Sri Arvind Seth, New Delhi V. DCIT, New Delhi

ITSSA 3/DEL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7714 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 06-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Depreciation; Search and seizure; Additional evidence; Cost of acquisition; Fair market value; Valuation report; Set aside
• Section: 132

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER IT(SS) NO. 3/DEL/2017 ( BLOCK PERIOD : 1989 - 90 TO 1999 - 2000 ) ARVIND SETH, C/O. M/S. SAMPATH IYENGAR ASSOCIATES, 112, HANS BHAWAN, 1, BAHADURSHAH ZAFAR MARG, NEW DELHI PAN: CUOPS8927C VS DCIT, NON RESIDENT CIRCLE NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADV SHRI V. RAJA KUMAR, ADV REVENUE BY: SHRI MUNISH KUMAR GUPTA, CIT DR DATE OF HEARING 07/05 / 201 9 DATE OF PRONOUNCEMENT 2 2 / 0 7 / 2019 O R D E R PER PRASHANT MAHARISHI, A. M. 1 . THIS APPEAL IS FILED BY THE ASSESSEE, AN INDIVIDUAL AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 43, NEW DELHI DATED 31/1/2017 . THIS ORDER IS PASSED BY THE LEARNED CIT A IN PURSUANCE OF THE DIRECTION OF THE COORDINATE BENCH IN ITA NUMBER (SS) 205/DELHI/2004 DATED 7/2/2007 WHEREIN THE MATTER WAS RESTORED TO TH E FILE OF THE LEARNED CIT A WITH A DIRECTION TO ADMIT THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH THE LAW. 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE ORDER OF THE LD CIT(A) BEING AGAINST FACTS AND LAW MUST BE QUASHED AND RELIEF PROVIDED. 2. THAT THE LD CIT(A) ERRED IN COMPUTING THE VALUE OF THE PROPERTY ON HIS OWN FOR CAPITAL GAIN PURPOSES AFTER REJECTING THE VALUATION REPORT AS SUBMITTED TO H IM BY THE APPELLANT. THE ACTION OF THE LD CIT(A) BEING ARBITRARY, ERRONEOUS AND AGAINST LAW MUST BE QUASHED WITH DIRECTIONS FOR RELIEF. 3 . BRIEF FACTS OF THE CASE SHOWS THAT SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT WAS CARRIED OUT IN THE C ASE OF THE ASSESSEE AND ANOTHER PAGE | 2 PERSON ON THE BASIS OF INFORMATION THAT PROPERTY DELAYED BEEN MADE TO S ALE PROPERTY NUMBER C - 104 NARAINA VIHAR NEW DELHI ON 1/2/1999. THE ONLY DISPUTE THAT REMAINS IN THIS APPEAL IS WHAT IS THE COST OF ACQUISITION TO BE ALLOWED TO THE ASSESSEE AS DEDUCTION FROM THE SALE CONSIDERATION OF THE PROPERTY. THE ASSESSEE COMPUTED THE CAPITAL GAIN CONSIDERING THE SALE CONSIDERATION OF THE ABOVE PROPERTY AT INR 8,600,000 AND CLAIMED THE DEDUCTION OF THE COST OF ACQUISITION OF TH E ABOVE PROPERTY CONSIDERING THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1/8/1990 AT INR 4,500,000 AND INDEXED IT TO INR 8679571/ AND THEREFORE THE LONG - TERM CAPITAL GAIN CHARGEABLE TO TAX UNDER SECTION 112 WAS STATED TO BE RS. NIL . T HE LEARNED ASSESSI NG OFFICER NOTED THAT THE COST OF ACQUISITION OF THE PROPERTY SHOWN AT INR 4,500,000 BASED ON A CERTIFICATE FROM VALUE OF AS 01/08/1990 WHO HAS MERELY STATED THAT THE MARKET VALUE OF THE PROPERTY HAVING BEEN BELONGING TO MR. RAJKUMAR SHETH IN AUGUST 1990 W AS INR 4,500,000. THE LEARNED AO FURTHER NOTED THAT NO BASIS WHATSOEVER FOR ARRIVING AT THE SAID VALUE OF THE PROPERTY WAS GIVEN IN THE CERTIFICATE. THEREFORE, HE HELD THAT THE CLAIM IN THE COST OF ACQUISITION AS AUGUST 1990 BASED ON THE VALUATION REPORT IS LEGALLY INCORRECT. HE FURTHER HELD THAT SECTION 49 (1) OF THE INCOME TAX ACT PROVIDES FOR THE METHOD OF TAKING COST WITH REFERENCE TO CERTAIN MODES OF ACQUISITION WHICH INCLUDE TRANSFER BY WAY OF GIFT OR WILL AND BY SUCCESSION, INHERITANCE OR DEVOLUTI ON ET CETERA. AS PER THIS SECTION, THE COST OF ACQUISITION OF THE ASSETS IS DEEMED THE COST FOR WHICH THE PREVIOUS OF THE PROPERTY ACQUIRED IT HAS INCREASED BY THE COST OF ANY IMPROVEMENT OF THE ASSESSEE INCURRED OR BORNE BY THE PREVIOUS OWNER. IN THE CA SE OF THE ASSESSEE AS HE HAS RECEIVED THE ABOVE PROPERTY UNDER APPEAL AFTER THE DEATH OF HIS FATHER. THEREFORE, ACCORDING TO AO THE COST OF ACQUISITION OF THE ABOVE PROPERTY SHALL BE TAKEN AT THE COST FOR WHICH H IS FATHER ACQUIRED THE PROPERTY. HE FURTHE R REFERRED TO THE PROVISIONS OF SECTION 55 (2) (B) (II) OF THE ACT. THEREFORE, HE HELD THAT IT IS CLEAR THAT THE ASSESSEE HAS NOT CORRECTLY CLAIMED COST OF ACQUISITION OF THE ABOVE PROPERTY BASED ON THE VALUATION REPORT DETERMINING THE COST IN AUGUST 1990 . THEREFORE, THE LEARNED ASSESSING OFFICER REJECTED THE COST OF ACQUISITION SHOWN BY THE ASSESSEE. HOWEVER TO WORK OUT THE CAPITAL GAIN AND TO GRANT THE DEDUCTION OF THE COST OF ACQUISITION OF THE PROPERTY, THE LEARNED ASSESSING OFFICER NOTED THAT THERE PAGE | 3 IS A PERPETUAL LEASE AGREEMENT OF MR. RAJKUMAR SHETH WITH DEL HI ADMINISTRATION DATED 28/8/19 70 WHERE THE CONSIDERATION OF THE PROPERTY WAS SHOWN AT RS 2 4100/ . HE FURTHER NOTED THAT AS THE THERE IS A CONSTRUCTION OF A TWO - STOREY FLAT ON THE SAID PROPERTY DURING THE LIFETIME OF MR. RAJKUMAR SHETH IS NO DETAILS OR EVIDENCES WAS FILED BY THE ASSESSEE HE ASSUMED THE COST OF INR 300,000. ACCORDINGLY HE COMPUTED THE CAPITAL GAIN ON SALE OF THE PROPERTY OF INR 8,600,000 BY TAKING THE COST OF ACQUISITION AT RS. 2 4100/ AND THE COST OF IMPROVEMENT OF INR 300,000. THE TOTAL COST OF ACQUISITION AND THE COST OF IMPROVEMENT OF INR 324100/ WAS INDEXED AT RS. 1137591/ AND COMPUTED THE NET CAPITAL GAIN OF INR 7462409. ACCORDINGLY ORDER U/S 158BC OF THE INCOME TAX ACT WAS PASSED ON 26/2/2001 DETERMINING TOTAL UNDISCLOSED INCOME OF INR 9 317700/ . 4 . THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LEARNED ASSESSING OFFICER PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) 43, NEW DELHI. THE LEARNED CIT A PASSED ORDER ON 16/2/ 2004 DISMISSING THE APPEAL OF THE ASSESSEE. BEFORE THE LEARNED CIT A THE ASSESSEE SUBMITTED THE VALUATION REPORT OF MESSERS CHADDHA AND ASSOCIATES DATED 21/12/2001 GIVING THE VALUE OF THE PROPERTY AS ON 1/4/1981 AT INR 889800/ AS ADDITIONAL EVIDENCE . THE LEARNED CIT A HELD THAT IT IS NEW EVIDENCE, WHICH WAS NOT PLACED BEFORE THE LEARNED ASSESSING OFFICER, AND THEREFORE IT CANNOT BE ADMITTED AT THE APPELLATE STAGE AS NONE OF THE CONDITIONS MENTIONED IN RULE 46A ARE SATISFIED . HE FURTHER HELD THAT THE APPELLANT HAS NOT GIVEN ANY REASON TO ADMIT THIS NEW EVIDENCE AND THEREFORE THIS EVIDENCES REJECTED. 