED THE ABOVE DEDUCTI ON ON THE GROUND THAT IT IS OF PENAL NATURE. THE LEARNE D CIT (APPEALS) ALSO UPHELD THE FINDINGS OF THE ASSESSING OFFICER ON THIS ISSUE. 14. THE CONTENTION MADE ON BEHALF OF THE ASSESSEE IN THIS REGARD IS THAT RS.1,00,900/- WERE PAID AS EXTE NSION FEES AND RS.23,300/- WERE PAID AS INCREASED PRICE. ACC ORDINGLY, IT WAS SUBMITTED THAT THERE WAS NO QUESTION OF ANY PENALTY IN THIS CASE. IT WAS SUBMITTED BY THE ASSESSEE THAT T HIS COMPOUNDING FEES PAID FOR RS.13,455/-, AT BEST, CA N BE TREATED AS PAYMENT OF COMPENSATORY NATURE FOR NOT C OMPLETING THE CONSTRUCTION UPON THE PLOT WITHIN THE SPECIFIED TIME AS PER THE TERMS OF ALLOTMENT LETTER. IN THIS REGARD , THE ASSESSEE SUBMITTED THAT THE COMPOUNDING FEES IS BEING PAID F OR DEFAULT IN TERMS OF CONTRACT BETWEEN TWO PARTIES. NO PROV ISIONS OF ANY ACT OR STATUTE IS BEING DISOBEYED TO THE LOSS O F PUBLIC AT LARGE. ACCORDINGLY, IT WAS SUBMITTED BY THE ASSES SEE THAT HE HAS NOT COMMITTED ANY OFFENCE UNDER ANY STATUTE OR ACT. IT IS A CASE OF NON-COMPLIANCE OF CERTAIN TERMS OF CON TRACT BETWEEN TWO PARTIES. IT IS ALSO SUBMITTED ON BEHA LF OF THE ASSESSEE THAT IT IS A OPEN SECRET THAT EVEN THOUGH SUCH DEVELOPMENT AUTHORITIES LIKE HUDA PUT A CLAUSE OF C ONSTRUCTION IN TERMS OF CONTRACT WHILE ALLOTTING THE PLOT TO THE A LLOTTEE, BUT THERE IS ALWAYS AN INBUILT MECHANISM PROVIDED TO TAKE THE EXTENSION BY PAYING EXTENSION FEES, ETC. ANY PERSON WHILE INVES TING IN SAID PLOT IS ALWAYS CONSCIOUS OF THE FACT THAT HE HAS TO PAY ADDITIONAL COST IN THE FORM OF EXTENSION FEES IF NO CONSTRUCTION IS DONE. THE 16 ASSESSEE FURTHER SUBMITTED THAT EVEN THOUGH RIGHT O F RESUMPTION OF THE SITE OR FORFEITURE OF WHOLE OR ANY PART OF T HE MONEY IS VESTED WITH HUDA , IT IS NEVER DONE. VIDE SHOW C AUSE NOTICE DATED 11.3.1985, HUDA ASKED THE ASSESSEE THAT SINCE HE HAS NOT DONE THE CONSTRUCTION UPTO 8.5.1972, WHY AN ORD ER OF RESUMPTION OF SITE AND FORFEITURE OF MONEY NOT BE M ADE? DESPITE THIS NOTICE, IN TWENTY YEARS TIME I.E. UPTO 27.9.2005 (DATE OF EXECUTION OF CONVEYANCE DEED IN FAVOUR OF ALLOTTEE) NO ACTION WAS EVER TAKEN BY HUDA. BUT AT THE TIME OF SALE OF SUCH PLOT BY THE ALLOTTEE, HE SIMPLY DEPOSITED THE PRESCRIBED FEES OF HUDA AND EXECUTED THE NECESSARY DOCUMENTS T O EFFECT SALE. SO, IN THE GIVEN FACTS OF THE CASE, THIS WA S A NECESSARY COST TO BE INCURRED BY THE ASSESSEE AND THUS DEDUCT IBLE. IN MY OPINION, THERE IS A MERIT IN THE ABOVE SUBMISSIO N OF THE ASSESSEE. IN MY CONSIDERED OPINION,, IN THE FACT S AND CIRCUMSTANCES OF THE PRESENT CASE, THE PAYMENT OF RS.1,38,000/- TO HUDA WAS INEVITABLE TO EFFECT THE SALE OF PLOT. THIS PAYMENT DEFINITELY IMPROVED THE RIGHT AND INTEREST OF THE ASSESSEE OVER THE SAID PROPERTY, WHICH ENABL ED OR LEGALLY ENTITLED THE ASSESSEE TO SELL THE PLOT. I N OTHER WORDS, THE LEGAL ENTITLEMENT TO SELL THE PROPERTY WAS VEST ED WITH THE ASSESSEE ONLY AFTER MAKING THIS NECESSARY LEGAL PAY MENT OF RS.1,38,000/-. I FULLY AGREE WITH THIS CONTENTION OF THE ASSESSEE THAT BY NO RATIONALE, IT CAN BE INFERRED T HAT IT IS NOT A DEDUCTIBLE EXPENDITURE WITHIN THE MEANING OF SECT ION 48(II) OF THE ACT, AS COST OF THE IMPROVEMENT. ACCORDING LY, I DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION OF RS. 1,38,000/- CLAIMED BY THE ASSESSEE. 17 15. IN VIEW OF THE ABOVE, I DIRECT THE ASSESSING O FFICER TO COMPUTE THE LONG TERM CAPITAL GAIN OF THE PROPERTY IN QUESTION. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF JUNE, 2015. SD/- (H.L.KARWA) VICE PRESIDENT DATED : 25 TH JUNE, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH