Income Tax Appellate Tribunal - Amritsar
Azad Nakodar Bus Service (P) Ltd., ... vs Assistant Commissioner Of Income Tax, ... on 27 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH: (CIRCUIT BENCH AT JALANDHAR)
BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A No.424/ASR/2016
(ASSESSMENT YEAR-2010-11)
The Azad Nakodar Bus Service (P) Vs.. ACIT-Circle III
Ltd. G.T. Road, Jalandhar.
Jalandhar.
PAN No.AADCA8627K
(Assessee) (Revenue)
Assessee by Shri . Y. K. Sud, AR.
Revenue by Shri Bhawani Shankar,DR.
Date of Hearing 20.01.2017
Date of Pronouncement 27 .03.2017
ORDER
PER, A. D. JAIN, JUDICIAL MEMBER:
This is assessee's appeal for the Assessment Year-2010-11, against the ld.
CIT(A)'s action in confirming the addition of Rs.38,59,815/- in the Long Term Capital Gains declared by the assessee.
2. The facts of the case are that assessee company is engaged in the business of passenger bus transportation, in Punjab for the last 67 years. The ACIT, while I.T.A No.424/ASR/2016 2 finalizing the assessment u/s 143(3), made the addition in the computation of LTCG amounting to Rs.36,59,815/- on sale of property situated at 26 Police Lines Road Jalandhar, by reducing the market value of the property as on 1.4.1981 from Rs.20,000/- per marla to Rs.9,950/-per marla. This action of the AO had been challenged by the assessee by way of filing an appeal before the ld. CIT(A)-2, Jalandhar. But the ld. CIT(A) dismissed the assessee's appeal.
3. The assessee has raised the following grounds:
"1. That the CIT(A) was not justified in sustaining the addition made by the AO amounting to Rs.38,59,815/- in the Long Term Capital Gains declared by the assessee.
2. That while sustaining the addition both the CIT(A) & AO failed to appreciate that the cost of acquisition as on 1.4.81 was supported by the well reasoned valuation report of the Govt. approved Regd. Valuer.
3. That CIT(A) & AO failed to appreciate and dispose off the objections made by the assessee in respect of the valuation made by the DVO as on 1.4.81 amounting to Rs.9,950/- per marla against the valuation of Rs.20000/- per marla made by the Regd. Valuer.
4. That both the CIT(A) & AO failed to appreciate the valuation report by DVO suffered from various defects pointed out by the I.T.A No.424/ASR/2016 3 assessee which were not met by the DVO. Hence the DVO report could not have been relied upon.
5. That both CIT(A) & AO failed to visit the sites of the properties despite the specific request made by the assessee. Hence the findings of both the authorities are factually incorrect."
4. The ld. Counsel for the assessee has contended that the ld. CIT(A) has erred in sustaining the addition wrongly made.
5. The ld. DR relied on the impugned order.
6. The ld. CIT(A), while upholding the addition, held as follows:
"5.2 I have considered the observations of the Assessing Officer as made by him in the assessment order while making the impugned addition. I have also considered written submissions filed by the assessee through his learned AR vide letter dated 07.07.2016. I have further considered various judicial pronouncements relied upon by the assessee during assessment as well as appellate proceedings. On careful consideration of the rival contentions, I am of the opinion that the assessee has advanced almost similar arguments during appellate proceedings as were advanced during assessment proceedings. Apart from this, the assessee has relied on certain case laws, the particulars of which have been mentioned in the written submissions. After carefully I.T.A No.424/ASR/2016 4 examining the submissions of the assessee, I am of the opinion that the assessee has absolutely failed to establish even during appellate proceedings that the property of the assessee will fetch more rate as on 01.04.1981 from the property situated at 17, Police Lines Road, Jalandhar. When confronted, the Government approved valuer has changed his stand with regard to the location of the property to justify his valuation report. In my opinion, the Government Approved Valuer has also lied in his report that he could not get any comparable sale instance on the Police Lines Road, Jalandhar, whereas he has quoted sale instance at Police Lines Road, Jalandhar while valuing property of another person/assessee. From this, it is clear that the valuation report given by the Government Approved Valuer is not based on actual facts and appears to have been given on incorrect facts. I am also of the opinion that the Government Approved Valuer has failed to discharge his duty being a Approved Valuer. Moreover, he could not support his valuation report with authentic documentary evidence which should have been in his possession while valuing the properly of the assessee. It has also been noticed that the property at 17 Police Lines Road, Jalandhar has fetched mere market value that the property of assessee inspite of the fact that the property I.T.A No.424/ASR/2016 5 of the assessee is situated on the G.T. Road. The observations of the Government Approved Valuer that the property of the assessee will fetch higher rate than the other properties situated at Police Lines Road, Jalandhar as on 01.04.1981 is factually incorrect as the property at 17 Police Lines Road, Jalandhar which is also not even on the G.T. Road has been sold at a much higher Rate than the property of the assessee. Similar should be the position as on 01.04.1981. It has also been noticed that the Assessing Officer has dealt with each and every objection of the assessee as well as of Government Approved Valuer while completing the assessment and I do not find any valid reason to interfere with the addition made. It has further been noticed that as per sale deed, the property of the assessee was also a residential property as on 01.04.1981 inspite of the fact that it is located on G.T. Road and was not a commercial property at the relevant time. I am also of the opinion that the judicial pronouncements relied upon by the assessee have no application in the case of the assessee as the facts of the case of the assessee are entirely different from the facts of the case of the assessee. I am also of the opinion that properties located at Nakodar Road are comparable to the properties located at G.T. Road as both the localities are equally developed. Under I.T.A No.424/ASR/2016 6 such circumstances, the action of the Assessing Officer in making addition of Rs.36,59,815/- on account of undisclosed Long Term Capital Gains earned by the assessee company on the sale of plot/property situated at 26, Police Line Road, Jalandhar cannot be said to be unjustified.
5.3 In view of the above stated facts and in the circumstances of the case. I am of the opinion that the Assessing Officer is fully justified in making addition, of Rs.36,59,815/- on account of undisclosed Long Term Capital Gains earned by the assessee company on the sale of plot/property situated at 26, Police Line Road, Jalandhar. The addition of Rs.36,59,815/- made by the Assessing Officer in this case is, therefore, upheld. In the result, grounds No. 1 to 5 of appeal taken by the assessee are dismissed."
7. It is seen that the assessee had furnished a report of Govt. approved valuer Sh. B.K. Singhal dated 18.09.2009 certifying that the Fair Market Value of land as on 01.04.1981 at Rs.20,000/- per marla alongwith the copy of Registries English translation of property situated at Central Town on which he relied upon. The same is available at Page no. 7 to 115 of the Paper Book. The AO summoned the I.T.A No.424/ASR/2016 7 approved valuer Sh. B.K. Singhal u/s 131(1) of the Income Tax Act to appear and produce the relevant documents on the basis of which valuation report had been prepared by him for the property. In response to this Sh. B.K. Singhal appeared before her on 12.10.2012 and after giving prima facie replies to the queries of the AO sought time to file the detailed reply. He again approved and filed his reply which is reproduced on Page 4 of assessment order. From the reply of the Registered Valuer Sh B.K. Singhal, it emerge that:
i. The plot of the assessee touches the G.T. Road in the Police Line Scheme and no where touches the Police Lines Road. Refer to layout plan Page 66 of the Paper Book.
ii. The plot of the assessee measuring 99.9 marla Marias is 3 sides open plot and front is located on the G.T. Road and it nowhere touches the Police Line Road as apparent from layout plan Page 66 of Paper Book. The G.T. Road is highly commercial area and police line road is developed in past 10-15 years of time. Hence while making the valuation the value of G.T. Road was considered and not police line road.
8. The AO again summoned the valuer u/s 131 on 19.11.2012 to provide certain information which is mentioned in para 4.3 of the assessment order. I.T.A No.424/ASR/2016 8 On page 6 of the assessment order the submissions of the Regd. Valuer were again recorded. The Gist of his submissions are as under:
i. The G.T. Road on which the plot of the assessee is located is the most commercial place and is developed since long. It passes through the heart of the city.
ii. Details of various commercial centre details located within 100 meters have been given. The comparison is made with the Police Line Road that in 1981 one side was residential houses and on the other side were Shabby Motor Workshops were existing.
iii. Further he supported his valuation by working out the valuation of the plot in reverse direction by applying the cost index in provided in the Income Tax Act and Rules and by that method the price per marla as on 1.4.1981 worked out at 58700/- against Rs.20,000/- adopted by the Regd. Valuer.
9. Despite these clarifications and the valid issues pointed by the Regd. Valuer in support of his valuation report the AO referred the matter to the DVO. The DVO issued a show cause notice at 2.1.2013 (Paper Book Page
16) for adopting a valuation of Rs.9,950/- and invited objections from the assessee. The assessee filed its objections vide letter dated 10.1.2013. A copy of the objections is enclosed at Page no. 32 of Paper Book. Alongwith I.T.A No.424/ASR/2016 9 this objection letter, the assessee filed the various sales instances where the land has been registered at the price of Rs.10,800/-Rs.17,500/-, Rs.20,170/- despite the fact that these properties were located far away from the property of the assessee. The copy of sale deeds are annexed on page 34 to 52 of Paper Book alongwith English Translation.
10. The objections of the assessee to the proposed valuation are vital and the counsel drew the attention of the Bench on page 32 of the Book.
11. Despite these objections the DVO disposed of the same by a non speaking letter dated 14.01.2013 (Paper Book page 55 and 56) and on the same day made the valuation of the property at Rs.9950/- per marla.
12. The assessee pointed out the defects in the report of DVO vide its letter dated 25.01.2013 (Paper Book Page 58 & 59) which have been reproduced by the AO on page 8 & 9 of the assessment order. In this letter the assessee had challenged the action of DVO in disposing of the objections by way of non-speaking order and requested the AO to visit the site. The assessee after receiving the copy of the registration deeds relied upon by the DVO filed its objections vide letter dated 30.1.2013 (Paper Book Page 60 & 61) which has been reproduced by the AO at page 9 of the assessment order. I.T.A No.424/ASR/2016 10 The most important and relevant objection of the assessee was that DVO was relying on the sale instances of properties located in Link Colony and Nakodar Road Jalandhar which has no comparison with the property of the assessee situated at G.T. Road. Further, another important issue was that when the DVO himself had agreed to the value of Rs. 10000/- per marla in residential property located at Nakodar Road, how he could object to the value of Rs. 20000/- per marla on the commercial property located at G.T. Road which is a commercial hub.
13. The ACIT required the assessee to file the rejoinder to the reply of DVO which was filed before the AO vide letter dated 5.2.2013, but despite the clear mistakes pointed out by the assessee, the AO ignored the same and also AO brushed aside the submission of the assessee that from the collectorate rate as on 1.4.2007, which was Rs. 2.50 lacs per marla, if the backward working of cost index is done as per working on page 64-65 of the Paper Book, the cost as on 1.4.1981 works out to Rs.45,371/-.
14. The assessee made the submissions before the CIT(A) which are at pages 1 to 6 of the Paper Book and reproduced by the CIT(A) at page 15 of his order.
I.T.A No.424/ASR/201611
15. The ld. CIT(A) has failed to consider that the value as on 1.4.1981 at Rs. 20,000/- per marla was duly supported by the report of Govt. approved registered valuer Sh. B.K. Singhal who had not only given a detailed report but also appeared before the ACIT for giving the various clarifications.
16. Both the AO and the CIT(A) and the DVO ignored the location plan of the property of the assessee which is at Paper Book page 66 which clearly shows that the plot of the assessee was 3 side open located on the G.T. Road and despite the request by the assessee to both the authorities to personally visit the side, both of them failed to do so.
17. The DVO, while preparing the report of valuation, ignored all the objections of the assessee and on the basis of the sale deeds and on the basis of some residential properties located at Nakodar Road, which have no comparison with the property located at G.T. Road, prepared a valuation report which is not sustainable.
18. The DVO, although he agreed that the property of the assessee is located on G.T. Road which is a commercial hub he erroneously compared his sales instances situated at Nakodar Road by giving a finding that Nakodar Road is also on the main highway, whereas Nakodar Road only I.T.A No.424/ASR/2016 12 connects Nakodar Tehsil to Jalandhar, whereas G.T. Road connects Kolkata to Peshawar.
19. The DVO has further stated that assessee is relying upon the sale instances of 3.12.1982, 31.1.1984, 1.2.1984 and 15.4.1983, which are of a period later than 1.4.1981 and hence cannot be comparable. He clearly overlooked the submissions of the assessee that Punjab was passing through the terrorism period in the years 1982,1983,1984, when the properties were at rock bottom price and in June 1984 Operation Blue Star took place and the Prime Minister Mr. Gandhi was assassinated in November 1984, Hence, the price of land in years 1982, 1983,1984 were lower than value prevailing on 1.4.1981.
20. Both the AO & CIT(A) failed to appreciate the prime location of the plot of the assessee, which was 3 side open facing the main G.T. Road and within the 100 meters where the following commercial establishment are located:
i. P.S. Jain Motors Show room & Tata Trucks & Bushes ii. Bajaj Scooter Showroom of P.S. Jain Motors I.T.A No.424/ASR/2016 13 iii. AVI Motors, Fiat Car Showroom iv. Banks & Insurance Companies such as Pb. & Sind Bank and United India Insurance Co. Ltd.
v. Narinder Cinema vi. Kings Hotel vii. Main Bus Stand of Jalandhar
21. The CIT(A) failed to apply his mind to the following judgments of the ITAT which the assessee relied upon in this regard: R.Vidhyadharan (Decd) By Lr. Smt. Santhadharan Vs. DCIT 155 TTJ (Coch) 100
22. For the purpose of estimating the fair market value as on 1st April 1981 the locality in which the land is situated, the accessibility to infrastructure facilities, comparative sale instances in the locality, potentially for future development distance between the land and the bus stand, railway station, airport, etc., have to be taken into consideration. The AO was not justified in taking fair market value as fixed by the Government to guide the Sub Registrar as the sold basis for taking the fair market value as on 1st April 1981.(copy enclosed) I.T.A No.424/ASR/2016 14
23. Then, it remains undisputed that where collectrate rate was not available or sale instances were also not available, the backward working from the year where collectrate rate is available can be made on the basis of cost indexed rates provided in the Income Tax Rules to work out the value as on 1.4.1981. The valuation was worked out by the assessee and the AO simply brushed aside this method without assigning any reason. Before the CIT(A) in support of this contention of the assessee the assessee relied on the third member judgment of the ITAT Agra Bench. In "Jalandhar Cold Storage Vs ACIT", 133 TTJ (Agra) (TM) 278, wherein, the Bench has held that market rate of agricultural land cannot be made the basis for ascertaining the fair market value of commercial land for computation of capital gains; and that the fair market value of the land as on 1st April 1981, estimated by the assessee by applying the cost inflation index to the sale value of land for stamp duty purposes in the reverse order is sustainable. The CIT(A) rather than following the said judgment, which was binding on him, gave a finding that the judgment is distinguishable.I.T.A No.424/ASR/2016 15
24. In view of the above, finding merit therein, the grievance raised by the assessee is found to be justified. It is accepted as such. The order under appeal is reversed. The addition is deleted.
25. In the result, the appeal is allowed.
Order pronounced in the open court on 27 /03/2017.
Sd/- Sd/-
(T. S. KAPOOR) (A.D. JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated 27/03/2017
*AKV*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
By Order AR/Sr.P.S./P.S.