Income Tax Appellate Tribunal - Kolkata
Vikash Bose, Kolkata vs Assessee
I . T. A . No .: 1 2 3 6 / KO L / 2 0 13 ,
A s s es s m e n t ye ar : 2 0 0 8 - 0 9
Page 1 of 9
IN THE INCOME TAX APP ELLATE TRIBUNAL,
KOLKATA 'C' BENCH, KOLKATA
Coram : Shri Mahavir Singh, Judicial Member
and Shri Abraham P. George, Accountant Member
I.T.A . No. 1236/KOL/ 2013)
Asse ssment ye ar : 20 08-2009
Sri Vivek Bo se ,............ ............. ......... .... ....... ............Appellant
1A, S hyam Bo se Road,
Kolkata-700 027
[PAN : AEAPB 0506 L ]
-Vs.-
Income Tax Office r,............ ...... ......... .,... ...............Res pondent
Wa rd-29(4) ,
Kolkata
Appearances by:
Shri Soumitra Chowdhury & Shri T.K. Chakraborty, A.R. fo r the appellant
Dr. Swetabh Suman, CIT, fo r the Respondent
Date of co ncluding the hearing : De cember 11, 2013
Date of pronouncing the orde r : De cember 19, 2013
O R D E R
Per Abraham P. George :
1. In this appeal filed by the assessee directed against an order dated 04.03.2013 of l d. Commissioner of Income Tax (A ppeals)-XVI, Kolkata, it has raised six grounds of which grounds 5 & 6 are general and need no adjudication.
2. Through his grounds 1 to 3, assessee assails the determination of indexed cost of acquisition with reference to 12.97 Kattah of land out of total 27.69 Kattah l and sold by him during the relevant previous year and consequential increase in capital gains computation done by the Assessing Officer.
3. Facts apropos are that the assessee had sol d 27.69 Kattah of land alongwith a structure having built up area of 878.34 sq. Mtrs. for a consideration of Rs.4,50,00,000/-.Stamp Valuation Authority valued the property at Rs.4,70,00,000/-. In its computation of capital gains, the assessee had worked out and deducted indexed cost of acquisition of Rs.4,03,26,616/-, which read as under :-
I . T. A . No .: 1 2 3 6 / KO L / 2 0 13 , A s s es s m e n t ye ar : 2 0 0 8 - 0 9 Page 2 of 9 Indexed cost of 12.97 Kattah land based on cost as on 1.4 .19 81-
Rs.3,50,000 x 551/100 = Rs.2,50 ,12 ,645/-
Indexed cost of 14.72 Kattah land purchased on 12.08.97 from Nita Bose at Cost Rs.91,99,500/- x 551/331 = Rs.1,53,13,971/-
____________________________ Rs.4,03,26,616/-
______________________________ Assessing Officer made a reference to the Departmental Valuation Officer for fixing the fair market value as on 1.4.1981. According to him, assessee had showed excessive cost for 12.97 Kottach land as on 1.4.1981, for indexation. Departmental Valuation Officer gave a report on 24.12.2010 by which he fixed the cost as on 1.4.1981 of 12.97 Kattah of land at Rs.11.90 lakhs. Accordingly the indexed cost of acquisition of this land came to Rs.65,56,900/-. The total indexed cost of acquisition thus came to Rs.2,18,70,871/- against Rs.4,03,26,616/- shown by the assessee.
There was no dispute with regard to the indexed cost of 14.72 Kattah of land purchased by the assessee on 12.08.1997 which was a part of the total 27.69 Kattah of land sold. Since indexed cost of acquisition assessed by the Assessing Officer came down drastically, resultant capital gains was substantially increased.
4. Assessee's appeal before the ld. CIT(Appeals) against adoption of valuation done by the Departmental Valuation Office r for 12.97 Kattah of land was unsuccessful.
5. Now before us, ld. AR prayed for admission of an additional ground of appeal, which according to him was purely a legal one. According to him the additional ground assailed the reference to DVO made by the Assessing Officer under section 55A of the Act. In his opinion such reference was illegal and substitution of the cost of acquisition based on the report of DVO was arbitrary and unjustified. Ld. DR did not raise any I . T. A . No .: 1 2 3 6 / KO L / 2 0 13 , A s s es s m e n t ye ar : 2 0 0 8 - 0 9 Page 3 of 9 objection to admission additional ground filed by the assessee. Hence the additional ground is admitted for adjudication.
6. Ld. Counsel for the assessee in support of the additional ground mentioned that DVO's report was sought under section 55A of the Act. Relying on the decision of Hon'ble jurisdictional High Court in the case of CIT -vs.- Umedbhai International (P) Ltd. [2011] 330 ITR 506, Ld. Counsel submitted that unless and until the value declared by the assessee based on a valuation done by a Registered Valuer was found to be lesser than fair market value, Assessing Officer could not make a reference under section 55A of the Act. Otherwise Assessing Officer has to form an opinion that the fair market value of the asset exceeded the value of the asset as claimed by the assessee. According to him, both these conditions were not satisfied. Hence reference made under section 55A of the Act was invalid and substitution of the cost given by the assessee which was based on Registered Valuer's report coul d not have been done.
7. Per contra, ld. DR submitted that reference under section 55A of the Act coul d be made once the Assessing Officer reached an opinion that value shown by the assessee was incorrect. Assessing Officer had clearl y mentioned that assessee had shown very high fair market value as on 1.4.1981 and, therefore, reference made under section 55A was justified.
8. We have heard the rival submissions and perused the material available on record. Assessee had worked out the indexed cost of acquisition of 12.97 Kattah of land out of total 27.96 Kattach of land sold by him taking Rs.3,50,000/- per Kattah as fair market value as on 1.4.1981. For arriving at this fair market value, assessee had relied on valuation report given by one Shri Mallar Mukherjee, Registered Valuer, copy of which has been placed at pages 34 to 46 of the paper book filed. In his report it has been mentioned by the Registered Valuer that on local enquiry, the price of land in the concerned area, during 1981-1982 was between Rs.3,50,000/- and Rs.4,00,000/- per Kattah. This conclusion I . T. A . No .: 1 2 3 6 / KO L / 2 0 13 , A s s es s m e n t ye ar : 2 0 0 8 - 0 9 Page 4 of 9 appears at page 42 of the paper book. As against this, opinion of the Assessing Officer was that such fair value was very high since assessee was holding the property since 1979. Based on this reasoning he had referred the valuation to the DVO. Copy of the DVO's report is placed at pages 69 to 84 of the paper book. DVO in his report has clearl y mentioned that reference to him was made by the Assessing Officer under section 55A of the A ct. He determined the value of 12.97 Kattah of land as on 1.4.1981 at Rs.11,90,000/-. At this juncture, a look at section 55A becomes necessary. This is reproduced hereunder :-
"55A : With a view of ascertaining the fair market value o f a capital asset fo r the purposes of this chap ter, the Assessing Officer may refer the valuatio n of capital asset to a Valuation Officer-
(a) In a case where the value of the asset as claimed by the assesese is in accordance with the estimate made by a registered valuer, if the Assessing Officer is o f the opinion that the value so claimed is less than its fair market value,
(b) In any other case, if the Assessing Officer is of the opinion-
(i) That the fair market value of the asset exceeds the value of the asset as claimed by the assesese by more than such amount as may be prescribed in this behalf, or
(ii) That having regard to the nature of the asset and other relevant circumstances, it is necessary so to do.
What is applicable here is clause (a) of the above section. Hence to make a reference under section 55A of the A ct, Assessing Officer has to form an opinion that value claimed is less than the fair ma rket value. On the other hand, the opinion of the Assessing Officer here is that the value shown was very high or in other words, more than the fair market value. This being the case we are of the opinion that the reference under section 55A coul d not have been made. H on'ble Calcutta High Court in the case of CIT
-vs.- Umedbhai International (P) Ltd. (2011) 338 ITR 506, in a similar situation, where there was a substitution of the cost as on 1.4.1981, by I . T. A . No .: 1 2 3 6 / KO L / 2 0 13 , A s s es s m e n t ye ar : 2 0 0 8 - 0 9 Page 5 of 9 value based by DVO on a reference under section 55A of the Act, held that such a reference could not be made unl ess and until the Assessing Officer formed an opinion that value shown by the assessee was less than fair market value. Paras 4 to 8 of the judgment is reproduced hereunder :-
"4. The assessee on the basis of registered valuer's report worked out indexed cost as on 1 s t April, 2002 at Rs.3,06,37,281/-. It was taken opening stock of land in the assessment year under consideration. With the returns the aforesaid valuation report was submitted. However, the AO did not accept valuation and referred the matter to the Departmental Valuer under section 55A of the said Act to determine the fair market value as on 1 s t April, 1981 and it was done by the Departmental Valuer at Rs.18,73,800. The AO did not accept valuation report submitted by the assessee on the ground that the same was not prepared on the basis of any sale instance. Naturally the AO proceeded on the basis of the valuation of the Departmental Valuer which made a lot of difference in as sessing tax liability. Basing Departmental valuation report the AO came to conclusion that the assessee had overstated the value of the opening stock at Rs.2,26,54,893/- and instead of accepting the loss, as shown in the return the AO has determined the net profit of Rs.6,09,025/-. Thus the conclusion arrived at by the AO based on valuation. Therefore, the point raised before the C!T(A) that the valuation was got to be done by the AO without compliance of s. 55A of the !T Act, 1961. According to the assessee reference to the valuation officer is without jurisdiction as per- condition for reference was not satisfied. According to the assessee before making any reference the AO has to form opinion that the value so claimed is less than the fair market value without doing so reference is without jurisdiction. On this limited point the C!T(A) allowed the appeal and held that the reference was not done by the AO in compliance of provisions of sec. 55A of the said Act. The Tribunal also upheld this finding.
