Shri Ashokkumar Govindbhai Patel, Ahmedabad V. The Income Tax Officer, Ward-4(2)(1), Ahmedabad

ITA 863/AHD/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2397 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-04-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Business income; Opportunity of being heard; Proportionate interest; Fair market value; Valuation report; Prejudicial to interest; Revised return; Reason to believe; Set aside; Capital Gains
• Section: 143(3); 50C; 142(1); 143(2); 13; 22; 147; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (CONDUCTED THROUGH VIRTUAL COURT) BEFORE: SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMB ER ASHOKKUMAR GOVINDBHAI PATEL, 7 & 8, SHANTAGOVIND BUNGALOWS, BEHIND KARGIL PETROL PUMP, SOLA, AHMEDABAD-380060 PAN: ACRPP8042J (APPELLANT) VS THE ITO, WARD-4(2)(1), AHMEDABAD (RESPONDENT) REVENUE BY: SHRI VINOD TANWANI, CIT-D.R. ASSESSEE BY: SHRI PRITESH SHAH, A.R . DATE OF HEARING : 03-06-2021 DATE OF PRONOUNCEMENT : 18-06-20 21 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- THIS ASSESSEES APPEAL FOR A.Y. 2012-13, ARISES FRO M ORDER OF THE PRINCIPAL CIT-4, AHMEDABAD DATED 27-03-2017, IN PR OCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE SOLITARY GROUND OF APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER U/S. 263 OF THE INCOME TAX ACT, 1961 OF PR. C IT-4, AHMEDABAD IN ITA NO. 863/AHD/2017 ASSESSMENT YEAR 2012-13 I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 2 SETTING ASIDE THE ORDER OF ASSESSING OFFICER PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961. 3. THE FACT IN BRIEF IS THAT ORIGINAL RETURN OF IN COME WAS FILED ON 14 TH AUGUST, 2012 DECLARING TOTAL INCOME OF RS. 1,04,28 .560/-. THE ASSESSEE HAS FILED REVISED RETURN OF INCOME ON 18 TH JUNE, 2013 DECLARING TOTAL INCOME OF RS. 1,07,53,050/-. THE CASE OF THE ASSESSEE WAS SU BJECT TO SCRUTINY ASSESSMENT AND NOTICE U/S. 143(2) OF THE ACT WAS IS SUED ON 8 TH AUGUST, 2013. THE ASSESSING OFFICER HAS PASSED ASSESSMENT ORDER U /S. 143(3) OF THE ACT ON 31 ST MARCH, 2015 AND ASSESSED THE TOTAL INCOME OF THE A SSESSEE AT RS. 1,07,53,050/. SUBSEQUENTLY, PR. CIT-4, AHMEDABAD HA S INITIATED PROCEEDINGS U/S. 263 OF THE ACT BY ISSUING OF SHOW CAUSE NOTICE DATED 22 ND DECEMBER, 2016 STATING THAT IN RESPECT OF ASSESSEES CLAIM O F INTEREST EXPENSES OF RS. 64,46,142/-, THE ASSESSING OFFICER HAS FAILED TO E XAMINE THE ADMISSIBILITY OF INTEREST EXPENSES UNDER THE HEAD INCOME FROM BUSINE SS. IT IS ALSO POINTED OUT THAT ASSESSEE HAS DECLARED THE SALE PRICE OF TH E PROPERTY SOLD AT SURVEY NO. 174/1, MOJA CHANDLODIYA, TALUKA CITY AHMEDABAD AT R S. 2,02,50,000/- AND THE ASSESSING OFFICER HAS REFERRED THE MATTER TO TH E VALUATION OFFICER WHO HAD DETERMINED THE FAIR MARKET VALUE OF THE SAID SO LD PROPERTY AT RS. 2,32,04,000/-. HOWEVER, THE ASSESSING OFFICER HAS T AKEN THE SALE CONSIDERATION AT RS. 2,02,50,000/- INSTEAD OF RS. 2 ,32,04,000/- WHILE DETERMINING THE CAPITAL GAIN AS PER ORDER PASSED U/ S. 143(3) OF THE ACT. THE RELEVANT PORTION OF THE SHOW CAUSE NOTICE IS REPROD UCED AS UNDER:- BY AN ORDER U/S.143(3) OF THE I.T. ACT 1961 DATED 31/03/2015, YOUR INCOME WAS ASSESSED AT RS.1,07,53,050/- BY DCIT CIRCLE-4(2) , AHMEDABAD. ON VERIFICATION OF THE STATEMENT OF TOTAL INCOME FI LED ALONG WITH RETURN OF INCOME, IT K FOUND THAT YOU HAVE REDUCED THE TOTAL INCOME TO THE EXTENT OF RS.64,46,142/- BEING 'INTEREST PAID ON BORROWED FUNDS'. HOWEVER, THE ASSESSING OFFICER FAILED TO VERIFY WHETHER THE CORRESPONDING INCOME WAS DECLARED BY YOU IN THE RETURN OF INCOME OR NOT. I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 3 ON VERIFICATION OF THE RECORD IT IS FOUND THAT YOU HAVE DECLARED THE SALE PRICE OF THE PROPERTY SOLD BY YOU LOCATED AT SURVEY NO.174/1, MO JE CHANDLODIYA, TALUKA-CITY AHMEDABAD AT RS.2,02,50,500/-. HOWEVER, THE VALUATION OF THE PRO PERTY AS PER STAMP DUTY AUTHORITY WAS RS.3,04,88,288/-. DURING THE ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER ALSO REFERRED THE MATTER TO THE VALUATION OFFICER, WHO HAD DETERMINED THE FAIR MARKET VALUE OF THE SAID PROPERTY AT RS.2,32,04,000/-. HOWEVER, THE ASSESSING OFFICER HA S TAKEN THE SALE CONSIDERATION AT RS.2,02,50,000/- INSTEAD OF RS.2,32,04,000/- WHILE DETERMINING THE CAPITAL GAIN IN THE ORDER U/S.143(3) OF THE I. T. ACT. IN VIEW OF THE ABOVE THE ASSESSMENT ORDER IN YOUR C ASE FOR THE YEAR UNDER CONSIDERATION HAS BEEN PASSED BY THE ASSESSING OFFICER IS WITHOUT ANY PROPER INQUIRY AND CROSS-VERIFICATION OF CORRECT FACTS OF THE CASE AS POINTED IN PARA 2 AND 3 ABOVE. THIS HAS RESULTED IN UNDERASSESSMENT TO THAT EXTENT AND THEREFORE THE ASSESSMENT ORDER IS E RRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE ASSESSING OFFICER HAS INCORRECTLY ACCEPTED THE FACTS SUBMITTED BY YOU AND PASSED THE ORDER U/S.143(3) OF THE I.T. ACT DATED 31/03/2015. THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS 'PREJUDICIAL TO THE INTEREST OF REVENUE'. IN THI S REGARD RELIANCE IS PLACED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. THEREFORE, PLEASE EXPLAIN AS TO WHY THE ASSESSMENT ORDER PASSED BY THE DCTT CIRCTE.- 4(2), AHMEDABAD FOR A,Y. 2012-13 U/S,143(3) DATED 3 1/03/2015 IN YOUR CASE SHOULD NOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO REVENUE AND BE SET ASIDE AND MODIFIED TO THE EXTENT MENTIONED IN PARA 2 AND 3 ABOVE. YOU ARE HEREBY GIVEN AN OPPORTUNITY OF BEING HEARD IN PERSON ALONG WITH DOCUMENTS AND EVIDENCE JUSTIFYING YOUR SUBMISSION. YOU MAY, IF YO U SO DESIRE, SUBMIT YOUR CONTENTIONS IN WRITING OR THROUGH AN AUTHORIZED REPRESENTATIVE A/SO. THE H EARING FOR THIS PURPOSE IS FIXED ON 30.12.2016 AT 11.30 A.M. ' THE ASSESSEE EXPLAINED THAT DURING THE COURSE OF AS SESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS VERIFIED THE CLAIM OF INTERES T EXPENDITURE OF RS. 64,46,142/- WHICH IS ESTABLISHED FROM THE SPECIFIC DETAILS ALONG WITH THE DOCUMENTARY EVIDENCES FURNISHED IN RESPONSE TO THE SPECIFIC QUERY RAISED BY THE ASSESSING OFFICER. VIDE LETTER DATED 9 TH JULY, 2014, THE ASSESSING OFFICER HAS SOUGHT SPECIFIC INFORMATION PERTAINING TO THE U NSECURED LOAN AND ALSO ASKED THE DETAIL OF UTILIZATION OF FUNDS ON WHICH I NTEREST OF RS. 64,46,142/- HAS BEEN PAID. THE ASSESSEE HAS SUBMITTED THAT DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER VIDE L ETTER DATED 27 TH FEB, 2015 HAS SPECIFICALLY ASKED TO PROVE NEXUS BETWEEN INTEREST PAYMENT OF RS. 64,46,142/- AND THE INCOME EARNED. THE ASSESSEE HA S SUBMITTED THAT VIDE LETTER DATED 28.08.2014 AND 09.03.2015 THE NECESSA RY EXPLANATION AND DETAIL WERE PROVIDED TO THE ASSESSING OFFICER AND AFTER CO NSIDERING THE DETAIL THE I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 4 ASSESSMENT ORDER U/S. 143(3) WAS FINALIZED. IN RE SPECT OF SECOND POINT REGARDING THE SALE PRICE OF PROPERTY SOLD, THE ASSE SSEE HAS SPECIFICALLY SUBMITTED BEFORE THE PR. CIT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS SPECIFICALLY VERIFIED THE ISSUE OF ACTUAL SALE PRICE AND THE VALUATION DETERMINED BY T HE DVO AND ALSO CONSIDERED THE NECESSARY JUDGMENT OF HONBLE SUPR EME COURT IN THE CASE OF C. B. GAUTAM VS. UNION OF INDIA 199 ITR 530 (SC) AS ITS COPIES ALONG WITH OTHER RELEVANT MATERIALS WERE PROVIDED AT THE TIME OF ASSESSMENT MADE U/S. 143(3) OF THE ACT. DURING THE COURSE OF ASSES SMENT RELEVANT MATERIALS TO SUBSTANTIATE THE EXISTENCE OF ENCROACHMENT ON THE S OLD LAND WERE ALSO SUBMITTED. THE ASSESSING OFFICER HAS ALSO VISITED THE ACTUAL SITE OF THE LAND AND NOTICED ENCROACHMENT ON THE LAND WHICH DID NOT ALLOW THE DEVELOPMENT OF THE LAND. THE RELEVANT PART OF THE SUBMISSION MADE VIDE LETTER DATED 30 TH DECEMBER, 2016 BY THE ASSESSEE BEFORE THE PR. CIT D URING THE COURSE OF PROCEEDINGS U/S. 263 IS REPRODUCED AS BELOW:- ' THE AMOUNT OF RS.64,46,142/~ BEING 'INTEREST PAID ON BORROWED FUNDS' HAS BEEN VERY WELL EXPLAINED TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH IS SUPPORTED BY THE FOLLOWING FETTERS ALONGWITH DOCUME NTARY PROOFS ATTACHED WITH THOSE LETTER: A. THE LEARNED ASSESSING OFFICER, WIDE LETTER NO.DC IT/CIR.9/AGP-56/2014-15 DOTED 09/07/2014 DATED FOR THE INFORMATION REGARDING THE UNSECURED B ANS OBTAINED/ PENDING DURING THE YEAR ALONGWITH THE DETAILS OF NAME, PAN, ADDRESS AND ASS ESSMENT DETAILS OF THE LENDERS, WITH COPY OF THE RETURN OF INCOME- - AL POINT NO. 19 OF THE ABOV E REFERRED LETTER [COPY ENCLOSED]. WE HAVE REPLIED THE SAME WIDE OUR LETTER DATED 05/08/20 U A LONG WITH ALL SUCH DETAILS (COPY ENCLOSED) - THESE COPIES ARE ALREADY IN YOUR ASSESSMENT PROCEED INGS FILE, AVAILABLE TO YOU, BUT STILL, WE ENCLOSE THE COPIES OF THE LETTERS GIVEN TO THE LEAR NED ASSESSING OFFICER. BUT STILL IF ANY SUPPORTING DOCUMENTS ARE MISSING IN YOUR FIFE, PLEASE LET US K NOW, WE ARE READY TO PROVIDE. B. AGAIN, DURING PERSONAL HEARING ON 05/OS/2014, TH E LEARNED ASSESSING OFFICER HAS ASKED FOR THE DETAIL'S OF FUNDS UTILIZATION ON WHICH SUCH INTERES T OF RS.64,46,142/- HAS BEEN PAID. WE HAVE REPLIED THE SAME WIDE OUR LETTER DATED 22/08/20I4, (BOTH COPIES ENCLOSED). C. AGAIN, WIDE LETTER DATED 27/02/2GS5, THE LEARNED ASSESSING OFFICER HAS ASKED IN POINT NO.4 TO PROVE NEXUS BETWEEN DEDUCTION CLAIM OF RS.64,46,142 A U/S.57 OF THE IT ACT AND THE INCOME EARNED UNDER THE SOME HEAD I.E. INCOME FROM OTHER SOURCES, WE HAVE AGAIN REPLIED WIDE OUR LETTER DATED 09.03.2015, EXPLAINING NEXUS BETWEEN THE INTEREST O N BORROWED FUNDS, BY PROVIDING THE PERSONAL BALANCE SHEET, CASH BOOK, BANK BOOK AND FOR THE OPE NING BALANCES, THE STATEMENT OF TAX CALCULATIONS, AND THE ASSESSMENT ORDERS U/S.143(3) OF THE A.Y.2009-10, AND A.Y.2CG7-08. WHEREIN I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 5 ALSO THE SIMILAR POINTS HAVE BEEN REPLIED, F COPIES ENCLOSED OF OUR REPLY DATED 09/03/2015, OTHER ATTACHMENTS ARE ALREADY IN YOUR FILE. SO, CONSIDERING THE ABOVE FACTS, WHICH ARE ALREADY ON RECORDS OF ASSESSMENT PROCEEDINGS, AND WELL ELABORATED AND EXPLORED BY THE LEARNED ASS ESSING OFFICER, HOW CAN THE ORDER BE CONSIDERED FO BE ERRONEOUS, WITHOUT ANY ADDITIONAL MATERIALS, OR DOCUMENTS, BEING PRODUCED FOR ORDER TO BE PREJUDICIAL OF THE REVENUE? WE REQUEST YOU TO CONSIDER ALL THE ABOVE FACTS AND DROP THE PROCEEDINGS U/S.263. 2. THE SECOND POINT IS REGARDING THE SALE PRICE OF THE PROPERTY SOLD BY US, LOCATED AT SUR. NO. 174/1, MOLE CHANDLODIYA OF RS. 2,02,50,500/-. H ERE ALSO, WE ENCLOSE THE COPIES OF THE LETTER GIVEN TO THE LEARNED ASSESSING OFFICER, PARTICULARL Y LETTER DATED 31/03/2015, ATONGWIFH FHE COPIES OF THE RELEVANT JUDGMENTS, WHEREIN IF WAS FIXED BY THE HON'BLE SUPREME COURT IN CASE OF C.B.GAUTARN VS UNION OF INDIA, TOLERANCE BAND OF 15% BETWEEN TH E ACTUAL SAFE PRICE AND THE VALUATION BY THE DVO, SO THE LEARNED ASSESSING OFFICER HAS TAKEN CON SIDERED VIEW AND CONSIDERED THE SALE PRICE OF RS.2,02,50,500/-. THE /EARNED ASSESSING OFFICER HAS ALSO VISITED THE ACTUAL SITE AND SEEN ENCROACHMENTS ON THE LAND WHICH DOES NOT ALLOW THE DEVELOPMENT OF THE LAND. SO, CONSIDERING THE ABOVE FACTS, WE THINK THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS NOT AT ALL ERRONEOUS AND NOT ELIGIBLE FO R REOPENING U/S.263, AS ALL THE FACTORS HAVE BEEN VERY WELL EXPLORED BY THE LEARNED ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND HAVE BEEN WE/1 DOCUMENTED IN THE ASSESSMENT PROCEEDINGS FILE, AND STILL IF ANYTHING IS MISSING, WE ARE READY TO GIVE THE SAME. NOW, IN THE ENCLOSED JUDGEMENT OF THE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CO. LTD.VS. CIT (SC)243 ITR 83, ON WHICH YOU HAVE RELIED, IT WA S VERY MUCH WRITTEN THAT: ' THE COMMISSIONER HAS TO BE SATISFIED OF TWIN COND ITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IF IS PREJUDICIAL TO THE INTERESTS OF REVENUE. IF ONE OF THEM IS ABSENT-IF THE ORDER OF THE INCOME-TA X OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUD ICIAL TO THE REVENUE-RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT'. NOW FOR ORDER TO BE ERRONEOUS, THERE SHOULD BE SOME CONCRETE MATERIALS OR DOCUMENTS, WHICH ARE MISSED OUT DURING THE ASSESSMENT PROCEEDINGS. HERE IN CASE O/ YOUR ASSESSEE, THE LEARNED ASSESSING OFFICER HAS TAKEN INTO ACCOUNT AIL THE MA TERIALS AND COPIES RELEVANT TO THE POINTS. HOWEVER, THE LD. PR. CIT HAD NOT AGREED WITH THE SU BMISSION OF THE ASSESSEE IN RESPECT OF POINT NO. 1 PERTAINING TO CLAIM OF IN TEREST EXPENDITURE OF RS. 64,46,142/-, THE LD. PR. CIT WAS OF THE VIEW THAT ASSESSEE HAD DIVERTED ITS INTEREST BEARING FUND TO THE ASSET FOR WHICH INTERE ST EXPENDITURE WAS NOT ALLOWABLE AS DEDUCTION OR NO INTEREST INCOME WAS EA RNED. HE HELD THAT THE PROPORTIONATE INTEREST ON THE LOAN OF RS. 4,38,55,8 79/- WAS ERRONEOUSLY ALLOWED BY THE ASSESSING OFFICER AND THE ASSESSMEN T ORDER PASSED U/S. 143(3) WAS HELD ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF REVENUE. IN RESPECT OF SECOND ISSUE, THE LD. PR. CIT POINTED OU T THAT ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS. 79,10,832/- ON SALE O F LAND SITUATED AT SURVEY I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 6 NO. 174/1 MOJE CHANDLODIYA, TALUKA CITY AHMEDABAD. HOWEVER, THE ASSESSING OFFICER HAS TAKEN SALE CONSIDERATION AS P ER SALE DEED OF RS. 2,02,50,000/- INSTEAD OF RS. 2,32,40,00/- DETERMINE D BY THE DVO. THE LD. PR. CIT HAS ALSO OBSERVED THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF C.B. GAUTAM VS. UNION OF INDIA 199 ITR 530 (SC) WAS IN RESPECT OF COMPULSORY PURCHASE MADE U/S. 269 UD AS PER THE PRO VISIONS OF CHAPTER XX- C OF THE ACT. THE LD. PR. CIT WAS OF THE VIEW THA T THERE WAS NO DISCRETION AVAILABLE FOR THE ASSESSING OFFICER NOT TO ADOPT TH E VALUATION DECIDED BY THE DVO IN VIEW OF THE PROVISION OF SECTION 50C OF THE ACT. THEREFORE, THE LD. CIT HELD THAT THE ASSESSING OFFICER WAS REQUIRED TO TAKE SALE CONSIDERATION AT RS. 2,32,04,000/- AS DETERMINED BY THE DVO FOR C OMPUTATION OF LONG TERM CAPITAL GAIN AND NOT AS PER SALE DEED OF RS. 2,02,5 0,000/- AND THE ASSESSMENT ORDER PASSED U/S. 143(3) DATED 31 ST MARCH, 2015 WAS HELD ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE . 4. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E US, THE LD. COUNSEL HAS FILED PAPER BOOK COMPRISING COPIES OF RETURN FI LED AND COPIES OF VARIOUS NOTICES ISSUED BY THE ASSESSING OFFICER AND COPIES OF VARIOUS SUBMISSION FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSME NT SPECIFICALLY ON THE ISSUE OF INTEREST EXPENDITURE AND CAPITAL GAIN ON T HE SALE OF THE REFERRED LAND. THE LD. COUNSEL HAS VEHEMENTLY CONTENDED THAT BOTH THE ISSUES OF INTEREST EXPENDITURE AND LONG TERM CAPITAL GAIN ON SALE OF L AND HAVE ALREADY BEEN DULY CONSIDERED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS THEREFORE THE ORDER PASSED U/S. 263 OF THE ACT IS NOT VALID. THE LD. COUNSEL HAS POINTED OUT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 5 TH AUGUST, 2014 THE ASSESSEE HAS FURNISHED COMPLETE D ETAILS I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 7 ALONG WITH COPIES OF LEDGER ACCOUNTS OF ALL THE PAR TIES TO WHOM THE INTEREST WAS PAID. FURTHER ALONG WITH RELEVANT MATERIAL IT WAS ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT INTEREST OF RS . 64,46,142/- WAS PAID ON BORROWED FUNDS WHICH WERE UTILIZED FOR THE BUSINESS PURPOSE. THEN AGAIN, VIDE LETTER DATED 9 TH MARCH, 2015 THE ASSESSEE HAS FILED COPIES OF BALAN CE SHEETS CONFIRMATION ALONG WITH ITR COPIES OF ALL TH E PERSONS FROM WHOM HE HAS BORROWED THE FUND. THE ASSESSEE HAS ALSO FURN ISHED THE COPIES OF CASH BOOK AND BANK BOOK AND DETAILS OF EARNING GROSS INC OME OF RS. 2,12,71,129/- (BUSINESS INCOME OF RS. 1,13,80,219 + CAPITAL GAIN RS. 79,01,832/- + INCOME FROM OTHER SOURCES RS. 19,80,078/-) BEFORE DEDUCTIN G ANY EXPENSES. THE ASSESSEE HAS ALSO EXPLAINED DURING THE COURSE OF AS SESSMENT THAT OUT OF THE BORROWED FUND ON WHICH INTEREST OF RS. 64,46,142/- WAS PAID, MANY OF THE BORROWED FUND WERE CARRIED FORWARD FROM THE EARLIER YEARS AND IN ALL THESE EARLIER YEARS THE ASSESSEE HAS CLAIMED THIS DEDUCTI ON OF INTEREST ON BORROWED FUND. THE SCRUTINY ASSESSMENTS ON THE SAME ISSUE H AVE BEEN CARRIED OUT IN THE EARLIER YEARS ALSO AND THE SAME HAVE BEEN ALLOW ED AS DEDUCTION. THE ASSESSEE HAS ALSO FILED THE COPIES OF ASSESSMENT OR DERS FOR ASSESSMENT YEAR 2009-10 AND 2007-08 IN SUPPORT OF HIS CLAIM THAT IN TEREST ON BORROWED FUNDS WERE ALLOWED AS DEDUCTION. REGARDING SECOND ISSUE ON LONG TERM CAPITAL GAIN ON SALE OF PROPERTY THE LD. COUNSEL HAS SUBMIT TED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 14 TH AUGUST, 2014 IT WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER ALONG WIT H SUPPORTING MATERIAL THAT SOLD LAND WAS HAVING SOME ENCROACHMENT AND THE Y HAVE TRIED TO GET THIS PROPERTY VACATED BUT FAILED TO CLEAR THE ENCROACHME NT THEREFORE THE PROPERTY WAS SOLD DURING THE F.Y. 2011-12. THE LD. COUNSEL HAS FURTHER CONTENDED THAT THE VALUE OF LAND SHOWN IN THE SALE DEED WAS L ESS THAN THE VALUATION AS I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 8 PER THE JANTRI RATE BECAUSE OF ENCROACHMENT ON THE LAND AND THE SAME WAS SOLD AT THE DISCOUNTED VALUE. THE MATTER WAS REFER RED TO THE DVO WHO HAS VALUED THE LOAN AT RS. 2,32,04,000/- AS AGAINST THE SALE CONSIDERATION OF RS. 2,02,50,000/-. DURING THE COURSE OF ASSESSMENT IT WAS EXPLAINED TO THE ASSESSING OFFICER VIDE LETTER DATED 31 ST MARCH, 2015 THAT DVO HAS NOT CONSIDERED THE MATERIAL FACT THAT THE LAND WAS FULL Y ENCROACHED BY UNAUTHORIZED PERSON AND IT WAS VIRTUALLY AND LEGALL Y IMPOSSIBLE TO GET IT VACATED. DURING THE COURSE OF ASSESSMENT THE ASSES SEE HAS ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF C.B. GAUTAM VS. UNION OF INDIA 199 I TR 530 WHEREIN THE HONBLE SUPREME COURT HAS ALLOWED TO CONSIDER THE A CTUAL CONSIDERATION, IF THE VALUATION REPORT OF DVO IS WITHIN THE TOLERANCE LIMIT OF 15%. THE LD. COUNSEL HAS SUBMITTED THAT PR. CIT AHMEDABAD HAS NO T DULY CONSIDERED THE SUBMISSION OF THE ASSESSEE AND IMPROPERLY PASSED TH E ORDER U/S. 263 OF THE ACT. THE LD. COUNSEL HAS ALSO REFERRED THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF G.B. GAUTAM VS. UNION OF INDIA 199 ITR 560 (SC). THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE DEC ISION OF CO-ORDINATE BENCH OF THE ITAT IN THE CASE OF SMT. SHARDABEN B. PATEL VS. PRINCIPAL CIT 112 TAXMAN.COM 118 UTD 328 AND THE DECISION OF HON BLE HIGH COURT OF GUJARAT HIGH COURT IN THE CASE OF ARYAN ARCADE LTD. VS. CIT 84 TAXMAN.COM 293 AND THE DECISION OF THE HONBLE HIGH COURT OF G UJARAT IN THE CASE OF PR. CIT VS. LALITABEN GOBINDBHAI PATEL 94 TAXMANN.COM 3 96 (GUJARAT). ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT ONCE THE ASSESSING OFFICER HAD THE VALUATION OF DVO AVAILABLE WITH HIM HE WAS BOUND TO FOLLOW THE SAME AND THE ASSESSMENT ORD ER PASSED BY HIM AT A VALUATION LOWER THAN THAT OF THE DVO MAKES THE ORDE R ERRONEOUS AND I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 9 PREJUDICIAL TO THE REVENUE. THE LD. DEPARTMENTAL R EPRESENTATIVE HAS RELIED UPON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- (I) CIT VS. DR. INDRA SWAROOP BHATNAGAR [2012] (30 TAXM ANN.COM 293 DATED 19-09-2011 (ALLAHABAD HC) (II) ANIL MURLIDHAR DESHMUKH VS. ITO (101 TAXMANN.COM 93 ) DATED 13- 12-2018 (PUNE ITAT) (III) SRI PATTABHIRAM VS. ITO (45 TAXMANN.COM 141) DATED 13-12-2013 (VISAKHAPATNAM ITAT) (IV) SURESH C. MEHTA VS. ITO (35 TAXMANN.COM 230) DATED 17-05-2013 (MUMBAI ITAT) 5. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS A PROPRIETOR OF MR. ASHOK GOVINDBHAI PA TEL, DEVELOPER AND ENGAGED IN THE BUSINESS OF BUILDING CONSTRUCTION, S OCIETY ORGANIZATION BUILDER, SALE, PURCHASE OF LANDS AND BUILDING ETC. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT U/S. 143(3 ) OF THE ACT WAS FINALIZED ON 31 ST MARCH, 2015 AND TOTAL INCOME WAS ASSESSED AT RS. 1 ,07,53,050/-. SUBSEQUENTLY, THE PR. CIT AHMEDABAD-4 HAS PASSED OR DER U/S. 263 OF THE ACT ON 27 TH MARCH, 2017 RULING THAT ASSESSMENT PASSED U/S. 142 (3) DATED 31 ST MARCH, 2015 WAS ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF REVENUE ON THE GROUND THAT THE ASSESSING OFFICER FAILED TO EXAMINE THE ADMISSIBILITY OF THE INTEREST EXPENSES OF RS. 64,46,142/- DEDUCTED UNDE R THE HEAD INCOME FROM BUSINESS. THE PR. CIT IN THE ORDER U/S. 263 OF TH E ACT HAS ALSO HELD THAT THE VALUATION OFFICER HAD DETERMINED THE FAIR MARKET V ALUE OF THE SOLD PROPERTY AT RS. 2,32,04,000/-, HOWEVER, THE ASSESSING OFFICE R HAS TAKEN THE SALE CONSIDERATION OF RS. 2,02,50,000/- AS PER THE SALE DEED INSTEAD OF RS. I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 10 2,32,04,000/- DETERMINED BY THE DVO. AFTER PERUSA L OF THE MATERIAL PLACED IN THE RECORD IT IS NOTICED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE NOTICE U/S. 142(1) DATED 9 TH JULY, 2014 THE ASSESSING OFFICER HAS MADE SPECIFIC INVESTIGATION AND VERIFICATION ON THE ISSU E OF CLAIM OF INTEREST EXPENDITURE OF RS. 64,46,142/-. THE ASSESSING OFFI CER HAS ASKED THE ASSESSEE VIDE POINT NO. 28 IN THE NOTICE U/S. 142(1 ) DATED 9 TH JULY, 2014 TO FURNISH THE COPIES OF LEDGER ACCOUNTS DETAIL OF LEN DERS AND PURPOSE FOR WHICH BORROWED FUNDS HAVE BEEN USED. AGAIN VIDE NOTICE U /S. 142(1) DATED 27-02- 2015, THE ASSESSING OFFICER HAS ALSO ASKED THE ASSE SSEE TO PROVE NEXUS BETWEEN DEDUCTION CLAIMED OF RS. 64,46,142/- AND IN COME EARNED. IN RESPONSE TO QUERY RAISED BY THE ASSESSING OFFICER, THE ASSESSEE HAS DULY FURNISHED THE COPIES OF LEDGER ACCOUNT OF INTEREST PAID ON BORROWED FUND OF RS. 64,46,142/- ALONG WITH COPIES OF LEDGER ACCOUNT OF ALL THE PARTIES TO WHOM THE INTEREST WAS PAID. IN HIS SUBMISSION DATE D 22 ND AUGUST, 2014 THE ASSESSEE HAS SPECIFICALLY EXPLAINED THAT FUNDS WERE UTILIZED FOR THE BUSINESS PURPOSE AND ALSO FILED COPIES OF BALANCE SHEET AND LEDGER ACCOUNT FOR VERIFICATION. IT IS NOTICED THAT AGAIN VIDE LETTER DATED 9 TH MARCH, 2015 THE ASSESSEE HAS POINTED OUT THAT HE HAS SUBMITTED COPI ES OF BALANCE SHEET, CONFIRMATION OF ALL THE PERSONS FROM WHOM THE FUNDS WERE BORROWED AND ALSO GIVEN THE BREAK-UP OF THE GROSS INCOME OF RS. 2,12,71,129/- BEFORE DEDUCTING ANY EXPENSES. THE ASSESSEE HAS ALSO EXPL AINED THAT MANY OF THE BORROWED FUNDS WERE CARRIED FORWARD FROM THE EARLIE R YEARS AND IN ALL THESE EARLIER YEARS HE HAS CLAIMED THE DEDUCTION OF INTER EST ON BORROWED FUNDS. THE SCRUTINY ASSESSMENTS HAVE BEEN CARRIED OUT IN T HE EARLIER YEARS ALSO AND THE SAME HAVE BEEN ALLOWED AS DEDUCTION. ON PERUSA L OF THE MATERIAL ON RECORD, IT IS OBSERVED THAT DURING THE COURSE OF AS SESSMENT PROCEEDINGS, I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 11 ASSESSING OFFICER HAS MADE DETAILED VERIFICATION AN D INVESTIGATION ON THE ISSUE OF CLAIM OF INTEREST EXPENDITURE OF RS. 64,46 ,142/ AND THESE MATERIAL FACTS WERE ALSO BROUGHT TO THE KNOWLEDGE OF THE PR. CIT-4 DURING THE COURSE OF PROCEEDING U/S. 263 OF THE ACT. IN THE LIGHT OF THE ABOVE FACTS AND MATERIAL PLAC ED ON RECORD IN RESPECT OF CLAIM OF INTEREST EXPENDITURE, WE CONSID ER THAT LD. PR. CIT HAS FAILED TO SUBSTANTIATE HOW THE ASSESSING OFFICER HA S NOT EXAMINED THE ADMISSIBILITY OF INTEREST EXPENSES, THEREFORE, THE LD. PR. CIT IS UNJUSTIFIED IN TREATING THE INTEREST PAYMENT AS NOT ALLOWABLE. TH EREFORE, WE CONSIDER THAT ORDER PASSED U/S. 263 OF THE ACT ON THE ISSUE OF PA YMENT OF INTEREST IS NOT SUSTAINABLE IN LAW. REGARDING SECOND POINT RAISED BY LD. CIT IN HIS ORD ER U/S. 263 OF THE INCOME TAX ACT THAT THE ASSESSING OFFICER HAS TAKEN THE SALE CONSIDERATION AT RS. 2,02,50,000/- INSTEAD OF RS. 2,32,04,000/- W HILE DETERMINING THE CAPITAL GAIN IN THE ORDER U/S. 143(3) OF THE ACT, IN THIS REGARD IT IS NOTICED THAT DURING THE COURSE OF ASSESSMENT IN THE NOTICE U/S. 142(1) DATED 27 TH FEB, 2015 THE ASSESSING OFFICER HAS RAISED SPECIFIC QUER Y REGARDING THE APPLICABILITY OF JANTRI VALUE TO DETERMINE THE CAPI TAL GAIN ON THE SALE OF THE LAND. THE ASSESSEE HAS MADE SUBMISSION VIDE LETTER DATED 9 TH MARCH, 2015 WHEREIN SPECIFICALLY MENTIONED THAT THE SOLD LAND W AS SITUATED ON THE BACK SIDE WITH ENCROACHMENT OVER THIS LAND OF MUDDY KACC HA HOUSE AND IN SPITE OF ALL THE EFFORTS THE ASSESSEE FAILED TO VACATE TH IS ZOPPAD PATTI THEREFORE THE LAND WAS SOLD TO REALIZE WHAT THEY COULD HAVE FETCH ED. DURING THE COURSE OF ASSESSMENT, THE ASSESSEE HAS ALSO SUBMITTED THE COP IES OF PURCHASE DEED AND SALE DEED WHEREIN IT HAS BEEN SPECIFICALLY MENTIONE D THE FACT ABOUT THE ENCROACHMENT ON THE LAND. IT WAS ALSO DISCUSSED DU RING THE COURSE OF I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 12 ASSESSMENT THAT DVO HAS VALUED THE LAND AT RS. 2,34 ,04,000/- AND THERE WAS SMALL VARIATION OF ONLY 12.73% AGAINST THE VALUE SH OWN IN THE SALE DEED. VIDE SUBMISSION DATED 31 ST MARCH, 2015 IT WAS SPECIFICALLY BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT DVO HAS NOT CO NSIDERED THAT THERE WAS ENCROACHMENT ON THE IMPUGNED LAND BY THE UNAUTHORIZ ED PERSON AND IT WAS VIRTUALLY AND LEGALLY IMPOSSIBLE TO GET IT VACATED. IN SUPPORT OF HIS SUBMISSION THE ASSESSEE HAS ALSO SUBMITTED COPIES O F COURT CASES PENDING FOR THIS LAND BEFORE THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. APART FROM THIS DURING THE COURSE OF ASSESSMENT, THE ASSESSEE HAS ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFF ICER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF C.B. GAUTAM VS . UNION OF INDIA 199 ITR 53 (SC) WHEREIN THE APEX COURT HAS ALLOWED TO CONSIDER THE ACTUAL SALE CONSIDERATION IF THE VALUATION REPORT OF THE DVO IS WITHIN THE TOLERANCE LIMIT OF 15%. AFTER CONSIDERING ALL THESE MATERIAL FACTS AND JUDICIAL FINDING THE ASSESSING OFFICER HAS TAKEN THE VALUE AS PER SALE D EED. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE U S THE LD. DEPARTMENTAL REPRESENTATIVE HAS CITED THE FOLLOWING DECISIONS:- (I) CIT VS. DR. INDRA SWAROOP BHATNAGAR [2012] (30 TAXM ANN.COM 293 DATED 19-09-2011 (ALLAHABAD HC) (II) ANIL MURLIDHAR DESHMUKH VS. ITO (101 TAXMANN.COM 93 ) DATED 13- 12-2018 (PUNE ITAT) (III) SRI PATTABHIRAM VS. ITO (45 TAXMANN.COM 141) DATED 13-12-2013 (VISAKHAPATNAM ITAT) (IV) SURESH C. MEHTA VS. ITO (35 TAXMANN.COM 230) DATED 17-05-2013 (MUMBAI ITAT) I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 13 WE HAVE GONE THROUGH THE AFORESAID JUDICIAL PRONOUN CEMENTS REFERRED BY THE LD. DEPARTMENTAL REPRESENTATIVE. IN THE CASE OF CIT VS. DR. INDRA SWAROOP BHATNAGAR SUPRA THE DVO DETERMINED THE FAIR MARKET VALUATION OF RS. 58 LACS . HOWEVER, THE ASSESSING OFFICER HAS ADOPTED THE VALUE DETERMINED BY THE STA MP VALUATION AUTHORITY ON HIGHER SIDE OF RS. 1.3 CRORES THEREFORE THE VALU ATION DONE BY DVO WHICH WAS LOWER THAN THE VALUE DETERMINED BY THE STAMP VA LUATION AUTHORITY WAS ADOPTED. IN THE CASE OF ANIL MURLIDHAR DESHMUKH VS . ITO THE VALUE DETERMINED BY THE DVO WAS TAKEN SINCE NO LITIGATION WAS PENDING AS ON DATE OF SALE AND IT WAS HELD THAT THERE CAN BE NO RELEVA NCE OF ANY FUTURE LITIGATION IN THE VALUATION OF THE PROPERTY. IN THE CASE OF S RI PATTABHIRAM VS. ITO SUPRA IT IS HELD THAT NEITHER THE ASSESSEE HAS CONT ESTED THE CORRECTNESS OF THE VALUATION MADE NOR HAS BROUGHT ANY CONTRARY MATERIA L TO PROVE THAT THE MODE AND METHOD OF FAIR MARKET VALUE DETERMINED BY THE D VO IS MORE THAN THE ACTUAL FAIR MARKET VALUE. IN THE CASE OF SURESH C. MEHTA VS. ITO SUPRA, THE DVO HAS DETERMINED THE SALE VALUE OF THE PROPERTY A T RS. 13.79 LACS, HOWEVER, THE ASSESSING OFFICER HAS ADOPTED THE VALU E DETERMINED BY THE STAMP VALUATION AUTHORITY AT RS. 20 LACS. IN THIS CASE, THE ITAT HAS HELD THAT IF THE ASSESSEE HAS MADE VARIOUS OBJECTIONS TO THE VALUATION OFFICERS REPORT THE COMMISSIONER (APPEAL) WAS BOUND TO LOOK INTO TH ESE OBJECTIONS SO AS TO ARRIVE ON PROPER FAIR MARKET VALUE. HE WAS ALSO B OUND TO CONSIDER THE CONTENTION OF THE ASSESSEE THAT IN CASE OF DIFFEREN CE OF LESS THAN 15% BETWEEN THE SALE VALUE ESTIMATED BY THE DVO, THE BE NEFIT SHOULD BE GIVEN TO THE ASSESSEE AND SUCH DIFFERENCE CAN BE IGNORED. A S SUMMARIZED ABOVE, THE FACTS OF THE CASES REFERRED BY THE LD. DEPARTMENTAL REPRESENTATIVE ARE DISTINGUISHABLE FROM THE CASE OF THE ASSESSEE AS IN THOSE CASES THE ISSUE WAS I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 14 PERTAINED TO ADOPTING OF HIGHER VALUE THAN THE VALU E DETERMINED BY THE DVO AND IN ONE OF CASE THE VALUE DETERMINED BY THE DVO WAS ADOPTED SINCE THERE WAS NO LITIGATION PENDING IN THAT CASE. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE U S, THE LD. COUNSEL HAS FILED THE COPY OF ORDER OF HONBLE HIGH COURT O F GUJARAT VIDE SPECIAL APPEAL NO. 67 TO 71 IN THE CASE OF THE ASSESSEE VS. STATE OF GUJARAT & 4 WHEREIN DIRECTION WAS SOUGHT AGAINST THE CORPORATIO N NOT TO REGULARIZE THE UNAUTHORIZED AND ILLEGAL CONSTRUCTIONS OF THE RESPO NDENTS THEREIN ON THE LAND OF THE PETITIONERS. IT WAS DEMONSTRATED FROM THE OR DER OF THE HONBLE HIGH COURT AS REFERRED ABOVE THAT THERE WAS UNAUTHORIZED AND ILLEGAL CONSTRUCTION ON THE IMPUGNED LAND WHICH WAS SOLD BY THE ASSESSEE . THE ASSESSEE HAS ALSO FILED A COPY OF ORDER OF HONBLE HIGH COURT OF GUJARAT VIDE SPECIAL APPEAL 6089 OF 2014 IN THE CASE OF THE ASSESSEE POI NTING OUT THAT THERE WAS ILLEGAL ENCROACHMENT ON THE IMPUGNED LAND OF THE AS SESSEE AND THE HONBLE GUJARAT HIGH COURT HAS DIRECTED THE MUNICIPAL CORPO RATION TO TAKE IMMEDIATE AND APPROPRIATE STEPS FOR VACATING THE EN CROACHMENT ON THE SAID LAND OF THE ASSESSEE. THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE VARIOUS PRONOUNCEMENTS IN THE CASE OF MACHINERY AGENCIES (I NDIA) VS. DEPUTY CIT VIDE ITA 800/KOL/2010 WHEREIN ITAT KOLKATTA HAS HE LD THAT THERE WAS NO STATUTORY PROVISION REQUIRING ASSESSEE TO ADOPT VAL UE AS PER DVO AS PURCHASE CONSIDERATION TO RESULT ANY ADDITION IN HANDS OF AS SESSEE FOR THAT REASON AND ORDER PASSED BY ASSESSING OFFICER CANNOT BE SAID TO ERRONEOUS OR PREJUDICIAL TO INTEREST OF REVENUE AND CIT WAS NOT JUSTIFIED IN EXERCISING JURISDICTION U/S. 263 OF THE ACT. THE LD. COUNSEL HAS ALSO PLACED RE LIANCE ON THE DECISION HONBLE HIGH COURT OF GUJARAT IN THE CASE OF AAVKAR INFRASTRUCTURE COMPANY VS. DCIT (2016) 67 TAXMAN.COM 39 (GUJ) DATE D 4 TH NOV, 2015 I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 15 WHEREIN IT IS HELD THAT REOPENING OF ASSESSMENT MER ELY ON THE BASIS OF REPORT OF DVO WAS WITHOUT AUTHORITY OF LAW AND COULD NOT B E SUSTAINED. THE LD. COUNSEL HAS ALSO REFERRED DECISION OF HONBLE GUJAR AT HIGH COURT IN THE CASE OF VINAYAK BUILDERS VS. B.D. GARSAR (OR) SUCCESSOR (2012) 27 TAXMAN.COM 116 (GUJ) DATED 18 TH MARCH, 2011 WHEREIN IT IS HELD THAT REOPENING OF ASSESSMENT BY ASSESSING OFFICER ON SOLE BASIS OF RE PORT OF DVO WITHOUT APPLYING HIS OWN MIND TO FACTS WAS NOT SUSTAINABLE. THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE DECISION OF HIGH COURT OF AL LAHABAD IN THE CASE OF CIT VS. VRINDABEN REAL ESTATE (P) LTD. (2013) 31 TA XMAN.COM 12 (ALD) DATED 24 TH JULY, 2012 WHEREIN IT IS HELD THAT REOPENING OF AS SESSMENT U/S. 147 ONLY ON BASIS OF REPORT OF DVO IS INVALID. THE LD. COUNSEL HAS PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE C.B. GAUTAM VS. UNION OF INDIA (1992) 65 TAXMAN 440 (SC) DATED 17 TH DECEMBER, 1992. IN THIS CASE PERTAINING TO COMPULSORY PURCHASE OF P ROPERTY U/S. 269UD OF THE ACT, THE HONBLE SUPREME COURT HAS ALLOWED TO CONSI DER THE ACTUAL SALE CONSIDERATION, IF THE VALUATION REPORT OF DVO IS WI THIN THE TOLERANCE LIMIT OF 15%. WE DO NOT FIND MERIT IN THE OBSERVATION OF TH E LD. PCIT STATING THAT DECISION WAS IN RESPECT OF COMPULSORY PURCHASE MADE UNDER SECTION 269UD BECAUSE IN THIS CASE THE HONBLE SUPREME COURT REFE RRED THE DECISION IN THE CASE OF K.P. VERGHESE VS. ITO (1981) 131 ITR 597 ON THE LIABILITY OF THE ASSESSEE U/S. 45 OF THE ACT ON CAPITAL GAINS WHILE RECOGNIZING VARIATION LESS THAN 15% AS TO TOLERABLE LIMITS. THE RELEVANT PA RA NO. 21 FROM THE DECISION OF THE HONBLE SUPREME COURT IS REPRODUCED AS UNDER :- THE CONCLUSION THAT THE PROVISIONS OF CHAPTER XX-C ARE TO BE RESORTED TO ONLY WHERE THERE IS SIGNIFICANT UNDER-VALUATION OF THE I MMOVEABLE PROPERTY TO BE SOLD IN THE AGREEMENT OF SALE WITH A VIEW TO EVADING TAX FINDS SUPPORT FROM THE DECISION OF THIS COURT IN THE CASE OF K.P. VARGHESE VS. ITO [1981] 597 ITR 597. SECTION 52 IN THE 1961 ACT WHICH HAS NOW BEEN DELET ED, CAME UP FOR I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 16 CONSIDERATION BEFORE A BENCH COMPRISING TWO LEARNED JUDGES OF THIS COURT, VERY BRIEFLY PUT THAT SECTION PROVIDED THAT WHERE A PERS ON ACQUIRED A CAPITAL ASSET FROM AN ASSESSEE CONNECTED WITH HIM AND THE ITO HAD REASON TO BELIEVE THAT THE TRANSFER WAS EFFECTED WITH A VIEW TO AVOID OR REDUC E THE LIABILITY OF THE ASSESSEE UNDER SECTION 45 OF THE ACT TO THE TAX ON CAPITAL G AINS ANY WITH THAT OBJECT THAT THE TRANSFER OF THE CAPITAL ASSET WAS BEING MADE AT AN UNDER- VALUE OF NOT LESS THAN 15 PER CENT FOR THE PURPOSES OF TAXING THE ASSESSEE , THE FULL VALUE OF THE CONSIDERATION WAS, TAKEN TO BE ITS FAIR MARKET VALU E ON THE DATE OF THE TRANSFER. IT WAS POINTED OUT BY THE BENCH THAT SUB-SECTION (I) O F SECTION 52 DID NOT DEAL WITH INCOME TO ACCRUE OR TO BE RECEIVED, WHICH IN FACT W AS NEVER ACCRUED AND WAS NEVER RECEIVED. IT SOUGHT TO BRING WITHIN THE NET O F TAXATION ONLY THAT INCOME WHICH HAS ACCRUED OR IS RECEIVED BY THE ASSESSEE AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET AND SINCE IT WOULD NOT BE POSSIBLE FO R THE ITO TO DETERMINE POSSIBLY HOW MUCH MORE CONSIDERATION IS RECEIVED BY THE ASSE SSEE THAN THAT DECLARED BY HIM, SUB-SECTION (1) PROVIDES THAT THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER SHALL BE TAKEN TO BE THE FULL VALU E OF THE CONSIDERATION WHICH HAS ACCRUED OR HAS BEEN RECEIVED BY THE ASSESSEE. THE O NUS OF ESTABLISHING THAT THE CONDITIONS OF TAXABILITY ARE FULFILLED IS ALWAYS ON THE REVENUE. IN THAT CASE IT WAS URGED ON BEHALF OF THE REVENUE THAT UNDER THE PROVI SIONS OF SECTION 52(2) ONCE THE ITO IS SATISFIED THAT THE CONDITION OF THE CONSIDER ATION DECLARED BY THE ASSESSEE IN RESPECT OF THE TRANSFER IS LESS BY 15 PER CENT OR M ORE THAN THE FAIR MARKET VALUE, THE CAPITAL GAINS CAN BE COMPUTED ON THE FOOTING TH AT THE FAIR MARKET VALUE WAS THE CONSIDERATION RECEIVED BY THE ASSESSEE. THIS SU BMISSION WAS REJECTED BY THIS COURT. IT WAS POINTED OUT THAT THE SUBMISSION WOULD BE JUSTIFIED ONLY ON A STRICT LITERAL READING OF SUB-SECTION (2) OF SECTION 52 BU T THAT SUCH A CONSTRUCTION COULD NOT BE ADOPTED. THE COURT OBSERVED THAT THE TASK OF INTERPRETATION OF A STATUTORY ENACTMENT IS NOT A MECHANICAL TASK. THE FAMOUS WORD S OF JUDGE LEARNED HAND OF THE UNITED STATES OF AMERICA THAT'... IT IS TRUE TH AT THE WORDS USED, EVEN IN THEIR LITERAL SENSE, ARE THE PRIMARY AND ORDINARILY THE M OST RELIABLE SOURCE OF INTERPRETING THE MEANING OF ANY WRITING : BE IT A S TATUTE, A CONTRACT OR ANYTHING ELSE. BUT IT IS ONE OF THE SUREST INDEXES OF A MATU RE AND DEVELOPED JURISPRUDENCE NOT TO MAKE A FORTRESS OUT OF THE DICTIONARY; BUT T O REMEMBER THAT STATUTES ALWAYS HAVE SOME PURPOSE OR OBJECT TO ACCOMPLISH, WHOSE SY MPATHETIC AND IMAGINATIVE DISCOVERY IS THE SUREST GUIDE TO THEIR MEANING' WER E QUOTED WITH APPROVAL. AFTER CONSIDERING VARIOUS AUTHORITIES AND THE HISTORICAL SETTING IN WHICH THE PROVISIONS OF THE SAID SECTION WERE ENACTED, IT WAS HELD THAT THE FAIR AND REASONABLE CONSTRUCTION TO PUT ON THE PROVISIONS OF SUB-SECTIO N (2) OF SECTION 52 WOULD BE TO SO CONSTRUE IT THAT IT WOULD APPLY ONLY WHEN THE CO NSIDERATION FOR THE TRANSFER IS UNDER-STATED OR, IN OTHER WORDS ONLY WHERE THE ASSESSEE HAS ACTUALLY RECEIVED A LARGER CONSIDERATION FOR THE TRANSFER THAN THAT WH AT IS DECLARED IN THE INSTRUMENT OF TRANSFER AND IT COULD HAVE NO APPLICATION IN THE CASE OF A BONA FIDE TRANSACTION WHERE THE FULL VALUE OF THE CONSIDERATION FOR THE T RANSFER IS CORRECTLY DECLARED BY THE ASSESSEE (SEE PAGE 606 OF THE REPORT), WE MAY POINT OUT THAT ALTHOUGH IT WAS SUBMITTED BY THE LEARNED ATTORNEY GENERAL THAT THE DECISION IN THE CASE OF K.P. VARGHESE (SUP RA)REQUIRES RECONSIDERATION, HE I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 17 DID NOT SERIOUSLY CHALLENGE THE CORRECTNESS OF THAT DECISION. NO ARGUMENT HAS BEEN ADVANCED BY HIM WHICH COULD LEAD US TO THE CON CLUSION THAT THE SAID CASE WAS NOT CORRECTLY DECIDED NOR HAS HE POINTED OUT AN Y ERROR IN THE JUDGMENT IN THAT CASE. WE HAVE ALSO GONE THROUGH THE DECISION OF GUJARAT H IGH COURT IN THE CASE OF ARVIND JEWELLERS (259 ITR 502) HELD THAT:- 'HELD, THAT THE FINDING OF FACT BY THE TRIBUNAL WAS THAT THE ASSESSES HAD PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANATIONS IN PURSU ANCE OF THE NOTICES ISSUED UNDER SECTION 142(1) AS WELL AS SECTION 143(2) OF THE ACT AND AFTER CONSIDERING THE MATERIAL AND EXPLANATIONS, THE INCOME-TAX OFFICER H AD COME TO A DEFINITE CONCLUSION. SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE INCOME-TAX OFFICER AND A PARTICUL AR VIEW WAS TAKEN, THE MERE FACT THAT DIFFERENT VIEW CAN BE TAKEN SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263. THE ORDER OF REVISION WAS NOT JUSTIFIE D.' THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COU RT IN THE CASE OF AFORESAID DECISION IS THAT WHEN THE ASSESSEE HAD PR ODUCED RELEVANT MATERIAL AND OFFERED EXPLANATION IN PURSUANCE OF THE NOTICE U/S. 143(2) AND 142(1) OF THE ACT AND AFTER CONSIDERING THE MATERIAL AND EXPL ANATION THE ASSESSING OFFICER HAD COME TO A DEFINITE CONCLUSION, THE MERE FACT A DIFFERENT VIEW CAN BE TAKEN SHOULD NOT BE THE BASIS FOR A VALID ACTION U/S. 263 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS EE HAS DISCUSSED AND REPORTED THE AFORESAID DECISION OF THE HONBLE SUPR EME COURT BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION AS THE VARIATION BETWEEN THE SALE CONSIDERATION