LATE SHRI DHAN SINGH BHATI L/H NEHA BHATI,AJMER vs. INCOME TAX OFFICER, AJMER

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH ‘B’ JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 384/JP/2018 fu/kZkj.k o"kZ@Assessment Year : 2006-07 cuke Late Shri Dhan Singh Bhati, CIT, Vs. (through legal Heir Smt Neha Bhati) Circle-1, Ajmer Ajmer LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABYPB9085D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Ajay Somani (CA) jktLo dh vksj ls@ Revenue by : Smt. Roshanta Meena (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 13/11/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 11/02/2019 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Ajmer dated 26.02.2018. At the outset, it is noted that this is the 2nd round of appellate proceedings before the Tribunal. In the earlier round, the Co-ordinate Bench vide its order dated 23.09.2016 in read with order passed in MA No. 178/JP/2016 dated 08.03.2017 has held as under:- “We have heard rival contentions, perused the material available on record and gone through the orders of the authorities below. Admittedly this issue does not arise from the impugned order. In earlier round of litigation, learned CIT(A) had directed the AO to revise the value of the property a and when revised by the IG(Stamps). The AO in pursuance of that order, revised the value of the property. It is also not in dispute that the assessee had not challenged the order dated 28.03.2011. -JP-2018 Late Shri Dhan Singh Bhati, Ajmer vs. ITO, Ajmer Hence the subject matter of the assessment was to the extent of valuation of property, and not the ownership of the property. But it is also a settle position of law that if a person is not liable for tax, merely because he has not claimed otherwise, that should not give license to the Assessing Authority to make the person liable for the entire value of the property. The assessee has not filed copy of the will dated 26.09.1996. Therefore, in the interest of natural justice, we deem it proper to restore the issue of ownership of the property and liability of the assessee, to the file of AO for fresh decision. In the event the AO finds that the ownership of the entire property i.e. Nanki Bhawan, at Prakash Road, Nagra, Ajmer was bequeathed by the father of the assessee in favour of the assessee, he would decide the issue accordingly as the owner of the entire property. However, in case he finds otherwise in terms of the will related to this property, he would consider the same and decided accordingly.

The Assessing Officer is further directed to consider the claim of indexation of the assessee as per law.”

2. In the set-aside proceedings, from the perusal of the sale deed dated 09.09.2005, the Assessing Officer has held that the assessee, Late Shri Dhan Singh is only owner of the impugned property. Therefore, the contention of the ld. AR that Late Shri Dhan Singh has only 50% share of the impugned property and income be so computed in support of his 50% ownership of the said property was not found acceptable.

3. Regarding claim of cost of indexation in the hands of the previous owner, the Assessing Officer rejected the valuation report submitted by the legal heir of the assessee in support of cost of construction in hands of the -JP-2018 Late Shri Dhan Singh Bhati, Ajmer vs. ITO, Ajmer previous owner for the reasons stated in the assessment order and had determined cost of land and cost of construction at Rs. 10,22,700/- and after indexation, the same was determined at Rs. 38,21,669/-. In this regard, the relevant findings of the Assessing Officer are reproduced as under:- “From the plain reading of the statement deposed by the approved valuer, the following points emerged-

1. 1. That the approved valuer has made the valuation of entire property known as Nanki Bhawan, Prakash Road Nagra, Ajmer i.e. 1048.87 sq. Mtr (11290.003 sq ft.).

2. That in the sale deed it is mentioned in the description of property sold on 9-9-2005 at page No. 10 that out of 11290 sq. ft> the construction of 1625 sq ft. had already been made 80-85 years back by the sellers to the previous owner in the FY 1985-86. That means the assessee is not entitle to claim of indexation u/s 49(1) of the construction cost of the building which were constructed by seller to the previous owner that too incurred 80-85 years back. The assessee is only entitle to get benefit of indexation where only the previous owner has incurred any expenditure.

-JP-2018 Late Shri Dhan Singh Bhati, Ajmer vs. ITO, Ajmer 4. It has also been deposed by the valuer, that as per instruction of the client he made the valuation of such property only for FY 1985-86, made in Dec. 2017 . 5. It has also been deposed that client has not instructed him to make the valuation of the property which was allegedly constructed only in 1985-86 but has instructed him to make valuation of the entire property before sale in 2005-06.

Considering the above facts and circumstances of the case, the following point emerged which are mentioned below:

3. There is no doubt that after 1985-86, it is no possible that no further renovations, fittings or construction was made in between 1985-86 to 2006-07. However, the approved valuer as instructed by the aforesaid client assessee, he made the entire property valued in Dec. 2017 as per existing building.

5. The valuation report submitted by the assessee is appearing total self serving of the assessee.

7. In view of misleading facts narrated by the assessee to valuer, the aforesaid valuation report of the assessee cannot be accepted in -JP-2018 Late Shri Dhan Singh Bhati, Ajmer vs. ITO, Ajmer

toto and found self serving to the assessee and based on the facts appraised to him only. Accordingly, the valuation made by the approved valuer is hereby rejected.

In view of foregoing discussion, it is observed, that now a question arises that what cost which have been incurred by the previous owner late Shri Ram Singh Bhati, be adopted in the FY 1985-86. In this connection before any conclusion, it is pertinent to mention here that the assessee and previous owners are well known businessman of the town since very long and having the services of various CAs/ lawyer. The cost for which indexation claimed in AY 2006-07 from 1996-97 after consulting with them. The plea of the assessee that the assessee wrongly claimed indexation from 1996-97 rather it would have been claimed it from F.Y. 1985-86 is not correct. In fact the assessee booked the cost of land and constructed as indexed value in the FY 1996-97 in which the property was inherited by the assessee only. Thus in my view the assessee has correctly taken the index cost of the building in the FY 1996-97 at Rs. 23,45,290/- and the AO while passing the original order taking the correct index cost of building at Rs. 38,21,669/- in the year of sale i.e. 2005-06 relevant for assessment year. Therefore, in absence of any documentary evidence produced by the assessee, I am inclined to determine the cost of land and building as index cost claimed in FY 1996-97 at Rs. 23,45,290/- (treating the cost of land and building in 1985-86 at Rs. 10,22,700/- being reversed index value of the same) and taken by the AO at Rs. 38,21,669/- in the year of sale i.e. 2005-06 relevant for assessment year.”

4. On appeal, the ld. CIT(A) has confirmed the finding of the Assessing Officer and the relevant finding of the ld. CIT(A) are as under:- Late Shri Dhan Singh Bhati, Ajmer Vs. CIT, Circle-1, Ajmer

“2.2 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that the issue of ownership of the property sold was restored by the ITAT to the file of AO, as the appellant had not filed copy of the “will” dated 26.09.1996 before the ITAT. The AO was specifically directed by the ITAT to decide the issue in terms of the “will” related to the property. As the appellant either before the AO or during the course of appellate proceedings has failed to produce the copy of the “will” dated 26.09.1996, therefore, I find no justification for interfering with the assessment completed by the AO. As far as indexation to the cost of acquisition is concerned, the appellant has not furnished, either before the AO or during the course of appellate proceedings any evidence to show that the property was constructed in the year 1985-86. Even the appellant himself had claimed the indexation from the F.Y. 1996-97 in the return of income filed by him. Therefore, the action of the AO allowing indexation from the F.Y 1996-97 is held to be valid and in accordance with the provisions of law.”

That the ld. CIT(A) Ajmer has erred in law and facts in dismissing the appeal against the order of ld. AO (in case remanded by ITAT, Jaipur – and MA No. 178/JP/2016 dated 08.03.2017)

1. Ground 1 : That the ld. CIT(A) Ajmer has erred in holding the deceased Assessee as 100% owner of the transferred property despite:- • PROBATE Order which mentions that the same was granted in favour of the Assessee on behalf of self and lunatic brother (Sh. LAXMAN SINGH BHATI), and. 7 ITA No. 384/JP/2018 Late Shri Dhan Singh Bhati, Ajmer Vs. CIT, Circle-1, Ajmer • Page No. 1 of the Sale Deed clearly states that it has been sold on behalf of self (Assessee) and as a guardian of mentally retarded brother (Sh. Laxman Singh Bhati)

2. Ground 2 : That the ld. CIT(A) Ajmer has erred in confirming the order of ld. AO in disregard to the instructions of ITAT by arbitrary changing and computing cost of acquisition at Rs. 10,22,700/- despite the facts. • Erstwhile A.O had accepted the cost of acquisition at Rs. 23,45,290/- • Approved Valuer’s Report on record (Computing new cost of construction as on 01.04.1986 at Rs. 25,25,000/-).”

6. During the course of hearing, the ld. AR submitted that the ld. CIT(A) has erred in upholding the order of the AO which is clearly in disregard to the remand by the Tribunal. Regarding ground no. 1, it was submitted that the assessee was Joint (50%) owner of the sold property and this fact is verifiable from PROBATE on record and the assessee’s heir’s inability to produce copy of Will of the deceased Late Shri Ram Singh Bhati should be ignored in light of humanitarian considerations. Regarding claim of indexation, it was submitted by the ld AR that the Assessing Officer accepted the contention of the assessee that he is entitled to get indexation from the F.Ys 1985-86 when the previous owner Late Shri Ram Singh Bhati, acquired the impugned property. In support of the cost of acquisition, the ld. AO as well as ld. CIT(A) were provided with the copies of the capital accounts and balance-sheet of the assessee from F.Y 1992-93 to F.Y. 1996-97 to evidence the cost of the inherited asset as per books at Rs. 23,45,290/-. To substantiate the claimed cost of acquisition, valuation report of approved Valuer was submitted wherein the Valuation as on 01.04.1986 was determined at Rs. 25,25,000/- and approved Valuer Sh. Dharmendra Jain also testified under section 131 before the Assessing officer and he confirmed the valuation of Rs. 25,25,000/-. It was further submitted 8 Late Shri Dhan Singh Bhati, Ajmer Vs. CIT, Circle-1, Ajmer that the ascertainment of cost of construction was not subject matter of Remand by the Tribunal. The AO has himself given a finding that “Thus following the directions of the ITAT, the assessee is entitled to get indexation, i.e. from the year 1985-86 when the previous owner Late Shri Ram Singh Bhati, acquired it”. The AO fixed the indexed cost allowed to appellant at Rs. 38,21,669/- (worked by erstwhile A.O order dated 29.12.2009), unjudicially and arbitrarily estimated the cost of acquisition at Rs. 10,22,700/- (instead of settled cost of acquisition at Rs. 23,45,290/- accepted in 143(3) dated 29.12.09) without any factual basis. In a way, the ld. AO and ld. CIT(A) although accepting the benefit of indexation to be allowed from FY 1985-86 (indexed factor 497/133 instead of 497/305), arbitrarily reworked COA from the indexed COA of Rs. 38,62,669/- (worked as per Index Factor of 497/305). It was further submitted that the assessee and his wife both have expired and the married daughter and son should not be expected to adduce evidence of cost of construction of Property in F.Y 85-86. At the same time, the undernoted evidences on record should suffice in support of cost of construction: • Mention in Sale Deed • Entries in Final Accounts of deceased • Valuation Report of Approved Valuer • Testimony of Approved Valuer Further, there is no cause to disturb the settled fact as regards cost of acquisition at Rs. 23,45,290/- by previous AO & subsequent orders.

, the ld DR submitted that the assessee has failed to submit a copy of the ‘Will’ as so directed by the Tribunal and in absence of the same, there is no infirmity in the order of the AO and the ld CIT(A) confirming the same. Regarding claim of indexation, the ld DR submitted that valuation

9. Late Shri Dhan Singh Bhati, Ajmer Vs. CIT, Circle-1, Ajmer report so submitted by the assessee has been rightly rejected by the AO for the details reasons given in the assessment order and in absence of any corroborative evidence, the AO has rightly determined the cost of acquisition and has allowed the indexation benefit to the assessee. It was accordingly submitted that there is no infirmity in the findings of the ld CIT(A) and his order should be confirmed.

relating to claim of cost of acquisition, the Coordinate Bench has directed that “The Assessing Officer is further directed to consider the claim of indexation of the assessee as per law.” The said directions were issued in context of assessee’s original ground of appeal that since the assessee has inherited the impunged property from his late father Shri Ram Singh, the indexation benefit on cost of acquisition should be allowed from the year in which his late father has purchased and constructed the property and not from the year in which the assessee inherited the property. The said directions cannot be read and understood only in the limited context of determining the indexing factor for the year in which 13. Late Shri Dhan Singh Bhati, Ajmer Vs. CIT, Circle-1, Ajmer previous owner purchased/constructed the property. However, the said directions have to be read and understood to determine the cost of acquisition/construction by the previous owner and then determining the relevant indexing factor relative to year of purchase/construction.

11. In the return of income, the assessee has shown indexed cost of acquisition at Rs 38,21,669 (F.Y 1996-97 - 23,45,290/305*497) and in the original assessment order passed u/s 148 r/w 143(3), we find that there is no discussion regarding such cost of acquisition and the same has been accepted as reflected and claimed by the assessee in his return of income. It is assessee’s contention that he had by mistake taken indexation factor for financial year 1996-97 instead of financial year 1985-86 and the same should be allowed to be rectified. And as far as cost of acquisition is concerned, there was no dispute and there is no basis for the AO to challenge the same in the set-aside proceedings. In our view, it is no doubt true that in the original proceedings, the AO has not disputed the cost of acquisition but once the assessee took a specific ground before the Co-ordinate Bench and the latter directed the AO to consider the claim of indexation as per law, the issue is wide open before the AO to determine the cost of acquisition in the hands of the previous owner and thereafter applying the relevant indexation factor.

12. Now, in terms of cost of acquisition in hands of the previous owner, the assessee has submitted that the previous owner late Shri Ram Singh Bhati has acquired the impunged property through 11 purchase registries in financial year 1985-86 for Rs 1,32,000. The same has been accepted by the Assessing officer in the set-aside proceedings and there is thus no dispute in this regard and the assessee is thus eligible for indexed cost of acquisition by applying indexation factor for financial year 1985-86 on such cost of acquisition. Late Shri Dhan Singh Bhati, Ajmer Vs. CIT, Circle-1, Ajmer 13. In terms of cost of construction is concerned, the assessee has submitted an approved valuer’s report who has determined the cost of construction as on 1.4.1986 at Rs 25,25,000. During the course of assessment proceedings, the statement of approved valuer was recorded and thereafter, the Assessing officer has rejected the said valuation report as a self-serving document. In our view, it would have been more appropriate that once the assessee has furnished a copy of the valuation report, the Assessing officer, not being a technical proficient person in the field of valuation, should have referred the matter to the DVO and sought the latter’s report. However, the Assessing officer has decided to examine the report by himself and has even called the approved valuer and his statement was also recorded. Given that the matter pertains to A.Y 2006-07 and this is the second round of appellate proceedings and that too, represented by the legal heir of the assessee, we believe that no useful purpose would be served in remanding the matter back to the AO and to give a fresh innings to both the parties besides involvement of additional time and cost. In the peculiar facts and circumstances of the present case, we therefore deem it appropriate to refer to objections raised by the Assessing officer with regard to valuation report so submitted by the assessee and the assessee’s submissions in this regard.

In the result, appeal of the assessee is partly allowed.

Late Shri Dhan Singh Bhati, Ajmer Vs. CIT, Circle-1, Ajmer Order pronounced in the Open Court on 11/02/2019.

Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 11/02/2019 *Ganesh Kr. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Late Shri Dhan Singh Bhati, Ajmer 2. izR;FkhZ@ The Respondent- CIT, Circle-1, Ajmer 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 384/JP/2018} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत