Commissioner Of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur Raj v. Shri Ravi Sancheti 176, Haldiyon Ka Rasta, Johri Bazar, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 183 / 2016 Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur Raj ----Appellant Versus Shri Ravi Sancheti 176, Haldiyon Ka Rasta, Johri Bazar, Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Anuroop Singhi with Mr. Aditya Vijay For Respondent(s) : Mr. Sandeep Taneja _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 16/01/2018 1.By way of this appeal, the appellant has challenged theorder and judgment of the Tribunal whereby the Tribunal hasallowed the appeal modifying the order of the CIT (A) as well asAO. 2.Counsel for appellant has contended that the Tribunalhas really traveled beyond the scope of the appeal and framed two questions. 3.However, while considering the matter the Tribunal has observed as under: 2.6 We have heard the rival contentions andperused the material available on record. This isthe second round of proceedings as ITAT Jaipurorder dated 24.06.2011 decided the main issuein favour of the assessee and for limited purposeof calculation of LTCG & STCG in accordance withsuch terms, the matter was remanded to the Ld.AO. Assessee was produced the floor wise DLCperused the material available on record. This isthe second round of proceedings as ITAT Jaipurorder dated 24.06.2011 decided the main issuein favour of the assessee and for limited purposeof calculation of LTCG & STCG in accordance withsuch terms, the matter was remanded to the Ld.AO. Assessee was produced the floor wise DLC rates from Sub Registraroffice, which areaccepted by AO. Under section 50C of the Act,Sub Registrar is the prescribed authority todetermine floorwise DLC rates. In our view thereis no justification on the part of AO to enhancethe values adopted on the basis of DLC rates.The allocable cost worked out for respective LTCGand STCG has been accepted by the Ld. CIT(A)as well. In the given facts and circumstances weare of the view that ld. CIT(A) erred in enhancingthe LTCG and STCG as computed by the AOwhich was based on DLC valuation. Besides thereappears no justification in disturbing the AO's inthis behalf and the specific directions of the ITAThave not been properly followed. Thus the orderof ld. CIT(A) in this behalf cannot be upheld.When the law prescribes the Sub Registrar asprescribed authority for determination floor wiseDLC rates u/s 50C we see no justification ininterfering with the same. 4.However, counsel for respondent has tried to justify the order of CIT (A) by reading paras which are as under: “In compliance with the Hon’ble ITAT’sorder, the AO has passed the impugned orderu/s 143(3). While calculating the capital gainsthe AO has applied DLC rates of the area on theproportionate value of the land included in thesale consideration. This was done by the AO onthe ground that in the sale deeds of the shops,only full value of consideration was mentionedand the bifurcation of the amount pertaining toland and building was not mentioned separately.TheAO,accordingly,calculatedtheproportionate long term capital gain at Rs.21,20,866/- and short term capital gain onshops at Rs. 43,84,270/- as against Rs.87,77,700/- and Rs. 3,42,061/- respectivelycalculated by the appellant. order of CIT (A) by reading paras which are as under: “In compliance with the Hon’ble ITAT’sorder, the AO has passed the impugned orderu/s 143(3). While calculating the capital gainsthe AO has applied DLC rates of the area on theproportionate value of the land included in thesale consideration. This was done by the AO onthe ground that in the sale deeds of the shops,only full value of consideration was mentionedand the bifurcation of the amount pertaining toland and building was not mentioned separately.TheAO,accordingly,calculatedtheproportionate long term capital gain at Rs.21,20,866/- and short term capital gain onshops at Rs. 43,84,270/- as against Rs.87,77,700/- and Rs. 3,42,061/- respectivelycalculated by the appellant. The contention of the appellant is that themethod adopted by the AO did not reflect thecorrect value of land and the buildingconstructed on it. In a multi storey building thevalue of the ground floor is generally higher .Since, the office of the Sub-Registrar deals withthe issue of property rates, the appellant wasasked to furnish the basis of valuation adoptedby the Sub-Registrar. The report of the Sub-Registrar, as approved by the DIG (Registration& Stamps) on 03/08/2006, regardingdetermination of the market rate of the buildingwas furnished by the appellant on 16/01/2014. The Dlc rates worked out by the StampAuthorities are as under: 1. Commercial Rate:3718/sq.ft.2. Semi-Commercial Rate :2479/sq.ft.The Floorwise DLC rates as have beenprescribed in the Sub-Registrar’s report is asbelow: 1. Ground Floor (Commercial): a. Value of Land : 80% of the total DLC rate i.e. 3718 = 2975/- per sq ft b. Cost of Construction : 400/- per sq ft c. Common : 33/- per sq ft facility value Ground Floor Rate : 3410/- per sq ft (Rounded off) 2. First Floor (Semi-Commercial) a. Value of Land : 70% of the total DLC rate i.e. 2479 = 1735/- per sq ft b. Cost of Construction : 400/- per sq ft c. Common : 33/- per sq ft facility value First Floor Rate : 2170/- per sq ft (Rounded off) 3. SecondFloor (Semi-Commercial) a. Value of Land : 60% of the total DLC rate i.e. 2479 = 1487/- per sq ft b. Cost of Construction : 400/- per sq ft c. Common : 33/- per sq ft facility value Second Floor Rate : 1920/- per sq ft (Rounded off) 4. ThirdFloor (Semi-Commercial) a. Value of Land : 50% of the total DLC rate i.e. 2479 = 1240/- per sq fti.e. 2479 = 1240/- per sq ft b. Cost of Construction : 400/- per sq ft c. Common : 33/- per sq ft facility value First Floor Rate : 1675/- per sq ft (Rounded off)” 8. I have considered submissions of theappellant, report of the AO, rejoinder filed bythe appellant and have also gone through theassessment order. The basic issue in this case, as mentioned above, is how to bifurcate thecapital gains between the long term capitalgains on the bale of land and short iterm capitalgains on sale of shops. It is seen that the AOhas adopted the value of land in a uniformmanner. This is not correct as far as a multistorybuilding is concerned. Similarly the appellanthas adopted the method of applying ne profitrate of 8% on construction activity and on thatbasis he has worked out the long term and shortterm capital gain on sale of land and buildingrespectively. However, this method also doesnot reflect the correct value of the land and theshops as this rate of 8% is adopted fordetermining income on presumptive basis incertain cases. The appellant has also relied onthe valuation adopted by the RegisteringAuthority. It would, therefore, be moreappropriate to adopt the methodology used bythe Sub-Registrar office which determines thevalue of a property for stamp duty purposes andwhich has been made statutorily admissible u/s50C. 5.This Court while admitting the appeal on 07.10.2016, framed following substantial question of law: 5.This Court while admitting the appeal on 07.10.2016, framed following substantial question of law: “1. Whether the Tribunal was legally justified inassessing Long Term Capital Gain ofRs.1,05,13,600/- and allowing deduction underSection 54 thereon as against Rs.31,48,870/-assessed by CIT (A) and Short Term Capital Lossof Rs.15,64,763/- as against Short Term CapitalGain of Rs.56,19,787/-, without any applicationof mind in complete ignorance of the report ofSub-Registrar and provisions of Section 50C ofthe Act?” 6. We have heard counsel for the parties. 7.After hearing both the sides, we are of the opinion that the matter is required to be remitted back to the Tribunal forreconsideration which has been agreed by both the parties. Sincewe remitting matter back to the Tribunal we are not expressingany opinion on merits as it will affect either side. 8. In view of consensus between the parties, the order of theTribunal is quashed and set aside. The matter is remitted back tothe Tribunal which will decide the same afresh after taking intoconsideration the grounds raised in the appeal memo. It is madeclear that no further amendment will be allowed in the appealmemo. 8.The appeal stands allowed. (VIJAY KUMAR VYAS)J. (K.S.JHAVERI)J. Chauhan/56