KUM.KULSUM ABDULRAZAK BANGADIWALA,BARODA vs. INCOME TAX OFFICER, WARD-5(3),, BARODA

Issue involved in both the appeals are common, therefore, we heard them together and deem it appropriate to dispose of both the appeals by this common order.

First common issue involved in both the appeals relates to computation of long term capital gain on sale of assets.

There is a long history exhibiting the filing of adjournment applications, non-disclosure of the capital gain and non-furnishing of complete details during the assessment proceedings, and thereafter filing of an application under Rule 46A before first appellate authority for production of additional evidence. Additional evidence was taken on record. Remand report was called for, and thereafter the ld.CIT(A) adjudicated the appeal in the case of Mohammad Afaque Abdulrazak Bangdiwala. This order has been followed in the case of Kum. Kulsum Abdulrazak Bangadiwala. I do not deem it necessary to take all these details in comprehensive manner.

Brief controversy is that Shri Afaque Abdulrazak Bangdiwala, Shri Shama Abdul Razak and Kum. Kulsum were co-owners having equal shares in an immovable property situated at RS No.230/1, 230/2, 232, 233 at Moje Sawad, Baroda. This land was sold by all the co-owners during the accounting period relevant to the Asstt.Year 2011-12 and they have disclosed sale consideration of Rs.75 lakhs. The stamp valuation authorities have determined the value of the property at Rs.1,26,23,100/- for the purpose of stamp duty payment. Thus, this value was adopted as full sale consideration by invoking section 50C of the Income Tax Act. As far as adoption of this value is concerned, the appellants have not disputed. Their main thrust of the dispute is that for the purpose of determining long term capital gain, the cost of acquisition as on 1.4.1981 was required to be determined. On the basis of registered valuer’s report, the assessees have adopted the cost of acquisition after taking benefit of indexation at Rs.90/- per sq.yard. The AO in the remand proceedings analysised the report, and thereafter worked out cost of acquisition as on 1.4.1981 at Rs.58 per sq.meter. This has been made by the AO after taking benefit of indexation. The ld.CIT(A) in the case of Shri Mohmed A. Bangdiwala has given the following directions:

Similar line of reasoning and directions are given in the case of Kum. Kulsum Abdulrazak Bangadiwala. The sole issue which has been agitated before me is that the ld.AO was not justified in determining the value after indexation as on 1.4.1981 at Rs.58 per sq.meter. The ld.counsel for the assessee submitted that the value taken by the assessee ought to be adopted. She took me through the valuation report which is available on page no.19 to 23 of the paper book. On the other hand, the ld.DR relied upon the orders of the revenue authorities.

I have duly considered rival submissions and gone through the record carefully. The ld.AO is successful in reducing the value adopted by the assessee for the purpose of cost of acquisition as on 1.4.1981 in the garb of determining fair market value as on 1.4.1981. Hon’ble Gujarat High Court has considered similar aspect wherein it has been propounded by the Hon’ble Court that the ld.AO has no power to make reference to the DVO under section 55A for transactions which have been executed before 1.7.2012, if the AO is of the opinion that value so claimed by the assessee is less than its fair market value. In other words, the AO cannot reduce the value adopted by the assessee on the basis of registered valuer report. The discussion made by the Hon’ble High Court in the case of CIT Vs. Gauranginiben S. Shodhan Inld. Vs. CIT, 45 taxmann.com 356 (Guj) reads as under: “15. Coming to the question of reference to DVO for ascertaining the fair market value as on 1.4.1981 also, we find that such reference was not competent. We have noticed that prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of the asset claimed by the assessee is in accordance with the estimate made by the Registered Valuer, if the Assessing Officer was of the opinion that the value so claimed was less than its fair market value as on 1.4.1981. It would not be the case of the Assessing Officer that the value of the asset shown as on 1.4.1981 was less than the fair market value. Such clause, therefore, as it stood at the relevant time, had no application to the valuation as on 1.4.1981. We are conscious that with effect from 1.7.2012, the expression now used in clause (a) of section 55A is “is at variance with its fair market value”. The situation may, therefore, be different after 1.7.2012. We are, however, concerned with the period prior thereto. Clause (b) of section 55A is in two parts and permits a reference to DVO if the Assessing Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee by more than such percentage of the value of the asset so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. Sub-clause(i) of clause (b) also for the same reasons recorded above, would have no bearing on the fair market value as on 1.4.1981. The Assessing Officer had not resorted to sub-clause(ii) of clause (b). In any case, clause(b) would apply where clause(a) does not apply since it starts with the expression “in any other case”. In other words if assessee has relied upon a Registered Valuer’s Report, Assessing Officer can proceed only under clause (a) and clause(b) would not be applicable.

Apart from the above, a perusal of the remand report on page no.22 would reveal that on the basis of sale instance, ld.Registered valuer pointed that there 10% to 15% increase in the price from 1981 upto day. He worked out the value at Rs.21 per sq.meter as well as 28.68 per sq.meter. These values have been adopted by the registered valuer after taking into consideration various surrounding circumstances coupled with sale instance in this area between 1979 to 1981. Thereafter, the AO has taken benefit of indexation for arriving at the value per sq.meter at Rs.90/-. The AO has re- appreciated this very sale instance and reduced to Rs.58/-. Assessing Officer is not an expert. The report of the registered valuer is based upon the opinion of the expert person in this area, and it could not have been disbelieved without giving any justifiable reasons. Therefore, Revenue authorities are not justified in taking cost of acquisition at Rs.58/- per sq.meter. I set aside the finding of the ld.Revenue authorities to this extent, and direct the AO to recompute the capital again after taking cost of acquisition at Rs.90/- per sq.meter. The AO thereafter work out if any capital gain assessable in the hands of the assessees. Any other consequential benefits if available to the assessee, viz. Section 54F on account of long term investment etc. be granted to the assessee. This exercise be done after providing reasonable opportunity of hearing to the assessee.

In the results, appeals of the assessees are allowed for statistical purpose. Order pronounced in the Court on 7th February, 2020 at Ahmedabad.