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Income Tax Appellate Tribunal, MUMBAI BENCHES “A” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner (Appeals) – 31, Mumbai and arises out of the order u/s 143(3) of the Income Tax Act, 1961 (the ‘Act’).
The grounds of appeal filed by the assessee read as under:-
i. The learned CIT(A) erred in confirming the computation of long term capital gains made by the learned AO from sale of Flat No. 1/17 in OM Vishal Nagar at Rs. 60,48,953/- as against the taxable long term capital gains of Rs. 29,59,774/- declared by the appellant and thereby confirming the additions of Rs. 29,59,774/- made to the long term capital gains by the learned AO. ii. The learned CIT(A) erred in confirming the restricting the deduction claimed u/s 54 to 50% of the amount of long term capital gain invested by the appellant in the new residential property and thereby confirming the addition of Rs. 24,28,699/- made to the income from long term capital gains by the learned AO. iii. The learned CIT(A) erred in confirming the aforesaid addition of Rs. 24,28,699/- by relying on the decision of Hon'ble Bombay High Court in the case of Prakash vs. ITO 173 taxmann 311 without giving the appellant an opportunity to deal with and distinguish the said decision. It is respectfully submitted that the said decision rendered in the context of section 54F is distinguishable and is not applicable to the case of the appellant .The learned CIT(A) also erred in not considering and dealing with the decisions of Hon'ble Delhi and Karnataka High Courts in favour of the appellant and copies whereof were filed in appeal proceedings. iv. The learned CIT(A) erred in confirming the fair market value of the said flat as at 01/04/1981 at Rs. 86,688/- as against Rs. 177,938/- claimed by the appellant and thereby confirming the indexed cost of the said flat at Rs. 594,524/- against the indexed cost of Rs. 10,25,017/- claimed by the appellant which resulted into addition of Rs. 440,493/-. v. The learned CIT(A) erred in confirming the interest levied u/s 234A / 234B and 234C.
In a nutshell, the facts are that the assessee is a developer of his proprietary concern ‘M/s. Bajaj Construction’. The Assessing Officer (AO) noticed during the course of assessment proceedings that the assessee had shown long term capital gains of Rs. 30,89,179/- on sale of property [ Flat No. A/17, 4th Floor of Building know as Om Vishal Nagar, Building – A, Plot No. 7, S.V. Road, Borivali (W), Mumbai -92] which was received by him by way of inheritance from his father Shri Ashok Bajaj, who died intestate on 10.05.2007. The assessee had furnished before the AO an unregistered agreement of the said property dated 04.09.1980 executed between Shri Ashok Bajaj and Shri Maganlal Chaganlal Shah, as per which, the assessee’s father had purchased the said property for an amount of Rs. 45,251/-. The assessee had filed before the AO the valuation report of M/s. Anmol Sekri Consultant Pvt. Ltd. dated 07.09.2009 as per which the said property was valued at Rs. 1,77,938/- as on 01.04.1981. The AO was not satisfied with the said valuation report submitted by the assessee. Therefore, he invoked the provisions of section 55A and referred the matter to the DVO, who estimated the value at Rs. 86,688/- as on 01.04.1981. The AO further observed that the assessee had made investments of the sale proceeds in respect of the flat and claimed deduction u/s 54 on the full amount invested. But as per the sale agreement the assessee owned only 50% of the property. In view of the above, the AO held that deduction u/s 54 available to the assessee was allowable only to the extent of 50% of the total cost of the new property. Accordingly, he worked out the long term capital gains at Rs. 60,48,953/- as against 30,89,179/- shown by the assessee.
The assessee preferred an appeal against the order of the AO before the learned CIT(A). The learned CIT(A) agreed with the valuation given by DVO as the valuation adopted by the assessee’s valuer is based on rates mentioned in Indian Valuer’s Dictionary, which is not a government authorised document. Therefore, he upheld the determination of FMV at Rs. 86,688/-. Thereafter, the learned CIT(A) found that the property was purchased in joint name of the assessee, his aunt and uncle, thus giving right over the said property to all three persons, with the assessee having 50% of share. Relying on the decision in the case of Prakash vs. ITO (2008) 173 taxmann 311 (Bom), the learned CIT(A) held that the AO correctly restricted the assessee’s claim of deduction u/s 54 to 50%
Before us, the learned counsel of the assessee submits (i) copy of written submission filed before learned CIT(A), (ii) copy of valuation report of Anmol Sekri Consultants Pvt. Ltd., (iii) copy of valuation report of Assistant Valuation Officer, (iv) copy of agreement for sale in reference, (v) copy of ledger account showing payments for flat purchase, (vi) copy of decision of Hon'ble Karnatake High Court in the case of DI (IT) vs. Mrs. Jennifer Bhide, (vii) copy of decision of Hon'ble Delhi High Court in the case of CIT vs. Kamal Wahal, (viii) copy of bank pass book of appellant reflecting payments for the flat in reference (ix) copy of affidavit of Shri Ranjit Mukhi and Mrs. Lata Mukhi, (x) copy of deed of rectification and (xi) copy of undertaking of appellant.
On the other hand, the learned DR supports the order passed by the learned CIT(A).
We have heard the rival submissions and perused the relevant material on record. We begin with the 4th ground of appeal. We find that the valuation report given by the Assistant Valuation Officer – I, Mumbai is based on the reasons that (i) the valuation report by Anmol Sekri Consultants Pvt. Ltd. adopted a very high rate of Rs. 390 sq.ft. without any justification, also the valuer, has not given any sale instance to support his rate, (ii) the Indian Valuer’s Directory by Santosh Kumar & Sunit Gupta is not a government approved document to adopt the rate, and the rate adopted in this particular case is very high as compared to the sale instances in nearby area in the year 1981. As the valuation report by the Assistant Valuation Officer – I, Mumbai is based on rates derived from comparable sale instances around the property in nearby locality after taking into account the relevant pros and cons and other factors such as physical, social, economical, legal, status and time gap, we consider the rate of Rs. 190 per sq.ft. as on 01.04.1981 as fair and reasonable. Thus the above ground of appeal is dismissed.
7.1 Now we turn to 1st, 2nd and 3rd ground of appeal. We find that the learned counsel of the assessee has rightly mentioned that the learned CIT(A) has relied on the judgement of the Hon'ble Bombay High Court in Prakash (supra) without giving him an opportunity to deal with and distinguish the said decision. This is evident from the appellate order passed by the learned CIT(A). In view of the above, we set aside the order of the learned CIT(A) in respect of the above grounds of appeal and restore the matter to him to pass an order as per the provisions of the Act after giving reasonable opportunity of being heard to the assessee including his explanation in the case of Prakash (supra). The assessee is also directed to file the relevant details before the learned CIT(A). Thus, the 1st, 2nd and 3rd grounds of appeal are allowed for statistical purposes.
In the result, the appeal is partly allowed.
Order pronounced in the open court on 29/03/2017