Income Tax Appellate Tribunal - Bangalore
D.N. Prasanna Kumar vs Assistant Commissioner Of Income Tax on 28 June, 1996
Equivalent citations: [1997]60ITD109(BANG)
ORDER
S. Bandyopadhyay, A.M.
1. The assessee was owning, inter alia, among a number of other properties, one property at No. 251 and portion of 250/8 situated by the side of 36th B Cross Road, Jayanagar, Bangalore. The property mainly consisted of 13,066 sq. ft. (1213.76 sq. m.) of open land covered by a small single storeyed RCC roofed building on 595 sq. ft. area and another AC sheet roofed garden room portion of area of 94.18 sq. ft. At the time of sale of the property, part construction upto plinth level was also over in respect of 363 sq. m. This property was ultimately sold by the assessee for a total consideration of Rs. 26 lakhs on 2nd Aug., 1993. The only issue before us relates to computation of the capital gains on the said sale.
The assessee has opted for considering the fair market value of the property as on 1st April, 1981, in place of the cost thereof. The said fair market value as on 1st April, 1981, has been considered by the assessee at Rs. 8,48,000 on the basis of the report dt. 15th Sept., 1993, of one approved valuer Shri H. S. Nagaraja. After indexing the above-mentioned fair market value, the assessee has returned the indexed cost at Rs. 20,69,120 and the resultant amount of capital gains at Rs. 8,30,880 only.
2. The Assessing Officer (AO), on the other hand, found out that in his WT returns, the assessee had returned the value of this property at Rs. 55,000 only as on 31st March, 1976, 31st March, 1977, and 31st March, 1978, and thereafter at Rs. 90,000 only as on 31st March, 1979, 31st March, 1980, 31st March, 1981, and 31st March, 1982. Thereafter, however, from asst. yr. 1983-84 onward, the assessee had returned the value of the property at Rs. 12,562 only by applying the provisions of r. 1BB in asmuch as the property was let out by the assessee in those later years. The AO, therefore, proposed to recompute the amount of the capital gains by considering the amount of Rs. 90,000 only to represent the fair market value of the property as on 1st April, 1981. After indexing the said amount, the net amount of capital gains was arrived at by the AO at Rs. 23,80,400. The assessee had obviously objected to the above valuation of the property. He had represented before the AO that in the WT return furnished by him, certain arbitrary basis had been followed till asst. yr. 1982-83 and, therefore, the valuation of the property as shown in the WT returns should not be considered as correct and that on the other hand, the valuation as per the authorised valuer's report should be taken as the proper and correct one. This contention of the assessee was, however, rejected by the AO.
3. The assessee filed an appeal before the CIT(A) against the assessment order and especially on the issue relating to computation of capital gains, as considered herein. The CIT(A) held that inasmuch as the assessee himself had returned a much lower valuation in the WT returns filed by him, there was an estoppel on him to try to change the said valuation later on in the IT assessment and in the matter of computation of capital gains so as to suit his own purpose. The CIT(A) also discussed the valuation as adopted by the authorised valuer in detail and pointed out a number of flaws therein. Ultimately therefore, he was of the opinion that neither was the assessee entitled to replace the valuation of the property as shown in the WT returns and also accepted by the Department, in the present IT assessment and nor was the report prepared by the authorised valuer was a correct one. Accordingly, the CIT(A) upheld the computation of capital gains as done by the AO. The assessee has come up before us in further appeal against the said order.
4. Shri Devaraj, learned counsel for the assessee, has vehemently contended before us that the Andhra Pradesh High Court has held in the case of Addl. CIT vs. Smt. Indira Bai (1985) 151 ITR 692 (AP) that no estoppel lies in regard to income-tax matters. He has tried to explain that only when a promise has been put forward by some party and in accordance with such promise the other party has acted in certain regard, the principle of promissory estoppel would lie. He has argued thereafter that in the present case, the assessee did not come up with any promise to the Department. He has furthermore argued that the valuation of the property as shown in the WT returns was merely on an arbitrary basis and hence, incorrect. He has thereafter emphasised on the fact that the expert opinion about valuation of the property as given in the valuation report of the authorised valuer is hence required to be taken into consideration. Shri Devraj has also relied on the following decisions in which cases it has been held that the valuation of an asset for the purpose of awarding compensation with regard to insurance business will not hold good for valuing the same assets for income-tax purposes :
(i) CIT vs. United India Life Assurance Co. Ltd. (1966) 62 ITR 610 (Mad);
(ii) CIT vs. Oriental Govt. Security Life Assurance Co. Ltd. (1983) 141 ITR 215 (Bom); and
(iii) CIT vs. New India Assurance Co. Ltd. (1980) 122 ITR 633 (Bom)
5. The learned Departmental Representative has, on the other hand, argued that the property was obtained by the assessee on partition of the HUF to which he had originally belonged. He furthermore argued that while disclosing the value of the property for wealth-tax purposes, the assessee was assisted by a Chartered Accountant and, hence, it must be considered that the valuation as shown in the WT returns was a well-considered one. As regards the other contention of the learned counsel for the assessee that in asmuch as the same valuation was shown for three successive years which itself showed that the valuation was arbitrary, the learned Departmental Representative argued that this was very much in conformity with the circular issued by the CBDT clarifying that an assessee need not change the value of any property from year to year basis and that the valuation once adopted could continue for three years and thereafter only the property was required to be revalued. The learned Departmental Representative also stated that most of the plots in Jayanagar area were allotted by the BDA around 1971 and that at that time plots measuring 30'x40' used to be priced at around Rs. 2,000 to Rs. 2,500 only. He thus argued that the value of the property consisting mostly of open land as disclosed in the WT returns actually represented its market value as at the relevant time. The learned Departmental Representative also referred to certain lacunae in the report of the authorised valuer to which we shall refer later on.
5.1. It appears that in deciding the issue, we are posed with two different questions, one of which may be considered as legal. The first such question is that when the assessee himself had declared the value of certain property at some figure in his WT returns, which was accepted by the Department (all the WT assessments are stated to have been completed by the WTO by accepting the returned figure of valuation of the property concerned), whether the assessee can change to his advantage the said valuation later on while computing capital gains on sale of the same property. The second question would, however, be that if the valuation offered by the assessee in the WT returns be considered to be not binding upon him in IT proceedings, whether the valuation as arrived at by the approved valuer can be considered as a correct one.
6. On the question of applicability of the principles of estoppel to the present case, we have gone through the judgment of the Andhra Pradesh High Court in the case of Smt. Indira Bai (supra). There, the point at issue was that whether for the purpose of computation of capital gains the value of one property belonging to that assessee could be taken to be not less than Rs. 5 lakhs as on 1st Jan., 1954, when the assessee herself had declared the value of the property for the wealth-tax purpose in asst. yr. 1957-58 at Rs. 2,50,000. The Tribunal had held in that case that there was no estoppel on the assessee to contend that the value of the property for income-tax purpose would be at the higher figure of Rs. 5 lakhs in spite of the assessee herself having returned the valuation in the WT return at a much lower figure. The Andhra Pradesh High Court did not find any error in the reasoning of the Tribunal. However, in doing so, the Andhra Pradesh High Court discussed that it was guided by two particular considerations. In the language of the Andhra Pradesh High Court :
"In the first place, we are unable to get the necessary clarification whether the sum of Rs. 2,50,000 was the valuation declared by the assessee and accepted by the Department or whether the Department enhanced the valuation of Rs. 2,50,000 made by the assessee for the asst. yr. 1957-58. Secondly, the Tribunal referred to the fact that there was a reduction in the rental income as a result of intervention of the rent control authorities from Rs. 2,600 to Rs. 1,450 per month and, therefore, the valuation as on 1st Jan., 1954, must be made with reference to the above-mentioned rent determined by the Rent Controller."
It is thus clear that the question of the principle of estoppel was judged in that particular case in the light of the peculiar circumstances relating to the case. The rent of the property had gone down which was considered by both the Tribunal and the High Court as one of the factors for showing a lesser valuation of the property in asst. yr. 1957-58 as compared to that shown earlier, i.e., on 1st Jan., 1954. Furthermore, the first consideration which led the High Court to agree with the Tribunal and which has been stated by us as above, was that there was no certainty as to whether the valuation of Rs. 2,50,000 as returned by that assessee in asst. yr. 1957-58 was accepted by the Department or was enhanced in the WT assessment. The purport of the discussion made by the High Court in its order in that regard seems to be that had the Department accepted the valuation as shown by the assessee, the case might have perhaps been somewhat different. It is required to be remembered in this connection that in the present case, the valuation of Rs. 90,000 as on 31st March, 1981, as declared by the assessee in his WT return was very much accepted by the Department.
7. In this connection, while considering the issue as to whether there should be a consistency between the figures adopted in the assessments of the same assessee for the same year under different direct tax enactments, two other decisions may be taken into consideration. In the case of H. J. Doshi & Ors. vs. CWT (1980) 123 ITR 893 (Bom), the Bombay High Court held that the Tribunal was fully justified in valuing the shares belonging to the assessee in conformity with the unanimous valuation report of two valuers adopted in the GT proceeding for the same year, for the purpose of valuation of the same shares in the WT assessments of the assessee. In the case of Smt. R. V. Kamalam vs. CWT (1973) 87 ITR 265 (Mad), the facts were that the WT assessment of one R for the year 1959-60 was completed valuing the jewels in his possession at Rs. 1 lakh disbelieving his claim that he had jewels worth only Rs. 40,000 and this was ultimately confirmed by the Tribunal. Meanwhile R died and in his estate duty proceedings, jewels of the value of Rs. 1 lakh were held to have passed rejecting the claim of the assessee, sister of R, that jewels of the value of only Rs. 3,350 had been left by the deceased. This was ultimately upheld by the High Court. In respect of the WT assessments of the said sister for the subsequent years 1960-61 and 1961-62, the claim of the assessee that jewels worth Rs. 1 lakh had not passed but only those of the value of Rs. 3,350 had been left by her brother was negatived on the ground that no tangible material to substantiate the contention was produced. On a reference to the High Court, their Lordships held that the assessee was not estopped from putting forward in the subsequent years the claim that she had in her possession only jewels worth Rs. 3,350 by producing acceptable material before the Tribunal. It was, however, ultimately held by the High Court that as no acceptable evidence had been adduced to substantiate that contention to displace the order of the Tribunal in respect of the WT assessment for asst. yr. 1959-60 and the view of the High Court in the estate duty proceeding of R, the Tribunal was right in its view that the assessee had inherited jewels worth Rs. 1 lakh on the death of R and these continued in her hands even in the asst. yrs. 1960-61 and 1961-62.
It may thus be seen that the issue of estoppel in this particular case was decided by the High Court in the context of completely a different claim that factually the assessee had inherited lesser quantity of jewellery than what had been assessed in the hands of her brother and also in his estate duty proceedings. So far as the valuation of the same asset is concerned, it appears that rather the intention of the High Court was that the valuation once adopted should be continued unless very strong reasons can be shown for departing from the same.
8. We will have to judge the present issue and especially the first question facing us in the light of the above decisions and also from the point of view of a general understanding of legal principles. It is the assessee who returned the value of the properties owned by him at Rs. 90,000 not only for asst. yr. 1981-82 (valuation date 31st March, 1981) but also for the preceding and subsequent years. On the basis of the circumstances prevailing at that time the WTO had accepted the valuation returned by the assessee by considering the same to be reasonable. Now, when the assessee is faced with the problem of paying capital gains on sale of the same property, he has come up with a much higher valuation ostensibly based on the report of an approved valuer. In the said valuation, the approved valuer has quoted instances of sales of certain properties around the property under consideration in or about the same period of time. Nothing prevented the assessee from appointing an approved valuer while returning the value of the property in his WT returns in the year 1981-82 and if the present contention of the assessee be correct, the valuation of the property on the basis of comparable sale instance would have been much higher at that time. The assessee did not undertake that exercise, as returning a lower valuation suited his purpose at that time. Now that he has come up with a much higher valuation just to suit his own purpose, in the matter of computation of capital gains and claims that the earlier valuation was not correct, only shows that his version is not acceptable at any point of time. The huge difference in the valuation of the same property as shown in the WT return and as claimed by the assessee in the present proceeding is also required to be taken into consideration. When the assessee says that the earlier valuation was done merely on arbitrary process, he admits as having very grossly undervalued his property for the wealth-tax purposes. The different Courts have held at various points of time that there should be some consistency in the matters of valuation of things like assets, closing stock, etc., in the nearby years and also in proceedings under the different direct tax enactments. A similar view with regard to transaction in general, has been expressed by the Madras High Court in the case of K. V. Iyer vs. CIT (1995) 215 ITR 461 (Mad). We are, thus, of the view that the valuation as disclosed by the assessee in the WT return has got to be taken into consideration for evaluating the same property and on the same date in connection with the determination of capital gains in the IT proceedings.
9. Even the basis for showing such a higher valuation, being the report of the approved valuer, is also not free from flaws and lacunae as has been discussed in detail by the CIT(A) in his impugned appellate order. He has discussed very well that the different instances of sale as cited by the approved valuer in his report mostly relate to properties situated at 4th Cross, which area was much more developed at the relevant point of time than the area being 36th Cross, on which the property of the assessee was situated. This point surely requires a serious consideration. Jayanagar is a very huge locality and the rate of land in one part of the same locality cannot have any close semblance to the same in another locality. The case must have been more so in 1981, when the entire area was in the stage of being developed. The portion of Jayanagar close to the city of Bangalore must have been developed earlier than the other portion which was remoter. The CIT(A) has discussed thoroughly that the property of the assessee is situated in one of such remoter areas. The value of land in that area must have, therefore, been much less than that in the other areas.
The other important flaw in the valuation report of the approved valuer is that while considering the values of the properties sold around that time, he has not given any basis for bifurcating the total consideration into value of land and that of building. If adjustments be made between the value of the land and the building according to the whims of the valuer, the rate in respect of the land can be altered to a very great extent. Even so far as the property belonging to the assessee is concerned, the learned Departmental Representative has pointed out that whereas in the WT return, the assessee had shown the value of the building at Rs. 35,000 only, in the report of the approved valuer, however, the value of the constructed portion has been considered as Rs. 1.56 lakhs. This huge discrepancy in the values of the constructed portion in the two valuations has never been reconciled by the assessee. The learned Departmental Representative has very aptly argued that if the valuation of the constructed portion of Rs. 1.56 lakhs be applied on per sq. ft. of constructed area basis to the other properties, the sales in respect of which have been cited by the approved valuer, the valuations of the building portions of such properties would arrive at much higher values thereby reducing the valuation of the land portions of those properties to considerably lower figures. The learned CIT(A) has also discussed that the property under consideration came in possession of the assessee by a family partition deed registered under document No. 444 of 1975-76 of Sub-Registrar's Office, Jayanagar, and that by virtue of a sale deed dt. 13th Jan., 1983, executed by the Block Development Authority in favour of the assessee (document No. 3843/82-83 of Sub-Registrar's Office, Jayanagar) the ultimate sale of the property in favour of the assessee was completed. The CIT(A) states thereafter that in both these documents, the value of the property must have been mentioned but unfortunately the assessee did not disclose such valuations before the IT authorities at any stage. The CIT(A) has been of the opinion that the value of this very property as shown in these two registered documents would give a much better idea about the valuation of the property as on 1st April, 1981. We agree with the CIT(A) in this regard. The assessee has not at all tried to come up clearly with all the relevant facts like the valuations of the property shown in these two documents, which would have thrown much more light on the valuation aspect.
The learned CIT(A) has also mentioned certain restrictions with regard to the above property like restriction on sub-dividing the plot into smaller plots, restriction on erecting more buildings than one and also restriction on raising multi-storeyed flats on the property, etc. The CIT(A) has aptly discussed that these restrictions finding place in the covenant of sale would go to reduce the price of the property considerably as compared to similar other properties even in the vicinity.
10. Taking into consideration all the above facts, we are finally of the view that not much reliance can be placed on the valuation report prepared by the approved valuer, which seems to have been got tailor-made by the assessee just for satisfying his own purpose in reducing the amount of capital gains on the sale of the property. Hence, finally, we would like to uphold the actions of the lower authorities in considering the amount of Rs. 90,000 being the valuation as returned by the assessee in his WT assessment for asst. yr. 1981-82 and also accepted by the WTO to represent the fair market value of it as on 1st April, 1981, for the purpose of computing capital gains of the property.
11. In the result, the appeal filed by the assessee is dismissed.