NARENDRA SHANKAR GAVAND,MUMBAI V. ITO, WARD 3(1), THANE, THANE

ITA 1057/MUM/2024

AI Insights

The case involves Narendra Shankar Gavand, who appealed against the order of the National Faceless Appeal Centre, which upheld the additions made by the Income Tax Officer under section 50C and assessed long-term capital gains on the sale of a property in Bhandup, Mumbai. The property was sold for a consideration of Rs. 270 lakhs, while the stamp duty value was Rs. 50,837,000. The assessee contested the valuation and the additions made, arguing that the District Valuation Officer had assessed the property at a lower value of Rs. 28,070,000, which was not accepted by the lower authorities. The Tribunal, after considering the submissions and the DVO's report, ruled in favor of the assessee, rejecting the higher deemed value and the consequent tax additions.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473094 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-07-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 07-03-2024
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KUMAR AMBASTHA
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Business income; Revised return; Sale consideration of property below Jantri Value; Fair market value; Cost of acquisition; Capital Gains; Valuation report
• Section: 147; 148; 50C

Judgement Text

" Page | 1 ITA No.1057/M/2024 A Y : 2010–11 Narendra Shankar Gavand, Thane Versus ITO, Thane IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI RAJ KUMAR CHAUHAN, JM ITA No. 1057/MUM/2024 Vs. A.Y.2010-11 Narendra Shankar Gavand, A-303, Pushp Parag, CHS Pokharan Road No.1, Samta Nagar, Thane (West) ITO, Ward 3(1), Thane (Appellant) (Respondent) PAN AEHPG 2061E Assessee by Shri Subodh Ratnaparkhi Revenue by Shri Ashok Kumar Ambastha, Sr. (DR), Date of hearing 31st July, 2024 Date of pronouncement 08th October, 2024 O R D E R PER PRASHANT MAHARISHI, AM: 1. ITA No. 1057/M/2024 is filed by Mr. Narendra Shankar Gavand (The assessee/appellant) for Assessment Year 2010 – 11 against the appellate order passed by the National faceless appeal Centre Delhi (the learned CIT – A) dated 9/1/2024 wherein the appeal filed by the Page | 2 ITA No.1057/M/2024 A Y : 2010–11 Narendra Shankar Gavand, Thane Versus ITO, Thane assessee against the assessment order passed under section 143 (3) read with section 147 of The Income Tax Act 1961 (the act) on 16/12/2017 by The Income Tax Officer, Ward 3 (1), Thane (the learned AO) was dismissed and therefore assessee is aggrieved and is in appeal before us. 2. Assessee has raised following grounds of appeal before us: “1. The Hon. CIT(A) erred in upholding the addition of Rs. 15,25,568/-, made by the Id AO, as business income of the appellant, on account of application of section 50C of the I. Tax Act 1961, failing to follow the valuation determined by the District Valuation Officer (DVO) in respect of the same transaction of sale of share in revisionary interest in a plot of land at Bhandup (W), Mumbai 2. The Hon. CIT(A) erred in upholding the addition of Rs.60,72,250/- made by the ld AO, as long term capital gains, considering the wrongly determined sale consideration amount on sale of share in revisionary interest in a plot of land at Bhandup (W), Mumbai, to be income of the appellant liable for tax, without granting appropriate deduction for indexed cost of acquisition of such rights, as per provisions of section 55(2)(b)(ii) of the I.T. Act, 1961 and incorrectly dismissing the specific ground of appeal no. 3 raised before the Hon. CIT(A) as general/consequential in nature. 3. The appellant craves leave to add, alter, amend, delete and/or vary any of the above grounds of appeal/relief claimed at any time before the decision of the appeal.” 3. Brief facts of the case shows that assessee has filed return of income for Assessment Year 2010 – 11 on 12/4/2017 at a total income of Rs. 169,350/–. The revised return was also filed at Rs. 371,630/–. Page | 3 ITA No.1057/M/2024 A Y : 2010–11 Narendra Shankar Gavand, Thane Versus ITO, Thane 4. There was an information during the year under consideration that the assessee has sold an immovable property for a deemed consideration of Rs. 50,837,000/- and the assessee has not filed the return of income, the capital gain arising out of such sale consideration was held as an escaped income. The case for the assessee was reopened under section 147 of the act by issuing notice under section 148 of the act on 31/3/2017. The reasons recorded clearly showed that despite selling the property for such a huge consideration the assessee has not filed any return of income. The assessee submitted a copy of the return filed on 12/4/2017. 5. Subsequently the notice under section 143 (2) was issued on 13/6/2017.During assessment proceedings, the assessee submitted that he is engaged in the business of civil work of contract and is supplying building material to small builders and developers and provide unskilled labourers for small construction activities. 6. It was further stated that assessee along with his mother and two brothers was holding 25.625 percentage in an undivided property in land situated at Bhandup, Mumbai suburban district since 1957 and same was leased to Newchem products Corporation since 1957. Subsequently, land was sold vide an agreement dated 1/9/2009 for sale consideration of Rs. 270 lakhs. The ready reckoner value of the property was Rs. 50,837,000/- at the time of registration of the document. It was submitted that assessee has only on 6.40% of the share in the above Page | 4 ITA No.1057/M/2024 A Y : 2010–11 Narendra Shankar Gavand, Thane Versus ITO, Thane property where the assessee received the consideration partially in Financial Year 2009 – 10 and the balance was received subsequently. The assessee was questioned that why the sale consideration should not be taken at Rs. 50,837,000 being stamp duty value of the property which is sold for Rs. 270 lakhs. The assessee submitted that that in the case of the other co-owners of the aforesaid property where the identical disallowances have been made are pending before the CIT appeal and the matter has been referred to the district valuation officer, valued the property at Rs. 28,037,000/–. The assessee also submitted the revised working as per the valuation report of the district valuation officer. 