Income Tax Appellate Tribunal - Ahmedabad
Premila M.Desai,Huf, Ahmedabad vs Assessee on 5 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
" B " BENCH, AHMEDABAD
Before Shri A. K. GARODIA, ACCOUNTANT MEMBER
and Shri KUL BHARAT, JUDICIAL MEMBER
I.T.A. No. 04/ Ahd/2012
(Assessment year 2008-09)
Smt. Pramila M Desai, HUF Vs. DCIT, Circle 1(2),
14/15, Akashdeep Society, Baroda
Makarpura Road,
Baroda-390014
PAN/GIR No. : AAJHP9022Q
(APPELLANT) .. (RESPONDENT)
Appellant by: Shri S N Soparkar, Sr. Adv.
Shri Anil R. Shah, Adv.
Respondent by: Shri BKS Pandya, CIT DR
Date of hearing: 05.07.2012
Date of pronouncement: 21.09.2012
ORDER
PER SHRI A. K. GARODIA, AM:-
This is assessee's appeal directed against the order of Ld. CIT(A) I, Baroda dated 14.10.2011 for the assessment year 2008-09. The grounds raised by the assessee are as under:
"1. The CIT(A) has erred both in Law and in fact in upholding order passed by the Income-tax Officer which was passed in haste and hurry disregarding facts of the case and without providing sufficient time to your Appellant to reply to his Show Cause Notice .
2. The CIT(A) has erred both in Law and in fact in upholding the order of Assessing Officer which was invalid bad in Law since the Assessing Officer had relied on certain evidence collected at the back of your Appellant a copy of which was not supplied and a chance of Cross Examination was also not given to the Appellant.
3. Your Appellant submits that the CIT(A) has also erred both in Law and in fact in computing Long Term Capital Gains at
2 I.T.A.No04./Ahd/2012 Rs.3,31,15,811 in place of Capital Gains Rs.61,92,697 (As Revised) as claimed by your Appellant..
4. (a) The CIT(A) has further erred both in Law and in fact in upholding the Market Value of Land as on 1-4-81 relied by the Assessing Officer based on evidence given by the Sub-Registrar disregarding the Valuation Report of Authorized and Approved Valuer relied by your Appellant.
(b) It is submitted that as per provision of the Act the Income Tax Officer was duty bound to accept the Valuation Report of Assessee or refer to matter of Valuation to Departmental Valuation Officer and therefore the CIT(A) ought to have held that the value as on adopted by AO is not valid.
5. It is further submitted that the CIT(A) has erred in making enhancement to computation of Capital Gain and by limiting cost of acquisition @ 12.65 % as against 18.1%, which is made in haste and hurry and without providing proper and sufficient time to your Appellant to consider effect/consequences of the said notice. .
6. The CIT(A) has also erred in upholding levy of Interest u/s.234A, B, & C which is not applicable on the facts of the case and also which has not been correctly worked out.
It is therefore submitted that reliefs claimed above be allowed and the order of the Assessing Officer be modified accordingly."
2. One additional ground was also raised by the assessee which is as under:
"The appellant submits that when the Ld. CIT(A) enhanced income by taxing amt. of Rs.3,85,815/- as interest taxable u/s 56(2)(vii) of the Income tax Act, 1961, he ought to have granted the consequential statutory deduction @ 50% u/s 57(iv) of the Act as well."
3. Ld. A.R. submitted that this additional ground is not pressed and accordingly, the additional ground is being rejected as not pressed.
4. Brief facts till the assessment stage are noted by Ld. CIT(A) in para 3 of his order which is reproduced below:
"3. Facts of the case are that in the return of income filed, appellant had declared long-term capital loss of Rs.3,19,68,561/- in respect of land admeasuring 1,22,718 sq mtrs acquired by State Government for SRP camp. During assessment proceedings, letter dt. 19.11.2010 was filed submitting that there was mistake in 3 I.T.A.No04./Ahd/2012 working of long-term capital loss in the return of income. Through letter dated 19.11.2010, appellant submitted that its share was 18.1% i.e. Rs 5,99,68,115/- in total sale consideration of Rs 33,33,15,552/- and advance of Rs 4,21,51,688/- was received during the year resulting in taxable long term capital gains of Rs 61,92,670/-, which appellant offered for tax. A.O. observed that out of compensation of Rs.33,33,15,552/- awarded by Special Land Acquisition Officer, Unit-I, Baroda through order dt. 11.12.2008, advance payment of Rs.23,48,82,252/- was received during the year in which appellant's share @ 18.1% was Rs.4,25,13,688/-. A.O. adopted sale consideration value at Rs.4,25,13,688/-. In support of cost of acquisition, appellant furnished valuation report dt. 3.12.2008 from Ms. Krishna Shah, Registered Valuer valuing the cost of land for the year 1981-82 @ Rs.293.81 per sq. mtr i.e Rs.3,60,55,775/-. AO observed that appellant had not produced evidence to indicate how approved valuer's valuation report for cost of land at Rs.293.81 per sq mtr was the basis for valuation. AO further observed that the sale deeds in respect of comparable instances quoted by the valuer were registered after 1.4.1981, the Revenue Survey numbers were different with different per sq. mtr values and the land in the sale instances were not in vicinity of appellant's land. AO held that the Valuer's report could not be depended upon. AO sought information from Sub-Registrar, Baroda-I in respect of comparable sale instances for determining fair market value as on 1.4.81. The Sub-Registrar, Vadodara through letter dt. 21.12.2010 furnished details and copy of registered document in respect of sale on 6.2.81 of 446 sq. mtrs of land in R.S.No. 324 for Rs.38,400/-. Accordingly, AO proposed to adopt rate of Rs.86.1 per sq. mtr for the purpose of determining FMV of appellant's land as on 1.4.1981. Appellant did not agree to AO's proposal but did not file any further documents in support of its claim. AO adopted the cost of the land sold as on 1.4.1981 after indexation at Rs.1,05,37,597/- and worked out the taxable long term capital gains at Rs.3,19,76,019/-."
5. Being aggrieved, the assessee carried the matter in appeal before ld. CIT(A) but without success and now, the assessee is in further appeal before us.
6. It is submitted by the Ld. A.R. before us that the decision of the A.O. is based on the information received form sub-registrar office being 4 I.T.A.No04./Ahd/2012 sale deed executed on 06.02.1981 of the land being situated at Goyapati Pratap Nagar, Baroda. It is also submitted that the assessee's land is situated near Lalbaug Railway Crossing Palace Road, Vadodara and both these areas are far away from each other. He further submitted that registered valuer's report has been furnished before the authorities below and the same is available on pages 14-18 of the paper book and from the same, it can be seen that the registered valuer has applied average price of 4 land transactions instead of applying the rates of one land as has been done by the A.O. and the said land is far away. It is also submitted that the lands referred to by the registered valuer are located near to the assessee's land whereas the land referred to by the A.O. is located far away from the assessee's land. Reliance was placed on the judgement of Hon'ble H.P. High Court rendered in the case of CIT Vs Raghunath Jha as reported in 216 CTR 248 wherein, it was held that if the A.O. does not agree with the report regarding the valuer relied upon by the assessee, rejection of such valuer's report without making reference to the valuation order is invalid and the report of registered valuer shall be accepted. Regarding the 2nd aspect i.e. regarding reduction to the extent of 10% and 25% from the land size of the assessee, it is submitted that such reduction done by Ld. CIT(A) is without any basis. He also submitted that the Ld. CIT(A) has also erred in taking the assessee's share of cost @ 12.65% of the total cost whereas sale consideration has been apportioned to the assessee to the extent of 18.1% of the total sale consideration.
7. Ld. D.R. of the revenue supported the orders of authorities below.
8. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that there are three aspects to be decided by us. The first aspect is regarding fair market value as on 01.04.1981 of the assessee's land. In 5 I.T.A.No04./Ahd/2012 this regard, the claim of the assessee is that the rates adopted by the registered valuer should be applied and not the rates adopted by the A.O. on the basis of single instance of a land which is situated at far away place. The second aspect is whether the quantity of land reduced by Ld. CIT(A) to the extent of 10% for common plot and 25% for internal roads/other development cost is justified or not. The 3rd aspect is whether the cost of acquisition as on 01.04.1981 of the assessee should be 18.10% of the total cost being the share of the assessee in the total land or whether it should be only 12.65% of the total cost as has been adopted by Ld. CIT(A) on the basis of net sale value of the assessee of Rs.421.52 lacs compared to Rs.3333.16 lacs being the total sale value.
- Regarding the first aspect as to what is the fair market value of the land as on 01.04.1981, we find that the registered valuer had applied the rate of Rs.295.81 per sq. mtr. on the basis of average rate of 4 different plots of land. The A.O. has applied the rate of Rs.86.10 per sq. mtr. on the basis of a single sale instance collected form sub-Registrar office by the A.O. Ld. CIT(A) has adopted the rates of Rs.156.50 per sq. mtr by ignoring two sales instances adopted by the registered valuer i.e. of Rs.538.20 per sq. mtr. being the first sale instance and Rs.253.60 per sq. mtr. being the 3rd sale instance. These two sales instances were ignored by the Ld. CIT(A) on this basis that in both these cases, open plot of land was not sold but partially constructed area was sold and if the said rate is adopted after reducing the cost of construction already made before sale then it will be very low in the case of 1st instance and 3rd instance. For 3rd sales instance, it is also noted by Ld. CIT(A) that the date of sale is August 1982 being more than one year after the date of 01.04.1981. He has ignored these two sales instances adopted by the Registered valuer and by taking average sale price of the remaining two sales instances adopted by the registered valuer and the one sale instance adopted by the 6 I.T.A.No04./Ahd/2012 A.O., he has worked out average market value of the land as on 01.04.1981 at Rs.156.50 per sq. mtr. Before us, it was submitted that when the assessee has submitted a report of registered valuer, the same cannot be ignored or varied or substituted without obtaining valuation report form DVO. In support of this contention, reliance was placed on the Tribunal decision rendered in the case of Shri Rajendra H Seth Vs ACIT in I.T.A.No. 1495/Ahd/2007 dated 11.11.2011 and in particular, our attention was drawn to para 10.1 of this Tribunal order which has been reproduced by the assessee in the written submission. We find that admittedly, no report of the DVO was obtained and the A.O. obtained one sale instance from sub-registrar office but regarding this sale instance, it is the submission of the assessee before us that this sale instance is of a far away place whereas, the sale instance noted by the registered valuer is nearer to the land in question. This contention of the Ld. A.R. could not be controverted by the Ld. D.R. and hence, in our opinion, this sale instance obtained by the A.O. from sub-registrar office cannot be adopted because it is related to a land situated at far away place and moreover, when the assessee has submitted the report of the registered valuer, the same cannot be ignored or substituted without obtaining the report of a technical person viz. DVO or some other technical expert. The Tribunal order cited by the Ld. A.R. rendered in the case of Rajendra H Seth (supra) supports the assessee on this aspect. Relevant para of this Tribunal order i.e. para 10.1 is reproduced below:
"10.1. As regards valuation of flat as on 1.4.1981, the admitted facts of the case are that the value declared by the assessee is supported by valuation report of a Registered Valuer. The A.O. has taken a different valuation without obtaining valuation report from the DVO. The AO has taken value as on 1.4.1981 on other basis. We are of the view that assessee's valuation as on 1.04.1981 is supported by valuation by a technical person ie. report of registered valuer and contrary to that no such material or 7 I.T.A.No04./Ahd/2012 departmental valuation report is available on record. Merely on the basis of other general enquiries the valuation declared by the registered valuer cannot be substituted. We therefore set aside the orders of Revenue authorities on this issue and direct the AO to adopt the valuation of the flats as on 1.4.1981 as declared by the assessee."
Reference is also invited to decision of ITAT in ITO vs Smt Usha Ramesh 133 1TD 67 (Chennai) (TM) but since in the case of appellant, Registered Valuer's Report was furnished, there was no justification in relying on irrelevant sale instances from Sub- Registrar's office and thereby rejecting the value as on 1st April, 1981 computed by Registered Valuer."
- Regarding the action of Ld. CIT(A) of excluding two sale instances adopted by the registered valuer on this basis that these sale instances are in respect of partly constructed plot, we are of the considered opinion that generally, no buyer pay any price for a part construction on a plot unless it is seen that such part construction is useful to the buyer because if the part construction is not useful to the buyer and he wants to construct as per his own design and requirement then such part construction built by the seller is of no value to the buyer and generally, he does not pay any price for the same because in such a case, he has to demolish such part construction and rebuild the whole thing and this is not brought on record by the authorities below or by Ld. D.R. that such part construction was useful to the buyer and the value of the same was considered for the valuation of the property in those two instances. In the absence of any such finding on this aspect, the order of Ld. CIT(A) to ignore those two sale instances is not proper. Regarding the action of Ld. CIT(A) also, the same tribunal decision rendered in the case of Rajendra H Seth (supra), supports the case of the assessee because as per this tribunal decision, the report of registered valuer being a technical person, cannot be substituted without obtaining any DVO's report or any other report of a technical person. In the present case, no such report of any technical person has 8 I.T.A.No04./Ahd/2012 been obtained by the authorities below and, therefore, for this reason also, the action of Ld. CIT(A) cannot be sustained. Under these facts, we are of the considered opinion that the fair market value of the property in question as on 01.04.1981 as declared by the assessee on the basis of a report of the registered valuer, cannot be disturbed and the same has to be accepted. We hold accordingly. The first aspect is decided in favour of the assessee.
- The 2nd aspect is this that while working out the fair market value of the land in question, it is held by Ld. CIT(A) that since it is a big plot, reduction has to be made in the area of the land to the extent of 10% on account of common plot and 25% for internal roads/other development charges. In this regard, we feel that as per Section 50C, if the value as per stamp valuation authority is higher, the same should be adopted. Now, the stamp duty rate for a big and small plot is not different. Hence, in our considered opinion, the adjustment made by Ld. CIT(A) by reducing land area to the extent of 35% is not justified. We reverse the same.
- The 3rd aspect is this that it is admitted position of facts that the assessee was having 18.10% share in the land in question and the entire land was acquired by the State Government for SRP camp and the total consideration was worked out for 18.10% share of the assessee to the extent of Rs.5,99,68,115/-. From this amount, there was deduction made of Rs.1,78,16,427/- on account of disputed amount and the net sale value of the plot of the assessee was adopted at Rs.4,21,51,688/-To this extent, there is no dispute. The dispute is this that it is adopted by the Ld. CIT(A) that since the share of the assessee in the total sale value works out to Rs.4,21,51,688/- only, which is only 12.65% of the total sale value of the plot in question at Rs.33,33,15,552/-, only 12.65% of the total fair market value of the property as on 01.04.1981 should be considered for 9 I.T.A.No04./Ahd/2012 the purpose of working out capital gain in the hands of the assessee. We do not find any merit in this view of Ld. CIT(A) because this is not in dispute that entire land had been sold out and the consideration received by the assessee is for the entire land and it is not the fact that only a portion of land was acquired and some portion of land is still owned by the assessee. Hence, in our considered opinion, the entire share of the assessee in the fair market value of the land to the extent of 18.10% should be considered for working out the capital gain of the assessee and as and when the assessee receives any amount out of the dispute amount of Rs.1,78,16,427/-, in that event, such actual receipt should be brought to tax in its totality without any reduction on account of indexed cost of acquisition but in the present year, the cost of acquisition cannot be reduced. We hold accordingly.
9. As per the above discussion, we find that all the three aspects are decided in favour of the assessee and hence, the capital gain declared by the assessee at Rs.61,92,697/- is to be accepted. We order accordingly.
10. In the result, appeal of the assessee is allowed.
11. Order pronounced in the open court on the date mentioned hereinabove.
Sd./- Sd./-
(KUL BHARAT) (A. K. GARODIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Sp
Copy of the Order forwarded to:
1. The applicant
2. The Respondent
3. The CIT Concerned
4. The Ld. CIT (Appeals)
5. The DR, Ahmedabad By order
6. The Guard File
AR,ITAT,Ahmedabad
10 I.T.A.No04./Ahd/2012
1. Date of dictation......27/8/12
2. Date on which the typed draft is placed before the Dictating Member 30.8.12....Other Member ............
3. Date on which the approved draft comes to the Sr. P.S./P.S.19/09/12
4. Date on which the fair order is placed before the Dictating Member for pronouncement ......21/09/2012
5. Date on which the fair order comes back to the Sr. P.S./P.S.21/9/12
6. Date on which the file goes to the Bench Clerk ...21/09/2012
7. Date on which the file goes to the Head Clerk .......................
8. The date on which the file goes to the Assistant Registrar for signature on the order .........................
9. Date of Despatch of the order. ......................