AS PER THE SALE DEED AND THE VALUE AS PER THE DVO REPORT WAS ONLY OF 12.73% WH ICH WAS BELOW THE TOLERANCE LIMIT OF 15%. APART FROM THE SMALL VARIA TION, IT IS ALSO NOTICED THAT ASSESSEE HAS SPECIFICALLY DEMONSTRATED FROM THE MAT ERIAL AND ORDER OF THE HONBLE HIGH COURT OF GUJARAT AS SUPRA THAT THERE W AS ENCROACHMENT ON THE IMPUGNED LAND UPTO TO THE DATE SALE AND THE POSSESS ION OF THE LAND WAS NOT IN THE HANDS OF THE ASSESSEE AND THE PLOT OF LAND WAS OCCUPIED BY ILLEGAL I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 18 ENCROACHERS. THESE MATERIAL FACTS WERE VERY WELL D EMONSTRATED WITH THE DOCUMENTARY EVIDENCES IN THE FORM OF JUDICIAL ORDER OF THE HONBLE HIGH COURT OF GUJARAT ON THE ISSUE OF EXISTENCE OF ENCRO ACHMENT ON THE LAND OF THE ASSESSEE AS DISCUSSED SUPRA IN THIS ORDER. AS DISC USS ABOVE, THE JUDICIAL PRONOUNCEMENTS REFERRED BY THE LD. DEPARTMENTAL REP RESENTATIVE ARE SPECIFICALLY PERTAINED TO THE ISSUE WHEREIN THE ASS ESSING OFFICER HAD ADOPTED THE VALUE AT HIGHER SIDE AS ASSESSED BY THE STAMP V ALUATION AUTHORITY AFTER IGNORING THE LOWER VALUE DETERMINED BY THE VALUATIO N OFFICER AND NO EVIDENCE OF ENCROACHMENT WERE EXISTED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS CONSIDERED T HAT THE DVO HAS NOT TAKEN INTO CONSIDERATION THE MATERIAL FACT THAT THE RE WAS ENCROACHMENT ON THE IMPUGNED LAND AND EVEN ON THE DATE OF SELLING OF TH IS LAND THE ASSESSEE COULD NOT TAKE THE POSSESSION OF THE LAND BECAUSE OF EXIS TENCE OF ENCROACHMENT. THE DVO HAS NOT DISCUSSED ANY OF THESE FACTORS IN H IS REPORT. FURTHER, WE HAVE NOTICED THAT ON THE SIMILAR FACTS PUNE BENCH O F ITAT IN THE CASE OF CIT VS. HARPREET HOTELS PVT. LTD. VIDE ITA 1156 TO 1160 /PN/2000 HELD THAT THE DIFFERENCE BETWEEN THE FIGURE SHOWN BY THE ASSESSEE AND THE FIGURE OF THE DVO IS HARDLY 10% THEREFORE ADDITION WAS DELETED. THE ITAT PUNE IN THE CASE OF ITO VS. KAADDU VIDE ITA NO. 441/PN/20004 FO LLOWING THE DECISION OF HONBLE J & K HIGH COURT IN THE CASE OF HONEST G ROUP OF HOTEL PVT. LTD. VS. CIT (2002) 177 CTR ( J & K) 232 HAD HELD THAT WHEN THE MARGIN BETWEEN THE VALUE AS GIVEN BY THE ASSESSEE AND THE DEPARTMENT VALUER WAS LESS THAN 10% THE DIFFERENCE IS LIABLE TO BE IGNORE D AND THE ADDITION MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. WE HAVE ALSO NOTICED THAT ITAT JAIPUR IN THE CASE SITEBIA KHETAN VS. ITO VIDE ITA 826/JP/2013 HELD THAT VALUATION IS A MATTER OF ESTIMATION AND SOME DEGREE OF DIFFERENCE IS BOUND TO I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 19 BE THERE. IF THE DIFFERENCE BETWEEN THE STAMP DUTY VALUATION AND THE DECLARED SALE CONSIDERATION IS LESS THAN 10% THEN A DDITION U/S. 50C SHOULD NOT BE MADE. THE ITAT PUNE IN THE CASE OF RAHUL CO NSTRUCTION VS. DCIT IN ITA 1543/PN/2007 (2010) 38 DTR PUNE TRIBUNAL HAS HE LD THAT SINCE DIFFERENCE IS LESS THAN 10% AND CONSIDERING THE FAC T THAT VALUATION IS ALWAYS A MATTER OF ESTIMATION WHERE SOME DEGREE OF DIFFERE NCE IS BOUND TO OCCUR THEREFORE THE ASSESSING OFFICER IS NOT JUSTIFIED IN SUBSTITUTING THE SALE CONSIDERATION AT RS. 20.50 LACS AS AGAINST ACTUAL S ALE CONSIDERATION OF RS. 19 LACS DISCLOSED BY THE ASSESSEE. ALL THE AFORESAID JUDICIAL FINDINGS JUSTIFY THAT SMALL VARIATION IS BOUND TO OCCUR CONSIDERING THE F ACT THAT VALUATION IS ALWAYS A MATTER OF ESTIMATION. IN THE CASE OF THE ASSESSEE APART OF SMALL VARIATION OF 12.73% BETWEEN THE SALE CONSIDERATION AS PER SALE DEED AND THE VALUE AS PER DVO REPORT, THERE WAS ALSO ENCROACHMEN T ON THE IMPUGNED LAND TILL THE TIME OF SALE AND ASSESSEE WAS NOT HAVING T HE POSSESSION OF THE LAND. IN THIS REGARD, WE HAVE GONE THROUGH THE REPORT OF THE DVO PLACED IN THE PAPER AT PAGE NO. 169 TO 175 AND IT IS NOTICED THAT NOWHERE IN HIS REPORT THE DVO HAS DISCUSSED THE ENCROACHMENT OF THE LAND WHIC H COMPELLED ASSESSEE TO SELL THE LAND AT THE PRICE WHICH WAS ONLY LESS B Y ABOUT 12% FROM THE VALUE DETERMINED BY THE DVO IN HIS REPORT. THE ASSESSING OFFICER HAS CONSIDERED THE MATERIAL FACTS OF THE EXISTENCE OF ENCROACHMENT ON THE LAND AND THE FINDING OF THE HONBLE SUPREME COURT SINCE THE VARI ATION IN THE VALUE SHOWN IN THE SALE DEED AND THE VALUE REPORTED IN THE DVO REPORT WAS ONLY 12.73% WHICH WAS WITHIN THE TOLERABLE LIMIT OF 15% VARIATI ON AS RECOGNIZED BY THE HONBLE SUPREME COURT IN THE CASE OF C.B. GAUTAM VS . UNION OF INDIA 199 ITR 530. WE CONSIDER THAT JUDICIAL FINDINGS AS DIS CUSSED IN THIS ORDER ARTICULATE THE FACT THAT SMALL VARIATION WITHIN THE TOLERABLE LIMIT OF 15% AS I.T.A NO. 863/AHD/2017 A.Y. 2012-13 PAGE NO ASHOKKUMAR GOVINDBHAI PATEL VS. ITO 20 HELD BY HONBLE SUPREME COURT AS ELABORATED SUPRA B ETWEEN THE VALUE SHOWN BY THE ASSESSEE AND THE VALUE OF THE DVO IS L IABLE TO BE IGNORED BECAUSE OF ELEMENT OF ESTIMATION INVOLVED IN VALUAT ION OF IMMOVEABLE PROPERTY. IN THIS LIGHT OF THE ABOVE FINDINGS AND CONSIDERING THE SPECIFIC ENQUIRIES MADE BY THE ASSESSING OFFICER BEFORE FRAM ING ASSESSMENT ORDER AND SUBSISTENCE OF ENCROACHMENT WHICH COMPELLED THE ASSESSEE TO SELL THE LAND WITHOUT POSSESSION, WE CONSIDER THAT ORDER PAS SED UNDER SECTION 263 OF THE ACT IS NOT SUSTAINABLE, THEREFORE, ORDER PASSED U/S. 263 IS QUASHED. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 -06-2021 SD/- SD/- (MAHAVIR PRASAD) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 18/06/2021 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ( ,