COMMISSIONER OF INCOME TAX JALANDHAR II vs. RIBU SAGGI

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Order: 26.08.2013 Commissioner of Income Tax, Jalandhar-II, Jalandhar. ...Appellant Versus Sh. Ribu Saggi, 684-R, Model Town, Distt. Jalandhar. ..Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present: Mr. Vivek Sethi, Advocate for the appellant. RAJIVE BHALLA, J. By way of this order, we shall dispose of Income Tax Appeal Nos.154, 155, 162, 163, 164 and 165 of 2013, as they involve adjudication of same questions of facts and law. Facts are being taken from Income Tax Appeal No.154 of 2013. The assessees filed returns of their income. The Assessing Officer held that “Malba” (scrap) valued at Rs.7,69,027/- cannot be computed under the head “Capital Gain” as it is "Income from Other Sources" and valued the land sold jointly by the assessees at Rs.21,000/- per marla as on 01.04.1981 and, therefore, re-worked capital gain at Rs.37,42,991/-. The assessee filed an appeal before the C.I.T(Appeals), which was partly allowed by directing the Assessing Officer to re-compute capital gain on the sale of malba by reducing the rate to Rs.3,12,000/-, after indexing the cost of structure Kumar Naresh N 2013.09.09 15:49 integrity of this document High Court Chandigarh -2- as on 01.04.1981 at Rs.56,440/-. The CIT(Appeals) also directed the Assessing Officer to assign value of Rs.83,802/- per marla as on 01.04.1981 for the purpose of calculating capital gain. Aggrieved by this order, the revenue as well as the assessee filed separate appeals. The Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal') dismissed the appeals filed by the revenue and partly allowed appeals filed by the assessees by confirming the relief granted by the CIT(Appeals) on account of addition made for malba and directed the Assessing Officer to recalculate capital gain by taking value of land as Rs.1,25,000/- per marla as against Rs.21,000/-, assessed by the Assessing Officer. Counsel for the revenue submits that the sale of "malba" cannot possibly be taxed under the head “Capital Gain” as it amounts to "Income from Other Sources". The finding recorded by the Tribunal, to the contrary is illegal and should be set aside. It is also contended that addition made by the Assessing Officer on account of capital gain has been wrongly reversed by the Tribunal and, therefore, the following substantial questions of law arise for adjudication:- i). Whether on the facts and circumstances of the case and in law the Hon'ble ITAT was justified in confirming the relief allowed by the Ld. CIT(A) by holding that the sale proceed of malba will be taxable under the head “Capital Gain” and not under the head “Income from other Sources?”. ii). Whether on the facts and circumstances of the Kumar Naresh N 2013.09.09 15:49 integrity of this document High Court Chandigarh -3- case and in law the Hon'ble ITAT was justified in allowing the appeal of the assessee in taking the fair market value of land at Rs.1,25,000/- per marla on estimated basis without taking into consideration the fair market value adopted by the A.O. which was based on specific instances of sale in the assessment order?”

We have heard counsel for the revenue, perused the substantial questions of law and upon due consideration of the impugned orders, passed by the Income Tax Appellate Tribunal and the CIT(Appeals), have no hesitation in holding that there is no error much less an error of law that gives rise to the substantial questions of law, framed by the revenue. The proceeds of malba, i.e., material left over after demolition of a structure has rightly been held to be taxable under the head “Capital Gain” and not “income from other sources”. We find no legal foundation of argument addressed by counsel for the revenue that income from “malba” should be assessed as income from other sources. As regard the market value at Rs.1,25,000/- assessed by the Tribunal, it is pure finding of fact based upon consideration of material on record and does not, in our considered opinion, give rise to any substantial question of law. The discretion exercised by the CIT(Appeals) and the Tribunal is neither arbitrary nor illegal so as to warrant interference. A relevant extract from the impugned order reads as follows:- “20. In the facts and circumstances of the case, the Ld. Kumar Naresh N 2013.09.09 15:49 integrity of this document High Court Chandigarh -4- CIT(A) on the basis of valuation of the Valuation Officer has taken the average of the market value of land of three properties mentioned in his order. On perusal of the same and also the arguments made by the assessee before the AO and the Ld. CIT(A) and considering the objections of the assessee, there appears to be not a identical comparable property, which could be taken as instance to substitute a valuation to the impugned property as on 1.4. 81. At the same time, the valuation made by the DVO, valuation submitted by the assessee's valuer who is govt. approved valuer and the objections of the assessee have been taken into account and to meet the ends of justice, if a valuation of Rs.1,25,000/- per marla is substituted to the rate applied by the Ld. CIT(A) at Rs.83,802/- per marla will meet both ends of justice. The orders of both the authorities below are modified accordingly and we direct the Assessing Officer to adopt a rate of Rs.1,25,000/- per marla as on 1.4.81 and ompute the capital gains accordingly.