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TMI Blog2019 (5) TMI 1506X X X X Extracts X X X X X X X X Extracts X X X X ..... te analyzed /sale and ready flat available in the nearby locality was totally wrong and against the principle of method of valuation of the immovable properties. We are quite convince with the arguments of Ld. AR that the said property which is occupied by the tenants should be valued on the basis of capitalization rental method and not any other method. See SIR MOHD. YUSUF TRUST VERSUS ACIT-18 (1) , MUMBAI [ 2019 (3) TMI 1455 - ITAT MUMBAI] Thus we hold that the property in question cannot be valued as has been directed by the ld CIT in view of the litigations underway and also the fact that the property is in the possession of the tenants. Accordingly, we set aside the order of CIT(A) and direct the AO delete the disallowances. - Appeal of the assessee is allowed. - ITA No.7395/Mum/2017 - - - Dated:- 24-5-2019 - Shri Rajesh Kumar, Accountant Member And Shri Ram Lal Negi, Judicial Member For the Assessee : Shri Hari S. Raheja For the Revenue : Shri Chaudhary Arun Kumar Singh ORDER PER RAJESH KUMAR, ACCOUNTANT MEMBER 1. The assessee by way of this appeal is challenging the order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) erred in not accepting the valuation of the property the appellant's registered valuer Kanti Karamsey S. Co. as per their Valuation Report. 7. Your appellant craves leave to add to , amend, alter, delete and/or modify the above grounds of appeal on or before the final date of hearing of this appeal petition. 2. At the outset the ld. Counsel of the assessee submitted that the ground no. 2,3 and 4 may be allowed to the withdrawn and accordingly the same are dismissed as withdrawn. 3. The issue raised in ground no.1,5 and 6 are connected to each other and common issue raised in these grounds by the assessee is against the order of CIT(A) directing the AO to adopt market value the property known as Sharma house at ₹ 4,05,35,360/- for the purpose of calculating the capital gain on sale of property as against sale of price ₹ 28 lacs by ignoring the objections raised by the assessee before the valuation officer. 4. The facts in brief are that the assessee filed return income of ₹ 06/09/2012 declaring of income of ₹ 3,71,250/- which was processed u/s 143(1) of the Act. Thereafter case of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 631/- to the income of the assessee by framing assessment u/s 143(3) vide order dated 31/03/2015 assessing the total income at ₹ 7,02,12,880/-. 6. In the appellate proceedings CIT(A) partly allowed the appeal of the assesse after considering the submissions and contentions of the assessee made during the course of the appellate proceedings by observing and holding as under: I have considered the facts of the case and submission made by the appellant. Prima facie , the issue boils down to the matter that if an immoveable property located in a prime locality of Sharma House, Khar West, 4th Road, Mumbai-400052, was purchased on 4/7/1996 for ₹ 24,00,000/- was sold to one of the directors holding 40% shares in the company during previous year 2011-12 relevant to AY 2012-13 only for ₹ 28,00,000/-, irrespective of the fact whether the immoveable property consisting of Sharma House, Khar West., Mumbai-400052 was held as an investment, that is, capital asset or as current assets/stocK in trade books of accounts from 1996 onwards and classified as Loan of ₹ 24,00,000/- and not to an outside third party. Further, why was the Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;. And thus it appears from the records that the property Sharma House, Khar West, Mumbai was held as a 'Capital asset' and not as 'Stock in trade . Anyhow, the assessee offered the income from the sale of property as business income and the AO has taxed the same as long term capital gains. 1.5: Entire issue raised by the assessee in all the nine grounds of appeal centers around this issue that the AO erred in referring the issue of valuation of property u/s, 50C of the l.T.Act, 1961 when the profit on sale was offered as business income and not as capital gains and hence the entire process of reference to valuation officer and its subsequent determination is vitiated from the beginning. Assuming without admitting that the AO should not have referred the issue of valuation of property- Sharma House, Khar west, Mumbai' to valuation officer u/s. 5oC of the IT. Act, 1961 the basic question is not answered by the assessee in as much as why was a property purchased in 1996 sold to a director and shareholder of the company for ₹ 28,00,000/- making a property of ₹ 4,00,000/- only especially when the Government had increased the FSI in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arer to the value of the property determined at ₹ 4r05,35,360/- by Valuation Officer Prima facie, It appears and it is held that the AO was not only justified in assessing the gains from the sale of Sharma House, Khar west, Mumbai-400052 as Long Term Capital Gains but was fully justified in referring the matter to the valuation officer u/s. 500C of the IT Act, 1961. The AO was forced to calculate the value of the property as on 2011 during the assessment proceedings in absence of valuation report, however, the valuation report of the department valuer is now available and hence the long term capital gains need to be computed with reference to the revised market value of the property determined by the valuer at ₹ 4,05,35,360/-. AO is directed to adopt the market value of the property Sharma House at ₹ 4,05,35,3607- for AY 2012-13 and compute the long term capital gains with reference to actual cost of ₹ 24,00,000/- of 1996 and allowing the benefit of indexation, available if any, to the assessee and tax the long term capital gains for AY 2012-13 accordingly. This ground of appeal is partly allowed. 6. In the result, appeal is Partly Allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Jayakishan Awtani one of the directors/ shareholder of the assessee company with all the defects/suits/tenants and other various litigations for a consideration of ₹ 28 lacs as against the earnest money paid by the company of 24 lacs. The assessee company has sold whatever rights in the said property with all tenants /litigations and other proceedings going on in the various courts of law and hence the profit of ₹ 3,71,250/- on the sale of rights in the property was shown in the return of income after claiming expense of ₹ 25,750/-. 8. The assessee submitted that the property is under heavy litigations having many cases pending against the same and cannot be considered as marketable property. The Ld. AR also submitted that the said property does not having market value for the following reasons:- 1. The property is under heavy litigations having many cases pending against the same and hence cannot be considered to be a marketable property. 2. The property does not have a market value as the property is subject matter of many claims and court cases and based on the decision of the Mumai Tribunal in the case of Mohd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with the owners of the property. 10. Further, the appellant and/or any of its Directors including Mr. Jaikishan Paraskumar Awtani to whom the property was sold by the appellant have not got any conveyance of the property in their favour till date. 11. The possession of the property is with its original owners of property and with the tenants. 12. Appellant and/or its directors have no authority to collect the rent from the tenants. All the rent from the tenants are being collected by the original owners of the property till date. 13. Appellant and/or its directors have no Power of Attorney in their favour in respect of any matters relating to said property. In nutshell, after lapse of 23 years (2019-2006), the status fo the property is same. 14 In such a case the valuation done by the Valuation Officer on the basis of Development method by considering development potential and by considering built up area rate analyzed/derived from the sale instances of ready flat available in nearby locality was totally wrong and against the principles of method of valuation of the immovable properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further discounting the said amount to arrive at a figure of ₹ 27,6,852/-. We also note that the development of the said property has not even started till date due to the litigations going on. We further note that the director of the company Shri. Jaikishan Awtani have not got any convenience of the property in his favour till date. The possession of the property still with the tenants and the assessee. The purhcaser director having no authority to collect the rent from the tenants. In other words even after elapse of 23 years, the status of the property is same. Thus in such a scenario the valuation done by the valuation officer on the basis of development method by considering the developmental potential and by considering the built up area rate analyzed /sale and ready flat available in the nearby locality was totally wrong and against the principle of method of valuation of the immovable properties. We are quite convince with the arguments of Ld. AR that the said property which is occupied by the tenants should be valued on the basis of capitalization rental method and not any other method. The case of the assessee supported by the decision of coordinate bench in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession and it was in possessing of unauthorized occupant. Therefore, M/s Essa Associates agreed to pay ₹ 13.06 Lakh per acre. For the land which were in the name of assessee was not shown though, it was earlier owned by assessee, M/s Essa Associates agreed to pay ₹ 6.53 Lakh per acre to the assessee. In the MOI, the assessee entered into registered agreement with M/s Essa Associates on 10.08.2010 for 4 Acre and 11 Gunta out of which the assessee was having only 50% of share, remaining 50% of share in the land was owned by 3 different parties, which were also parties to the said conveyance. Thus, out of total consideration of ₹ 27,93,285/-, assessee s share being 50% is ₹ 13,96,642/- which was received by assessee before 26.09.2009. 5. The ld. AR further submits that as per Clause 14 20 of Trust- Deed dated 29.04.1929, the said MOI was subject to the sanction of Hon ble Bombay High Court. The assessee filed a petition before Hon ble Bombay High Court on 08.07.2004. The Hon ble Bombay High Court vide its order dated 01.10.2004 approved the MOI. The copy of the petition presented before the Hon ble Bombay High Court dated 08.07.2004 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C), (2)Modipon Ltd [2015] 154 ITD 369 (Delhi Tribunal), (3)Dharmsibhai Soni [2016] 161 ITD 627 (Ahmedabad Tribunal) and (4)Chalasani Naga Ratna Kumari (ITA No. 639/Vizag/2013 ( Vishakhapatnam Tribunal) 8. On the other hand the ld. DR for the revenue supported the order of the authorities below. The ld DR further submits that the assessee has raised certain new grounds of appeal which were not raised before lower authorities, therefore, the issue may be restored to the lower authorities for adjudication afresh. 9. We have considered the rival submissions of the parties and have gone through the orders of the authorities below. We have also deliberated on the various case laws referred and relied by lower authorities. The assessing officer treated the stamp valuation as value of consideration holding that section 50C is deeming provision which is mandatory in nature is to be applied on the basis of stamp duty valuation irrespective of the fact that the value was approved by High Court or not. The assessing officer also took the view that essence before the High Court was consent and not the valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with M/s. Essa Associate that the assessee was still holding certain rights in the property and the same constituting capital asset. Moreover, the MOI was duly approved by Hon ble Bombay High Court in its order dated 01.10.2004. 11. So far as the issue involved in the appeal relating to the applicability of the provisions of section 50C in the case of the assessee, it is observed that the market value of the property for stamp duty purpose was determined by the concerned authority at ₹ 11.76 Crore and accordingly the stamp duty thereon was also duly paid, while registering the relevant agreement. The value adopted for the purpose of payment of stamp duty is not disputed by the assessee. The assessing officer has not brought on record that the property under sale was not was under various encumbrances and the assessee was having the absolute marketable title of the said property. No material is brought on record by assessing officer that the assessee has received much more consideration than shown in the MOI. The assessing officer treated the stamp valuation rate as the value of consideration, dispite the facts that the assessee throughout the proceedings contended that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acto, cannot be a legitimate ground for concluding that there was undervaluation, in the acquisition of immovable property. If Parliamentary intention was to enable such a finding, a provision akin to Section 50-C would have been included in the statute book, to assess income on the basis of a similar fiction in the case of the assessee who acquires such an asset. No doubt, the declaration of a higher cost for acquisition for stamp duty might be the starting point for an inquiry in that regard; that inquiry might extend to analyzing sale or transfer deeds executed in respect of similar or neighboring properties, contemporaneously at the time of the transaction. Yet, the finding cannot start and conclude with the fact that such stamp duty value or basis is higher than the consideration mentioned in the deed. The compulsion for such higher value is the mandate of the Stamp Act, and provisions which levy stamp duty at pre-determined or notified dates. In the present case, the revenue did not rely on any objective fact or circumstances; consequently, the Court holds that there is no infirmity in the approach of the lower authorities and the Tribunal, granting relief to the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of return of the alleged individual to the ld. CIT(A) despite specific direction. The ld DR submits that the assessee be directed to file relevant evidences before assessing officer to verify the claim of assessee. 19.We have considered the rival submissions of the parties and gone through the orders of the lower authorities. We have noted that the ld CIT(A) has recorded that the assessee failed to established the shares of the various beneficiary on the basis of trust deed and their return of income to substantiate that the sums received from the assessee have been offered to tax by those individual. Considering the contention of both the parties this issue is restored to the file of assessing officer to verify the fact and grant relief to the assessee in accordance with law. Needless to direct that the assessing officer shall grant opportunity to the assessee for filing relevant documentary evidences to substantiate its contention. The assessee is also directed to provide the relevant documentary evidences at the earliest possible date and not to seek time without any valid reasons. In the result this ground of appeal is allowed for statistic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the assessee from the tenants, the total fair market value of the property of the assessee as per such revised estimation would be less than the sale consideration of ₹ 1,30,00,000/- shown by the assessee and there would be no case of making addition on account of capital gain. We direct the Assessing Officer to verify this contention of the ld. Counsel for the assessee and if it is found after recomputation of the valuation of the assessee's property I . T. A . N o. 316/KOL./2015 Assessment year: 2007- 2008 that the fair market value is less than the sale consideration shown by the assessee, no addition shall be required to be made on this issue. 13. Considering the facts of the case of the assessee with the ratio laid down by the coordinate benches we hold that the property in question cannot be valued as has been directed by the ld CIT in view of the litigations underway and also the fact that the property is in the possession of the tenants. Accordingly, we set aside the order of CIT(A) and direct the AO delete the disallowances. Appeal of the assessee is allowed. 14. In the result, the appeal of the assessee is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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