ASHA BHARAT SHAH, MUMBAI v. ITO 16(1)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: MUMBAI BEFORE SHRI R.S. SYAL ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.1716/MUM/2010 (ASSESSMENT YEAR: 2005-06) MRS. ASHA BHARAT SHAH 11 LEJARDIN KASHIBAI NAVRANGE MARG GAMDEVI MUMBAI -400 007 ..ASSESSEE VS INCOME TAX OFFICER WARD-16(1)(1) MATRU MMANDIR TARDEO MUMBAI -400 012 ......REVENUE PAN: AAHPS 4944 A ASSESSEE BY: SHRI REEPAL G. TRALSHAWALA REVENUE BY: SHRI R.S. SRIVASTAVA O R D E R PER R.S. PADVEKAR JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A) 27 MUMBAI DATED 8.1.2010 FOR THE A.Y. 2005-06. GROUND NO.1 READS AS UNDER:- I. THE LD. CIT (A) ERRED IN CONFIRMING THE ACTION OF THE A.O. IN TAKING VALUATION OF STAMP DUTY AUTHORITIES OF SION PROPERTY AS SALE CONSIDERATION WITHOUT REFERRING THE VALUATION TO THE ITA 1716/M/2010 MRS. ASHA BHARAT SHAH 2 DEPARTMENTAL VALUATION OFFICER AS REQUIRED U/S.50C OF THE ACT. 2. THE ISSUE IS IN RESPECT OF THE APPLICABILITY OF PROVISIONS OF SECTION 50C. THE ASSESSEE IS A CO-OWNER OF PROPERTY SOLD D URING THE PREVIOUS YEAR WHICH WAS SITUATED AT PLOT NO. 10B OF SION-MA TUNGA ESTATE MUMBAI -400 023 DURING THE FINANCIAL YEAR 2004-05 THE SAID PROPERTY WAS SOLD FOR THE TOTAL CONSIDERATION OF ` 4 25 00 000/- AS PER THE DEVELOPMENT AGREEMENT DATED 22.6.2004. THE SAID DE VELOPMENT AGREEMENT WAS REGISTERED AND FOR THE PURPOSE OF THE STAMP-DUTY PAYMENT THE FAIR MARKET VALUE OF THE PROPERTY WAS D ETERMINED AT ` 4 94 61 000/-. THE A.O. APPLIED SECTION 50C OF THE ACT AND ADOPTED THE VALUATION MADE BY THE STAMP DUTY AUTHORITIES AS CON SIDERATION WHICH WAS VALUED AT ` 4 94 67 000/- AND ACCORDINGLY WORKED OUT LONG-TERM - CAPITAL-GAIN AND BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF HER SHARE. THE ASSESSEE CHALLENGED THE ACTION O F THE A.O. BEFORE THE LD. CIT (A) BY TAKING THE CONTENTION THAT DESPITE T HE SPECIFIC REQUEST OF THE ASSESSEE THE A.O. DID NOT REFER THE MATTER TO THE DISTRICT VALUATION OFFICER (DVO) AS PER SUB-SECTION (4) TO SECTION 50 C. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE ITAT LUCKNOW B BENC H IN THE CASE OF A.K.G. CONSULTANT P. LTD. IN SUPPORT OF HIS PLEA. THE LD. COUNSEL ARGUED THAT ONCE THE ASSESSEE CLAIMED BEFORE THE A.O. THAT THE FAIR MARKET VALUE DETERMINED BY THE STAMP-DUTY AUTHORITIES ARE HIGHER THEN THE ACTUAL SALE CONSIDERATION AND THE A.O. IS BOUND TO REFER THE MA TTER TO THE DVO FOR VALUATION UNDER SUB-SECTION (2) TO SECTION 50C. TH E ASSESSEE ALSO RELIED ON THE DECISION OF THE ITAT JODHPUR BENCH IN THE CA SE OF MEGHRAJ BAID VS. ITO 114 TTJ 814 (JD.). WE HAVE ALSO HEARD THE LD. D.R. 3. SECTION 50C IS A DEEMING PROVISION AND IT IS APP LICABLE IN RESPECT OF TRANSFER OF THE LAND OR BUILDING OR BOTH BY THE ASSESSEE. IT PROVIDES THAT IN CASE OF TRANSFER OF A LAND OR A BUILDING IF THE VALUATION MADE FOR ITA 1716/M/2010 MRS. ASHA BHARAT SHAH 3 THE PURPOSE OF THE PAYMENT OF THE STAMP-DUTY BY THE STATE REGISTRATION AUTHORITY IS MORE THAN THE SALE CONSIDERATION DECLA RED BY THE ASSESSEE IN THE CONVEYANCE THEN THE SAID VALUE WILL BE ADOPTED AS A CONSIDERATION FOR COMPUTATION OF THE CAPITAL GAIN U/S.48 OF THE A CT. SUB-SECTION (2) PROVIDES THAT IF THE ASSESSEE CLAIMS BEFORE THE A.O . THAT THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY EXCEEDS TH E FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF THE TRANSFER WHIC H HAS NOT BEEN DISPUTED BY THE ASSESSEE IN ANY LEGAL PROCEEDINGS THEN THE A.O. MAY REFER THE CASE TO THE VALUATION OFFICER AS PER THE PROVISIONS OF THE WEALTH-TAX ACT 1957. THE LD. CIT (A) DECLINED TO ENTERTAIN THE PLEA OF THE ASSESSEE FOR REFERRING THE MATTER TO THE DVO BY HOLDING THAT THE WORD MAY IS USED BY THE LEGISLATURE AND IT IS DISCRETI ON OF THE A.O. TO REFER OR NOT TO REFER. IN THE CASE OF MEGHRAJ BAID (SUPRA) IT IS HELD THAT THE WORD MAY USED IN SUB-SEC. (2) TO SEC. 50C SIGNIFIES TH AT IN CASE THE A.O. IS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE THEN HE SHOULD REFER THE MATTER TO THE DVO FOR THE VALUATION. WE THERE FORE FOLLOWING THE DECISION OF THE TRIBUNAL IN MEGHRAJ BAID (SUPRA) AL LOW GROUND NO.1 TAKEN BY THE ASSESSEE AND DIRECT THE A.O. TO REFER THE MA TTER TO THE DISTRICT VALUATION OFFICER FOR DETERMINING THE FAIR MARKET V ALUE AS PER PROVISIONS OF SUB-SEC. (2) OF SECTION 50C. ACCORDINGLY GROUN D NO.1 IS ALLOWED. 4. GROUND NO.2 READS AS UNDER:- 2. LD. CIT (A) ERRED IN CONFIRMING THE ACTION OF T HE A.O. IN MAKING REFERENCE U/S.55 OF THE ACT TO THE VALUATION OFFICE R FOR ASCERTAINING THE VALUE OF 01/04/1981 WHICH WAS SUPPORTED BY VALU ATION REPORT OF THE ARCHITECT / REGISTERED VALUER AS REFERRED TO IN PARA 4 OF THE ORDER. 5. WE HAVE HEARD THE PARTIES. AS THE SAID PROPERTY WAS PURCHASED PRIOR TO 1.4.1981 THE ASSESSEE ADOPTED FAIR MARKET VALUE OF THE PLOT FOR ITA 1716/M/2010 MRS. ASHA BHARAT SHAH 4 THE PURPOSE OF THE INDEX COST OF THE ACQUISITION (I CA). THE ASSESSEE FILED THE VALUATION REPORT OF THE REGISTERED VALUER AND A S PER THE VALUATION MADE BY THE REGISTERED VALUER THE FAIR MARKET VALUE OF THE SAID PROPERTY AS ON 1.4.1981 AT ` 43 10 100/- AND INDEX COST WAS WORKED OUT AT ` 2 06 88 000/-. THE A.O. MADE A REFERENCE TO THE DI STRICT VALUATION OFFICER I MUMBAI U/S. 55A OF THE ACT. IT APPEARS THAT AS THE VALUATION REPORT WAS NOT RECEIVED FROM THE DVO AND ASSESSMENT WAS GETTING TIME BARRED THE A.O. COMPLETED THE ASSESSMENT SUBJECT T O THE FURTHER RECTIFICATION. NOW THE ASSESSEE HAS CHALLENGED TH E ACTION OF THE A.O. FOR REFERRING THE MATTER TO THE VALUATION. 6. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL SUBM ITTED THAT THE DVO HAS DETERMINED THE FAIR MARKET VALUE OF THE PRO PERTY AS ON 1.4.1981 AT ` 29.62 LAKHS AS AGAINST THE VALUE DECLARED BY THE A SSESSEE AT ` 43.10 LAKHS. IT IS ARGUED THAT NO REFERENCE CAN BE MADE BY THE DVO FOR DETERMINING THE LESSER FAIR MARKET VALUE AND THIS I SSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE ITAT MUMBAI IN THE CASE OF SMT. SARALA N. SAKRANEY VS. ITO 46 DTR (MUM)(TRIB) 208. HE THEREFORE PLEADED THAT THE A.O. MAY BE DIRECTED TO ADOPT THE FAIR MARKET VALUE AS PER VALUATION MADE BY ASSESSEES VALUER. WE HAVE ALSO HEARD THE LD. D.R. 7. AFTER ELABORATELY DISCUSSING THE PROVISIONS OF S ECTION 55A AND RELYING ON THE DECISION IN THE CASE OF CIT VS. DAUL AL MOHTA (HUF)1031 OF 2008 JUDGMENT DATED 22ND SEPTEMBER 2008 AND HELD A S UNDER:- 14. IN VIEW OF THE AFORESAID DECISIONS WE ARE OF THE VIEW THAT REFERENCE BY THE AO TO THE DVO UNDER S.55A FOR VALU ATION OF FAIR MARKET VALUE OF THE PROPERTY AS ON 1ST APRIL 1981 IS NOT VALID FOR THE REASON THAT FAIR MARKET VALUE DECLARED BY THE ASSES SEE AS PER ITA 1716/M/2010 MRS. ASHA BHARAT SHAH 5 GOVERNMENT REGISTERED VALUERS REPORT WAS MORE THAN THE FAIR MARKET VALUE AS ESTIMATED BY THE DVO. SINCE DETERM INATION OF THE FAIR MARKET VALUE AS ON 1ST APRIL 1981 WAS BASED O N THE REPORT OF THE DVO THE SAME IS HELD TO BE INVALID. CONSEQUEN TLY ESTIMATION OF THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1ST APR IL 1981 AS MADE BY THE ASSESSEE IS DIRECTED TO BE ACCEPTED. GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 8. IN THE PRESENT CASE THE FAIR MARKET VALUE DECLA RED BY THE ASSESSEE AS ON 1.4.1981 IS MORE THAN THE FAIR MARKET VALUE D ETERMINED BY THE DVO HENCE THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION OF THE ITAT MUMBAI IN THE CASE OF SMT. SARALA N. SAKRANEY (SUPRA) AND ACCORDINGLY GROUND NO.2 IS ALLOWED AND THE A.O. IS DIRECTED TO ADOPT THE FAIR MARKET VALUE DECLARED BY THE ASSESSEE AS PER T HE VALUATION REPORT AS ON 1.4.1981. 9. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH FEBRUARY 2011. SD/- SD/- ( R.S. SYAL ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE: 15TH FEBRUARY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 27 MUMBAI. 4) THE CIT CITY XVI MUMBAI. 5) THE D.R. A BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T. MUMBAI *CHAVAN ITA 1716/M/2010 MRS. ASHA BHARAT SHAH 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 27.01.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 27.01.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER