The DCIT, Circle-9, Surat V. M/s. I.P. Patel & Co., Surat

ITA 781/AHD/2011

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8520 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-07-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 11-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Cost of acquisition; Fair market value
• Section: 14A

Judgement Text

, - SMC IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO. 781,784 & 785/AHD/2011 / ASSTT. YEAR: 2011-12 (1)LATE SHANTABEN P PATEL, L/H GOVINDBHAI P. PATEL, 36, GOURAV CO-OP. SOCIETY V.T. PARK, GOTA ROAD, CHANDLODIYA, AHMEDABAD PAN: BFCPP6980A (2) BABUBHAI RAMANLAL PATEL DARSHAK, 14A SWASTIK SOCIETY, PUNJABI HALL GALI, NAVRANGPURA, AHMEDABAD- 380009 PAN: ABYPP8048A (3) ILABEN K. PATEL A-12, SHYAM SATTADHAR SOCIETY, NEAR SARVODAY PART-I, SOLA ROAD, GHATLODIYA, AHMEDABAD PAN: AFEPP9294E VS. VS. VS. INCOME-TAX OFFICER, WARD-6(5), AHMEDABAD DY. COMMISSIONER OF INCOME- TAX,CIRCLE-1, AHMEDABAD INCOME-TAX OFFICER, WARD-6(5), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : HEMANSHU SHAH, A.R. REVENUE BY : ADITYA SHUKLA, SR. D.R ! / DATE OF HEARING : 12/02/2018 '#$ ! / DATE OF PRONOUNCEMENT: 02/04/2018 %& / O R D E R ITA NO.781,784 & 785/AHD/2011 A.Y. 2011-12 2 PER RAJPAL YADAV, JUDICIAL MEMBER: THE PRESENT THREE APPEALS ARE DIRECTED AT THE INSTA NCE OF ASSESSEES AGAINST THE ORDERS OF LD. CIT(A) DATED 0 5.02.2015, 18.02.2015 & 05.02.2015 PASSED ON THE RESPECTIVE AP PEALS OF ILABEN K. PATEL, BABUBHAI RAMANLAL PATEL & LATE SHANTABEN P P ATEL IN A.Y 2011-12. 2. THE SOLITARY SUBSTANTIAL GROUND OF APPEAL TAKEN BY ILABEN K. PATEL AND SHANTABEN P PATEL ARE INTERCONNECTED WITH GROUN D NO.3 IN THE CASE OF BABUBHAI RAMANLAL PATEL. THEREFORE WE HEARD ALL THESE APPEALS TOGETHER AND DEEMED IT APPROPRIATE TO DISPOSED OF T HEM BY THIS COMMON ORDER. THE GRIEVANCE OF THE ASSESSEES RELATES TO D ETERMINATION OF LONG TERM CAPITAL GAIN ON SALE OF A PLOT. ALL THESE THRE E ASSESSEES ARE CHALLENGING THE ADDITIONS OF RS. 6,98,630/-, 1,74,6 50/- & 13,97,290/- IN THEIR RESPECTIVE HEADS I.E ILABEN K. PATEL, BABUBHA I RAMANLAL PATEL & SHANTABEN P PATEL UNDER THE HEAD LONG TERM CAPITAL GAIN. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEES WERE CO-OWNERS OF A PROPERTY WHICH WAS SOLD FOR RS. 5,10,00000/-. SMT. ILABEN K. PATEL WAS HAVING 1/32 SHARES IN THE PROPERTY. WHILE COMPUTING THE CAPITAL GAIN THEY HAVE ADOPTED THE COST OF ACQUISITION AS ON 01. 04.1981 AT RS. 800 PER SQ. METER. THE LD. ASSESSING OFFICER MADE REFER ENCE TO THE DVO FOR VALUATION OF THE PROPERTY AS ON 01.04.1981. THE VAL UATION OFFICER HAS DETERMINED THE VALUE OF THE PROPERTY AT RS. 36,54,0 00/- AS AGAINST RS. 67,98,400/- ADOPTED BY THE ASSESSEES. IN OTHER WOR DS THE ASSESSEES HAVE WORKED OUT THE COST OF ACQUISITION AS ON 01.04 .1981 @ 800 PER SQ. METER WHEREAS VALUATION OFFICER WORKED OUT THE VALU E @ RS. 430/- PER SQ. METER. THE ASSESSING OFFICER AFTER TAKING INTO CONSIDERATION THE COST OF ACQUISITION AT THE VALUE OF 430 PER SQ. METER WO RKED OUT THE CAPITAL ITA NO.781,784 & 785/AHD/2011 A.Y. 2011-12 3 GAIN ASSESSABLE IN THE HANDS OF EACH ASSESSEE ACCOR DING TO THEIR SHARE IN THE PROPERTY. 4. APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELIE F TO THE ASSESSEE. 5. BEFORE ME LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE APPELL ANT BY THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. GAURANGINIBEN S. SHODHAN INDL. REPORTED IN 367 ITR PAGE 238. HE POINTED OUT THAT ASSESSING OFFICER HAD NO POWER TO REFER THE MATTER TO THE DVO AS PER SECTION 55A OF THE ACT, AS THE VALUE SHOWN BY THE APPELLANTS WAS NOT LESS THAN FAIR MARKET VALUE WHIC H IS A BASIC CONDITION FOR REFERRING THE MATTER TO THE DVO. HE FURTHER POI NTED OUT THAT IN THE CASE OF OTHER CO-SHARES NAMELY LATE SHRI RAMANBHAI KAKUBHAI PATEL THIS PROPOSITION WAS ACCEPTED BY THE CIT(A) WHOSE ORDER IS PLACED ON PAGE NO. 71 OF THE PAPER BOOK. 6. LD. D.R ON THE OTHER HAND RELIED UPON THE ORDER OF REVENUE AUTHORITIES. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THE DISPUTE BEFORE ME IS, WHE THER ASSESSING OFFICER COULD MAKE A REFERENCE TO THE DVO FOR DETERMINING T HE FAIR MARKET VALUE OF THE ASSETS AS ON 01.04.1981. ACCORDING TO THE LD . COUNSEL FOR THE ASSESSEE A REFERENCE UNDER SUB-CLAUSE A OF SECTION 55A COULD BE MADE, IF VALUE SHOWN BY THE ASSESSEE AS ON 01.04.1981 IS LES S THAN THE FAIR MARKET VALUE. IN OTHER WORDS ASSESSEE HAS SHOWN THE VALUE AT RS. 67,98,400/- WHICH IS HIGHER THAN THE MARKET VALUE O THERWISE DETERMINED BY THE DVO AFTER THE REFERENCE. HE ADOPTED VALUE AT RS. 36,44,000/-. ITA NO.781,784 & 785/AHD/2011 A.Y. 2011-12 4 HONBLE GUJARAT HIGH COURT HAS CONSIDERED THIS ASPE CT IN THE CASE OF GAURANGINIBEN S. SHODHAN AND HELD THAT THE ASSESSIN G OFFICER HAS NO POWER TO MAKE A REFERENCE IF THE VALUE SHOWN BY ASS ESSEE IS NOT LESS THAN FAIR MARKET VALUE. THE DISCUSSION MADE BY THE HONBLE HIGH COURT IN PARAGRAPH 15 TO 17 READ AS UNDER:- 15. COMING TO THE QUESTION OF REFERENCE TO DVO FOR ASCE RTAINING THE FAIR MARKET VALUE AS ON 1.4.1981 ALSO, WE FIND THAT SUCH REFERENCE WAS NOT COMPETENT. WE HAVE NOTICED THAT PRIOR TO THE AMENDM ENT IN SECTION 55A WITH EFFECT FROM 1.7.2012 IN A CASE, THE VALUE OF THE AS SET CLAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY THE REGI STERED VALUER, IF THE ASSESSING OFFICER WAS OF THE OPINION THAT THE VALUE SO CLAIMED WAS LESS THAN ITS FAIR MARKET VALUE AS ON 1.4.1981. IT WOULD NOT BE THE CASE OF THE ASSESSING OFFICER THAT THE VALUE OF THE ASSET SHOWN AS ON 1.4.1981 WAS LESS THAN THE FAIR MARKET VALUE. SUCH CLAUSE, 'THEREFORE , AS IT STOOD AT THE RELEVANT TIME, HAD NO APPLICATION TO THE VALUATION AS ON 1.4 .1981. WE ARE CONSCIOUS THAT WITH EFFECT FROM 1.7.2012, THE EXPRESSION NOW USED IN CLAUSE (A) OF SECTION 55A IS 'IS AT VARIANCE WITH ITS FAIR MARKET VALUE'. THE SITUATION MAY, THEREFORE, BE DIFFERENT AFTER 1.7.2012. WE ARE, HOW EVER, CONCERNED WITH THE PERIOD PRIOR THERETO. CLAUSE (B) OF SECTION 55A IS IN TWO PARTS AND PERMITS A REFERENCE TO DVO IF THE ASSESSING OFFICER IS OF THE OPINION THAT (I) THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET SO CLAIMED BY THE ASSESSEE BY MORE THAN SUCH PERCENTAGE OF THE VALUE OF THE ASSET SO CLAIMED OR BY MORE THAN SUCH AMOUNT AS MAY BE PRESCRIBED IN THIS BEHALF; OR (II) THAT HAVING REGARD TO THE NATURE OF THE ASSET AND O THER RELEVANT CIRCUMSTANCES, IT IS NECESSARY SO TO DO. SUB-CLAUSE (I) OF CLAUSE (B) ALSO FOR THE SAME REASONS RECORDED ABOVE, WOULD HAVE NO BEAR ING ON THE FAIR MARKET VALUE AS ON 1.4.1981. THE ASSESSING OFFICER HAD NOT RESORTED TO SUB- CLAUSE(II) OF CLAUSE (B). IN ANY CASE, CLAUSE (B) W OULD APPLY WHERE CLAUSE (A) DOES NOT APPLY SINCE IT STARTS WITH THE EXPRESSION 'IN ANY OTHER CASE'. IN OTHER WORDS IF ASSESSEE HAS RELIED UPON A REGISTERE D VALUER'S REPORT, ASSESSING OFFICER CAN PROCEED ONLY UNDER CLAUSE (A) AND CLAUSE (B) WOULD NOT BE APPLICABLE. 16. IN THE PRESENT CASE, ADMITTEDLY THE ASSESSEE HA D RELIED ON THE ESTIMATE MADE BY THE REGISTERED VALUER FOR THE PURPOSE OF SU PPORTING ITS VALUE OF THE ASSET. ANY SUCH SITUATION WOULD BE GOVERNED BY CLAU SE (A) OF SECTION 55A OF ITA NO.781,784 & 785/AHD/2011 A.Y. 2011-12 5 THE ACT AND THE ASSESSING OFFICER COULD NOT HAVE RE SORTED TO CLAUSE (B) THEREOF AS HELD BY THE DIVISION BENCH OF THIS COURT IN THE CASE OF HIABEN JAYANTILAL SHAH V. ITO [20091 310 1TR 31/181 TAXMAN 191 (GUJ.). IN THE SAID DECISION, IT WAS HELD AND OBSERVED AS UNDER: '10. UNDER CLAUSE(A) OF SEC. 55A OF THE ACT UNDER T HE ASSESSING OFFICER IS ENTITLED TO MAKE THE REFERENCE TO THE VALUATION OFF ICER IN A CASE WHERE THE VALUE OF THE ASSET AS CLAIMED BY THE ASSESSEE IS IN ACCORDANCE WITH THE ESTIMATE MADE BY THE REGISTERED VALUER, IF THE ASSE SSING OFFICER IS OF THE OPINION THAT THE VALUE SO CLAIMED IS LESS THAN THE FAIR MARKET VALUE. IN ANY OTHER CASE, AS PROVIDED UNDER CLAUSE(B) OF SEC. 55A OF THE ACT, THE ASSESSING OFFICER HAS TO RECORD AN OPINION THAT (I) THE FAIR MARKET VALUE OF THE ASSET EXCEEDS THE VALUE OF THE ASSET AS CLAIMED BY THE AS SESSEE BY MORE THAN SUCH PERCENTAGE OR BY MORE THAN SUCH AN AMOUNT AS MAY BE PRESCRIBED; OR (II) HAVING REGARD TO THE NATURE OF THE ASSET AND OTHER RELEVANT CIRCUMSTANCES, IT IS NECESSARY TO MAKE SUCH A REFERENCE.' 17. IN THE RESULT, WE SEE NO REASON TO INTERFERE. H OWEVER, WE HAVE GIVEN OUR INDEPENDENT REASONS AND SHOULD NOT BE SEEN TO HAVE CONFIRMED THE REASONING ADOPTED BY THE TRIBUNAL IN THE IMPUGNED J UDGMENT. TAX APPEAL IS DISMISSED. 8. IN LIGHT OF THE ABOVE, IF FACTS OF THE PRESENT A PPEALS ARE EXAMINED THEN IT WOULD REVEAL VALUE SHOWN BY THE APPELLANTS OF THE PROPERTY AS ON 01.04.1981 IS CONSIDERED THEN IT WAS NOT LESS THAN FAIR MARKET VALUE AND REFERENCE CANNOT BE MADE. AS FAR AS THE AMENDMENT C ARRIED OUT IN SECTION 55A IS CONCERNED, IT IS WITH EFFECT FROM 01 .07.2012 I.E. BY FINANCE ACT 2012 THE TRANSACTION TAKEN PLACE IN F.Y. 2010-1 1 RELEVANT TO ASSESSMENT YEAR 2011-12 AND THE AMENDED PROVISION W OULD NOT BE APPLICABLE ON THIS TRANSACTION. 9. RESPECTFULLY FOLLOWING THE DECISION OF HONBLE G UJARAT HIGH COURT. I ALLOW THESE GROUNDS OF APPEAL IN THE CASE OF ALL THE THREE APPELLANTS AND DELETE THE ADDITIONS MADE UNDER THE HEAD LONG TERM CAPITAL GAIN. ITA NO.781,784 & 785/AHD/2011 A.Y. 2011-12 6 10. IN THE CASE OF BABUBHAI RAMANLAL PATEL THERE IS ONE MORE GROUND OF APPEAL WHEREBY ASSESSEE HAS CHALLENGED DISALLOWA NCE OF INTEREST EXPENSE OF RS. 2,02,376/-. THE BRIEF FACTS OF THE C ASE ARE THAT ON SCRUTINY OF THE ACCOUNT IT REVEALS TO THE ASSESSING OFFICER THAT ASSESSEE HAS BORROWED LOAN @ 12% AND HE HAS GIVEN LOANS @ 6% TO THE PERSONS COVERED UNDER SECTION 40A(2)(B). LD. ASSESSING OFFI CER HAS MADE AN ANALYSIS AND DISALLOWED INTEREST EXPENDITURE BY A S UM OF RS. 2,02,376/-. 11. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 12. BEFORE US IT WAS CONTENDED THAT ASSESSEE IS IN THE BUSINESS. IT HAS USED THE BORROWED FUND FOR THE PURPOSE OF THE BUSIN ESS WHEN FUNDS WERE LYING IDEAL AND NOT REQUIRED FOR THE PURPOSE OF THE BUSINESS THEN IN ORDER TO REDUCE BURDEN OF INTEREST EXPENDITURE, HE HAS GI VEN THESE FUNDS ON A LOWER RATE OF INTEREST. 13. I HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. SECTION 40A(2)(B) OF THE INCOME T AX ACT CONTEMPLATES THAT IF AN ASSESSEE INCURRED EXPENDITURE FOR AVAILI NG THE SERVICES OR PURCHASE OF A GOODS FROM THE PERSONS MENTIONED IN S UB-CLAUSE-(B) AND MAKE THEM PAYMENTS OVER AND ABOVE THE MARKET PRICE THEN THE EXPENDITURE INCURRED OVER AND ABOVE THE MARKET PRIC E WOULD BE DISALLOWED. THE ASSESSEE HAS GIVEN INTEREST BEARING LOAN FUNDS TO THE HUF WHERE HE IS THE KARTA. THEREFORE SECTION 40A(2) (B) HAS RIGHTLY BEEN APPLIED BY THE ASSESSING OFFICER AND HE HAS RIGHTLY MADE THE DISALLOWANCE. THIS GROUND OF APPEAL IS REJECTED. ITA NO.781,784 & 785/AHD/2011 A.Y. 2011-12 7 14. IN THE RESULT APPEAL OF ILABEN K. PATEL, GOVIND BHAI PATEL L/H OF SHANTABEN P. PATEL ARE ALLOWED, WHEREAS APPEAL OF B ABUBHAI RAMANLAL PATEL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 02/04/2018. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 02/04/2018 %& '() *%)$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. + / THE RESPONDENT. 3. ,, - / CONCERNED CIT 4. - ( ) / THE CIT(A) 5. )./ '' , / DR, ITAT, 6. /01 2 / GUARD FILE. %& / BY ORDER, 3 / ,4 (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD