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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI N.K. BILLAIYA & SHRI PAWAN SINGH
O R D E R PER N.K. BILLAIYA, AM: These two appeals by two different assessees are directed against two separate orders of the Ld. CIT(A)-1, Mumbai dated 1.11.2012. Since the first grievance in both these appeals is common on similar set of facts, therefore these appeals are disposed of by this common order for the sake of convenience.
The first common grievance relates to the disallowance made u/s. 14A of the Act r.w. Rule 8D though the quantum differs in both the appeals.
We are taking up the facts of ITA No. 1441/M/2013. While scrutinizing the return of income, the Assessing Officer noticed that the assessee is having investment in shares, bonds etc at Rs. 70,15,05,138/- on which dividend income of Rs. 64,699/- was earned and claimed exempt. The assessee was asked to explain why disallowance should not be made u/s. 14A r.w. Rule 8D.
3.1. Vide letter dated 15.7.2011, the assessee replied that the dividend is represented by only one dividend warrant and direct and indirect expenses incurred in relation to earning of this exempt income amounting to Rs. 1,736/- have already been offered for disallowance. The assessee furnished a reasonable estimation of disallowance and computed such disallowance at Rs. 917/-. It was stated that on such facts, no further disallowance is needed. The AO did not accept this claim of the assessee and computed the disallowance as per Rule 8D at Rs. 35,08,699/- and after deducting the disallowance made by the assessee Rs. 917/-, Rs. 35,07,782/- was added to the total income of the assessee.
The assessee carried the matter before the Ld. CIT(A) but without any success.
Before us, the Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. It is the say of the Ld. Counsel that the AO has not disputed the fact that there was only one single dividend warrant, therefore, the disallowance made by the assessee is justified on facts of the case. Drawing our attention to the investment made by the assessee, the Ld. Counsel pointed out that the entire investments are strategic investments made in the sister concerns of the assessee therefore, no disallowance can be made on this count also.
Per contra, the Ld. Departmental Representative strongly supported the order of the Revenue authorities.
We have gone through the orders of the authorities below. We have also considered the relevant documentary evidences brought before us. There is no dispute that the only exempt income earned by the assessee is by way of single dividend warrant. We have also gone through the computation of estimation of expenses made by the assessee. We find that computation at Rs. 917/- is quite reasonable. The AO has simply rubbished this computation made by the assessee without assigning any specific reason or fallacy in the computation. In our considered opinion on the peculiar facts of the case, the addition made by the AO is unwarranted, we, accordingly, direct the AO to delete the addition of Rs. 35,07,782/- in and Rs. 9,27,033?- in ITA No. 1442/M/2013. With this ITA No. 1442/M/2013 is allowed.
The second ground in relates to the additions made u/s. 50C of the Act.
8.1. While scrutinizing the return of income, it came to the notice of the AO that the assessee has sold 2 plots of land situated in District Aligarh (U.P). Details and copies of the deeds pertaining to the sale transactions were called for.
8.2. On perusing the details furnished, the AO found that the value assessed by the Stamp Duty Authority in both cases was substantially higher than the sale consideration shown by the assessee. A reference u/s. 50C(2) was made in both the cases to the Valuation Officer. After receiving the valuation report, the AO found that valuation assessed by the DVO in the case of land No. 14/1 is lower than the value assessed by the Stamp Duty authority and in case of Land No. 177, value assessed by the DVO was higher than the value assessed by the Stamp Duty authority. Following the provisions of Sec. 50C(3), the AO computed the capital gains at Rs. 1,08,24,369/- and added the same to the returned income.
Aggrieved by this, the assessee carried the matter before the Ld. CIT(A). Before the Ld. CIT(A), it was strongly contended that the value assessed by the Stamp Duty authority in both the cases was on the higher side and in so far as the valuation made by the Valuation Officer is concerned, objections were raised before the valuation authority. It was explained that the property is an undeveloped property connected with a kaccha road with a slaughter house in the vicinity because of which general public or traders do not want to live or operate nearby. It was requested to reduce the valuation made by the DVO by 50%. It was brought to the notice of the Ld. CIT(A) that without considering the objections made by the assessee, the AO has completed the assessment by simply relying upon the report of the DVO.
9.1. After considering the facts and the submissions, the Ld. CIT(A) observed that sale price as per the sale deed was lower than the value assessed by the Stamp duty authorities therefore a reference was rightly made by the AO. The Ld. CIT(A) was convinced that the AO was correct in adopting the valuation of the DVO in computing the short term capital gains and confirmed the addition.
Aggrieved by this, the assessee is before us.
The Ld. Counsel for the assessee reiterated what has been stated before the lower authorities. It is the say of the Ld. Counsel that the assessee has also taken a valuation report from a Government approved valuor wherein the value adopted by the Valuation Officer is lower than the sale consideration and the assessee has shown capital gains as per the sale consideration. It is the say of the Ld. Counsel that AO’s action is supported by DVOs report therefore since there are two valuation reports by two experts, the report which is beneficial to the assessee should be taken into consideration.
Per contra, the Ld. Departmental Representative strongly supported the findings of the lower authorities.
We have given a thoughtful consideration to the orders of the authorities below. The entire factual matrix can be understood by considering the following chart as under:
Thus, it can be seen that assessee’s Valuation Officer has reported the rate for Plot No. 14/1 at Rs. 272/-per Sq. mtr and for Plot No. 177 at Rs. 261/- per Sq. mtr. The same has been taken by the DVO at Rs. 623/- and Rs. 722/- per Sq. mtr respectively. A perusal of both the Valuation Report shows that none of the report is based on comparable cases being sale deeds in or near the impugned properties. Thus, there is no sale incidence to support the value taken by the respective valuation authorities. No doubt, the DVOs report is based on the circle rate but then the stamp duty is also assessed on the circle rate. So the DVOs report cannot be accepted at its face value. As mentioned elsewhere, the valuation report furnished by the assessee is also devoid of any sample sale in or around impugned property, therefore the value taken by the Valuation Officer also cannot be accepted.
14.1. In our considered opinion, such litigation should come to an end and therefore to put an end to the litigation, the value for plot No. 14/1 taken by the DVO at Rs. 623/- is to be reduced by 40%, the value now should be adopted is Rs. 374/-. Similarly, the value adopted for Plot No. 177 at Rs. 722/- is to be reduced by 35%, the value now should be adopted is Rs. 470/-. The AO is accordingly directed to consider these two values and recompute the Short term capital gains as per the provisions of the law.
In the result, the appeal filed by the assessee in is partly allowed and ITA No. 1442/M/13 is allowed. Order pronounced in the open court on 16th December, 2015.