Income Tax Appellate Tribunal - Delhi
Nakul Kapur, New Delhi vs Acit, New Delhi on 1 October, 2018
In the Income-Tax Appellate Tribunal,
Delhi Bench 'E', New Delhi
Before : Shri Amit Shukla, Judicial Member And
Shri L.P. Sahu, Accountant Member
WTA No. 01 & 02/Del/2017
Assessment Year: 2010-11 & 2012-13
Nakul Kapur, B-34, Malcha Marg, vs. ACIT, Circle 53(1),
Chankyapuri, New Delhi. New Delhi.
PAN - AASPK5144M
(Appellant) (Respondent)
Appellant by Sh. B.K. Anand, C.A.
Respondent by Sh. Surjit Kumar, Sr. DR
Date of Hearing 04.07.2018
Date of Pronouncement 01.10.2018
ORDER
Per L.P. Sahu, A.M.:
These two appeals have been filed by the assessee against the orders of the ld. CIT(A)-18, New Delhi for the assessment years 2010-11 and 2012-13 respectively. Since the issues involved in these appeals are identical and the grounds raised are common, the same were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. We first take up the appeal for assessment year 2010-11, the decision on which shall equally apply to the appeal for A.Y. 2012-13. The grounds raised read as under :
1. That the learned CIT (A) erred in not holding that the AO having failed to refer the valuation of the properties as assessed by him to a Valuation Officer in terms of section 16A of the Wealth Tax Act and the Rules thereunder hence the additions made to the returned wealth could not be sustained on the facts of the case.WTA No. 01 & 02/Del/2017 2
2. That on the facts and circumstance of the case the authorities below erred in estimating the assessee's one half share in each of the two plots of land at village Tusiyana, Dadari, Gutam Budh Nagar, Greater Noida at Rs.2,91,600 and Rs.10,49,760 respectively, arbitrarily on pure assumptions which is contrary to law.
3. That on the facts and circumstance of the case the authorities below erred in estimating the assessee's half share in property at Village Daulatpur, Nasirabad, Distt. Gurgaon at Rs.2.50 crores arbitrarily on pure assumptions which is contrary to law.
4. That the orders of the authorities below being contrary to the facts of the case and in law the appeal be allowed.
2. The brief facts of the case are that the assessee filed return of declaring wealth at Rs.1,30,12,936/- on 21.12.2010, which was selected for scrutiny and notice u/s. 16(2) of the Wealth-tax Act was issued to the assessee. During the scrutiny proceedings, the Wealth-tax Officer noticed that assessee was the owner of two plots of land at village Tusiyana Dadri, Distt. Gautam Budh Nagar, Greater Noida, of which no value was declared by the assessee in its return of income. Both these plots were stated to have been purchased by assessee on 06.07.2006 for Rs. 3,24,000/- and Rs.11,66,400/- and to be under the acquisition proceedings. However, the assessee has not declared the value of these two plots in the Wealth-tax Return. The Wealth-tax Officer was of the opinion that since the said properties were not acquired by the Government till the date of assessment, it was taxable in the hands of the assessee under the Wealth-tax Act and it was imperative on the part of the assessee to declare the value of these properties in its return of wealth. The Wealth-tax Officer, therefore, estimating the increase in the value of properties by 20% per annum, determined the total value of above properties at Rs.5,83,200/- and Rs.20,99,250/- respectively, from which 50% share of assessee amounting to WTA No. 01 & 02/Del/2017 3 Rs.2,91,600/- and Rs.10,49,760/- was added to the declared wealth of the assessee for the year under consideration.
3. Similarly, the assessee declared another property at Village Daulatpur, District Gurgaon measuring 15 Kanal 12 Marle, but had shown its value at nil in the computation of wealth. This property was also claimed to be under acquisition proceedings. This property was also stated to be purchased on 18.03.1976 for Rs.39,600/-. The Wealth-tax Officer opined that this property was also not acquired by the government and therefore, after considering the circle rate applicable to the property, the Wealth-tax Officer determined the total value of property at Rs.2.50 crores and added to the total wealth of the assessee. Aggrieved by the assessment order, the assessee carried the matter in appeal before the ld. CIT(A), who after considering the detailed submissions of the assessee and case laws cited, sustained the additions made by the Wealth- tax Officer vide impugned order. Aggrieved, the assessee is in appeal before the Tribunal.
4. The ld. AR of the assessee reiterating the submissions made before the authorities below, also submitted a written synopsis wherein he has relied on several decisions, which reads as under :
"Before CIT (A) the assessee's stand was - (a) That the valuation of properties adopted by the AO being ad hoc and arbitrary and further the additions made disregard the provision of section 7 and CBDT Circular No.96 of 1972 (at 16 of PB), which the AO was bound to follow, being bad in law are unsustainable. In this context reliance was placed on the judgement of the Delhi High Court in Sharbati Devi Jhalani v. CWT (reported as 159 ITR 549 (Delhi) abstract enclosed), which has laid down the procedure that the AO is to statutorily follow while adopting the value of assets and in absence of which the additions cannot be sustained. The CIT (A) disagreed with the assessee for the reasons (i) in his opinion the said judgment stood reversed by the Apex Court order in Bharat Hari Singhania (reported as 73 Taxman 3 (SC), and (ii) that reference u/s 16A or the CBDT Circular referred above would only apply if the WTA No. 01 & 02/Del/2017 4 assessee filed a registered valuer's report; that in absence of such report the AO could proceed and estimate value himself.
(b) It was argued that the basis on which the AO proceeded to value these three properties is arbitrary and bad in law as the order of the AO is not a speaking order and if at best the only value that could be assessed in respect of such properties notified for acquisition or acquisition proceedings taken it could be the amount of compensation fixed. As no compensation amounts are fixed so far there can be no value assessed in respect of the said properties. Reliance was also placed on the order of the ITAT order in Kesho Pass Bhutain vs. WTO (reported as8 ITD 67).
(c) It was also argued that the AO failed to consider the fact that the said three properties having been notified for acquisition under the Land Acquisition Act and/or acquisition proceeding pending there against there was unlikely to be any market value of the said properties as no buyers would come forth for their purchase and that the assessee had any right to deal therewith.
The submissions were dismissed by the CIT (A) and he confirmed the additions made to the retuned wealth, which are now subject matter of the grounds in appeal before the Honourable Members.
4. Before the Hon'ble Members: Humbly submitted-
(a) Since the filing of the appeal, it was learnt that the Hon'ble Members ITAT Bench "B" Pune in WTA Nos.02 to 07/PN/2013 have considered the assessment of wealth tax in respect of lands acquired under the Land Acquisition Act. Accordingly, as a facts in the present appeal were similar to those before the Hon'ble Pune Bench the assessee filed an additional ground of appeal alongwith copy of that order. As the ground of appeal emanates from issues discussed before the authorities below, it is prayed that the additional ground is accepted and disposed off as Ground No. 1 in the appeal.
It is submitted that once proceedings under the Land Acquisition Act had been notified and action started by the concerned Sate Government/ Agencies the Land ceased to belong to the assessee and if that be the position they cannot be said that the said properties 'belong' to the assessee so as to come within the scope of the charging section 4 of the W.T. Act. It is a matter of record that the acquisition proceeding had been notified by the respective State Government of U.P. and Haryana in respect of the three plots and therefore these ceased 'to belong' to the assessee. Further, nowhere in their respective orders the Authorities below have stated that the assets belonged to the assessee, they only state that the assessee is the 'owner' of the property and therefore liable to wealth tax. The Authorities below failed to appreciate that is a difference in the word 'owner' as used in the various provisions of the Income Tax Act and the words 'belonging to' the assessee used in the charging section 4 of the W.T. Act. Such that the asset belongs to the assessee, the assessee should be both in possession and control of the property and the assessee is exploiting the property for his own purpose and if that be not so, the asset cannot be said to 'belong to' the WTA No. 01 & 02/Del/2017 5 assessee as to come under preview of charging section 4 of the W.T. Act. In this context support is drawn from following Conclusion in the judgment of Delhi High Court in CWT v. Mohan Exports India Pvt. Ltd, (reported as 387 ITR 252 (Del), "34 The resultant position is that in a situation like the present one where the possession and control of the property vests with the Assessee to the exclusion of everyone else and it is the Assessee who is exploiting the property for its own purposes, it is not open to the Assessee to contend that the property in question does not belong to it...."
(b) Ground No.2 (old Ground No.1) relates to the dismissing of assessee's stand that the AO having failed to refer the valuation of the properties to a Valuation Officer the ad hoc and arbitrary addition made by the AO cannot be sustained. The legal position in this regard has been explained by the Delhi High Court in the case of Sharbati Devi Jhalani (referred above) and the CIT (A) erred in drawing his conclusion that the Hon'ble the Apex Court had completely over ruled the said judgement. It was on the substantive issue whether there can be two different dates one of the date on which the Balance Sheet of the Company is drawn and the other the valuation date on which the wealth tax assessment is framed that, whereas,, the Delhi High Court held that if these two dates are different then the Rules of valuation as per Schedule to the Wealth Tax Act would not apply. However, the Supreme Court over ruled this stating that for application of the said Rules of Valuation it was immaterial what the date of closing of accounts of the assessee company may be different while determining the value of its share for wealth tax purposes closest to the valuation date under the W.T. Act. The Apex Court had not passed any judgment adverse to the procedure to be followed by AO in valuation of properties as per section 7 and Rule 3B Respectively of W.T. Act and Rules or the CBDT Circular referred to above. Relying on the procedure as explained by the Delhi High Court it is humbly submitted that the order of the AO in making an ad hoc addition contrary to section 16A, Rule 3B of Wealth Tax Rule and CBDT Circular referred to above is not sustainable and be deleted.
Another mistake in CIT (A)' s order is that he has not fully read either section 16A or the CBDT Circular. Besides the reference to Valuation officer of cases where AO is not satisfied with the valuation report of recognized valuer the said provisions also applied to other cases', i.e. cases where the assessee files no valuers report but in the opinion of AO the market value exceeds the declared value. To that extent CIT (A) order is incorrect on this conclusion of his. (para 4.14 of CI order at page 4 thereof).
(c) Grounds Nos.3 & 4 (old Ground 2 & 3) The grounds are inter-related as much in that they both deal with ad-hoc and arbitrary adoption of value as on the valuation date of the said three properties, namely, the two properties at NOIDA and the property at Gurgaon. A plain reading of the order of the AO will show that it has been passed without application of mind such that even the properties have been given the same number and speaks of the careless approach of the AO . The AO has not anywhere in the assessment order quoted or explained the evidence or data on the basis of which she has arrived to the conclusion that on an average there is "20% increase in the value of properties in NOIDA Sector". Similarly, ambiguity exists in respect of the Gurgaon property where she states "as per the Circle rate available", but WTA No. 01 & 02/Del/2017 6 has not stated what was the Circle rate and whether it related to agricultural lands or plotted areas and how she calculated to arrive at figure of Rs.2.50 crores. The AO has not stated whether the rates adopted for any of the properties were on any technical or statistical data she got from any State Agencies or on the basis of then prevailing wholesale price index or consumer price index or even the inflation schedule for indexation given under the Income Tax Act for determining capital gains. It is settled law that that where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. The rule requiring reasons to be given in support of an order is, like the principle o/audi alteram partem, a basic principal of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law. Reliance is placed on Rasikla Ranchodbhai v. CWT reported as 121 ITR 219 (Gujarat), abstract enclosed). In the absence of such speaking order the additions made should not have been sustained by the CIT(A). It is prayed that the same be deleted and appeal allowed.
5. Reply to specific comments by CIT[Aj in his order: The learned CIT(A) has again erred in para 4.36 (page 9) of his order in holding that the properties had not been acquired. The fact is that the properties were acquired and the owners thereof had challenged the acquisition proceedings. The matter was sub-judice to the extent the authorities were restraint further steps until the Court decided one way or the other, but to say that there had been no acquisition of properties will be equally wrong as even till this day the assessee has no rights that he can exercise in respect thereof such as the department can hold the asset 'belonged' to the assessee to be included under the charging section and nor have the authorities withdrawn the notifications or annulled the acquisition proceedings. Similarly, on page 10 where the CIT(A) states that the assessee has taken possession of lands at NOIDA, it is factually incorrect because till date the possession has not been transferred (kindly see Pgs. 37- 38 and 40-41 copy of RTI reply translation in English filed before him], even though there was a letter asking him to take possession subject to the acquisition proceedings pending. Also in para 4.3.8 on page 10 of his order, the CIT(A) erred in holding that the assessee has not made any comment on valuation of land. The learned CIT(A) erred that in Grounds of Appeal in Ground 2(b) (page 19 of PB) was specifically challenging that the additions were arbitrary and bad in law and need to be deleted.
In respect of the Gurgaon property CIT(A) para 4.4.5 at page 11 of his order refer to earlier ground No. 2 as per grounds of appeal relating to NOIDA properties and not to Gurgaon property. In this para CIT(A) admits that copies of RTI reply from tehsildar confirm that the said properties were acquired under section 6 of Land Acquisition Act. Therefore, it does not lie on CIT(A) to state in his order the properties were only notified but not acquired and therefore, his order is bad in law as it is based on erroneous assumptions.
In para 4.4.8 of his order, the CIT (A) quotes from the judgment of Punjab & Haryana High Court (PB pgs. 23-29), "it is as admitted fact that during the pendency cases dispossession of petitioners remained stayed under the orders passes by this Court or the WTA No. 01 & 02/Del/2017 7 Hon'ble SC. Those interim orders are still operating." But he failed to note or conveniently overlooked the fact that on Para 8 of the order (here PB pg. 28), the court specifically restrained the petitioners (which included the assessee) from alienating and/or or changing the nature of their released land for a period of one year from the date of receipt of certified copy of the order, which was one year from May 20,2014. That is to say that prior to this property stood acquired on valuation date 31st March 2010 . Also that the assessee could not exercise rights on the property as belonged to him and explained by Delhi High Court in Mohan Exports case narrated above. Also in his concluding paragraph he just sums up saying "following the same reasons taken by me in ground no. 2, this ground also stands dismissed." But there were various reasons, some common but not all. To that extent the learned CIT(A) order in disposal of the ground cannot be said to be a peaking order and needs to be annulled."
5. On the other hand, the ld. DR, relied on the orders of the authorities below and submitted that the properties are still in possession of the assessee. Merely because the notification was issued by the Government, would not mean to assume that the properties were acquired by the Govt., as no title stood transferred to the Government. Therefore, the ld. Authorities below are justified to hold that the said properties were the capital assets of the assessee for the purpose of wealth-tax. The case laws cited by the assessee are not applicable to the present case.
6. We have heard the submissions of both the parties and have gone through the entire material available on record including the decisions cited by the assessee. From the facts, narrated above, we observe that what we have to decide in these appeals is (i) whether under the facts and circumstances of the case, the ld. Authorities below are justified in determining the valuation of such properties for the purpose of wealth tax, which were subjected to acquisition proceedings under the Land Acquisition Act (LA Act) and if the answer to this question comes in affirmation then (ii) whether the Wealth-tax Officer herself was competent to estimate the valuation of properties for the purpose of wealth Tax in terms of Sec. 16A of WT Act and Rule 3B of the WT Rules.
WTA No. 01 & 02/Del/2017 87. Adverting to the first question, the contention of the ld. AR has been that that once the properties in question were notified for acquisition under the LA Act, and acquisition proceedings were pending against them, there was no reason to declare any value of such properties in the computation of Wealth. It is not in dispute that the impugned properties were not acquired by the Govt. And mere notification u/s. 4 of the LA Act does not amount to acquisition by the Govt. or cessation of assessee's right on the impugned properties. In this context, the ld. CIT(A) has considered various provisions of the LA Act and various eventualities under which such notifications would cease to operate. It is also not the case of the assessee that the impugned properties had been acquired by Government or any compensation there for was awarded to the assessee u/s. 11 of the LA Act. The assessee has challenged by way of writ petition before the Punjab & Haryana High Court, which is placed at paper book page 24 to 29, where the Hon'ble High Court has decided as under :
[7] The concept of pendente lite having been explained by the Hon'ble Supreme Court, the acquisition of petitioners' land is declared to have lapsed. Consequently, the writ petitions are allowed; the impugned notifications dated 13.11.1981 and 15.11.1984 and the award dated 02.05.1986 qua the petitioners are set aside. The respondents, however, shall be at liberty re-acquire the subject property in accordance with law and provisions of the 2013 Act.
[8] Having held that, we cannot be oblivious of the fact that the land was acquired for the regulated development of Gurgaon City. As a consequence of the lapse of acquisition, if the petitioners succeed in changing the nature of land or if they create third party rights, it is likely to be detrimental to the 'public interest' as several basic amenities like roads, sewerage or park etc. would also be adversely affected. We, thus, restrain WTA No. 01 & 02/Del/2017 9 the petitioners from alienating and/or changing the nature of their released land for a period of one year from the date of receipt of certified copy of the order. No construction shall be raised by the petitioners on their respective sites and the District Administration shall ensure that nature of the land is not changed by anyone.
[9] The aforesaid period of one year has been fixed so as to enable the State authorities to consider and re-acquire the subject land in accordance with the provisions of 2013 Act, if need be. If no fresh acquisition takes place during the period of one year, the petitioners shall be at liberty to utilize their land in the manner as may be permissible under the local laws."
Further, the technology Parks Ltd. on 21.04.2010 had called the assessee for taking possession of the property. The letter is at page 6 of the paper book. However, the possession was not taken by the assessee and the objections had been filed with other members. In view of the above, the assessee was not enjoying the property as on the date of valuation of net wealth. Therefore, it is outside the definition of net wealth as defined in section 2 of the WT Act, 1957 as well as various decisions by Hon'ble Courts. Hon'ble Chandigarh Highcourt has also made restriction as per para 9 of their order for one year from the date of receipt of writ petition order. Keeping in view all these things, the impugned properties taken by the WTO for the purpose of computation of net wealth is not taxable. Accordingly, the first question on the issue of determining the valuation of such properties for the purpose of wealth tax, which were subjected to acquisition proceedings under the LA Act, is decided in negative and therefore, we need not to enter into the second question regarding competency of WTO to estimate the valuation of properties for wealth tax purposes. As a result, the appeal of the assessee deserves to be allowed.
WTA No. 01 & 02/Del/2017 1008. As already noted, the issues involved in appeal for A.Y. 2012-13 are identical to those involved in appeal for A.Y. 2010-11 and relate to the same properties, our above decision shall apply mutatis mutandis in appeal for A.Y. 2012-13 also. Accordingly, WTA No. 02/Del/2017 also deserves to be allowed on the same line.
9. In the result, the appeals are allowed.
Order pronounced in the open court on 01.10.2018.
Sd/- Sd/-
(Amit Shukla) (L.P. Sahu)
Judicial member Accountant Member
Dated: 1st October, 2018
*aks*
Copy of order forwarded to:
(1) The appellant (2) The respondent
(3) Commissioner (4) CIT(A)
(5) Departmental Representative (6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Delhi Benches, New Delhi