5 . AGAINST THIS ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COORDINATE BENCH. THE COORDINATE BENCH SET ASIDE THE WHOLE O RDER OF THE LEARNED CIT A AS PER ORDER DATED 7/2/2007 IN ITA NUMBER ( SS) 205/DEL/200 4 BACK TO THE FILE OF THE LEARNED CIT A WITH A DIRECTION TO ADMIT THE SAID EVIDENCE AND AFTER ADMITTING THE SAI D EVIDENCE TO DECIDE THE ISSUE AFRESH IN ACCORDANCE W ITH LAW. 6 . PURSUANT TO THAT DIRECTION , THE LEARNED CIT A HAS PASSED AN ORDER DATED 31/1/2017 WHER EIN HE PERUSED THE REPORT OF AUTHORISED VALUER CHADHA & ASSOCIATES WHICH VALUED THE PROPERTY AS ON 1/4/1981 AT INR 889800/ . HE FURTHER HELD THAT THE VALU ATION REPORT OF THE PROPERTY HAS BEEN ARRIVED AT ON VAGUE BASIS . THE VALUATION IS BASED ON SURMISES, WITHOUT RELYING UPON ANY PAGE | 4 ACTUAL COMPARABLE INSTANCES AND THEREFORE IT IS NOT ACCEPTABLE. THEREAFTER HE PROCEEDED TO DETERMINE THE VALUATION ON HIS OWN. H E HELD THAT MCD LAND RATES AS PER CIRCULAR DATED 16/ 5 /1985 IN THE NEARBY AREA IS GIVEN AT INR 1317 / - PER SQUARE METER IN 1980 AND AS INR 1 200 / - PER SQUARE METER IN 1981. THEREFORE, HE STATED THAT HE WAS TO TAKE THE AVERAGE RATE AS RS. 1259 / - PER SQUARE METER . HE ALSO GIVES THE COPY OF THE CIRCULAR TO THE ASSESSEE. THE ASSESSEE APPEARED BEFORE THE LEARNED CIT APPEAL AND HELD THAT EXPERTS REPORT CANNOT BE DISPUTED . THE LEARNED CIT APPEAL REJECTED THE EXPLANATION OF THE ASSESSEE HOLDING THAT THERE IS NO MEANINGFUL EXPLANATION PROVIDED BY THE ASSESSEE. HE DETERMINE S THE AVERAGE RATE OF LAND AT INR 1259 / - PER SQUARE METER AND FURTHER THE COST OF CONSTRUCTION ADMEASURING 162 FT WAS TAKEN AT INR 4 0 / - PER SQUARE FEET. ACCORDINGLY HE COMPUTED THE COST OF LAND AS ON 01/04/1981 OF 250.83 M AT INR 1 259 PER SQUARE METER AMOUNTING TO INR 3 15795/ . HE ALSO WORKED OUT THE COST OF CONSTRUCTION OF GROUND FLOOR OF 162 0 FT AT INR 45 / - PER SQUARE FEET AMOUNTING TO INR 7 2900/ . F OR THE CONSTRUCTION OF 1 ST FLOOR OF 162 0 FT HE ADOPTED THE RATE OF CONSTRUCTION AT INR 40 PER SQUARE FEET AMOUNTING TO INR 6 4800/ . C ONSEQUENTLY HE HELD THAT THE COST OF IMMOVABLE ASSET AS ON 1/4/1981 WAS ONLY INR 4 53495 INSTEAD OF VALUE ARRIVED AT BY THE VALUER AT RS. 889800/ . AG AINST THIS ORDER OF THE LEARNED CIT A , ASSESSEE IS IN APPEAL BEFORE US. 7 . THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY STATED THAT THE VALU ATION SHOWN BY THE ASSESSEE OF RS. 889800/ IS BASED ON THE REPORT OF THE AUTHORISED VALUER. THE LEARNED CIT A HAS TAKEN THE VALUE OF THE LAND AS PER MCD LAND AREA RATE, WHICH IS NOT AT ALL RELEVANT FOR WORKING OUT THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1/4/1981. HE OTHERWISE SUBMITTED THAT THE LEARNED CIT A HAS REJECTED THE VALUATION REPORT PREPARED BY TH E EXPORT VALUER WITHOUT ANY COGENT REASON. HE EXTENSIVELY REFERRED TO THE VALUATION REPORT SUBMITTED BY THE REGISTERED VALUER AND STATED THAT THE LEARNED CIT A IS NOT COMPETENT ENOUGH TO VALUE THE PROPERTY ON HIS OWN . HE THEREFORE SUBMITTED THAT THE VA LUATION REPORT WHICH IS SUPPORTED BY THE RELEVANT CONSIDERATION FOR VALUING THE PROPERTY SHOULD HAVE BEEN ACCEPTED BY THE LEARNED CIT A. PAGE | 5 8 . THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT A AND STATED THAT HE HAS POINTED OUT SEVERAL INFIRMITIES IN THE VALUATION REPORT SUBMITTED BY THE ASSESSEE AND THEREFORE THE MCD LAND RATES ADOPTED BY THE LEARNED CIT A ARE CORRECT VALUATION OF THE PROPERTY. 9 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDE RS OF THE LD CIT (A). THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LEARNED CIT A IN COMPUTING THE VALUE OF THE PROPERTY ON HIS OWN FOR DETERMINING THE COST OF ACQUISITION AS AT 1 - 4 - 1981 FOR CAPITAL GAIN PURPOSES AFTER REJECTING THE VALUATION REPORT S UBMITTED TO HIM BY THE APPELLANT. HE THEREFORE SUBMITTED THAT THE ACTION OF THE LEARNED CIT A BEING ARBITRARY, ERRONEOUS AND AGAINST LAW MUST BE QUASHED WITH THE DIRECTIONS FOR RELIEF. THEREFORE, NOW WE PROCEED TO EXAMINE THE VALUATION REPORT SUBMITTED BY THE AUTHORISED VALUER. AT PAGE NUMBER 43 52 OF THE PAPER BOOK SUBMITTED BY THE ASSESSEE THE VALUATION REPORT OF MESSERS CHADHA AND ASSOCIATES IS PLACED. THE VALUER HAS SPECIFIED THE PROPERTY AS THE DOUBLE STORY STRUCTURE HAVING GROUND FLOOR BUILT IN 70 71 AND 1 ST FLOOR IN 77 78. BOTH THE FLOORS ARE CONSISTING OF DRAWING, DINING, KITCHEN, 3 BEDROOMS, 2 TOILETS , VERANDHA AND THE STAIRCASE ON EACH OF THE FLOOR. REGARDING THE FAIR MARKET VA LUE OF THE LAND, THE VALUER HAS STATED THAT PLOT AND MEASURING 36*75 AND THE AREA IS 300 YD OR 250.83 M. THE LEASEHOLD LAND WAS NOW CONVERTED TO FREEHOLD. THE VALUER FOR THE INSTANCE OF SALE OF IMMOVABLE PROPERTY IN THE LOCALITY HAS STATED THAT PLOT IS SITUATED IN AN AREA WHICH WAS 1 OF THE 1 ST FEW AREAS WHICH WERE DEVELOPED BY THE DELHI DEVELOPMENT AUTHORITY WHEN IT WAS FORMED AND IT IS WELL DEVELOPED BOTH FOR RESIDENTIAL AS WELL AS FOR INDUSTRIAL/COMMERCIAL PURPOSES. IT IS NEAR TO THE IMPORTANT AREAS LIKE KIRTI NAGAR, MANSAROVAR GARDEN, RAJOURI GARDEN AND OTHER AREAS. AS PER RECORDS, THE AREA NEAR TO THIS AREA, WHICH WAS SOLD IN PUBLIC AUCTION, WAS PANKHA ROAD AREA WHERE THE LAND RATE IN 1981 82 WAS RS 1195 PER SQUARE METERS . IT IS APPROXIMATELY 6 7 KM AWAY FROM THE LAND. HE FURTHER STATED THAT AS PER RECORDS THE LAND RATE AS NOTIFIED BY LAND AND DEVELOPMENT OFFICE NEAREST TO THE AREA SITUATED IS APPROXIMATELY INR 2000 PER SQUARE METER . FOR VALUING THE LAND RATE AT INR 2500/ - PER SQUARE METE R THE VALUER HAS ALSO GIVEN A JUSTIFICATION THAT THE RATE ARE ADOPTED BY THE GOVERNMENT FOR RECOVERY OF UNEARNED INCREASE IS LOWER THAN THE MARKET RATES TO GIVE THE BENEFIT TO THE PAGE | 6 LESSEE. CONSIDERING ALL THESE FACTS THAT IT WAS BUILT UP PROPERTY IN SEL F - OCCUPATION HE ADOPTED THE FAIR MARKET VALUE OF THE LAND AT INR 2500 PER SQUARE METER . WITH RESPECT TO THE CONSTRUCTION OF GROUND FLOOR HE ADOPTED THE CONSTRUCTION VALUE IN 1970/71 AT INR 9 0 PER SQUARE FEET TAKING THE CONSIDERATION OF THE TYPE OF CONSTR UCTION, THE MATERIAL USED AND THE MARKET CONDITION INCLUDING THE TYPE OF FINISH ET CETERA. HE ALSO GRANTED DEPRECIATION OF 15% TO BRING IT TO THE VALUE AS AT 01/04/1981. HE ALSO TOOK THE VALUE FOR THE CONSTRUCTION MADE IN 1977 78 AT INR 80 PER SQUARE F EET AND CONSIDERED THE DEPRECIATION AT THE RATE OF 6% THEREON. WHILE DETERMINING THE CONSTRUCTION COST THE LEARNED AUTHORISED VALUER HAS GIVEN THE COMPLETE DETAIL WITH THE SPECIFICATION OF CONSTRUCTION IN ANNEXURE ATTACHED TO THE VALUATION REPORT. ACCORD INGLY, HE VALUED THE TOTAL PROPERTY AT RS. 889800/ AS ON 1/4/81. THE LEARNED CIT A HAS REJECTED THE VALUATION REPORT STATING THAT IT IS VAGUE, AS IT IS NOT SUPPORTED BY THE SALE INSTANCES. HOWEVER LOOKING AT PAGE NUMBER 5 OF THE VALUATION REPORT, THE AUTHORISED VALUER HAS GIVEN THE COMPLETE DESCRIPTION OF THE PROPERTY AND COMPARED IT WITH THE NEARBY SALE PRICES AS WELL AS THE GOVERNMENT RATES PREVAILING AS ON THAT DATE. THE LEARNED CIT A REJECTED THE VALUATION REPORT WITH RESPECT TO THE RATES OF TH E LAND TAKEN BY THE LEARNED AUTHORISED VALUER STATING THAT HE HAS NOT GIVEN A COMPARABLE SALE INSTANCES HOWEVER HE HIMSELF HAS ALSO NOT GIVEN ANY COMPARABLE INSTANCES BUT HAS TAKEN THE MCD LAND RATES FOR THE PURPOSES OF THE VALUATION. HE ALSO DID NOT JUST IFY THAT WHAT FOR THE MCD LAND RATES ARE SPECIFIED AND ACCORDING TO THAT RATES HOW MUCH LAND IS SOLD. THERE IS NO JUSTIFICATION GIVEN BY THE LEARNED CIT A FOR ADOPTING THE COST OF CONSTRUCTION. ACCORDING TO US, IT IS ON NEARLY EXEMPTION ON PRESUMPTIONS . IN FACT THE LEARNED CIT A HAS REJECTED THE OPINION OF AN EXPERT, WITHOUT EXAMINING HIM. IF HE WANTED TO KNOW ABOUT THE RATIONAL OF THE VARIOUS RATES ADOPTED BY HIM, HE SHOULD HAVE CALLED HIM AND EXAMINED HIM. EVEN OTHERWISE THE LEARNED CIT A IS NO T AN AUTHORISED PERSON UNDER THE ACT TO VALUE AN IMMOVABLE PROPERTY. THE RIGHT COURSE WOULD HAVE BEEN TO REFER THE MATTER TO THE VALUATION CELL, WHICH HE HAS NOT DONE. THEREFORE, WE REVERSE THE ORDER OF THE LEARNED CIT A AND DIRECT THE LEARNED ASSESSIN G OFFICER TO CONSIDERED THE COST OF ACQUISITION BASED ON THE VALUATION REPORT OF THE AUTHORISED VALUER. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO TAKE THE PAGE | 7 COST OF ACQUISITION OF THE PROPERTY AT RS. 889800/ . ACCORDINGLY, GROUND NUMBER 2 OF THE APP EAL OF THE ASSESSEE IS ALLOWED. 10 . GROUND NUMBER 1 OF THE APPEAL OF THE ASSESSEE IS GENERAL IN NATURE AND THEREFORE IT IS DISMISSED. 11 . ACCORDINGLY, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 / 07 / 2019 . - SD/ - - SD/ - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 / 0 7 / 2019 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI