Income Tax Appellate Tribunal - Rajkot
Shri Pravinbhai Arjanbhai Sorathiya,, ... vs The Income Tax Officer, Ward-1(3),, ... on 7 June, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
"RAJKOT" BENCH, RAJKOT
BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
& SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR
आयकर अपील सं./I.T.A. Nos. 336 & 379/Rjt/2014
( नधा रण वष / Assessment Year : 2009-10)
Shri Pravinbhai Arjanbhai बनाम/ Income Tax Officer,
Sorathiya Vs. Ward-1(3), Rajkot
Kalpesh S. Doshi & Co,
Chartered Accountant, 411,
Cosmo Complex, Mahila
College Circle, Rajkot 360
001
&
Income Tax Officer, Ward- Vs. Shri Pravinbhai
1(3), Rajkot Arjanbhai Sorathiya
C/o Shanti Machine
Tools, Dhebar Road,
South, Opp. Amardeep
Foundry, Atika
Industrial Area, Rajkot
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AEXPS3316J
(अपीलाथ /Appellant) .. ( यथ /Respondent)
अपीलाथ ओर से /Appellant by : Shri Kalpesh Doshi, A.R.
यथ क ओर से / Respondent
Shri Ravi Prakash, D.R.
by :
सन
ु वाई क तार ख / Date of
15/03/2018
Hearing
घोषणा क तार ख /Date of
07/06/2018
Pronouncement
आदे श/O R D E R
ITA Nos. 336 & 379/Rjt/14 [Shri Pravinbhai A. Sorathiya vs. ITO]
A.Y. 2009-10 -2-
PER PRADIP KUMAR KEDIA - AM:
The captioned cross appeals have been filed by the assessee as
well as the Revenue against the order of the CIT(A), Jamnagar
('CIT(A)' in short), dated 11.03.2014 arising in the assessment order
dated 18.11.2011 passed by the Assessing Officer (AO) u/s.143(3) of
the Income Tax Act, 1961; (the Act) concerning assessment year 2009-
10.
2. Both assessee as well as the Revenue are aggrieved by the order
of the CIT(A) on the common issue i.e. quantification of development
and improvement expenses associated with purchase of land under sale
and consequential quantification of short term capital gains.
3. Briefly stated, the assessee, an individual, is engaged in the
business of manufacturing and trading of Drill machines and other
parts. In the course of the scrutiny assessment, the AO observed that
the assessee sold a plot at Revenue Survey no.385, Paki 1 for a
consideration of Rs.54,70,271/- on which no capital gains were
offered during the assessment year. It was further noticed by the AO
that the said land was not appearing in his books of accounts. An
statement on oath u/s.131(1) was recorded by the AO wherein the
assessee was confronted on the issue of capital gain liability and was
requested to explain the reasons thereof. In reply to question no.7, the
assessee replied that he had given power of attorney to sale the said
land to one Shri Dharmendrasinh Jeenuba Jhala and Smt. Sitaben
Prakashbhai Patel. The said land was sold on 15.09.2008 by power of
attorney and the sale consideration was credited into the accounts of
the power of attorney holders. It was claimed by the assessee that he
had received entire consideration in cash in advance from the power of
attorney holders during the relevant assessment year. The assessee
ITA Nos. 336 & 379/Rjt/14 [Shri Pravinbhai A. Sorathiya vs. ITO]
A.Y. 2009-10 -3-
further claimed that Rs.54,70,271/- is not his profit at all. The
assessee claimed that an aggregate expenditure of Rs.48 Lakhs
approximately was incurred towards purchase price of land, land
development costs and conversion cost of agricultural land into
nonagricultural land prior to its sale. It was observed by the AO that
the assessee could not submit requisite details and supporting
evidences of expenses towards cost of acquisition etc. amounting to
Rs.47,20,054/- claimed to be incurred towards cost of
development/improvement of land. The AO accordingly adopted the
purchase cost of Rs.79,946/- alone and ignored the cost of
development/improvement etc. for the purposes of determination of
capital gains. The capital gain was accordingly computed at
Rs.53,05,836/- and the same was added to the total income of
assessee.
4. Aggrieved by the action of the AO in holding that the assessee is
liable for taxation of short term capital gains of Rs.53.05 Lakhs on
sale of land, the assessee preferred appeal before the CIT(A). Several
additional evidences were furnished before the CIT(A) in the course of
appellate proceedings. The CIT(A) obtained remand report thereon
from the AO. The CIT(A) also directed the AO to refer the issue to
valuation cell towards cost of improvement/development expenses.
Pursuant to the directions, the AO obtained valuation report from
Departmental Valuation Officer (DVO). The assessee also submitted a
valuation report of the registered valuer before the AO in the remand
proceedings and claimed that the registered valuer has broadl y
accepted the improvement cost/development expenses as shown by the
assessee as fair and reasonable. The valuation as per the registered
valuer filed by the assessee stands at Rs.49,45,000/-. The AO
however noted that the fair value of development work done by the
assessee stands at Rs.31,11,984/- as per DVO. Before the CIT(A), the
ITA Nos. 336 & 379/Rjt/14 [Shri Pravinbhai A. Sorathiya vs. ITO]
A.Y. 2009-10 -4-
assessee however strongly objected to the basis of determination of
valuation by the DVO as noted in page no.7 of the order of the
CIT(A). The CIT(A) after taking into account the evidences towards
development expenses, valuation report filed by the assessee and
valuation obtained by the AO from DVO as well as defects pointed out
by Assessee in report of DVO, came to the conclusion that valuation
done by the DVO is not entirely sacrosanct. Having regard to the
defects pointed out by the assessee in the DVO report, the CIT(A)
estimated the value of development costs etc. at Rs.42 Lakhs in place
of Rs.47,20,054/- claimed by the assessee on the one hand and
Rs.31,12,000/- claimed by the AO on the other hand. The short term
capital gain was accordingly revised having regard to the cost of
improvement noted above.
5. Aggrieved, the assessee preferred appeal before the Tribunal on
the ground that the CIT(A) ought to have accepted the entire cost
towards improvement of Rs.48 Lakhs instead of Rs.42 Lakhs estimated
by the CIT(A). The Revenue, on the other hand, has impugned the
action of the CIT(A) for adopting the cost of improvement of Rs.42
Lakhs and thereby granting consequential relief on account of short
term capital gains.
6. We have carefully considered the rival submissions made by
both sides in this regard and perused the orders of AO and CIT(A). As
noted above, the valuation of cost of improvement before the land was
sold is in question for the purposes of determination of short term
capital gain on sale of land. In this regard, we find that the CIT(A)
has taken cognizance of the valuation report filed by the assessee as
well as Revenue and objectively appreciated the defects pointed out on
behalf of the assessee in this regard. After taking note of the
valuation report placed by the assessee and Revenue and case laws
ITA Nos. 336 & 379/Rjt/14 [Shri Pravinbhai A. Sorathiya vs. ITO]
A.Y. 2009-10 -5-
governing the field in such a situation, the CIT(A) has granted
concessions to both sides and estimated the valuation at Rs.42 Lakhs.
The relevant operative part of the order of the CIT(A) is reproduced
hereunder:
"Decision:
7. I have duly consider ed the submission of the appellant, remand
report of AO, valuation report of AVO and the counter-submissi on of the
appellant and also gone through the discus sion made in the ass essment
order.
7.1 First three grounds of appeal are inter-relat ed and are being taken
together for disposal.
7.2 Here, the basic issue is valuation of cost of improvement to the said
land. The appellant has claimed Rs.47,20,054/- while this value has been
arrived at Rs.31,12,000/- by AVO, which has been vehemently objected by
the appellant by point ing out some major mistakes in AVO's report which
are as under:-
(i ) The total quantity of the materials used for levelling is 18,430.25
Cu. Mts. as per regi stered valuer while the AVO has taken only
4,755.25 Cu. Mts. which Is almost l/4th of the claim made by the
appellant. Although rate for filling has been taken more as
compared to appellant 's claim.
(ii) The rate for cleaning the site development has been taken at Rs.3/ -
per sq.mt. instead of Rs.20/- per sq,mt. clai med by the appellant.
(iii) Similarly rate for marking individual plots and r ate of road work
too has been adopted much less than the registered valuer's report .
7.3 As the appellant has objected to the valuation done by the AVO on
the ground of above mistakes as well as wide variation in valuation I have
left with no option but to estimate the value of improvement taking
following factors mind:-
(1) Time Gap - There is a big time gap between the time the said land
was earth-filled & the date of valuation. Hence, the claim made by
the appellant is unverifiable completely/accurately. But at the same
time the claim cannot be brushed aside completely too.
(2) The mistakes in the valuation report.
Therefore, in the interest of justice the value is estimated at Rs.
42,00,000/- taking all the above (ti me gap, mistakes in AVO repor t, nature
of improvement.) into account. This ground of appeal is partly all owed.
ITA Nos. 336 & 379/Rjt/14 [Shri Pravinbhai A. Sorathiya vs. ITO]
A.Y. 2009-10 -6-
8. Last ground of appeal is against charging of interest
u/s.234A/234B/234C/234D of the Act and the AO is directed t o grant
consequential relief."
7. As can be seen, the CIT(A) has taken into account the inherent
limitations in the respective valuation report and has taken a benign
view while holding the estimated cost of improvement at Rs.42 Lakhs.
Thus, while the valuation determined by the registered valuer pointed
out on behalf of the assessee has been scaled down, the valuation
determined by the DVO has been scaled up. We are of the view that
having regard to the facts and circumstances, the action of the CIT(A)
cannot be faulted. The CIT(A), in our view, has approached the issue
in right perspective while determining the cost of
improvement/development costs. We, thus, decline to interfere.
8. In the result, the appeal of the assessee as well as that of
Revenue is dismissed.
[Pronounced in the open Court on this the 7 t h day of June, 2018.]
Sd/- Sd/-
(MAHAVIR PRASAD) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad: Dated 07/06/2018
True Copy
S.K.SINHA
Copy of the Order f orwarded to: -
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deput y/ As stt.Registrar ITAT, Raj kot