KISHORKUMAR NARANJI DESAI,KHARWASA V. INCOME TAX OFFICER, WARD 3(1)(1), SURAT, SURAT

ITA 825/SRT/2023

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The case involves Kishorkumar Naranji Desai, the appellant, contesting the order of the National Faceless Appeal Centre, Delhi/Commissioner of Income Tax (Appeals) regarding the assessment year 2013-14. The primary issues revolved around the validity of a demand notice for AY 2011-12 affecting AY 2013-14, the addition of Rs.13,19,000 under section 50C of the Income Tax Act, 1961, and the initiation of penalty under section 271(1)(c). Additionally, the appellant raised concerns about the computation of exemption under section 54F, arguing that the actual sale consideration should be considered rather than the enhanced valuation as per section 50C. The Tribunal's decision also addressed the procedural aspects of admitting additional grounds of appeal and the substantive issues related to the valuation of the property and the corresponding tax implications.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 29821 (ITAT-SURAT)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Next Hearing Date: 08-10-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 01-12-2023
• Other Referred Cases: Sunil Miglani vs. DCIT, Lalitkumar Kalwar vs. ITO, ITO vs. Raj Kumar Parashar, Gyan Chand Batra vs. ITO, Shri Haresh P. Shah vs. ITO, Smt. Varshaben Vipulbhai Bhalani vs. DCIT, Gouli Mahadevappa vs. ITO, CIT Vs. Mitesh Impex
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Assessee Lawyers: MANALI JAIN
• Keywords: Condonation of delay; Opportunity of being heard; Sale consideration of property below Jantri Value; Fair market value; Cost of acquisition; Capital Gains; Valuation report; Rectification of order; Deemed to accrue or arise in india
• Section: 143(3); 271(1)(c); 54B; 54F; 50C

Judgement Text

" आयकर अपीलीय अिधकरण, सूरत Ɋायपीठ, सूरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 825/SRT/2023 (AY 2013-14) (Hearing in Physical Court) Kishorkumar Naranji Desai AT & PO. Kharwasa, Surat-394210 [PAN : ACAPD 3960 G] बनाम Vs Income Tax Officer, Ward-3(1), Surat, Aaykar Bhawan, Majura Gate, Surat-395001 अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by Ms. Manali Jain, CA राजˢ की ओर से /Revenue by Shri Mukesh Jain– Sr-DR सुनवाई की तारीख/Date of hearing 08.10.2024 उद ्घोषणा की तारीख/Date of pronouncement 10.10.2024 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi/Commissioner of Income tax (Appeals)[for short to as “NFAC/Ld.CIT(A)] dated 13.09.2023 for assessment year (AY) 2013-14, which in turn arises out of assessment order passed by Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) 06.12.2018. The assessee has raised following grounds of appeal: “1. The Learned Commissioner of Income-tax, (Appeals), has erred in law and on the facts and circumstances of the case, in confirming the demand notice sent for AY 2011-12 as valid demand notice u/s 156 for assessment proceedings carried on for AY 2013-14. 2.The Learned Commissioner of Income-tax, (Appeals), has erred in confirming addition of Rs.13,19,000/- on account of section 50C of the Income Tax Act, 1961 by adopting the sale consideration as per valuation made by DVO and not as per the sale deed when there was a marginal difference of ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 2 15% between the fair market value ascertained by DVO and sale deed executed by assessee. 3. Further, the levy of interest u/s 234-A, 2234-VB, 234-C & 234-D of the I.T Act, 1961 is not justified because the addition is made under section 50C of the Act which is deemed income and not real income. 4. The Learned Commissioner of Income-tax, (Appeals), has erred in confirming the initiation of penalty u/s 271(1)(c) of the I.T Act, 1961 when the addition is on account of deeming provision under section 50C of the Act. 5. The appellant craves to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal or from time to time.” 2. The assessee vide application dated 07.102.24, raised following additional ground of appeal; “The ld CIT(A) as well as Assessing officer, Surat has erred in allowing the eligible amount of deduction under section 54F. It is settled law that for the computation of exemption under section 54F, actual sale consideration is to be taken and not the enhanced valuation as per 50C”. 3. At the outset of hearing, the Ld. Authorized Representative (Ld.AR) for the assessee submits that impugned order was passed by Ld.CIT(A) on 13.09.2023, however, the present appeal is filed on 01.12.2023. Thus, there is delay of seven days in filing appeal before the Tribunal. The Ld. AR for the assessee submits that assessee has filed application for condonation of delay. The Ld. AR of the assessee submits that due to local festival, the assessee was away from Surat and could not take appropriate steps for filing appeal in time. The delay in filing appeal before Tribunal is neither intentional nor deliberate. The Ld. AR for the assessee submits that there is minor delay of seven days and same may be condoned as assessee has a good case on merit and will suffer prejudice for delay of filing is not condoned. ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 3 4. Against the admission of additional ground of appeal, Ld. AR for the assessee submits that assessee is his additional ground of appeal seeking additional claim of deduction under section 54F on the basis of deeming value of sale consideration, considered by Assessing Officer by invoking provisions of Section 50C of the Act. The Ld. AR for the assessee submits that assessee along with two other persons sold agriculture land on a sale consideration at Rs.2.21 crores, the Stamp Valuation Authority valued the said asset for the purpose of registration of sale transaction at Rs.3.80 crores. Since there was a difference in sale value declared by assessee vis-à-vis value determined by Stamp Valuation Authority, the Assessing Officer invoked the provisions of Section 50C of the Act. The Assessing Officer made a reference to District Valuation Officer (DVO) for estimation of Fair Market Value on the date of sale of said agriculture land. The DVO gave his report and estimated fair market value of asset at Rs.2.60 crores. The assessee also obtained valuation report prepared by Government Registered Valuer; the Registered Valuer estimated the value of assets at Rs.2.18 crores. In case the valuation report of registered valuer was accepted, no further addition was warranted, however, if the report of DVO is considered, there is a difference of Rs.39.57 lakh for addition under section 50C of the Act. The assessee is having 1/3 share in the said agriculture land. Thus, the difference between value estimated by DVO and the value shown by assessee on the share of assessee, is only about Rs.13.00 lakh. As per sale consideration disclosed by assessee, his share is Rs.73.66 lakh and index cost of acquisition of asset is Rs.27.00 lakh. Thus, assessee computed capital gains of Rs.46.65 Lakhs. Cost of acquisition of land is not in dispute. ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 4 The assessee had constructed a house and invested Rs.44.00 lakh. Such investment is also not disputed. The assessee claimed exemption under section 54F of Rs.25.00 lakh only. Once by invoking deeming fiction of Section 50C, the Assessing Officer increased the capital gains, therefore, the assessee may be allowed to revise claim of exemption under section 54F of the Act. In fact, in the additional ground of appeal the assessee has made revise claim of deduction under section 54F. 5. In alternative submission, the Ld. AR of the assessee submits that when the assessee has invested entire capital gains and sought exemption under section 54F of deeming provisions of Section 50C of the Act cannot be invoked. To support her submission, Ld. AR for the assessee relied upon the following judgment:  Sunil Miglani vs. DCIT [ITA No.5829/Del/2016]  Lalitkumar Kalwar vs. ITO [2023] 156 taxmann.com 27 (Jaipur-Trib.)  ITO vs. Raj Kumar Parashar [2017] 167 ITD 237 (Jaipur-Trib.)  Gyan Chand Batra vs. ITO [2010] 6 ITR(T) 147 (Jaipur)  Shri Haresh P. Shah vs. ITO [ITA No.2154/Ahd/2010 dated 08.07.2010]  Smt. Varshaben Vipulbhai Bhalani vs. DCIT [ITA No.348/Ahd/2021 dated 23.11.2022  Gouli Mahadevappa vs. ITO [2013] 33 taxmann.com 47 (Kar.)/[2013] 215 Taxman 145 (Kar.)/[2013] 356 ITR 90 (Kar.)/[2013] 259 CTR 579 (Kar.)[06.01.2012] 6. On the other hand, Ld. Senior Departmental Representative (Ld. Sr-DR) for the Revenue, on the plea of condonation of delay submits that approach of assessee is very casual in filing appeal before Tribunal and no reasonable and plausible reasons is disclosed by assessee in his application for condonation of delay application. Thus, delay may not be condoned. On the issue of additional ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 5 ground of appeal, the Ld. Sr-DR for the Revenue submits that the assessee is raising additional claim under the garb of additional ground additional ground of appeal. Such claim of was not raised before the lower authorities, hence, additional claim may not be entertained at this stage. On merit of claim of additional deduction under section 54F, the Ld. Sr-DR for the Revenue submits that matter was referred to DVO and the DVO on considering the relevant fact and effecting the cost of asset estimated in his report. The Assessing Officer accordingly rectified the assessment order. The Assessing Officer allowed full deduction under section 54F as claimed in the computation of income. In alternative submission, Ld. Sr-DR for the Revenue submits that since the assessee has raised additional claim, which was not examined by Assessing Officer, in case, the additional ground of appeal is allowed, in such situation, the matter may be remitted back to the file of Assessing Officer for further verification of fact. 7. We have heard the rival submissions of both the parties and have gone the orders of lower authorities carefully. We have also deliberated on the case law relied on by Ld. AR for the assessee. First, we are considering the plea of assessee on condonation of delay. We find that Registry of this Tribunal has pointed out seven-day delay in filing appeal before Tribunal. The Ld. AR for the assessee while making her submission urged the delay in filing is neither intentional more deliberate. We find that there is minor delay of seven days only. Considering the contention of both the parties and the fact that delay in filing appeal before Tribunal is not inordinate for not intentional or deliberate. ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 6 Thus, the delay of seven days is condoned. Now adverting to admission of additional ground in making additional claim of deduction under section 54F. 8. We find that in the additional ground of appeal, the assessee in fact has claimed additional deduction under section 54F, though, it is not properly drafted ground of appeal. Such additional claim of exemption of capital gain is basically raised due to notional increase in the sale consideration by virtue of deeming fiction of Section 50C of the Act. Considering the fact that the facts relating to adjudicate the additional ground of appeal, are emanating from the order of lower authorities and no new facts is required for adjudication of such grounds of appeal. The Hon’ble jurisdictional High Court in the case of CIT Vs. Mitesh Impex (2014) 367 ITR 85 (Guj) held that though, the Assessing Officer is not entitled to admit or entertain additional claim during the assessment proceedings, however the appellate authority has such jurisdiction to admit such additional claim. Therefore, additional claim of assessee for enhanced deduction under section 54F is admitted as raised in the additional ground of appeal. Now adverting the merit of additional claim. 9. We find that during assessment, Assessing Officer noted that assessee with his two co-owners has sold agricultural land out of R.S. No.20/2 Block No.36 admeasuring 19020 square meter of village Kharwasa, Choryasi Taluka, District Surat. The assessee and his co-owners have shown / disclosed consideration of Rs.2.21 crores. The assessee is owner of one-third share. The assessee received Rs.73.66 lakhs of his share. The assessee in his computation of income and computed capital gains of Rs.46.65 lakh. Out of which, assessee claimed deduction under section 54B of Rs.21.64 lakh and deduction under section 54F ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 7 of Rs.25.00 lakhs (approx.) thereby showing / reducing capital gains to nil. The Assessing Officer found that Stamp Valuation Authority valued transaction for the purpose of registration of transaction of said agriculture land at Rs.3.80 crores. The Assessing Officer on the basis of difference vis-à-vis value declared on the sale deed and the value determined by Stamp Valuation Authority recomputed the capital gains. The assessing officer allowed full deduction under section 54F. However, on further examination of fact found the Assessing Officer noted capital gains earned by assessee is shown to have invested for purchase of agricultural land and sought deduction under section 54B of the Act of Rs.21,64,850/-. The Assessing Officer was of the view that assessee has purchased agricultural land on 29.03.2012 which is prior to sale of agricultural land. The Assessing Officer, thus issued show-cause notice to substantiate the claim of deduction under section 54B of the Act. The assessee in his reply submitted that agreement for purchase of new agriculture land was entered on 21.12.2011 as he has received part payment prior final sale deed executed in March, 2012. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer held that there was no proof of agricultural activities. Thus, the Assessing Officer disallowed claim / deduction under section 54B of the Act of Rs.21,64,850/-. However, on appeal before Ld. CIT(A) the claim of assessee under section 54B was allowed in toto. The assessee also raised plea against the deduction claim under section 54F of the Act. The Ld. CIT(A) held that deduction claimed by assessee under section 54F of Rs.25,0,977/- has already been allowed. Hence, the assessee should not have any grievance. It was held that the assessee has not filed any written submission. ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 8 10. We find that almost on similar ground of appeal Surat Bench of Tribunal in Mehualhbai D Vithalani in ITA No. 148/Srt/2024, on considering almost similar contention of that assessee that in the return of income, he claimed deduction under section 54, which is equal to the amount of long-term capital gain shown by the assessee. The Assessing Officer in principle satisfied that the assessee fulfilled the conditions for seeking exemption under section 54F. In case the value of asset sold by the assessee, if adopted on the basis of report of DVO as deemed sale consideration, the relief under section 54F would automatically increase with higher denominator. On considering such contention, we have passed the following order; 9. We have considered the submission of both the parties and have gone through the orders of the lower authorities carefully. We have also deliberated on case law relied by ld AR of the assessee. We have also perused the report of DVO very carefully. There is no dispute about the area and share of assessee with regards to non-agriculture land sold by the assessee with his co-owner. The Assessing Officer made addition under section 50C of Rs. 1.56 Crore by taking view that there is a difference between the value declared by the assessee vis- à-vis the value determined by Stamp Valuation Authority while registering the transaction of said land. We find that on the request of assessee a reference was made by Assessing Officer to DVO for estimation of fair value of asset on the date of transfer of said land. We find that the assessee declared the value of asset on the basis of report of Registered Valuer at the rate Rs.988/- per square meter. The DVO estimated / suggested the value of asset @ Rs. 3,111/- per square meter. The Stamp Valuation Authority valued the asset @ Rs.6150/- per square meter on the basis of jantry value declared by State Government. 10. Before us the Ld.AR of the assessee vehemently argued that assessee has sold asset on fair market value and that no additional amount is received by assessee in excess to sale consideration shown by assessee on the sale deed. The comparable instances narrated by DVO in his report are not good comparable. The Ld.AR of the assesse strongly relied on a comparable instance ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 9 in his submission by showing jantry rate of just adjoining RS No.54 which is only Rs.1450/- per square meter. The Ld.AR of the assessee in his submission urged that average of value estimated by DVO and estimated by Govt. Approved Valuer may be adopted for the purpose of working of long term capital gains. 11. In our view, the value estimated by Govt. Registered Valuer is on lower side. We also find a huge difference between the jantry rate of R.S. no.55 and No.54 of Village Hindorana, though both the survey numbers are adjoining to each other. Therefore, considering overall facts and circumstances of different variation in the value estimated by Registered Valuer, DVO and jantry value of RS No.54 and 55, in our view if average value estimated by DVO and jantry value of adjoining R.S. No. 54 of same village is taken, the same will be reasonable and sufficient to avoid the possibility of revenue leakage. We find that average of jantry value of R.S. No.54 and value estimated by DVO, is Rs.2280/- per square meter. Hence, the Assessing Officer is directed to work out the long-term capital gains accordingly. In the result, Ground No.1 of assessee’s appeal is partly allowed.” 11. Now again adverting to the facts of the case in hand. Before us the sole grievance of Ld. AR for the assessee is that assessee has invested of much more amount on construction of new residential house, within the time allowed for seeking deduction under section 54F, then the initial claim of deduction under section 54F. Therefore, in view of the fact that sale consideration is considered at higher amount on the basis of deeming friction under section 50C of the Act. Thus, the assessee may be allowed more deduction under section 54F of the Act. We find that original claim made by assessee has already been allowed by lower authorities. However, as the sale consideration is notionally increased due to deeming friction under section 50C of the Act. Therefore, assessee has made present claim before us. Considering the fact that such claim is raised before us for the first time after passing order of rectification order ITA No.825/SRT/2023 (A.Y.13-14) Kishorkumar N Desai 10 under section 156 in the assessment order on receipt report of DVO. Therefore, additional claim of deduction under section 54F is restored back to the Assessing Officer to verify the additional deduction under section 54F and allow appropriate relief to the assessee as per law. Needless to direct the Assessing Officer shall grant opportunity of being heard to assessee. The assessee is also directed to provide all evidences and information, if so, required by Assessing Officer. In the result, additional claim of assessee under section 54F is allowed for statistical purposes. 12. Other grounds of appeal relate to levy of interest under section 234A/234B/ 234C & 234D, which is consequential and need no specific adjudication. 13. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 10/10/2024. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) लेखा सद˟/Accountant Member Ɋाियक सद˟/Judicial Member सूरत / Surat Dated: 10/10/2024 Dkp Outsourcing Sr.P.S* आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to :  अपीलाथŎ/ The Appellant  ŮȑथŎ/ The Respondent  आयकर आयुƅ/ CIT  िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT  गाडŊ फाईल/ Guard File // True Copy // By order/आदेश से, सहायक पंजीकार आयकर अपीलीय अिधकरण, सूरत "