Income Tax Appellate Tribunal - Pune
Subhash Vinayak Supnekar,, Pune vs Assessee on 28 May, 2013
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IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No.1672/PN/2011
(Asstt.Year : 2008-09)
Subhash Vinayak Supnekar,
S.No.38/2, Gujarwadi Road,
Katraj, Pune
PAN No. ACQPS 5828H .. Appellant
Vs.
ACIT, Range-2, Pune. .. Respondent
ITA No.152/PN/2012
(Asstt.Year : 2008-09)
DCIT, Circle-2, Pune .. Appellant
Vs.
Subhash Vinayak Supnekar,
S.No.38/2, Gujarwadi Road,
Katraj, Pune
PAN No. ACQPS 5828H .. Appellant
Appellant by : Shri Nikhil Pathak &
Shri Suhas Bora
Respondent by : Shri S.K. Singh
Date of Hearing : 28-05-2013
Date of Pronouncement : 28-06-2013
ORDER
PER R.K.PANDA, AM :
These are cross appeals, the first one filed by the assessee and the second one filed by the Revenue and are directed against the order dated 21-10-2011 of the CIT(A)-II, Pune relating to Assessment year 2008-09. For the sake of convenience these were heard together and are being disposed of by this common order.
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2. Facts of the case, in brief, are that the assessee is an individual and filed return of income on 31-03-2009 declaring total income of Rs.8,31,07,890/-. During the course of assessment proceedings the Assessing Officer noted that the assessee has sold the property at Mukund Nagar on 05-04-2007 for a total consideration of Rs.16 crores. After claiming indexed cost of acquisition at Rs.4,88,09,205/- the assessee has offered an amount of Rs.11,11,90,795/- as Long Term Capital Gain. Further, the assessee has claimed exemption u/s.54F amounting to Rs.1,84,07,799/- by investing the same in the construction of new residential property. The assessee has further claimed exemption of Rs.50 lakhs u/s.54EC by investing the same in Rural Electrification Corporation Ltd. on 02-02-2007.
2.1 The Assessing Officer noted that the assessee has invested the amount of Rs.50 lakhs in Rural Electrification Corporation Ltd. before the date of sale. He, therefore, asked the assessee to explain as to how the exemption is available. Referring to the decision of the Nagpur Bench of the Tribunal in the case of Bhikulal Chandak HUF Vs. ITO reported in 126 TTJ 545 and CBDT Circular No.359 dated 10-05-2003 36 CTR (TLT) 1 it was submitted that the assessee has correctly claimed the deduction. However, the Assessing Officer was not convinced with the explanation given by the assessee. He noted that the CBDT Circular refers to exemption u/s.54E whereas the claim of the assessee is u/s.54EC. Rejecting the arguments advanced by the assessee and distinguishing the decision cited before him, the Assessing Officer disallowed the claim of deduction u/s.54EC(1) amounting to Rs.50 lakhs.
32.2 So far as the claim of deduction u/s.54F by the assessee amounting to Rs.1,84,07,799/- is concerned the Assessing Officer noted that the same is on the basis of a certificate from an architect towards construction of new residential property. From the details furnished by the assessee he noted that the assessee could not furnish either the completion certificate or approved plan. Therefore, he was of the opinion that there is no authenticated document to show the actual construction in the residential property. The Assessing Officer, therefore, asked the assessee to produce the architect who has issued the certificate. However, the assessee did not produce the architect. The Assessing Officer noted from the various details furnished by the assessee that the assessee has spent an amount of Rs.2,62,96,856/- for construction of new property consisting of residential and commercial property being factory shed. He asked the assessee to give the bifurcation of the cost incurred. The assessee filed the certificate issued by the architect M/s. Deshpande Degaonkar dated 07-04-2008 wherein he has stated that the total cost for the residential property is Rs.1,84,89,057/-. The Assessing Officer noted that the bifurcation of the total area of the construction was not given. He therefore asked the assessee to submit the bills/vouchers to prove the expenditure claimed. The assessee initially furnished bills amounting to Rs.1,90,65,224/- and subsequently submitted further bills amounting to Rs.38,57,443/-. Thus the total of the bills produced before the Assessing Officer was Rs.2,29,22,667/-. The Assessing Officer noted that all the bills are raised in the name of "M/s. The Southern Machine Industries". Even the assessee has also submitted the ledger extracts of the respective parties as appearing in the books of M/s. The Southern Machine Industries. He noted that the said firm is a 4 partnership firm wherein the assessee and his wife are partners. The firm is running business of manufacturing mechanical equipments from the factory shed which has composite structure along with the so-called residential property. He noted that the bills produced for Rs.2.29 Crores include the total payments for labour charges at Rs.85,01,375/- which are paid in cash on various dates. The vouchers are self made vouchers drawn by M/s. The Southern Machine Industries. The percentage of such labour charges to the total bills works out to 37%. Since the amount was incurred in cash the Assessing Officer was of the opinion that the genuineness of the same cannot be verified. Further, the construction cost includes bills for purchase of computers on 26-04-2008 amounting to Rs.33,000/- and purchase of one DVD writer on 09-04-2008 amounting to Rs.12,050/-. He, therefore, asked the assessee to explain as to why the claim of exemption u/s.54F should not be disallowed. Rejecting the various explanations given by the assessee and in absence of production of the architect before him the Assessing Officer disallowed the claim of exemption u/s.54F amounting to Rs.1,84,07,779/-.
3. So far as the calculation of indexed cost of acquisition the Assessing Officer noted that the property so sold was bequeathed to the assessee as per his father's will in the year 2003-04. The assessee has valued the property as on 01-04-1981 at Rs.71,18,920/- in respect of land and Rs.17,39,375/- in respect of the building as per the valuation report dated 20-10-2008 and claimed the cost of indexation w.e.f. 01-04-1981. The Assessing Officer was of the opinion that the valuation report submitted by the assessee is on the higher side. In order to ascertain the value as on 01- 04-1981 the Assessing Officer wrote a letter to the Joint Director, Registrar 5 of Stamps on 10-12-2010. In response to the same the Joint Director, Registrar vide his letter dated 22-12-2010 valued the said property at Rs.40,91,400/-. The Assessing Officer therefore asked the assessee to explain as to why the valuation of the property as on 01-04-1981 should not be taken at Rs.40,91,400/- in respect of the land. It was explained by the assessee that the evidences collected by the department is towards the valuation for the purpose of ascertaining the stamp duty and recovery matters which is based on circle rates and they adopt uniform rate of property for the entire locality and therefore the same should not be applied. However, the Assessing Officer was not convinced with the above argument. He observed that the assessee has not furnished any evidence to show that his property was better located. He noted that the valuation furnished by the assessee is on the basis of general valuation prevailing during 01-04-1981. Therefore, the only authenticated valuation according to Assessing Officer is that of the Registrar of Stamp duty. He therefore adopted the valuation of the property as on 01-04-1981 at Rs.40,91,400/- as against Rs.71,18,920/- taken by the assessee.
3.1 The Assessing Officer further noted that the assessee has claimed indexation w.e.f., 01-04-1981 though the property came into assessee's hands only during the year 2003-04. He, therefore, asked the assessee to explain as to why for indexation purpose the year of acquisition should not be taken as 2003-04. Rejecting the various explanations given by the assessee and relying on certain decisions the Assessing Officer held that the provisions of section 55(2)(b)(ii) are very clear and unambiguous. Referring to provisions of section 49(1), Explanation 1(b) to section 2(42A) and provisions of Explanation (iii) to section 48 the Assessing Officer took 6 the indexation for the F.Y. 2003-04 as the basis and re-determined the cost of indexation at Rs.69,39,000/-. After deducting the same from the sale proceeds of Rs.16 crores the Assessing Officer determined the capital gain at Rs.15,30,61,000/- as against Rs.11,11,90,795/- offered by the assessee. Thus, he made addition of Rs.4,18,70,205/- being the income from Long Term Capital Gain on account of sale of land.
4. Before the CIT(A) the assessee made elaborate arguments and filed detailed submissions. The assessee also relied on various case decisions. Based on the arguments advanced by the assessee and relying on various decisions cited before him the Ld. CIT(A) gave part relief to the assessee. So far as the question relating to exemption u/s.54EC amounting to Rs.50 lakhs is concerned he rejected the claim of the assessee on the ground that there is only one agreement for sale which is dated 05-04-2007. The assessee neither at the assessment stage nor during the appeal proceedings has brought any evidence or documents on record to indicate that any prior agreement for sale has taken place. Distinguishing the decision of the Nagpur Bench of the Tribunal and other decisions cited before him and relying on the decision of the Hon'ble Bombay High Court in the case of Hindustan Unilever Ltd. Vs. DCIT reported in 325 ITR 102 and the decision of Hon'ble Karnataka High Court in the case of ITO Vs. H.P. Vishweshwaraiah reported in 250 ITR 863 wherein it has been held that in order to avail of the benefit of section 54EC, the capital gain have to be invested in a long term specified asset within a period of 6 months of the date of transfer, he rejected the claim of the assessee. 7
5. So far as the exemption u/s.54 of the I.T. Act amounting to Rs.1,84,07,779/- is concerned, he also rejected the claim of the assessee on the ground that the assessee was not able to justify the investment and also the ownership of the residential property which was claimed to have been constructed for claiming exemption u/s.54 of the I.T. Act. According to him for claiming exemption u/s.54F (wrongly mentioned by the Assessing Officer u/s.54 which according to the Ld. CIT(A) is a typographical error and for that the provisions of section 292B will be applicable), re- investment by the assessee whether u/s.54 or 54F in a residential property is required to be made before due date for filing return for the relevant year. If the investment could not be made, it is required to be deposited under the capital gain account scheme till such time it is utilised within the permissible time as investment u/s.54 of 3 years. Since the assessee has not been able to demonstrate this vital aspect for claiming exemption u/s.54 at the stage of assessment or at appeal stage, therefore, he upheld the action of the AO in disallowing the claim of deduction u/s.54 of the I.T. Act.
6. So far as the issue relating to adoption of the Fair Market value of the land at Rs.40,91,400/- as against Rs.71,18,920/- by the assessee on the basis of the valuation given by the Registrar of Stamp duty the Ld. CIT(A) allowed the claim of the assessee on the ground that the assessee has adopted the valuation as on 01-04-1981 on the basis of valuation report obtained from Government approved valuer. According to him, the valuation by the Stamp authority is based on the circle rates which are uniform for the entire locality and which does not consider the peculiar features of a particular property. According to him, even on a particular area on account of locational factors and possibilities of its use there can be 8 wide variation in the price of the property. The circle rates or the ready reckoner rates adopted for Stamp duty purpose disregards all these factors and a uniform rate has been taken into consideration for all the properties in that particular area. Relying on the decision of the Delhi Bench of the Tribunal in the case of Ravikant Vs. ITO reported in 110 TTJ 297 and various other decisions the Ld. CIT(A) held that the addition made by the Assessing Officer on the basis of Stamp duty valuation is not correct and deserves to be deleted.
7. As regards the adoption of the cost inflation index for the F.Y. 2003- 04 by the Assessing Officer as against 1981-82 by the assessee he noted that the assessee got the possession of the property as per will on death of his father. Therefore, it clearly falls within the provisions of section 49(1)(ii) of the I.T. Act. Referring to the expression indexed cost of acquisition used in Explanation 3 to Section 48 and following the decision of the Special Bench of the Tribunal in the case of DCIT Vs. Manjula J. Shah reported in 318 ITR (AT) 417 (Mum) (SB) he held that the cost inflation index and the indexed cost of acquisition has to be worked out by taking the date of acquisition by the previous owner in respect of property received by the assessee from his father by way of a will. He accordingly allowed the claim of the assessee.
7.1 In view of the part relief given by the CIT(A) both the assessee as well as the Revenue are in appeal before us with the following grounds :
Grounds by Assessee :
" On the facts and in the circumstances of the case :9
1. The Ld. CIT(A) erred in confirming the addition made by the Assessing Officer amounting to Rs.50,00,000/- by disallowing claim u/s.54EC of the Income Tax Act, 1961 for A.Y. 2008-09.
2. The Ld. CIT(A) erred in confirming the addition made by the Assessing Officer rejecting exemption u/s.54 amounting to Rs.1,84,07,779/- on the ground that appellant has not justify the investment and the ownership of residential property for claiming exemption and the appellant failed to reinvest the capital gain before the due date of filing of return.
3. The appellant may kindly be permitted to add to or alter any of grounds of appeal, if deemed necessary".
Grounds by Revenue :
"1. The order of the learned Commissioner of Income-tax (Appeals) is contrary to law and to the facts and circumstances of the case.
2. The learned Commissioner of Income-tax (Appeals) grossly erred in accepting the Fair Market Value as on 01.04.1981 of Rs.71.18.920/- adopted by the assessee in respect of land which was based on general valuation whereas the Registrar of Stamp Duty, the competent authority, had valued the said property at Rs. 40,91,400/-.
3. The learned Commissioner of Income-tax (Appeals) grossly erred in accepting the Fair Market Value as on 01.04.1981 of Rs. 71.18.920/- merely by referring to and relying on a case law given in context of Sec 50C of the Income-tax Act, 1961.
4. The learned Commissioner of Income-tax (Appeals) grossly erred in negating the stand taken by the Assessing Officer in adopting the Cost Inflation Index for the Financial Year 1993-94 as against the year 1981-82 applied by the assessee.
5. The learned Commissioner of Income-tax (Appeals) grossly erred in holding that for the purpose of determining the indexed cost of acquisition in respect of an asset acquired under a gift or will, the cost inflation index has to be worked out by taking the date of acquisition by the previous owner.
6. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that as per clause (iii) of the Explanation to section 48, the Cost Inflation Index to be taken on the denominator has to be necessarily the index for the first year in which the asset was held by the assessee and not by any previous owner.10
7. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that under the scheme of the Act, the benefit of indexation can be given only to the owner of the asset, and that too from the date he becomes the owner to the date he ceases to be the owner."
8. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. Ground of appeal No.1 by the assessee relates to addition of Rs.50 lakhs made by the Assessing Officer by disallowing the claim u/s.54EC and upheld by the Ld.CIT(A). We find the assessee has invested the said amount in Rural Electrification Corporation Ltd bonds on 02-02-2007. It is the case of the Assessing Officer that since the property at Mukundnagar was sold on 05-04-2007 for a total consideration of Rs.16 Crores and the assessee has invested prior to the date of the sale, therefore, the assessee is not entitled to the claim. While doing so, he further held that the Circular No.359 dated 10-05-1983 is not applicable to the facts of the present case since the same was in context of section 54E. We find the Ld. CIT(A) rejected the claim of the assessee on the ground that there is only one agreement for sale which is dated 05-04-2007 and the assessee neither at the assessment stage nor during the appeal proceedings has brought any evidence or documents on record to indicate that any prior agreement for sale had taken place. Therefore, distinguishing the decision of the Nagpur Bench of the Tribunal he rejected the claim of the assessee.
8.1 From the copy of the sale deed placed at Paper Book page No.4 to 25 we find Clause (d) of the agreement reads as under :
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"In compliance to the agreement to sell dated 21-02-2006, registered in the office of the Sub-Registrar, Haveli No.2, at serial No.1234/2006, the Vendor by this instrument sold, assigned, transferred and otherwise absolutely conveyed the said property, upto and in favour of the purchaser herein, for and at the lumpsum price of Rs.16,00,00,000/- (sixteen crore only), paid by the Purchaser to the Vendor as mentioned herein".
Therefore, the order of the Ld. CIT(A) that there was no agreement prior to date of sale is incorrect in view of the express provision in the sale deed dated 05-04-2007 cited above. We find the CBDT vide Circular No.359 (F.No.207/8/82-IT(A-11) dated 10-05-1983 has held that earnest money or advance is a part of the sale consideration and therefore if the assessee invests the earnest money or the advance received in specified assets before the date of transfer of the asset, the amount so invested will qualify for exemption u/s.54E. Although in the instant case the issue is u/s.54EC, however, we find the language in the above section is similar to that of section 54. Therefore, we find force in the arguments of the Ld. Counsel for the assessee that earnest money or advance money is a part of sale consideration.
8.2 We find the Nagpur Bench of the Tribunal in the case of Bhikulal Chandak (HUF) Vs. ITO 126 TTJ 545 has held that assessee cannot be treated as defaulter in making investment in bonds as required u/s.54EC on receipt of advance as per the agreement to sell property and claiming exemption u/s.54EC. So far as the decision of the Hon'ble Bombay High Court in the case of Hindustan Unilever Ltd. (Supra) relied on by the Ld. CIT(A) is concerned we find the same is distinguishable and not applicable to the facts of the present case. The Hon'ble Court in the said case has held that for the purpose of claiming deduction under the provisions of section 12 54EC, the date of investment by the assessee must be recorded as the date on which payment was made and received by the National Housing Bank. Since in that case the investment was within a period of 6 months from the date of transfer of the asset the Hon'ble Court held that the provisions of section 54EC were complied with by the assessee. However, in the instant case, the issue is regarding advance money received on the basis of agreement to sale and the applicability of section 54EC on account of investment in specified bond out of advance money but before the date of actual sale. Therefore, the said decision is not applicable to the facts of the present case. We also do not find force in the submission of the Ld. Departmental Representative that the Act does not contemplate any advance and that the CBDT Circular No.359 dated 10-05-1983 is not applicable to the facts of the present case.
8.3 So far as the decision of Hon'ble Karnataka High Court in the case of H.P. Vishweswaraiah (Supra) is concerned, we find the issue was compulsory acquisition of land and receipt of enhanced compensation after omission of section 54E(3). It was held that enhanced compensation dates back to original receipt and the assessee is entitled to exemption u/s.54E(3) of the I.T. Act. 1961 though the additional compensation was received at the time when the provisions of section 54E(3) were no longer in the statute book in so far as the same were omitted.
8.4 Since in the instant case the assessee has invested an amount of Rs.50 lakhs out of the advance money received on the basis of the agreement to sale, therefore, following the spirit of the CBDT Circular No.359 dated 10-05-1983 in the context of section 54E and the ratio of the 13 decision of Nagpur Bench of the Tribunal in the case of Bhikulal Chandak (HUF) (Supra) we hold that the assessee is entitled to deduction u/s.54EC on account of amount of Rs.50 lakhs. The order of the CIT(A) is accordingly set-aside and the ground raised by the assessee is allowed.
9. So far as the ground of appeal No. 2 of the assessee is concerned we find the Assessing Officer disallowed the claim of deduction u/s.54 on the ground that (a) there is no approval for building plan and no structural design of the property (b) the assessee has not submitted any document in support of regularisation of the building by PMC (c) the expenses shown are not completely verifiable and (d) the assessee has not produced the architect.
9.1 It is the argument of the Ld. Counsel for the assessee that although the construction was unauthorised, however, the assessee subsequently availed of the amnesty scheme. Referring to page 8 of the Paper Book No.2 the Ld. Counsel for the assessee drew the attention of the Bench to the detailed submissions given before the Assessing Officer. Referring to Page 57 of Paper Book No.1 the Ld. Counsel for the assessee drew the attention of the Bench to the property tax assessment notice to the assessee which is dated 05-02-2009. Similarly, he also drew the attention of the Bench to the Municipal tax receipt dated 20-02-2009 and Municipal tax receipt dated 25- 03-2010 placed at Paper Book Page No. 54 and 51 respectively. 9.2 Referring to the decision of Hon'ble Punjab & Haryana High Court in the case of Ms. Jagrit Aggarwal reported in 339 ITR 610 the Ld. Counsel for the assessee submitted that the assessee can claim exemption on account 14 of capital gain either by purchasing a residential property or deposit in specified account before the due date of furnishing the return of income and such date for furnishing the return can be the date u/s.139(4). He however submitted that he has no objection if the same is restored to the file of the Assessing Officer with a direction for the limited purpose of verifying the quantum of deduction.
9.3 The Ld. Departmental Representative on the other hand while supporting the order of the CIT(A) submitted that the architect was not produced before the Assessing Officer. The supporting bills and vouchers produced contain photocopies in most of the cases. Further, in some of the cases the bills were in the name of the firm "Southern Machine Industries". There is no sanction plan and therefore the genuineness of the claim was not proved. There is no date of commencement nor the date of completion. Therefore, the assessee in the instant case has not fulfilled the intention of the legislature.
9.4 The Ld. Counsel for the assessee in his rejoinder referred to the decision of Hon'ble Bombay High Court in the case of Dr. P.S. Pasricha and submitted that the Hon'ble High Court in the said decision has held that there is no requirement that the money should be out of sale proceeds. He submitted that since the architect was not available at the relevant time when the assessment proceedings were going on, therefore, he was not produced. However, now if the matter is restored to the file of the Assessing Officer, he is in a position to produce the architect. 15 9.5 We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book on behalf of the assessee. We find the Assessing Officer in the instant case disallowed the claim of exemption/s.54 on account of following reasons :
1. There is no approval for building plan & no structural design of the property.
2. The appellant has not submitted any document in support of regularization of the building by the PMC.
3. The expenses shown are not fully verifiable.
4. The appellant has not produced the Architect.
9.6 We find the CIT(A) upheld the action of the Assessing Officer on the ground that the assessee was not able to justify the investment and also the ownership of the residential property. Further, the assessee also was unable to prove that the investment was made before the due date of filing of the return for the relevant year.
9.7 It is the submission of the Ld. Counsel for the assessee that although the construction was unauthorised, however the same has been regularized in the amnesty scheme and the investment towards construction of the property has been made before the due date of filing of the return u/s.139(4) and that he is in a position to produce the architect and also furnish the details towards the construction of the property. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one more opportunity to the assessee to substantiate his case by producing the architect before him for his examination. The Assessing Officer also shall give an opportunity to the assessee to produce the various details 16 which according to him is relevant for deciding the issue. While doing so, the Assessing Officer shall also keep in mind the decision of the Hon'ble Punjab & Haryana High Court in the case of Ms. Jagrit Aggarwal (Supra) and the decision of Hon'ble Bombay High Court in the case of Dr. P.S. Pasricha. This ground by the assessee is accordingly allowed for statistical purposes.ITA No.152/PN/2012 (By Revenue) :
10. Grounds of appeal No. 1 to 3 by the Revenue relate to the order of the CIT(A) in accepting the Fair Market Value as on 01-04-1981 at Rs.71,18,920/- adopted by the assessee as against Rs.40,91,400/-
determined by the Assessing Officer.
10.1 We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book furnished on behalf of the assessee. We find in the instant case the assessee sold the property at Mukundnagar for a total consideration of Rs.16 crores. The said property is bequeathed to the assessee as per his father's will in the year 2003-04. The assessee valued the above property as on 01-04-1981 at Rs.71,18,920/- in respect of the land and Rs.17,39,379/- in respect of the building as per the valuation report dated 20-10-2008 and claimed the cost of indexation w.e.f. 01-04-1981. We find the Assessing Officer obtained a report from the Joint District Registrar of Stamps and ascertained the value of the property for Stamp duty valuation who vide his letter dated 22-12-2010 valued the said property at Rs.40,91,400/-. The Assessing Officer accordingly adopted this value. 17 While doing so, he rejected the argument of the assessee that the valuation by the Stamp authority is based on circle rates which are uniform and they did not consider the peculiar features of a particular property. We find the Ld. CIT(A) following the decision of the Delhi Bench of the Tribunal in the case of Ravikant Vs. ITO reported in 110 TTJ 297 and various other decisions held that the addition made by the Assessing Officer on the basis of the Stamp duty valuation is not correct. While doing so, he further held that the architect had given clarification for the valuation which was completely ignored by the Assessing Officer. Further, the valuation has been based on sale instances of the nearby area which appears to be reasonable in confirming the basis for the fair market value. He observed that the Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Chandni Bhocher reported in 323 ITR 510 has held that value adopted or assessed by any authority of the State Government for the purpose of payment of stamp duty in respect of land or building cannot be taken as sale consideration received for the purpose of section 48. The decision of the Tribunal holding that valuation done by any State Agency for the purpose of Stamp duty would not Ipso facto substitute the actual sale consideration as being passed on to the seller by the purchaser in the absence of any admissible evidence and that the Assessing Officer is obliged to bring on record positive evidence supporting the price assessed by the State Government for the purpose of stamp duty was upheld by the Hon'ble High Court.
10.2 From the copy of the valuation done by the District Registrar & Stamp Collector we find he has adopted the value of land at Rs.1200/- per 18 square meter as on 01-04-1981 taking the valuation rate of Rs.3,000/- per square meter during 1989. The Registered valuer on the other hand has considered the sale instance in 1985 at Rs.2,721.23 per square meter and considered the rate of Rs.2,276.69 per square meter. The sale instance of 1985 is more closer to valuation in 1981 as against the sale instance of 1989.
10.3 We further find the Ld.CIT(A) while allowing the claim of the assessee has held as under :
"6.2 I have considered the submissions of the appellant and the material available on the record. The valuation adopted by the appellant as on 01-04-1981 is on the basis of valuation report obtained from Govt. Approved Valuer. The normal rule is that when there is variation in the stamp duty valuation and the value adopted by the assessee on the basis of valuation report and the assessee objects for considering the .stamp duty valuation, the fair market value is to be adopted unless it is referred by A.O. to Valuation Officer and since in this case the assessee had objected to the stamp duty valuation adopted by the A.O., which is evident from paras 5.2 and 5.3 of the assessment order, the Assessing Officer was not right in substituting the stamp duty valuation without referring the matter to the Valuation Officer. There is force in the contention of the appellant that the valuation by the Stamp Authority is based on the circle rates. These circle rates adopt uniform rate of property for the entire locality, which inherently disregard the peculiar features of a particular property. Even in a particular area, on account of location factors and possibilities of its use, there can be vide variations in the price of the property. The circle rates or the ready reckonor rates adopted for stamp duty purpose disregards all these factors and a uniform rate has been taken into consideration for all the properties in that particular area.
6.3 The Hon'ble Tribunal in the case of Ravi Kant vs. ITO (2007) 110 TTJ 297 (Del), while deciding the issue in the context of Sec. 50C(2) has held as under:
"The valuation by the stamp valuation authority is based on the circle rates. These circle rates adopt uniform rate of land for an entire locality, which inherently disregards peculiar features of a particular property. Even in a particular area, on account of location factors and possibilities of commercial use, there can be wide variations in the prices of land. However, circle rates disregard all these factors and adopt a uniform rate for all properties in that particular area if the circle rate fixed by the stamp valuation authorities was 19 to be adopted in all situations, there was no need of reference to the DVO under s. 50C(2). The sweeping generalizations inherent in the circle rates cannot hold good in all situations. It is, therefore, not uncommon that while fixing the circle rates authorities do err on the side of excessive caution by adopting higher rates of the land in a particular area as the circle rate. In such circumstances, the DVO's blind reliance on circle rates is unjustified. The: DVO has simply adopted the average circle rate of residential and commercial area, on the ground that interior area of the locality, where the assessee's property is situated, is mixed developed area i.e. shops and offices on the ground floor and residence on the upper floors. When DVO's valuation required to compare the same with the valuation by the stamp valuation authority, it is futile to base such a report on the circle report itself. Such an approach will render exercise under s. 50C(2) a meaningless ritual and an empty formality. In our considered view, in such a case, the DVO's report should be based on consideration stated in the registration documents for comparable transactions, as also factors such as inputs from other sources about the market rates."
The A.O. has dismissed the valuation report submitted by the appellant during the assessment proceedings, The clarification given by the Architect for the valuation and in support of his claim regarding fair market value as on 01.04.1981, has also not been considered at all by the A.O. The valuation has been based on sale instance of the nearby area which appears to be reasonable in forming the basis for the fair market value. In the case of CIT Vs. Chandni Bhuchar, (2010) 323 ITR 510 (P&H), of the Punjab and Haryana High Court there was a categorical finding recorded by the CIT(A) that value adopted or assessed by any authority of the State Govt. for the purpose of payment of stamp duty in respect of land or building cannot be taken as sale consideration received for the purpose of section 48. The Tribunal held that valuation done by any state agency for the purpose of stamp duty would not IPSO facto substitute the actual sale consideration as being passed on to the seller by the purchaser in the absence of any admissible evidence - A.O. is obliged to bring on record positive evidence supporting the price assessed by the State Govt. for the purpose of stamp duty. The High Court concurred with the view of the Allahabad High Court in the case of CIT Vs Smt. Raj Kumari Vimla Devi (2005) 279 ITR 360 (All). In the said case the Allahabad High Court has relied upon the observations made by the Hon'ble Supreme Court in the case of Jawjee Nagnatham Vs. RDO (1994) 4 SCC 595, to hold that the basic valuation register prepared and maintained for the purpose of collecting stamp duty could not form the foundation to determine the market value of the acquired land u/s. 23 of the Land Acquisition Act, 1894.
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6.4 In view of the above facts and the legal position, in my considered opinion the addition made by the A.O. to the stamp duty valuation is not correct and, therefore, deserves to be deleted. In view of the above Ground No. 4 is allowed."
10.4 Considering the totality of the facts of the case we are of the considered opinion that the order of Ld.CIT(A) is a reasoned one which requires no interference from our side. We accordingly uphold the same. The grounds by the Revenue are accordingly dismissed.
11. Grounds of appeal 4 to 6 by the Revenue relate to the adoption of cost inflation index as 1981-82 as against F.Y. 1993-94 by the Assessing Officer.
11.1 We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. In the instant case, as mentioned earlier the property sold by the assessee at Mukundnagar was bequeathed to him as per his father's will in the year 2003-04. The assessee valued the property by claiming indexation w.e.f. 01-04-1981. However, according to the Assessing Officer since the property came into assessee's hands during 2003-04, therefore, for the purpose of indexation the year of acquisition should be taken as 2003-04. Rejecting the various explanations given by the assessee and rejecting the various decisions cited before him the Assessing Officer adopted the year 2003-04 for the purpose of indexation. In appeal the Ld. CIT(A) following the decision of the Special Bench of the Tribunal in the case of DCIT Vs. Manjula J. Shah reported in 318 ITR 417 held that the cost inflation index and the indexed cost of acquisition has to 21 be worked out by taking the date of acquisition by the previous owner in respect of the property received by the assessee from his father by way of a will.
11.2 As per the provisions of section 49(i)(ii) where the capital asset became the property of the assessee under a gift or will the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. The explanation further provides that the expression previous owner of the property in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) or clause (iv) of sub-section (1) of section 49. Since in the instant case the assessee became the owner of the property by way of a will, therefore, the cost of the same shall relate back to the previous owner. Since the previous owner had owned the property prior to 01-04-1981, therefore, the year 1980-81 adopted by the assessee for the purpose of indexation is in consonance with the provisions of the Act. Since the Ld. CIT(A) while deciding the issue has referred to various provisions in support of the same, therefore, in absence of any distinguishing features brought before us we find no infirmity in the order of the Ld. CIT(A) adopting 1980-81 as the cost inflation index. The grounds raised by the Revenue are accordingly dismissed. 22
12. In the result, the appeal filed by the assessee is partly allowed for statistical purposes and the appeal filed by the Revenue is dismissed.
Pronounced in the Open court on this the 28th day of June, 2013.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, dated : 28th June 2013
satish
Copy of the order is forwarded to :
1. The assessee
2. The Department
3. The CIT(A)-II, Pune
4. The CIT-II, Pune
5. D.R. "B" Bench, Pune
6. Guard File
By order
// True Copy //
Senior Private Secretary,
Income Tax Appellate Tribunal, Pune