ACIT, CHENNAI V. M/s. MIL Industries Ltd., CHENNAI

ITA 988/CHNY/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0934 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 07-01-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 06-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G K DHA LL IRS
• Assessee Lawyers: S NAGARAJAN
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Valuation report
• Section: 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.988(MDS)/2011 ASSESSMENT YEAR : 2005-06 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE IV(3), CHENNAI. VS. M/S.MIL INDUSTRIES LTD., 25A, SIDCO INDUSTRIAL ESTATE, AMBATTUR, CHENNAI 600 098. PAN AAACM4380Q. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G. K.DHALL, IRS, CIT RESPONDENT BY : SHRI S.NAGA RAJAN, C.A. DATE OF HEARING : 7 TH JANUARY, 2013 DATE OF PRONOUNCEMENT : 7 TH JANUARY, 2013 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR IS 2005-06. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-V AT CHENNAI, - - ITA 988 OF 2011 2 DATED 22-3-2011 AND ARISES OUT OF THE ASSESSMENT CO MPLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAD SOLD A PORTION OF TH E LAND OF ITS FACTORY PROPERTY SITUATED AT AMBATTUR FOR A CONSIDE RATION OF ` 2,22,64,409/-. THIS CONSIDERATION IS AS PER THE SALE DEED EXECUTED BY THE ASSESSEE-COMPANY. AT THE SAME TIME, THE GUI DELINE VALUE ADOPTED BY THE REGISTERING AUTHORITY WAS ` 3,95,91,000/-. IN THE COMPUTATION OF LONG-TERM CAPITAL GAINS THE ASSESSEE ADOPTED THE CONSIDERATION AT ` 2,22,64,409/-. BUT, THE ASSESSING OFFICER HELD TH AT THE GUIDELINE VALUE OF ` 3,95,91,000/- MUST BE ADOPTED IN COMPUTING THE LONG-TERM CAPITAL GAINS. THE ASSESSEE REQUESTE D FOR REFERRING THE MATTER TO THE VALUATION CELL. THE ASSESSING OFFICE R REFERRED THE MATTER TO THE VALUATION CELL UNDER SECTION 50C OF T HE INCOME-TAX ACT, 1961. THE DISTRICT VALUATION OFFICER(DVO) PROPOSED A VALUE OF ` 6,17,82,328/-. THE ASSESSEE-COMPANY STRONGLY OBJE CTED THE ABOVE PROPOSAL AND PLACED ITS VARIOUS OBJECTIONS BEFORE T HE DVO. FINALLY, THE DVO VALUED THE PROPERTY AT RS 3,54,73,536/- THR OUGH HIS FINAL REPORT DATED 4 TH NOVEMBER, 2009. - - ITA 988 OF 2011 3 3. BUT THE VALUATION REPORT WAS NOT AVAILABLE TO T HE ASSESSING OFFICER BEFORE COMPLETING THE ASSESSMENT. THE ASSESSING OFFICER HAD TO COMPLETE THE ASSESSMENT BEFORE THE L IMITATION PERIOD EXPIRED. HE PASSED THE ASSESSMENT ORDER ON 31-12-2 007. THE REPORT OF THE DVO WAS AVAILABLE ONLY ON 25-6-2009. THEREFORE, THE ASSESSING OFFICER HAD NO OCCASION TO CONSIDER THE R EPORT OF THE DVO AND TO ADOPT THE VALUE REPORTED BY THE DVO. THEREF ORE, THE ASSESSMENT WAS COMPLETED BY ADOPTING THE GUIDELINE VALUE OF ` 3,95,91,000/-. 4. THIS ISSUE WAS TAKEN IN FIRST APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS). THE COMMISSIO NER OF INCOME-TAX(APPEALS), RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SHARBATI DEVI JHALANI, 207 ITR 1, HELD THAT THE VALUATION REPORT IS NOT BINDING ON THE APPELLATE AUTHORITIES. ON THE BASIS OF THE ABOVE, HE EXAMINE D THE VARIOUS ARGUMENTS AND EXPLANATIONS PUT FORTH BY THE ASSESSE E AND DETERMINED THE CONSIDERATION AT ` 2.25 CRORES. THE REVENUE IS AGGRIEVED AND THEREFORE THE SECOND APPEAL BEFORE TH E TRIBUNAL. 5. WE HEARD SHRI G.K.DHALL, THE LEARNED COMMISSION ER OF INCOME-TAX APPEARING FOR THE REVENUE. THE LEARNED COMMISSIONER - - ITA 988 OF 2011 4 EXPLAINED THAT SECTION 50C IS BINDING ON THE ASSESS ING AUTHORITY, WHEREIN THE LAW HAS STATED THAT THE ASSESSING OFFIC ER SHALL, FOR THE PURPOSE OF SECTION 48, ADOPT THE VALUATION DETERMIN ED BY THE STAMP VALUATION AUTHORITY AND IN COMPLETING THE ASSESSMEN T THE ASSESSING OFFICER HAS ACCEPTED ONLY THAT VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY. THE LEARNED COMMISSIONER OF INCOME-TAX HAS FURTHER EXPLAINED THAT THE REPORT OF THE DVO WAS NOT AVAILA BLE BEFORE THE ASSESSING OFFICER AT THE TIME OF COMPLETING THE ASS ESSMENT. THE LEARNED COMMISSIONER OF INCOME-TAX FURTHER CONTENDE D THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS GROSSLY ERR ED IN INTERFERING IN THE QUANTUM OF SALE CONSIDERATION WITHOUT UNDERS TANDING THE PREDICAMENT OF THE ASSESSING OFFICER AND WITHOUT HE ARING THE OBJECTIONS OF THE ASSESSING AUTHORITY. EVEN IN THE REMAND REPORT OBTAINED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) , THE ASSESSING OFFICER HAS STATED THAT THERE IS NO REASO N TO GO BELOW THE GUIDELINE VALUE DETERMINED BY THE STAMP VALUATION A UTHORITY. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS DETERMINED THE VALUE, ALMOST ACCEPTING THE CONSIDERATION STATED IN THE SA LE DEED. THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS NOT EVEN ST ATED THE REASONS IN A SPEAKING MANNER AS TO WHY THE REPORT O F THE DVO WAS - - ITA 988 OF 2011 5 REJECTED BY HIM. THE COMMISSIONER OF INCOME-TAX(AP PEALS) NEITHER ACCEPTED THE GUIDELINE VALUE NOR ACCEPTED THE VALUE REPORTED BY THE DVO. BUT, HE STRAIGHTAWAY WENT TO ACCEPT THE CONSI DERATION STATED BY THE ASSESSEE IN THE SALE DEED. THE LEARNED COMM ISSIONER OF INCOME-TAX CONTENDED THAT THIS IS QUITE AGAINST LAW AND THE FINDING OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IS UNSUSTAI NABLE. 6. SHRI S.NAGARAJAN, THE LEARNED CHARTERED ACCOUNT ANT APPEARING FOR THE ASSESSEE, ON THE OTHER HAND, SUPP ORTED THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS). THE LEARNED CHARTERED ACCOUNTANT EXPLAINED THAT THE SALE OF PRO PERTY MADE BY THE ASSESSEE-COMPANY WAS A DISTRESS SALE. THE ASSESSEE -COMPANY HAD TO PAY HUGE AMOUNT OF LOAN AVAILED FROM UCO BANK. IN THAT CONTEXT THE UCO BANK HAD GOT THE PROPERTY VALUED BEFORE THE SALE MADE BY THE ASSESSEE-COMPANY. AT THAT POINT OF TIME THE PR OPERTY WAS VALUED AT ` 1.21 CRORES. HE EXPLAINED THAT THE ACTUAL CONSIDE RATION RECEIVED BY THE ASSESSEE WAS ALSO CLOSE TO THAT AMOUNT. THE ASSESSEE- COMPANY RECEIVED A CONSIDERATION OF ` 2,22,64,409/-. THE LEARNED CHARTERED ACCOUNTANT EXPLAINED THAT THE VALUE REALI ZED BY THE ASSESSEE AGAINST THE SALE OF THE PROPERTY WAS A BET TER PRICE IN THE PREVAILING CIRCUMSTANCES. IT WAS A DISTRESS SALE, AS THE PROPERTY WAS - - ITA 988 OF 2011 6 SOLD BY THE ASSESSEE TO PAY OFF THE BANK LIABILITIE S. HE EXPLAINED THAT THE ACCOUNTS OF THE ASSESSEE-COMPANY SHOWED THAT TH E SALE PROCEEDS WERE IMMEDIATELY REMITTED TO THE LOAN ACCO UNT OF UCO BANK. 7. THE LEARNED CHARTERED ACCOUNTANT FURTHER CONTEN DED THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS EXAMINE D ALL THE ASPECTS OF THE CASE. HE HAS GONE THROUGH THE REPOR T OF THE DVO. HE HAS CONSIDERED THE IMPLICATION OF SECTION 50C OF TH E ACT. HE HAS CONSIDERED THE GUIDELINE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITIES. IT IS AFTER CONSIDERING ALL THESE REL EVANT FACTORS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS DETERMINED THE SALE CONSIDERATION AT ` 2.25 CRORES. 8. THE LEARNED CHARTERED ACCOUNTANT FURTHER CONTEN DED THAT EVEN THOUGH THE REPORT OF THE DVO IS BINDING ON THE ASSESSING AUTHORITY, IT IS NOT BINDING ON THE COMMISSIONER OF INCOME- TAX(APPEALS) AND THE COMMISSIONER OF INCOME-TAX(APP EALS) IS FULLY EMPOWERED TO EXAMINE THE ENTIRE FACTS OF THE CASE A ND COME TO THE PROPER CONCLUSION IN ACCORDANCE WITH LAW. THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) IN THE PRESENT CASE IS NOT WITHOUT ANY BASIS. THE ORDER IS NOT ARBITRARY. IT IS A SPEAKING ORDER. - - ITA 988 OF 2011 7 IT HAS EXAMINED ALL THE ASPECTS OF THE CASE. IN TH ESE CIRCUMSTANCES, THE LEARNED CHARTERED ACCOUNTANT SUBMITTED THAT THE RE IS NO MERIT IN THE APPEAL FILED BY THE REVENUE. 9. WE HEARD BOTH SIDES IN DETAIL. SECTION 50C OF THE ACT PROVIDES THAT WHERE THE CONSIDERATION RECEIVED OR A CCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT, REFERRED TO AS THE STAMP VALUATION AUTHORITY FOR THE PURPOSE OF PAYMEN T OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED OR A SSESSED OR ASSESSABLE SHALL, FOR THE PURPOSE OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUIN G AS A RESULT OF SUCH TRANSFER. 10. IT IS STATED IN THAT SECTION THAT THE GUIDELIN E VALUE SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION WHERE THE CONSIDERATION STATED BY THE ASSESSEE IS LESS THAN T HE GUIDELINE VALUE. NO MUCH ARGUMENT IS NECESSARY TO SAY THAT SECTION 5 0C(1) IS A DEEMING PROVISION. A DEEMING PROVISION IS TO BE ST RICTLY APPLIED WITHOUT WIDENING ITS SCOPE. BUT IT IS ALSO EQUALLY IMPORTANT TO NOTE THAT A DEEMING PROVISION IS UNFLEXIBLE . WHERE A DEEMING PROVISION - - ITA 988 OF 2011 8 STATES A PARTICULAR MODE OF OPERATION, THAT MODE SH OULD BE ADOPTED AND IT CANNOT BE DILUTED OR DISTINGUISHED OR DIFFER ENTIATED. 11. IN THE PRESENT CASE, THE GUIDELINE VALUE IS ` 3,95,91,000/-. THE CONSIDERATION STATED BY THE AS SESSEE-COMPANY IS ` 2,22,64,409/-. THE DOCUMENT CONSIDERATION IS LESS THAN THE GUIDELINE VALUE. THE DEEMING PROVISION OF SECTION 50C(1) OPERATES. THE ASSESSING OFFICER HAS TO ADOPT THE GUIDELINE VA LUE. 12. THE SAFEGUARD GIVEN TO THE ASSESSEE IS TO REQU EST THE ASSESSING OFFICER TO REFER THE MATTER TO THE DVO FO R VALUATION. THAT WAS DONE IN THIS CASE. THE VALUATION REPORT NEVER CAME TO THE ASSESSING OFFICER BEFORE COMPLETING THE ASSESSMENT. THE ASSESSING OFFICER HAD TO COMPLETE THE ASSESSMENT WITHIN THE L IMITATION PERIOD. THEREFORE, THE ONLY WAY OPEN BEFORE THE ASSESSING O FFICER WAS TO COMPLETE THE ASSESSMENT BY ADOPTING THE GUIDELINE V ALUE OF ` 3,95,91,000/-. THEREFORE, THERE IS NO INFIRMITY I N THE ORDER PASSED BY THE ASSESSING OFFICER. 13. BUT, STILL IT IS WITHIN THE AUTHORITY OF THE A PPELLATE AUTHORITY TO HEAR THE ASSESSEE ON THE QUESTION OF VALUE OF CO NSIDERATION AND GRANT APPROPRIATE RELIEF, DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE PRESENT CASE, THE COMMISSIONER OF INCOME- - - ITA 988 OF 2011 9 TAX(APPEALS) HAD THE OCCASION TO GO THROUGH THE REP ORT OF THE DVO, WHEREIN THE VALUE WAS DETERMINED AT ` 3,54,73,536/-. THE COMMISSIONER OF INCOME-TAX(APPEALS) IS FULLY COMPET ENT TO GO BELOW THIS VALUATION, AS THE REPORT OF THE DVO IS NOT BIN DING ON THE COMMISSIONER OF INCOME-TAX(APPEALS). ALL THESE PRO CEDURES ARE FOLLOWED IN THE PRESENT CASE AND THEY ARE ALL REALL Y SUSTAINABLE IN LAW. 14. BUT, THE ONLY CONCERN IS THAT THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS BEEN CARRIED AWAY BY CERTAIN SITUA TIONS EXPLAINED BY THE ASSESSEE BEFORE HIM. THE ASSESSEE HAS EXPLA INED THAT THE SALE MADE BY THE ASSESSEE WAS A DISTRESS SALE AND T HE ENTIRE CONSIDERATION WAS PAID TO THE UCO BANK AND THE SALE CONSIDERATION WAS COMPARABLE TO THE EARLIER VALUATION OF THE PROP ERTY TAKEN BY THE UCO BANK AND IN SUCH CIRCUMSTANCES THERE WAS NO CHA NCE TO EXPECT MORE PRICE FOR THE PROPERTY. IT MEANS THAT THERE W ERE CERTAIN COMPELLING CIRCUMSTANCES, WHICH MADE THE ASSESSEE T O SELL THE PROPERTY FOR A CONSIDERATION OF ` 2,22,64,409/-. 15. IN OUR VIEW, THESE FACTORS, HOWEVER HEARTENING MAY BE, CANNOT BE ACTED UPON BY THE APPELLATE AUTHORITIES F OR THE REASON THAT SECTION 50C IS A DEEMING PROVISION. ANY RELIEF GRA NTED TO AN ASSESSEE MUST BE ON THE BASIS OF REASONS. THE REAS ONS MUST BE - - ITA 988 OF 2011 10 WITHIN THE FOUR CORNERS OF LAW. WHATEVER MAY BE TH E PROBLEMS SUFFERED BY AN ASSESSEE, IN REALITY THOSE REASONS C ANNOT BE PERMITTED TO GO BEYOND THE SCOPE OF SECTION 50C. WHEN SECTIO N 50C SAYS THAT THE SALE CONSIDERATION SHALL BE THE GUIDELINE VALUE , IF THE STATED CONSIDERATION IS LESS THAN THAT, IT MEANS THAT LAW HAS ALREADY DECIDED THE COURSE OF ACTION. NOTHING CAN PERSUADE THE SIT UATION INCLUDING THE GENUINE AND VALID DIFFICULTIES OF AN ASSESSEE. 16. IT IS TO ALLEVIATE THE DIFFICULTIES OF AN ASSE SSEE THAT A PROVISION FOR REFERENCE TO DVO IS GIVEN IN THE SECT ION. BUT, WHILE CONSIDERING THE REPORT OF THE DVO AND OTHER SUCH FA CTORS TO INTERFERE IN THE VALUATION OF THE PROPERTY, IT IS NOT PERMISS IBLE FOR THE APPELLATE AUTHORITIES TO CONSIDER PERSONAL AND INDIVIDUAL REA SONS. THE RELIEF GRANTED BY THE APPELLATE AUTHORITY SHOULD BE ON THE BASIS OF APPARENT FEATURES OF THE PROPERTY IN QUESTION. THE MISFORTU NES HAPPENED TO THE ASSESSEE OR THE DIFFICULTIES FACED BY THE ASSES SEE OR THE MATTER OF DISTRESS SALE, ETC. CANNOT BE A GROUND TO MODIFY TH E VALUATION. IF SUCH EXTRANEOUS FACTORS ARE RELIED UPON, WE WOULD BE CON TRAVENING THE DEEMING PROVISION OF LAW STATED IN SECTION 50C OF T HE ACT. 17. THEREFORE, WE FIND THAT ON THE ABOVE STATED PO INT WE HAVE TO DIFFER FROM THE VIEW TAKEN BY THE COMMISSIONER O F INCOME- - - ITA 988 OF 2011 11 TAX(APPEALS). THIS IS WITHOUT QUESTIONING THE AUTH ORITY OF THE COMMISSIONER OF INCOME-TAX(APPEALS) TO INTERFERE IN THE VALUATION OF THE PROPERTY, FOR THE PURPOSE OF DETERMINING THE CO NSIDERATION UNDER SECTION 50C OF THE ACT. 18. EXCEPT THE ABOVE, ON ALL OTHER ASPECTS WE AGRE E WITH THE COMMISSIONER OF INCOME-TAX(APPEALS) AND THE APPROAC H ADOPTED BY HIM. EARLIER THERE WAS A VALUATION. THE VALUE WAS ` 1.21 CRORES. THE VALUATION WAS MADE BY THE ASSESSEES BANKERS. THE GUIDELINE VALUE IS ` 3,95,91,000/-. BUT THE VALUATION MADE BY THE DVO IS LESS THAN THE GUIDELINE VALUE. THE DVOS ESTIMATION WAS AT ` 3,54,73,536/-. WHEN ALL THESE VARIABLES ARE CHANG ING FROM TIME TO TIME, FROM AUTHORITY TO AUTHORITY, IT IS NOT POSSIB LE TO REJECT THE CONTENTIONS OF THE ASSESSEE AS A WHOLE. THE TRUTH LIES SOMEWHERE IN BETWEEN. WE CANNOT ACCEPT THE VALUATION REPORTED B Y THE DVO AS SACROSANCT. WE HAVE TO GIVE EQUAL IMPORTANCE TO TH E OTHER FINDINGS ARRIVED AT BY THE COMMISSIONER OF INCOME-TAX(APPEAL S). 19. NOW, TAKING INTO ALL ASPECTS OF THE CASE, WE R EFIX THE CONSIDERATION ACCOUNTABLE IN THE HANDS OF THE ASSES SEE-COMPANY FOR THE PURPOSE OF SECTION 50C AT ` 2.5 CRORES. - - ITA 988 OF 2011 12 20. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO MODIFY THE LONG-TERM CAPITAL GAINS ASSESSABLE IN THE HANDS OF THE ASSESSEE- COMPANY. 21. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 7 TH OF JANUARY, 2013 AT CHENNAI. SD/- SD/- (S.S.GODARA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 7 TH JANUARY, 2013. V.A.P. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.