SH. VINAY SINGAL,LUDHIANA vs. ACIT, LUDHIANA

आदेश/ORDER PER BENCH:

The captioned appeals have been preferred by two different assessees against separate orders dated 20.1.2015, 11.11,2016, 20.1.2015, and 11.11.2016 of the Commissioner

2 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

of Income Tax (Appeals)-2, Ludhiana [hereinafter referred to

as CIT(A)], passed u/s 250(6) of the Income Tax

Act,1961(hereinafter referred to as “Act”) The assessment

years involved in all the appeals are A.Y 2011-12 and A.Y

2012-13.

It was common ground between both the parties that

the issue involved in all the appeals is identical. They were

therefore heard together and are being disposed off by this

consolidated common order.

For the sake of convenience we shall be dealing with

the facts in the case of ITA No.262/Chd/2015 relating to

assessment year 2011-12 and our decision rendered therein

will apply mutatis mutandis to other appeals also.

ITA No.262/Chd/2015(A.Y.2011-12):

“(1) That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)-II, Ludhiana is against law and facts on the file in as much he was not justified to arbitrarily uphold the disallowance of Rs. 95.73.276/- out of total disallowance of Rs. 1,49,62,428/- made by the Ld. Assessing Officer u/s 57 out of interest account.” 3. Brief facts relating to the issue are that return

declaring total income of Rs. 1,55,36,200/- was filed on

30.09.2011. The assessee derives income from capital gains

and income from other sources. During the course of

3 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

assessment proceedings A.O. noted that the assessee had

claimed interest expenses of Rs. 1,49,62,428/- against

interest income of Rs. 1,52,77,082/-. The A.O. asked the

assessee to explain how each of these expenses claimed had

been incurred wholly and exclusively towards earning

income. The assessee submitted that he had raised loans

from various parties/banks as overdraft facilities in the past

more than 4 to 5 years which was introduced by the assessee

with his family concerns namely M/s Janpath Estates Pvt.

Ltd. M/s Eastman Impex, M/s JVR Forgings Ltd. etc. That

Over a period of time some of the loans were repaid and

taken from some other parties. That after having number of

entries in these 4 to 5 years, at present it was not possible

for the assessee to establish any nexus of interest paid

against earning of interest income. Keeping in view the submissions made by the assessee the A.O. asked the

assessee to explain why interest expenses claimed may not

be disallowed us 57 of the I.T. Act. The A.O. considered the

reply of the assessee. Thereafter referring to the provisions

of Section 57, which provide that deduction would be

allowed only if expenditure is laid out or expended wholly

and exclusively for the purpose of earning income, the A.O.

pointed out that there had to be a direct and complete nexus

between income and the expenditure so as to claim

deduction u/s 57. In this regard the A.O. pointed out that

4 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

the assessee had himself admitted in the letter dated

16.12.2013 that it was not possible for the assessee to

establish any nexus of interest paid against earning of

interest income.

computation of income it was seen that out of the interest

receipts of Rs. 1,52,77,083/-, Rs. 1,51,99,859/- had been

received from M/s Janpath Estates Pvt. Ltd. The A.O. further

pointed out that the ledger of the assessee in the books of

M/s Janpath Estates also showed that significant amount of

payment made to M/s Janpath Estate Ltd. was during the

year under consideration. The A.O. further pointed out that

during the year the assessee had withdrawn Rs.

18,51,55,5307- from M/s Eastman Impex. The A.O. observed

that the payments made to M/s Janpath Estate Ltd., from

whom most of the interest income had been received, was

out of funds received from M/s Eastman Impex and not from

borrowed funds. The A.O. therefore held that interest

bearing loans had not been used for earning of interest

income. The A.O. accordingly disallowed deduction claimed

u/s 57 amounting to Rs.1,49,62,428/-.

submissions, reproduced at para 4.3 of the order The

Ld.CIT(A) analyzed the provisions of law in this regard culled

5 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

from various judicial decisions and held that as per the

provisions of section 57(iii) of the Act, any expenditure is

allowable as deduction against the income from other

sources only it its is laid out or expanded wholly or

exclusively for the purpose of making or earning such

income. Thereafter applying this provision to the facts of the

case drawn from the statement of affairs of the assessee,at

para 4.7 of the order, the Ld.CIT(A) held that at best, only

funds amounting to Rs.11,55,30,660/- were deployed for

earning interest and remaining amounts of funds out of the

total borrowed funds of Rs.22,35,30,371/- i.e.

Rs.10,80,26,711/- were used for other activities.

Accordingly, he held that the interest on these funds be

disallowed u/s 57 of the Act.

the method employed by the Ld.CIT(A) for working out the

disallowance of interest was incorrect. It was pointed out

that the fact of the matter was that there were mixed funds

available with the assessee and it was difficult, therefore, to

work out the direct nexus between the borrowed funds

utilized for making loans and advances. The Ld.Counsel for

the assessee contended that identical issue had been dealt

with by the ITAT Chandigarh Benches in the case of ACIT,

Circle-VI, Ludhiana Vs. Pawan Kumar Goel in ITA

6 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

No.1438/Chd/2010 dated 31.10.2011 wherein the total

amount of funds deployed for earning interest was viewed

against the borrowed funds and after considering the same

the disallowance of interest u/s 57(iii) of the Act was worked

out. Our attention was drawn to para 4.5 of the order as

under:

“4. We have carefully perused the facts of the case, rival submissions and the case laws relied on by both the parties including the paper book. In this case the assessee submitted before the Id. CIT(A), as recorded at page 2 of the appellate order that own fund of the assessee exceeded borrowed funds, on which the interest was paid. It was, further, demonstrated in the form of submission field before the Id. CIT(A) that through out the year borrowed fund is on the lower side as compared to fund given on interest. As such it was contended that no disallowance on this count is called for. The relevant data in the matter is extracted from the order of Id. CIT(A) and is reproduced hereunder:-

7 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

4.1 The Id. C1T(A) in his findings clearly held that the assessee had given Rs. 4,25.86,325/~, on interest to different parties. The assessee has taken an amount of Rs. 3,48,27,666/-, on interest. In view of this, it was held by the Id. G1T(A) that the funds for earning interest is higher than the amount of borrowed funds. Therefore, in the entirety of the facts and circumstances of the case, it is evident that the borrowed funds had not been used for other purposes than earning interest. Reference made by the Id. 'AR', to the contents of table 3 and 4 has force. Deployed funds for interest is always higher than the borrowed funds except for the month of December, 2006. In views of this, the decision of Hon'ble Jurisdictional High Court in the case of Abhishek Industries relied upon by the Id. 'AR1 is not applicable to facts of the case. Sirnilary, the decision in the case of Padmmavati Jaykrishna V. C1T, 131 ITR 653 (Guj) does not support the case of the revenue having regard to the facts of the case. 4.2 The findings of the Id. CIT(A) are given hereunder: "1 have carefully considered the contention of the Ld. counsel for the appellant and perused the relevant record. The assessee has given Rs. 4,25,86,3257- to different parties on interest. Similarly the assessee has taken Rs.3,48,27,666/- on interest. Since fund_ deployed for earning interest is higher than the amount of borrowed fund hence in totality it seems that borrowed fund has not used for assessee has also point out that disallowance of interest expenditure at the ratio of 36.81 is against the fact of the case. The Id. counsel for the assessee has

8 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

further submitted that as per Table 3 prepared by the AO deployed fund for interest is always higher than the borrowed fund except for the month of December, 2006. The ld. counsel in his submission has submitted that Table 4 as calculated by the AO has been taken as a basis for calculating the amount of interest not utilized wholly and exclusively for the purpose of earning of interest. Conclusion of fund deployment as per Table 4 does not in accordance with a conclusion of fund deployed as per balance sheet. The argument put forth by the Id. counsel has strong reason to believe that the ratio taken by the Dy. Commissioner for disallowing interest expenditure is not correct. In view of the above discussion the expenditure of Rs.17,32,8117- is directed to be considered as expenditure. This ground of appeal is therefore, allowed." 4.3 The decision relied upon by the Ld. 'AR' in the case of Appollo Trade Links v. ITO, B-Ward, 204 ITR (AT) 78 supports the case of the assessee. 5. In view of the above detailed legal and factual discussions, it is evident that borrowed funds were not used for advancing loans. However, the assessee used his surplus funds for earning the interest. Consequently, disallowance of interest by the AO under such fact-situation is not justified, therefore, we do not find any infirmity in the findings of the Id. C1T(A) and, hence, the same are upheld.” 7. It was pointed out that this decision of the I.T.A.T. was

followed in the subsequent year in the case of Pawan Kumar

Goel Vs. ACIT in ITA No.528/Chd/2013 dated 11.7.2014.

Further the Ld. counsel for assessee pointed out that

following these decisions the A.O. had worked out

disallowance of interest u/s 57(3) of the Act in the case of

the assessee itself in subsequent years .e. assessment year

2013-14 and assessment year 2014-15. Copies of all the

above orders were placed before us. Our attention was drawn

to pages 3 to 5 of the assessment order for A.Y 2013-14,

9 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

pointing out therefrom that following decision of the I.T.A.T.

in the case of Pawan Kumar Goel in ITA No.1438/Chd/2010

on noting that the facts were identical in the said case with

that of the assessee, the A.O. had worked out disallowance

of interest by working out monthwise excess interest bearing

funds available with the assessee as compared to the

interest earning advances disallowing interest relating to the

same as under:

Interest Interest earning Interest bearing Interest bearing funds advances funds invested in disallowance Non-interest u/s 57(1) earning advances April- 238813515 226219957.14 12593557.86 125935.58 2012 May-2012 236404560 282969957.14 June- 238863723 290669957.14 2012 July-2012 238158189 289669957.14 August- 243135079 290819957.14 2012 Sep-2012 252273184 300169957.14 Oct-2012 268233343 303069957.14 Nov-2012 272047764 310599957.14 Dec-2012 241306970 307499957.14 Jan-2013 235013297 311999957.14 Feb-2013 242933362 315499957.14 March- 279709033 313364589.14 2013 Total 1,25,935.58 Thus, an amount of Rs.1,25,936/- is disallowed u/s 57 and added back to the income of the assessee.

interest for assessment year 2014-15 placed at Paper Book

page No.30 pointing therefrom that there were no surplus

interest bearing funds in that year and accordingly, no

disallowance of interest was made in the assessment framed

10 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

u/s 143(3) of the Act vide order dated 17.8.2016 which was

placed at Paper Book page No.34. Our attention was also

drawn to identical monthwise wise detail of interest bearing

borrowings and interest bearing advances for assessment

year 2015-16 placed at Paper Book page No.36 pointing out

therefrom that the calculation of interest disallowance u/s

57(iii) amounted to Rs.1,92,766/- which was accordingly

shown to have been disallowed by the assessee in its

computation of income, placed at Paper Book page No.38 and

which was accepted in assessment framed u/s 143(3) of the

Act, copy of order of which was placed at Paper Book page

No.40. Thus it was contended by the Ld. counsel for

assessee that following the principle of consistency, the

disallowance of interest in the impugned year ought to be

worked out in an identical manner. Monthwise details of

interest bearing borrowings and interest bearing advances

for the impugned year were placed before us and it was

pleaded that the matter be restored back to be allowed in the

light of the decision of the I.T.A.T. in the case of Pawan

Kumar Goel (supra) followed by the A.O. in the case of the

assessee for subsequent years as detailed above.

the CIT(A) pointing therefrom that it had made detailed

exercise of working out the amount of borrowed funds

11 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

utilized for the purpose of making interest earning loans and

advances and, therefore, the disallowance of interest worked

out by him, it was contended, was rightly made.

orders of the authorities below. The issue in the present

ground before us relates to disallowance of interest expenses

as per the provisions of section 57(iii) of the Act. It is an

undisputed fact that the funds available with the assessee

were mixed funds and some of the interest bearing advances

had been made in the preceding years and it was difficult to

work out the exact nexus between the interest bearing funds

and interest bearing advances. None of the authorities below

we find, have been able to establish directly the absence of

any such nexus while working out the amount disallowable

u/s 57(iii) of the Act. The AO we find reasoned that majorly

interest was earned by the assessee from one M/s Janpath

Estates and scrutinizing the ledger account of the said

party, worked out the advances made to it during the year

on the basis of difference in the opening and closing

balance. Thereafter he derived from the bank statement of

the assessee that major amount was received by the assessee

from M/s Eastman Impex which was non interest bearing. He

therefore deduced that this non interest bearing fund had

been advanced for earning major portion of interest during

12 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

the year and accordingly disallowed entire interest claimed

by the assessee. The Ld.CIT(A), we find, adopted a totally

different basis for calculating the disallowance extracting

figures from the statement of affairs filed by the assessee

and finding that total borrowings bearing interest during the

year were Rs.22.35 crores while amount advanced for

earning interest was only 11.55 crores, which he held could

at best be treated as made from interest bearing funds. The

rest of the interest paid was accordingly disallowed by the

Ld.CIT(A).Thus the disallowance of interest u/s 57(iii) of the

Act, made by the Revenue authorities, we find, was not on

the basis of direct nexus between non interest bearing funds

deployed for making investments earning interest.

I.T.A.T. in the case of Pawan Kumar Goel (supra) wherein

quantum of disallowance u/s 57(iii) was worked out by

calculating the monthly difference of interest bearing funds

and interest earning advances and disallowing interest

relating to the surplus of interest bearing funds raised ,on

the presumption that the interest bearing funds had been

deployed for making these advances and the surplus if any

was therefore deployed for purposes other than earning

interest income. Moreover, we find, that in the case of the

assessee in the subsequent years disallowance of interest

13 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

u/s 57(iii) was made on this basis following the decision of

the ITAT in the case of Pawan Goel(supra) . Considering the

same, we hold that the disallowance u/s 57(iii) of the Act in

the present case also should be worked out accordingly as

prescribed by the ITAT in the case of Pawan Goel(supra) and

which was followed in the case of the assessee in subsequent

years. The issue is accordingly restored back to the A.O. to

work out disallowance of interest as above. This ground of

appeal by the assessee is, therefore, allowed for statistical

purposes

under:

“2. That he was not justified to arbitrarily uphold the disallowance of Rs.74,34,992/- made u/s 14A.” 13. This ground relates to disallowance of expenses made

u/s 14A of the Act relating to those incurred for the purpose

of earning exempt income.

had shown investment of Rs. 25,36,52,818/- and

Rs.16,15,53,614/- as on 31.03.2011 and 31.03.2010

respectively in the balance sheet. The income from these

investments does not form part of the total income. The A.O.

further noted that the assessee had incurred interest

expenditure of Rs.1,49,62,428/-. The A.O. asked the

14 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

assessee to explain why provisions of Section 14A may not

be applied in the assessee’s case. After considering the

assessee’s submissions on this issue, the A.O. held that

provisions of Section 14 A were attracted in the case. The

A.O. computed disallowance under Rule 8D(ii) at Rs.

74,34,992/- and under Rule 8D(iii) at Rs.10,38,016/-. The

total disallowance of Rs.84,37,008/- was made. However, as

the whole of interest expenditure of Rs.1,49,62,428/- was

disallowed by the A.O. u/s 57 of the Act, no further

disallowance on this account was made.

expenditure of Rs.1,49,62,428/- claimed by the assessee an

amount of Rs.95,73,276/- had been disallowed u/s 57 of the

Act and the remaining had been held as incurred directly for

the purpose of earning interest income and held that no

further disallowance was to be made out of the expenditure

held to have been incurred for the purpose of earning

interest income. Accordingly, he telescoped the disallowance

made by the assessee of Rs.74,34,922/- u/s 14A in the total

disallowance of interest of Rs.95,73,276/- made u/s 57 of

the Act.

findings of the Ld.CIT(A) that once the total interest

expenditure is bifurcated for the purpose of section 57 as

15 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

incurred for the purpose of earning interest income and

otherwise and the later portion is disallowed, no further

disallowance u/s 14A can be made since the balance clearly

related for the purpose of earning taxable interest income.

assessee. The disallowance, if any, u/s 14A is to be made

out of the balance amount remaining after making

disallowance of interest u/s 57 of the Act. This balance

amount which is allowed u/s 57 of the Act is on the ground

that it has been incurred for earning taxable interest

income. Therefore, this interest expenses cannot now be held

to have been incurred for earning exempt income for the

purpose of section 14A of the Act and hence, we agree with

the Ld. counsel for assessee that after the exercise of

disallowance of interest u/s 57 of the Act is completed vis-à-

vis entire interest expenditure incurred by the assessee, no

further disallowance of interest is warranted u/s 14A of the

Act. This ground of appeal, is, therefore, allowed.

The appeal of the assessee is allowed for statistical

purposes.

ITA No.23/Chd/2017(A.Y. 2012-13:

under:

16 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

“1. That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)- 2, Ludhiana is against law and facts on the file in as much as she was not justified to arbitrarily uphold disallowance of a sum of Rs. 84,28,993/- out of interest account made by the Ld. Assessing treating the same as not allowable u/s 57 of the Income Tax Act, 1961. 2. That she was further not justified to uphold disallowance of Rs. 93,88,780/- u/s 14A as worked out by the Ld. Assessing Officer.” 19. It was common ground that the issues in ground Nos.1

& 2 raised by the assessee in this appeal were similar to

ground Nos.1 & 2 raised by the assessee in ITA

No.262/Chd/2015 adjudicated above .Our decision rendered

therein at paras 10 -11 and 16 respectively and will

therefore apply mutatis mutandis to these grounds also

following which Ground Nos. 1 raised by the assessee is

allowed for statistical purposes while ground no.2 is allowed.

“3. That she further gravely erred in upholding an addition of Rs. 23,92,500/- to the long term capital gain made by the Ld. Assessing Officer by invoking the provisions of Section 50C.” 21. Brief facts relating to the issue are that an information

was received from ITO, Ward 20(1)(5), Mumbai vide letter

dated 18.02.2015 that the assessee had sold a flat at

Matunga, Mumbai for Rs. 85,00,000/-, the fair market value

of which was Rs.1,08,92,500/-, The valuation report attested

by the Joint Su-Registrar, Department of Stamp and

Registration, Mumbai-1 was also provided in which the

17 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

market value or the Stamp Duty/ Value had been mentioned

as Rs. 1,08,92,500/-. The assessee was asked to explain why

the balance amount should not be added back. The A.O. was

not satisfied with the assessee’s submission since the

competent authority in the matter had certified that the

property was sold at less than the value adopted for Stamp

Duty purposes. Therefore, the A.O. made disallowance of

Rs.23,92,500/- as difference and added to the total income

of the assessee as Long Term Capital Gain of the assessee.

The A.O. placed reliance on the decision of the I.T.A.T.,

Mumbai Bench in the case of Rallis India Ltd. Vs. Addl. CIT

in ITA No.2464(Mum.) of 2010.

the A.O. the assessee had claimed that the fair market value

of the property was less than the stamp duty value and the

A.O., therefore, as per the provisions section 50C of the Act

should have referred the matter for valuation to a Valuation

Officer. Reliance was placed on the decision of the I.T.A.T.

Pune Bench in the case of Subhash Vinayak Supnekar Vs.

ACIT. The Ld.CIT(A) thereafter upheld the order of the A.O.

holding that since the competent authority i.e. Joint Sub

Registrar, Department of Stamp & Registration, Mumbai-I

had certified that the property was sold at less than the

18 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

value adopted for the stamp duty purposes, therefore, no

interference was required in the order of the A.O.

contentions made before the Ld.CIT(A) that in view of his

assertion before the A.O. that the fair market value of the

property was less than the stamp duty value, the valuation

of the property should have been referred to the Valuation

Officer as per section 50C(2) of the Act. Our attention was

drawn to the provisions of section 50C(2) of the Act, which

reads as under:

“50C. (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 86[or assessable] 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 86[or assessable] 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 86[or assessable] 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 value so adopted or assessed 86[or assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the

19 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

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 section 16A, 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 modi-fications, 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. [Explanation 1].—For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). [Explanation 2.—For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.] (3) Subject to the provisions contained in sub- section (2), where the value ascertained under sub- section (2) exceeds the value adopted or assessed [or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed [or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.]

And also to the submission made before the A.O., reproduced

at page 15 of the A.O’s order as under:

“Sir, Reference discussion on the last hearing. Regarding Your Honours show cause dated 26.02.2015 with respect to the market value of the property/flat sold during the year under consideration be not taken at Rs.1,08,92,500/- as against sale consideration shown in the return of income at Rs.85,00,000/- based on the information

20 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

received from Your Honour from ITO, wArd/20(1)(5), Mumbai. In reply, it is respectfully submitted that whatever was the market price, the assessee has transacted on that whereaxs there weas no mention of stamp duty value on the registration deed which requires for application of provision of Section 50C of the Act. In view of the submission, it is submitted that basis on which the market value as reviewed by the Ld.ITO, Ward-20(1)(5), Mumbai has never been shown/made available to the assessee and no addition is called for on the balance amount as desired by Your Honour vide order sheet entry dated 26.02.2015. Hope Your Honour will find the above information in order and shall proceed to finalize the proceedings accordingly. Thanking you, Yours faithfully, Sd/- (Vinay Singal) Encl: As above. Dated-----

the light of the same, the matter be restored back to the A.O.

for reference of the valuation of the property to the DVO in

accordance with the provisions of section 50C(2) of the Act.

the CIT(A).

issue before us relates to the substitution of the actual

value of consideration received from the sale of a property by

stamp duty value for the purpose of calculating capital gains

21 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

earned thereon as per the provisions of section 50C of the

Act. The facts which are not disputed are that the assessee

had sold a flat at Matunga, Mumbai for Rs.85 lacs. The

Valuation Report attested by the Joint Sub Registrar,

Department of Stamp & Registration, Mumbai-I showed the

stamp duty value of the property at Rs.1,08,92,500/-. The

provisions of section 50C(2) of the Act which have been

referred to by the Ld. counsel for assessee and which have

been reproduced above clearly state that the substitution of

the actual consideration received with the stamp duty value

is not automatic and where the assessee contends that the

fair value of the property did not exceed the stamp duty

value, it is incumbent upon the A.O. to verify this fact by

referring for valuation. In the present case, we find that the

assessee did contend that the fair market value of the

property did not exceed the stamp duty value. In such facts

and circumstances we agree with the Ld. counsel for

assessee that the A.O. should have referred the matter to the

DVO for valuation purposes. The act of the A.O. and CIT(A)

in ignoring this contention of the assessee, we hold, is in

violation of provisions of section 50C(2) of the Act. We,

therefore, set aside the order of the CIT(A) in this regard and

restore the issue back to the A.O. directing him to refer the

value of the property to the Valuation Officer in accordance

with the provisions of section 50(2) of the Act and thereafter

22 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

decide the issue in accordance with law. This ground of

appeal raised by the assessee is allowed for statistical

purposes.

The appeal is allowed for statistical purposes.

ITA No.261/Chd/2015(A.Y. 2011-12:

“(1) That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)-II, Ludhiana is against law and facts on the file in as much he was not justified to arbitrarily uphold the disallowance of Rs.24,24,858/- out of total disallowance of Rs.60,95,957/- made by the Ld. Assessing Officer u/s 57 out of interest account.” 2. That he was not justified to arbitrarily uphold the disallowance of Rs.25,78,108/- made u/s 14A.” 28. It was common ground that the issues in ground Nos.1

& 2 raised by the assessee in this appeal were similar to

ground Nos.1 & 2 raised by the assessee in ITA

No.262/Chd/2015 adjudicated above .Our decision rendered

therein at paras 10 -11 and 16 respectively will therefore

apply mutatis mutandis to these grounds also following

which Ground Nos. 1 raised by the assessee is allowed for

statistical purposes while ground no.2 is allowed.

The appeal of the assessee is allowed for statistical

purposes.

ITA No.22/Chd/2017(A.Y. 2012-13:

23 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

“(1) That order passed u/s 250(6) of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax (Appeals)-II, Ludhiana is against law and facts on the file in as much as she was not justified to arbitrarily uphold the disallowance of a sum of Rs.43,32,058/- out of interest accont made by the Ld. Assessing treating the same as not allowable u/s 57 of the Income Tax Act, 1961.” 2. That she was further not justified to uphold disallowance of Rs.237,62,254/- u/s 14A as worked out by the Ld. Assessing Officer.” 30. It was common ground that the issues in ground Nos.1 & 2 raised by the assessee in this appeal were similar to ground Nos.1 & 2 raised by the assessee in ITA No.262/Chd/2015 adjudicated above .Our decision rendered therein at paras 10 -11 and 16 respectively and will therefore apply mutatis mutandis to these grounds also following which Ground Nos. 1 raised by the assessee is allowed for statistical purposes while ground no.2 is allowed.

Sd/- Sd/- संजय गग� अ�नपूणा� गु�ता (ANNAPURNA GUPTA) (SANJAY GARG) �याय�क सद�य/Judicial Member लेखा सद�य/Accountant Member �दनांक /Dated: 29th March, 2019 *रती*

24 ITA No.261/Chd/2015 A.Y.2011-12 ITA No.22/Chd/2017 A.Y.2012-13 ITA No.262/Chd/2015 A.Y.2011-12 ITA No.23/Chd/2017 A.Y.2012-13

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar