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Income Tax Appellate Tribunal, ‘’C’’ BENCH, AHMEDABAD
(Applicant) (Respondent) Revenue by : Shri Lalit P. Jain, Sr.DR Assessee by : Shri S.N. Soparkar, and Ms. Urvashi Shodhan, A.Rs सुनवाई क� तार�ख/Date of Hearing : 14/06/2019 घोषणा क� तार�ख /Date of Pronouncement: 25/06/2019 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned cross-appeals have been filed at the instance of the Revenue and Assessee against the orders of the Learned Commissioner of Income Tax (Appeals)-XV, Ahmedabad [Ld.CIT(A) in short], of even dated 30/11/2011 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dated 31/12/2010 relevant to the Assessment Years (A.Y) 2008-09. Since issues raised in the grounds of appeals are common and/or interconnected, therefore, we have clubbed them together for the sake of convenience and adjudication by this consolidated order.
-398/Ahd/2012 and others Asstt. Year 2008-09.
We are taking the appeal bearing no. 170/Ahd/2012 for the AY 2008- 09 filed by the Revenue as the lead case for the adjudication.
The Revenue has raised the following grounds of appeal:
The Ld.Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on fact in directing the Assessing Officer to take the sale consideration at Rs.44,32,275/- as against of Rs.1,59,23,358/- (i.e one third of Rs.4,77,70,075/-).
2. The Ld.Commissioner of Income-tax (Appeals)-XV, Ahmedabad has erred in law and on facts in admitting additional evidences in violation of Rule 46A. 3. On the facts and in the circumstances of the case, the ''Ld.Commissioner of Income-Tax (Appeals)-XV, Ahmedabad ought to have upheld the order of the Assessing Officer. 4. It is therefore, prayed that the order of the ''Ld.Commissioner of Income-tax (Appeals)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored.
The 1st issue raised by the Revenue is that the learned CIT (A) erred in directing the AO to take the sale consideration at ₹ 44,32,275.00 against the amount of ₹ 1,59,23,358.00 only.
The facts of the case, in brief, are that the assessee in the present case is an individual and is a partner in the partnership firm. The assessee was a co- owner in the agricultural lands along with other parties. The assessee acquired these agricultural lands along with other co-owners vide document dated 21st January 2004 and 29th of June 2005. The details of the purchases of the lands stand as under:
Dt. of document Purchaser Seller Amount(Rs.) 21.01.2004 Popatlal B. Dabhi Mehmoodbhai Page 3 of 11 -398/Ahd/2012 and others Asstt. Year 2008-09.
Rehmanbhai (Purchaser Ganpatbhai J. Patel document for 14,12,000 70589.14 sq. Mtr.) Bhikhabhai H. Patel Ramjanbhai Bhikhubhai 29.06.2005 Popatlal B. Dabhi Abdul Ajij Rajabbhai (Purchae document Ganpatbhai J. Patel for 11764.87 sq. Mtr.) 2,40,000 Bhikhabhai H. patel Jubedaben Rajabbhai 2.1 The assessee subsequently claimed that he has paid along with co- owners a sum of ₹7 6,00,000.00 who were claiming the right in the lands as discussed above. As such, the assessee claimed that the payment of Rs. 76.00 lacs was made to the parties to make the title of the land clear and free from all the encumbrance. The necessary details of the claimants/ parties are available on page 4 of the AO order.
2.2 However, the AO disagreed for the payment made by the assessee along with the co-owners for the following reasons i. As per the document, the assessee was not liable to make any payment to the claimants as discussed above. ii. The additional payment made by the assessee does not qualify within the definition of cost of improvement as specified under section 55(2)(ii) of the Act. As such, the expenditure incurred for any addition/ alteration to the capital assets is only eligible for the deduction as the cost of the improvement. Page 4 of 11 -398/Ahd/2012 and others Asstt. Year 2008-09.
2.3 In view of the above, the AO did not allow the deduction to the assessee against the income under the head capital gain on account of the cost of improvement as discussed above. Accordingly, the share of the assessee at Rs. 28,79,723.00 being one-third share (indexed cost) in the property was disallowed and added to the total income of the assessee.
2.4 The assessee, along with the other co-owners, has sold the property for the consideration at ₹4,77,70,075.00 only but the assessee, along with other co-owners, has shown the sale consideration at ₹1,32,96,825.00 only. As such the assessee has declared his share in the sale consideration of such property at ₹44,32,275.00 only being one-third share of ₹1,32,96,825.00. As such, the assessee claimed that the buyer paid the balance amount of Rs. 3,44,73,251.00 (4,77,70,075.00-1,39,96,825.00) directly to the confirming parties as appearing in the sale deed. The details of the confirming parties stand as under: 1. Divyangbhai Jayantibhai Mewada (PAN No.AFQM8736A) 2. Neetaben Jayantibhai Mewada (PAN No.AKWPM2066C) 1. Kantaben Jayantibhai Mewada (PAN No.AGLPM0032D) 2. Dineshbhai Kacharabhai Patel (PAN No.AFCPP8583J) 5. Rajnibhai Kacharabhai Patel (PAN No.AEAPP9081N) 6. Manojbhai Kacharabhai Patel (PAN No.AIWPP8688F)
2.5 However, the AO disagreed with the submission of the assessee and held that the sale price, as mentioned in the sale deed, is the sale consideration. Accordingly, the AO treated the amount of ₹1,59,23,358.00 being one-third share in the property of the assessee.
In view of the above, AO calculated the income under the head capital gain after giving the effect of the above adjustment accordingly. Page 5 of 11 -398/Ahd/2012 and others Asstt. Year 2008-09.
The aggrieved assessee preferred an appeal to the learned CIT (A) who has partly deleted the addition made by the AO by observing as under:
To summarize, the sale consideration of land should be taken at Rs.44,32,275 as proved by the sale Deed and bank statement of the nousing society but payments made to the so called daughters of sellers of land of deeds dated 21.1.2004 and 29.6.2005 cannot be treated as cost of improvement u/s.55(2)(ii). Also because identity of the daughters and other persons to whom the so called daughters sold their rights has not been \ established hence the payment of Rs.76,00,000 claimed (please refer to the fresh computation of capital gains filed through letter dated 24.11.2011 during the appellate proceedings and enclosed as Annexure-1 of this order) as 'cost of , improvement cannot be allowed. Names of women appearing in the deeds are appearing as Daughters some other persons not those of the sellers of land mentioned in deeds dated 21.1.2004 and 29.6.2005. The working of capital gains given by the appellant through letter dated 24.11.2011 (Annexure-1 of this order) is accepted but stands modified to the extent that 'Cost of improvement' worked out at Rs.3,62,013 while f calculating STCG and Rs.23,05,197 while calculating LTCG will not be allowed as deduction. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 19. After going through rival submissions it is seen that the Sale deed dated 26.7.2007 as well as Bank statement of the Vraj Residency Cooperative Housing Society maintained in Naroda Nagarik Cooperative Bank, Naroda Branch, Ahmedabad prove that the appellant received only Rs.44,32,275 which is 1/3rd share received by the three co-owners of land totaling to Rs. 1,32,96,825 out of total Sale consideration of Rs.4,77,70,075. Though the appellant has not been able to answer satisfactorily that though the total area of the land sold remained 82,354 sq.mtrs but why different areas were mentioned of land sold in the two blocks (block number 96 and 98) though different areas were mentioned in the purchase deeds. Still in my view it would meet the interest of justice if the sale consideration is taken at Rs.44,32,275 received by the appellant as it is proved by the bank statement of the purchaser as well as the sale deed itself. The balance Rs.3,44,73,250 out of Rs.4,77,70,075, was received by the Conforming parties (the various Patels and Mevadas mentioned in the sale deed quoted above). This sale consideration has been divided at 85.71% of Rs.44,32,275 on the basis of the ratio of land of 70589.14 sq.mtrs. of land in total land of 82,354.01 sq.mtrs. of land which comes to Rs.37,98,903 for long term capital gain and Rs.6,33,372/- at the ratio of 14.29% of Rs.44,32,275/- on the basis of the ratio of land of 11,764,87 sq.mtrs in the total land of 82,354.01 sq.mtrs. Therefore, Rs.37,98,903/- should be taken as sale value for calculating STCG instead of the value taken at Rs.1,36,48,590 in the assessment order.
-398/Ahd/2012 and others Asstt. Year 2008-09.
Being aggrieved by the order of the learned CIT (A) both the Revenue and the assessee are in appeal before us. The Revenue is in appeal before us against the direction of the learned CIT (A) for taking the sale consideration at ₹44,32,275.00 against the sale consideration at ₹1,59,23,358.00 whereas the assessee is in an appeal against the disallowance of the cost of the improvement. The grounds of appeal raised by the assessee are reproduced as under: The order of learned Commissioner of Income-tax(Appeals) - XV partly confirming the order of A.O. is bad in law as well on facts on the following grounds; (1) The learned CIT(A) has erred in confirming disallowance of expenditure of Rs. 76,00,0007- (1/3 share of assessee i.e. Rs. 25,33,3337-) claimed as cost of improvement being payment made to right claimant daughters & persons to whom the daughters have sold their rights in land (Block No. 96 & 98) during the year, though complete details with evidences furnished to CIT(A). (2) The learned CIT(A) has erred in confirming disallowance of expenditure of Rs. 76,00,0007- for working out LTCG & STCG on the ground that same does not fall in the definition of cost of improvement provided u/s. 55(2)(ii) of the I. T.Act.1961. (3) The learned CIT(A) has erred in confirming interest charged u/s 234A, 234B of Income Tax Act. (4) The assessee craves for liberty to amend, modify and add any grounds of appeal or furnish additional evidences.
The learned AR before us filed a paper book running from pages 1 to 278 and submitted that the claim of the assessee regarding the cost of improvement and the sale consideration had been accepted by the Revenue in the case of one of the co-owner namely Shri Bhikhabhai Hirabhai Patel in the assessment framed under section 143(3) of the Act for the assessment year 2008-09 vide order dated 30-12-2010. Accordingly, the learned AR claimed that the contention of the assessee should also be accepted for the year under consideration. -398/Ahd/2012 and others Asstt. Year 2008-09.
6. The learned DR has not brought anything on record contrary to the argument advanced by the learned AR for the assessee.
Both the parties before us relied on the order of the authorities below as favorable to them.
We have heard the rival contentions of both the parties and perused the materials available on record. The assessee in the year under consideration has sold a piece of agricultural land along with co-owners and declared the income under the head capital gain in respect of such land to the extent of his share in the property. However, the AO was not satisfied with the working of the assessee and accordingly disallowed the claim of the assessee for the cost of the improvement. Similarly, the AO also treated the sale consideration at ₹1,59,23,358.00 as against the sale consideration declared by the assessee at Rs. 44,32,275.00. However, the learned CIT (A) allowed the relief to the assessee in part.
8.1 Before going into the controversy of the case as discussed above, we note that the AO in the case of one of the co-owner of the impugned property has accepted the claim of the assessee as discussed above. The relevant extract of the order of the AO is reproduced as under: In view of above the capital gain is re-calculated as under Total Sale price of the land Rs.4,77,70,075/- Less: payment to confirming parties Rs.3,44,73,249/- Net Sale price Rs.1,32,96,826/- Receipt by assessee (As per 1/3 Share) Rs.44,32,275/- Total land purchase is: On 21/1/2004 70,589.14 Sq.Meters 85.70% On 29/6/2005 11,764.86 Sq.Meters 14.30% Total 82,354.00 Sq.Meters 100.00% -398/Ahd/2012 and others Asstt. Year 2008-09.
Considering above ratio, the receipt of the assessee is divided as under: Rs.44,32,275/- Long Term / Short Term Rs.37,98,460 Rs.6,33,815 Less: (i) Cost of acquisition (C.I. Price) Rs.5,41,268 Rs.88,043(Actual price) (ii) Additional cost paid (Actual) Rs.23,33,923 Rs.3,88,987(Actual price) Total Capital Gain Rs.9,23,269 Rs.1,56,785 8.2 Now the issue arises for our adjudication whether the Revenue can work out the capital gain differently in respect of the different co-owners of the same property. The answer is certainly in negative. At this juncture, we would like to make a reference to the judgement of Hon’ble Madras High Court in the case of CIT Vs. Kumararani Smt. Meenakshi reported in 292 ITR 624 wherein it was held as under: 5. It is trite that if during the same assessment year the same quantity of wealth in possession of one co-sharer is subjected to a lower rate of taxation, it would be highly improper to burden a similarly situated co-sharer with a higher rate of tax. If such an action on the part of the assessing authorities sanctioned, it would militate against the principle of equality of law as enshrined in article 14 of the Constitution, vide Jaswant Rai v. CWT [1977] 107 ITR 477 (Punj. & Har.).
Applying the ratio laid down in Jaswant Rai's case (supra), to the facts of the case on hand would lead to the firm conclusion that the assessee, who also a co- owner of the property, is entitled to the benefit enjoyed by the other co-owner, whose valuation of the same property, at the same rate as that of the assessee, was accepted by the Commissioner of Income-tax and recorded in the order under appeal by the Tribunal. We also note that ITAT Ahmedabd has also taken the similar view in the case of Shri Chandulal Parbatbhai Patel Vs. DCIT in vide order dated 23-10-2018 wherein it was held as under: “5. With the assistance of ld.reprsentatives, we have gone through the record carefully. The grievance of the assessee is that the ld.AO has erred in adopting value of the land transferred by the assessee equivalent to the value on which stamp duty was paid. It emerges out from the record that the assessee was having 25% share in the land bearing survey no.1089/90. He has sold this land with other co- owners. The ld.AO while computing the capital gain under section 48 of the Act adopted full value of the sale consideration equivalent to the amount on which -398/Ahd/2012 and others Asstt. Year 2008-09.
stamp duty was paid. The case of the assessee was that in the case of co-owner, reference was given to DVO under section 50C(2) who had determined fair market value of the property. The ld.counsel for the assessee contended that the assessee made a prayer before the ld.CIT(A) that the same value be adopted in the case of the assessee. We find force in this contention of the assessee, because section (2) of section 50C contemplates that in case assessee raises an objection of the value on which stamp duty was paid, then in order to find fair market value of the asset, reference would be made to the DVO , since in the case of co-owner such reference was made on the same piece of land. The same value determined by the AO in the case of co-owner ought to be adopted in the case of the assessee. We allow the appeal of the assessee and remit the issue to the file of the AO with direction to the ld.AO to compute the capital gain assessable in the hands of the assessee on transfer of the above land by adopting full sale consideration equivalent to the amount determined by the DVO in the case of co-owner. With this direction, we allow this ground of appeal.”
8.3 The ratio laid down by the Hon’ble Madras High Court can be applied in the case on hand. As such in the present case, the Revenue has allowed the deduction for the cost of improvement as well as has accepted the sale consideration at Rs. 44,32,275.00 against the sale consideration of ₹1,59,23,358.00 in respect of one of the co-owner of the impugned property. Therefore, we are of the view the Revenue has erred in working out the capital gain in a different manner for the different assessee in respect of the joint property. Accordingly, we direct the AO to allow the cost of improvement to the assessee and take the sale consideration at Rs. 44,32,275.00 only for the working of the capital gain. Hence, the ground of appeal filed by the Revenue is dismissed, and the ground of appeal filed by the assessee is allowed.
8.4 The learned DR did not advance any argument in respect to other grounds of appeal raised by the Revenue. Therefore we dismiss the same. -398/Ahd/2012 and others Asstt. Year 2008-09.
8.5 Similarly, the learned AR did not advance any argument in respect to other grounds of appeal raised by the assessee. Therefore we dismiss the same.
In the result, the appeal filed by the Revenue is dismissed, and the appeal filed by the assessee is partly allowed.
Now coming to the and Revenue and Assessee for A.Y 2008-09.
At the outset, we note that in the identical facts and circumstances the appeal filed by the Revenue has been dismissed and the appeal filed by the assessee has been allowed in part vide paragraph number 8 of this order. For a detailed discussion, please refer the relevant paragraph. Hence, the ground of appeal filed by the Revenue is dismissed, and the ground of appeal filed by the assessee is allowed.
In the combined results, the appeals filed by the Revenue bearing 310/Ahd/2012 for A.Y 2008-09 are dismissed, and appeals filed by the assessee bearing ITA nos.397-398/Ahd/2012 for A.Y 2008-09 are partly allowed.