ITA NO. 203/DEL/2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E", NEW DELHI
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
AND
SHRI H.S. SIDHU, JUDICIAL MEMBER
I.T.A.No. 203/DEL/2012
A.Y. : 2008-09
Mahesh Chand Jain, Income Tax Officer,
I-923, Palam Vihar, VS. Ward-32(4),
Gurgaon-122017 New Delhi
(PAN: AALPJ7704P)
(APPELLANT) (RESPONDENT)
Assessee by : Sh. Satyam Sethi & Sh.
A.T. Panda, Advocates
Department by : Sh. P. Dam Kanunjha,
Sr. DR.
Date of Hearing : 25-3-2015
Date of Order : 27-3-2015
ORDER
PER H.S. SIDHU : JM
The Assessee has filed the present appeal against the
impugned order dated 18/10/2011 passed by the Commissioner of
Income Tax (Appeals)-XXVI, New Delhi pertaining to the assessment
year 2008-09.
2. The following grounds have been raised in the Assessee's
appeal.
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"1. That on the facts and circumstances of the case and in
law, the Commissioner of Income-tax (Appeals)-XXVI, New
Delhi [briefly "the CIT(A)"] has erred in upholding the
assessment of total income at Rs.22,44,5701-. The assessee
denies his liability to be assessed at the income
ofRs.22,44,570/-.
2. That on the facts and circumstances of the case and in
law, the CIT(A) has erred in holding that long term capital gain
on sale of plot No.65-B, Roop Nagar Industrial Estate loni (UP)
was rightly computed at Rs.17, 73,417/-.
3. That on the facts and circumstances of the case and in
law, the CIT(A) has erred in not appreciating that value
determined by the AVO of plot No.65-B, Roop Nagar Industrial
Estate loni (UP), which was a tenanted property and was sold
to the person who was in actual control & possession thereof
was not properly an correctly determined.
4. That on the facts and circumstances of the case and in
law, the value of plot No.65-B, Roop Nagar Industrial Estate
loni (UP) determined at Rs.28,24,100/- did not represent fair
market value more so because it was a case of distress sale.
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5. That on the facts and circumstances of the case and in
law, the CIT(A) has erred in not considering the submissions in
proper perspective.
That the Assessee craves leave to add, alter, amend or
vary any of the ground either at or before the hearing of the
appeal."
3. The brief facts of the case are that the assessee filed his return
of income on 27.09.2008/ declaring a total income of Rs. 4,71,150/-.
The case was processed u/s 143(1) and subsequently was selected
for scrutiny on the basis of the receipt of AIR information. Thereafter
notice u/s 143(2) was issued on 13.08.2009 through speed post. In
response to the same the AR of the assessee attended the
proceedings and filed the details. According to the AIR information/
the assessee sold an immovable property at Rs.31,32,000/- and the
same made available to the assessee by the Assessing Officer. On
perusal of the sale deed furnished by the AR during the course of
the assessment proceedings/ it was observed by the Assessing
Officer that the assessee sold the property at Rs.10,25,000/-
whereas according to the Govt. circle the value of rate the property
was Rs.38,56,000/-. After taking into consideration the sale value at
Rs.10,25,000/-the assessee in his computation calculated a capital
loss at Rs.25,683/-. Therefore, the Assessing Officer considered the
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sale value at Rs.38,56,000/- in concurrence to the provisions laid in
section 50C of the IT Act/ 1961. In compliance to the request made
by the A.O. vide letter dated 02.08.2010 the Assessing Officer
referred the property to the AVO, Meerut vide letter dated
09.08.2010/ u/s 50C(2) to determine the fair market value of the
property. Vide report dated 13.12.2010, the AVO determined the fair
market value of the property in question at Rs.28,24,100/-
.Thereafter on 16.12.2010/ the copy of the valuation report was
forwarded to the assessee to offer his objections/comments. Vide
letter dated 20.12.2010, the assessee did not accept the AVO's
valuation of property at Rs.28,24,100/- and raised certain objections
mainly on two grounds/ firstly it was on the ground that the AVO
adopted a detailed measurement method instead of rent
capitalization method and secondly, the property was sold in
distress. These objections were reproduced by the A.O. in the
assessment order dated 28.12.2010. The objections raised by the
assessee were considered and vide letter dated 20.12.2010 the
Assessing Officer rejected the same. In the same letter, the A.O.
show caused the assessee as to why the proposed valuation of
Rs.28,24,100/- should not be taken as sale consideration for
calculating the capital gains. Through the assessee appeared on
22.12.2010, no reply to the said shown cause was forwarded to the
Assessing Officer. Therefore, as the issue is within the ambit of
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section 50C and on request of the assessee u/s. 50C(2), the
Assessing Officer referred the property to the AVO and adopted the
value reported by the AVO for calculation of capital gains rather
than adopting the value of stamp valuation Authority and re-
computed the long term capital gains resulting in an addition of
Rs.17,73,417/- (AVO'S Valuation of property at Rs.28,24,100/- minus
Index cost of acquisition as given by the assessee) as against
Rs.4,71,150/.
4. Aggrieved by the aforesaid assessment order, the assessee
preferred an appeal before the Ld. CIT(A), who vide impugned
order dated 18.10.2011 has dismissed the appeal of the assessee.
5. Against the order dated 18.10.2011 of the Ld. CIT(A) assessee
is in appeal before the Tribunal.
6. Ld. Counsel of the assessee has reiterated the grounds of
appeal and stated that it is res-integra that rent capitalization
method is one of the recognized methods of valuing immovable
property. Valuation of property is an issue that is relevant not only
for the purposes of computation of capital gain but also for the
purposes of levy of wealth tax, compulsory acquisition of property
and pre-emptive purchase of properties. He also stated that the
Hon'ble Jurisdictional High court in the case of CIT vs. New India
Construction Co. (1980) 123 ITR 68 has considered the issue of
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ITA NO. 203/DEL/2012
appropriate method of valuation in case of tenanted property. In
this case, transferor sold a first floor of a building situated in
Connaught Place which was in the occupation of three tenants for
the sum of Rs. 2,20,000/-. The transferee was also given right to
effect construction above the first floor. After the sale, the
transferee obtained vacant possession for tenant by paying certain
amount to each of the tenant and also got the user of property
converted from residential to commercial. Based upon the report of
Valuation Officer, who on the basis of land and building method
determined the fair market value at Rs. 11,41,900/-, acquisition
proceeding under section 269C were initiated. On appeal, the
Tribunal quashed the acquisition observing that a building with
vacant possession and a building with tenants were two different
things altogether. Upholding the order of the Tribunal, the Hon'ble
Court has observed that :-
"The fair market value of the property on the basis of
cost of land and building method would have been
relevant if it was self occupied by the transferor and he
was in a position to hand over the vacant possession
thereof to the transferee."
6.1 Ld. Counsel of the assessee further submitted that the present
issue in dispute is covered by the Jurisdictional High Court decision
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ITA NO. 203/DEL/2012
as aforesaid and hence, the present case may be decided on the
similar lines. He also submitted that the reason that for rent
capitalization method to be applied, a small proportion of the
property must be self occupied is devoid of any merit. He also
stated that in the case of CIT vs. New India Construction (Supra) it
was held that where rent capitalization method was adopted to
value the respective properties, the premises were fully tenanted.
Therefore, the conclusion of the Valuation Officer that has been
endorsed by the AO that for rent capitalization method can be
applied where small proportion of the property is self occupied is
against the legal possession because the method has regularly been
applied to fully tenanted premises.
7. On the contrary, Ld. DR has relied upon the order of the
authorities below and requested that the same may be upheld.
8. We have heard both parties and perused the relevant record
available with us especially the orders of the revenue authorities.
We find that in this case according to the AIR information/ the
assessee sold an immovable property at Rs.31,32,000/- and the
same made available to the assessee by the Assessing Officer. On
perusal of the sale deed furnished by the AR during the course of
the assessment proceedings/ it was observed by the Assessing
Officer that the assessee sold the property at Rs.10,25,000/-
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ITA NO. 203/DEL/2012
whereas according to the Govt. circle the value of rate the property
was Rs.38,56,000/-. After taking into consideration the sale value at
Rs.10,25,000/-the assessee in his computation calculated a capital
loss at Rs.25,683/-. Therefore, the Assessing Officer considered the
sale value at Rs.38,56,000/- in concurrence to the provisions laid in
section 50C of the IT Act/ 1961. In compliance to the request made
by the A.O. vide letter dated 02.08.2010 the Assessing Officer
referred the property to the AVO, Meerut vide letter dated
09.08.2010/ u/s 50C(2) to determine the fair market value of the
property. Vide report dated 13.12.2010, the AVO determined the fair
market value of the property in question at Rs.28,24,100/-
.Thereafter on 16.12.2010/ the copy of the valuation report was
forwarded to the assessee to offer his objections/comments. Vide
letter dated 20.12.2010, the assessee did not accept the AVO's
valuation of property at Rs.28,24,100/- and raised certain objections
mainly on two grounds/ firstly it was on the ground that the AVO
adopted a detailed measurement method instead of rent
capitalization method and secondly, the property was sold in
distress. These objections were reproduced by the A.O. in the
assessment order dated 28.12.2010. The objections raised by the
assessee were considered and vide letter dated 20.12.2010 the
Assessing Officer rejected the same. In the same letter, the A.O.
show caused the assessee as to why the proposed valuation of
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ITA NO. 203/DEL/2012
Rs.28,24,100/- should not be taken as sale consideration for
calculating the capital gains. Through the assessee appeared on
22.12.2010, no reply to the said shown cause was forwarded to the
Assessing Officer. Therefore, as the issue is within the ambit of
section 50C and on request of the assessee u/s. 50C(2), the
Assessing Officer referred the property to the AVO and adopted the
value reported by the AVO for calculation of capital gains rather
than adopting the value of stamp valuation Authority and re-
computed the long term capital gains resulting in an addition of
Rs.17,73,417/- (AVO'S Valuation of property at Rs.28,24,100/- minus
Index cost of acquisition as given by the assessee) as against
Rs.4,71,150/. Thereafter, on appeal before the Ld. CIT(A), who vide
his order 18.10.2011 has confirmed the order of the AO and
dismissed the appeal of the assessee. During the hearing before
us, Ld. Counsel of the assessee has filed a Paper Bok containing the
various decision of the Hon'ble High Courts, especially the
Jurisdictional High Court in the case of CIT vs. New India
Construction Co. (1980) 123 ITR 68 (Del.) and stated that the
present case may be decided in accordance with the decision of the
Hon'ble Jurisdictional High Court in the case of CIT vs. New India
Construction Co. (Supra), as the facts and circumstance of the
present case are similar to that case. We have perused the
judgment of the Hon'ble Jurisdictional High Court in the case of CIT
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ITA NO. 203/DEL/2012
vs. New India Construction Co. (Supra), and therefore, we are of the
view that in the interest of justice, the present issues in dispute are
required thorough examination at the level of the Assessing Officer,
hence, we quash the order of the Ld. CIT(A) and remit back the
issues in dispute, to the file of the Assessing Officer, with the
direction to decide the present issues in dispute, in accordance with
the aforesaid directions of the Hon'ble Jurisdictional High Court
delivered in the case of CIT vs. New India Construction Co. (1980)
123 ITR 68 (Del.), after giving adequate opportunity of being heard
to the assessee.
9. In the result, the Appeal filed by the assessee stands allowed
for statistical purposes.
Order pronounced in the Open Court on 27/3/2015.
Sd/- Sd/-
[N.K. SAINI] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 27/3/2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Assessee-
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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