Income Tax Appellate Tribunal - Mumbai
Narendra G. Kanakia ( Huf), Mumbai vs Department Of Income Tax on 10 April, 2013
ITA No.190/M u m/ 2 0 1 1
M/s Narendra G. Kanakia.
आयकर अपील य अ धकरण "बी" यायपीठ मब
ुं ई म।
IN THE INCOME TAX APPELLATE TRIBUNAL " B " BENCH, MUMBAI
BEFORE SHRI B. RAMAKOTAIAH, AM AND Dr. S.T.M. PAVALAN, JM
आयकर अपील सं./I.T.A. No. 190 /Mum/2011
( नधारण वष / Assessment Year :2007-08
I.T.O. Wd. 21(1)(3), बनाम/
बनाम M/s Narendra G.
Room No. 605, 6 t h Kanakia (HUF) 101/A
Vs.
Floor, C-10 Ameya Plot No. 228,
Pratyakshakar Bhavan, Nariman Road, Vile
Bandra-Kurla Complex, Parle (E), Mumbai-400
Bandra(E), Mumbai. 057.
थायी ले खा सं . /PAN : AACHN1303F
(अपीलाथ / Appellant) .. ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : Shri Mohit Jain
यथ क ओर से/ Respondent by : Shri. Manish J. Sheth.
सन
ु वाई क तार ख / Date of Hearing : 10.04.2013
घोषणा क तार ख /Date of Pronouncement : 19.04.2013
आदे श / O R D E R
PER B. RAMAKOTAIAH, A.M. :
This is a Revenue Appeal against the orders of the CIT(A)-32 Mumbai dated 12.10.2010. The revenue has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in directing the Assessing Officer to consider the deemed sale consideration of the property as per the value determined by the DVO for calculation of Short Term Capital Gain on sale of property.
i. In doing so, the Ld. CIT(A) has erred in directing the A.O. to refer to the VO under section 50C (2) of the I.T. 1961, Act. despite the 1 ITA No.190/M u m/ 2 0 1 1 M/s Narendra G. Kanakia.
Assessing Officer's contention that provisions for making a reference to Valuation Officer is not mandatory and rather discretionary as the word used is "may" and not "shall" in the Section 50C(2) of the Act. 1961.
2. "The appellant prays that the order of Ld. CIT(A) on the above grounds be set-aside and that of the Assessing Officer be restored."
2. The issue in the appeal is with reference to the DVO under section 50C(2) and adopting valuation arrived at by DVO while computing Capital Gain on Sale of property. The issue arises as under as stated by CIT(A) in his order:
3.1 The assessee had sold a flat for a sale consideration of Rs.47,10,000/- vide agreement dated 13.7.2006 but the stamp. duty authorities valued the property at Rs.65,79,7 10/ - When the AO asked the assessee as to why the stamp duty valuation may not treated as deemed sale consideration u/s.500, it was submitted by the assessee that at the time of sale the flat was in completely raw condition which is evident from the clauses 3 & 4 of the sale agreement itself. Hence the actual sale consideration shown is fair and reasonable The assessee further submitted that incase the declared value is not accepted then the matter may be referred to the Valuation officer u/s.50C(2), The AO however did not accept the contention of the assessee on the ground that the capital gain being shown is short term capital gain and not long term capital gain and provisions for making a reference to the Valuation Cell is not mandatory and rather discretionary as the word used is: 'may'. and not 'shall' . It was further observed by the 40 it was not disclosed whether the assessee has filed any appeal before the stamp duty authorities. Therefore he rejected the request of the assessee to refer the matter to the DVO and computed the STCG by taking Rs.65,79,710/- as the deemed value of the, sale consideration.
3.2 During the appellate proceedings the assessee once again requested to refer the matter to the Valuation Cell In view of the specific request made by assessee even during asstt proceedings, the AO was directed to refer the issue to DVO u/s 50C(2) and submit the remand report The AO vide his remand report dated 16.8. 2010 has forwarded the valuation report of the DVO who has valued the property at Rs 52,78,714/- as on 13.7 2006. The AO has further stated that during the course of assessment proceedings the matter was not referred to the 2 ITA No.190/M u m/ 2 0 1 1 M/s Narendra G. Kanakia.
DVO because the assessee has not challenged the value adopted by the stamp duty authorities, neither obtained any valuation report of registered valuer and moreover the valuation by the stamp duty authorities, is based on the large number of data of such transactions which is normally expected to be more realistic. Finally it has been stated by the AO though the report of the DVO may be binding on the AO but the same is not binding on the CIT(A) and hence the valuation adopted by the Stamp duty Authorities only should be taken as fair market value of the property. The Addl CIT range 21(1) while forwarding the remand report of the AO has also concurred with the views of the AO that referring the issue to DVO u/s 50C(2) is discretionary and that the valuation by stamp authorities is based on larger sample as compared to only three samples taken by VO and hence the former is more reasonable. He has further stated that out of the three samples taken by the DVO, the second sample showing rate of Rs 49,658/- is more near to the property in question in terms of number of floors of the building and size of flat, hence if at all DVO's report is to be relied, only the 2nd sale instance of Rs 49658/-should be adopted as basis for deemed sale consideration and not the average rate of three sample ® Rs 40,090/- It is further stated by the Addl CIT that in case the above request is not found acceptable, CIT(A) may seek clarification from the DVO
3. The Ld. CIT(A) after obtaining the objections of the assessee has considered the issue as under:
3.4.1 I have considered the arguments of the Ld. AR arid perused the remand report of the AO and the forwarding comments of the Addl CIT, Range 21(1) The view of the Addl CIT Range 21(1) and the AO that reference to valuation officer is not mandatory but discretionary, is not tenable. The only condition to be fulfilled before a reference to Valuation officer is required is that (1) the assessee should object to adoption of the stamp valuation as deemed sale consideration and (2) assessee should not have filed any appeal before the stamp valuation authorities. The asstt order itself reveals that the assessee had objected, to the AO for reference to Valuation officer. So far as filing of appeal before stamp authorities is concerned, the AO himself has stated in the remand report that one of the reason for not referring to valuation officer was that no appeal was filed by assessee before the stamp valuation authorities. So undisputedly 'both the conditions for referring 3 ITA No.190/M u m/ 2 0 1 1 M/s Narendra G. Kanakia.
. to valuation officer were satisfied and therefore the AO had no option not to refer to the DVO Under similar situations, the reference to VO has been interpreted to be mandatory in view of the decision reported in the case of 24 SOT 24(Del), 23 SOT 25 (Jodh), Kalpataru Industries ITS No 5440/MUM/2007, Abbas P. Reshamwala ITA No.3093/MUM/2009. However since now the reference to valuation officer has already made as per direction of CIT(A)-32 Mumbai and DVO's report has been received, the issue has become only academic in nature.
