Ita/114/2015 Of B.m.j. Real Estate (P) Ltd v. Commissioner Of Income Tax, Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.114 of 2015 (O&M)Date of decision: 15.9.2015 B.M.J.Real Estate (P) Limited| ..-.--Appell Commissioner of Income Tax, Ludhiana and another .....Responden CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’BLE MR. JUSTICEK RAMENDRA JAIN 1. Whether Reporters of local papers may be allowed to see the judgment?2. To be referred to the Reporters or not?2. To be referred to the Reporters or not? 3. Whether the judgment should be reported 1n the Digest? Present: Ms. Radhika Suri, Sr. Advocate with Ms. Rinku Dahiya, Advocatefor the appellant. Mr. Rajesh Katoch, Advocate for the revenue. Ajay Kumar Mittal,J. CM No.8043 CII of 2015 1]Delay in filing the appeal is condoned. CM stands disposed of. CM No.8044 CII of 2015 2.There is a delay of 75 days in refiling the appeal. For thereasons stated in the application and after hearing learned counsel for theparties, the delay in refiling the appeal is condoned. CM stands disposed of. ITA No.114 of 2015 3.This appeal has been preferred by the assessee-appellant under order dated 28.4.2014, Annexure A.6 passed by the Income Tax AppellateTribunal, Chandigarh Bench (in short, “the Tribunal’) in ITANo.179/Chd/2013 for the assessment year 2006-07, claiming followingsubstantial questions of law:- 1) Whether in the facts and circumstances of the case, theIncome Tax Appellate Tribunal was correct in law in holdingthat the full value of consideration for the purpose ofcomputation, the capital gains wereLy1.25 crores as opposed toLT73,60,000/- shown in the sale deed? i1) Whether in the tacts and circumstances, the ITAT had fallenin error in not considering that the property in question being inpossession of the tenant and being closed to cremation groundwas correctly valued at=a73,00,000/- (correct figure being |=73,60,000/-) and not<1.25 crores? 4A few facts relevant for the decision of the controversyinvolved as narrated in the appeal may be noticed. The return of income ofL25,26,880/- was filed by the assessee on 27.11.2006 which was processedunder Section 143(1) of the Act on 2.8.2007 which was later on selected forscrutiny assessment. The Assessing Officer by placing reliance on Section50C of the Act considered the sale consideration of plot on the basis ofstamp duty paid on circle rate of|Lv1.25 crores aS opposed to disclosedconsideration ofa73,60,000/- and made addition ofa51,72,000/- to theincome of the assessee vide order dated 15.12.2008, Annexure A.1. Theappellant filed appeal before the Commissioner of Income Tax (Appeals) IJ,Ludhiana [CIT(A)]. Vide order dated 31.8.2009, Annexure A.2, the CIT(A)upheld the order of the Assessing Officer and dismissed the appeal. Theappellant went in appeal before the Tribunal. Vide order dated 30.4.2010,Annexure A.3, the Tribunal partly allowed the appeal holding that the ITA No.114 of 2015 (O&M) ITA No.114 of 2015 (O&M) Assessing Officer had failed to make a reference to the District ValuationOfficer (DVO) and remitted the issue back to the Assessing Officer fordeciding the same atresh after making reference to the DVO to ascertain thefair market value of the asset on the date of the transfer. The DVOdetermined the value of the property at -2,97,98,550/- on 19.12.2011treating the same to be commercial property situated on main GT roadwhereas while assessing the value of the property for the purpose of thestamp duty, the revenue authority considered the same to be residential areaat Gandhi Nagar. The assessee pointed out that as per agreement of saledated 6.11.2004, the property was shown to be residential and in occupationof the tenants. The assessee filed objections before the Assessing Officer.The Assessing Officer vide order dated 30.12.2011, Annexure A.4 treatedthe sale consideration at.=a2,97,98,550/-. The assessee filed appeal beforethe ClT(Appeals). The CIT(A) vide Annexure A.5 observed that theaddition made by the Assessing Officer by adopting the sale considerationalta2,97,98,550/- was contrary to the provisions of Section 50C of the Actas the full value of consideration by the DVO could not exceed the value onwhich stamp duty was paid. The CIT(A) considered the sale value at41,25,32,000/-. Still not satisfied, the appellant filed appeal before theTribunal. Vide order dated 28.4.2014, Annexure A.6, the Tribunaldismissed the appeal. Hence the instant appeal by the assessee. 5 We have heard learned counsel for the parties.6 Learned counsel for the appellant submitted that there wasdefect in the valuation of property adopted by the Valuation Officer undersection 50C(2) of the Act. It was urged that under sub section 3 of Section50C of the Act, it was open for the appellant to have raised objection with ITA No.114 of 2015 (O&M) regard to the report of the Valuation Officer. It was also argued that the saleconsideration of|=a73,60,000/- was the correct value whereas the sale valueadopted by the CIT(A) and the Tribunal at —-1,25,32,000/- wasunsustainable. TiOn the other hand, learned counsel for the revenue besidessupporting the impugned order submitted that the value disclosed by theasseSSee WdS<a73,60,000/- and the value assessed by the Collector underSection 50C(1) of the Act was LT1.25 crores which was never challenged bythe assessee. It was urged that on a prayer made by the assessee, under sub)section 2 of Section 50C of the Act, the matter was referred to the ValuationOfficer and the value was determined atLv2,97,98,550/-. In suchcircumstances, the value of|L1.25 crores was justified. 8 Section 50C of the Act reads thus:- “AOC.(1) Where the consideration received or accruing as aresult of the transfer by an assessee of a capital asset, beingland or building or both, is less than the value adopted orassessed or assessable by any authority of a State Government(hereafter 1n this section referred to as the "stamp valuationauthority’) for the purpose of payment of stamp duty inrespect of such transfer, the value so adopted or assessed orassessable shall, for the purposes ofsection 48, be deemed tobe the full value of the consideration received or accruing as aresult of such transfer. (2) Without prejudice to the provisions of sub-section (1),where— G) the assessee claims before any Assessing Officer that thevalue adopted or assessed or assessable by the stampvaluation authority under sub-section (1) exceeds the fairmarket value of the property as on the date of transfer; b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not beendisputed in any appeal or revision or no reference has beenmade before any other authority, court or the High Court, (2) Without prejudice to the provisions of sub-section (1),where— G) the assessee claims before any Assessing Officer that thevalue adopted or assessed or assessable by the stampvaluation authority under sub-section (1) exceeds the fairmarket value of the property as on the date of transfer; b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not beendisputed in any appeal or revision or no reference has beenmade before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capitalasset to a Valuation Officer and where any such reference 1smade, the provisions of sub-sections (2), (3), (4), (5) and (6)of section 16A, clause (7) of sub-section (1) and sub-sections(6) and (7) of section 23A, sub-section (5) of section 24,section 34AA, section 35 and section 37 of the Wealth-taxAct, 1957 (27 of 1957), shall, with necessary modifications,apply in relation to such reference as they apply 1n relation toa reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation I—For the purposes of this section, "ValuationVOfficer" shall have the same meaning as in clause () ofsection 2 of the Wealth-tax Act, 1957 (27 of 1957). Explanation 2.—For the purposes of this section, theexpression "assessable" means the price which the stampvaluation authority would have, notwithstanding anything tothe contrary contained in any other law for the time being inforce, adopted or assessed, 1f 1t were referred to such authorityfor the purposes of the payment of stamp duty. (3) Subject to the provisions contained in sub-section (2),where the value ascertained under sub-section (2) exceeds thevalue adopted or assessed or assessable by the stampvaluation authority referred to 1n sub-section (1), the value soadopted or assessed or assessable by such authority shall betaken as the full value of the consideration received oraccruing as a result of the transfer.” QOA perusal of the above provisions shows that under sub section (1) of Section 50C of the Act, where the consideration received or accrued as a result of transter of capital asset being the land or building or both is less than the value adopted or assessed by the stamp valuation authorities, ITA No.114 of 2015 (O&M)2then the value so adopted or assesseed for the payment of stamp duty inrespect of such transfer shall be deemed to be the full value of considerationreceived or accruing as a result of such transfer and should be adopted forthe purposes of section 48 of the Act. Sub section (2) of Section 50C of theAct provides that where the assessee claimed before any Assessing Officerthat the value adopted or assessed by the stamp Valuation authoritiesexceeds the fair market value of the property as on the date of transfer andthe said value had not been disputed in any appeal or revision or noreference had been made before any authority, the Assessing Officer mayrefer the valuation of the capital asset to the Valuation officer who in turnshall value the property. According to sub section (3) of Section 50C of theAct, where the value ascertained under sub section (2) of section 50C of theAct exceeds the value adopted or assessed by the stamp valuationauthorities then the value so adopted or assessed by such stamp valuationauthority shall be taken as the full value of the consideration received oraccruing as a result of the transfer. 10,In the present case, the assessee had sold the property for anamount ofLT73,60,000/- and the stamp duty had been paid at the rate ofL1.25 crores whereas against the said stamp duty valuation, the Valuationofficer had valued the property at|<a2,97,98,550/-. The CIT(A) applied thevalue determined by the stamp valuation authorities as to be fair marketvalue of the property on the date of transfer. Hence the value assessed inthe hands of the assessee was a1.25 crores as against the value assessed bythe DVO ata2,97,98,550/-. The Tribunal after considering the matter heldthat the stand of the assessee and the objections raised by it against thevaluation report had no meaning including the stand of the DVO to have ITA No.114 of 2015 (O&M).adopted commercial rates tor valuing the said property as the assessment inthe hands of the assessee had not been made on such valuation report but ona much lesser value oftL1.25 crores and even if credit is given on accountof all objections raised by the assessee, the value of the property adopted inthe hands of the assessee is much lower than the value determined by theDVO. The relevant findings recorded by the Tribunal read thus:- “17. In the facts of the present case the requirements of section50C of the Act have been met with by the Assessing Officer bymaking reference to the Valuation Officer and in turn receivedvaluation report of the property determining the value ofproperty as on the date of sale. The learned AR for the assesseehas vehemently pointed out various defects in the valuationreport made by the valuation officer and the main grievance ofthe assessee is that the valuation officer has adopted higherrates i.e. the commercial as against the residential rates whichresulted in higher valuation of the property. However, if welook at the case in entirety and considering the facts andcircumstances of the present case, we find that the assessee hadsold the said asset for an amount of.L73,60,000/- and the stampduty had been paid at the rate of|L1.25 crores whereas againstthe said stamp duty valuation, the Valuation Officer had valuedthe property at<2.97 crores. The CIT(Appeals) had applied thevalue determined by the stamp Valuation authorities as to befair market value of the property on the date of transfer, againstwhich revenue is not in appeal. Hence the value assessed in thehands of the assessee js Lv1.25 crores as against the valueassessed by the DVO at an2.97 crores. The perusal of thegrievances raised by the assessee reflects that all the grievanceswere against the valuation framed by the Valuation Officer andeven if the value is reduced as per the said grievances, there isno substance in the grievance of the assessee where reducedvalue has been adopted by the ClT(Appeals) as fair marketvalue of the property. In the entirety of the facts and circumstances, we find no merit in the stand of the assessee andthe objections raised against the valuation report have nomeaning including the stand of DVO to have adoptedcommercial rates for valuing the said property as _ theassessment in the hands of the assessee has not been made onsuch valuation report but on a much lesser value ofv1305crores and even if credit is given on account of all theobjections raised by the assessee, the value of property adoptedin the hands of the assessee is much lower than the valuedetermined by the DVO. Hence we uphold the order the CIT(Appeals) in adopting the value assessed by the StampValuation authorities as the fair market value of the property onthe date of transfer in computing the income of the assessee.”’ ll.Learned counsel for the appellant has not been able to showany illegality or perversity in the findings recorded by the Tribunal,watranting interference by this Court. Thus, no substantial question of lawarises. Consequently, the appeal stands dismissed. (Ajay Kumar Mittal)Judge September 15, 2015<:%< (Ramendra Jain)Judge