Rajkumar Kumbhat v. The Income-tax Officer, Business Ward XV(4) Chennai
[Citation -2016-LL-0923-40]

Citation 2016-LL-0923-40
Appellant Name Rajkumar Kumbhat
Respondent Name The Income-tax Officer, Business Ward XV(4) Chennai
Court ITAT-Chennai
Relevant Act Income-tax
Date of Order 23/09/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags district valuation officer • immovable property • fair market value • capital asset • value of land
Bot Summary: The District Valuation Officer called for the objections from the assessee which :- 6 -: ITA No.2283 Mds 2013 assessee duly furnished vide its letters dated 26.09.2012, 17.10.2012 and 22.10.2012. As per assessee, sale effected by these persons who had no authority or title to the subject property was assailed by the assessee s through a suit filed before High Court of Madras. As per assessee subject property was occupied earlier by the tenant who had :- 7 -: ITA No.2283 Mds 2013 unauthorizely sold the property to Smt.J. Geetha and after such fraudulent sale assessee was constrained to sell the property at much lower a price than the market value due to the particular facts and circumstances, to avoid prolonged litigation. 50C of the Act did not allow any relief for the type sought by the assessee for alleged distress situation as canvassed by the assessee. Ft of building sold by the assessee a relief of 2,11,150 - was given to the assessee. The assessee has explained that the sale made by the assessee was a distress sale and the entire consideration was paid to the UCO Bank and the sale consideration was comparable to the earlier valuation of the property taken by the UCO Bank and in such circumstances there was no chance to expect more price for the property. In assessee s case, although had filed a suit against the tenants who had earlier sold the subject property, assessee s assertion all along was that they had no title in the subject property.


IN INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI, BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . I.T.A. No.2283 Mds 2013 Assessment year : 2008-2009 Rajkumar Kumbhat Vs. Income Tax Officer, (Deceased) Business Ward XV(4) By L.R. Mr. Akash Kumbhat, Chennai New No.31, Old No.12- 15 27, Dr. Guruswamy Road, Chetpet, Chennai 600 031. [PAN AABPK 2663A] ( Appellant) ( Respondent) Appellant by : Shri. V. Jagadisan, C.A. Respondent by : Shri. Supriya Pal, JCIT. Date of Hearing : 19-09-2016 Date of : 23-09-2016 Pronouncement ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER This appeal of assessee is directed against order dated 31.10.2013 of Commissioner of Income-tax (Appeals)-VI, :- 2 -: ITA No.2283 Mds 2013 Chennai, dated 31.10.2013. assessee has raised following grounds:- l. Commissioner of Income Tax (Appeals) erred in not properly considering grounds raised in respect of objection against valuation of property u s 50C as well as other grounds raised in appeal filed before Hon'ble CIT (A). 2.The Commissioner of Income Tax (Appeals) erred in holding that DVO considered facts of litigation involved in property while fixing fair market value without proper regard to decision on subject furnished by appellant. 3.The Commissioner of Income Tax (Appeals) erred in holding that DVO has considered provisions of section 50- C (2) in fixing fair market value of properties sold. 4.The Commissioner of Income Tax (Appeals) erred in holding that DVO was justified in adopting CPWD rate as against state PWD rate which is applicable even to properties in Chennai, thus disregarding principles laid down by courts of law. 5.The Commissioner of Income Tax (Appeals) has not properly considered that fair market value of property sold should take into consideration factual circumstance related to forced sale after litigation over long period of years and difficult position of assessee to fight battle against :- 3 -: ITA No.2283 Mds 2013 earlier illegal sale of same property by illegal vendor to same purchaser - Commissioner of Income Tax (Appeals) failed to accept normal fair market value should not be adopted u s 50 C where sale in question is distress sale. 6.In any event, reasonsings of Commissioner of Income Tax (Appeals) for confirming method adopted by DVO in determining fair market value of property in question is not legally and factually correct. 7.The Commissioner of Income Tax (Appeals) erred in confirming fair market value as on 1.4.1981 at Rs.35,000 - per ground - based on guideline value , details of such value not being furnished to assessee at any time. Commissioner of Income Tax (Appeals) erred in rejecting fair market value as on 1.4.81 adopted by assessee appellant . 8.The Commissioner of Income Tax (Appeals) having accepted that FMV fixed by DVO is to be reduced by Rs.6,33,450 -- erred in reducing only 2,11,150 - (1 3rd share) on gross FMV - correct working is 1 3 of 3,66,18,000 - = 1,22,06,000 - less 1 3 of 6,33,4501- = 2,11,150 - - nett value 1,19,94,8501- and not Rs.1,21,35,616 -. 9.The Commissioner of Income Tax (Appeals) erred in :- 4 -: ITA No.2283 Mds 2013 disregarding claim that set off should be given in respect of amount of 24,91 ,667 - being sale consideration already received in respect of sale of same property by illegal owner to same purchaser who purchased property from appellant . 2. Facts apropos are that assessee alongwith his two siblings had inherited immovable property comprising of land and building at Old Survey No.1951, New Survey No.1419 7F, C.C. No.3807, Block No.28, Mylapore Village, Mylapore Triplicane taluk. area of plot came to 3731 sq.ft. property was inherited by assessee and his siblings on death of their mother Smt. Ratankumari Kumbhat. Smt. Ratankumari Kumbhat had purchased this property in 1963 through registered sale deed. 3. During course of assessment proceedings for impugned assessment year it was noticed by ld. Assessing Officer that assessee had sold above property to one Smt. J. Geetha on 12.10.2007 and consideration mentioned in sale deed was 1,50,00,000 -. On last page of document Sub Registrar office placed value of 10,500 - per sq.ft for land and fixed value of 1,50,000 - for building. buyer of land had paid additional stamp duty as well. Based on land value taken at :- 5 -: ITA No.2283 Mds 2013 10,500 - per. Sq.ft for 3731 sq.ft of land sold by assessee, value came to 3,91,75,500 -. Alongwith value of building, total value fixed by Sub Registrar Office came to 3,93,25,500 - and assessee s share as per Assessing Officer being 1 3rd, came to 1,31,08,500 -. As per ld. Assessing Officer sale consideration paid by assessee s mother in 1963 while acquiring subject property was only 15,000 -. He considered base base guideline value of popery as on 01.04.1981 at 35,000 - per ground, which effectively worked out to 14.50 per sq.ft. Long term capital gains was reworked taking consideration as 1,31,08,500 - and cost at 99,356 - 4. Aggrieved, assessee moved in appeal before CIT(A). One of grounds taken by assessee before ld. Commissioner of Income Tax (Appeals) was that ld. Assessing Officer had not followed procedure set out in Sec.50C of Income Tax Act, 1961 (herein after referred to as Act ). After considering this objection, ld. Commissioner of Income Tax (Appeals) directed ld. Assessing Officer to refer valuation of subject property to valuation officer of Department. Accordingly, ld. Assessing Officer referred to District Valuation Officer. District Valuation Officer called for objections from assessee which :- 6 -: ITA No.2283 Mds 2013 assessee duly furnished vide its letters dated 26.09.2012, 17.10.2012 and 22.10.2012. After considering objections of assessee, District Valuation Officer estimated fair market value at 3,66,18,000 -. ld. Assessing Officer forwarded valuation report to ld. Commissioner of Income Tax (Appeals). 5. Thereafter, ld. Commissioner of Income Tax (Appeals) required assessee to file its objection in light of valuation report. assessee submitted before ld. Commissioner of Income Tax (Appeals) that subject property was earlier sold by one Shri. H. Mahendra Kumar and three others who were tenants therein through sale deed dated 27.05.2002 in favour of very same buyer Smt. J. Geetha for sale consideration of 74,75,000 -. As per assessee, sale effected by these persons who had no authority or title to subject property was assailed by assessee s through suit filed before High Court of Madras. However, as per assessee such suit was compromised by mutual agreement. Pursuant to such compromise, assessee had sold subject property to Smt. J. Geetha alongwith other with his siblings for total consideration of 1,50,00,000 -. Contention of assessee was that value as per Sec. 50C of Act could not be adopted since it was distress sale. As per assessee subject property was occupied earlier by tenant who had :- 7 -: ITA No.2283 Mds 2013 unauthorizely sold property to Smt.J. Geetha and after such fraudulent sale assessee was constrained to sell property at much lower price than market value due to particular facts and circumstances, to avoid prolonged litigation. In so far as valuation made by District Valuation Officer was concerned assessee stated that District Valuation Officer ignored its objections and considered building area wrongly as 2299 sq.ft against actually sold area of 600 sq.ft. As per assessee area of building was clearly mentioned in sale deed as 600 sq.ft. One other contention of assessee before ld. Commissioner of Income Tax (Appeals) was that District Valuation Officer had adopted CPWD rates for valuation of building as against PWD rates. Reliance was placed by assessee on decision of Co-ordinate Bench in case of ACIT vs. MIL Industries Ltd (2013) 142 ITD 428 in support of its contention that in distress sale fair market value as per Sec.50C of Act could not be adopted. Reliance was also placed on judgment of Hon ble Allhabad High Court in case of CIT vs. Chandra Narain Chaudhri (2014) 99 DTR 105. 6. However, ld. Commissioner of Income Tax (Appeals) was not impressed by above arguments except for mistake committed by DVO in area of building sold. As per ld. :- 8 -: ITA No.2283 Mds 2013 Commissioner of Income Tax (Appeals) assessee could not show why PWD rates was to be adopted for valuing building. ld. Commissioner of Income Tax (Appeals) also noted that Sec. 50C of Act did not allow any relief for type sought by assessee for alleged distress situation as canvassed by assessee. Nevertheless for mistake in taking 2299 sq.ft against 600 sq.ft of building sold by assessee relief of 2,11,150 - was given to assessee. As for decision of Allhabad High Court in case of Chandra Narain Chowdri (supra) ld. Commissioner of Income Tax (Appeals) noted that there was no valuation by District Valuation Officer in said case and thus facts were different. 7. Now before us, ld. Authorised Representative strongly assailing orders of lower authorities submitted that sale effected by assessee was under peculiar circumstances. As per ld. Authorised Representative tenants had sold subject property claiming it to be theirs and had registered sale deed in favour of very same buyer on 27.05.2002. ld. Authorised Representative submitted that assessee and his siblings came to know of fraudulent sale by tenants only on later date. Contention of ld. Authorised Representative was that they had moved jurisdictional High Court for nullifying such sale. Nevertheless, as per :- 9 -: ITA No.2283 Mds 2013 ld. Authorised Representative, assessee considering long time period involved in Civil litigation had opted for out-of-Court resolution with ultimate buyer. As per ld. Authorised Representative pursuant to such out of Court settlement, assessee had executed sale deed on 12.10.2007 in favour of very same buyer. As per ld. Authorised Representative sum of 1,50,00,000 - received by assessee and siblings on execution of such sale deed was not comparable to normal sale. Hence, according to him Sec. 50C of Act could not applied at all. 8. So far as merits of case was concerned, ld. Authorised Representative submitted that District Valuation Officer had took land rate at 10,500 - per sq.ft without any evidence based on rates furnished by Sub Registrar Office. As against this, as per ld. Authorised Representative, guideline rate came to 5,556 - per sq.ft only at Anna Salai. Further as per ld. Authorised Representative if building was valued as per state PWD rates, its valuation would go down by 25%. In any case as per ld. Authorised Representative rebate for difference due to adoption of larger area of building was not correctly given by ld.CIT(A). Ld. Authorised Representative further submitted that abatement had to be given for amount received by tenant who had sold property. :- 10 -: ITA No.2283 Mds 2013 9. In support of his contention that in distress sale, valuation u s.50C of Act could not be adopted, reliance was placed on judgment of Allahabad High Court in case of Dinesh Kumar Mittal vs. ITO & ORS 193 ITR 0770, CIT vs. Smt.Rajakumari Vimala Devi 279 ITR 360 and decision of Co-ordinate Bench in case of ITO vs. K.S.R. Anirudhra (ITA No.396 Mds 2013, dated 07.03.2014). For adoption of PWD rates for valuing building, ld. Authorised Representative placed reliance on judgment of Rajasthan High Court in case of CIT vs. Smt. Prem Kumar Murdia 296 ITR 508, CIT vs. Dinesh Talwar 265 ITR 344 and Hyderabad Bench of Tribunal in case of ACIT vs. Vinod Kumar Agarwal 257 ITR (Trib) 65 that of Chennai Bench of Tribunal in case of ITO vs. Rajitha (ITA No.1642 Mds 2011, dated 26.03.2012). 10. Per contra, ld. DR strongly supported orders of authorities below. 11. We have considered rival contentions and perused orders of authorities below. Section 50C of Act is reproduced hereunder:- (1) Where consideration received or accruing as result of transfer by assessee of capital asset, being land or building or both, is less than value adopted or assessed or assessed or assessable by any authority of State Government (hereafter in this section :- 11 -: ITA No.2283 Mds 2013 referred to as "stamp valuation authority") for purpose of payment of stamp duty in respect of such transfer, value so adopted or assessed or assessed or assessable shall, for purposes of section 48, be deemed to be full value of consideration received or accruing as result of such transfer. (2) Without prejudice to provisions of sub-section (1), where- (a) assessee claims before any Assessing Officer that value adopted or assessed or assessed or assessable by stamp valuation authority under sub-section (1) exceeds fair market value of property as on date of transfer ; (b) value so adopted or assessed or assessed or assessable by stamp valuation authority under sub- section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or High Court, Assessing Officer may refer valuation of capital asset to Valuation Officer and where any such reference is made, provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) 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 Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to reference made by Assessing Officer under sub-section (1) of section 16A of that Act. (3) Subject to provisions contained in sub-section (2), where value ascertained under sub-section (2) exceeds value adopted or assessed by stamp valuation authority referred to in sub-section (1), value so adopted or assessed by such authority shall be taken as full value of consideration received or accruing as result of transfer . :- 12 -: ITA No.2283 Mds 2013 Reading of above Section would show that assessee had option before ld. Assessing Officer, for seeking reference to Valuation Officer for valuing capital asset which was transferred. Assessee here had exercised this option before ld. Commissioner of Income Tax (Appeals). Ld. Commissioner of Income Tax (Appeals) through ld. Assessing Officer had made such reference and got capital asset valued. 12. Coming to procedure which is to be followed by Valuation Officer there are clearly set out in sub-sec (2) of Sec. 50C. There is no case for assessee have that Valuation Officer had not followed above procedure. Assessee was given opportunity by Valuation Officer for presenting its case. earlier episode of tenant attempting sale of subjected property and subsequent compromise with ultimate buyer were all canvassed before valuation officer. ld. Counsel for assessee on question from Bench admitted that DVO had indeed considered these and given rebate in valuing property. However, according to him rebate was insufficient. In our opinion once procedure set out in sub- sec.(2) of Sec. 50C of Act is followed by Valuation Officer, Assessing Officer is left with no choice but adopt such value as fixed by ld. Assessing Officer. By virtue of sub-sec (3) of Sec. 50C of :- 13 -: ITA No.2283 Mds 2013 Act, Assessing Officer can examine such value only if it was more than valuation given to property by stamp valuation authority. Coming to grievance of assessee that State PWD rates and not CPWD rates are to be adopted, cases cited by ld. Authorised Representative are all relating to assessment of undisclosed investments for under statement of construction cost and not where Sec. 50C of Act was invoked. As for cases relied by ld. Authorised Representative for canvassing for his contention that for distress that Sec. 50C of Act could not be adopted, fact situation in each of these cases were entirely different. Hon ble Allahabad High Court in case of Dinesh Kumar Mittal (supra) was on issue relating to addition by substituting true sale consideration with value fixed by registration authorities in year prior to Sec. 50C being introduced in Act. As for case of Smt. Rajkumari Vimla Devi (supra) their lordship was considering issue of deemed gift u s.4(1)(a) of Gift Tax Act. Coming to decision of Chennai Bench of Tribunal in case of Shri. K.S.R. Anirudha, (supra) question was whether absence of access road if not considered by DVO in his valuation, could maternally affect such valuation. As for decision of MIL Industries (supra) value was refixed for reason that variables involved in DVO estimation were changing from time to time. However, paras of 14 & 15 of said :- 14 -: ITA No.2283 Mds 2013 decision which is reproduced hereunder, in our opinion swings case in favour of Revenue only. 14. But, only concern is that Commissioner of Incometax (Appeals) has been carried away by certain situations explained by assessee before him. assessee has explained that sale made by assessee was distress sale and entire consideration was paid to UCO Bank and sale consideration was comparable to earlier valuation of property taken by UCO Bank and in such circumstances there was no chance to expect more price for property. It means that there were certain compelling circumstances, which made assessee to sell property for consideration of 2,22,64,409 - 15. In our view, these factors, however heartening may be, cannot be acted upon by appellate authorities for reason that section 50C is deeming provision. Any relief granted to assessee must be on basis of reasons. reasons must be within four corners of law. Whatever may be problems suffered b assessee, in reality those reasons cannot be permitted to go beyond scope of section 50C. When section 50C says that sale consideration shall be guideline value, if stated consideration is less than that, it means that law has already decided course of action. Nothing can persuade situation including genuine and valid difficulties of assessee . 13. Now coming to argument that value of land was fixed by ld. DVO without any evidence, it is admitted position that DVO had considered rates furnished by Sub-Registrar Office. So far as buildup area sold being less than that what it was considered by DVO, we find that ld. Commissioner of Income Tax (Appeals) has indeed given relief for this. Coming to question of abatement for amount received by earlier tenant as per earlier sale deed, in our :- 15 -: ITA No.2283 Mds 2013 opinion this cannot be in anyway considered for any relief to be given to assessee. This is for simple reason that no purchaser of property can acquire title better than that of seller. In assessee s case, although had filed suit against tenants who had earlier sold subject property, assessee s assertion all along was that they had no title in subject property. Thus, we do not find any merits in appeal filed by assessee. 14. In result, appeal filed by assessee in ITA No.2283 Mds 2013 stand dismissed. Order pronounced on Friday, 23rd day of September, 2016, at Chennai. Sd - Sd - (G. PAVAN KUMAR) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER Chennai Dated:23rd September, 2016 KV Copy to: 1. Appellant 3. CIT(A) 5. DR 2. Respondent 4. CIT 6. GF Rajkumar Kumbhat v. Income-tax Officer, Business Ward XV(4) Chennai
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