CHANDRALOK HOTELS LIMITED, HYDERABAD,HYDERABAD vs. DCIT, CIRCLE-1(2), HYDERABAD, HYDERABAD

O R D E R PER L.P. SAHU, A.M.: This appeal filed by the Assessee is directed against CIT(A) - 1, Hyderabad’s order dated 30/05/2017=6 for AY 2011-12 involving proceedings u/s 143(3) of the Income- Tax Act, 1961; in short “the Act” on the following grounds of appeal:

“1. The order of the ld. CIT(A), Hyderabad is erroneous both on facts and in law. 2. The Ld. CIT (A) erred in dismissing the appeal.

:- 2 -: Chandra Lok Hotels Ltd., Hyderabad.

3. The Ld. CIT (A) ought to have appreciated. the fact that the provisions of section 50C of the Act would not apply in the appellant's case. 4.The Ld. CIT (A) ought to have appreciated that the assessment completed u/ s 143(3) of the Act dated 28/03/2014 is invalid ab initio for the AO, having referred to the DVO as per the provisions of section 50OC (2) of the Act, has failed to follow the procedure laid down in sub section (2) & (3) of section 5OC of the Act. 5. The Ld. CIT (A) erred in confirming the .assessment where an sale consideration of Rs. 17,68,83,350/ _ had been adopted instead of the actual sale consideration of Rs. 15,00,00,000/ - 6. The Ld. CIT (A) ought to have appreciated the fact that the engaged property sold was in litigation with the tenant and it was adjacent to a dumping yard of GHMC grave yard and a Government Park. 7. The assessee may add, alter or modify or substitute any other point to the Grounds of appeal

at any time before or at the time of hearing of the appeal. 1.1 The assessee filed a petition requesting to admit the following additional grounds: “8. As per the ratio laid down by the Hon'ble Supreme Court of India in the case of National Thermal Power Co. Ltd vs. CIT (1998) 229 ITR 383 (SC) the !TAT has jurisdiction to examine the question of law though not arisen before the CIT (A) but has arisen before the ITAT for the first time.

9. The Ld. CIT (A) erred in disallowing the expenditure of Rs.1 ,35,00,000/-, which is not the subject matter of :- 3 -: Chandra Lok Hotels Ltd., Hyderabad. the appeal and whereas the said expenditure was allowed by the AO.

11. The appellant may add or alter or amend or modify or substitute or delete or rescind all or any of the grounds of appeal

at any time before or at the time of hearing of the appeal.

12. As per the ratio laid down by the Hon'ble Supreme Court of India in the case of National Thermal Power Co. Ltd vs. CIT (1998) 229 ITR 383 (SC) the IT AT has jurisdiction to examine the question of law though not arisen before the CIT (A) but has arisen before the ITAT for the first time.

13. The Id. CIT(A) ought to have well appreciated that there was an oral agreement for sale of the impugned property on 27/05/2010 against which the vendee has paid the part consideration for sum of Rs.9 lakhs

14. The Ld. CIT (A) ought to have considered the legal position that agreement of sale can also be oral and that the payment of advance through cheque being part performance of agreement.

15. The Ld. CIT(A) has erred in not properly appreciating the legal position that J the oral agreement for sale transaction is binding agreement on the date on which the advance sale consideration is paid .

:- 4 -: Chandra Lok Hotels Ltd., Hyderabad.

at any time before or at the time of hearing of the appeal.

19. As per the ratio laid down by the Hon'ble Supreme Court of India in the case of National Thermal Power Co. Ltd vs. CIT (1998) 229 ITR 383 (SC) the ITAT has jurisdiction to examine any question of law though not raised before the CIT (A) but is raised before the IT AT for the first time.

20. The Ld. CIT (A) ought to have appreciated that the audited books of account were never rejected by AO during the assessment, and thus reference made to valuation officer without rejecting books of accounts is not tenable as per the judgement of Hon'ble Apex court in the case of Sargam Cinema V. CIT [2011] 197 Taxmann 203 (SC).

11. The appellant may add or alter or amend or modify or substitute or delete or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal. 1.2 We admit the said additional grounds raised by the assessee as they do not require any fresh investigation.

:- 5 -: Chandra Lok Hotels Ltd., Hyderabad.

2.1 The AO noted that the assessee sold its entire land of 5052.11 sq.yds located at Indira Park, Hyderabad on 24/01/2011 for a consideration of Rs. 15 crores to a firm namely M/s SVSS Constructions, Hyderabad. The registered agreement of sale cum GPA relating to this transaction was found during the survey, as per which, the market value adopted for the purpose of payment of stamp duty amounted to Rs. 17,68,83,850/-. The AO asked the assessee to show cause as to why the amount of Rs. 17,68,83,850/- adopted by the SRO as market value should not be taken into account for computing the long term capital gains. After rejecting the submissions of the assessee, the AO observed that the assessee should have adopted Rs. 17,68,83,850/- as the sale consideration when the expenditure of Rs. 1,35,00,000/- claimed as transfer expenses. He, therefore, completed the assessment u/s 143(3) on 28/03/2014 determining taxable income at Rs. 10,81,94,948/-.

:- 6 -: Chandra Lok Hotels Ltd., Hyderabad.

4. Aggrieved, the assessee is in appeal before the ITAT.

:- 7 -: Chandra Lok Hotels Ltd., Hyderabad. the earlier agreement was part of written agreement, therefore, the same was executed on 24 th day of January, 2011. Therefore, he submitted that the SRO value considered on the date of first payment received by the assessee, which is much lower than the amount determined on total consideration of Rs. 15 crores, to which, the assessee has offered sale consideration for the purpose of computation of capital gains. Further, he submitted that the property was sold after getting vacated the tenants from the land and the property cannot be sold without vacating them. Due to the circumstances around the land, the land value cannot fetch at fair market value as determined by the SRO for stamp duty purpose. He, therefore, contended that the authorities were not justified to take the sale consideration at Rs. 17,68,83,850/-, which is the SRO value. In support of his arguments, he relied on the following judgments: “1. Appadurai Vijayaraghavan Vs. JCIT, 49 Taxmann 513 (Mad. HC) 2. S. Muthuraja Vs. CIT, 37 taxmann 352 (HC Mad) 3. Lalitha Karan Vs. ITAT,

:- 8 -: Chandra Lok Hotels Ltd., Hyderabad.

M/s Hyderabad Supplying Company of Rs. 1,35,00,000/- towards sales expenses as claimed by the assessee and has allowed while computing capital gains tax. On perusal of additional evidence filed by the assessee on 19/07/2018, the assessee has filed the same with regard to market value of the property as per SRO, in which, the sale price mentioned at Rs. 28,000/- per sq.yd. on 27/05/2010, but, on this day transfer of the property was not effected as per section 2(47) of the Act r.w.s. 53A of the Transfer of Properties Act, 1853. The date of transfer shall be considered as 24th January, 2011 as the sale executed on 24/01/2011, in which, nothing was mentioned about earlier agreements orally or written, on the basis of which the assessee was receiving any paymens. Therefore, considering the facts and circumstances of the case and as per the definition of transfer as per section 2(47) of the Act, the arguments advanced by the ld. AR in this regard is hereby rejected. From the assessment order, we observe that the AO has referred the matter to the DVO for determining fair market value as per section 50C(2) of the Act, but, it was not mentioned in the order the details of reference to DVO. He has completed the assessment without waiting for the report of the DVO. As per the judgment of the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal Vs. CIT(GA No. 3686 of 2013/ ITAT No. 221 of 2013), judgment dated 13th March, 2014, if there is a difference in the value of the property as determined by the :- 10 -: Chandra Lok Hotels Ltd., Hyderabad. assessee and the SRO value, the AO is bound to refer the matter to the DVO and the assessment should be done on the basis of DVO report. Similar issue has been decided by the coordinate bench of ITAT, Bengaluru in the case of Shri Somashekar Venkataswamappa Vs. ACIT in vide order dated 14/08/2019 wherein it was held as under:

3.4.1 We have considered the rival submissions; perused the orders of the authorities below and the material on record. From an appraisal of the records before us, it is seen that the assessee sold a property at Site No.11/15-490 vide Khata No.504 situated at Jattipalya Village, Kengeri Hobli, Bangalore South Taluk vide sale deed dated 26.06.2013 for sale consideration of Rs.80 lakhs and computed LTCG thereon at Rs.2,94,164/-. In the course of assessment proceedings, the AO noticed that stamp duty was paid by the purchaser as per stamp authorities' valuation of the property at Rs.1,30,68,000/-; while the assessee had only offered Rs.80 lakhs as sale consideration in the sale agreement. The AO states that in view of the above, the provisions of section 50C of the Act were invoked taking Rs.1,30,68,000/- as the sale consideration and the LTCG was re-computed at Rs.50,68,000/-. 3.4.2 In the 'statement of facts' filed by the assessee, in its appeal before the CIT(A) and which the CIT(A) purportedly utilized to dispose of the assessee's appeal ex-parte for non-prosecution, the assessee has submitted as under:-

Since the market value mentioned in the sale deed was not the actual consideration, the appellant objected to the adoption of market value for capital gains purposes during the scrutiny proceedings before the Assessing

:- 11 -: Chandra Lok Hotels Ltd., Hyderabad.

Officer, and insisted upon not taking the deemed sale consideration as per Section 50C. By virtue of the power vested in him under section . 1.42A of the Income tax Act, the Assessing Officer referred the matter to the Departmental Valuation Cell vide his letter • No. ACIT C- 3(2)(1)/16-17/105 dated: 13.12.2016. Pursuant to such a reference, the Valuation Officer vide his letter No. VO (B)/CG/680/2016-17/346 dated: 16.12.2016 called for various particulars for the purpose of making the valuation. He had fixed the date as 2.1.2017 as the date for compliance. Numbers of details were called for. The appellant was in the process of gathering particulars for compliance. However, to his utter shock and surprise, he received the order of assessment itself dated: 27,12.2016, much before the date fixed by the Valuation Officer. The reason for completion of assessment in such haste is not discernible from the assessment order. According to Explanation 1 to Section 153, in computing the period of limitation, the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of section 142A and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer shall be excluded. According to sub-section (6) of section 142A, the Valuation Officer shall send a copy of the report of the estimate made under sub-section (4) or sub-section (5), as the case may be of Section 142A, to the Assessing Officer and the assessee, within a period of six months from the end of the month in Which a reference is made under sub-section (1) of section 142A. The Valuation Officer having got a letter 13.12.2016 from the Assessing Officer had time up to 30.6.2017 to send the report. The period of six months odd taken by the Valuation Officer could have been excluded for the purpose of completion of assessment. The Assessing Officer, on the contrary, rushed through the assessment on 27.12.2016 without waiting for the valuation report

:- 12 -: Chandra Lok Hotels Ltd., Hyderabad. itself. He has fixed the value of the property at Rs. 1,30,68,000/- for the purpose of computation of capital gains. After deducting the cost of acquisition etc., he has arrived at a difference of Rs. 50,68,000/-and added the same to the. income returned. The order of assessment is bad in law, in as much as, the Assessing Officer has not adopted the value as per Valuation Officer, after having made a reference to him. The appellant did not have fair opportunity to furnish the particulars to the Valuation Officer, study his proposal and obtain a final Valuation Report. The order of the Assessing Officer is, therefore, opposed to principles of natural justice. 3.4.3 In the impugned order the CIT(A) has dismissed the assessee's appeal holding as under at para 4.7 of the impugned order:- "4.7 The claim of the appellant during appellate proceedings (as in the statement afflicts) that he had made a request to the AO to refer the matter to Valuation Officer is without any basis as neither any such documents have been produced by the appellant during appellate proceedings nor there are any such documents on the assessment records which support the claim of the appellant. el The order sheet notings available on the assessment records also do not show that any such claim was ever made by the appellant before the AO. So the contention of the appellant that the AO should have waited for the valuation report is without any merit. In the case of Amhattur Clothing Company Limited vs ACIT, 2010 326 IT1? 245 (Madras), the High Court held that the AO is bound to follow the mandate of law and if the assessee has not availed the opportunity as provided under Section 50C of the Act, there was no option available with the AO. Considering above the grounds of appeal 5 to 7 of the appellant are dismissed."

:- 13 -: Chandra Lok Hotels Ltd., Hyderabad.

3.4.4 We are inclined to accept that there appears to be merit in the averments of the learned AR that; it is because the assessee had orally objected to the AO's proposal to invoke the provisions of section 50C of the Act; to substitute the sale consideration of Rs. 80 lakhs mentioned in the sale deed with the value as per stamp valuation authorities of Rs.1,30,68,000/- for computing the LTCG on sale of the aforesaid property; that the AO referred the matter to the DVO for valuation of the property vide letter dated 13.02.2016. Nowhere in the relevant provisions of the Act has it been laid down that the assessee has to put forth a request in writing to the AO for making a reference to the DVO. In our view, the AO, after having made the reference to the DVO; ostensibly on the assessee's objections to the AO's proposal invoking the provisions of section 50C of the Act; the AO ought to have completed the assessment in accordance with the valuation report rendered by the DVO. 3.4.5 The CIT(A)'s view is that since the assessee did not make a written request to the AO for reference for valuation of the said property and therefore has not availed the opportunity under section 50C of the Act, the AO had no option but to proceed to apply provision of section 50C of the Act and in this regard placed reliance on the decision of the Hon'ble Madras High Court in the case of Ambattur Clothing Co. Ltd., Vs. ACIT (2010) 326 ITR 245 (Madras). The CIT(A)'s attempt to buttress this claim was in his observation that the AO's reference to the DVO was made suo-moto and invalid as the AO exceeded his jurisdiction. 3.4.6 Per contra, the learned AR has placed reliance on the decision of the Hon'ble Calcutta High Court in the case of Sunil Kumar Agarwal Vs. CIT reported in (2015) 372 ITR 83 (Cal). On a perusal thereof, we find that the Hon'ble Court; after detailed consideration of the provisions of section 50C of the Act; has held that the valuation by the DVO, contemplated under section :- 14 -: Chandra Lok Hotels Ltd., Hyderabad.

50C of the Act, is required to give fair treatment to the tax-payer and avoid the miscarriage of justice as the Legislature did not intend that the capital gains should be fixed merely on the basis of the valuation to be made by the District Sub-Registrar for the purpose of stamp duty. There is no reason why the machinery provided by Legislature should not be used and the benefit thereof refused, even in a case where no prayer has been made by the assessee, who may not have been properly instructed. Since the AO, discharging a quasi-judicial function, has the bounden duty to act fairly; he should in all fairness make a reference to the DVO to have the valuation of the said property contemplated under section 50C of the Act. In this regard, the Hon'ble Calcutta High Court finally at paras 9 to 11 thereof has held as under:- ......................We are of the opinion that the valuation by the Departmental Valuation Officer, contemplated under section 50C is required to avoid miscarriage of justice. The Legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub- Registrar for the purpose of stamp duty. The Legislature has taken care to provide adequate machinery to give a fair treatment to the citizen / taxpayer. There is no reason why the machinery provided by the Legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the Assessing Officer, discharging a quasi-judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law. 10 For the aforesaid reasons, the order under challenge is set aside.

Assessing Officer are all set aside. The matter is remanded to the Assessing Officer. He shall refer the matter to the Departmental Valuation Officer in accordance with law. After such valuation is made, the assessment shall be made de novo in accordance with law." We must observe that in the case on hand, the circumstances are even more acute as the AO who had admittedly made a reference to the DVO vide letter No.ACIT C-3(2)(1)/16-17/105 dated 13.12.2016, strangely did not wait for the DVO's valuation report and hurriedly proceeded to pass the impugned order of assessment on 27.12.2016; just 14 days later; when the DVO had already initiated valuation proceedings by calling for details to be filed by the assessee on 02.01.2017 and had time to submit his Valuation Report upto 30.06.2017. 3.4.7 We now have slightly contrasting judicial pronouncements on the issue before us; wherein Revenue has relied on the Hon'ble Madras High Court in the case of Ambattaur Clothing Co. Ltd., (2010) 326 ITR 235 (Mad) and the learned AR of the assessee has placed reliance on the decision of the Hon'ble Calcutta High Court in the case of Sunil Kumar Agarwal Vs. CIT (2015) 372 ITR 83 (Cal). In our view, in the circumstances that prevail on the issue before us, the Hon'ble Apex Court in the case of CIT Vs. Vegetable Products Ltd., 88 ITR 192 (SC) has laid down the principle that the Rule of judicial precedence demands that if there are judgments in favour of the assessee and against the assessee, then the view favourable to the assessee should be adopted. Respectfully, following the ratio of the aforesaid decision of the Hon'ble Apex Court in Vegetable Products Ltd., (supra) and from we drew support, we hold that the decision of the Hon'ble Calcutta High Court in the case of Sunil Kumar Agarwal Vs. CIT (2015) 372 ITR 83 (Cal) is to be followed and applied and do so. In this view of the matter, the orders passed

:- 16 -: Chandra Lok Hotels Ltd., Hyderabad. by the authorities below i.e., CIT(A) and AO are set aside and we restore the matter of computation of LTCG on sale of the said property by the assessee to the file of the AO. The AO shall obtain the DVO's Valuation Report, as called for by him in his reference dated 13.12.2016 , and after such valuation is made by the DVO, the computation of LTCG shall be made on this issue, de novo in accordance with law and after affording the assessee adequate opportunity of being heard in the matter by both the DVO for valuation proceedings and the AO and to file details required which shall be duly considered by the DVO / AO before deciding the issue. We hold and direct accordingly. Consequently, the grounds raised by the assessee are allowed for statistical purposes.” 7.1 Therefore, considering the above judgments, we deem it fit and proper to remit the issue back to the file of the AO with a direction to determine the market value of the property as on the date of transfer of capital asset in accordance with law after providing reasonable opportunity of being heard to the assessee in the matter. The assessee is directed to produce all the relevant documents before the AO to substantiate its claim.

decision of the ITAT, Pune in the case of Naresh Sunderlal Chug Vs. ITO, [2018] 93 taxmann.com 485, on which reliance placed by the ld. AR of the assessee, wherein the coordinate bench has held as under: “14. The CIT (A) after receiving the submission of assessee, remand report of Assessing Officer and Comments of assessee, went on to decide the issue as to assessibility of gain arising on transfer of development rights. It may be pointed out herein itself, the said issue of assessibility of capital gain was completed before the Assessing Officer who accepted the stand of assessee that the said gain was to be assessed as income from capital gains. There was no dispute about the assessibility of gains as income - from Long Term Capital Gain. The only dispute was that whether against such gains, the assessee could claim deduction under section 54 F of the Act on account of investment in new asset. In this regard, action of the CIT (A) in holding that the said income on sale of development rights was to be treated as adventure in the nature of trade/ business income, was not correct as per provisions of the Act. The powers of CIT (A) are coterminous with the power of Assessing Officer. In other words, the CIT (A) has wide power while deciding the appeal. However, as per Clause (2) of Section 251 of the Act, it is provided that the CIT (A) shall not enhance an assessment or a penalty or reduce the amount of refund, unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. The Explanation taIks about the power of CIT (A) in deciding the appeal and stresses that he may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the CIT (A) by the appellant. In view of the said provisions, the CIT (A) has power to decide any matter arising out of the proceedings but the said power has to be exercised after giving reasonable opportunity to the :- 18 -: Chandra Lok Hotels Ltd., Hyderabad. assessee to show cause against such enhancement or reduction. The CIT (A) was not only changing the head of income but was also enhancing the assessment, since income which is assessed in the hands of assessee as per direction of CIT (A) had worked out at Rs. 49,41,225/- as against income assessed by the Assessing Officer under the head Long Term Capital Gain at Rs.48,75,610/- The second aspect is rate of tax. In case income is assessed under the head Long Term Capital Gain, the rate of tax is lower than the rate applied when the income is being assessed as business income. In view thereof in not giving an opportunity or any show cause notice of enhancement as required under section 251(2) of the Act, the order of CIT (A) suffers from infirmity and the same cannot be sustained.” 8.1 In the case of United Provinces Sugar Company Ltd Vs ITO (ITAT Kolkata) in order dated 01/04/2021, the coordinate bench has held as under:

A perusal of the propositions of law laid down in all these case-law, takes us to the conclusion that the ld. CIT(A) cannot touch or delve on any issue which does not arise from the order of assessment and which was outside the scope of or an issue which is not a subject matter the order of the assessment. In the case on hand, the issue of computation of book profits u/s 115JB of the Act was not an issue that was a subject matter during the course of assessment proceedings. This issue of computation of book profits u/s 115JB of the Act, does not arise from the order of the assessment. Section 115JB of the Act, is a “self contained code as per the CBDT Circular No. 13/2001, dt. 09/11/2001 and was outside the scope of the order of assessment passed by the Assessing Officer u/s 143(3) of the Act on 21/12/2015. The ld. CIT(A), in our view, is not empowered to enhance the assessment by computing book profits u/s 115JB of the Act, as it is a separate

:- 19 -: Chandra Lok Hotels Ltd., Hyderabad. code. Thus, we uphold this contention of the assessee and adjudicate this issue on powers of enhancement of the CIT(A), on the facts and circumstances of the case, in favour of the assessee. Thus, we quash the enhancement made by the ld. CIT(A).”

Following the ratio laid down in the above judgments, we set aside the order of the CIT(A) on this issue and allow the ground No. 9, 10 & 11 raised by the assessee in this regard.

Pronounced in the open court on 27th August, 2021.