IN INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI, HON BLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HON BLE JUDICIAL MEMBER ITA No. 377 & 378/PAN/2015 (Asst. Year : 2007-08) ACIT, Circle-2(1), Vs. 1) Mr. Gil Oswald Ribeiro, Panaji Goa. Angels Resorts, Chogum Road, Alto De Porvorim, Bardez, Goa. PAN No. ABPPR 0215 E 2) Mrs. Matildes Lobo Ribeiro, Angels Resorts, Chogum Road, Alto De Porvorim, Bardez, Goa. PAN No. ADEPR 7731 (Appellant) (Respondents) Assessee by : Shri D.E. Robinson Adv. Department By : Shri Ramesh S. Mutagar - DR Date of hearing : 14/09/2016. Date of pronouncement : 14/09/2016. ORDER PER GEORGE MATHAN, JUDICIAL MEMBER These are appeals filed by Revenue against separate orders of Commissioner of Income Tax (Appeals), Panaji-1 in appeal Nos. 166 & 158/PNJ/09-10, both dated 03/07/2015 for Assessment Year 2007-08. These two appeals are of husband and wife, to whom provisions of section 5A of Income Tax Act, 1961 apply. 2 ITA No. 377 & 378/PAN/2015 2. In Revenue s appeal, Revenue has raised following grounds:- 1. On facts and in law, learned CIT(A) erred in concluding that payment of Rs. 2 crores made to other nine legal heirs of his father justified improvement title of land , and consequently in allowing Rs.2 crores as cost of improvement , thereby, reducing quantum of capital gains liable for tax. 2. learned CIT(A) grossly erred in replying on decision of Hon ble Supreme Court in case of R. M. Arunachalam V. Commissioner of Income Tax 227 ITR 222 (SC), since facts and circumstances of said case are at variance to facts and circumstances of instant case of assessee. 3. Learned CIT(A) erred in deleting addition of Rs. 1,90,90,497/- without arriving at any independent finding and in ignoring decision of Supreme Court in case of Sunil Siddharthbhai Karthikeya Sarabhai vs. CIT (1985) 156 ITR 509 SC. 4. CIT(A) erred in upholding that year 1977 as year of transfer of property disregarding fact that actual sale deed for conveyance of property was executed before Competent Authority in year 1985. 5. learned CIT(A) erred in directing Assessing Officer to adopt Fair Market Value as on 01.04.1981 despite evidence on record that properly was actually transferred to assessee in year 1985. 6. learned CIT(A) erred in not appreciating fact that assessee has not cooperated during assessment proceedings despite repeated opportunities given to him by AO to rebut evidence gathered against him. 7. learned CIT(A) erred in admitting evidence produced before him, without giving AO opportunity to examine it, depriving Revenue opportunity to check velocity of claim made by assessee before CIT(A) and provided to use this evidence to decide issue in favour of assessee. 8. learned CIT(A) erred in not appreciating fact assessee, even otherwise, failed to fulfil necessary provisions of Transfer of Property Act before 1981. 9. Any other ground that may arise during hearing. 3. Shri Ramesh S. Mutagar, Departmental Representative represented on behalf of Revenue and Shri D.E. Robinson, Advocate represented on behalf of assessees. 3 ITA No. 377 & 378/PAN/2015 4. In respect of ground Nos. 1 to 3 of Revenue s appeal, it was submitted by Departmental Representative that issue was against action of Commissioner of Income Tax (Appeals) in holding that payment of 2 crores made to nine legal heirs of assessee s father justified improvement in title of land . It was submission that assessee had inherited nearly 183000 sq.mts. of land from his father. It was submission that assessee sold this property for amount of 5 crores and had paid 2 crores to other legal heirs on family settlement. It was submission that amount of 2 crores could not be treated as improvement in respect of title of land. It was submission that order of Commissioner of Income Tax (Appeals) was liable to be reversed. 5. In reply, Authorized Representative of assessee submitted that assessee had entered into agreement with his father on 01/12/1977 for development of said 183000 sq.mts. of land situated at Soccorro, Goa. He drew our attention to agreement which was placed at page No. 140 of paper book. It was submission that as per agreement, assessee had paid 5 Lac to his parents and as per agreement, assessee was to provide seven houses, each having 110 sq.mts. along with appurtenant thereto 300 sq.mts. It was submission that consequently irrevocable power of attorney has also been given to assessee along with possession of said land. It was submission that in meantime on 31/01/1999, assessee s father expired and inventory proceedings had been initiated. In view of Article 2111 of Portuguese Civil Code, said property at Soccorro was also included as property of deceased for purpose of determining share of each of members being legal heirs. It was submission that in view of provisions of Article 1417 of Portuguese Civil Law, Hon ble Civil Judge Senior Division C Court at 4 ITA No. 377 & 378/PAN/2015 Mapusa had included said property in inventory proceedings No. 23/2000/C. order was delivered on 27/10/2004, wherein assets of deceased Dr.Jose Olavo Ribeiro, father of assessee was valued at 39,18,998/- and said property was valued at around 11 Lac. It was submission that consequent to said inventory proceedings, assessee had sold said property during Assessment Year 2007-08 and as assessee was bound to pay nearly 13,95,377/- representing shares of other members, which amounted to nearly 35% of value of total assets of assessee s father. assessee paid 2 crores to legal heirs. It was submission that Assessing Officer at page No. 11 of his order had accepted payment of 2 crores to legal heirs and had also permitted indexation from 1999. It was submission that it is only issue on indexation more specifically year relating to which index is to be granted, issue was taken before Commissioner of Income Tax (Appeals). It was submission that payment of 2 crores and issue as to whether said amount of 2 crores went towards improvement in title to land, was not issue of dispute before Commissioner of Income Tax (Appeals) and Commissioner of Income Tax (Appeals) had not adjudicated such issue, but in fact Assessing Officer himself has accepted that said amount of 2 crores did go towards improvement in title of land. It was submission that ground Nos. 1 to 3 of Revenue s appeal did not arise out of order of Commissioner of Income Tax (Appeals) and consequently liable to be dismissed. 6. In reply, Departmental Representative vehemently supported grounds No. 1 to 3 of appeal. 7. We have considered rival submissions. perusal of page No. 11 of assessment order clearly shows that Assessing Officer 5 ITA No. 377 & 378/PAN/2015 himself accepted claim of assessee in respect of amount of 2 crores paid by assessee to other legal heirs in respect of improvement to title. Admittedly, this is not issue which arise from order of Commissioner of Income Tax (Appeals). In fact, this is issue which has attained finality insofar as Assessing Officer himself has accepted same. This being so, grounds No. 1 to 3 of Revenue s appeal stand dismissed as not arising out of order of Commissioner of Income Tax (Appeals). 8. In respect of ground Nos. 4 to 8, it was submitted by Departmental Representative that assessee had purchased 18075 sq.mts. of land at Calangute from one Mr. Finton Marcedo and Mrs. Marcedo. It was submission that assessee had purchased this land in 1985 for consideration of 15 Lac. It was submission that assessee had subsequently sold 11394 sq.mts. of land for consideration of 10 crores. It was submission that assessee had claimed that actual sale was of 14525 sq.mts. and nearly 1920 sq.mts. had been sold to Mundkars. It was submission that Assessing Officer has adopted cost of acquisition of said property at 83/- and area which has been transferred has been adopted at 11394 sq.mts., whereas assessee had adopted 18075 sq.mts. 9. It was submission that on appeal, Commissioner of Income Tax (Appeals) has accepted claim of assessee that valuation has been done on 01/04/1981 and area sold was adopted at 18075 sq.mts. and had consequently, deleted entire addition made by Assessing Officer. It was submission that order of Commissioner of Income Tax (Appeals) was liable to be reversed. 10. In reply, Authorized Representative of assessee submitted that assessee had purchased 18075sq.mts. of land from Mr. & Mrs. 6 ITA No. 377 & 378/PAN/2015 Marcedo. It was submission that agreement was entered into in 1977 for consideration of 15 Lac. Authorized Representative of assessee drew our attention to copy of agreement which was shown at page No. 91 of paper book. It was submission that till year 1982, Coastal Regulation Zone had not been implemented and consequently said property being beach side property had been developed by assessee. It was submission that in 1985, assessee obtained sale deed as per agreement dated 01/12/1977. It was submission that assessee had requested for valuation of property as on 01/04/1981 as assessee was in possession of property right from 1977. It was submission that affidavit from Mr. Finton Marcedo had also been produced before Commissioner of Income Tax (Appeals) which had been sent to Assessing Officer in course of appellate proceedings and Assessing Officer had not raised any objection to same. It was submission that assessee as per agreement of 1977 had settled with Mundkars and had transferred 1920 sq.mts. of land to various Mundkars which had not been accepted by Assessing Officer on ground that settlement was done before Mukundars. It was further submission that in sale deed in respect of sale of balance land, area has been specified as 11394 sq.mts whereas in schedule thereof, it clearly shown 14794 sq.mts. It was submission that it was typographical error in sale deed, whereas schedule to sale deed clearly showed area. It was submission that consequently, assessee was entitled to valuation of property as on 01/04/1981 for purpose of indexation and sale consideration in respect of total area sold/transferred was liable to be considered. It was submission that some part of land had also been acquired by Government. On specific query from Bench as to when sale deed has been registered only in 1985, how valuation can be done as on 01/04/1981, Authorized Representative of assessee submitted that assessee was in 7 ITA No. 377 & 378/PAN/2015 possession right from 1977 as per agreement and he had irrevocable power of attorney in respect of said land and consequently he was entitled to valuation as on 01/04/1981. It was then put to him that as per agreement dated 01/12/1977, caluse-1 of said agreement, assessee was entitled to buy 18000 sq.mts. of land subject to terms and conditions stated therein and sum of 15 Lac payable to vendors. It was then put to Authorized Representative of assessee as to when conditions in agreement were complied with and amount of 15 Lac paid to vendors. It was fairly submitted by Authorized Representative of assessee that right from 1977, compliance to agreement was in process and it was completed in 1985 and consideration of 15 Lac had been paid in 1985 when sale deed was registered. It was then fairly agreed by Authorized Representative of assessee that in order to set issues to rest, assessee was willing to accept fair market value to be fixed as of 1985. It was submission that valuation of fair market value as determined by Assessing Officer in respect of said property by applying rate of 83/- per sq.mtr. was erroneous. It was submission that issue of valuation may be restored to file of Assessing Officer for re- adjudication by applying comparative case method of similar properties of comparable size. To this submission, Departmental Representative had no objection. It was further submission that Assessing Officer may also be directed to verify from mutation records as to verify actual area of land sold, to which also Departmental Representative did not raise any objection. It was final submission by Authorized Representative of assessee that in respect of transfer of 1920 sq.mts. of land to Mundkars, who acquired interest in said property, Assessing Officer may be directed to treat same as sale and compute capital gains/loss in respect of same. To this also, Departmental Representative did not raise any objection. 8 ITA No. 377 & 378/PAN/2015 11. We have considered submissions. Admittedly, as per agreement dated 01/12/1977, assessee would get complete rights and ownership of property only when he has complied with conditions mentioned therein. conditions have been complied with and completed in only 1985 when sale deed was registered. Consequently, 1985 would have to be taken as year of acquisition. Coming to cost of acquisition, dispute between assessee and Assessing Officer is that Assessing Officer has taken 83/- as cost of land and he has not taken into consideration cost of building in said land nor he has taken into consideration various expenses that has been incurred by assessee for purpose of complying with agreement dated 01/12/1977. assessee had adopted approximately 400 sq.mtr. 1) In these circumstances, for purpose of determining cost of land, Assessing Officer shall apply comparable case method in respect of similar properties of comparable size. Assessing Officer shall also value property by taking cost of acquisition at 15 Lac and adding to same, costs incurred by assessee till 1985 for purpose of complying with agreement dated 01/12/1977 whichever of two is higher, same is to be adopted as cost of acquisition of said land as on 1985 for purpose of applying indexation. In event that assessee is unable to provide details of expenses incurred between 1977 to 1983 in compliance with agreement dated 01/12/1977, Assessing Officer may adopt estimation. cost of building of 400 sq. mts. which is therein in property is also to be valued. It must be appreciated that in 1977 when agreement was entered into consideration had been fixed at 15 Lac for 18000 sq.mts. in 1985 which is nearly seven years later obviously value of property would have increased. 9 ITA No. 377 & 378/PAN/2015 2) Assessing Officer shall verify with mutation records to verify area of land sold/transferred for consideration of 10 crores. Whatever mutation records show as having been transferred is to be considered as area which has been transferred under sale deed for consideration of 10 crores. 3) As per agreement dated 01/12/1977 existence of Mundkars are recognized. assessee has specifically claimed to have transferred 1920 sq.mts. of land to Mundkars. Assessing Officer shall compute capital gains/loss in respect of transfer of said area to Mundkars applying same rate in respect of cost of acquisition. assessee shall cooperate with Assessing Officer in providing all evidences as required by Assessing Officer for purpose of quantification of capital gains and valuation of cost of acquisition and improvements thereof. With these directions, issues in ground Nos. 4 to 8 of appeal of Revenue stand restored to file of Assessing Officer for re-adjudication. 12 In result, appeal of Revenue is partly allowed for statistical purpose. Order Pronounced in Court at close of hearing on Wednesday, 14th day of September, 2016 at Goa. Sd/- sd/- (N.S.SAINI) (GEORGE MATHAN) Accountant Member Judicial Member Dated : 15 t h September , 2016. vr/- 10 ITA No. 377 & 378/PAN/2015 Copy to: 1. Assessee. 1) Mr. Gil Oswald Ribeiro, Angels Resorts, Chogum Road, Alto De Porvorim, Bardez, Goa. 2) Mrs. Matildes Lobo Ribeiro, Angels Resorts, Chogum Road, Alto De Porvorim, Bardez, Goa. 2. Revenue. ACIT, Circle-2(1), Panaji Goa. 3. CIT, Panaji, Goa. 4. CIT(A), Panaji-1, Goa. 5. D.R. 6. Guard file. By order Assistant Registrar I.T.A.T., Panaji ACIT, Circle-2(1), Panaji Goa v. Gil Oswald Ribeiro