Income Tax Appellate Tribunal - Kolkata
Acit, Cir-32, Kolkata, Kolkata vs M/S Bajaj Chemicals, Kolkata on 23 August, 2017
ITA No.640/Ko0l/2015- M/s. Bajaj Chemicals A.Y.2005-06 1
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH 'C' KOLKATA
[Before Hon'ble Shri J.Sudhakar Reddy, AM & Shri S.S.Viswanethra Ravi, JM ]
ITA No.640/Kol/2015
Assessment Year : 2005-06
D.C.I.T., Circle-32, -versus- M/s. Bajaj Chemicals
Kolkata Kolkata
(PAN: AADFB 7734 M)
(Appellant) (Respondent)
For the Appellant: Shri David Z. Chowngthu, Addl. CIT(DR)
For the Respondent: Shri S.K.Tulsiyan, Advocate
Date of Hearing : 10.08.2017.
Date of Pronouncement : 23.08.2017.
ORDER
PER J.SUDHAKAR REDDY, AM:
This is an appeal by the Revenue directed against the order of the Commissioner of Income Tax-(A)-9, Kolkata for A.Y.2005-06.
2. There is only one issue involved in all the grounds of appeal and this relates to computation of the long term capital gain at Rs.83,38,733/- by the AO as against Rs.17,70,015/- declared by the appellant.
3. The fact of the case is that the return of income was filed by the assessee declaring total income at Rs.66,83,684/- which was assessed at Rs.l,31,53,007/-. The difference between the returned income and the assessed income resulted from determination of long-term capital gain at Rs.82,38,733/- by the AO by invoking and applying the provisions of sec. 50C of the Act. The assessee-firm had jointly held with other two co-owners, a plot of land situated at, 16/lF, East Topsia Road, Tiljala, 24- Parganas (5) and the cost attributable to the assessee's l/3rd share was of Rs.l,65,000/- . During the year under consideration, the said land was sold for Rs.19,35,015/-. The A.O. noticed that the sale value adopted by the Stamp Valuation authority for the entire plot of land was of Rs.2,56,33,822/-, whereas Deed of Conveyance reflected the ITA No.640/Ko0l/2015- M/s. Bajaj Chemicals A.Y.2005-06 2 sale consideration to the tune of Rs.58,05,000/- only. In terms of the deed of conveyance the assessee was to have received Rs.19,35,000/- as its l/3rd share of the sale proceeds, the amount receivable in terms of the stamp duty valuation was of Rs. 85,44,607/-. During original assessment proceedings, the A.O. asked the assessee to explain as to why stamp duty valuation should not be deemed to be the full value of consideration of transfer for the purpose of capital gain u/s. 50C of the Act. Thereafter, the A.O. referred the matter to the D.V.O., who after allowing time to the assessee and obtaining further information/details/datas from Alipore Sub-Registry Office, estimated the total value of the impugned land at Rs.2,52,13,000/-. The assessee objected to such adoption of value of the land on the ground that, he omitted to consider several factors and related documents furnished to him including, the valuation report of the impugned land made by a registered valuer Mr. A.K. Dey who valued the land at Rs.58,05,000/-. The A.O. assumed the value adopted by the DVO and completed the assessment by taking value of l/3rd share of the assessee in the said land at Rs.85,44,607/- for the purpose of calculation of LTCG. The assessee was unsuccessful in the first round of appeal before the C.I.T.(A) and thus preferred second appeal before the Hon'ble I.T.A.T., Kolkata. Before the Tribunal, the assessee filed several documents/evidences in the form of Paper Book. After perusal of the same and hearing the Representatives of both the sides, the Hon'ble Tribunal was of the considered opinion that the A.O. in the present case had passed the assessment order just to comply the statutory requirements for completing the assessment before 31/12/2007 and it was further held that the materials brought on record by the assessee before the A.O. has neither been considered by him nor by the C.I.T.(A). Therefore, in the interest of natural justice, the matter was set aside to the file of the A.O. to re- decide the issue as per law, after taking into consideration of the various materials filed by the assessee and affording reasonable opportunity of being heard.
The present order giving effect to the said order of Hon'ble Tribunal passed by the A.O. u/s. 254 of the Act was the subject matter of appeal before the ld. CIT(A). In the said appeal effect order, the A.O. followed the same basis of valuation as adopted ITA No.640/Ko0l/2015- M/s. Bajaj Chemicals A.Y.2005-06 3 in the original assessment proceeding and the value of the sale consideration was deemed to have been fixed at Rs.2,52,13,000/- and the l/3rd share of the appellant at Rs.84,04,333/-, meaning thereby the LTCG was computed at Rs.82,38,733/- and the total income at Rs.1,31,53,007/-.
4. The assessee carried the matter on appeal to the ld. First Appellate Authority, who considered various factors and other evidences furnished by the assessee, in support of his contention that the market value of the property in question was much lesser than the guidelines value fixed by Sub-Registrar office and granted relief. Aggrieved the revenue is in appeal before us on the following grounds :-
"Ground No.l : "That, on the facts and in circumstances of the case and in law, the CIT(Appeals) erred in allowing relief to the assessee by accepting the valuation made by the appellant and not considering the valuation made by the Departmental Valuation Officer, thereby reducing the amount of Long Term Capital Gain on sale of property. "
Ground No.2 : "That, on the facts and in circumstances of the case and in law, the CIT(Appeals) erred in allowing relief to the assessee by holding that the A 0 has not come up with any reliable material and findings while making the addition while on the contrary AO had passed the order after gathering sufficient material on record and considering the appellant's submissions."
Ground No.3 : "That, on the facts and circumstances of the case, and in law, the Ld.CIT(A) has erred in allowing relief to the assessee firm by relying on judgments in cases wherein the factual matrix are different from that of the present case of the appellant firm.
Ground No.4 : "That the appellant craves leave to submit additional grounds of appeal, if any, at or before the time of hearing and/or alter, modify, reframe any grounds of appeal at or before the time of hearing."
5. The ld. Senior Departmental Representative submitted that the ld. CIT(A) did not have the power nor the expertise to determine the market value of the property on transfer. He submitted that the AO referred the matter to the Department Valuation Officer and the ld. DVO had after taking into consideration the details furnished by the assessee arrived at the total value of the impugned land at Rs.2,52,13,000/- in place of the value arrived at by the Registered Valuer Shri A.K.Dey at Rs.58,05,000/-. ITA No.640/Ko0l/2015- M/s. Bajaj Chemicals A.Y.2005-06 4 He submitted that at best the ld. CIT(A) should have referred the issue back to the DVO and he should not have himself arrived at the present value. He referred to the various factors considered by ld. CIT(A) while coming to a conclusion that the value of the said land is depressed and submitted that these factors cannot lead to the quantum of reduction in value as reduced by the ld. CIT(A). He prayed that the issue should be restored to the file of the AO , who shall refer once again to the DVO for fresh adjudication.
6. The ld.counsel for the assessee, on the other hand, vehemently opposed the contentions and submitted that the assessee was the owner of 1/3rd of the land and the other two owners sold the land at the very same rate and the revenue had accepted the sale rates in those case. He further submitted that in the first round of the appellate proceedings the Tribunal had given certain directions and the ld. AO failed to consider the directions and repeated the assessment. He submitted that the land was located in a slum area with families all along and primarily inhabited by working class people of the minority community known as Anjuman-e-Burhani He enumerated each one of the factors which depressed the value of the land and the offer of purchase for building of a mosque on the said land and submitted that the assessee had no choice but to sell the land at the rate offered. He relied on various submissions made before ld. CIT(A) as well as the findings of the ld. CIT(A) and submitted that the same be upheld.
