The ACIT, Circle-5,, Baroda v. M/s. Prakash Ratanlal Sheth, Baroda

ITA 951/AHD/2012 | misc
Pronouncement Date: 31-07-2012 | Result: Dismissed

Appeal Details

RSA Number 95120514 RSA 2012
Assessee PAN AHFPS1577C
Bench Ahmedabad
Appeal Number ITA 951/AHD/2012
Duration Of Justice 2 month(s) 30 day(s)
Appellant The ACIT, Circle-5,, Baroda
Respondent M/s. Prakash Ratanlal Sheth, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 31-07-2012
Assessment Year misc
Appeal Filed On 01-05-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI JUDICIAL MEMBER AND SHRI T.R. MEENA ACCOUNTANT MEMBER ITA NO. 951/AHD/2012 ASSESSMENT YEAR :2008-09 ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE-5 5 TH FLOOR AAYAKAR BHAVAN RACE COURSE CIRCLE BARODA-390007 V/S . SHRI PRAKASH RATANLAL SHETH SHETH PARIKH & CO 101 1 ST FLOOR KAUTILYA COMPLEX SUBHASH CHAR RASTA HARNI ROAD VADODARA - 390006. PAN NO. AHFPS1577C (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI C.K. MISHRA SR.D.R. /BY RESPONDENT WRITTEN SUBMISSION /DATE OF HEARING 0 2 .0 7 .2012 /DATE OF PRONOUNCEMENT 31.07.2012 O R D E R PER : T.R.MEENA ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHIC H HAS EMANATED FROM THE ORDER OF CIT(A)-V BARODA ORDER DATED 15. 02.2012 FOR ASSESSMENT YEAR 2008-09. THE EFFECTIVE GROUNDS OF REVENUE APP EAL ARE AS UNDER:- (I) THE LEARNED CIT(A) ERRED IN LAW IN NOT CONSIDE RING THE APPLICABILITY OF THE PROVISIONS OF SECTION 55A OF T HE IT ACT WHICH EMPOWERS THE AO TO ASCERTAIN THE FAIR MARKET VALUE OF A CAPITAL ASSET ITA NO. 951/AHD/2012 A.Y. 08-09 PAGE 2 FOR THE PURPOSE OF DETERMINING CAPITAL GAINS BY REF ERRING THE VALUATION OF THE SAME TO VALUATION OFFICER. (II) THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW I N NOT CONSIDERING THE FACTS THAT ASSESSEE HAD CONSTRUCTED ADDITIONAL FLOOR AT DIFFERENT TIMES AND HAD GIVEN THE WRONG COMPUTATION OF LONG T ERM CAPITAL GAIN BY ADOPTING INCORRECT INDEXATION. 2. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSES SEE HAS SHOWN LONG TERM CAPITAL LOSS ON PROPERTY A-1-23 ISHWARSHANTI SOCIE TY KARELIBAUG SOLD ON 28.02.2008 AT A PRICE OF RS.14 00 000/-. THE COST OF ACQUISITION IS RS.10 49 237/- AS ON 1991 WHICH AFTER INDEXATION CO MES TO RS.29 05 174/-. AS THE APPELLANT CLAIMED LOSS UNDER THE HEAD CAPITA L GAIN THEREFORE LD. A.O. HAS REFERRED THE PROPERTY U/S 55A OF THE IT ACT FOR FAIR MARKET VALUE OF THE PROPERTY ON DATE OF SALE TO THE DISTRICT VALUATION OFFICER WHO ESTIMATED THE FAIR MARKET VALUE OF THE PROPERTY RS.24 04 400/- AGAINST THE CONSIDERATION OF RS.14 00 000/- SHOWN IN THE SALE AGREEMENT. IT IS A LSO FOUND FROM THE VALUATION REPORT THAT THE APPELLANT HAD CONSTRUCTE D GROUND FLOOR IN 1991 AND FIRST FLOOR & SECOND FLOOR IN 1994 TO 95-96 RESPECT IVELY. THE APPELLANT HOWEVER CLAIMING THE BENEFITS OF INDEXATION FROM F.Y. 1991-92. THE A.O. HAD GIVEN REASONABLE OPPORTUNITY TO THE ASSESSEE BEFORE COMPUTING A CAPITAL GAIN ON THE BASIS OF DVO REPORT. THE APPE LLANT ADMITTED BEFORE THE A.O. VIDE HIS LETTER DATED 22.12.2010 THAT PROPERTY WAS ACQUIRED ON 16.10.1991 AND ADMITTED THAT SOME CONSTRUCTION ON GROUND FLOOR FIRST FLOOR AND SECOND FLOOR WAS DONE BY HIM. THE LD. COUNSEL FOR THE APPELLANT ITA NO. 951/AHD/2012 A.Y. 08-09 PAGE 3 AS WELL AS LD. A.O. RELIED UPON VARIOUS CASE LAWS. FINALLY THE A.O. COMPUTED THE CAPITAL GAIN AS UNDER:- 13. REVISED CALCULATION OF INDEXATION FOR DETERMIN ING THE COST OF ACQUISITION: DATE OF VALUATION COST OF ACQUISITION INDEX COST OF ACQUISITION 16/10/91 227000 687236 1995-96 802999 1574564 TOTAL: 1029999 2261800 REVISED CALCULATION OF LONG TERM CAPITAL GAINS: VALUE DETERMINED BY VALUATION OFFICER: 24 04 000 LESS: INDEX COST OF ACQUISITION : (-) 22 61 800 1 42 200 AS THE ASSESSEE HAS SHOWN LONG TERM CAPITAL LOSS ON THE PROPERTY A- 1-23 ISHWARSHANTI SOCIETY KARELIBAUG AT RS.(-) 15 05 174/-. AS PER THE REVISED CALCULATION THE LONG TERM CAPITAL GAINS IS RS.1 42 200/-. HENCE THE DIFFERENCE OF RS.1 42 200 + 15 05 174/- I.E. RS.16 47 374/- IS ADDED BACK TO ASSESSEES INCOME FROM LONG TERM CAPITAL GA IN ON THE SAID PROPERTY. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O. THE AP PELLANT CARRIES THE MATTER BEFORE THE CIT(A) WHO HAS DELETED THE ADDITI ON AFTER CONSIDERING THE HONBLE DELHI HIGH COURT DECISION IN CASE OF COMMISSIONER OF INCOME-TAX VS. SMT. NILOFER I. SINGH (2009) 309 ITR 233 AND HAS HELD AS UNDER:- 5.2 I HAVE CONSIDERED THE FACTS OF THE CASE AS WEL L AS THE OBSERVATION OF THE AO AND THE ARGUMENTS ADVANCED BY THE AR. TH E AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT ACTUAL CONSIDERATION RECEIVED BY THE APPELLANT IS MORE THAN THE CONSIDER ATION SHOWN BY THE APPELLANT. EXCEPT FOR THE SITUATIONS MENTIONED IN SECTION-50C THERE IS NO PROVISION IN THE ACT WHICH ALLOWS ADOPTION OF FA IR MARKET VALUE OF PROPERTY AS FULL VALUE OF CONSIDERATION RECEIVED FO R THE PURPOSE OF ITA NO. 951/AHD/2012 A.Y. 08-09 PAGE 4 COMPUTING CAPITAL GAINS. SINCE THE APPELLANT HAS N OT OBJECTED TO THE VALUATION MADE BY THE STAMP VALUATION AUTHORITY THE RE IS NO OCCASION FOR THE A.O. TO MAKE REFERENCE TO THE VALUATION OFFICER UNDER PROVISIONS OF SECTION-50C (2) OF THE IT ACT. EVEN WHEN THE REFER ENCE IS MADE TO THE VALUATION OFFICER AND HE DETERMINES A VALUE HIGHER THAN THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY THE AO IS REQUIRED TO ADOPT THE VALUE DETERMINED BY STAMP DUTY AUTHORITY AS PER PROVISIONS OF SECTION 50C (3) OF THE IT ACT. THUS THE AO HAS CL EARLY ERRED IN ADOPTING THE FAIR MARKET VALUE OF PROPERTY AS FULL VALUE OF THE CONSIDERATION RECEIVED FOR THE PURPOSE OF COMPUTING CAPITAL GAINS. ACTION OF THE AO IS THEREFORE QUASHED AND HE IS DI RECTED TO ADOPT THE AMOUNT OF RS.14 00 000/- AS FULL OF CONSIDERATION A CCRUING TO THE APPELLANT ON TRANSFER OF PROPERTY. 