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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Smt. Madhumita Roy
Per Shri P.M. Jagtap, A.M. :- This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-20, Kolkata dated 16.01.2015.
At the outset, it s noted that there is a delay of 19 days on the part of the assessee in filing this appeal before the Tribunal. In this regard, the assessee has filed an application seeking condonation of the said delay and keeping in view the reasons given therein, which are duly supported by an affidavit filed by the authorized representative of the assessee, we are satisfied that there was a sufficient cause for the delay
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on the part of the assessee in filing this appeal before the Tribunal. Even the ld. D.R. has not raised any objection in this regard. We, therefore, condone the said delay and proceed to dispose of the appeal of the assessee on merit.
The issue raised in Ground No. 1 relates to the addition made by the Assessing Officer on account of unexplained jewellery, which is sustained by the ld. CIT(Appeals) to the extent of Rs.9,09,600/-
The assessee in the present case is an individual, who is Director of Merlin Group. A search and seizure operation was conducted in the cases belonging to Merlin Group on 11.09.2008. During the course of search and seizure operation, jewellery valued at Rs.23,23,211/- was found in the residential premises of the assessee. The said jewellery was explained by the assessee as belonging to him as well as his family members. This explanation of the assessee was not found to be fully satisfactory by the Assessing Officer. He found that some of the items of jewellery claimed by the assessee as belonging to Prem Ratan Shiv Kishan Mohta (HUF) were not tallying with the valuation report of the Departmental Valuer. He also found that some of the items of jewellery claimed to be belonging to the Estate of Raj Kumari Mohta were not tallying with the valuation report of the Departmental Valuer. He accordingly treated the said items of jewellery valuing Rs.10,08,609/- as unexplained investment and made an addition to that extent to the total income of the assessee.
The addition of Rs.10,08,609/- made by the Assessing Officer on account of unexplained investment made in jewellery was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions of the assessee as well as the material available on record, the ld.CIT(Appeals) sustained the said addition to the extent of R.9,09,600/- for the following reasons given in paragraph no. 3 of his impugned order:-
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“3. Ground no 1 is directed against the addition of Rs.10,08,609/- on account of unexplained jewellery. The relevant facts of the case are that search u/s 132 was conducted on 11-09-2008 at the residential and business premises of the assessee group wherein jewellery valued at Rs.23,23,211/- was found. The assessee claimed at the assessment stage that jewellery belonged to his family members and HUFs. It was claimed before the AO that Prem Ratan Shiv Kishan Mohta (HUF) was earlier assessed to wealth tax and its wealth tax return was filed upto the assessment year 1992-93 wherein 500.900 gms gold jewellery and 41.00 cts diamond was declared. It was also claimed that 708.600 gms gold jewellery' was explained in the hands of the Estate of Raj Kumari Mohta. The AO held that the items of jewellery bearing ID mark SM/9, 11, 12, 13, 25 & 29 claimed to be belonging to Prem Ratan Shiv Kishan Mohta (HUF) valued at Rs.6,54,870/- and those bearing ID mark SM/15, 20, 21, 26, 35, 36, 37, 38 & 40 claimed to be belonging to the Estate of Raj Kumari Mohta valued at Rs.3,53,739/- were not explained on the ground that these items of jewellery did not tally on item-to-item basis. The AO treated the jewellery claimed to be belonging to Prem Ratan Shiv Kishan Mohta (HUF) and the Estate of Raj Kumari Mohta as unexplained and accordingly made addition of Rs.10,08,609/. The ld. AR appeared for the assessee and reiterated the arguments made at the assessment stage. The Ld. A/R also submitted that the issue regarding jewellery belonging to Prem Ratan Shiv Kishan Mohta (HUF) and the estate of Raj Kumari Mohta had already been discussed in my order dated 31st January, 2013 in the case of Seema Mohta for the assessmen year 2009-10 in Appeal No. 216/CC-XXVIII/CIT(A)C-1/10-11. I have perused the relevant orders and considered the submissions of the assessee. I have held in para 13 of my appellate order in the case of Seema Mohta for the assessment year 2009-10 in Appeal No. 216/CC- XXVIII/CIT(A)C-1/10-11 that 500.900 gms. Gold jewellery and 41 cts diamond was explained in the case of Prem Rtan Shiv Kishan Mohta (HUF) and 708.600 gms gold jewellery was explained in the hands of the Estate of Raj Kumari Mohta. I have also held that one has to go by the gross weight of jewellery as items of jewellery are subject to re- making according to changing fashion and design. However, credit has already been allowed in the case of Seema Mohta for 429.160 gms gold jewellery and 39.50 cts of diamond belonging to Prem Ratan Shiv Kishan Mohta (HUF) and 560.800 gms gold jewellery belonging to the Estate of Raj Kumari Mohta. Under the circumstances, one is left with 219.660 gms gold jewellery whereas diamond is
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almost exhausted. The items of jewellery held as unexplained by the AO contained 155.370 gms gold jewellery and 39.7 cts diamond. In this factual background, the gold jewellery of 155.370 gms has to be treated as explained whereas the entire diamond of 39.7 cts has to be held as unexplained. I find from the valuation report of the departmental valuer prepared at the time of the search that the items of diamond were valued at Rs.9,09,600/-. I therefore uphold the addition on account of unexplained jewellery to the extent of Rs.9,09,600/-. The assessee gets consequent relief of Rs.99,009/-. Ground no 1 is partly allowed”.
We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. Counsel for the assessee has contended that the explanation of the assessee mainly as regards the diamond jewellery was not accepted by the authorities below on the ground that there were no such items of diamond jewellery reflected in the probate of Late Smt. Raj Kumari Mohta. He has invited our attention to the relevant portion of the said probate placed at pages no. 32 & 33 of the paper book to point out that there were certain items of diamond jewellery, which had been clearly reflected in the probate of late Smt. Raj Kumari Mohta. He has contended that the authorities below, however, failed to take cognizance of the said items of diamond jewellery. We are unable to accept this contention of the ld. Counsel for the assessee. It is observed from the relevant portion of the ld. CIT(Appeals)’s impugned order that the aspect of diamond jewellery belonging to the Estate of Raj Kumari Mohta as well as to Prem Ratan Shiv Kishan Mohta (HUF) was duly taken into consideration while appreciating the explanation of the assessee and after allowing credit for the same including the items of diamond jewellery, the jewellery found from the residential premises of the assessee was treated by the ld. CIT(Appeals) as unexplained to the extent of Rs.9,09,600/-. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) on this issue and upholding the same, we dismiss Ground No. 1 of the assessee’s appeal.
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The common issue involved in Grounds No. 2 & 3 of the assessee’s appeal relates to the addition of Rs.85,94,520/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of long-term capital gain.
During the year under consideration, the assessee had sold two properties, one having area of 715 sq.ft. on the mezzanine floor and the other having area of 761 sq.ft. on the ground floor of the premises No.79, Sambhunath Pandit Street, Kolkata for a consideration of Rs.20 lakhs and Rs.40 lakhs respectively. Since the values adopted by the Stamp Duty Authority of the said properties were Rs.39,38,220/- and Rs.46,56,300/-, the same were adopted by the Assessing Officer for the purpose of computing capital gain as per section 50C of the Income Tax Act instead of Rs.60 lakhs shown by the assessee. In the computation of capital gain, the assessee had also claimed deduction on account of indexed cost of acquisition of Rs.31,56,620/-. In this regard, it was claimed by the assessee that he had invested a sum of Rs.21,47,505/- in the properties from the financial year 1993-94 to 2000-01 and the indexed cost of acquisition was worked out at Rs.31,56,620/-. It was noticed by the Assessing Officer from the sale deeds of both the properties dated 11.07.2008 that the assessee was provided both the properties in the new building on ownership basis in lieu of the tenanted properties in the old building without any monetary consideration. He, therefore, treated the cost of acquisition of the said properties at ‘NIL’ and computed long-term capital gain chargeable to tax in the hands of the assessee at Rs.85,94,520/-.
The computation of capital gain as made by the Assessing Officer at Rs.85,94,520/- was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and since the submissions made by the assessee in support of his case on this issue were not found acceptable by the ld. CIT(Appeals), the later upheld the action of the Assessing Officer in
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computing the long-term capital gain at Rs. 85,94,520/- for the following reasons given in paragraph no. 5 of his impugned order:- “5. The Ld AR explained that the assessee acquired a tenanted premise in a property wherein he also owned a premise. The assessee agreed to handover the possession of both the premises to a developer which made him entitled for 1665 sq ft area in the proposed building. The assessee did receive such area on completion of the project out of which 1476 sq ft was sold during the year. It is an admitted fact that the property under consideration was received by the assessee in lieu of the earlier spaces and therefore the AO has rightly held the cost of acquisition of such property as nil. The Ld AR argued that the assessee had incurred expenses in relation to the earlier spaces which should be considered for determining the cost of acquisition of the property under consideration. I do not find merit in the arguments in as much as such expenses have to be considered while computing the cost of acquisition of the earlier spaces. But, such expenses incurred in relation to the earlier spaces cannot be considered for determining the cost of acquisition of the property under consideration. The ld. A.R. in course of the appellate proceedings has contested the application of section 50C. He has submitted that the value adopted by the stamp valuation authority for the purposes of stamp duty should not have been considered by the AO as the municipal valuation of the property was also lower. He has further submitted that no reference could be made to the valuation cell due to the limitation of time- barring assessment. I however find from the impugned order that no case for reference to the valuation cell was made out by the assessee. In view of the above, I am of the considered opinion that application of section 50C was in conformity with the legal provisions of the I.T. Act' 61 and the AO was justified in invoking section 50C while computing the capital gain on transfer of the property under consideration. The order of the AO is upheld. Ground no 2 and 3 are dismissed”.
We have heard the arguments of both the sides and also perused the relevant material available on record. As submitted by the ld. Counsel for the assessee, the value of both the properties adopted by the Stamp Duty Authorities was not the fair market value, but the Assessing Officer considered the same for the purpose of computation of capital gain by
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applying section 50C without giving any opportunity to the assessee to raise his objections challenging the value adopted by the Stamp Duty Authorities. He has contended that the issue relating to determination the fair market value of both the properties sold by the assessee may be sent back to the Assessing Officer with a direction to him to obtain the valuation report from the Valuation Officer as required by the provisions of section 2 of section 50C. Although the ld. D.R. has raised an objection in this regard by submitting that making a reference to the valuation Officer is required to be made by the Assessing Officer under section 50C(2) only when the assessee objects the value adopted or assessed by the Stamp Valuation Authority during the course of assessment proceedings, it is observed that the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal –vs.- CIT [372 ITR 83] has clearly held that the Assessing Officer is duty bound to make a reference to the Valuation Officer before adopting the value of assets by the Stamp Valuation Authority for the purpose of computing capital gain even without there being any objection. Moreover, as submitted by the ld. Counsel for the assessee, no opportunity was specifically given by the Assessing Officer to the assessee to raise such objection, if any, during the course of assessment proceedings. We, accordingly, restore the issue relating to the determination of fair market value of the properties sold by the assessee for the purpose of computation of capital gain in accordance with law under section 50C to the file of the Assessing Officer for deciding the same afresh after making a reference to the Valuation Officer. The Assessing Officer is also directed to consider the other contention raised by the ld. Counsel for the assessee in this regard that the sale agreement having been entered earlier to the date of registration and some part consideration having been received by cheque even before the date of such agreement, the fair market value of the properties as on the date of agreement may be taken into consideration in view of the 1st proviso to section 50C(1).
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As regards the claim of the assessee for deduction on account of indexed cost of acquisition while computing the long term capital gain, the ld. Counsel for the assessee has submitted that one of the properties sold by the assessee was originally taken on rent from other tenants. He has also submitted that the consideration of Rs.18.37 lakhs was paid by the assessee for this purpose and the same was reflected in the balance- sheet of the assessee as on 31.03.2000. He has contended that although the assessee got on ownership a new property in the new building in lieu of tenanted property for no monetary consideration as mentioned in the agreement, the amount of Rs.18.37 lakhs paid for acquiring old property on rent from the earlier tenant should be considered as the cost of acquisition of the new property received by the assessee in new building, which was ultimately sold giving rise to the long-term capital gain. The ld. D.R. has not disputed this position in principle. He, however, has contended that this claim specifically raised on behalf of the assessee for the first time before the Tribunal requires verification by the Assessing Officer. We find merit in this contention of the ld. D.R. and since the ld. Counsel for the assessee also has not raised any objection in this regard, we restore this matter relating to the assessee’s claim for deduction on account of indexed cost of acquisition to the file of the Assessing Officer for deciding the same afresh after verifying the claim of the assessee. Grounds No. 2 & 3 of the assessee’s appeal are accordingly treated as allowed for statistical purposes.
As regards the issue raised in ground No. 4 relating to the assesse’s claim for short-term capital loss of Rs.8,02,231/- to be set off against the long-term capital gain, the ld. Counsel for the assessee has sought limited relief that the said claim made specifically by the assessee in the return of income having not been considered in the assessment order, the Assessing Officer may be directed to consider and decide the same. Since the ld. D.R. has also not raised any objection in this regard, we direct the Assessing Officer to consider the said claim of the assessee made
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specifically in the return of income and allow the same in accordance with law.
In the result, the appeal of the assessee is treated as partly allowed for statistical purposes.
Order pronounced in the open Court on June 20, 2018. Sd/- Sd/- (Madhumita Roy) (P.M. Jagtap) Judicial Member Accountant Member Kolkata, the 20th day of June, 2018
Order pronounced by
Sd/- Sd/- (S.S.V. Ravi) (P.M.J.) J.M. A.M. Copies to : (1) Sri Sushil Kr. Mohta, 9, Alipore Park Place, Souh City Bel Air, Kolkata-700 027 (2) Deputy Commissioner of Income Tax, Central Circle-XXVIII, Kolkata, Aayakar Bhawan Poorva, 110, Shantipally, Kolkata-700 107 (3) Commissioner of Income Tax (Appeals)-20, (4) Commissioner of Income Tax- , (5) The Departmental Representative (6) Guard File
By order
Senior Private Secretary, Head of Office/D.D.O. Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.