M/S OMPRAKASH MITTAL,INDORE vs. ITO 2(2), INDORE

THIS APPEAL:

M/s Omprakash Mittal Assessment year 2017-18 BACKGROUND:

2. The assessee filed original Return of Income on 30.10.2017 declaring a total income of Rs. 11,74,260/- and subsequently filed a revised Return of Income on 05.01.2018 declaring a total income of Rs.11,76,260/-. The case was selected for scrutiny and the statutory notices u/s 143(2) and 142(1) were issued from time to time. Finally, the assessment was completed u/s 143(3) by order dated 23.12.2019 at a total income of Rs. 29,66,132/-, after making various additions. The assessee filed appeal to Ld. CIT(A) challenging one of those additions, viz. the addition of Rs. 15,71,040/- u/s 56(2)(vii) on account of difference between the fair market value of the land purchased by assessee i.e. Rs. 1,35,23,540/-) and the actual purchase-price of the land (i.e. Rs. 1,19,52,500/-). However, the Ld. CIT(A) did not grant any relief. Against the order of Ld. CIT(A), the assessee has filed this appeal and now before us.

GROUNDS:

3. The assessee has raised following grounds: “1. On the facts and circumstances of the case, the ld. CIT(A) NFAC Delhi erred in sustaining the addition of Rs. 15,71,040/- being the difference between alleged Fair Market Value determined by the DVO Indore and purchase price of Rs. 1,19,52,500/- u/s 56(2)(vii) of the Income Tax 1961 of the land situate at village Reward Tehsil Depalpur which is wrong illegal and unjustified.

4. The appellant prays for the relief.

M/s Omprakash Mittal Assessment year 2017-18 6. The appellant craves leave to add, alter or amend any Grounds of Appeal as and when the necessity or occasion arises.”

ISSUE:

PROCEEDINGS BEFORE Ld. AO:

5. The assessee purchased a land situated at village Rawad, Tehsil Depalpur for Rs. 1,19,52,500/-, which was valued by the Stamp Authority at Rs. 4,11,60,000/- for registration purpose. The assessee was not satisfied with the valuation of Stamp Authority and therefore requested the Ld. AO to refer the matter to the Departmental Valuation Officer [“Ld. DVO”]. The Ld. AO made a reference to Ld. DVO, whereupon the Ld. DVO estimated fair market value of land at Rs. 1,35,23,540/- vide his Report dated 13/12/2019, a copy of which is placed at Page No. 69 to 73 of the Paper-Book. On the basis of this Report of Ld. DVO, the Ld. AO issued a show-cause notice to the assessee u/s 56(2)(vii) with a proposal to tax a sum of Rs. 15,71,740/- (being the difference of Rs. 1,35,23,540/- finalized by Ld. DVO and Rs. 1,19,52,500/- actual purchase-price) as Income from Other Sources. In response, the assessee submitted that the land is interior, situated in a remote village and the assessee has not paid any money other than what is declared in the purchase-deed. The assessee further submitted that the difference of Rs. 1,35,23,540/- is just 13.14% of the actual purchase price of Rs. 1,19,52,500/- which is very meagre and can happen due to the subjectivity involved in estimation. The assessee also relied upon the decisions in C.B. Gauttam Vs. Union of India & Ors. dated 17.11.1992 (Supreme Court) and M/s Kaysons Builders Pvt. Ltd. Vs. Department of Income-tax (ITAT-Lucknow). However, the Ld. AO was not satisfied with the submission of assessee and made an addition of Rs. 15,71,040/- u/s 56(2)(vii).

M/s Omprakash Mittal Assessment year 2017-18 PROCEEDINGS BEFORE Ld. CIT(A):

6. Before Ld. CIT(A), the assessee repeated the same submissions as made before Ld. AO. However, the Ld. CIT(A) observed that the Ld. AO has already referred matter to DVO at the request of assessee and the Ld. DVO has finalized valuation at Rs. 1,35,23,540/-. The Ld. CIT(A) further observed that the difference in valuation is about 13.14% which has exceeded the permissible range of 5% as applicable for the assessment-year 2017-18. On this basis, the Ld. CIT(A) confirmed the addition made by Ld. AO.

SUBMISSIONS OF Ld. AR:

M/s Omprakash Mittal Assessment year 2017-18 colony it has not potential. But as per rocky area it has potential. So this potential of property considered in valuation of property.” Ld. AR submitted that the Ld. DVO has openly accepted extreme deficiencies in the quality of land i.e. the land is interior as well as rocky and it does not have potential for building residential colony, which have a great impact on the valuation. Ld. AR further submitted that it is also apparent from the Valuation-Report that no concrete basis has been given for making valuation, therefore the value determined by the Ld. DVO is a pure estimate. Ld. AR submitted that the Ld. DVO has finalized valuation at Rs. 1,35,23,540/- as against the purchase-price declared by the assessee at Rs. 1,19,52,500/- and therefore the difference is just 13.14% which is meagre. Ld. AR submitted that although the assessee has raised these contentions before the Ld. AO as well as Ld. CIT(A) but the authorities have not given due consideration to the assessee’ contentions.

Ld. AR also referred to the decision of Hon'ble Supreme Court in case of C.B. Gautam vs. Union of India & Ors dated 17.11.1992. Ld. AR submitted that although the decision was given for a different provision of Income-Tax Act, 1961 yet it can be gainfully used even in the present appeal. According to Ld. AR, the Hon'ble Supreme Court has accepted that the valuation is a substantive-matter and difference up to 15% is an acceptable margin. Ld. AR submitted that the benefit of the decision should be given to the assessee.

Ld. AR further referred to the decision of Hon'ble’, I.T.A.T., Mumbai Bench in Suresh C Mehta vs. ITO-13(2)(1), Mumbai, order dated 17.05.2013 where a similar issue arose and the Hon'ble Bench has held as under:

“7. We have carefully considered the rival submissions, perused the relevant findings of the learned Commissioner (Appeals) as well as the Assessing Officer. The assessee has sold the property for a sum of Rs. 12,00,000, and has computed the long term capital gain at Rs. 10,05,783, whereas the V.O. to whom reference was made under section 50C, has estimated the fair market value at Rs. 13,79,913. For the purpose of section 50C, the Assessing Officer has adopted the value determined by the V.O. and has computed the long term capital gain at Rs. Page 5 of 9

M/s Omprakash Mittal Assessment year 2017-18 11,38,020. Section 50C is a deeming provision wherein the fair market value for sale consideration received on an asset is deemed to be taken as per the value assessed or adopted by the stamp valuation authority for the purpose of stamp duty. Sub- section (2) of section 50C further provides that if the assessee claims before the Assessing Officer that valuation adopted or assessed by the stamp valuation authority has exceeded the fair market value of the property on the date of transfer, the Assessing Officer may refer the valuation of the capital asset to the V.O. and on such a reference, provisions of section 16A of Wealth Act, 1957, will apply. Sub-section (2) further provides that if such a reference is made then certain provisions of section 16A, 23A, 24, 34AA, 35 and 37 of the Wealth Tax Act, 1957,shall apply with necessary modification. Section 16A of the Wealth Tax Act, 1957, provides power to make reference to the V.O. for determining the fair market value and the functions of the V.O. Sub-section (6) of section 16A, makes it obligatory to the Assessing Officer to adopt the value as reported by the V.O. Provisions of section 23A gives scope of first appeal and the subject matter which can be appealed before the learned Commissioner (Appeals) including that of any order of the V.O. and the powers of the learned Commissioner (Appeals) in relation to such valuation. Section 24 deals with the appeal to the appellate Tribunal and section 34AA deals with the appearance of the assessee through registered valuers before the learned Commissioner (Appeals) and the Tribunal and section 35 deals with rectification of mistakes. A combined reading of these sections provide that in so far as the Assessing Officer is concerned, he is bound by the valuation adopted by the V.O. whereas the learned Commissioner (Appeals) and the Tribunal can entertain objections relating to such valuation and V.O's valuation is not binding upon them. Sub-section (3) of section 50C provides that if the value ascertained by the V.O. exceeds the value adopted or assessed by the stamp valuation authority then such valuation adopted or assessed by the stamp valuation authority shall be taken, that is, if the V.O's value exceeds the value adopted by the stamp valuation authority, the same should be ignored by the Assessing Officer. From the conjoined reading of sub-section (1), (2) and (3) of section 50C along with the relevant provisions of Wealth Tax Act as have been referred to in sub-section (2), it is evident that though the Assessing Officer is bound by the V.O's report in case it is lower than the value assessed by the stamp valuation authority, however, the same is not binding upon the learned Commissioner (Appeals) or the Tribunal wherein the assessee can further raise objection to such valuation. If that is so, then the learned Commissioner (Appeals) and the Tribunal can also examine into the fact whether the difference of less than 15% between the actual sale consideration and the value adopted by the V.O. can be ignored on the facts Page 6 of 9

M/s Omprakash Mittal Assessment year 2017-18 and circumstances of the case. In the present case, the assessee has objected to the fair market value adopted by the V.O. vide letter dated 13th November 2009. Neither the Assessing Officer nor the learned Commissioner (Appeals) entertained any such objection or has given any cogent reasons. If the assessee has made various objections to the V.O's report, the learned Commissioner (Appeals) was bound to look into these objections so as to arrive at proper fair market value. He was also bound to consider the contentions of the assessee that in case of difference of less than 15% between the value shown by the assessee and the value estimated by the V.O., the benefit should be given to the assessee and such a difference can be ignored. We, therefore, set aside the impugned order passed by the learned Commissioner (Appeals) and remit the matter back to him to decide the same afresh after considering the objections of the assessee to V.O's estimate as well as his claim for benefit when the difference is less than 15%. Consequently, the appeal of the assessee is treated as allowed for statistical purposes.” SUBMISSIONS OF Ld. DR:

OUR ANALYSIS:

“Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assesee on grounds mentioned in sub-section 50C(2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub- section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections:”

Respectfully following the decision of Hon’ble Co-ordinate Bench, we also think it fit to remit the present matter back to Ld. CIT(A) for a fresh adjudication after considering the objections of assessee.

DISPOSITION: