DCIT, NEW DELHI vs. M/S. JINDAL PIPES LTD., NEW DELHI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that additions cannot be made solely based on a DVO's valuation report, and fair market value cannot be substituted for the actual sale consideration received. The CIT(A)'s deletion of the addition was upheld as it followed binding precedents.
What were the facts?
The Assessing Officer (AO) made an addition to the assessee's capital gains based on the difference between the declared sale proceeds and the valuation report of the Department's Valuation Officer (DVO). The assessee argued that the AO lacked material evidence beyond the DVO's report to prove understatement of consideration.
What were the issues?
Whether the AO can substitute the actual sale consideration with the fair market value determined by the DVO for computing capital gains, and if an addition can be made solely on the basis of a DVO's report without other corroborating material.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(11)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- K.P. Varghese v. ITO989 citing131 ITR 597 · 1981 · SC
- CIT v. Ved Prakash Choudhary95 citing214 CTR 51 · 2008 · HC · Read judgment
- CIT v. Smt. Shakuntala\nDevi73 citing316 ITR 46 · 2009 · HC
- CIT v. Puneet Sabharwal69 citing338 ITR 485 · 2011 · HC · Read judgment
- CIT v. Smt. Suraj Devi58 citing328 ITR 604 · 2010 · HC · Read judgment
- CIT v. Smt. Nilofer I. Singh55 citing309 ITR 233 · 2009 · HC · Read judgment
- CIT v. Gillanders Arbuthnot & Co.51 citing87 ITR 407 · 1973 · SC · Read judgment
- Delhi in CIT v. Abhinav Kumar Mittal47 citing351 ITR 20 · 2013 · HC
- Arjun Malhotra v. CIT15 citing403 ITR 354 · 2018 · HC · Read judgment
- CIT vs. Puneet Sabherwal (2011) 338 ITR 485 (Delhi), CIT v. Abhinav Kumar Mittal14 citing309 ITR 240 · 2009 · HC
- CIT v. Mahesh Kumar4 citing196 Taxmann 415 · 2011 · HC · Read judgment
Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: SHRI. N. K. SAINI & SHRI K. NARASIMHA CHARY
This is an appeal by the Revenue challenging the order dated 07/05/2015 in Appeal No. 150/2012-13 passed by the Learned Commissioner of Income Tax (Appeals)-V (in short ‘Ld. CIT(A)’) deleting the addition of Rs.4,39,77,238/- made by the Learned Assessing Officer (Ld. AO) under the head “Capital Gain” on the basis of difference between sale proceeds declared by the assessee and the sale proceeds taken by the Ld. AO on the basis of valuation report of DVO.
Brief facts of the case are that the assessee is a public Ltd company engaged in the manufacture of ERW pipes. They have filed their return of income for the Assessment Year 2005-06 on 29/10/2005 showing an income of Rs.16,39,15,323/- from business and profession, house property, capital gain and other sources. Ld. AO concluded reassessment at the total income of Rs.16,39,15,320/- on 31/12/2007. Subsequently, assessment was reopened on the ground that there was understatement of the purchase consideration in respect of property. Ld. AO furnished the copy of the valuation report to the assessee. Assessee submitted before the Ld. AO that except for the valuation report, the Ld. AO could not bring any material on record, to prove that the purchaser in the case had understated the purchase consideration, which is the basis of initiation of reassessment proceedings. Assessee also submitted the copies of sale deeds. However, Ld. AO brushed aside the submissions and documents filed on behalf of the assessee and made an addition of Rs.4,39,77,238/- by calculating the capital gain on residential property/land in the hands of the assessee by taking Rs.5,39,77,238/- as the sale consideration instead of Rs.1,00,00,000/-.
Assessee preferred appeal against this addition and the Ld. CIT(A), while noticing the decision of the Hon’ble jurisdictional High Court in CIT vs. Mahesh Kumar 196 Taxman 415 (Del) which was rendered following the decision of the Hon’ble Apex Court in KP Verghese vs. ITO 131 ITR 597, held that the addition on the basis of valuation report of DVO was not justified and consequently deleted the addition of Rs.4,39,77,238/- based on valuation report of DVO.
Challenging the impugned order assessee preferred this appeal before us stating that the four sale instances of the entire property which was sold in parts by the assessee company and M/s. Jindal Aluminium to the other purchasers at about the same time, and the sale rate varies from Rs. 9500/-to Rs. 13,000/-approximately per square yard which is much higher than the sale rate declared by the assessee and the Ld. CIT(A) erred in holding that the report of the DVO was on assumption despite the fact that the DVO had scientifically determined the fair market value of property considering all the factors by which the value of property is affected. Ld. DR heavily relied upon the orders of the Ld. AO.
Per contra, it is the argument of the Ld. AR that inasmuch as the Ld. CIT(A) deleted the addition by following the decision of the Hon’ble Apex Court, it is not open for the revenue to challenge the same unless and until the decision of the Hon’ble Apex Court in the case of KP Verghese (supra) is no longer a good law. He further submitted that recently in Arjun Malhotra vs. CIT (2018) 403 ITR 354 (Delhi) the Hon’ble jurisdictional High Court while referring to the decision of the Apex Court in KP Verghese (supra) held that when section 52 of the Act itself is not applicable, the Assessing Officer could not have substituted the actual sale consideration received by the assessee with another figure stating that this was the fair market value. He also placed reliance on several other relations including the decision in vs. Gillanders Arbuthnot (1973) 87 ITR 407 (SC), CIT vs. Smt. Nilofer I . Singh (2009) 309 ITR 233 (Delhi), and CIT vs. M/s. Gujarat Nre Coke Ltd dated 06/03/2014 (Calcutta High Court) for the principle that under section 48 of the Income Tax Act, tax chargeable under the head “capital gains” has to be computed taking into consideration the full value received or accrued, and any other valuation is not permissible under section 48; and when the legislature wanted to make a departure a specific provision was introduced. In this respect, the Hon’ble Court made reference to section 50C of the Act.
We have gone through the record in the light of the submissions made on either side. Ld. CIT(A) made an elaborate discussion on the issue of capital gains and in the light of the judgement of the Hon’ble jurisdictional High Court in Mahesh Kumar’s case (supra) wherein the Hon’ble jurisdictional High Court referred to the decision of the Hon’ble Apex Court in KP Verghese’s case, Ld. CIT(A) reached a conclusion that the addition on the basis of valuation report of DVO is not justified.
Further, in the case of Arjun Malhotra (supra) the Hon’ble judicial High Court very recently in (2018) 403 ITR 354 (Delhi) making reference to the decision of the Hon’ble Apex Court in KP Verghese’s case (supra) observed that the Assessing Officer could not have substituted the actual sale consideration received by the assessee with another figure stating that this was the fair market value. In the case of Smt. Nilofer (supra), the Hon’ble jurisdictional High Court after referring to the case law on this aspect stated that in a case involving the sales simplicitor, when the full value of the considerations are the sale prices, for the purpose of computing capital gains, there is no necessity for computing the fair market value and, therefore, the Assessing Officer could not have referred the matter to the valuation officer.
We are convinced with the arguments of Ld. AR, basing on the decisions reported in CIT vs. Puneet Sabherwal (2011) 338 ITR 485 (Delhi), CIT vs. Abhinav Kumar Mittal (2013) 351 ITR 20 (Delhi), Dev Kumar Jain vs. ITO (2009) 309 ITR 240 (Delhi), CIT vs. Shakuntala Devi (2009) 316 ITR 46 (Delhi), CIT vs. Smt. Suraj Devi (2010) 328 ITR 604 (Delhi) and CIT vs. Prem Nath Nagpal (2007) 214 CTR 51 (Delhi), that no addition can be made merely on the basis of valuation report and fair market value cannot be substituted for actual consideration received.
In these circumstances, learned Commissioner of Income Tax (Appeals) rightly followed the binding precedents. Inasmuch as the Ld. CIT(A) basis is a decision on the binding precedent, which binds this Tribunal equally, we find it difficult to hold that the impugned order is either illegal or regular. By no stretch of imagination could it be said that such findings of the Ld. CIT(A) are perverse or liable to be set-aside. We, therefore, do not find any merits in this appeal and the appeal is liable to be dismissed. Appeal is accordingly dismissed.
In the result, appeal of the revenue is dismissed
Order pronounced in the open Court on 01/08/2018.
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