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Shri Prembhai Kanjibhai Tandel Versus ITO, Daman Ward Daman.

2016 (10) TMI 994 - ITAT AHMEDABAD

Determination of capital gain on transfer of land - long term capital gain v/s capital loss - Held that:- If we exclude the DVO’s report, there is no other evidence available with the AO, except the calculation submitted by the assessee based on an exercise of reverse indexation from the order of the Deputy Secretary, Revenue determining fair market value of the land in this area. Other evidence collected by the AO from Sub-Registrar was not considered by the AO himself, because, the DVO has rep .....

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ue authorities on this issue and direct the AO to take figure of long term capital loss of ₹ 52,50,759/-.- Decided in favour of assessee - Addition on on-money received over and above, the amounts stated in the sale deed - Held that:- AO failed to bring conclusive evidence on record to say that the assessee has received on-money. It is also pertinent to mention that AO has made an addition of ₹ 1,92,06,000/- in the total income of the assessee. To our mind, the AO has erred in ma .....

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accepted at ₹ 52,50,759/-. The assessee is a salaried person. No carry forward of loss would affect him. Thus, in view of the above discussion, we are of the view that addition of ₹ 1,92,06,000/- is not sustainable in the case of the assessee, because AO failed to bring conclusive evidence on record. We allow this ground of appeal, and delete this addition. - Decided in favour of assessee - ITA.No.192/Ahd/2016 - Dated:- 30-8-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHA .....

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s grievance revolves around one major issue which relates to determination of capital gain on transfer of land. In the first fold of grievance, the assessee has pleaded that the ld.CIT(A) has erred in confirming long term capital gain at ₹ 33,46,640/- as against capital loss of ₹ 52,50,759/- disclosed by the assessee. 3. Brief facts of the case are that the assessee is an individual. He derives salary income from M/s.Dharmesh Distillery, Daman. He has filed his return of income on 31 .....

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sold by the assessee is of 8800 sq.meters. He sold this land at the rate of 1887.50 per sq.meter to M/s.Alkem Laboratories. The assessee has shown sale consideration at ₹ 1,66,10,000/-. While computing long term capital gain, the assessee has adopted cost of acquisition of the property at ₹ 316/- per sq.meter as on 1.4.1981. The ld.AO was not satisfied with the calculation of long term capital loss at ₹ 52,50,759/-. Therefore, in order to collect correct fair market value as o .....

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the assessee as to why this calculation should not be adopted, the assessee filed objections. The AO has noticed those objections on page no.4 and 5 of the impugned order. The assessee contended that Civil Sub-Registrar failed to consider the nature of land before adopting average rate. He has also not transmitted information with regard to industrial land sold by the assessee in village Dabhel. Information relates to agriculture land of a different Revenue area. The ld.AO has made reference to .....

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4.1981. The assessee has worked out the rate of ₹ 316/- per sq.meter on the basis of rate determined by the Deputy Secretary, Revenue Department vide order dated 23.3.2012, whereby, fair market value of the properties have been specified for different areas of Union Territory, Daman. The assessee has adopted rate as on 1.4.1981 by taking reverse indexation cost on the basis of this order. According to the ld.CIT(A), the assessee has sold land on 21.10.2011. On that date, the order of the D .....

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in the first appellate stage. The ld.DVO has determined the cost of acquisition as on 1.4.1981 at the rate of ₹ 192/- per sq.meter as against ₹ 2/- adopted by the Revenue department. The ld.CIT(A) in this way, upheld the computation of long term capital gain at ₹ 35,46,640/-. 5. Dissatisfied with the order of the ld.CIT(A), the assessee is in appeal before the Tribunal. The ld.counsel for the assessee while impugning the orders of the Revenue authorities has contended that the .....

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to have not rejected this contention of the assessee. With regard to DVO s report, he contended that this aspect has been considered by the Hon ble Jurisdictional High Court in large number decisions, and it has been propounded that the AO has no power to make reference to the DVO for the transactions which have been executed before 1.7.2012. He relied upon the decisions of the Hon ble Gujarat High Court in the case of CIT Vs. Gauranginiben S. Shodhan Inld. Vs. CIT, 45 taxmann.com 356 (Guj) and .....

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is on the higher side. In such situation, there cannot be any reference to the DVO. Once the assessee was in appeal before the ld.CIT(A) and challenged the very reference to the DVO, then, it was not necessary for the assessee to raise objections in the proceedings under section 154. Apart from this, the ld.CIT(A) failed to take note that scope of proceedings under section 154 is very limited. The AO has to rectify his order as per his finding in the assessment order, which was subject to DVO s .....

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ket value as on 1.4.1981 has been considered by the Hon ble jurisdictional High Court in the above two judgments. Relevant discussion made by the Hon ble High Court in the case of CIT Vs. Gauranginiben S. Shodhan (supra) reads as under: 15. Coming to the question of reference to DVO for ascertaining the fair market value as on 1.4.1981 also, we find that such reference was not competent. We have noticed that prior to the amendment in section 55A with effect from 1.7.2012 in a case, the value of .....

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t from 1.7.2012, the expression now used in clause (a) of section 55A is is at variance with its fair market value . The situation may, therefore, be different after 1.7.2012. We are, however, concerned with the period prior thereto. Clause (b) of section 55A is in two parts and permits a reference to DVO if the Assessing Officer is of the opinion that (i) the fair market value of the asset exceeds the value of the asset so claimed by the assessee by more than such percentage of the value of the .....

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ion in any other case . In other words if assessee has relied upon a Registered Valuer s Report, Assessing Officer can proceed only under clause (a) and clause(b) would not be applicable. 16. In the present case, admittedly the assessee had relied on the estimate made by the Registered Valuer for the purpose of supporting its value of the asset. Any such situation would be governed by clause (a) of section 55A of the Act and the Assessing Officer could not have resorted to clause (b) thereof as .....

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the opinion that the value so claimed is less than the fair market value. In any other case, as provided under clause(b) of Sec. 55A of the Act, the Assessing Officer has to record an opinion that (i) the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage or by more than such an amount as may be prescribed; or (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to make such a reference .....

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of its order observed as under:- 6. We have duly considered the rival contentions. A reference to the Valuation Officer is to be made under section 55A of the Act. Clause(A) of Section 55A has a bearing on making such a reference. It reads as under: 55.A. With a view to ascertaining the fair markiet value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the Valuation of capital asset to a Valuation Officer: (a) in a case where the value of the asset as claimed .....

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s subjective or guided by some judicious actions. The formation of opinion should have rational connection with the material brought on record. It should not be based on extraneous or irrelevant reasons. In the present case, the Assessing Officer before making a reference to the Valuation Officer has not brought anything on the record indicating that the assessee has disclosed lesser sale price. There is nothing on the record which can suggest to ignore the report of the registered valuer and to .....

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ital gains at ₹ 12,28,9077-." 6. In view of the above, we are in complete agreement with the view taken by the Tribunal. The Tribunal has given cogent and convincing reasons in arriving at the conclusion. Therefore, the present appeal is dismissed. Accordingly, the question posed in this appeal is answered in favour of the assessee and against the revenue. 8. In the light of the above, if we exclude the DVO s report, there is no other evidence available with the AO, except the calcula .....

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considered by the AO were not of similar land. These were for agriculture land having different geographical locations, whereas the land sold by the assessee was of an industrial land. Therefore, the calculations made by the assessee deserve to be accepted. We set aside the orders of the Revenue authorities on this issue and direct the AO to take figure of long term capital loss of ₹ 52,50,759/-. This figure would be subject to our finding hereinbelow on the second aspect disputed in this .....

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ains survey numbers of land sold by the assessee, area, cash payment and payment by cheque. On the basis of these noting found in this page, the ld.AO formed an opinion that the assessee has received a sum of ₹ 1,92,06,000/- as on-money, over and above, the amounts stated in the sale deed. The ld.AO has called upon the assessee and confronted him. He recorded statement of the assessee under section 131 of the Act. The ld.AO further observed that one component of the cash payment was of  .....

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uated at Porvorim within area of Socorro village, North Goa. The assessee had sold this bungalow vide sale agreement dated 1.8.2011. It was sold to nine persons and agreement was duly notarized. The assessee has received initial payment in cash, and out of that, ₹ 50 lakhs were deposited. The ld.AO has called for all nine vendees. Out of nine persons, five persons appeared before him, whose statements were recorded by the AO under section 131 of the Act. The AO has observed that these pers .....

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e should produce the vendee. According to the AO, the assessee failed to produce the vendee, therefore, no cross-examination could be provided to the assessee of the vendee. Accordingly, the ld.AO made addition of ₹ 1,92,06,000/- in the total income of the assessee. 11. Appeal to the ld.CIT(A) did not bring any relief to the assessee. The ld.counsel for the assessee, while impugning the order of the Revenue authorities has contended that the sale deed was executed on 21.10.2011. Survey on .....

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brought documentary evidence, such as bank statement, source of income etc. The ld.counsel for the assessee contended that witnesses were not called upon to bring bank statements, source of income etc. Their role was to demonstrate whether they have entered into an agreement with assessee for purchase of bungalow or not. If they failed to show the source, then that could be examined in their cases. How this reasoning of the AO would falsify the claim of the assessee, is not discernible. The ld. .....

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this page first against the assessee, and only thereafter, explanation of the assessee could be sought. In this way, the ld.counsel for the assessee prayed that addition made by the AO on account of receipt of on-money be deleted. 12. On the other hand, the ld.DR contended that perusal of this page would make it clear that the assessee has received on-money. The page has been written in methodological manner, which discloses survey numbers, rates on which the land was sold and component of money .....

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he assessee has disclosed total sale consideration at ₹ 1,66,10,000/-. Department was able to lay its hand on a loose paper at the premises of the vendees during survey operation. This page does disclose details of land, area, rate at which land was sold, cash component. Dates mentioned in this page are 01.08.2001 and 31.8.2011. The ld.AO observed that there was some error in mentioning of first date. Assessee sought to cross-examine person who has authored this page. The ld.AO did not mak .....

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uring the course of hearing and appraised ourselves about the fact that it was a stay granted appeal, in which stay was going to expire on 10.9.2016, we have directed the ld.DR to place on record the following information: 03-08-2016 Present: Assessee by-Shri Suresh K. Kabra, AR Revenue by - Shri James Kurian, Sr.DR It is a stay granted appeal, and the stay is going to expire on 11th September, 2016. There are two issues involved in this appeal viz. determination of long term capital gain/loss, .....

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endee. This prayer was not acceded to by the AO. 3. We have heard this appeal, but we want the following information from the department: i) Whether any representative of the vendee, while explaining this paper during the course of survey, made any disclosure about payment of any money to the assessee. ii) Whether any inquiry is made in the case of vendee or any addition on account of unexplained investment etc. was made in vendee's case. The Id.DR is directed to collect this information and .....

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remises of a third party, authored by a third party, could not be considered as a sufficient evidence to accept that assessee has received on-money. This piece of evidence can be a corroborative piece of evidence for confronting the assessee, but it is not a conclusive proof. The assessee has specifically asked for an opportunity to cross-examine Principal Officer of the vendee company. But no such opportunity was granted to the assessee. Hon ble Supreme Court in recent decision passed in the ca .....

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the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-exa .....

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d that crossexamination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 15. In the present case also, the assessee had made a prayer that let he be given an opportunity to cross-examine the pe .....

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vendees out of nine. The assessee has produced Notary who has notarized the agreement. The AO did not rely upon the statement of the vendee on the ground that they were not possessing copy of bank statement or evidences exhibiting the source of income. In our opinion, their role as witness was to depose whether they have entered into an agreement with the assessee for purchase of bungalow or not. They confirmed this transaction. The AO could not found fault in their statement with regard to this .....

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