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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Ms. Annapurna Gupta & Shri T.R. Senthil Kumar
आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-
This assessee’s appeal for A.Y. 2014-15, arises from order of the CIT(A)-3, Rajkot dated 11-10-2019, in proceedings under section 250 of the Income Tax Act, 1961; in short “the Act”.
Grounds raised by the assessee are as under:-
Page No 2 Smt. Mumtajbanu A. Jivani vs. ITO Sr. Grounds of Appeal Tax effect relating to each No. Ground of appeal
1. That, the Ld. CIT(A) has wrongly confirmed addition of Rs. 7,07,500/- as unexplained income u/s 56(2)(vii)(b) of the IT. Act, 1961.
2. That, the findings of the Ld. CIT(A) are not justified and are bad-in-law.
3. That, the appellant craves to add, amend, alter or delete any of the above grounds of appeals. Total tax effect (see note below) Rs. 7,07,500/-
3. The solitary issue in the present appeal relates to the addition to the income of the assessee in terms of section 56(2)(vii)(b) of the Act amounting to Rs. 55,91,837/-, being the amount by which an immoveable property purchased by the assessee fell short of its stamp duty value.
The facts relating to the case is that the assessee had jointly purchased an agricultural land at village Kadiyali, Taluka Rajula, District Amreli for a total consideration of Rs. 80,00,000/-. The stamp duty paid on this purchase of agricultural land was Rs. 9,40,000/-. The Assessing Officer accordingly calculated the fair market value i.e. stamp duty value of the property at Rs. 1,91,83,673/- and since purchase consideration was less than the aggregate fair market value of the property adopted for stamp duty valuation, he treated the difference of Rs. 1,11,83,673/- as income in terms of section 56(2)(vii)(b) of the Act. The assessee’s share in the property being 50%, addition of 50% of the difference i.e. Rs. 55,91,873/- was made in the hands of the assessee.
Page No 3 Smt. Mumtajbanu A. Jivani vs. ITO
During appellate proceedings, the assessee contended that the Assessing Officer had erred in not referring the property for valuation to the DVO and requested the property be referred for valuation as contemplated u/s. 50C of the Act. The ld. CIT(A) accordingly directed the Assessing Officer to make reference to the DVO. The DVO submitted his valuation report dated 23-08-2018, estimating the fair market value of the property @ 94,15,000/- as against Rs. 80,00,000/- declared by the assessee. Before the ld. CIT(A), the assessee objected to the valuation of the property by the DVO and also contended that the difference in the DVO valuation and purchase value of the property being merely 15%, there was no need to make any addition to the income of the assessee in terms of section 56(2)(vii)(b). Reliance was placed on the decision of Hon’ble Apex Court in the case of C.B. Gautam vs. Union of India 199 ITR 530. The ld. CIT(A) however did not find any merit in the arguments of the ld. counsel for the assessee and noting that despite several opportunities given by the DVO to file objection to his valuation, the assessee had made no objection to the same, he stated that any objection of the assessee to the valuation report at this stage could not be entertained. He further distinguished the decision of the Hon’ble Apex Court relied upon by the ld. counsel for the assessee as having been rendered in a totally different context, in terms of section 269UD of the Act. The ld. CIT(A) thereafter upheld the addition made by the Assessing Officer to the extent of difference in value reported by the DVO which came to Rs. 7,07,500/- and dismissed the appeal of the assessee. His finding in this regard at para 7.2 of the order is as under:-
Page No 4 Smt. Mumtajbanu A. Jivani vs. ITO
“7.2 I have carefully gone through the submissions of the appellant and the case laws relied upon. I have also gone through the objections filed by the appellant regarding the valuation made by the DVO. At the outset, it is seen that the DVO vide letter dated 25.07.2018 had confronted the assessee, about the proposed valuation. It is also mentioned by the DVO that assessee has not submitted any objection in writing within the stipulated time given till 17.08.2018. As such the objection of the assessee at this stage, regarding the valuation made is without any basis and is rejected. I have also gone through the judgment relied upon by the appellant of Hon. Supreme Court in the case of C.B. Gautam v/s UOI 199 ITR 530 (SC) which was rendered in an entirely different context. The judgment dealt with the order by Appropriate Authority and section 269UD and thus distinguishable on facts. As such, in my considered view, the same does not help the case of the assessee which deals specifically with section 56(2)(vii)(b). Further, the relevant extract of section 56(2)(vii)(b) is reproduced as under:- “ii. for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as uxceeds such consideration." The section makes it amply clear that in cases where the purchase consideration is less than the stamp duty value of the property by an amount; exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration has to be assessed u/s 56(2). In the provisions of section 56 there is no further allowance whatsoever that is permitted. In the case of the: appellant, such difference's more than 15% i.e. 15.02%. Since no allowance whatsoever is permitted within Sec 56(2) the contentions of the appellant are rejected. Also the case laws relied upon are distinguishable on facts and do not help the case of the assessee.
7.8 In view of the above discussion, the appellant's contentions are rejected and AO is directed to re-compute the addition u/s 56(2)(vii)(b) on the basis of fair market value arrived at in the valuation report by the DVO. In the result the appeal of the appellant is partly allowed.”
Before us the ld. counsel for the assessee reiterated the contentions made before ld. CIT(A) that the land purchased by the assessee had several defects effecting its market value which he pointed out were also noted by the DVO in his valuation report and therefore the market value of the land was comparatively lower. He drew our attention to the defects in the land as reproduced before us in writing in a brief chart of arguments as under:-
Page No 5 Smt. Mumtajbanu A. Jivani vs. ITO
(A) The Impugned Land is not fertile land • The "A" has jointly acquired land for agriculture purposes • The impinged land is close to sea area, the land is affected by salt and not good for agriculture activity. • No irrigation facility is available Land is also undulated • There is also one huge pipeline installed in the land by the Government and therefore there is various speculation about the feasibility of the land holding due to which the market value is lower • These facts are also verified by the Valuation Officer vide page no. 35 of the Paper book in his special observation . • Therefore, the market value of the land is also comparatively lower.
7 He also drew our attention to pager book page no. 35 containing the DVO report pointing therefrom the special observations of the DVO as under:- “The PUC inspected on 29.06.2018, the land was agricultural land but no irrigation facility was available, land was undulated & one side sloping pipeline was also passing through the PUC. The PUC is having good future potentiality.”
8 The other contention of the ld. counsel for the assessee was to the effect that the value of land in the nearby area was within the range in which the assessee had purchased the land. He pointed out that the assessee had purchased the land @ Rs. 421/- per square meter and the value in the nearby area was within the range of Rs. 108 to 508 per square meter. He drew our attention to the submissions in this regard before ld. CIT(A) at page no. 4 as under:-
District Taluka Village Survey no Rate
Amreli Rajula Kadiyali 178 308 Amreli Rajula Kadiyali 63 508 Page No 6 Smt. Mumtajbanu A. Jivani vs. ITO
Arnreii Rajula Kadiyali 56 458
Amreli Rajula Ningala No. 1 70 108
Amreli Rajula Devka 104 115 9 He also contended that even the comparable instances which were taken by the DVO were quite largely comparable to the assessee. He drew our attention to paper book page no. 38 where the DVO had listed the comparable instances for the purpose of valuation pointing out that the rate per square meter of the comparable instances noted by the DVO Rs. 416/- per square meter, Rs. 458 per square meter, Rs. 525 per square meter and 457 per square meter. He pointed from the same that most of the comparable instances were comparable to the assessee’s purchase price of Rs. 421/- per square meter referring to the chart as placed below:-
COMPARABLE SALE INSTANCES ANNEXUTRE-“A” Assessee : Smt. Mumtajbanu Jivani Property: S. No. 5/2 paiki 1/2/1, Kadiyali Date Of Valuation : As on 26.06.2013 Sr. Location Consideratio Area in Rate/ Seller Regd. No. No. n (Sq.m) Sq. m in in (Rs.) (Rs.) Purchaser Date 1 S.No.l54, Paiki 3 Kadiyali 4212000.00 10117. 416.00 Kantilal Shah 1881 00
Kanjibhai Sardhara 18.10.2013 2 S. No. 187 paiki 1, Kadiyali 9083399.00 19830. 458.00 Jalodhara Valabhai 1093 00 Page No 7 Smt. Mumtajbanu A. Jivani vs. ITO
Navneetrai Vora 23.05.2013 3 S.No.189 paiki 1. Kadiyali 9081700.00 17300. 525.00 Nadhabhai Nakoom 1751 00 Praveenaben 26.09.2013 Radhadiya 4 S. No. 66/2 paiki, 2, Kadiyali 9900000.00 21661. 457.00 Jinabhai Chauhan 1464 00
Himanshubhai Mehta 09.08.2012 Considering the above sale instances and taking into account all the factors which affect the land rates such as size, shape, situation, location, utility, land tenure, Co-ownership, Future Potentiality, time lag, etc of the sale instance properties with respect to PUC and make it comparable by adjusting all advantages and disadvantages of the sale instances with the PUC the land rate of Rs. 495/- per sq. as on date 26/06/2013 is considered quite fair and reasonable.
His last line of argument was that even statute recognizes 10% difference in the fair market value of land and the actual purchase price of land as immaterial for the purposes of making any adjustments to the incomes of the assessee in terms of section 50C or section 56(2)(vii)(b) of the Act. He pointed out that by virtue of third proviso to section 50C of the Act inserted by Finance Act 2018,which section required substitution of the actual sale consideration received on sale of land with its stamp duty value where found higher for the purposes of computing capital gain earned on sale of land, any difference in the actual sale consideration and the stamp duty valuation to the extent of 10% was to be ignored for the purposes of treating as deemed consideration. He drew our attention to the decision of the Hon’ble ITAT in the case of Amrapali Cinema vs. ACIT [2021] 127 taxman.com 376 (Delhi-Tri) holding this amendment to be retrospective in nature. The contention of the ld. counsel for the assessee before us was that Page No 8 Smt. Mumtajbanu A. Jivani vs. ITO out of the four comparable instances taken by the DVO, in three instances the difference was less than or upto 10% while it exceeded 10% only in one instance. The contention was that the DVO was grossly unjustified in valuing the land in such circumstances at a value exceeding 15% of the purchase price. He pleaded that where the majority of the comparable instances taken by the DVO itself fell within the acceptable market value price, there is no need for making any addition to the income of the assessee on account of fair market value exceeding the purchase price of the asset.
The ld. Departmental Representative on the other hand contended that the Assessing Officer was bound by the report of the DVO and could not have made any adjustment to the same. In this regard, he relied upon the decision of Hon’ble Jurisdictional High Court in the case of Gayatri Enterprise vs. ITO reported in 105 CCH 483. He further relied upon the order of the ld. CIT(A) finding the ratio laid down by the Hon’ble Apex Court in the case of CB Gautam supra as unacceptable in the facts of the present case. Ld. Departmental Representative also pointed out that the difference in valuation contended by the learned counsel for the assessee to be 15% was actually 17.68%. He therefore contended that ld. CIT(A) had confirmed the addition in the facts of the case.
We have heard the rival contentions and carefully considered the arguments of both the parties and have also gone through the orders of authorities below.
Page No 9 Smt. Mumtajbanu A. Jivani vs. ITO 12.1 The issue before us is relating to the addition made to the income of the assessee on account of purchase price of land purchased during the impugned year by the assessee found to be less than its fair market value/stamp duty valuation, in terms of provisions of 56(2)(vii)(b) of the Act. The assessee had purchased the land at a value of Rs. 421 per square meter and the DVO had assigned to it value of Rs.495 per sq mtrs resulting in a total difference of 7,07,500/- to the portion of land purchased by the assessee, which in turn was added to his income u/s. 56(2)(vii)(b).
12.2 The DVO’s report placed before us at P.B 32-38 reveals that he had considered four comparable instances for arriving at the fair market value of the land purchased by the assessee at Rs. 495 per square meter. The four instances are tabulated in our order above. For the sake of convenience, we are reproducing the same here again.
COMPARABLE SALE INSTANCES ANNEXUTRE-“A” Assessee : Smt. Mumtajbanu Jivani Property: S. No. 5/2 paiki 1/2/1, Kadiyali Date Of Valuation : As on 26.06.2013 Sr. Location Consideratio Area in Rate/ Seller Regd. No. No. n (Sq.m) Sq. m in in (Rs.) (Rs.) Purchaser Date 1 S.No.l54, Paiki 3 Kadiyali 4212000.00 10117. 416.00 Kantilal Shah 1881 00
Kanjibhai Sardhara 18.10.2013 2 S. No. 187 paiki 1, Kadiyali 9083399.00 19830. 458.00 Jalodhara Valabhai 1093 00 Page No 10 Smt. Mumtajbanu A. Jivani vs. ITO
Navneetrai Vora 23.05.2013 3 S.No.189 paiki 1. Kadiyali 9081700.00 17300. 525.00 Nadhabhai Nakoom 1751 00 Praveenaben 26.09.2013 Radhadiya 4 S. No. 66/2 paiki, 2, Kadiyali 9900000.00 21661. 457.00 Jinabhai Chauhan 1464 00
Himanshubhai Mehta 09.08.2012 Considering the above sale instances and taking into account all the factors which affect the land rates such as size, shape, situation, location, utility, land tenure, Co-ownership, Future Potentiality, time lag, etc of the sale instance properties with respect to PUC and make it comparable by adjusting all advantages and disadvantages of the sale instances with the PUC the land rate of Rs. 495/- per sq. as on date 26/06/2013 is considered quite fair and reasonable.
12.3 The assessee contends that out of four comparable instances listed above by the DVO, three are comparable to the assessee, the first case showing value of a property less than that at which the assessee purchased the land and the instances at serial no. 2 and 4 showing value of the comparable land within the 10% range of being in excess of the purchase value. The assessee’s purchase value being Rs. 421 per square meter the 10% range for acceptable fair market value is Rs. 463 per square meter, the comparable lands at serial nos. 2 and 4 showing their rates at Rs. 458 per square meter and Rs. 457 per square meter, they are within 10% acceptable range. Even the ld. Departmental Representative does not dispute this fact.
12.4 In the light of the above, we agree with the Ld. Counsel for the assessee that majority of the comparable instances picked up by the DVO for valuation of impugned land falling within the acceptable range of Page No 11 Smt. Mumtajbanu A. Jivani vs. ITO comparison with the purchase value of the assessee, there was a good a justifiable case for treating the purchase value of land by the assessee as comparable to its fair market value.
Moreover, we find, there is no basis given by the DVO for arriving at fair market value of Rs. 495/- from the comparable instances listed by him in his report. Therefore, we see no reason for adopting the said value as the fair market value when the facts sufficiently demonstrate that majority of the comparable instances picked up by the DVO himself showed that the purchase price paid by the assessee was comparable to the instances picked up by him.
12.5 For this reason alone, we hold that the addition made to the income of the assessee u/s 56(2)(viib) of the Act to the tune of Rs. 55,91,420/- , was not justified and direct the same to be deleted.
12.6 The contention of the ld. Departmental Representative that the Assessing Officer is bound to accept the DVO’s report, we agree with the same. But at the same time Valuation of property is only an exercise in approximate estimation. And therefore there is always scope for correction of the estimates on account of discrepancies .The assessee is well within his rights to contest the valuation, which if found justified, the appellate authorities cannot shut their eyes to the same.
12.7 Further, the decision relied upon by the ld. Departmental Representative of the hon’ble jurisdictional high court in the case of Page No 12 Smt. Mumtajbanu A. Jivani vs. ITO Gayatri Enterprise vs. ITO reported in 105 CCH 483 has been rendered in a totally different context where the issue raised before the Hon’ble Court was in the context of revisionary proceedings conducted by the Commissioner u/s 263 of the Act finding assessment order erroneous on account of the Assessing Officer have not taxed difference between the purchase price of the asset and the fair market value of the property. It is in this context of facts that the Hon’ble Court held that the Assessing Officer was bound by the valuation done by the DVO and having not brought to tax the difference between the valuation done by the DVO and the price by which the property was purchased by the assessee the order passed by the Assessing Officer was held to be in error. The said decision is of no assistance to the Revenue.
12.8 The distinction pointed out by the ld. Departmental Representative on the case law referred to by the counsel for the assessee for getting the benefit of 10% difference in valuation and actual purchase price in the case of GB. Gautam (supra), we have noted that the assessee has relied on the decision of the Co-ordinate Bench of the ITAT in the case of Amrapali Cinema (supra) for the proposition that the safe harbour of 10% difference in valuation and purchase price provided in section 50C of the Act is applicable retrospectively. No decision being cited by the ld. Departmental Representative to the contrary of any higher judicial authority, the said decision will apply to the present case.
12.9 In view of the above all the contentions raised by the ld. Departmental Representative are found devoid of merit and dismissed by us.
Page No 13 Smt. Mumtajbanu A. Jivani vs. ITO 12.10 In view of the above, we hold that there is no case for making any addition to the income of the assessee on account of purchase price of land falling short of its fair market value. The addition made to the income of the assessee on account of the same therefore to the tune of Rs. 55,91,837/- is deleted. The grounds of appeal raised by the assessee are allowed.
In effect, the appeal of the assessee is allowed.
Order pronounced in the open court on 09-08-2023