5. Reading the aforesaid question we are not concerned with any other portion of the judgment and order of the learned Tribunal.
6. The C!T(A) as well as the learned Tribunal has came to fact finding that the Department has not brought any material on record that AO had formed an opinion having regard to the nature of the assessment and considering the other relevant circumstances for making reference to Departmental Valuation Officer under s. 55A of the said Act. This concurrent fact finding of two authorities are not questioned to be perverse.
7. This Court cannot make any endeavour to make any fact finding nor does it wish to do in absence of plea of perversity. In this case the admitted position is that the assessee submitted valuation made by the registered Valuer. Hence cI. (a) of the aforesaid section is applicable in this case which is set out hereunder-
"55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this chapter, the (Assessing) Officer may refer the valuation of capital asset to a Valuation Officer-
(a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the (Assessing) I . T. A . No .: 1 2 3 6 / KO L / 2 0 13 , A s s es s m e n t ye ar : 2 0 0 8 - 0 9 Page 6 of 9 Officer is of the opinion that the value so claimed is less than its fair market value.
(b) In any other case, if the (Assessing) Officer is of the opinion
(i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such amount as may be prescribed in this behalf, or
(ii) that having regard to the nature of the asset and other relevant circumstances, so to do".
8. Thus it is clear based on the aforesaid concurrent fact findings that the formation of opinion of the AO that the value claimed by the assessee less than its fair market value is sine qua non Reasons recorded after order of reference for valuation of the registered Valuer is not the substitute of pre-decisional formation of opinion.
We are, therefore, of the opinion that assessee has to succeed in the additional ground. Substitution of cost of acquisition with the value fixed by the DVO, therefore, stands quashed.
9. The only other effective ground taken by the assessee which is in its ground no. 4 is regarding an addition of Rs.20,00,000/- claimed by it as an expenditure while computing the l ong-term capital gains.
10. Claim of the assessee was that he had paid a sum of Rs.20,00,000/- to one Shri Nikhil Chanda who was a confirming party in the sale. However, Assessing Officer was not inclined to accept the claim. Assessee's appeal in this regard before the ld. CIT(Appeals) was also not successful. Ld. CIT(Appeals) held that the claim of Rs.20,00,000/- was not a genuine.
11. Now before us, l d. AR strongly assailing the order of authorities below submitted that the vendors of the property were assessee and Smt. Nita Bose. According to him, the agreement entered into by the assessee and Smt. Nita Bose with the purchaser M/s. Madgul Services Pvt. Ltd., copy of which was placed at pages 15 to 33 of the paper book, clearly mentioned that Shri Nikhil Chanda was a confirming party. According to him, payment of Rs.20,00,000/- was directl y made to Shri Nikhil Chanda and this was evident from page 28 of the paper book. Shri Nikhil Chanda had acknowledged receipt of Rs.20,00,000/-. Therefore, according to him I . T. A . No .: 1 2 3 6 / KO L / 2 0 13 , A s s es s m e n t ye ar : 2 0 0 8 - 0 9 Page 7 of 9 it was a necessary outgo without which the sale would not have taken place. Hence the payment was to be allowed.
12. Per contra, ld. D.R. supported the order of authorities below.
13 We have heard the rival submissions, perused the material available on record and seen the computation of capital gains under section 48 of the Act. Sub-clause (i) of that Section states that expenditure incurred wholly and exclusively in connection with the transfer of capital asset has to be deducted from full value consideration received or accruing. Preamble of the Conveyance Deed executed by the assessee alongwith Shri Nita Basu reads as under :-
"THIS INDENTURE made this 15 t h day of February Two Tho usand and Eight BETWEEN (1) (SM.) NITA BASU (also known as NITA BOSE) wife of Shri Pranab Basu and daughter- in-law of Shri Santosh K umar Bose and (2) VIVEK BOSE son of Shri Parmananda Bose both residing at 3A, Shyam Bose Road, Police Statio n Chetla, Kolkata-700 027 hereinafter referred to as "the VENDORS" (which expression shall unless excluded by on repugnant to the subject or context be deemed to mean and include their and each of their respective heirs, e xecutors, administrators and legal representatives) of the FIRST PART AND RICKY CHANDRA son of Dhruba Chandra residing at 6 8A, Peary Mohan Roy Road, Police Station Chetla, Kolkata-700 027 hereinafter referred to as "the CONFIRMING PARTY" ( which expressions unless excluded by or rep ugnant to the subject or context shall be deemed to mean and include his heirs executors, administrators and legal representatives) of the SECOND PART AND MADGUL SERVICES PRIVATE LIMITED, a Company incorpo rated under the Companies Act, 1956 having its Registered Office at 20, Ballygunge Circular Road, Police Station Ballygunge, Kolkata-700 019 hereinafter referred to as "the PURCHASER" (which exp ression shall unless excluded by or repugnant to the subject or context be deemed top mean and include its successor or successors-in-office and/o r assigns) of the THIRD PART".
It is clear that Shri Nikhil Chanda was a confirming party who had nominated the buyers to the vendors. That confirming party had nominated the buyers is also clear from Clause (K) appearing at pages 19-20 of the paper book, which is reproduced hereunder:-
I . T. A . No .: 1 2 3 6 / KO L / 2 0 13 , A s s es s m e n t ye ar : 2 0 0 8 - 0 9 Page 8 of 9 "The Confirming Party has nominated to the Vendors, the purchaser herein as being entitled in p lace and ste ad of the Confirming Party to complete the purchase of the said p remises from the vendors and has agreed to concur and confirm the sale and transfer by the vendo rs in favo ur of the purchaser as the nominee o f the confirming party. The nominatio n of the purchaser was accepted by the vendo rs. The purchaser has paid to the said Smt. Nita Basu directly the balance consideratio n o f Rs.50,00,000.00 receivable by her as aforesaid and has paid to the said Vivek Basu directly the balance consideration of Rs.3,70,00,000.00 receivable by him as afo resaid and has also paid to the co nfirming party a sum of Rs.30,00,000/- as and by way o f reimbursement of the same amo unt paid by the confirming party to the said Vivek Bose and a further sum of Rs.20,00,000.00 by way o f nominatio n charges o f the confirming party in respect of the said premises and the said transaction.
In the premises aforesaid, the vendo rs have contrac ted with the purchaser for sale and transfer of the said pre mises free from all encumbrances mortgages charges attachments liens lispendens leases tenancies occupancy rights uses debutters trusts acquisition requisition alignment claims demands and liabilities whatsoever o r howsoever by the vendors to the purchaser at or fo r the consideratio n of Rs.4,50,00,0 00.00 (Rupees four cro res fifty lacs) only paid to the vendors by the purchaser in the proportion as afo resaid and the confirming party has agreed to concur co nfirm and assure such sale". That the payment to Shri Nikhil Chanda has directly effected by the purchaser is clear from the receipt memo given at page 28 of the paper book. In such circumstances, we are of the opinion that the payment coul d only be considered as an expenditure incurred only and exclusivel y in connection with the transfer of the property. It was an allowable one under section 48(i) of the Act. Such addition therefore stands deleted. Ground No. 4 of the assessee stands allowed.
14. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 19 t h day of December, 2013.
Sd/- Sd/-
Mahavir Singh Abraham P. George
(Judicial M ember) (Accountant Member)
t h
Kolkata, the 19 day of December, 2013
I . T. A . No .: 1 2 3 6 / KO L / 2 0 13 ,
A s s es s m e n t ye ar : 2 0 0 8 - 0 9
Page 9 of 9
Copies to : (1) The assessee
(2) The Department
(3) CIT
(4) CIT(A)
(5) The Departmental Representative
(6) Guard File
TRUE COPY
By o rder etc
Assistant Registrar
Income Tax Appellate Tribunal
Kolkata Benches, Kolkata
Laha/Sr. P.S.