PHOOL CHAND GUPTA(HUF),1/90 VIDHYADHAR NAGAR vs. ITO, WD-4(2), JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 393/JPR/2023 fu/kZkj.k o"kZ@Assessment Years : 2014-15 Phool Chand Gupta (HUF) cuke ITO Vs. 1-90, Sikar Road, Vidhyadhar Ward-4(2), Jaipur. Nagar, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADHP 6429 B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Jain (C.A.) jktLo dh vksj ls@ Revenue by : Smt. Monisha Choudhary (Addl.CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 31/10/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 11/01/2024 vkns'k@ ORDER

PER: DR. S. SEETHALAKSHMI, J.M. This appeal is filed by the assessee aggrieved from the order of the CIT(A), National Faceless Appeal Centre, Delhi [Here in after referred as “CIT(A)/NFAC”] for the assessment year 2014-15 dated 26.04.2023, which in turn arises from the order passed by the AO ITO Wd-4(2), Jaipur passed under Section 147/143(3) of the Income tax Act, 1961 (in short 'the Act') dated 08.12.2017.

2 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO “1. That the learned Commissioner of Income Tax (Appeals) has erred in not accepting our argument on account of reopening of case. The reopening of case was totally bad and unlawful. 2. That the learned CIT(A) ) has erred in maintaining the addition of Rs. 1487800/- on account of differences in DLC rate from purchase cost of the property.

3 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO satisfaction/ approval of the Joint Commissioner of Income-tax, Range-4, Jaipur, notice u/s 148 was issued to the assessee on 22.03.2017. The assessee filed its return of income in response to notice u/s 148 on 20.04.2017 declaring total income of Rs. 1,71,090/-. The ld. AO further observed that reasons recorded for reopening the assessment were communicated to the assessee, vide his letter dated 24.04.2017, the assessee filed objections against the proceedings u/s 148. The objections filed by the assessee were disposed of by passing a speaking order on 07.07.2017.

4 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO not been made. He further stated that he intends to furnish a valuation report in this regard. The objection of the assessee was examined. It was noticed that the District Valuation Officer has passed his order after affording proper opportunity to the assessee and examining/considering the objections raised by the assessee before him. The report of other valuation officer cannot be considered now as the valuation of land is a technical matter which has already been decided by the District Valuation Officer of the Department based on these observations the assessment was made by making an addition of Rs. 14,87,800/- u/s. 56(2)(vii)(b) of the Act.

“6. I have carefully considered the grounds of appeal, statement of facts, written submission filed by the assessee and the contents of the assessment order. During the course of appellate proceedings, the appellant has filed valuation report from Er. Vivek Kulshrestha dated 20.01.2020 wherein the land was valued at Rs. 24,86,591/-. Remand report was requisitioned in view of fresh evidence. However, the AO has not submitted any remand report and hence the appeal is disposed based on material available on record including the valuation report filed by the assessee. 6.1 On examination of valuation report of the assessee, it is found that final working is as under:- DETAILS OF VALUATION AS ON 2013-14

5 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO 1. Fair market value of construction works ( as considered by stamp department Rs. 73935 2. Fair market value of land A. Fair market value of land of northen part of land Land bearing Khasra No. -19 Land area 0.04 Hectare Or 0.15809 Beegha Land rate, as worked out in theRs.1782860 Per Beegha Valuation report Value of land of this part will be Rs. 281852 B. fair market value of land of southern part of land Land bearing Khasra No. 93,94 &95 Land area 0.21 Hectare Or 0.829972 Beegha Land rate, as worked out in the Rs. 2567318 per beegha Valuation report Value lf land of this part will be Rs. 2130804 C. Total land value of both the part will be (A+B) Rs. 2412656 3. Hence the total fair market value of the property will be Rs. 2486591 As a result of my appraisal and analysis it is my considered opinion that the fair market valuation of the agricultural property as immovable property as of land & construction works completed upto the stage of 2013-14 only in the prevailing condition with aforesaid specification could be Rs. 2486591 ( Rs. Twenty four lacs eighty six thousands & five hundred ninty one only) Place- Jaipur Date 20.01.2020 6.2 As mentioned above, the valuer of the assessee has taken land rate per Beegha at Rs. 17.82 lacs for northern part of land and Rs. 25.67 lacs per Beegha for southern part of land. The DLC rate was 35.65 lacs per beegha. The valuer has not considered or given any comparable instances of sale in that locality and merely an opinion which is without any basis has been given by the valuer which is as under:-