4. NOW THE REVENUE IS BEFORE US. THE LD. D.R. VEHE MENTLY ARGUED THAT THE A.O. HAS POWER TO REFER THE CASE FOR DETERMININ G THE FAIR MARKET VALUE AS ON DATE OF SALE U/S 55A OF THE IT ACT. FURTHER THE INCORRECT INDEXATION HAD BEEN CALCULATED IN COMPUTING THE CAPITAL GAIN. THE A.O. CAN REFER THE CASE UNDER SUB-SECTION (B) OF SECTION 55A IN ANY OTHER C ASE TO THE DVO. THE CIT(A) WAS NOT RIGHT IN DELETING THE ADDITION OF TH E A.O. 5. FROM THE APPELLANT SIDE A WRITTEN REPLY WAS FIL ED BY THE ASSESSEE. THE ASSESSEES SUBMISSION IS REPRODUCED AS UNDER:- I) IT IS FIRSTLY SUBMITTED THAT SOME OF THE CONSIDERATIONS THAT LED TO THE ADDITION ARE APPARENTLY IRRATIONAL AND IRRELEVA NT FOR COMPUTING INCOME UNDER INCOME-TAX ACT. THESE OBSERVATIONS ARE TO THE EFFECT THAT GENERALLY IT IS NOT POSSIBLE TO INCUR LOSS ON SALE OF PROPERTY AND TRANSACTIONS IN CASH ARE RAMPANT IN TRANSACTIONS OF PROPERTY. IN SUCH AN EVENT UNDERSTATEMENT OF INCOME BEING RAMPANT ALL INCOME-TAX RETURNS FILED IN THE COUNTRY WILL NEED TO BE DISBELIEVED. ITA NO. 951/AHD/2012 A.Y. 08-09 PAGE 5 II) IT IS SECONDLY SUBMITTED THAT THE ASSESSING OFF ICER WAS NOT ENTITLED TO MAKE A REFERENCE TO VALUER. THE VALUER WAS NOT JUSTIFIED IN VALUING THE PROPERTY IN THE MANNER HE DID. THE VALUATION BY STAMP DUTY AUTHORITIES WAS IN ACCORDANCE WITH NORMS DETERMINED BY THE GOVERNMENT. THAT THERE WAS NO LOSS ON SALE OF PROPERTY AS ERRONEOUSLY UNDERSTOOD BY THE ASSESSING OFFICER. THAT THE PROPERTY WAS IN BAD PHYSICAL CONDITION AND DID NOT HAVE A GO OD LOCATION. THAT BOTH THE ASSESSING OFFICER AND THE VALUER OUGH T TO HAVE GIVEN ADEQUATE OPPORTUNITY TO CHALLENGE THE VALUATION. HOWEVER WE ARE NOT ADDRESSING DETAILED ARGUMENTS IN THIS REGARD AS WE BELIEVE IT IS UNNECESSARY IN VIEW OF LATER SUBMISSIONS. HOWEVER IN CASE LATE R SUBMISSIONS ARE NOT ACCEPTED WE REQUEST YOUR HONOU R TO GRANT OPPORTUNITY TO ADDRESS ARGUMENTS IN THIS REGARD. III) IT IS SUBMITTED THAT THE ADDITION IS NOT WARRANTED IN VIEW OF THE FUNDAMENTAL PROVISION OF SECTION 48 THAT THE COMPUTATION OF INCOME IS TO BE DONE BY REDUCING THE COST FROM SALE CONSID ERATION RECEIVED. THERE IS NO PROVISION ANY WHERE PERMITTING ADOPTION OF A DIF FERENT FIGURE IN LIEU OF CONSIDERATION ACTUALLY RECEIVED. MARKET VALUE CAN BE SUBSTITUTED FOR CONSIDERATION ACTUALLY RECEIVED ONLY IN SITUATIONS CONTEMPLATED IN SECTIONS 50C OR 45(4) ETC. ASSESSING OFFICER HAS FAILED TO APPRECIATE THIS FUNDAMENTAL PROVISION. WHILE SECTION 55A PERMITS REFERENCE TO VALUER TO DETERMINE FAIR MARKET VALUE THE PERMISSION IS ONLY FOR THE PURPO SES OF THIS CHAPTER' MEANING THAT WHENEVER CHAPTER CONTEMPLATES DETERMINATION OF FAIR MARKET VALUE AS IN CASE OF SE CTION 50C OR ITA NO. 951/AHD/2012 A.Y. 08-09 PAGE 6 45(4) ETC. . IT DOES NOT PERMIT REFERENCE EVEN WHEN MARKET VALUE I S NOT THE PRESCRIBED BASIS FOR COMPUTING INCOME . THIS IS IN ACCORDANCE WITH THE DECISION AF HON'BLE DELHI HIGH COURT IN CASE OF COMMISSIONER OF INCOME-TAX V. SMT. NILOFER I. SING H REPORTED AT 2009-(309)-ITR -0233 -DEL . THIS DECISI ON RELATES TO ASSESSMENT YEAR 1998-99 WHICH IS LONG AFTER INSERTION OF SECTION 55A AND DELETION OF SECTION 52. HENCE THE ASSESSING OFF ICER'S REASONS FOR IGNORING THE OTHER DECISION ON THAT GROUND DO N OT SURVIVE. WE WOULD ADD THAT AT ONE POINT OF TIME SECTION 52 CONTEMPLATED ADOPTION OF MARKET VALUE IN PLACE OF ACTUAL CONSIDE RATION. EVEN WHEN THAT PROVISION WAS THERE SUPREME COURT IN CAS E OF K.P. VERGHESE MARKET VALUE CANNOT BE ADOPTED UNLESS THER E IS EVIDENCE OF RECEIPT OF EXTRA CONSIDERATION. NOW WITH DELETI ON OF SECTION 52 THE DECISION IN CASE OF K.P. VERGHESE MUCH MORE APP LICABLE RATHER THAN NOT BEING APPLICABLE. IV) THE DECISIONS RELIED ON BY THE ASSESSING OFFICER ARE RE LATING TO ESTIMATION OF COST FOR ASCERTAINING INVESTMENT FROM UNDISCLOSED SOURCES FOR THE PURPOSE OF SECTION 68 WHERE MARKET VALUE WOULD BE RELEVANT. THEY CANNOT BE APPLIED FOR DETERMINING ACTUAL CONSIDERATION RECEIVED FOR THE PURPOSE OF SECTION 4 8. HENCE IT IS SUBMITTED THAT THE DECISION OF THE HON. CLT(A) BE UPHELD AND APPEAL OF THE DEPARTMENT REQUIRED TO BE DISMISS ED. 6. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND WRITTEN REPLY OF THE ASSESSEE AND GONE THROUGH THE CASE LAW. THE AP PELLANT HAD SHOWN SALE VALUE AS A RESULT OF TRANSFER AT RS.14 00 000/- WHE REAS STAMP AUTHORITY HAS TAKEN THIS VALUE AT RS.13 83 600/- IT MEANS THA T ASSESSEE HAD SHOWN ITA NO. 951/AHD/2012 A.Y. 08-09 PAGE 7 MORE SALE CONSIDERATION IN SALE DEED. THUS THIS C ASE CANNOT BE REFERRED U/S 50C (2) OF THE IT ACT TO THE DVO. THE CAPITAL GAIN CAN BE CALCULATED UNDER CHAPTER IV OF COMPUTATION OF INCOME FROM CAPITAL GAIN. SECTION 48 EMPOWERED TO AO TO CALCULATE THE CAPITAL GAIN. FOR CALCULATION OF CAPITAL GAIN FULL VALUE OF THE TRANSACTION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSETS FOLLOWING AMOUNT IS TO BE DEDUCT ED (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVE IN CONNECTION WITH SUCH TRANSF ER (II) THE COST OF ACQUISITION OF THE ASSETS AND THE COST OF ANY IMPROVEMENT THERE ON. FURTHER INDEXATION ON COST OF ACQUISITION AND COST OF IMPROVEMENT IS T O BE ALLOWED. THE VARIOUS HIGH COURTS HAVE HELD THAT FULL VALUE OF CONSIDERAT ION U/S 48 CANNOT BE CONSTRUED FAIR MARKET VALUE AS PER SECTION 55A OF T HE IT ACT. THE HONBLE DELHI HIGH COURT HAS HELD THE SIMILAR VIEW IN CASE OF COMMISSIONER OF INCOME-TAX VS. SMT. NILOFER I. SINGH (SUPRA) AFTER CONSIDERING HONBLE SUPREME COURT DECISION IN CASE OF CIT V. GEORGE HINDERSON & CO. LTD (1967) 66 ITR 622 . THE FULL VALUE CONSIDERATION IS MEAN THE FULL V ALUE OF CONSIDERATION RECEIVED BY THE TRANSFEREE IN EXCHANG E OF THE CAPITAL ASSETS TRANSFERRED BY HIM. THE HONBLE SUPREME COURT ALSO OBSERVED THAT IN THE CASE OF FULL VALUE CONSIDERATION IS THE FULL SALE P RICE IS ACTUALLY PAID. IT WAS FURTHER OF THE VIEW THAT THE EXPRESSION FULL VALUE MEANS THE WHOLE PRICE WITHOUT ANY DEDUCTION WHATSOEVER AND IT CANNOT REF ER TO THE ADEQUACY OR INADEQUACY OF THE PRICE BARGAINED FOR. NOR DID IT HAS ANY NECESSARY REFERENCE TO THE MARKET VALUE OF THE CAPITAL ASSETS WHICH IS THE SUBJECT MATTER OF THE TRANSFER. FOLLOWING THE HONBLE DELHI HIGH COURT RATIO IN ABOVE CASE WE HAVE ITA NO. 951/AHD/2012 A.Y. 08-09 PAGE 8 CONSIDERED VIEW THAT THE LD. A.O. WAS NOT JUSTIFIED IN SUBSTITUTING THE FAIR MARKET VALUE IN PLACE OF FULL VALUE OF CONSIDERATIO N. THUS WE CONFIRM THE ORDER OF THE CIT(A). 7. THE SECOND GROUND OF REVENUE APPEAL IS AGAINST N OT CONSIDERING THE ADDITIONAL CONSTRUCTION MADE BY THE APPELLANT IN DI FFERENT YEAR BY THE CIT(A). THE A.O. NOTICED THAT THE ASSESSEE HAD CONSTRUCTED GROUND FLOOR FIRST FLOOR AND SECOND FLOOR IN DIFFERENT YEARS. THE APPELLANT HAD ADMITTED THE FACT DURING THE COURSE OF ASSESSMENT PROCEEDING. LD. A.O. CO MPUTED THE CAPITAL GAIN ON THE BASIS OF INDEXATION ON CONSTRUCTION IN DIFFE RENT YEARS AT THE TIME OF ASSESSMENT WHICH WAS NOT CHALLENGED BY THE APPELLAN T BEFORE THE CIT(A). THE LD. CIT(A) ALSO HAD NOT GIVEN ANY FINDINGS IN H IS APPEAL ORDER ON COST OF IMPROVEMENT AND INDEXATION THERE ON. THUS THIS GR OUND OF REVENUE APPEAL IS DISMISSED. 8. IN THE RESULT ON BOTH GROUNDS THE REVENUES AP PEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31.07.2012 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ) ) 12( / DR ITAT AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ ITA NO. 951/AHD/2012 A.Y. 08-09 PAGE 9 8/ 1 ': ) 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 26 & 27 & 30.07.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 27.07.2012 4) DATE OF CORRECTION 5) DATE OF FURTHER CORRECTION 6) DATE OF INITIAL SIGN BY MEMBERS 31.07.2012 7) ORDER UPLOADED ON 31.07.2012 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 31.07.2012