AKSHAY V SANDU,MUMBAI vs. ITO 22(2)(1), NAVI MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dated 27/02/2015 of the CIT (A) -25, Mumbai, the assessee has filed the present appeal.Assessee,an individual,had filed his return of income on 31/07/2008,declaring total income at Rs.19.62 lakhs.The Assessing Officer (AO)completed the original assessment, u/s. 143 (3) of the Act,on 23/12/2010, determining his income at Rs. 28.15 lakhs. 2.The assessee, in his letter, dated 21/10/2016,has made a request to admit additional grounds of appeal

.It was stated that ground raised by it was legal in nature and would go to the root of the matter.We find that in the additional ground the assessee has raised the issue of transfer of development rights to the builder and taxability of such right.We find that the issue does not require investigation of the facts and that it is a pure legal issue. Therefore, he admitted additional evidence raised by him. Brief Facts: 3.As stated earlier,the AO had passed original scrutiny assessment in the month of December, 2010.Subsequently,the CIT

22. Mumbai, on perusal of the record found that said assessment order was erroneous and prejudicial to the interest of the revenue.Accordingly,he passed an order u/s. 263 on 23/01/2013 directing the AO to revise the assessment. In his order, the CIT observed that as per the valuation of property and as per the stamp duty valuation the market value of the plot was Rs.3.55 crores, i.e., the agreement value was 2740/M/15(08-09) Akshay Sandhu shown at Rs. 2.50 crores, that in the return of income the assessee had calculated the capital gain as per the agreement value i.e. at Rs. 2.50 crores, that the AO had accepted the same while completing the assessment, that the assessee was having 12.5% share in the said property. In response to the notice issued u/s. 263, the assessee contended that he had not only received the consideration cash but also received consideration incurring in form of a flat of 1580 sq. ft., that the value of the flat was also included in the total consideration received from the developer, that the total consideration would be Rs.3.43 crores, that after considering the other expenses like stamp duty, registration charges, legal services, etc. the cost of temporary accommodation incurred by the developer comes to Rs.34.69 crores, that the total consideration would exceed the stamp duty valuation of the property. 3.1.After considering the submissions of the assessee, the CIT observed that the stamp duty charges were made on the basis of property available at the time of transaction, that any subsequent investment made by the developer as promised by him was not to be included in such valuation, that the contention of the assessee that cost of construction was included in the valuation done by the stamp duty authorities were not tenable, that assessee had received a flat of 1580 sq.ft. free of cost in addition the monetary consideration,that the assessee had availed exemption u/s. 54 of the Act for the said flat received as part of consideration, that he had offered only monetary consideration for taxation.The CIT directed the AO to examine the above-mentioned two issues. In his order, passed u/s. 143 (3) r.w.s. 263 of the Act, the AO observed that as per the provisions of section 50 C for transfer of immovable property, the value fixed at Rs. 3.55 crores by the stamp valuation authority,was to be adopted if the value was more than the consideration shown as received, that value of the flat (Rs. 93.78 lakhs) was to be added as forming part of consideration for transfer along with the registration charges (Rs. 3.86 lakhs), that consideration of Rs. 4.52 crores (Rs. 3.55 crores plus Rs. 93.78 lakhs plus Rs. 3.86 lakhs) was to be adopted in place of Rs. 2.50 crores in the original assessment order. He further observed that the assessee had claimed exemption u/s. 54 of the Act wherein only monetary consideration was offered for taxation,that in the computation of total income there was no indication that such exemption was claimed in respect of the flat, that assessee did not file any claim u/s. 54 of the Act, during the revisionary proceedings. 3.2. During the revisionary-assessment proceedings the Authorised Representative (AR) pointed out that notices u/s.263 were issued on 18/05/2012 and 09/01/2013, that an appellate order was already issued by the First Appellate Authority (FAA). However, the AO held that 2740/M/15(08-09) Akshay Sandhu such issues could not be taken for consideration. Finally, he determined the income of the assessee u/s. 143(3) r.w.s. 263 on 26.11.2013, at Rs.44.98 lakhs. 4.Aggrieved by the order of the AO,the assessee preferred an appeal before the FAA. During the appellate proceedings, the assessee submitted a copy of the valuation report,dated 07/04/2008, of a government approved property valuer in support of his claim for substitution of fair market value as on 01/04/1981 along with the development agreement dated 31/12/2006. The FAA referred to the provisions of section 50 C of the Act and stated that the assessee had granted workable power of attorney in favour of the developers, that there was transfer of land by the assessee in favour of the developer for consideration, that provisions of section 50C of the Act were applicable, that the AO had rightly invoked the said provisions. He issued a show cause notice to the assessee asking to explain as to why the market value adopted by the state government should not be considered in place of the agreement value considered by the AO. He further asked the assessee as to why the value of the recommendation should not be taxed as forming part of sale consideration.The FAA in a tabular form calculated the consideration. After considering the reply of the assessee dated 13/02/2015,he held that the argument of the assessee that valuation adopted by the State governments had to be reduced further on account of owner held property was not acceptable on facts, that during assessment/appellate proceedings, the assessee had not disclosed the option exercised by him for receipt of consideration in terms of clause 11 of the development agreement, that the AO had not discovered the important aspect pertaining to sale consideration,that the full value of consideration received/accrued to the assessee would be Rs.86.39 lakhs.He directed the AO to consider the said value as full value of consideration for the purpose of computing capital gains.With regard to disallowing the claim for deduction u/s. 54 of the Act, the FAA observed that the assessee did not claim direction in the original return, that during the appellate proceedings he did not offer any explanation for the claim made, that the cost of acquisition of new residential property in the hands of the assessee was nil, that in the absence of any cost incurred by him towards new residential property the claim made by the assessee was not acceptable. 5.During the course of hearing before us, the Authorised Representative (AR) stated that while deciding the appeal, the FAA had taken a figure of 1180 sq. ft. instead of one 1008 sq. ft., that the of the cost of construction was taken at Rs.38,300 per sq. ft. as against cost of construction of Rs.7,500 per sq. ft., that the F AA had not referred the matter to the District Valuation Officer (DVO) though the assessee had disputed the valuation arrived at by the 2740/M/15(08-09) Akshay Sandhu stamp duty authorities, that the actual development rights transferred pertained to half of the piece of land only,that balance was retained by the assessee and members of HUF along with the tenants,that the FAA had not adjudicated the claim of the assessee u/s.54 of the Act with regard to cost of construction received, that the AO/FAA had not considered the facts with regard to valuation of the property, that the valuation of the property adopted by both the authorities was incorrect, that the valuation should have been done on the area offered for development to the developer, that in the return submission dated 09/12/2011 to the FAA the assessee had shown calculation of long-term capital gain i.e. deduction u/s. 54 of the Act.The Departmental Representative (DR) supported the order of the FAA. 6.We have heard the rival submissions and their perused the material before us. We find that the assessee had sold his inherited property in which she had a 12.5% share is a coparcener of Hindu Undivided Family (HUF),that all the coparceners of HUF decided to develop the property and the development agreement was entered with the developer, that the assessee had shown his long-term capital gain at Rs.19.26 lakhs in his return of income, that the original assessment was revised by the AO, as per the direction of the CIT, passed u/s. 263 of the Act, that in the order passed u/s.143(3)r.w.s. 263, the AO enhanced the income of the assessee,that he did not consider the claim made by the assessee during the course of assessment proceedings towards deduction u/s.54 of the Act,that the FAA confirmed the order of the AO and made further additions. We find that the entire plot of land was not handed over by the HUF to the developer,that the FAA had adopted wrong figures in the Tables for enhancing the income of the assessee,that the assessee had objected to the valuation of stamp duty authorities,that the matter was not referred to the DVO,that the assessee had challenged the original order of the AO before the FAA,that the then FAA had decided the issue in favour of the assessee,that during the assessment/appellate proceedings,challenging the order passed u/s.143(3)r.w.s.263 the order of the then FAA was not considered,that one of the grounds raised the assessee before the FAA remained unadjudicated.In our opinion,in these circumstances,the matter should be restored back to the file of the FAA for fresh adjudication,in the interest of justice.The FAA is directed to decide the issue de novo after affording a reasonable opportunity of hearing to the assessee.Effective ground of appeal is decided in favour of the assessee,in part. As a result,appeal filed by the assessee stands partly allowed. फलतः अिधकारी �ारा दािखल क� गई अपील अंशतःमंजूर क� जाती है. Order pronounced in the open court on 12th April, 2017. आदेश क� घोषणा खुले �यायालय म� �दनांक 12 अ�ैल ,2017 को क� गई । 4 2740/M/15(08-09) Akshay Sandhu