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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED&
PER WASEEM AHMED, ACCOUNTANT MEMBER:\
The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)–IV, Rajkot [CIT(A) in short] vide appeal no.CIT(A)-IV/0287/11-12 dated 24/01/2014 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961(hereinafter referred to as "the Act") dated 29/12/2011 relevant to Assessment Year (AY) 2008-09.
The assessee has raised the following grounds of appeal:-
ITA No.139/Rjt/2014 Karanbhai Bharatbhai Gangdev vs. ITO Asst.Year – 2008-09
The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 20,91,108/-. The addition needs deletion. 2. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 20,91,108/- without following the settled law that valuation in such case is to be made as per rental method The addition needs deletion. 3. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 20,91,108/- based on irrelevant factors which he described wrongly. The addition needs deletion. 4. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 20,91,108/- ignoring and disbelieving the evidences and explanation furnished. The addition needs deletion. 5. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 20,91,108/- based on presumption and cermises. The addition needs deletion. 6. Taking into consideration the legal, statutory, factual and administrative aspects, no addition of an amount of Rs. 20,91,108/- ought to have been confirmed. The additions need deletion. 7. Without prejudice, the assessment made is bad in law and deserves annulment. 8. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing assessment order. The assessment needs annulment. 9. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing appeal order. The assessment needs annulment. 10. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided by the Ld. Valuation officer. The assessment needs annulment. 11. The appellant craves leave to add/alter/amend and/or substitute any or all ground of appeal before the actual hearing takes place.
The assessee has raised as many as 11 grounds of appeal but the effective issue raised is that the learned CIT (A) erred in confirming the order of the Assessing Officer (AO in short) by sustaining the addition of Rs. 20,91,108/- on account of the difference in the valuation of the property determined under section 50C of the Act vis-a-vis sale price declared by the assessee in the return of income.
ITA No.139/Rjt/2014 Karanbhai Bharatbhai Gangdev vs. ITO Asst.Year – 2008-09 3. Briefly stated facts are that the assessee in the present case is an individual and engaged in the activity of job work of Marble cutting and Kota Stone. The assessee in the year under consideration claimed to have sold its factory premises at Rs. 6 lakhs only though the same was valued for the purpose of the stamp duty at Rs. 27,41,890/- which resulted a difference in the amount of capital gain of Rs. 21,41,890/- only. Accordingly, the matter was referred to the DVO to determine the fair market value of the property for computing the capital gain under the provisions of section 50C of the Act. The DVO in turn has valued the property at Rs. 26,91,300/- only. Accordingly, the AO observed the difference of Rs. 20,91,108/- as capital gain which was added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A) who has confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) assessee is in appeal before us.
The learned AR before us filed a paper book running into pages 1 to 58 and furnished the written submission placed on record.
On the other hand, the learned DR before us vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates to the
ITA No.139/Rjt/2014 Karanbhai Bharatbhai Gangdev vs. ITO Asst.Year – 2008-09 determination of the fair market value of the property under the provisions of section 50C of the Act sold by the assessee. The assessee in the case on hand based on registered valuer has claimed the value of the property at Rs. 2,38,000/- whereas the AO, based on the report of DVO determined the value of the property at Rs. 26,91,300/-. Accordingly, an addition of Rs. 20,91,108/- was made to the total income of the assessee on account of short term capital gain. The view adopted by the AO was subsequently confirmed by the learned CIT (A).
There is no dispute to the fact that the consideration of the immovable property, if it is less than the stamp value then the value determined for the purpose of the stamp duty shall be taken as the sale consideration in pursuance to the provisions of section 50C of the Act. However, if the assessee disputes the value determined by the AO as discussed above, then the AO has to refer the matter to the DVO to determine the fair market value of such immovable property. The relevant extract of the provisions of section 50C reads as under: (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-section (1), where— (a ) the assessee claims before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b ) ***** the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.
ITA No.139/Rjt/2014 Karanbhai Bharatbhai Gangdev vs. ITO Asst.Year – 2008-09
Once the matter has been referred to the DVO, then the value of the impugned property has to be decided to determine the fair market value of the property as per the provisions of section 7 read with schedule III of the Wealth Tax Act 1957. The relevant extract of the schedule III reads as under:
Valuation of immovable property. - Subject to the provisions of rules 4, 5, 6, 7 and 8 for the purposes of sub-section (1) of section 7, the value of any immovable property, being a building or land appurtenant thereto, or part thereof, shall be the amount arrived at by multiplying the net maintainable rent by the figure 12.5: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 4. Net maintainable rent how to be computed. - For the purposes of rule 3, "net maintainable rent" in relation to an immovable property referred to in that rule, shall be the amount of gross maintainable rent as reduced by (i) the amount of taxes levied by any local authority in respect of the property; and (ii) a sum equal to fifteen per cent, of the gross maintainable rent. 5. Gross maintainable rent how to be computed. - For the purposes of rule 4, "gross maintainable rent', in relation to any immovable property referred to in rule 3, means-- (i) where the property is let, the amount received or receivable by the owner as annual rent or the annual value assessed by the local authority in whose area the property is situated for the purposes of levy of property tax or any other tax on the basis of such assessment, whichever is higher; (ii) **** There is no dispute to the fact that the property in dispute was occupied by the tenant. As such the assessee acquired the property dated 19-04-2015 which was already occupied by the tenant. The purchase value of the property was of Rs. 4,51,000/- which was sold in the same position (occupied by the tenant) to
ITA No.139/Rjt/2014 Karanbhai Bharatbhai Gangdev vs. ITO Asst.Year – 2008-09 Hareshbhai chhaganbhai for a consideration of Rs. 6 Lacs as claimed by the assessee.
Thus, the case of the assessee is covered under clause 5 (i) part B of schedule III of the Wealth Tax Act 1957 as discussed above which requires to determine the fair market value considering the actual rent received/receivable or the valuation determined by the local authority for levying the property tax/other tax whichever is higher.
However, we note that the DVO in the case on hand has adopted capitalization method to determine the fair market value which is against the provisions of the schedule III of the wealth tax Act. The report of the DVO is placed on page 38 to 41 of the paper book.
On perusal of the report of the DVO, we note that there was no reference made to the value determined by the local authority for the levy of tax or the actual rent received/ receivable by the assessee. Thus, we are of the view that the DVO has not determined the value of the property in the light of the provisions of Wealth Tax as discussed above. Therefore the same cannot be accepted for the purpose of computing the capital gain under the provisions of section 50C of the Act.
Similarly, we also note that there was the valuation report from the registered valuer furnished by the assessee which is placed on page 43 of the paper book. On perusal of the same, we note that the value of the property has been determined as per the provisions of schedule III of the valve tax Act. As such the copy of the rent
ITA No.139/Rjt/2014 Karanbhai Bharatbhai Gangdev vs. ITO Asst.Year – 2008-09 agreement as well as the value determined for the purpose of levying the tax by the local authority is placed on pages 7 & 8 AND 22 to 24 of the paper book. None of the authority below has pointed out any defect in the details furnished by the assessee in the paper book. Thus, in the absence of any defect pointed out by the lower authorities in the registered valuation report furnished by the assessee, we are not convinced with the finding of the authorities below. Accordingly we set aside the order of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
In the result, Assessee’s appeal is allowed. This Order pronounced in Open Court on 25/ 10 /2019
Sd/- Sd/- (Ms. MADHUMITA ROY) ( WASEEM AHMED ) JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 25 / 10 /2019 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-IV, Rajkot 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,राजोकट/DR,ITAT, Rajkot 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, राजोकट / ITAT, Rajkot