RAMCHAND H.VALECHA,MUMBAI vs. DCIT CEN CIR 41, MUMBAI

आदेश / O R D E R

Per Manoj Kumar Aggarwal (Accountant Member)

The assessment for impugned AY was framed by Ld. Assistant Commissioner of Income Tax, Central Circle-41, Mumbai [AO] u/s 143(3) read with section 153A of the Income Tax Act, 1961 on 13/03/2014 wherein the income of the assessee has been assessed at Rs.71.81 Lacs after certain additions as against returned income of Rs.29.03 Lacs offered in return of income filed on 20/12/2012 in response to notice u/s 153A. The assessee, being part of Valecha Engineering Limited, was subjected to search operations u/s 132 on 26/07/2011 and consequently a notice u/s 153A dated 16/10/2012 was issued to the assessee which was followed by statutory notices u/s 143(2) and 142(1).

No. Valuation Date Amount (Rs.) 1. As on 01/04/1981 Rs.6,27,000/- 2. As on 01/02/2011 Rs.4,15,38,750/- The assessee while accepting the valuation as on the date of sale, pleaded for allowance of cost of acquisition in the computations. The valuation adopted by Ld.DVO as on 01/04/1981 was also contested. However, not convinced, Ld. CIT(A) concluded the matter in the following manner:- Decision 6. I have carefully examined the facts of the case, the stand taken by the A.O in me assessment order, the grounds of appeal, the written submissions filed by the appellant during the hearing proceedings and the Remand Report submitted by the A.O. 6.1 In the assessment order, the A.O. has computed the long term capital gain on the sale of plot at Pathardi, Nashik by considering the purchase value with indexation as per assessee at Rs. Nil and the sale value at Rs.1,02,75,430/- @ Ramchand H. Valecha Assessment Year-2011-12 17.14% of the value adopted by the Stamp Valuation authorities at Rs.5,99,50,000/-, in view of the provisions of Section 50C of the Act. The A.O. has further allowed deduction u/s.54EC of Rs.50,00,000/- 6.1.1 The appellant has submitted that the A.O. was not justified in holding that the appellant's share in the property was at 17.14% for the following reasons: (i)Nowhere in the purchase agreement dated 09.01.1981, the shares of the co- owners are specified. From the purchase agreement, one cannot determine who has paid the purchase consideration and what is the consideration contributed by the respective co-owner. (ii)The sales consideration of the property is determinable from the conveyance deed dated 01.02.2011 and the appellant's share in the sales consideration is at Rs.60,00,000/-, out of total sales consideration of Rs.3,50,00,000/-. 6.1.2 It has been further submitted, that during the course of assessment proceedings, it was categorically stated that the value adopted by the Stamp Valuation Authority exceeds the fair market value of the property as on the date of transfer and it was claimed that the sales consideration of Rs.3,50,00000/-, as appearing in the agreement, be considered as the fair market value for the purpose of computation of capital gain. Since, the appellant had objected to the valuation adopted by the Stamp Duty Valuation Authority, the A.O. was duty bound to refer to the Valuation Officer for determining the fair market value of the property as on the date of transfer. The appellant relied on the decision of the Hon’ble High Court of Calcutta in the case of Sunil Kumar Agarwal vs. CIT (supra). 6.1.3 The appellant has also submitted that the property was acquired by the co- owners prior to 01.04.1981 and therefore, the fair-market value as on 01.04.1981 should have been substituted and should have been determined by referring the matter to the Valuation Officer. The A.O. has not allowed the indexed cost of acquisition for the purpose of computing long term capital gain as per provisions of Section 48 of the Act. 6.2 The relevant provisions for computing the capital gains are provided in Chapter IV of the I.T. Act. Section 48 provides for computing the capital gains by deducting from the full value of consideration received or accruing as a result of the transfer of the capital asset, the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. It further provides that where long term capital gain arises, the words 'cost of acquisition' and 'cost of improvement' have to be substituted by the words 'indexed cost of acquisition' and 'indexed cost of any improvement.’ 6.2.1 Section 50C(1) provides that where the consideration received or accruing as a result of the transfer is less than the value adopted or assessed by the Stamp Valuation Authority, for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of Section 48, be deemed to be full value of the consideration. Section 50C(2) provides that the A.O, may refer the valuation of the capital asset to a Valuation Officer where the assessee claims before the A.O. that the value adopted by the Stamp Valuation Authority exceeds the fair market value of the property as on the date of transfer. 6.2.2 Section 55(2)(b)(i) provides that for the purposes of Section 48 and 49, cost of acquisition in relation to any other capital asset, where the capital asset became a property of the assessee before the 1 day of April, 1981, means the cost of Ramchand H. Valecha Assessment Year-2011-12 acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of April, 1981, at the option of the assessee. 6.3 I find that the appellant, in the return of income filed u/s153A of the Act on 20.12.2012, has disclosed long term capital gains on the said property by providing following details: Description Qt Sale Net Purchase Purchase Index Indexed Taxable Cost y Date Sales Date Amount cost Share in 1 01.02.20 60,00000 09.01.1981 0 711/100 0 6000000 0 property at 11 6000000 0 0 6000000 0 6.3.1 This return was filed much after the date of search, i.e. 26.07.2011 in which the document regarding purchase agreement/sale deed dated 09.01.1981 was found and seized, showing the purchase cost at Rs.33,000/- The appellant has submitted that there were three co-owners of the said plot of land and the share of respective co-owners was not mentioned in the purchase agreement. From the purchase agreement, one cannot determine who has paid the purchase consideration and what is the consideration contributed by the respective co-owner. Further, I find that the appellant has himself opted to declare the cost of acquisition of the asset at Rs.Nil, in terms of Section 55(2)(b)(i) of the Act, as per the declaration made in the return of income and in the computation of capital gains. The appellant has mentioned the index at 711/100 and has computed the indexed cost at Rs. Nil. Therefore, the contention of the appellant that the fair market value as on 01.04.1981 should have been substituted and should have been determined by the A.O., by referring the matter to the Valuation Officer, is found to be without merit and against the provisions of the Act. 6.3.2. From the remand report and the report of the DVO-1, Mumbai dated 26.01.2016, it appears that the reference has been made to the Valuation Officer to determine the fair market value of the property as on 01.04.1981 uls.55A of the Act and as on 01.02.2011 u/s.50C(2) of the Act. In this regard, it is noted that as per the remand letter dated 25.08.2015, the AO. was directed to make a reference to the Valuation Officer in terms of Section 50C(2) of the Act to ascertain the value of consideration of the said asset. Further, the A.O. was required to enquire regarding the contention of the appellant that the cost of acquisition on 09.01.1981 of the said property was Rs.33,000/- as per the supporting evidence (seized documents) flied along with the Paper Book. There is no direction in the remand report to make a reference to Valuation Officer u/s.55A to ascertain the fair market value of the asset as on 01.04.1981. It appears that there has been some communication gap and reference uls.55A of the Act has been made erroneously. Even otherwise, reference to Valuation Officer u/s.55A was not required since the appellant did not file any estimate of such fair market value by way of any report of registered valuer either in the course of assessment proceedings or the appellate proceedings. The appellant has itself opted to disclose the cost of acquisition at Rs. Nil u(s.55(2)(b)(i) of the Act and there was no justification to make such a reference, With respect to the question as to whether the property as on 1.4.1981 can be referred to DVO for determining fair market value for the purpose of computation of long term gains u/s 55A of the Act, the Hon'ble High Court of Calcutta , in the case of CIT vs Umedbhai International (P) Ltd (2011) 338 ITR 506 has held that such a reference could not be made unless the AO formed an opinion that the value shown by the assessee was Ramchand H. Valecha Assessment Year-2011-12 less than the fair market value. Obviously, such an opinion cannot be formed with respect to value shown by the appellant at Rs Nil, since that would go against the interest of the revenue. Accordingly, it is held that the report of the Valuation Officer, estimating the fair market value of the said property as on 01.04.1981 u/s 55A of the Act, is to be ignored for these proceedings. The appellant has submitted that taking the fair market value of the property as on 1.4.1981 at Rs. 33,000/- as contended by the AO in the remand report was misconceived. I find that other than the above said DVO’s report, the appellant has not brought on record any other material to make a claim for a cost of acquisition other than the amount declared in the return at Rs. Nil. Accordingly, it is held that the AO has rightly considered the indexed cost of acquisition of the said property at Rs. Nil. 6.4 The District Valuation Officer has reported that the fair market value of the property as on 01.02.2011 was Rs.4,15,38,750/-, in terms of Section 50C(2) of the Act. Therefore, the A.O. is directed to adopt the above said value as the full value of consideration and re-compute the capital gains by considering the sale consideration in the hands of the appellant at Rs.71,19,742/-, (i.e., 17.14% of Rs.4,15,38,750/-), as accepted and adopted by the appellant in the return of income. As a result, the addition made uls.50C of the Act of Rs.42,75,430/- will get restricted to Rs,11,19,742/-. In view of the above discussion, ground No.1 is partly allowed and ground No.2 is dismissed. Aggrieved, the assessee is in further appeal before us.