Itxa/141/2012 Of Commissioner Of Income Tax-17 v. Shantilal J. Shah

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.141 OF 2012 The Commissioner of Income Tax-17 -Versus-Shantilal J. Shah ..Appellant ..Respondent ........... Mr. A. R. Malhotra with Ms. Padma Divakar for the Appellant. ........... CORAM: S.C. DHARMADHIKARIAND B.P. COLABAWALLA, JJ. DATE :- 17[th] June, 2014 P.C.: 1]Heard Mr. Malhota, learned counsel appearing on behalf of the revenue in support of this appeal. The revenue challenges this appeal against the order passed by the Income Tax Appellate Tribunal in Income Tax Appeal No.4085/Mum/2009 dated 4[th] March, 2011. 2]Mr. Malhotra submits that the following three questions framed by him are the substantial questions of law:- “(i) Whether on the facts and the circumstances of the case and in law, the Tribunal was justified in upholding the order of the CIT(A) Mumbai deleting the addition of Rs.64,72,000/- of the CIT(A) Mumbai deleting the addition of Rs.64,72,000/- 1/6 being the cost of construction of flats given to tenant without any sale consideration as expenditure despite of the fact that the assessee was granted additional F.S.I. to compensate him?(ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in not directing the Assessing Officer to refer the matter u/s. 55A of the I.T. Act, 1961 and estimating the value of property at Rs.2,50,000/- as on 01.04.1981 for computing capital gain? (iii) Whether on the facts and the circumstances of the case and in law, the Tribunal was justified in setting aside the order of the CIT(A) & remit the matter back to the file of the Assessing Officer with direction to re-examine the same in the light of its decision in respect of value of the property as on 01.04.1981?” 3]On the fourth question, Mr. Malhotra submits that the assessee had claimed before the Assessing Officer that the cost of construction is an expenditure and that was incurred by the assessee on construction of tenaments in the new building for the purposes of handing over the same to the earstwhile tenants. Mr. Malhotra submits that the assessee was compensated by grant of additional Floor Space Index ( for short F.S.I.), and therefore, there was no question of his claiming these expenses or cost of construction of flats. The order of the Commissioner of Income Tax (Appeals) and the Tribunal, therefore, is totally perverse. 4]We are unable to agree with Shri Malhotra. The assessee on the own showing of the revenue purchased the tenanted property. The building was 30 years old. In the event of a re-development, the assessee was obliged to provide the tenants in the old building the area commensurate to the one held by them. For that purpose, at his own cost, the assessee had to construct a new building so as to house the tenants in the old building. For that purpose, he could not recover any sum from the tenants. The entire expenditure was incurred by him on construction of such tenaments and for handing over to the tenants. That he was to be compensated by F.S.I. so as to enable him to reimburse himself the cost of construction for rehabilitating to the tenant, does not mean that the expenditure needs to be deleted straightway. The revenue has failed to bring any material which would indicate as to how much F.S.I. was made available and placed at the disposal of the assessee, how much was utilized in the form of making for construction of buildings for sale in open market and how much was actually sold and the income derived therefrom. In the absence of this vital material, the Commissioner of 3/6 *4* 5.itxa141.12 Income Tax and the Tribunal concurrently held that this deduction was totally unjustified. The view taken is in accord with the facts and circumstances placed on record. It cannot be said to be perverse. 3/6 *4* 5.itxa141.12 Income Tax and the Tribunal concurrently held that this deduction was totally unjustified. The view taken is in accord with the facts and circumstances placed on record. It cannot be said to be perverse. 5]On the second and third question, we find that the Tribunal has held that the Assessing Officer did not refer the matter to the valuation officer. Assessing Officer estimated the value and by holding that if the date of purchase by the assessee is 31[st] October, 1979, then, the value of the tenanted property cannot be increased to such an extent and as claimed by the assessee. The Tribunal found that the tenanted property fetches low price. The tenanted property was purchased by the assessee but the same remained tenanted. None of the tenants had left the property as on 1[st] April, 1981. The Assessing Officer added 15% to the purchase cost and tried to determine the fair value. The matter, thereafter, was not though fit, to be referred to the Valuation Officer. The date of valuation was 30 years old. The Tribunal, therefore, found that in the given facts and circumstances, taking recourse of section 55A and making a reference to the Valuation Officer will not serve any useful purpose. Rather, the Tribunal made an estimate of the value and based on the circumstances stated to be prevailing after nearly 18 months of the purchase. It arrived at figure of 2,50,000/-. Rather, it did not accept the *5* 5.itxa141.12 value estimated by the Commissioner of Income Tax. In such circumstances, the approach of the Tribunal cannot be said to be vitiated in law nor it can be termed as perverse. On the second question as well, this appeal does not give rise to any substantial question of law. 6]As far as third question is concerned, Mr. Malhotra submits that it is erroneous to assume that it is incidental to the second question on valuation for computing capital gain. In fact, the Assessing Officer was obliged to examine this issue in the light of the finding which has been rendered by the Assessing Officer and which is to be found at page 16 of the paper book. 7]What we have noted in this behalf of that both assessee and the revenue agreed before the Tribunal that this matter is consequential to the first ground namely with regard to the valuation but yet the Commissioner's order is required to be quashed and set aside and the matter deserves to be remitted back to the Assessing Officer with a direction to re-examine the same in the light of the decision rendered in respect of ground No.1. Once this agreement is reached between the parties and finding that no attempt was made, to have any alleged erroneous assumption or error in the order corrected, that we are of the *6* opinion that even third question does not give rise to any substantial question of law. 8]As a result of the above discussion, the appeal fails and it is dismissed. No costs. (B.P.COLABAWALLA, J.) (S.C. DHARMADHIKARI, J.) wadhwa