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Income Tax Appellate Tribunal, ‘ A’ (SMC
Before: SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
This appeal filed by the assessee is directed against an order dated 18.10.2016 of ld. Commissioner of Income Tax (Appeals)- 2, Chennai. Assessee has taken altogether raised twelve grounds of which grounds No.1 & 12 are general in nature needing no specific adjudication
ITA No. 3406/Mds/2016 :- 2 -:
Through its grounds 2 & 3, assessee assail reopening done u/s.148 of the Income Tax Act, 1961 (in short ‘’the Act’’) for the impugned assessment year. Ld. Counsel for the assessee submitted that assessment was reopened without a valid reason. Hence, according to him, reopening was invalid.
Per contra, ld. Departmental Representative strongly supported the orders of the authorities below.
I have considered the rival contentions and perused the 4. orders of the authorities below. What I find is that assessee had not filed any return voluntarily. First return filed by the assessee was pursuant to a notice issued u/s.148 of the Act on 17.12.2013. The said notice was issued since assessee had alongwith three other co- owners sold land measuring 1 ground 1593 sq.ft, at New No.76, Old No.24, Mandaveli Street, Chennai-28 on 27.12.2006, but had not filed any return for the capital gains arising from such transaction. In my opinion, assessee having not filed any return voluntarily, the proceedings resulted only in a first assessment. Therefore assessee ‘s ground challenging the reopening has no merits. Grounds 2 & 3 are dismissed.
ITA No. 3406/Mds/2016 :- 3 -:
Vide its grounds 4 to 7, assessee is aggrieved on the computation of long term capital gains at �16,84,760/- against �40,500/- declared by him.
As mentioned earlier assessee had sold a property with other three co-owners on 27.12.2006. Assessee had declared long term capital gains of � 40,500/- in the return filed pursuant to the notice issued u/s.148 of the Act. As per ld. Assessing Officer sale consideration though mentioned in the sale deed as �10,00,000/-, the market value of the property was much higher and stamp duty was on such higher value. When the assessee was queried on it, his reply was that there was a suit pending before Jurisdictional High Court filed by M/s. Mylapore Gymkhana for declaration of title of the subject property and hence the sale was under distress. Assessee also requested ld. Assessing Officer to refer the Valuation to the DVO. DVO vide its report dated 24.03.2015 estimated fair market value at �74,76,054/-.
Thereafter long term capital gains was recomputed by the ld. Assessing Officer based on the DVO report, in accordance with Sec. 50C (3) of the Act. 1/4th share of the assessee came to �18,69,000/-, and after deducting indexed cost of acquisition �1,84,245/-, long term capital gains was computed at �16,84,755/-.
ITA No. 3406/Mds/2016 :- 4 -:
Aggrieved, assessee moved in appeal before ld. Commissioner of Income Tax (Appeals). Argument of the assessee was that sale consideration could not be taken at market value since there was a pending suit for declaration of title to the subject property.
According to the assessee, Valuation Officer did not take into account the pending suit while doing the valuation. Assessee brought to the notice of ld. Commissioner of Income Tax (Appeals), details of the Civil suit filed by M/s. Mylapore Gymkhana Club. As per assessee, the Hon’ble Jurisdictional High Court had directed the respondents, which included assessee, to indicate the pendency of the litigation in all the transactions relating to the subject property and this was a factor which compelled assessee to go for a distress sale. According to the assessee Sec. 50C (1) of the Act could not be applied on a distress sale. For this, reliance was placed on the decision of Lucknow Bench of the Tribunal in the case of ITO vs. Hari Om Gupta (2016) 45 ITR (Trib) 0137.
However, ld. Commissioner of Income Tax (Appeals) was not impressed by the above arguments. According to him, the reference to the DVO was based on a request of the assessee. Opinion of the ld. Commissioner of Income Tax (Appeals) was that by virtue of Sec.
50C(3) of the Act, once such a reference was made, on the request of ITA No. 3406/Mds/2016 :- 5 -: the assessee, ld. Assessing Officer was bound to adopt the valuation made by the DVO. Further, as per ld. Commissioner of Income Tax (Appeals) pendency of the suit was mentioned in the sale deed and the suit as such did not affect the value of the property, since the condition stipulated by the Hon’ble Jurisdictional High Court was only to intimate the pendency of the litigation to the purchaser. Thus, he held that the Assessing Officer had adopted value of �18,69,000/- for the property correctly.
Now before me, ld. Authorised Representative strongly assailing the orders of the lower authorities submitted that Lucknow Bench of the Tribunal in the case of Hari Om Gupta (supra) had clearly held that in a distress sale the procedure mentioned in Sec. 50C of the Act could never be applied. According to him, assessee was constrained to sell the subject property at a rate lower than the market value due to the pending litigation. Hence to substitute the consideration which was actually paid by the buyer to the seller with market value would give rise to fictitious income. According to him, the price mentioned by the assessee in the sale deed alone could be considered for working out capital gains.
Per contra, ld. Departmental Representative strongly 10.
supported the orders of the authorities below.
ITA No. 3406/Mds/2016 :- 6 -:
I have considered the rival contentions and perused the orders of the authorities below. It is true that there was a pending litigation on the property which was sold by the assessee. This was also brought to the notice of the ld. Assessing Officer/DVO. However, Jurisdictional High Court had not restrained assessee from alienating or dealing with the property. What it directed was only to indicate the pendency of litigation in any transactions relating to the property.
Assessee had during the course of the valuation proceedings before ld. DVO, brought to his attention, the existence of the litigation in the objections filed by him. It was after considering such objections that DVO made the valuation. Relevant part of the order dated 24.03.2015 of the DVO is reproduced hereunder.
’Having considered the statement of objections filed by the Assessee and having considered all the evidence produced by the assessee and having taken into account all the relevant materials gathered by me during the physical inspection of the property, I propose to estimate the Fair Market Value of the above said property Old Door No 24, New No 76 (New No 58) Mandaveli Street, Mylapore Chennai 600004. For the land measuring one ground and 1593 sq feet sold vide doc No 3783/2006 as on 27.12.2006 ie Rs 74,76,054/- . Accordingly 1/4the share of the assessee is worked out as ₹.18,69,OOO/- (Rupees Eighteen lakhs sixty nine thousand only)"
ITA No. 3406/Mds/2016 :- 7 -:
Thus, the value determined by the DVO was after considering the effect of the pending litigation. Assessee thus, was not been able to rebut the case of the Revenue that DVO had considered all the material filed by the assessee including the details of the suit pending on the subject property. At this juncture, it is required to have a look at Sec. 50(C) of the Act which is reproduced hereunder:-
‘’1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government (hereafter in this section referred to as 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 the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub- section (1), where (a) the assessee claims before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer ; (b) the value so adopted or assessed by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply
ITA No. 3406/Mds/2016 :- 8 -: in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer’’.
Sub Section (3) to Sec. 50C of the Act clearly mandates adoption of the value fixed by the DVO when such value was less than what was adopted by the Revenue authorities for fixing the stamp value.
Admittedly, DVO had taken FMV at �74,76,054/- which was less than the value of �78,70,203/- adopted by the Registration authorities.
Coming to the decision of Lucknow Bench of the Tribunal in the case of Hari Om Gupta (supra) relied on by the ld. Authorised Representative, the sale was considered as done under distress, since assessee concerned was not able to pay dues to the bank where the property was kept as collateral security. It does not lay down a law that in all cases where there is a litigation it would be a distress sale.
Therefore, I am of the opinion that lower authorities were justified in applying Sec. 50C of the Act. I do not find any reason to interfere with ITA No. 3406/Mds/2016 :- 9 -: the order of the lower authorities. Grounds 4 to 7 of the assessee are dismissed.
Vide its grounds 8 to 11, grievance raised by the assessee on 12. the enhancement done by the ld. Commissioner of Income Tax (Appeals), by recomputing the cost of acquisition.
Facts apropos are that cost of acquisition which was sold 13. was adopted by the assessee at �1,42,000/- (for 4000 sq.ft) based on an estimated value as on 01.04.1981. As per ld. Commissioner of Income Tax (Appeals) in the partition deed dated 28.07.1978, through which the property came into ownership of the assessee alongwith three other persons, the value was �35,000/- for 6119 sq.ft, which translated to �22,880/- for 4000 sq.ft. As per ld. Commissioner of Income Tax (Appeals), the SRO, Mylapore had confirmed the guideline value per ground at �22,000/- as on 01.04.1981. He therefore proposed an enhancement of long term capital gains by substituting the value per ground adopted by the assessee with guideline value of �22,000/- per ground.
When assessee was put on notice on above proposed 14. enhancement, it submitted that Sec. 55A of the Act as it existed prior to amendment, did not give any room to make a reference to ITA No. 3406/Mds/2016 :- 10 -:
Valuation Officer, when the value of a properly claimed by the assessee was higher than the FMV. According to the assessee, the value estimated by him, as on 01.04.1981 was higher than the FMV.
Reliance was placed on the judgment of Hon’ble Bombay High Court in the case of CIT vs. Puja Prints 360 ITR 697. However, ld. Commissioner of Income Tax (Appeals) was not impressed. According to him, there was no valuation done by a Valuation Officer for estimating the value of the property as on 01.04.1981. Further, according to him, what was to be adopted was the guideline value based on Government records. He held that Sec. 55A of the Act had no application in such a situation and directed the ld. Assessing Officer to apply the guideline value as on 01.04.1981, at �22,000/-, per ground for arriving at the cost of acquisition.
Now before me, ld. Authorised Representative reiterated the contentions taken by the assessee before ld. Commissioner of Income Tax (Appeals). According to him, prior to amendment to clause (a) to Sec. 55A through Finance Act, 2012 which came into effect from 01.07.2012, a reference could not be made to the Valuation Officer when the value claimed by the assessee was more than the FMV.
Per contra, ld. Departmental Representative strongly 16.
supported the orders of the authorities below.
ITA No. 3406/Mds/2016 :- 11 -:
I have considered the rival contentions and perused the orders of the authorities below. Assessee had adopted cost as on 01.04.1981 at �1,42,000/- for 4000 sq.ft which translated to �85,200/- per ground. Ld. Commissioner of Income Tax (Appeals) had considered the guideline value given by SRO, Mylapore which gave a value of �22,000/- per ground, as on 01.04.1981. Ld. Commissioner of Income Tax (Appeals) had also noted the partition deed at 28.07.1978 wherein the value given was �22,880/- for 4000 sq.ft which translated to �13,728/- per ground. Contention of the assessee before me is that Sec.55A of the Act had no application where the value claimed by the assessee was more than the FMV, prior to amendment to clause (a) to Sec. 55A of the Act through Finance Act, 2012. There can be no quarrel on this, by virtue of judgment of Hon’ble Bombay High Court in the case of Puja Prints (supra).
However, in the instant case there was no reference made to a Valuation Officer by the ld. Assessing Officer or ld. Commissioner of Income Tax (Appeals). Ld. Commissioner of Income Tax (Appeals) had taken note of the partition deed dated 28.07.1978 through which assessee become the owner of the property, and thereafter adopted the guideline value fixed by the Government for the property. In such circumstances, I am of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in holding that Sec. 55A of the Act
ITA No. 3406/Mds/2016 :- 12 -: had no application. I do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). Ground Nos. 8 to 11 of the assessee are dismissed.
In the result, the appeal of the assessee stands dismissed.
Order pronounced on Friday, the 31st day of March , 2017, at Chennai.