MAGANBHAI SUKHABHAI PATEL,SURAT V. .THE DCIT, CIRCLE-2(3), SURAT

ITA 425/SRT/2024

AI Insights

The case involves Maganbhai Sukhabhai Patel, who appealed against the order of the Commissioner of Income Tax (Appeals) confirming the addition of Rs.86,91,384 to his income for the assessment year 2014-15, attributed to a difference in long-term capital gain on the sale of land. The land was sold for Rs.8,54,40,000, and after adjusting the indexed cost of acquisition, a capital gain was declared. The Assessing Officer contested the valuation method used by the assessee, leading to a revised and higher assessment of LTCG. The Tribunal's decision to average the valuations from different authorities aimed to ensure a fairer assessment.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 26765 (ITAT-SURAT)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 15-04-2024
• Other Referred Cases: CIT-II vs. Kantibhai Revidas Patel, CIT vs. Kamararani Smt. Meenakshi Achi, Rajeshkumar Shantilal Patel vs. ITO, Sanjaykumar Ramanbhai Pate vs. ITO, ACIT vs. Shri Mahesh Chunilal Shah, Tejas Dineshbhai Patel vs. ITO, Vijaykumar M. Shah vs. DCIT, Shri Mahesh Naginbhai Patel vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVISH BHATT
• Assessee Lawyers: P. M. JAGASHETH
• Keywords: Fair market value; Valuation report; Rectification of order; Value adopted by valuation officer
• Section: 143(3); 250; 154; 143(1)

Judgement Text

" 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.425/SRT/2024 Assessment Year: (2014-15) (Physical Hearing) Maganbhai Sukhabhai Patel, Plot No.25, Shree Asharam Nagar, Jiyav Budiya Road, Bhestan, Surat - 395023 Vs. The DCIT, Circle -2(3), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: AOWPP9367B (Appellant) (Respondent) Appellant by Shri P. M. Jagasheth, CA Respondent by Shri Ravish Bhatt, Sr. DR Date of Hearing 14/11/2024 Date of Pronouncement 09/12/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 15.02.2024 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2014-15. 2. The grounds of appeal raised by the assessee are as under: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.86,91,384/- on account of alleged difference in long term capital gain on sale of land. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in not considering the cost of acquisition as on 01.04.1981 as filed by the assessee and referring to the DVO. 2 ITA No.425/SRT/2024/AY.2014-15 Maganbhai Sukhabhai Patel 3. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. Brief facts of the case are that that assessee filed return of income for AY.2014-15 on 31.10.2014, declaring total income of Rs.51,74,290/-. The case was selected for scrutiny under CASS and during the assessment proceedings, the Assessing Officer (in short, ‘AO’) found that assessee had sold land at Bloc No.83, T.P – 71, T.P – 47, Village: Vadod, Dist: Surat admeasuring 17,800 sq. meter for Rs.8,54,40,000/- with other co-owners. Share of the assessee was 20%, which comes to Rs.1,70,88,000/-. After adjusting the indexed cost of acquisition, the assessee has shown long-term capital gain (LTCG) of Rs.48,83,560/-. The assessee relied on the valuation report of Shri P. K. Desai, Government Register Valuer (RV), who has taken the rate at Rs.350/- per sq. mtr. as on 01.04.1981. The AO found the rate of assessee on the higher side. Based on the instances of sale at Vadod, AO asked assessee as to why rate of Rs.3.45 per sq. mtr. should not be adopted. The assessee objected to the rate of the AO and requested either to accept the rate of RV or refer to DVO to determine the fair market value (FMV) of land as on 01.04.1981. Considering request of assessee, AO referred the case to DVO. However, valuation report had not been received till the date of passing the impugned assessment order. Hence, AO adopted the rate of Rs.3.45 per sq. mtr. which was the existing rate in the nearby village Puna as on 01.04.1981. Accordingly, LTCG 3 ITA No.425/SRT/2024/AY.2014-15 Maganbhai Sukhabhai Patel was computed at Rs.1,69,62,672/- from which the LTCG of Rs.53,88,060/- offered by assessee was reduced and the remaining amount of Rs.1,15,84,612/- was added as LTCG. 4. Aggrieved by the order of AO, the assessee filed this appeal before the CIT(A). The CIT(A) found that the DVO has subsequently submitted the valuation report dated 29.12.2016 where he has estimated the rate of impugned property at Rs.59 per sq. mtr. as on 01.04.1981. He found that the AO has passed the rectification order on 27.01.2017 and re-computed the LTCG at Rs.1,40,79,444/- and added the difference of Rs.86,91,384/- instead of Rs.1,15,84,612/- in original assessment order. The assessee submitted before CIT(A) that report of DVO is questionable and the addition should be deleted. He relied on various decisions which were not found applicable because in those cases the appellant had categorically specified the defect in the valuation report of DVO. However, in the present case, the appellant has not detected any specific deficiency in the valuation report of DVO. Hence, addition was confirmed by CIT(A). 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) has filed two paper books containing various details including valuation report by RV and DVO as well as status of e-proceedings in case of other co-owners. He has also submitted allotment of GIDC Land on lease hold basis @ Rs.126/- per sq. mtr. He submitted that the other co-owners have not been taxed and hence the assessee should not be subjected to tax at higher rate. He submitted that 4 ITA No.425/SRT/2024/AY.2014-15 Maganbhai Sukhabhai Patel there is violation of Article 14 of the Constitution because the other co- owners were not taxed in a similar manner as in the case of assessee. He admitted that the cases of other co-owners are not taken up for scrutiny. The ld. AR has also relied on various case laws which are at serial nos.6 to 17 at pages 58 to 150 of the paper book i.e., (i) CIT-II vs. Kantibhai Revidas Patel, 42 taxmann.com 128 (Gujarat HC), (ii) CIT vs. Kamararani Smt. Meenakshi Achi, 158 taxman 4 (Mad.), (iii) Rajeshkumar Shantilal Patel vs. ITO, 127 taxmann.com 109 (Surat), (iv) Sanjaykumar Ramanbhai Pate vs. ITO, ITA No.374/SRT/2020 (ITAT Hyderabad), (v) ACIT vs. Shri Mahesh Chunilal Shah, ITA No.210/Ahd/2011 (ITAT Ahd.), (vi) Tejas Dineshbhai Patel vs. ITO, ITA No.12 to 15/SRT/2017 and (vii) Vijaykumar M. Shah vs. DCIT, 29 SOT 338 (Mumbai). He also submitted that the GIDC has allotted its land on lease hold basis for 99 years @ 126 per sq. mtr. and transfer fee @ 20% of prevailing allotment price (AP) and 1% non-utilization penalty per year was charged. 6. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) of the revenue supported the order of lower authorities. He submitted that the DVO has given opportunity to the assessee and called for objection of assessee which is at point no.10 of DVO Report. The assessee has not questioned valuation of DVO before the lower authority. In fact, assessee himself requested to refer the valuation to DVO. Regarding the question of equality before law in respect of other co-owners, the ld. Sr. DR submitted that the CIT(A) has not dealt with the issue in his appellate order because such grievance was not raised before him. He submitted that the cases of 5 ITA No.425/SRT/2024/AY.2014-15 Maganbhai Sukhabhai Patel other co-owners were not selected under CASS and hence the comparison is not tenable. Hence, he requested to sustain the addition confirmed by the CIT(A). 7. We have heard both parties and perused the materials available on record. We have also deliberated on the decisions relied upon by the ld. AR. Before deciding merit of the case, let us decide the issue raised by the ld. AR that the assessee cannot be treated differently from the other co-owners. The contention of ld. AR is prima facie not tenable because rate of tax on LTCG is same for assessee as well as other co-owners. It is only the computation of LTCG which is different due to rate adopted by AO for FMV as on 01.04.1981. We find that the case of the assessee was selected for scrutiny under CASS whereas the cases of other co-owners were not selected. It is seen from the status of e-proceeding in co-owner’s cases that no e- proceeding’s record was found in the Income-tax Portal. Hence, their cases were accepted u/s 143(1) of the Act. It is common knowledge that only a limited number of cases are randomly selected by the computer on basis of pre-determined risk parameters under CASS. In fact, the number of cases selected for security has reduced drastically over the years. Presently, less than 0.5% of the total returns filed in the country are selected for scrutiny assessment u/s 143(3) of the Act. This is because of the trust of the Government on voluntary compliance by the tax-paying citizenry of the country and to facilitate better tax-payers service. CASS scrutinises the ITRs using various risk parameters to select cases for scrutiny assessment. In 6 ITA No.425/SRT/2024/AY.2014-15 Maganbhai Sukhabhai Patel scrutiny assessment, a detailed scrutiny of the returned of income is carried out to confirm the correctness and genuineness of various claims, deductions etc., made by the taxpayer in the return of income. The bona fide and impartiality of CASS cannot be questioned on the ground of equity. As stated earlier, more than 99.50% of the cases are accepted by the Department and only processing u/s 143(1) of the Act is done accepting the returns filed by the assessees. Out of the above cases u/s 143(1) of the Act, only in few cases, adjustments are made after giving opportunity to the assessees. The cases of the other co-owners were not selected for scrutiny under CASS. Hence, the AO had no opportunity to examine their cases on merit because their returns have only been processed u/s 143(1) of the Act and not selected for scrutiny under CASS. Drawing parity between cases of 143(1) with the cases u/s 143(3) is not proper and reasonable because they are not comparable. As per Article 265 of the Constitution, no tax shall be levied or collected except by the “Authority of law”. Having accepted the power of the Government to levy tax, its decision to reduce the number of cases for scrutiny cannot be said to be discriminatory so as to invite Article 14 of the Constitution. It may be stated that CASS has not been held to be arbitrary and discriminatory being violative of Article 14 of the Constitution inasmuch as the classification of cases for scrutiny or non-scrutiny assessment is concerned. The clarification is based on intelligible differential and has direct nexus with the objective sought to be achieved by the Government. Hence, the objection of the ld. AR is rejected and we proceed to decide the issue on merit. 7 ITA No.425/SRT/2024/AY.2014-15 Maganbhai Sukhabhai Patel 7.1 The AO had originally taken the rate of Rs.3.45 per sq. mtr. as on 01.04.1981 as against rate of Rs.350 adopted by the assessee. Subsequently, the DVO has determined the rate at Rs.90 per sq. mtr., which was adopted by AO in rectification order u/s 154 of the Act. There is wide variation in the rates adopted by the DVO and the RV. The ld. AR has also given the rate of sale deed on lease hold basis by GIDC in the year 1981 which was Rs.126 per sq. mtr. Two pieces of land were allotted by GIDC for a lease period of 99 years which could be renewed for another 99 years. The transfer of utilized properties is permitted by the Corporation by charging transfer fees based on utilization of properties. The transfer of non-utilized / open industrial property is permitted by the Corporation by charging transfer fee @ 20% of prevailing AP and 1% non-utilization penalty for upto maximum of 10%. The ld. AR has relied on the decisions of ITAT, Surat in case of Shri Mahesh Naginbhai Patel vs. ITO, ITA No.1070/Ahd/2017, dated 18.07.2019 where there was variation in the value of land rate adopted by the RV, DVO and CIT(A). The ITAT was of the opinion that it would be fair and reasonable if average rate of the RV and DVO and CIT(A) is considered. In this case, we find that there are three rates by RV, DVO and GIDC. It would be fair and reasonable if the average rate of the three authorities is considered to determine the rate as on 01.04.1981. The rate of GIDC after adding the transfer fee of 20% would be Rs.151/- (i.e., Rs.126 + 20% of Rs.126). Thus, the average rate would be Rs.197/- per sq. mtr. [i.e., (350 + 90 + 151) / 3]. Accordingly, the AO is directed to work out the LTCG by taking rate of 8 ITA No.425/SRT/2024/AY.2014-15 Maganbhai Sukhabhai Patel Rs.197/- as FMV as on 01.04.1981 for the impugned land under consideration. The ground is partly allowed. 8. In the result, the appeal of the assessee is partly allowed. Order is pronounced in the open court on 09/12/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 09/12/2024 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat "