BALLABH DAS KATTA vs. C I T

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ITA/277/2005HC RajasthanRJHC02042041200514 February 20176 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal committed a serious error in sustaining the addition of Rs. 3,00,000/- under Section 69 of the Income Tax Act and Rs. 1,18,750/- in the case of the wife. The Court noted that the Tribunal believed the assessee had a 1/4th share and that the property was disposed of by registered sale deed. The Tribunal's view that the property was not situated nearby and that the CIT(A)'s view was not approved was acknowledged. The Court found that the Tribunal could not have personal knowledge of the facts and that its decisions must be supported by documents, which was not done. The Court concluded that the additions made by the AO and CIT(A) were required to be quashed completely. The issues were answered in favour of the assessee-appellant and against the department. The operative direction was to allow the appeals.

What were the facts?

These appeals concern the assessment years not explicitly stated. The appellant, Ballabh Das Katta (and his wife, Meera Devi Katta in the connected appeal), challenged orders of the Income Tax Appellate Tribunal (ITAT). The ITAT had partly allowed the assessee's appeal, reversing the CIT(A)'s order but rejecting the full claim. The core dispute involves additions made on account of capital gains. In one appeal, the question framed by the High Court relates to an addition of Rs. 3,00,000/- under Section 69. In the other, the questions concern the 'full value of consideration received' for capital gains computation under Section 48, and whether the ITAT was justified in computing capital gains based on Rs. 7,00,000/- as against the registered sale deed amount of Rs. 6,00,000/-.

What were the issues?

1. Whether the Income Tax Appellate Tribunal was justified in sustaining the addition of Rs. 3,00,000/- on estimate basis under section 69 of the Income Tax Act? 2. Whether 'full value of consideration received or accrued' as a result of transfer of capital asset for the purpose of computation of capital gain under the provision of section 48 of the act can be presumed and substituted for the actual consideration received by the seller on the basis of valuer’s report/estimation based on guess work? 3. Whether the learned ITAT was justified in computing the capital gain by taking the sale consideration received by the appellant at Rs. 7,00,000/- as against the consideration as per the registered sale deed amounting to Rs. 6,00,000/- merely on the basis of conjectures and surmises? Assessee's Contentions: The appellant argued that the Tribunal's findings were in favour of the assessee, noting that the property sold was not near the property valued by the DVO, and that it is a normal practice to make over and above payments in property dealings. The appellant relied on several Supreme Court and High Court judgments, including K.P. Varghese vs. Income Tax Officer & Anr. (1981) 131 ITR 597 (SC), CIT vs. Dr. V.K. Bhaskaran Nair & Anr. (1979) 116 ITR 873 (Mad.), Commissioner of Income Tax vs. Shivakami Co. P. Ltd. (1986) 159 ITR 71, Commissioner of Income Tax vs. Sudha Transports (1991) 189 ITR 0691, Commissioner of Income Tax vs. Raja Narendra (1994) 210 ITR 250 (Raj.), Commissioner of Income Tax vs. Amar Corporation (Gujarat High Court, 2016), and R.S. Bedi vs. Assistant Commissioner of Income Tax (2015) 94 CCH 0068 DelHC. The appellant contended that the Tribunal wrongly sustained additions contrary to well-settled principles of law. Revenue's Contentions: The respondent relied on the observations of the CIT(A), which stated that the DVO's opinion should be binding on the AO, and that the DVO's estimate of the total property at Rs. 32,75,000/- should be accepted. The CIT(A) calculated the assessee's 1/4th share as Rs. 8,18,750/- and found no evidence to support the AR's arguments regarding lower property values compared to comparable cases. The CIT(A) also found deductions for joint ownership and encumbrance reasonable.

Which sections of the Income-tax Act were involved?

Section 69,Section 48

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 277 / 2005 Ballabh Das Katta ----Appellant Versus C I T ----Respondent Connected With D.B.INCOME TAX APPEAL No. 51 / 2006 Meera Devi Katta ----Appellant Versus C I T ----Respondent _____________________________________________________ For Appellant(s) : Mr. Sanjay Jhanwar For Respondent(s) : Mr. Anuroop Singhi with Mr. N.S. Bhati _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VINIT KUMAR MATHUR

Judgment 14/02/2017

1.

In both these appeals, identical question of law and facts are involved therefore, these appeals are decided by this common judgment.

2.

By way of the appeal (51/2006), the appellant has assailed the judgment & order of the Tribunal whereby the Tribunal has partly allowed the appeal preferred by the assessee and reversed the order of CIT(A). However the Tribunal has wrongly rejected

(2 of 6) [ITA-277/2005]

the full claim in spite of specific finding in favour of the assessee. Even second appeal (277/2005) has been preferred by the husband and both heard together. In the first appeal when matter was admitted by this Court following question of law was framed:- “Whether the Income Tax Appellate Tribunal was justified in sustaining the addition of Rs. 3,00,000/- on estimate basis under section 69 of the Income Tax Act?”

3.

In the other case, the appeal was admitted on 14/7/2008 and following substantial questions of law were framed:- “i) Whether “full value of consideration received or accrued” as a result of transfer of capital asset for the purpose of computation of capital gain under the provision of section 48 of the act can be presumed and substituted for the actual consideration received by the seller on the basis of valuer’s report/estimation based on guess work? ii) Whether ld. ITAT was justified in computing the capital gain by taking the sale consideration received by the appellant at Rs. 7,00,000/- as against the consideration as per the registered sale deed amounting to Rs. 6,00,000/- merely on the basis of conjectures and surmises?”

4.

Counsel for the appellant Mr. Jhanwar has taken us to the order of the Tribunal wherein it has been observed as under:- “6.

We have heard both the parties at length and gone through the material available on record. Both the parties have agreed that the capital gains was wrongly worked out by the AO by taking the assessee’s share as ½ of the value of the property instead of ¼. So in this regard the order of the CIT(A) is hereby upheld. Regarding the value of assessee’s share, we are of the view that assessee has sold the property through the registered deed. The comparative case was taken by the DVO is related to Subash Marg, C-Scheme which is far away from present locality. No sale instance was brought of the adjoining areas.

(3 of 6) [ITA-277/2005]

Nonetheless it is normal practice that over and above payment is made in property dealing. In these circumstances, we find little justification in the order of the AO, which is solely based on the DVO’s report. Moreover, the DVO’s report is the opinion of the DVO. He has not brought counter opinion of the Assessee’s valuer. In these circumstances, the addition for the purpose of capital gains is looking on higher side. Therefore, we modify both the orders of the lower authorities and accept the value of sale consideration of the said property at Rs. 7,00,000/- instead of Rs. 6,00,000/- which was shown by the assessee. Thus the assessee will get the adhoc relief of Rs. 1,18,750/- from the order of CIT(A) for the purpose of capital gains. This ground is partly allowed.

9.

With this background we heard both the parties at length and gone through the material available on record. The property of the assessee is located at Devi Marg, Bani Park, Jaipur. The comparative case is of behind Collectorate, Bani Park, Jaipur where the property was sold in auction, which usually fatches the higher price. But in the instant case, the assessee has proportionate share in the property, which is not independent property. It was not purchased in the auction. The CIT (A) has discussed a number of case laws and took the comparative case of Shiv Marg, Bani park, Jaipur, which is more closure to the Collectorate. In Bani Park, there are so many colonies and the rates are different. The circumstances in the auction sale and normal sale are quite different. In these circumstances, we find little justification in the orders of the lower authorities. By keeping in mind the doctrine of equity, justice and good conscious, we modify both the orders of the lower authorities and restrict the addition to Rs. 3,00,000/- Thus the assessee will get further adhoc relief of Rs. 1,18,570/- from the order of the CIT (A). This ground is partly allowed in favour of the assessee.”

5.

Taking into consideration the above, he contended that in spite of the findings given by the Tribunal that the property which was disposed off by the appellant and they were not near to the (4 of 6) [ITA-277/2005]

property which has been valued by the DVO in transaction and it is normal practice that over and above payment is made in property dealing, which is referred in the documents. He contended that such a practice is applied by the Hon’ble Supreme Court right from K.P. Varghese vs. Income Tax Officer & Anr. reported in (1981) 131 ITR 597 (SC), another judgment of Madras High Court in CIT vs. Dr. V.K. Bhaskaran Nair & Anr. reported in (1979) 116 ITR 873 (Mad.), then Supreme Court judgment in the case of vs. Amar Corporation in Tax Appeal No. 1250 to 1257/2011 CIT(A) and relied on the observations made as under:-

(5 of 6) [ITA-277/2005]

“2. 3. The opinion of the V.O. should be binding on the AO and therefore, the estimate made by the V.O. of the total property at Rs. 3275000 has to be accepted by the AO. Since the assessee was only 1/4th owner of the property, the assessee’s 1/4th share works out to Rs. 8,18, 750/-. the arguments given by the AR regarding the lower value of the assessee’s property as compared to the comparable case taken in appeal is not supported by any evidence. The sale instances cited by the AR are private sales and liable to not reflect the correct market rate. Further, deductions allowed by the V.O. on account of joint ownership and encumbrance, appears to be reasonable. Under these circumstances, the AO is directed to take the capital gains at Rs. 818750/- as against Rs. 1882000/- taken by the AO. Accordingly, this ground of appeal is partly allowed.”

8.

We have counsel for both the sides.

9.

The Tribunal has believed for ¼ share and looking to the fact that by registered sale deed, ¼ property was disposed off and ½ out of the sold property and that the property was not situated nearby, therefore, the view of the CIT(A) was not approved by the Tribunal and the addition which was made by the AO and CIT(A) is required to be quashed completely. The Tribunal could not have personal knowledge of the facts and normally it has to be supported by some documents which has not been done.

10.

In that view of the matter, the contention raised by the appellant is required to be accepted. The Tribunal has committed serious error in sustaining the addition of 3,00,000/- under Section 69 of the Income Tax Act and 1,18,750/- in case of wife.

11.

Hence, the issues are answered in favour of the assessee- appellant and against the department.

(6 of 6) [ITA-277/2005]

12.

The appeals are accordingly allowed. A copy of the same be placed in each file. (VINIT KUMAR MATHUR)J. (K.S. JHAVERI)J. A.Sharma/30-31

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