7. The learned assessing officer held that total deemed sale consideration of the property is Rs. 50,837,000/– the actual consideration is Rs. 270 lakhs. Therefore the 6.40% of the total share of 25.625% of the share of the family of the assessee is chargeable to tax in the hands of the assessee and therefore he computed such difference by not disclosing the sale consideration as business income of the assessee applying the provisions of section 50 C of the act. 8. The AO further computed the capital gain holding that out of the total sale consideration of Rs.270 lakhs, the assessee along with the other co owners has received Rs. 10,125,000/- and the share of the assessee is Rs. 2,532,000. From the balance consideration of Rs. 16,875,000/- the assessee has received Rs. 3,540,250/–. Page | 5 ITA No.1057/M/2024 A Y : 2010–11 Narendra Shankar Gavand, Thane Versus ITO, Thane Therefore, the entire share in the hands of the assessee is Rs. 6,072,250/– same was treated as a long-term capital gain earned by the assessee. Accordingly, the income of the assessee was assessed at Rs. 7,636,457/– as per the assessment order passed under section 143 (3) of the act dated 4/12/2017. 9. The assessee aggrieved with the same contested it before the learned CIT – A, wherein it was submitted that even the learned district valuation officer has determined the value of the above property in the case of his brother at Rs. 28,070,000/–. Despite the above fact, the learned CIT – A confirmed the action of the learned assessing officer. The learned CIT – A noted that the learned assessing officer has passed the order after the report of the district valuation officer but did not discuss the finding of the report. Although the report was called in the case of the brother of the assessee, the learned CIT appeal on examination of the report of the DVO found certain anomalies in the same and therefore he also rejected the report of the DVO. It was held by the learned CIT – A that the report of the DVO is not acceptable and therefore the confirmed the entire addition of Rs. 15,25,568/– and Rs. 6,072,250/–. Accordingly, the appeal of the assessee was dismissed. 10. The assessee is aggrieved with the same and is in appeal before us. The learned authorised representative submitted a paper book containing 36 pages and written submission. The same was reiterated before us. Page | 6 ITA No.1057/M/2024 A Y : 2010–11 Narendra Shankar Gavand, Thane Versus ITO, Thane 11. The learned Departmental Representative submitted the orders of the learned lower authorities. 12. We find that assessee along with his 2 brothers and mothers held 25.625% ownership share in a plot of land admeasuring 13,337 m² at Bhandup, Mumbai wherein the share of the assessee was 6.40%. The above land was leased to one company which was running its own factory. As per the registered agreement dated 1/9/2009 the above property was sold to that company for a lump-sum consideration of Rs. 270 lakhs. As on the date of the registration of the sale agreement the stamp duty value of the above property was Rs. 50,837,000. As the assessee has received the actual sale consideration of Rs. 270 lakhs, it computed the cost of acquisition of the above property at Rs. 1043,39,408/- computed long-term capital loss of 7,73,39,408/- and submitted that the share of the assessee is 6.40% thereof amounting to a long- term capital loss of Rs. 19,319,384/-. 13. Meanwhile in the case of the brother of the assessee, the report of the DVO was called for which was furnished on 31/05/2017 which is placed at page number 26 of the paper book. The fair market value of the property was determined by the DVO at Rs. 28,070,000/-. Despite the above fact, neither the AO nor the learned CIT – A accepted the same. We find that when the property is valued by the district valuation officer, he is an expert, neither the learned AO nor the learned CIT – A has any right to reject the same so far as the computation of Page | 7 ITA No.1057/M/2024 A Y : 2010–11 Narendra Shankar Gavand, Thane Versus ITO, Thane capital gain under section 50 C is required to be determined. We also find that the actual sale consideration shown by the assessee is Rs. 270 lakhs whereas the deemed consideration determined by the district valuation officer is of Rs. 28,070,000/–. Thus, there is a difference of Rs. 1,070,000/- in the valuation adopted by the learned district valuation officer and actual sale consideration. We find that hundred and 10% of the actual sale consideration would be higher than the amount of the valuation adopted by the district valuation officer. Therefore, even otherwise, no addition could have been made under the provisions of section 50C of the act. Accordingly, we direct the learned assessing officer to delete the addition made of Rs. 1,525,568/– as well as of Rs. 6,072,250/–. Accordingly, both the grounds of the appeal are allowed. 14. In the result appeal filed by the assessee is allowed. Order pronounced in the open court on 08/10/2024. Sd/- Sd/- Sd/- Sd/- (RAJ KUMAR CHAUHAN) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 08.10.2024 Dragon Page | 8 ITA No.1057/M/2024 A Y : 2010–11 Narendra Shankar Gavand, Thane Versus ITO, Thane Copy of the Order forwarded to : The Appellant, The Respondent, The CIT, The DR ITAT & Guard File BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai "