Income tax Officer., Allahabad V. Smt. Rama Rani Kalia. w/o Late Satya Pal Kalia, Allahabad

ITA 95/ALLD/2011

• Counselvise Citation: 9520714 RSA 2011
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y P SRIVASTA VA
• Assessee Lawyers: DR N C AGARWAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Principle of natural justice; Cost of acquisition; Date of conversion; Fair market value; Valuation report
• Section: 50C; 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 95/A/2011 ASSTT. YEAR : 2004-05 INCOME-TAX OFFICER, VS. SMT. RAMA RANI KALIA, RANGE-II(3), ALLAHABAD. W/O LATE SATYA PAL KALI A, 102-ATTERSUIYA, ALLAHABAD. (PAN : BLBPK 4260 P) C.O. NO. 15/A/2011 (IN ITA NO. 95/A/2011) ASSTT. YEAR : 2004-05 SMT. RAMA RANI KALIA, VS. INCOME-TAX OFFICER, W/O LATE SATYA PAL KALIA, RANGE-II(3), ALLAHABAD . 102-ATTERSUIYA, ALLAHABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI Y.P. SRIVASTAVA, D.R. RESPONDENT BY : DR. N.C. AGARWAL, C.A. DATE OF HEARING : 29.10.2012 DATE OF PRONOUNCEMENT OF ORDER : 31.10.2012 ORDER PER BHAVNESH SAINI, J.M.: THE DEPARTMENTAL APPEAL AND THE CROSS-OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A), ALLAHABAD DATED 07 .03.2011 FOR THE ASSESSMENT YEAR 2004-05. ITA NO. 95 & C.O. NO. 15/A/2011 2 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A SENIOR CITIZEN. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD IMM OVABLE PROPERTY, I.E., SHOP NO. 26/7, M.G. MARG, CIVIL LINES, ALLAHABAD, BUT DID NO T FILE RETURN OF INCOME ON THE ADVICE OF THE COUNSEL BUT FILED THE RETURN OF INCOM E IN RESPONSE TO NOTICE U/S. 148 OF THE IT ACT AT RS.70,430/-. THE ASSESSEE WAS REQU IRED TO FILE THE VALUATION REPORT OF THE GOVERNMENT APPROVED VALUER TO ESTIMATE THE F AIR MARKET VALUE OF THE PROPERTY FOR THE PURPOSE OF CAPITAL GAINS, BUT THE ASSESSING OFFICER PROCEEDED TO TAKE THE MARKET VALUE FOR STAMP DUTY PURPOSE SINCE TILL THE COMPLETION OF THE ASSESSMENT ORDER, THE REPORT WAS NOT RECEIVED FROM THE DVO. TH E ASSESSEE SUBMITTED THE COPY OF THE ORDER OF ITAT, ALLAHABAD BENCH IN THE CASE O F SHRI D.N. CHADDHA AND SHRI T.N. CHADDHA DATED 28.02.2008, WHEREBY IN SIMILAR F ACTS AND CIRCUMSTANCES, IT HAS BEEN HELD BY THE TRIBUNAL THAT THE CAPITAL GAIN ON SALE OF PROPERTY SHALL BE TAXED AS LONG-TERM CAPITAL GAINS AND NOT AS SHORT TERM CAPIT AL GAIN. MOREOVER, THE PROPERTY IN QUESTION IS UNDER RENT CONTROL ACT, HENCE, THE B UYER COULD NOT GET POSSESSION TILL DATE. THE ASSESSING OFFICER, HOWEVER, ASSESSED THE INCOME AT RS.44,04,140/-. THE CAPITAL GAIN WORKED OUT BY THE ASSESSING OFFICE R IS ON SHORT TERM BASIS ON ACCOUNT OF THE VALUE AS PER STAMP VALUATION AUTHORI TY, I.E., RS.46,05,840/- AS ITA NO. 95 & C.O. NO. 15/A/2011 3 AGAINST THE FAIR MARKET VALUE AS SHOWN BY THE ASSES SEE AT RS.20,66,000/- BASED ON GOVERNMENT APPROVED VALUERS REPORT AS AGAINST THE ACTUAL SALE CONSIDERATION OF RS.20,00,000/- AS PER DEED OF CONVEYANCE. IT WAS SU BMITTED BEFORE THE LD. CIT(A) THAT THE CAPITAL GAIN WORKED OUT BY THE ASSESSING O FFICER WAS AGAINST THE PRINCIPLE OF NATURAL JUSTICE FOR HIS FAILURE TO OBTAIN THE VA LUATION REPORT FROM THE DVO, HENCE, IN THE ABSENCE OF ANY EVIDENCE, THE SALE CON SIDERATION SHOULD HAVE BEEN TAKEN AS FAIR MARKET VALUE FOR THE PURPOSE OF CALCU LATING THE LONG TERM CAPITAL GAINS AND NOT SHORT TERM CAPITAL GAINS AFTER ALLOWING BEN EFIT OF INDEXATION AS REGARDS THE LONG TERM PROPERTY IN APPEAL. IT WAS SUBMITTED THAT THE DECISION CITED BY THE ASSESSING OFFICER IN THE CASE OF V.V. MODY VS. CIT, 218 ITR 1 IS NOT APPLICABLE TO THE FACTS OF THE CASE AND THE ABOVE DECISIONS OF TH E TRIBUNAL ARE DIRECTLY APPLICABLE TO THE CASE OF THE ASSESSEE. ON THE SUBMISSIONS OF THE ASSESSEE, REMAND REPORT WAS CALLED FOR WITH REGARD TO WORKING OUT OF LONG-TERM CAPITAL GAINS. THE DVOS REPORT WAS RECEIVED IN THE MATTER IN THE MEANTIME, IN WHIC H THE OBJECTIONS WERE ALSO FILED BY THE ASSESSEE. THE DVO HAS VALUED THE PROPERTY AT RS.34,53,800/- AS ON 31.03.2004. HENCE, THE OBJECTIONS WERE DISPOSED OF BY THE DVO. 3.1 THE LD. CIT(A), CONSIDERING THE EXPLANATION OF THE ASSESSEE, REPORT OF THE DVO AND THE FINDINGS OF THE ASSESSING OFFICER, FOUN D THAT THE CONVEYANCE / SALE DEED OF THE PROPERTY IN QUESTION REFLECTED THE FACT THAT THE PROPERTY WAS ACQUIRED BY ITA NO. 95 & C.O. NO. 15/A/2011 4 THE ASSESSEE ON 07.07.1984 FOR APPROXIMATELY RS.46, 000/- AND THE SAME WAS CONVERTED FROM LEASE HOLD TO FREE HOLD ON 29.03.200 4, OF WHICH COST WAS PAID BY THE ASSESSEE INITIALLY AMOUNTING TO RS.1,34,567/- A ND AS PER CONVEYANCE/SALE DEED DATED 29.03.2004, THE PROPERTY WAS SOLD BY THE ASSE SSEE FOR RS.20,00,000/- AND STAMP DUTY ON THE SAME WAS PAID AT RS.4,60,000/- ON TOTAL STAMP VALUE OF RS.46,05,840/-. THE ASSESSEE ALSO FILED COPY OF CER TIFICATE REGARDING INVESTMENT OF RS.16,00,000/- WHICH WAS DEPOSITED IN LONG-TERM CAP ITAL ACCOUNT WITHIN SIX MONTHS FROM THE DATE OF SALE OF PROPERTY ON 24.09.2004. TH E LD. CIT(A) NOTED THAT THE ASSESSING OFFICER HAS RIGHTLY REFERRED THE MATTER T O THE DVO U/S. 50C OF THE IT ACT AND ULTIMATELY REPORT HAS BEEN RECEIVED. THE LD. CI T(A) FOUND THAT HE ASSESSING OFFICER TOOK THE CAPITAL GAINS AS SHORT TERM BY TAK ING THE COST OF ACQUISITION OF PROPERTY AS FREE HOLD CHARGES PAID BY THE ASSESSEE, OVERLOOKING THE DECISION OF THE TRIBUNAL ABOVE. THE LD. CIT(A) ALSO FOLLOWED SOME O F HIS DECISIONS IN SUPPORT OF HIS FINDINGS THAT IT IS A CASE OF LONG TERM CAPITAL GAIN AND ALSO RELIED UPON THE ORDER OF THE TRIBUNAL, ALLAHABAD BENCH IN THE CASE OF DHI RAJ SHYAMJI CHAUHAN VS. CIT DATED 22.11.2007, IN WHICH IT WAS HELD THAT CONVERS ION OF PROPERTY FROM LEASE HOLD TO FREE HOLD IS NOTHING BUT IMPROVEMENT OF THE TITL E OF THE PROPERTY, BUT THE FACT REMAINS THAT THE ASSESSEE WAS OWNER OF THE PROPERTY EVEN PRIOR TO THE SAID CONVERSION. THE SAME POINT WAS REITERATED BY THE TR IBUNAL IN THE CASE OF D.N. CHADDHA AND T.N. CHADDHA (SUPRA). THE LD. CIT(A) AL SO QUOTED SEVERAL DECISIONS ITA NO. 95 & C.O. NO. 15/A/2011 5 OF DIFFERENT HIGH COURTS AND HELD THAT THE VALUATIO N SHOULD BE COMPUTED FROM THE EARLIER DATE WHEN THE ASSESSEE ACQUIRED THE PROPERT Y AND NOT FROM THE DATE OF CONVERSION OF PROPERTY FROM LEASE HOLD TO FREE HOLD . THE LD. CIT(A), THEREFORE, HELD THAT IT IS A CASE OF LONG-TERM CAPITAL GAINS AND TH E DECISION RELIED UPON BY THE ASSESSING OFFICER IN THE CASE OF DR. V.V. MODY (SUP RA) IS CLEARLY DISTINGUISHABLE ON FACTS AND ENTIRE GIST OF THE ORDER IS CONSIDERED IN THE APPELLATE ORDER. THE LD. CIT(A), THEREFORE, HELD THAT IT IS A CASE OF LONG-T ERM CAPITAL GAINS AS PER THE DECISIONS CITED ABOVE AND FURTHER, THE MATTER WAS C ORRECTLY REFERRED TO THE DVO FOR VALUATION OF THE PROPERTY, WHO HAS VALUED THE PROPE RTY AT RS.34,53,800/-. THEREFORE, THAT VALUATION SHOULD BE TAKEN FOR THE P URPOSE OF CAPITAL GAINS AND IN SUPPORT OF THE FINDINGS, HE HAS QUOTED SEVERAL DECI SIONS OF DIFFERENT BENCHES OF TRIBUNAL BECAUSE ACCORDING TO SECTION 50C, IF THE A SSESSEE CLAIMS THAT THE VALUATION TAKEN BY THE STAMP VALUATION OFFICER EXCEEDS THE FA IR MARKET VALUE OF THE PROPERTY, THE ASSESSING OFFICER CAN REFER THE MATTE R TO THE DVO FOR VALUATION OF THE CAPITAL ASSET AND ACCORDING TO SUB-SEC. (3) OF SECT ION 50C, IF THE DVOS VALUATION EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY, THE VALUE SO ASSESSED BY SUCH AUTHORITY SHALL BE TAKEN AS FUL L VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER. THE LD. CIT(A) , CONSIDERING SEVERAL DECISIONS OF DIFFERENT HIGH COURTS AND HE TRIBUNAL WAS OF THE VI EW THAT THE STAND TAKEN BY THE ASSESSING OFFICER THAT THE VALUE ADOPTED BY THE STA MP VALUATION AUTHORITY HAS TO ITA NO. 95 & C.O. NO. 15/A/2011 6 BE REFERRED TO THE DVO FOR DETERMINATION OF FAIR MA RKET VALUE IS CORRECT, AS BOTH THE INGREDIENTS OF PROVISIONS OF SECTION 50C(2) ARE PRESENT, WHICH HAS COMPELLED THE ASSESSING OFFICER TO REFER SUCH MATTER FOR VALU ATION BY THE DVO AND AS SUCH, THE PROVISIONS OF SECTION 50C(2) ARE ESSENTIALLY TO BE READ IN CONJUNCTION WITH THE PROVISIONS OF SECTION 50C(1) OF THE IT ACT. THEREFO RE, THE FAIR MARKET VALUE AS PER THE REGISTERED VALUERS REPORT CANNOT BE ACCEPTED F OR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS. THE ASSESSING OFFICER WAS DIRECTED T O ALLOW DEDUCTION OF THE AMOUNT OF RS.16,00,000/- AS INVESTED BY THE ASSESSEE TOWAR DS THE INVESTMENT IN CAPITAL GAINS BONDS U/S. 54E OF THE IT ACT. THE APPEAL OF T HE ASSESSEE WAS ACCORDINGLY ALLOWED PARTLY. 4. THE REVENUE IN THE DEPARTMENTAL APPEAL HAS RAISE D THE FOLLOWING GROUNDS : 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE CIDING THE APPEAL ON THE BASIS OF JUDGMENT OF HON'BLE ITAT, ALLAHABAD , WHEN THE DEPARTMENT HAS NOT ACCEPTED THE IMPUGNED ORDERS OF THE HON'BLE ITAT, ALLAHABAD, AND FOR WHICH APPEAL U/S. 260A OF THE INCOME-TAX ACT, 1961 IS PENDING BEFORE THE HON'BLE HIGH COURT. 2. THE CASE IS SQUARELY COVERED BY THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF V.V. MODI VS. CIT, 128 IT R 1. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THE LD. CIT(A) ON THE BASIS OF THE DECISIONS OF THE TRIBUNAL HAS HELD THAT IT IS A CASE OF LONG-TERM CAPITAL GAI NS BECAUSE THE CONVERSION OF ITA NO. 95 & C.O. NO. 15/A/2011 7 PROPERTY FROM LEASE HOLD TO FREE HOLD IS NOTHING BU T IMPROVEMENT OF TITLE, AS THE ASSESSEE WAS OWNER OF THE PROPERTY EVEN PRIOR TO TH E SAID CONVERSION. IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS OWNER OF THE PROPERTY IN 1984 AND IT WAS CONVERTED INTO FREE HOLD IN MARCH, 2004. THEREFORE, THE DECIS IONS OF THE TRIBUNAL WERE SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND FURTHER WHEN THE MATTER WAS REFERRED TO THE DVO AS PER SECTION 50C O F THE IT ACT, THE LD. CIT(A) CORRECTLY DIRECTED TO TAKE VALUATION AS PER DVOS R EPORT. HON'BLE M.P. HIGH COURT IN THE CASE OF GOVINDRAM SEKSARIA CHARITY TRUST VS. ITO, 168 ITR 387 HELD HELD, THAT TILL THE ORDER PASSED BY THE TRIBUNAL WAS SET ASIDE, THE REVENUE WAS BOUND BY THE ORDER PASSED BY THE TR IBUNAL. THEREFORE, THE NOTICE AND THE DRAFT ASSESSMENT ORDE RS ISSUED BY THE INCOME-TAX OFFICER WERE LIABLE TO BE QUASHED. 5.1 HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS. DARSHAN TALKIES, 217 ITR 744 HELD THE DECISION OF THE HIGH COURT IS BINDING AND THE PENDENCY OF A PETITION FOR SPECIAL LEAVE TO APPEAL TO THE SUPRE ME COURT FROM SUCH A DECISION CANNOT OBLITERATE ITS IMPACT. IT IS BIND ING UNTIL IT IS REVERSED OR OVERRULED. 5.2 IN THE DEPARTMENTAL APPEAL, THE REVENUE MERELY STATED THAT SINCE THE ORDERS OF THE TRIBUNAL HAVE NOT BEEN ACCEPTED BY THE DEPAR TMENT, THEREFORE, THE LD. CIT(A) HAS ERRED IN DECIDING THE APPEAL IN FAVOUR OF THE A SSESSEE. SUCH A POINT HAS ALREADY BEEN DECIDED IN THE ABOVE DECISIONS AND MERELY BECA USE THE DECISIONS OF THE ITA NO. 95 & C.O. NO. 15/A/2011 8 TRIBUNAL HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT I S NO GROUND FOR THE LD. CIT(A) TO DECIDE THE APPEAL AGAINST THE ASSESSEE. THE LD. CIT(A) RIGHTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AS PER DECISION OF THE TR IBUNAL, WHICH WAS SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CA SE IN FAVOUR OF THE ASSESSEE. THE DEPARTMENTAL APPEAL HAS NO MERIT AND IS ACCORDINGLY , LIABLE TO BE DISMISSED. THE LD. DR HAS NOT POINTED OUT ANY INFIRMITY IN THE ORDER O F THE LD. CIT(A) IN DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THE RESULT, THE DEPARTMENTAL APPEAL FAILS AND IS DISMISSED. 6. THE CROSS-OBJECTION IS MERELY FILED BY THE ASSES SEE IN SUPPORT OF THE ORDER OF THE LD. CIT(A). THEREFORE, THE SAME WOULD NOT SURVI VE AND IS LIABLE TO BE DISMISSED. THE CROSS-OBJECTION IS ACCORDINGLY, DISM ISSED BEING INFRUCTUOUS. 7. IN THE RESULT, THE DEPARTMENTAL APPEAL AS WELL A S CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- ITA NO. 95 & C.O. NO. 15/A/2011 9 COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, ALLAHABAD 6. GUARD FILE ASSTT. REGISTRAR TRUE COPY