Allahabad High Court
Commissioner Of Income Tax-I Lko. vs Late Sri Saubhagmal Jain Through L/H Sri ... on 8 March, 2017
Author: Sudhir Agarwal
Bench: Sudhir Agarwal
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH Court No. - 3 A.F.R. Reserved on 07.02.2017 Delivered on 08.03.2017 1. Case :- INCOME TAX APPEAL No. - 164 of 2009 Appellant :- Commissioner Of Income Tax-I Lko. Respondent :- Late Sri Saubhagmal Jain Through L/H Sri Rakesh Jain Lko. Counsel for Appellant :- D.D.Chopra Counsel for Respondent :- Mudit Agarwal 2. Case :- INCOME TAX APPEAL No. - 163 of 2009 Appellant :- Commissioner Of Income Tax-I Lko. Respondent :- Sri Suraj Kumar Gupta Saadatganj Lko. Counsel for Appellant :- D.D.Chopra Counsel for Respondent :- Mudit Agarwal Hon'ble Sudhir Agarwal,J.
Hon'ble Ravindra Nath Mishra-II,J.
(Delivered by Hon'ble Sudhir Agarwal, J.)
1. Both these appeals have arisen from a common order passed by Tribunal, wherein similar questions are involved, therefore, they have been heard together are being decided by this common judgment.
2. For the purpose of narration of facts, we have taken pleadings from the record of Income Tax Appeal No. 164 of 2009.
3. These appeals under Section 260-A of Income Tax Act, 1961 (hereinafter referred to as the ''Act, 1961) have arisen from judgment and order dated 30.06.2009 passed by Income Tax Appellate Tribunal (hereinafter referred to as the ''Tribunal') in Income Tax Appeal Nos. 224(Luc)/2009 and 223(Luc)/2009 respectively, relating to Assessment Year(hereinafter referred to as ''A.Y.') 2004-05.
4. It was admitted on the following two substantial questions of law:
"I. Under the facts and circumstances of the case, the learned Income Tax Appellate Tribunal has erred in law in quashing the order of the Commissioner of Income Tax u/s 263 without appreciating that the assessment order was both erroneous and prejudicial to the interest of revenue, as the assessment order was passed without proper inquires, without appreciating facts properly and without application of mind on various issues.
II. Under the facts and circumstances of the case, the learned Income Tax Appellate Tribunal has erred in law in quashing the order of the Commissioner of Income Tax u/s 263 by completely ignoring the findings of the Commissioner of Income Tax on various issues in his order u/s 263 such as non application of provisions of section 50 C (1) of the Act by the Assessing Officer and instead accepting the value of land as shown by the assessee."
5. Assessee filed return of income tax for the A.Y. 2004-05 on 20.10.2004 showing income of Rs. 17,880/- and long term capital loss of Rs. 7,85,312/-. Assessing Officer (hereinafter referred to as the ''A.O.') accepted returned pleadings under Section 143(3) vide assessment order dated 29.12.2006.
6. Commissioner of Income of Income Tax -I (hereinafter referred to as the ''C.I.T.') called for record of relevant A.Y. under Section 263 of Act, 1961 and set aside assessment order, vide order dated 27.03.2009. C.I.T. directed A.O. to complete assessment de novo after making necessary inquiries and giving opportunity of hearing to Assessee.
7. Aggrieved by the said order, Assessee filed appeal before Tribunal, which has been allowed vide order dated 20.06.2009 (impugned in this appeal). Tribunal has set aside order passed by C.I.T. under Section 263 of Act, 1961.
8. Now question is whether Tribunal has rightly set aside the order passed by C.I.T. under Section 263 or not.
9. C.I.T. can exercise its power of revision under Section 263 only if it finds, (i) that the order passed by A.O. is erroneous; (ii) it is prejudicial to the interest of revenue.
10. C.I.T. issued notice dated 20.03.2009 initiating proceedings under Section 263 of the Act, 1961 and stated therein that Assessee had sold a piece of land to M/s. Omaxe Properties Ltd. during relevant A.Y. It has shown sale consideration at Rs.60,00,000/- for the purpose of computing capital gains and accordingly worked out long term loss of Rs.7,85,312/-. A.O. accepted aforesaid sale consideration/ value of land, without importing Section 50C of Act, 1961, which says, if consideration received or accrued as a result of transfer by an Assessee of a capital asset of a land or building, is less than the value adopted or assessed by any authority of State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed for the purposes of Section 48 be deemed to be the full value of consideration received or accrued as a result of such transfer. Commissioner also found that value adopted by Stamp Valuation Authority was Rs. 3,24,84,000/- which should have been taken as value of sale consideration for the purpose of computation of capital gains which would have worked out at Rs. 2,56,98,688/-. A.O., thus, has worked out capital gains wrongly and not assessed capital gain by an amount of Rs.2,64,84,000/-(2,56,98,688 + 7,85,312 as loss shown by Assessee).
11. Assessee in its reply said that if A.O. finds that value of asset sold is less than the value as adopted or assessed for the stamp duty purpose, it had two options, (i) it may accept valuation disclosed by Assessee; and (ii) may refer the matter to Valuation Officer and the value so estimated by such officer would be taken into account for completion of assessment.
12. A.O. referred the matter to District Valuation Officer, Lucknow (hereinafter referred to as the ''D.V.O.') for valuation under Section 50C(2) of Act, 1961 and after receiving report, issued notice to Assessee also. It is only thereafter, valuation disclosed by Assessee was accepted. Assessee, thus contended that A.O. passed order with deep and indepth inquiry. He submitted that A.O. has neither passed erroneous order nor it is prejudicial to Revenue, therefore, Section 263 of Act, 1961 would not be attracted.
13. C.I.T. found that in the order passed by A.O., all the details and factum regarding valuation of D.V.O. were not mentioned. The order is cryptic and stereotyped. Thus, it cannot be said that A.O. made detailed inquiry in the claim of capital loss made by Assessee. C.I.T. also held that A.O. did not make any attempt to verify veracity or otherwise of evidence available on record and there was a complete failure on the part of A.O. to make necessary inquiry. Tribunal has found that A.O. made reference to D.V.O. which shows that in his view some numbers shown by Assessee, present valuation of stamp duty was not justified. D.V.O. worked out fair market value at Rs.59.30 lacs. A.O. asked D.V.O. to reconsider his decision but D.V.O. still too rigid on its opinion. A.O., in these circumstances, accepted consideration disclosed by Assessee, i.e., Rs.60.00 lacs.
14. Learned counsel for Revenue contended that D.V.O. valued land, treated as agricultural land. For the purpose of calculation, fair market value of land as on 01.04.1981 was taken as per District Magistrate's circle rate applicable on 01.04.1981 and the rate of Rs.8.00 lacs per acre was found for agricultural land as on 01.04.2002. It enhanced the said rate by 10% and estimated the value. It is contended that land is situated in the municipal limits of Lucknow and therefore, under Section 2(14) of Act, 1961, could not have been treated to be an agricultural land, excluded from the term, ''capital asset'.
15. Shri Manish Mishra, learned counsel for Revenue submitted that copy of sale deed is not part of record but he has produced a photostat copy thereof, showing sale consideration at Rs.60,00 lacs, market value at Rs. 3,24,84,000/- and stamp duty paid at Rs. 32,48,400/-, drew attention of Court to the recital in the sale deed that relevant Khasra is within limits of Nagar Nigam. He said that D.V.O. failed to consider this aspect but A.O. ought to have applied its mind which he has failed, therefore, power was rightly exercised by C.I.T.
16. Learned counsel for Assessee contended that sale deed which has been placed before this Court during the course of arguments, cannot be taken into consideration since it was not material available before A.O. or C.I.T.
17. From the order of Tribunal, we find that various letters and notices sent by A.O. and D.V.O. have been quoted in extentio. It shows that D.V.O. in his report remarked that valuation unit of department has no provision to value agricultural land as per statutory provisions, hence D.V.O. did not determine fair market value of property and sought for the direction, again it was required to provide fair market value of the property sold by Assessee.
18. The confidential letter dated 12/13.09.2006 of Shri N. K. Gupta, D.V.O. is also reproduced in the order of Tribunal which shows that D.V.O. determined value treating as agricultural land and for that purpose referred to page Nos. 7 and 26 of sale deed as also revenue record.
19. The disputed property situated at Mauza-Aurangabad Khalsa, Village-Bijli Pasi, District-Lucknow. It shows that the sale deed was part of record but D.V.O. treated land as an agricultural land since its entry was shown in the revenue records without noticing the fact that under Act, 1961 an agricultural land which is within municipal limits of Nagar Nigam is not excluded from the term, ''capital asset'.
20. Further when Assessee himself has shown market value as Rs. 3,24,84,000/- on the basis of circle rate, D.V.O. apparently ignored the fact that in the sale deed, itself, it was mentioned that land was within municipal limits of Lucknow. This fact, that land is within municipal limits of Lucknow, we find, was noticed by A.O. and mentioned in its letter dated 25.09.2006, wherein it is mentioned that land sold, falls within the limits of Nagar Nigam, Lucknow and has been treated as capital asset of Assessee. Consequently, all the provisions relating to taxation of capital gains as contained in Sections 45 to 55A of Act, 1961 will apply.
21. D.V.O. instead of considering this aspect, wrote a letter dated 29.12.2006 to Additional Commissioner, Income Tax, Lucknow stating that Assessee himself has admitted fair market value of land at Rs. 60,00 lacs, while D.V.O. has estimated at Rs. 59.30 lacs. Being agricultural land there was no further necessity for determination of market value of land again. Thereafter, D.V.O. sent letter dated 20.02.2007 addressed to Additional Commissioner of Income Tax, Lucknow, that A.O., if wants to stay on its own interpretation of law he can proceed. The tone of letter is aveiled threat to A.O.
22. It is true that A.O. made reference to D.V.O. for valuation of land in dispute under Section 50C(2) of the Act, 1961, but D.V.O. examined the matter erroneously by taking nature of land as agricultural, ignoring that in the sale deed itself it was also mentioned that land was within limits of Nagar Nigam and that being so, its value ought to have been examined as an urban land and not agricultural land. A.O. treated estimation of D.V.O. as final and proceeded accordingly. In our view, order of assessment passed by A.O. was clearly erroneous and also prejudicial to the interest of Revenue. Tribunal has dealt in detail, various inquires made by A.O. with regard to valuation of property but the basic fact regarding nature of land which was relevant for determination of fair market value was erroneous and has not been examined at all. The Assessee himself knew that the land was within the municipal limits of Nagar Nigam, therefore, fair market value mentioned in the sale deed was not taken by it, which was applicable to an agricultural land but Assessee admittedly applied the circle rate applicable to urban land. The land which was within the municipal limits, could not have been treated to be ''agricultural land' on the basis of revenue record prepared under U.P. Z.A. & L.R. Act. A.O. also did not examine when Assessee admitted circle rate, applicable to ''urban land' for the purpose of fair market value, for stamp duty, then, why for determination of market value by D.V.O., land should be taken as an agricultural land.
23. C.I.T., therefore, rightly exercised power under Section 263 of Act, 1961, and Tribunal, in our view, has erred in law in taking otherwise cognizance and setting aside order of C.I.T.
24. The questions formulated above are answered in favour of Revenue and against Assessee.
25. Both appeals are allowed.
26. The order of Tribunal is hereby set aside and the order of C.I.T. is restored.
27. Consequences shall follow.
Order Date:- 08.03.2017 Mustaqeem