THE ACIT, GUNTUR vs. SRI MADANLAL GHEVARCHAND JAIN, GUNTUR

आदेश / O R D E R

PER Bench:

These appeals filed by the revenue are directed against different

orders of the Commissioner of Income Tax (Appeals)-1, Guntur {CIT(A)}

dated 30.11.2016 for the assessment year 2012-13. The cross

objections filed by different assessees are in support of the orders

passed by the Ld. CIT(A). Since the facts are identical all the appeals

are clubbed together, heard and disposed off in common order for the

sake of convenience.

adopted by the A.O. as per the provisions of section 50C of the Income

Tax Act, 1961 (hereinafter called as 'the Act') for the purpose of

computing the long term capital gains on sale of immovable property.

During the year under consideration, the assessee along with three

other co-owners sold the property situated at Nahur village, Mumbai and

disclosed the toal sale consideration of the property at ` 12.00 crores

and offered 1/4th of his share of ` 3.00 crores to capital gains. The A.O.

collected the sale deed bearing No.ADJ/2092/11/K dated 29.9.2011 and

found that the value adopted by the Stamps Valuation Authority of State

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur Government (herein after referred to as SRO) was valued at `

21,69,07,000/-. Accordingly, 1/4th share of the assessee worked out to

` 5,42,26,750/- against the capital gains admitted by the assessee at `

3.00 crores. The A.O. has called for the explanation of the assessee as

to why the sale consideration should not be adopted as determined by

the SRO and the difference amount should not be brought to tax. In

response to the notice issued by the A.O., the assessee submitted their

explanation stating that the property in question was leased out on

2.1.1975 for a period of 94 years and the lease period has not yet

expired. The assessee is the co-owner for 1/4th of the share of 3 annas

out of 16 annas and the total rent receivable from the property was `

3,700/- per month out of which the assessee’s share of rent was `

2,081.25ps. p.a. The remaining period of lease is above 58 years and

there is no other way for the assessee to get better price for the said

property. The assessee stated before the A.O. that the other co-owners

Smt Leelavati Leeladhar Tucker and four others have also disposed of

their share of 8 annas being 50% on 31.10.2010 for a consideration of

15.00 crores and the property was valued by the SRO at ` 23,500/- per

sq.ft. Further, the assessee argued that in the other co-owners share of

property, the sub-registrar has reduced the area occupied by the tenant

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur and valued the same on rent capitalization method. In the case of other

co-owners Smt. Leelavati Leeladhar Tucker and others for the share of

50% (8 annas) of the property, the market value determined by the

sub-registrar was ` 9,93,94,000/- and in the case of the assessee, the

market value determined by the SRO was ` 21,69,07,000/-, which was

representing the share of 3 annas out of total 16 Annas. In the

assessee’s case, the sub-registrar has not reduced the area occupied by

the tenant. The Ld. A.R. argued before the A.O. that the value adopted

by the sub-registrar in the case of the assessee was exceeding fair

market value, therefore requested the A.O. to accept the actual sale

consideration as per the sale deed and to complete the assessment

proceedings. Not being convinced with the explanation of the assessee,

the A.O. adopted the valuation adopted by the SRO for the purpose of

payment of stamp duty at ` 21,69,07,000/- and assessed the assessee’s

share of ` 5,42,26,750/- to the long term capital gains and taxed the

balance amount of ` 3,33,98,588/-

before the CIT(A) and the Ld. CIT(A) observed that the assessee along

with three others is holding the total landed property of 30,244.07

Sq.mts representing the share of 3 annas and the other co-owners

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur Smt. Leelavati Leeladhar Tucker and 4 others were holding 50%( 8

annas) of the undivided share in the entire property. They sold and

registered their right in the property on 30.10.2010 in favour of M/s.

D.B. Chandak Realtors, Mumbai for a consideration of Rs.15.00 crores

vide document No.ADJ/3430/10/K. Their share of 50% was valued by

sub-registrar at ` 9,93,94,000/- crores. While valuing the 50% of

undivided share belonging to Smt. Leelavati Leeladhar Tucker and 4

others, the sub-registrar reduced the area occupied by the tenant and

valued the same on rent capitalization method, whereas in the case of

the assessee, no such reduction was allowed. The Ld. CIT(A) further

observed that the assessee has raised the objection during the

assessment proceedings for adoption of the valuation made by the sub-

registrar as excessive, hence, the assessing officer should have referred

the valuation to the DVO as provided by sub-section 2 of section 50C of

the Act. Accordingly, the Ld. CIT(A) allowed the appeal of the assessee.

matter to the Tribunal. During the appeal hearing, the Ld. D.R.

submitted that the assessee owns 3 Annas ( out of 16 annas) share of

immovable property in survey Nos.33(1), 34(1), 37, 38, 44(1), 54(3) and

102 situated at Nahur village, Mumbai in the registration District and

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur sub- district of Mumbai city, Mumbai within the limits of Municipal

Corporation of Greater Mumbai. The property was held jointly and the

assessee’s share was ¼th share 3 annas out of 16 annas. The assessee

along with Amrutlal Jain Hunda, Madanlal Ghevarchand Jain and Smt.

Jadavi Bai sold the property to the extent of 30,244.07 Sq. mtrs. to M/s.

Manchand Developers Pvt. Ltd., Chembur, West Mumbai vide Document

No.ADJ/2092/11/K dated 29.9.2011. The value of the property assessed

by SRO for the purpose of collecting the stamp duty was at `

21,69,07,000/- against the actual consideration of ` 12 crores. The

assessee’s 1/4th share worked out to ` 5,42,26,750/- as per the rate

adopted by the SRO against which the assessee had admitted a sum of

` 3.00 crores in the Income tax return. Out of the long term capital

gains admitted, the assessee also claimed deduction u/s 54F of the Act

amounting to ` 1,61,14,559/-. As per section 50C of the Act, the

assessee required to adopt the value determined by the authority of

State Government for the purpose of payment of stamp duty in respect

of the transfer of the property. The assessee has not made any dispute

with regard to the stamp valuation authorities for fixing the valuation at

higher rate. Therefore, the Ld. D.R. argued that the A.O. has rightly

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur brought to tax the difference amount, accordingly, submitted that the

A.O.’s order required to be upheld.

under occupation of the tenant. There was no approach road and the

land was marked for government acquisition and also under Railway

buffer reserve systems. All these factors contributed to fetch the least

price compared to the prevailing market rate. Further, the ld. A.R.

argued that the assessee brought to the notice of the A.O. with regard

to the sale of property by the co-owner on 31.3.2010, wherein the sub-

registrar office has valued the 50% property at ` 9,93,94,000/- and

reduced the area occupied by the tenant and valued the same on rent

capitalization method. In the case of the assessee, though assessees

were holding the share of 3 annas out of 16 annas, the property was

valued at ` 21,69,07,000/- which was exorbitantly excessive. The ld.

A.R. further argued that though all these factors were brought to the

notice of the A.O., the A.O. ignored plea made by the assessee with

regard to the excessive valuation made by the stamps and registration

authorities and completed the assessment adopting the value adopted

by the sub-registrar office. Since the assessee has raised the objection

for adopting the valuation, the Ld. A.R. argued that the A.O. should

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur have referred the valuation to the Departmental Valuation Officer. Non

reference to the departmental valuation cell renders the addition made

unsustainable, accordingly, argued that the CIT(A) has rightly deleted

the addition and no interference is called for.

on record and gone through the orders of the authorities below. We

have gone through the papers and documents placed before us. As per

the details in the assessment order, on 2.12.1940, Sri Narsingji

Manrupji, Sri Gulabchand Narsingji and Sri Rekabchand Bhutaji as

partners of M/s. Bhuta Manrupji & Co and Sri Pragji Ramji Thakkar have

purchased the immovable properties bearing S.Nos.33(1), 34(1), 37, 38,

44(1), 54(3) and 101(2) situated at Nahur village, Mumbai in the

Registration District and Sub District of Mumbai City and Mumbai sub-

urban within the limits of Municipal Corporation of Greater Mumbai.

Later, due to differences of opinion among the partners, the dispute was

referred to the Arbitrators for effecting dissolution and distribution of

assets of M/s. Bhuta Manrupji & Co among the partners. The arbitrators

passed their Award and decree on 5th December, 1946 stating that the

firm M/s. Bhuta Manrupji & Co was dissolved and its assets were

distributed among the partners in accordance thereof. Since the

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur

partnership firm M/s. Bhuta Manrupji & Co was holding ½ undivided

share in the lands described in the schedule to the Deed of Conveyance

dated 2nd December, 1940, the same could not be partitioned by metes

and bounds among the partners of M/s. Bhuta Manrupji & Co and as per

the proportion fixed by the Award, the partners of the said firm on

dissolution became co-owners as tenants in common in the said lands

described in the schedule to the Deed of Conveyance dated 2nd

December, 1940 and each of them were holding undivided share in the

following proportion:

Sl.No. Name of the party Share of property 1. Narasingji Manrupji 3 annas 2. Gulabchand Narsingji 2 annas 3. Rekabchand Bhutaji 3 annas

The heir’s of Sri Rekabchand Bhutaji (3 annas share holder) are as

under:

Sl.No. Name Relationship with Rekabchand Bhutaji 1. Smt. Jadavi Bai W/o (Late) Sri Daughter-in-law Ghewarchand 2. Madanlal Ghewarchand Jain Daughter-in-law 3. Kishore Kumar Ghewarchand Grand son Jain 4. Amrutlal Ghewarchand Jain Grand son 5. Smt. Kanchan Devi Grand Daughter 6. Smt. Usha Devi Grand Daughter 7. Smt. Vina Devi Grand Daughter 8. Smt. Trishala Devi Grand Daughter

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur From the details described above, Late Sri Rekabchand Bhutaji

was holding 3 annas share in the said property situated at Nahur village,

which was 30,244.07 sq.mtrs. of land. Smt. Jadavi Bai, W/o (late) Sri

Ghewarchand, Sri Madanlal Ghewarchand Jain, Sri Amrutlal

Ghewarchand Jain and Sri Kishore Kumar are the legal heirs of the

property who sold the property to M/s. Man Chandak Develpers Private

Limited, Chembur (West), Mumbai vide document No.ADJ/2092/11/K

dated 29.9.2011 for a consideration of ` 12.00 crores against which the

sub-registrar valued the property at ` 21,69,07,000/- for the purpose of

stamp duty. On finding the fact that there was a difference in valuation

made by the sub-registrar for the purpose of payment of stamp duty

and the consideration admitted by the assessee for the purpose of

income tax, the A.O. issued the notices to all the co-owners of the

property proposing to adopt the stamp duty valuation for the purpose of

capital gains as per section 50C of IT Act.. In response to the notices

issued by the A.O., the assesses have filed their objections explaining

the reasons for receipt of less consideration and also submitted that

valuation made by the sub-registrar for the purpose of stamp duty is in

excess of market value. The assessee also furnished a chart explaining

that the value of the property of the other co-owners i.e Leelavati

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur Leeladhar Tucker and others which was about 50% or 8 annas was sold

on 30.10.2010 and the SRO valued the property at ` 9,93,94,000/- @ `

23,500/- per sq.mtr and reduced the market value of the area occupied

by the tenant and valued the same on rent capitalization method,

whereas, in the case of assessee no such reduction was allowed. The

Ld. A.R. argued that though the co-owners have sold the property one

year prior to the sale of the property by the assessee and there was no

such steep increase of prices in the land in the intervening period.

However, though the assessee raised the objection, the A.O. proceeded

to complete the assessment adopting value adopted by the sub-registrar

office. As observed from the order of the Ld. CIT(A), 50% share of the

property belonging to Smt. Leelavathi Tucker and 4 others comprising of

8 annas or 50% in the total property was sold for a consideration of `

15 crores and the sub-registrar valued the property at ` 9,93,94,000/-

on 20/10/2010 as under:

a) Total area - 33,247.57 sq.mtrs. b) Occupied tenant - 24,823.80 sq.mtrs. c) Balance FSI (33247.57 – 24,823.80) - 8,423.77 sq.mtrs. d) Value of balance of FSI 8,423.77 x 23,500 - 19,79,58,595/- e) Value of 50% share (19,79,58,595 x 50%) - 9,89,79,297/- f) Rental value (3700x112) - `4,14,400/- g) Market value – say ` 9,93,94,000/-

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur 7. In the case of the assessee, as submitted by the Ld. A.R., the sub-

registrar did not reduce the market value occupied by the tenant and

the value adopted by the sub registrar is far excessive than the property

of the co-owner. Though we are of the view that the rate adopted in

the case of other co-owner Leelavati Leeladhar Tucker cannot be

adopted in the case of the assessee, due to a time gap between both

the transactions, considering the entire facts and merits of the case it is

evident that the assessee has brought on record the objections for

receiving the lesser consideration than the value adopted by SRO. The

A.O. without referring to the valuation of the property to the

Departmental valuation cell completed the assessment ignoring the

pleas made by the assessee.

Hon’ble High Court of Punjab & Haryana in the case of CIT Faridabad

Vs. Chandni Buchar 323 ITR 510 which is related to the unexplained

investment in purchase of land but not related to the assessment of

capital gains and application of section 50C of the Act. Similarly,

another case law relied upon by the Ld. CIT(A) was CIT Vs. Madho

Properties Ltd. of Hon’ble High court of Kolkata, which was related to 13

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur section 269UC r.w.s. 269UD of the Act i.e. acquisition of property by

competent authority but not related to the computation of capital gains.

The decisions were rendered before introduction of section 50C of the

Act. Another decision relied upon by the Ld. CIT(A) is CIT Vs. Rajkumari

Vimaladevi 279 ITR 360 pertaining to deemed gift and the assessment

year involved was 1981-82 prior to insertion of section 50C of the Act.

The Hon’ble High Court of Allahabad decision in the case of Dinesh

Kumar Mittal Vs. ITO 193 ITR 770 (1991) was also related to

unexplained investment and the assessment year involved is 1984-85

before introduction of section 50C of the Act. Therefore, all the case

laws relied upon by the Ld. CIT(A) has no relevance to the assessee’s

case and has no application.

Act which reads as under:

(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 91 [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 91 [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 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 14

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur 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. 92 [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). 93 [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 93 [or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed 93 [or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.]

As per section 50C of the Act for computing the capital gains in

case of a capital asset being land or building or both, if it is less than the

value adopted or assessed by any authority of a State Government for

the purpose of stamp duty in respect of such transfer the value so

adopted or assessed shall for the purpose of section 48 of the Act be

deemed to be the full value of consideration received or accruing as a

result of transfer. In case of dispute, the assessee is free to approach

the stamp valuation authority. In case the assessee did not dispute in

any appeal or revision or no reference has been made before any High

Court, and objects before the AO for adopting the SRO value for capital

gains as per section 50C, the A.O. may refer the valuation of the capital

asset to valuation officer and the value determined by the valuation 15

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur authority shall be taken as full value for the purpose of capital gains. In

the instant case, the assessee has not disputed the valuation made by

the stamp valuation authorities for the purpose of stamp duties but

objected for adoption of the same for capital gains. The assessee

explained that SRO value was not disputed because of payment of

stamp duty by the buyer. The assessee also did not request the AO for

making reference to the Departmental valuation officer (DVO) for

valuing the property. However the assessee brought on record

regarding the non exclusion of tenants share and complexities involved

in sale of the property and for getting the lesser rate. Therefore in all

fairness the AO should have referred to the Departmental Valuation cell

for valuing the property as provided in section 50C(2) of IT Act. Since

the AO has ignored the objections of the assessee and failed to refer the

valuation of property to the DVO, we are of the opinion that the case

should be remitted back to the file of the A.O. to make reference to the

DVO to determine the fair market value of the property for the purpose

of computation of capital gains.

Chennai in ITA No.2115/Mds/2016 for the assessment year 2005-06

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur dated 28.10.2016 remitted the matter back to the file of the A.O. for re-

adjudication. Similarly Hon’ble coordinate bench of Chennai tribunal in

the case of S.D. Vimalchand Jain Vs. ITO, (2016) 45 ITR (Trib) 0628

(Chennai), referred the matter back to the file of the AO for fresh

consideration. The coordinate bench of Agra Tribunal in Udha Jain vs.

ITO, reported in (2016) 46 CCH 0573 taken the similar view and

remitted the matter back to the file of AO. Accordingly, we set aside the

order of the Ld. CIT(A) and remit the matter back to the file of the A.O.

to re-adjudicate the issue afresh after the reference made to the

Valuation officer on merits and as per law. Since we have remitted

back the case to the file of Ld. Assessing Officer for fresh

consideration, the assessee is at liberty to raise any other

grounds before the Ld. Assessing Officer to justify his stand on

the issue.

statistical purposes.

CIT(A). Since we have remitted matter back to the file of the A.O., no

ITA Nos.149, 190 & 191 /Vizag/2017 &CO 54 to 56/Vizag/2017 Sri Kishore Kuma, Sri Madanlal Ghevarchand Jain & Sri Amrutlal Jain Hundia, Guntur separate adjudication is considered necessary in respect of cross

objections, accordingly, both the appeals of the revenue and cross

objections of the assessees are allowed for statistical purposes. The above order was pronounced in the open court on 11th Jul’18.

Sd/- Sd/- ( ड.एस. सु�दर "संह) (वी. दुगा�राव) (D.S. SUNDER SINGH) (V. DURGA RAO) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 11.07.2018 VG/SPS

आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-