6 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO Sales 38. give instances of sales of immovable Not available property in the locality on a separate sheet indicating the name and address of the property registration number, sales price and area of land sold 39. Land rate adopted in this valuation. The standard DLC rate applicable in the area during the period is been considered as reference fair market land rate of the property. The DLC rate was Rs. 3565720.00 per beegha. As stated above the property is at two sides of roads, one is on northen side & another in southern side. Also, as stated above in 'economic obsolence as stated above, the northern part of land is at very lower level arround 25-30 fett below the normal road Leve hence the standard 50% deduction against the extra expenditure could be occurred to come up with the building at road level, is been considered. Hence the land rate for the northen part could be Rs 1782860.00(3565720x50/100=1782860.00)per beegha The same rate of land is been adopted in this valuation report. The land rate for southern part of land has economic obsolences as stated above, mainly the two nos of sales, de-appreciating the fair market land rate as DLC rate of area by 10% for each drain, Hence total deductions as Rs 20% is been made. The land rate of this part will be Rs 2852576.00(3565720- 20x3565720/100=2852576). Simmilar part of land was been previously under aquisition by govt. development authority JDA, which sill has the chance of beeing aquisation, hence for such,further reducing the worked out fair land of rate by 10%, Hecne the fair land of rate of this part could be Rs. 2567318.4(2852576-10x2852576/100=2567318.40), the same is been adopted as fair market land rate of this part in this valuation report. 40. if sale instances are not relied as stated above upon the basis of arriving at the land rate. 6.3 The valuer of the assessee has allowed higher rebate for defects mentioned in the report like drain, nala, un levelled land and acquisition by JDA etc. However, there is no justification for allowing such higher rebate for some defects mentioned in the report. Even after allowing huge rebate, the value of the property was arrived at by the valuer of the assessee at Rs. 24,86,591/- which is still higher than the purchase consideration of Rs. 21 lakh. Therefore, the valuation done by the stamp duty authority, the valuation done by the DVO as well as the valuer of the assessee all indicate higher fair market value than the purchase consideration paid by the assessee. The DVO has assessed the market value of property at Rs. 35,87,800/-by allowing fair amount of rebate for various defects and the appellant has not proved its case eligible for

7 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO higher amount of rebate. Therefore, the value adopted by the DVO is held to be correct and the market value of the property is held at Rs. 35,87,800/-. In view of above, the addition of Rs. 14,87,800/- made by the AO u/s 56(2)(vii)(b) is hereby confirmed. The relevant grounds of appeal are dismissed. 6.5 So far addition of Rs. 1,66,889/- made on account of expenditure towards registration/stamp duty by cash is concerned, the assessee has filed copy of capital account and balance sheet prepared on computer sheet without any signature of any person certifying its authenticity. Moreover, cash flow statement regarding availability of accountant cash as on date of making cash payment was not filed by the assessee. The assessee has not explained the nature of activities carried out by it resulting into generation of opening cash in hand of Rs. 1,66,889/-, In view of above, it is held that the AO has correctly treated the expenditure of Rs. 1,66,889/- made out of undisclosed sources and the said addition is confirmed. The relevant grounds of appeal are dismissed. 6.6 The appellant has not explained as to how he is eligible for deduction of Rs. 2,435/- u/s 80TTA as the details and breakup of bank interest from saving bank account was not filed. Therefore, the relevant grounds of appeal are hereby dismissed. 7. Accordingly, the appeal is treated as dismissed.” 6. Feeling dissatisfied with the above order of the ld. CIT(A) the assessee has preferred the present appeal before this forum on the grounds as stated in para 2 above. In support of the various grounds so raised by the ld. AR of the assessee reiterated the written submission which is reproduced hereinbelow:-

“We submit with regard our appeal for the ass. Year 2014-15 as under: - 1.That the learned commissioner of income tax (appeals)has erred in not considering our argument that case reopened was wrong and illegal. The property in this case was agriculture land situated more than 8 km distance from municipal limits which is outside per view of capital assets. The clause (iii) of section 2(14) specifically excludes such agricultural land out of purview of capital assets u/s 56 (2) (vii) (b) even if the same is immovable being land and building or both. In other words, provisions of section56(2)(vii)(b) applies only to those immovable property being land or building or both if it falls with in the definition of capital assets. In this regard we rely on the decision of the ITAT Pune bench in the case of Mubarak Gafur Korabu v/s ITO ward 2 Pune (117 taxman.com) The main reason for reopening of assessment was that DLC rate of purchased property was more than purchase cost. The valuation by

8 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO registrar was mechanically as per their norms without considering deficiency of land whether it was suffering from Ganda nallas, rocks, some part of land was 30-40 feet below the land level and it was unlevelled therefore it does not show correct market value of property. The registrar valuation does not show correct market value of property because they value the property as per rate of location of property but they do not take into account deficiencies of properties that i.e., nala, rocks, acquisition of land by JDA, levelling of land. Our land was suffering from drawback of acquisition by JDA, 2-3 Ganda nalas, rocks, non levelling of land. The all deficiencies reduce market value of property. The registrar has not considered these drawbacks in their valuation therefore there valuation is not correct and does not show correct market value. These difference does not show any escapement of income because all these shows deemed difference for which provisions of section 147 is not applicable. We have not paid any amount over and above the purchase price therefore no question of any income has escaped assessment. Merely because of stamp valuation authority has adopted a certain valuation for payment stamp duty on the property on the property purchased by the assessee the same cannot be a basis to conclude that assessee's income has escaped assessment, particularly when no tangible material has been brought on record to suggest escapement of income. learned AO is wrong and illegal in reopening of assessment u/s 147 on the basis of provisions of section 56(2)(vii)(b) because these provisions are deeming provisions and, on the basis, of DLC rate it could not be presumed that tax has evaded on any income because there is no actual income. Provisions of section 56(2) (vii)(b) are similar section 50C because both are applicable on difference in valuation of property by registrar therefore not applicale in case of reopening of assessment. Kindly therefore cancel the reopening proceedings and assessment order passed by AO on this basis. 2.That the learned commissioner of Income Tax (appeals) has erred in confirming the addition of Rs. 1437800/- made by AO on account of section 56 (2)(vii)(b) of the income tax act. The property in question was agriculture land outside the purview of more than 8 KM from municipal limits which does not comes within the definition of capital assets and outside the purview of section 56 (2)(vii)(b) The CIT(A) has not considered deficiency of land and valuation report of approved our valuer. He has not considered actual facts of land. That the CIT (A) has confused about land rate. The land rate was same as per our valuer but he has allowed rebate for nallas, acquisition by government rebate for rocks and unlevelled land therefore land actual rate was reduced because of rebate. The CIT(A) opinion that valuer has not given any comparable instances. In this regard overall rate was same and difference was due to rebate therefore there was no need of comparable instances. Other point of difference in valuation by our valuer and department valuer was because of following reasons: - (a) The department valuer has allowed 5% rebate only for one Gandha nalla of Rs.178286/-instead of 20% for two Gandha nallas of Rs. 713144/-in the land which was appearing from front of land.

9 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO (b)The department valuer has not considered the rebate of rocks and land level is 30-40 feet below the road level therefore it was not useable as such without making extra expenses to utilise the land therefore such rebate is rightly allowable. The valuer has wrongly commented that land was not properly identified at the time of inspection while it was thoroughly checked by department valuer and it was clearly visible and at the time of inspection they were agree with the situation that land is not usable as such but they have not allowed the rebate for such high deficiency therefore our valuer has taken the rebate of Rs. 281852/- for such deficiency. (c)The rebate for acquisition of land has been allowed by department valuer Therefore, we have no objection for the same. (d) Total rebate allowed by our valuer was of Rs.1280253/-(20% rebate for two nallas of Rs.713144/- + Rs.285257/- for acquisition and Rs.281852/-for rocks and un levelling of land) and total rebate allowed by departmental valuer was of Rs.576929/-(rebate for acquisition of Rs.398646/-and 5% rebate for Gandha nalla ofRs.178286/-) therefore total rebate of Rs. 703324/- short allowed by departmental valuer. (e)The valuation of boundary wall and tin shed room by departmental valuer has estimated Rs.599000/- and as per registrar value comes to Rs.73935/- (tin shed value of Rs.13935/- and boundary value of Rs.60000/-) The departmental valuer has estimated the value on estimate basis they have not verified the area of boundary wall and they himself agree that they have seen the land from front side therefore they do not have correct boundary wall area. Because of bad smell they have not entered the premises. boundary wall was of one feet only just to cover the area without any plaster and R. R. Masonry foundation and plinth and tin boundary was not plastered. The valuation by departmental valuer is estimated and not based on actual facts of the case therefore valuation was excess by Rs.525065/- which was wrong. The valuer has added Rs. 412992 for foundation work generally, such work is not done in case of boundary of agriculture land because it does not have upper load work. The total valuation as per our valuer comes to Rs.2486591/- and the difference between purchase value and value as per valuer is of Rs.386591/- which is 18.4%. the difference is very nominal and minor therefore it should be ignored because it is very difficult to correctly value any property. Our property is agricultural land and outside the purview of of capital assets because it is more than 8 km away from municipal limits and The provisions of section 56(2)(vii)(b) is not applicable. Immovable property being also property r/w definition of income in section 2(24)(xv) so section 56(2)(vii)(b) is to be r/w explanation (d) and the mention of immovable in clause 56(2)(vii)(b) is within the meaning of said explanation (d)to sub section 56(2)(vii) are not applicable for such capital assets. The learned AO only picked the immovable property from section56 56(2)(vii)(b) The clause (iii) of section 2(14) specifically excludes agricultural land of description given from capital asset. Provision section 56 are deeming provisions and which does not correct market value and on this basis no addition should be made further we submit agriculture land is

10 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO out of per view of capital assets therefore not taxable u/s 56(2)(vii)(2)\circ f the act. kindly therefore delete the addition of Rs.1487800/ 3.That the learned CIT (A)is wrong in maintaining the addition of Rs.168889/ on account of stamp duty and registration charges. It was surprised to note that CIT (A) has mentioned that it was not explained as to where such cash has been generated which is lying as cash in hand. We are regularly filling our income tax return since last 25 years and such cash balance was generated out of our Saving from income & it was lying with us and we have submitted computation of total income, capital account and balance sheet before the AO which clearly shows our cash balance and no doubt should be expressed on our papers. We have completely explained in this matter. we have filed capital account & balance sheet as on 31st march 2013 at the time hearing but AO doubted we have not filed on 7.7.2017 it does mean that we are false in any manner even if previously not filed because previously matter was under valuation and case adjourned till the valuation report after valuation we have filed the capital account and balance sheet showing cash balance of Rs.169991/- but AO has denied our cash balance because of reason that we are not maintaining any books of account therefore cash balance could not be accepted. we are not required to maintain any books of account because we are not doing any business.NO valid reason given by AO for addition of Rs. 168889/-further CIT(A) has confirmed the addition on the ground that cash flow statement not filed by us which clearly shows cash balance available with us before the payment. we are now filling cash flow statement which clearly shows cash balance available with us before the payment. As regards nature of activities carried on by us we are filling herewith computation of total income which clearly shows the nature of activities carried on by us which resulted in generation of cash in hand of Rs.166889/- There was no undisclosed sources and all the cash were from disclosed sources we therefore request please to delete the addition of Rs.168889/-made by AO and confirmed CIT(A).”

6.1 The ld. AR of the assessee vehemently argued that the DVO has not granted the various deduction as claimed by the assessee in the valuation report done by the ld. DVO. Therefore, he prayed that though the land in question being agricultural, no adjustment is required. But alternatively, he submitted that if the DVO’s report is to be considered through that report needs to be adjusted on account of the fact that there is no boundary

11 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO wall but the DVO has taken the length of boundary wall as per valuation of Sub-Registrar but in fact the boundary wall in the calculation sheet of Sub-Registrar present in the paper book is at a different figure the DVO has also not considered the rebate for nalla acquisition of land by government on account of and unleveled land thus was the reasons the assessee got reduced the price. The ld. AR of the assessee further argued that though there were two nallas but the rebate at the @ 5% for one nalla if this deduction is given for two nalla the fair market value of the land will be similar to that valuation adopted and mentioned in the agreement executed by the parties.

12 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO assessee has purchased the agricultural land which is outside municipal limit but there are no argument made before us though the land being agricultural land the addition cannot be made u/s 56(2)(vii) (b) of the Act. Therefore, Bench feels that there is no merit in the arguments of the ld. AR of the assessee on that aspect that the land is agricultural. The ld. AR of the assessee alternatively prayed to considered his argument on its merit about the defect pointed about in the valuation report. The Bench noted that the objections were submitted to the DVO for his comments and the same is extracted here in below :

13 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO

14 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO On this comments of the DVO for the nallas, we find from the comments of the DVO vide para 3 that the ld. DVO’s comments who has not considered the second nalla only on the reason that it was on backside and was not visible from the front side of the property and hence back side of nalla deduction was not considered. Considering that aspect of the matter that there were two nallas the deduction for that second nalla was not considered and therefore, the Bench direct the ld. AO to grant the deduction for two nallas instead of one nalla. The Bench also direct the ld. AO that the DLC rate for one nalla to be considered as 10% as it is appearing from the report of the registered valuer chart an engineer approved by the Revenue wherein 10% deduction was granted and therefore, for these two nallas the ld. AO is directed to grant the deduction @ 20% of the DLC rate for these two nallas. As regards the contention of the estimated cost of boundary wall the DVO in his comment specifically stated that the length of boundary wall is on estimate basis as no documentary evidence has been submitted by the assessee the cost of boundary wall and tin shed room was considered at Rs. 5,99,000/-. We are of the view that considering the peculiar fact of the case that the ld. AO has not estimated the cost based on actual verification and valuation has been done merely based on the length of boundary wall mentioned in the valuation sheet of Sub-Registrar. The ld. AR of the assessee on this aspect

15 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO argued that the sheet of calculation for boundary value and shed is considered at Rs. 60,000/- for boundary value and shade value was considered at Rs. 13,935/-, therefore, since the DVO categorically submitted that the valuation done by the Sub-registrar be considered. We find force in the arguments of the ld. AR of the assessee and therefore, we direct the ld. AO to grant the resultant benefit of taking valuation based on the sheet of registrar wherein the 60,000 and 13,945 taken. The valuation of shade and boundary wall and the shade value at thus in aggregate comes to Rs. 73,935/- mentioned in the DVO’s report. The third arguments advanced by the ld. AR of the assessee that price of 400 square yard land was not considered as properly identifiable. Therefore, it was not considered. This aspect of the matter it has been accepted by the DVO. We therefore, direct the ld. AO to grant the consequential relief of 400 square yard acquired by the JDA. As regards unexplained expenditure to open the registration of stamp duty charges etc. for an amount of Rs. 1,66,889/- . The ld. AR of the assessee submitted that a fund flow statement and from that fund flow we note that the assessee is having the cash balance as available to the extent of Rs. 2,67,691/- and out of that the assessee has also already used the registration charges for an amount of Rs. 2,36,889/- which covers the addition of Rs. 1,66,889/- and therefore, no separate addition is called for on this aspect. The Bench noted that the

16 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO assessee has submitted that the copy of balance sheet as at 31.03.2013 wherein the cash of balance of Rs. 1,69,991/- is recorded and therefore, on that aspect the ld. AR of the assessee heavily relied upon the cash flow statement. On this aspect, the Bench noted that the assessee debited the withdrawal of Rs. 6510/- withdrawal being very much at the lower side but considering the fact that the assessee has opening cash balance and therefore, we find that the assessee may be having an amount of Rs. 1,00,000/- out of the opening cash balance as well as current year income. Therefore, considering that aspect of the matter, the ld. AO is directed to grant the relief of Rs. 1,00,000/- and balance addition be sustained.

In terms of these observations, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 11/01/2024.

Sd/- Sd/-

¼jkBkSM +deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 11/01/2024 *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Phool Chand Gupta(HUF), Jaipur. 2. izR;FkhZ@ The Respondent- ITO, Ward-4(2), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A)

17 ITA No. 393/JPR/2023 Phool Chand Gupta (HUF) vs. ITO 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File { ITA No. 393/JPR/2023} vkns'kkuqlkj@ By order

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