7. Heard the rival submissions. On a careful consideration of the facts and circumstances of the case and perusal of the papers on record and the orders of the authorities below as well as the case laws cited we hold as follows :
The Tribunal in the first round of the appellate proceedings in ITA No.373/Kol/2009 for A.Y.2005-06 order dated 11.09.2009 at para 4 held as follows :-
"4. After hearing the rival submissions and on careful perusal of the materials available on record and taking into consideration the various submissions made by the Ld. Counsel for the Assessee and the ld. DR and further on careful perusal of the provisions of section 50C, we are of the considered opinion that the AO has passed the assessment order in order to comply the statutory requirements by ITA No.640/Ko0l/2015- M/s. Bajaj Chemicals A.Y.2005-06 5 completing the assessment before 31.12.07 and we further observe that the materials brought on record by the assessee before the AO has neither been considered by the AO nor by the Ld. CIT(A). Therefore, in the interest of justice, we set aside the matter to the file of the AO to re-decide the issue, as per law, after taking into consideration of the various materials filed by the assessee and after giving a reasonable opportunity of being heard to the assessee. "
8. The Tribunal while doing so considered the objections of the assessee on the DVO's valuation. The Registered Valuer of the Income Tax Department, in his valuation report, had valued the very same land at Rs.58,05,000/-. On these facts the First Appellate Authority in his impugned order held as follows :-
"7. I have considered the submission of the appellant and carefully perused the material placed during the appellate proceedings as well as the assessment records, In the instant case, the issue involved is whether the sale consideration received by the appellant on sale of plots of land situated 16/1F, East Topsia Road, Kolkata during October & November, 2004 should be taken by applying the provisions of sec. 50C of the Act admitting the valuation report of the DVO depicting fair market value of the property or the same should be taken on the sale price claimed to have been actually received by the appellant and which was duly supported by registered valuer's report.
7.2. Before coming to the issue whether the sale price received and/or shown as per deed of conveyance is the actual value realized by the appellant or the appellant has suppressed the same in view of DVO's report backed by value estimated by the stamp duty authority while registering the conveyance deeds of the impugned land, the geographical situation of the land, surrounded attending situation and factors having any depressing or appreciative effect on the value of the property are to be looked into. The appellant submitted and narrated such situation in detail and argued that the same cannot be said to be untrue in absence of denial of such facts by the A.O. The appellant further submitted that the impugned land at the relevant time consisted of very low land, partly agricultural and partly doba (small waterbody). The dobas and other low areas gradually got filled up due to garbage dumping by the KMC. The land is bounded on the North by East Topsia Road, a decrepit road of 12 to 15 feet average width, which is the only ingress and egress to the land. The land could not be approached through any other side without trespassing into properties of other people, which were also of similar type during the relevant time. Such surroundings and access to any land is bound to substantially diminish its market value. The locality and neighbourhood, in which the land is situated, is mostly slum area with tanneries all around and primarily inhabited . by working class people, mainly of the minority community. The plots adjacent to the appellant's plot were under possession of tannery and these plots ultimately came under the possession of a society run by the minority community known as ITA No.640/Ko0l/2015- M/s. Bajaj Chemicals A.Y.2005-06 6 Anjuman-e-Burhani, who acquired the same between 22/01/2004 and 07/04/2004 for the purpose of constructing of a Mosque. Further, from the letter dated 16/1/2004 received by the appellant from Anjuman-e-Burhani, quoted above, it is evident that the appellant had no real option but to sell the land to this society at a price offered by them. In such situation, there was hardly any option to bargain for better price. Price of a land depends on its geographical position and availabilities of civic amenities. The stamp duty authority generally estimates the value Ward-wise. The Stamp Duty authorities value a property for stamp duty purposes simply on the basis of pre-declared rate and not on the basis of the factors governing each individual premise as had been wrongly presumed by the A.O. It is also fact that each part of the Ward may not fetch the same geographical situation, civic facilities and other factors, therefore, the impugned land cannot fetch such value as estimated by the A.O. and DVO depending upon the value adopted for the purpose of stamp duty.
7.3. The A.R to justify the sale price of the impugned land has referred to the Govt. Notification No.72-LA(Cal)1-2/2000/M.A. dated 16/11/2000, published in the Calcutta Gazette on 21/11/2000, a copy of which is placed on record. It is evident there from that certain holding' adjacents to the impugned land of the appellant were acquired at a price of R .48,082/- per kottah. It is further observed that as on 14/01/2004, four owners of premises No.16F, East Topsia Road (appellant's impugned plot is just adjacent, i.e. 16/1F, East Topsia Road) had sold their land to Anjuman-E-Burthani on 14/01/2004 at a value between Rs.49,905/- and Rs.51,285/- per kottah. The copies of conveyance deeds of plot No.16/F, East Topsia Road are on record. Therefore, on the basis of the aforesaid instances, it cannot be said that the market value of the appellant's land at the relevant time was higher than mentioned in the conveyance deed. On th other hand, it is evident that the DVO in his report has not discussed or taken into consideration the above position in and around the land and circumstance under which the appellant had to sell the property at the price fixed by the purchaser while determining fair market value rather he has based his opinion on the basis of value assessed by the Addl, District Sub-Registrar Office, Alipore for ascertaining value for stamp valuation purposes. In fact, relying on the stamp valuation for valuing a property defeats the very purpose of referring the matter for valuation to the DVO since the dispute is in respect of the stamp duty valuation itself. The DVO should have based his valuation on actual verification of the land and the various methods of valuation, i.e. primarily land & building method, contractor's method of valuation, rental basis or yield basis method, municipal valuation method etc. In this case, the DVO has not ascertained any market value to which a willing, reasonable and prudent purchaser would pay for this property. Even the DVO has not considered the factors having any depressing or appreciative effect on the value of the property. It is the fact that valuation of an immovable property depends on various plus and minus factors and evaluation of these factors, of course, depends on the facts of each case. In general, plus and minus factors are as under as submitted by the appellant.
ITA No.640/Ko0l/2015- M/s. Bajaj Chemicals A.Y.2005-06 7
Plus factors Minus factors
1. Smallness of size 1. Largeness of area
2. Proximity to a road 2.Situation in the interior at a
distance
From the road.
3. Frontage on a road. 3. Narrow strip of land With small
frontage compared to depth
4. Nearness to developed area. 4. Lower level requiring filling up
5. Regular shape 5.Some special disadvantageous
factor which would deter a purchaser.
If the above factors are applied to the appellant's property, it would be seen that in comparison to plus factors, minus factors existed much at the relevant time. The area of plot was large, which was about 114.95 cottahs. The plot was not on the main road, rather the front approach road was narrow, kutcha and without drainage facility. The approach road was ending at the Mosque which was surrounded by kutcha hutments of slum dwellers. The land at the relevant time was a dumping ground of KMC garbage and thus soft and underdeveloped without proper filling. Further, right to peaceful enjoyment of the property was disturbed and free choice of sale was not possible due to insistence by Anjuman- e-Burhani for transfer of the land at the price settled by them. It appears, neither the DVO nor the AO has considered the above things while determining the fair market price of the land and instead they were simply guided by the valuation made for stamp duty purposes by the registering authority, which is a valuation made at predetermined rate and not on the basis of the actual facts of each property. "
9. The ld. DR has not controverted these factual finding of the ld. CIT(A). Further the ld. CIT(A) held as follows :-
" 7.6. The appellant also filed a valuation report from a Registered Valuer, Sri A.K. Dey, during assessment proceeding. According to the appellant, the said valuer visited/inspected the impugned land/area in order to determine and assess valuation of the same as on November, 2004. On perusal of the said report it is found that the registered valuer has, in fact, incorporated the detailed basis of valuation including the comparable sale transaction adjacent to the appellant's impugned land and thus adopted the fair market value as on November, 2004 of the appellant's impugned land at Rs.50,509/- per cottah and for entire 114.93 cottah at Rs.58,05,000/-. Accordingly, the valuation as per stamp duty authority of Rs.2,56,33,822/-, being more than 4 times higher, appeared not reasonable .. It is found that the A.O. has not discussed about the merits or demerits of the said valuation report. The A.O. could have discarded the report by adducing reason ITA No.640/Ko0l/2015- M/s. Bajaj Chemicals A.Y.2005-06 8 whatsoever and that not being done, it is to be presumed that he has nothing to comment on the same.
7.7. Before parting, it may be mentioned here that during first round of appellate proceeding, the then C.I.T.(A) sought for a remand report from the A.O. to know the status of assessment in the case of other two joint-owners for A.Y. 2005-06. In reply, the A.O. vide communication dated 18/08/2014 to the C.I.T.{A) has intimated that in both the cases no scrutiny assessment was done by the concerned A.O. For better appreciation, the relevant portion of the remand report is reproduced hereunder :
"The jurisdiction of Bajaj Brothers lies with the charge itself. It is found from the records of the said Bajaj Brothers that it had filed return of income for the A.Y. 2005-06 on 31/10/2005 and computed capital gains by taking sale consideration at Rs.19,34,992/-. No scrutiny assessment was made in this case. From the return of income filed by M/s. Milap Leather Co. for the A.Y. 2005-06, it was observed that it had also computed the capital gains by taking sale consideration at Rs.19,34,993/-. It is also to be stated that the jurisdiction of M/s. Milap Leather during the financial year 2007-08 (during which the assessment for A.Y. 2005-06 was to get barred) was found to be with A.CLT., Circle-31, Kolkata. Accordingly, A.CL.I.T., Circle-31, Kolkata was requested to inform whether any scrutiny assessment was made in this case. He informed that no scrutiny assessment was made in that case also."
8. After considering the facts and circumstances of the case in totality and judicial precedence referred to above, I find merit in the submission of the appellant and find no justifiable reason to adopt the deemed value of sale consideration of the appellant's 1/3rd portion in the property at Rs.84,04,333/- and consequential assessment of Rs.82,38,733/- under the head LTCG. Therefore, appeal on this ground is allowed."
10. We find no infirmity in the order of the First Appellate Authority. This is a case where there are two valuation reports, one by the Departmental Valuation Officer and the other by the Registered Valuer of the Income Tax department. In such a situation, we are of the opinion that the adjudicating authority has to examine both the reports on facts and come to a conclusion as to which report is more realistic on the facts of the case and then choose to adopt the same. When the DVO's report has not taken into account vital facts, it cannot be a basis for substituting the stamp duty valuation fixed by the registration authority of the State Govt. It is open to the appellate authorities to examine both the valuation reports and come to a conclusion as to which report gives the fair market value of the property. The contention of the ld. DR that the valuation ITA No.640/Ko0l/2015- M/s. Bajaj Chemicals A.Y.2005-06 9 made by the DVO cannot be looked into or interfered with by the appellate authorities is not correct. The issue of determination of ' Fair Market Value ' is a finding of a fact and the report of the DVO is an opinion in arriving at this fact. The report of the DVO or the registered valuer is an expert opinion and it can be challenged and questioned by the parties before the authorities. When this DVO's report is proved as wrong, then it is open to the authorities to reject it and adopt other methods for arriving at the " fair market value . Sub-sec.(3) of Sec.50C provides for adoption of the value ascertained under sub-sec. (2) as the full value of consideration. In the case on hand, on facts, the fair market value arrived at by the Registered Valuer and accepted by the ld. CIT(A) has not been controverted by the ld. DR. The order of the ld. CIT(A) is a reasoned order. Hence we uphold the same.
11. In the result the appeal by the revenue is dismissed.
Order pronounced in the Court on 23.08.2017.
Sd/- Sd/-
[S.S.Viswanethra Ravi] [ J.Sudhakar Reddy ]
Judicial Member Accountant Member
Dated : 23.08.2017.
[RG PS]
Copy of the order forwarded to:
1.M/s. Bajaj Chemicals, 83, Shakespeare Sarani, Kolkata-700017.
2. Dy/A.C.I.T., Circle-32, Kolkata.
3. C.I.T.(A)- 9, Kolkata 4. C.I.T-11, Kolkata
5. CIT(DR), Kolkata Benches, Kolkata.
True Copy By order, Senior Private Secretary Head of Office/D.D.O, ITAT Kolkata Benches ITA No.640/Ko0l/2015- M/s. Bajaj Chemicals A.Y.2005-06 10