3. 4 2. The next view of the AO that the valuation by stamp authorities is based on larger database and hence it could be substituted in place of a reference to DVO is also not tenable. Section 50C is a deeming provision and therefore the conditions to invoke a deeming provisions needs to be strictly satisfied Once the section 50C(2) mandates a reference to Valuation officer who is specifically defined under the I T Act to have the same meaning as in clause (r) of section 2 of the W T Act, then the expression va1uation officer cannot be substituted to mean stamp valuation authorities of the state. govt. Therefore the valuation done by the stamp authorities for purpose of levy of stamp duty, cannot be taken as valuation u/s 50C(2) The valuation of stamp duty authorities is applicable for the limited purpose of section 50C(1) only and not for 50C(2). If the Valuation officer was to substituted by stamp authorities, then the provisions of section 50C(2) will become redundant because then stamp duty valuation u/s 50C(2) will be the same as adopted u/s 50C( 1). Thus the expression Valuation officer and the stamp authorities are for different purposes and: are not interchangeable and stamp authorities cannot step into shoes of Valuation officer This view is supported by the fact that u/s 142(A) also where a reference to valuation officer has been prescribed to ascertain the investment in a property, the stamp duty valuation was not treated to be valid for the purpose of arriving at unexplained investment iii the property as held in Swami Complex P Ltd 111 TTJ (JP) 531 Sangam Towers 31 DTR (JPJ Tribunal 172, Kamal Inshore Chandak 103 TTJ 843(Jd), Hearly street pharmaceuticals Ltd 38 SOT 486(Ahd), Chandni Baucher 323 ITR 510 (P & H), Raj Kumar Vimla Devi 279 ITR 360(Alld), etc. Hence, the view of the AG and the Addl CIT range 2 1(1) that the valuation by the stamp duty authorities being based on large sample can substitute the requirement of valuation u/s 4 ITA No.190/M u m/ 2 0 1 1 M/s Narendra G. Kanakia.
50C(2) by valuation, is not tenable.
3.4.3. The request of the AO to. accept the stamp valuation authority valuation only, ignoring the DVO's report, on grounds that DVO's report is not binding on CIT(A), cannot be acceded as AO has not brought sufficient material to justify that the DVO's report is erroneous and unreliable Though the DVO's report may not be binding on CITA) but it is still a report of a technically qualified person and hence the same cannot be discarded unless there are sufficient seasons to reject it either totally or even partially. As already discussed, when a reference under section 50C(2) has been made to DVO, stamp duty valuation has lost its relevance.The request of the Addl.CIT Range 21(1) that in case of my disagreement with his views, the CIT(A) may seek clarification from DVO is also not acceptable Unless the AO has made out a sufficiently good case for disagreement with the DVO's report, office of CIT(A) primarily having appellate work, cannot be expected to seek further clarifications at the behest of the AO. It was for Addl CIT to have asked the AO working under him, to seek any further clarification front the DVO, if he were to disagree with the valuation report The plea of the Addl CIT range 2 1(1) that out of the three instances, only the 2nd instance having rate of Rs 49658/sq mts be considered and not the average rate of three instances cannot be accepted The main thrust to adopt rate as per 2nd instance only and not the average rate of three instance, is based on mere fact that the said building was similar in number of.- floors and similar size of the flat, but the fact that the flat in question was not the finished flat but only in raw condition or 'Box' condition which is admitted by the DVO's report and duly appearing in clause 3 & 4 of the sale agreement filed before AG also, has not been considered by the AO/Addl CIT at all If the valuation were to be only a mathematical exercise then the whole purpose of referring to a technical expert and valuing the property only after making a physical inspection of the property would be redundant. Making valuations on the basis of three instances are part of standard procedure adopted by the DVOs which need to be followed, unless there are sufficient reasons to make a deviation. Hence only one instance cannot be taken as gospel truth, merely due to reason that the number of floors 0f the building and flat size is approx similar, ignoring the very important fact that the said flat was only in 'raw' condition Necessary rebate on market value of normal flats has to be given to arrive at the fair market value of 'raw' condition flat The method adopted by the DVO seems to be justified and 5 ITA No.190/M u m/ 2 0 1 1 M/s Narendra G. Kanakia.
hence the plea of the AO/Addl CIT to adopt the only one instance as per DVO's report for ascertaining the deemed sale consideration, cannot be accepted 3.4.4 Now coming to the plea of the appellant at DVO has not rebate or account of 'raw' condition of the flat, it is noted from the of the valuation report in para 3 1, that the DVO has specifically that the said flat is in raw condition without . flooring, Door frames, windows, bathroom fittings, etc. It is further noted that for the purpose of valuing the appellant's property of 127.93 sq.mts, the DVO has applied the rate of Rs.40,090 per sq.mt whereas as per the average rate of three sale instances taken by the DVO comes to Rs.44,8 1 1/-(46584 + 49658 +38193 /3). Hence by applying the rate of Rs. 40,090 only which is much less than the average rate of Rs 44,811/- it appears that the DVG has already given a discount of Rs 4721 per sq mts (approx 10.5%) on account of raw condition of flat. Hence it cannot be said that the DVO has not given any rebate on account of raw condition of the flat. Thus the objection of the appellant also to the DVO's report cannot be sustained. The valuation done by the DVO at Rs 52,78,714/- appears to be fair and reasonable after considering the relevant condition of the raw flats. Accordingly the deemed sale consideration to be adopted u/s 50C(2) should be at Rs. 52,78,714 as determined by the DVO. The AO is directed to compute the short term capital gains accordingly.
4. The Ld. DR relied on the orders of the AO and referred to the provisions of the Ac. It is submitted that there is no need to refer the issue to Valuation Officer and to that extent the order of the Ld. CIT(A) is not correct. Ld. Counsel in reply explained the facts and also the provisions of the Act. He relied on the orders of the CIT(A) and further submitted assessee has accepted the valuation by the DVO in order to settle the issue.
5. We have considered the issue and examine the record. We do not see any reason to differ from the findings of the CIT(A). The provisions of section 50C are as under:-
50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed [or assessable] by any authority of a State Government (hereafter in this 6 ITA No.190/M u m/ 2 0 1 1 M/s Narendra G. Kanakia.
section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.
(2) Without prejudice to the provisions of sub-section (1), where--
(a) the assessee claims before any Assessing Officer that the value adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer;
(b) the value so adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-
tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.
[Explanation 1].--For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).
[Explanation 2.--For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.] (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed [or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed [or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.] As can be seen from the above provisions, when the Assessee objects to the valuation of the Stamp Authorities before the A.O., the Assessing Officer has no option than to refer the valuation to the DVO. It has been held by various decisions of the coordinate bench of the Tribunal that the word "May" used in subsection 2 of section 50C has to be read as "Should" and the Assessing Officer has no discretion but to refer the matter to DVO for the valuation of the property when the Assessee raises an objection that the 7 ITA No.190/M u m/ 2 0 1 1 M/s Narendra G. Kanakia.
valuation adopted or assessed by the Stamp Valuation Authorities exceeds the Fair Market Valuation of the property. Coordinate bench orders in the Case of Shri Abbas T. Reshmawala Vs. I.T.O. in ITA N o. 3093/Mum/2009 dated 30.11.2009 and Smt. Bharti Jayesh Sangani Vs. ITO in ITA No. 178/Mum/2009 128 ITD 345 Mum support the above view. In view of this, the objection of the Revenue that CIT direction in referring the valuation to DVO is not correct cannot be accepted. More over, if any such direction is given and same was implemented by the Assessing Officer, having referred the matter to the DVO, it cannot be questioned in the present appellate proceedings when the CIT(A) directed the AO to adopt the valuation of DVO which is mandatory under the provisions.
6. In view of this, we do not see any reason to differ from the findings of the CIT(A). The Revenue ground is accordingly rejected.
7. In the result the Appeal dismissed.
Order pronounced in the open court on 19.04.2013 .
आदे श क घोषणा खल
ु े यायालय म दनांकः को क गई ।
Sd/ Sd/-
( Dr. S.T.M. PAVALAN) (B.RAMAKOTAIAH)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
मुंबई Mumbai; दनांक Dated 19.04.2013
व. न.स. / Ashish PS
आदे श क त ल प अ े षत/Copy
षत of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT(A)-32, Mumbai
4. आयकर आयु / CIT - 21, Mumbai
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai B
6. गाड फाईल / Guard file.
ु ार/ BY ORDER,
आदे शानस
स या पत त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.
उप/ Registrar)
आयकर अपील य अ धकरण,
धकरण, मंब
ु ई / ITAT, Mumbai
8