Smt. L.Vanitha & others, CHENNAI v. ACIT, CHENNAI

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN JUDICIAL MEMBER .. I.T.A. NO. 2054/MDS/98 ASSESSMENT YEAR :1996-97 THE ASSISTANT COMMISSIONER OF INCOME-TAX CITY CIRCLE-I(1) CHENNAI. V. SMT. L. VANITHA & OTHERS L/H OF SRI R. LAKSHMANAN AKSHYA PARTMENTS 5/2 PINCHALA SUBRAMANIAN ST. T. NAGAR CHENNAI-600 017. PAN / GIR NO. L-1633 (APPELLANT) (RESPONDENT) AND C.O. NO. 57/MDS.99 (IN ITA NO. 2054/MDS/98) ASSESSMENT YEAR : 1996-97 SMT. L. VANITHA & OTHERS V. THE ASSISTANT CO MMISSINER L/H OF SRI R. LAKSHMANAN OF INCOME-TAX AKSHYA PARTMENTS CITY CIRCLE-I(1) 5/2 PINCHALA SUBRAMANIAN CHENNAI. ST. T. NAGAR CHENNAI-600 017. (CROSS OBJECTOR) (RESPONDEN T) DEPARTMENT BY : SHRI P.B. SEKARAN ASSESSEE BY : SHRI S. SRIDHAR O R D E R PER GEORGE MATHAN JUDICIAL MEMBER : ITA NO. 2054/MDS/98 IS AN APPEAL FILED BY THE REVE NUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-IX CHENNAI IN ITA NO. 563/97-98 DATED 29-9-1998 I.T.A. NO.2054/MDS/98 & C.O.NO. 57/MDS/99 2 FOR THE ASSESSMENT YEAR 1996-97. C.O. NO. 57/MDS.9 9 IS THE CROSS OBJECTION FILED BY THE ASSESSEE IN THE APPEAL IN ITA NO. 2054/MDS/9 8 FILED BY THE REVENUE. 2. SHRI P.B. SEKARAN LEARNED CIT-DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI S.SRIDHAR ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. IN THE REVENUES APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS : 1. THE ORDER OF THE CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1. THE CIT(A) ERRED IN HOLDING THAT THE SUM OF ` . 10 20 000/- CLAIMED TO HAVE BEEN PAID TO THE CO-OWNER TO EXCLUDE HIM FROM OWNERSHIP SHOULD BE ALLOWED AS DEDUCTION U/S 48 AS HAVING B EEN INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRA NSFER OF THE PROPERTY. 2.2. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HAS PAID ` . 2 50 000/- ONLY AS PER THE COURT DECREE NO .222 O F 1991 DATED 30.6.92 TO SHRI P.N. VENKATESAN AND NOTHING MORE THAN THAT WAS TO BE PAYABLE BY HIM AS HE BECAME THE ABSOLUTE OWNER OF THE PROPERTY CONSEQUENT TO THE COURT ORDER ON PAYMENT OF THE AFORESAID AMOUNT. 3.1. THE CIT(A) ERRED IN HOLDING THAT THE VALUEOF THE HALF SHARE OF THE PROPERTY SHOULD BE ADOPTED AT ` . 3 46 000/- AS ON 1.4.81. 3.2. THE CIT(A) FAILED TO NOTE THAT THE VALUE ADOP TED BY THE ASSESSING OFFICER FOR THE HALF SHARE OF THE PROPERTY AS ON 1.4.81 WAS ` . 2 50 000/- BASED ON THE DECREE OF THE HIGH COURT WHEREAS THE VALUE ADMITTED BY THE ASSESSEE IS NOT BASED ON AN Y MATERIAL AS HAS BEEN MENTIONED IN PARA 6 OF THE APPELLATE ORDER. I.T.A. NO.2054/MDS/98 & C.O.NO. 57/MDS/99 3 3.3. THE CIT(A) HAD NO CONCRETE EVIDENCE TO HOLD TH AT THE VALUE AS ON 1.4.81 SHOULD BE TAKEN AS ` . 3 46 000/-. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORD ER OF CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED. 3. GROUNDS NO. 1 AND 4 ARE GENERAL IN NATURE AND DO NOT NEED ADJUDICATION. 4. IN REGARD TO GROUNDS NO. 2.1 AND 2.2 THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF ` . 10 20 000/- PAID TO ONE SHRI P.V. VENKATESAN THE UNCLE OF THE ASSESSEE AS EXPENDITUR E IN CONNECTION WITH THE COST OF IMPROVEMENT OF THE PROPERTY U/S. 48 OF THE INCOM E-TAX ACT 1961. IT WAS THE SUBMISSION THAT THE HON'BLE MADRAS HIGH COURT HAD V IDE ITS ORDER DATED 30-06- 1992 IN RESPECT OF THEO.A. BETWEEN THE ASSESSEE AND SHRI P.N. VENKATESAN DIRECTED THAT SHRI P.N. VENKATESAN WAS ENTITLED ONL Y TO ` . 2 50 000/-. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD ALLOWED THE ASSESSEES CLAIM OF ` . 10 20 000/- PAID TO SHRI P.N. VENKATESAN AS THE COS T OF IMPROVEMENT OF THE PROPERTY. HE VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 5. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT AFTER THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE SA ID O.A.NO. 4734 OF 1995 WHEREIN THE HON'BLE HIGH COURT HAD HELD THAT SHRI P .N. VENKATESAN WAS LIABLE TO I.T.A. NO.2054/MDS/98 & C.O.NO. 57/MDS/99 4 BE PAID ONLY ` . 2 50 000/- TOWARDS HIS ENTIRE CLAIM OVER THE PROP ERTY SHRI P.N. VENKATESAN CHALLENGED THE ORDER OF THE HON'BLE MADR AS HIGH COURT AND AS A CONSEQUENCE OF THE INTERVENTION OF THE FAMILY AND F RIENDS AN AGREEMENT WAS REACHED BETWEEN THE ASSESSEE AND SHRI P.N.VENKATESA N WHEREBY SHRI P.N. VENKATESAN WAS PAID ` . 10 20 000/- AS PER THE NOTARIZED AGREEMENT ENTERE D INTO BETWEEN THE ASSESSEE AND SHRI P.N. VENKATESAN ON 10 -10-1995. IT WAS THE SUBMISSION THAT EVEN AFTER REACHING THIS AGREEMENT AND PAYMENT OF THIS MONEY SHRI P.N.VENKATESAN HAD FILED ANOTHER PETITION IN 1 997 TRYING TO EXTRACT MORE MONEY FROM THE ASSESSEE. IT WAS THE SUBMISSION THA T THE ASSESSEE HAD SOLD THE PROPERTY IN DISPUTE FOR A TOTAL CONSIDERATION OF ` . 56 70 000/- AND IT WAS ONLY AFTER THE SETTLEMENT WAS REACHED THE ASSESSEE WAS A BLE TO SELL THE PROPERTY. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A ). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ASSESSING OFFICER BASE D HIS FINDING TO RESTRICT THE ALLOWANCE U/S. 48 IN RESPECT OF THE PAYMENT TO SHRI P.N.VENKATESAN AT ` .2 50 000/- ON THE BASIS OF THE DECISION OF THE HON 'BLE MADRAS HIGH COURT IN THE DISPUTE BETWEEN THE ASSESSEE AND SHRI P.N.VENKATESA N. THE ASSESSING OFFICER HAS NOT CONSIDERED THE SUBSEQUENT EVENTS. THE SUBS EQUENT EVENTS IT IS NOTICED HAVE ALSO BEEN BROUGHT TO THE NOTICE OF THE ASSESSI NG OFFICER. IT IS ALSO NOTICED THAT THE LEARNED CIT(A) HAD CONSIDERED THE SUBSEQUE NT EVENTS AS ALSO THE NOTARIZED AGREEMENT. A PERUSAL OF THE PAPER BOOK O F THE ASSESSEE ALSO CLEARLY I.T.A. NO.2054/MDS/98 & C.O.NO. 57/MDS/99 5 SHOWS THAT THE SAID SHRI P.N.VENKATESAN HAS FILED A SUIT IN THE HON'BLE HIGH COURT OF MADRAS IN C.S.NO.521 OF 1997 WHEREIN HE HA S RECOGNIZED THAT THE AGREEMENT WAS ENTERED INTO IN SEPTEMBER 1995 WHEN THE AMOUNT OF ` . 10 20 000/- WAS AGREED TO BE PAID AND THAT IN OCTOB ER 1995 THE SAID SHRI P.N.VENKATESAN HAD RECEIVED THE AMOUNT OF ` . 10 20 000/-. IT IS ALSO NOTICED THAT THE SAID SHRI P.N. VENKATESAN HAS FURTHER ALLE GED THAT THE AGREEMENT SIGNED BEFORE THE NOTARY IN OCTOBER 1995 WHEREBY HE HAD RE CEIVED ` . 10 20 000/- ITSELF WAS NOT ADEQUATE AND THAT HE FELT THAT HE IS DUPED. ALL THESE CLEARLY SHOW THAT THE ASSESSEE HAS INCURRED THIS EXPENDITURE OF ` .10 20 000/- WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF THE PROPERTY AND THE SAME IS LIABLE TO BE CONSIDERED AS PART OF COST OF IMPROVEMENT OF THE PROPERTY U/S 48. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FINDING A S ARRIVED AT BY THE LEARNED CIT(A) IS ON A RIGHT FOOTING AND DOES NOT CALL FOR INTERFERENCE. CONSEQUENTLY GROUNDS NO.21. AND 2.2 IN THE REVENUES APPEAL STAN D DISMISSED. 7. IN REGARD TO GROUNDS NO.3.1 3.2 AND 3.3 THE REV ENUE HAS CHALLENGED THE ACTION OF THE LEARNED CIT(A) HOLDING THAT THE VALUE OF THE HALF SHARE IN THE PROPERTY SOLD WAS LIABLE TO BE ADOPTED AT ` . 3 46 000/- AS ON 1.4.1981 AS AGAINST THE VALUE ADOPTED BY THE ASSESSING OFFICER AT ` . 1 42 200/-. IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSESSING OFFICER HAD ADOPT ED THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 AT ` .1 42 200/- ON THE BASIS OF THE SUIT FILED BETWEEN THE ASSESSEE AND SHRI P.N. VENKATESAN. IT WAS THE S UBMISSION THAT THE LEARNED I.T.A. NO.2054/MDS/98 & C.O.NO. 57/MDS/99 6 CIT(A) HAD DIRECTED THE ASSESSING OFFICER TO ADOPT THE VALUE OF THE HALF SHARE OF THE PROPERTY AT ` . 3 46 000/- BY ESTIMATING THE VALUE WITHOUT ANY BA SIS. HE VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 8. IN REPLY THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THERE WAS NO BASIS FOR THE VALUATION OF THE PROPERTY AS DONE BY THE ASSESSING OFFICER. HOWEVER THE ASSESSEE HAD PRODUCED THE VALUATION RE PORT OF THE REGISTERED VALUER WHEREIN THE 50% SHARE OF THE PROPERTY WAS VA LUED AT ` .5 27 500/-. IT WAS THE SUBMISSION THAT IF THE VALUE AS ADOPTED BY THE LEARNED CIT(A) IS LIABLE TO BE DISTRIBUTED THEN THE ONLY SCIENTIFIC BASIS FOR A RRIVING AT THE VALUE OF THE HALF SHARE OF THE PROPERTY AS ON 1.4.1981 WAS THE VALUE AS ARRIVED AT ON THE BASIS OF THE VALUATION REPORT OF THE REGISTERED VALUER WHICH WAS ` . 5 27 500/-. IT WAS THE FURTHER SUBMISSION THAT IN THE CROSS OBJECTION THE ASSESSEE HAS CHALLENGED THE VALUATION OF THE PROPERTY AS ON 1.4.1981 AT ` .3 46 000/- AND HAS PRAYED THAT THE VALUE OF THE PROPERTY SHOULD BE TAKEN AT ` . 5 27 500/- AS ON 1.4.1981. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS ADOPTED THE FAIR MARKET VALUE AS ON 1.4.1981 FOR THE HALF SHARE OF THE PROPERTY A T ` . 1 42 200/- ON THE BASIS OF THE PLAINT FILED AND THE REPLY OF THE ASSESSEE TO T HE PLAINT IN THE DISPUTE BETWEEN THE ASSESSEE AND SHRI P.N.VENKATESAN. FAIR MARKET VALUE HAS BEEN DEFINED IN SECTION 2(22B) OF THE INCOME-TAX ACT 1961 AS FOLLO WS : I.T.A. NO.2054/MDS/98 & C.O.NO. 57/MDS/99 7 (22B) FAIR MARKET VALUE IN RELATION TO A CAPITA L ASSET MEANS (I) THE PRICE THAT THE CAPITAL ASSET WOULD ORDINARILY FETCH ON SALE IN THE OPEN MARKET ON THE RELEVANT DATE; AND (II) WHERE THE PRICE REFERRED TO IN SUB-CLAUSE (I) IS NOT ASCERTAINABLE SUCH PRICE AS MAY BE DETERMINED IN ACCORDANCE WITH THE RULES MADE UNDER THIS ACT; A PERUSAL OF THE PROVISIONS OF SECTION 2(22B) CLEAR LY SHOWS THAT THE METHOD ADOPTED BY THE ASSESSING OFFICER IS NOT THE METHOD PRESCRIBED UNDER THE STATUTE FOR ARRIVING AT THE FAIR MARKET VALUE. IT IS ALSO N OTICED THAT THE ASSESSING OFFICER HAS NOT CONSIDERED ANY COMPARATIVE CASE OR ANY GUID ELINE NOR REFERRED THE SAME TO THE DVO. A PERUSAL OF THE ORDER OF THE LEARNED CIT(A) CLEARLY SHOWS THAT HE HAS FIXED THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 ON AN ESTIMATE BASIS EVEN THOUGH THE ASSESSEE HAS PRODUCED THE REG ISTERED VALUERS REPORT. THUS WHAT IS NOW BEFORE US IS THE REGISTERED VALUER S REPORT AS SUBMITTED BY THE ASSESSEE WHEREIN THE VALUE OF 50% OF SHARE IN THE P ROPERTY IS VALUED AT ` . 5 27 500/- AND THERE IS NO BASIS TO SUPPORT THE VAL UATION AS ARRIVED AT BY THE ASSESSING OFFICER OR THE LEARNED CIT(A). WHEN WE A RE FACED WITH AN EVIDENCE AS PRODUCED BY THE ASSESSEE WHICH REMAINS UNREBUTTED B Y ANY OTHER EVIDENCE OR BY A BETTER EVIDENCE THE EVIDENCE PRODUCED BY THE ASS ESSEE IN THE FORM OF I.T.A. NO.2054/MDS/98 & C.O.NO. 57/MDS/99 8 REGISTERED VALUERS REPORT WOULD HAVE TO BE ACCEPTE D. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE VALUE OF THE PROPERTY AS F IXED BY THE LEARNED CIT(A) AT ` . 3 46 000/- IS WITHOUT ANY BASIS AND IS LIABLE TO BE SET ASIDE. IT WAS ALSO NOTICED THAT THE FAIR MARKET VALUE AS ON 1.4.1981 ADOPTED B Y THE ASSESSING OFFICER AT ` . 1 42 200/- IS ALSO WITHOUT ANY BASIS NOR IN ACCORDA NCE WITH LAW AND EVEN THIS VALUE IS UNSUSTAINABLE. IN THE CIRCUMSTANCES THE A SSESSING OFFICER IS DIRECTED TO ADOPT THE VALUE OF THE HALF SHARE IN THE PROPERTY A T ` . 5 27 500/- AS ON 1.4.1981 FOR THE PURPOSE OF COMPUTING THE LONG TERM CAPITAL GAINS. IN THE CIRCUMSTANCES THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROS S OBJECTION AS FILED BY THE ASSESSEE IS ALLOWED. 10. THE ORDER WAS PRONOUNCED IN THE COURT ON 13-08- 2010. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI DATED THE 13 TH AUGUST 2010. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE