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Dattatraya Kerba Lonkar Versus Deputy Commissioner of Income Tax, Circle-2, Pune

2017 (2) TMI 159 - ITAT PUNE

Computing long term capital gain - adoption of value of property - reference to DVO - Held that:- The Hon’ble Delhi High Court in the case of CIT V/s. Sadna Gupta [2013 (3) TMI 418 - DELHI HIGH COURT] held that unless and until there was some other evidence to indicate that extra consideration had flowed in transaction for purchase of property, report of DVO could not form basis of any addition on part of revenue. In absence of any evidence no reliance could be placed on the report of DVO for ma .....

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n as mentioned in the Sale Deed as a fair market value for determining the long term capital gain. - Addition of Part of sale consideration alleged to have been directly paid by purchaser - Held that:- A perusal of the orders of the Authorities below reveal that the Authorities below without verifying the fact whether the amount of ₹ 23 Lacs have actually been paid by the purchaser to the Mr. Mansoor Abdul Gani Aaga and Smt. Shagufta M. Aaga, has out rightly rejected the contentions of .....

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y, ground No. 2 raised in the appeal by the assessee is allowed for statistical purposes. - ITA No. 1818/PUN/2014 - Dated:- 30-1-2017 - Shri R. K. Panda, AM And Shri Vikas Awasthy, JM Assessee by : Shri Vipin Gujarathi Revenue by : Shri P.L Kureel ORDER Per Vikas Awasthy, JM This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-II, Pune dated 13.05.2014 for the assessment year 2010-2011. 2. The brief facts of the case as emanating from the record are: .....

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on 29.08.2011. During assessment proceeding, the Assessing Officer made addition on account of long term capital gains arising from sale of land on the ground that assessee has understated the value of sale consideration while computing long term capital gain at the time of filing return of income. Aggrieved by assessment order dated 20.03.2013, the assessee preferred appeal before Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) partly accepted the appeal of assess .....

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7; 3,14,86,000/- as full value consideration instead of the Agreement Value ₹ 3,07,71,470/- without appreciating the fact that there was very minor difference between the valuation as per DVO and the Agreement Value. The honorable Commissioner of Income Tax (Appeals) failed to appreciate that valuation is an estimate and that the learned A.O has not brought on record anything to suggest that the appellant has received more than the Agreement Value of ₹ 3,07,71,470/-. The appellant he .....

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ed 08.12.2009. The honorable Commissioner of Income Tax ( Appeals) failed to appreciate the fact that appellant was neither entitle to nor has received the said consideration and hence it is not taxable in his hands. The appellant hereby prays that the sale consideration may please be reduce by ₹ 23,00,000/-. 3) The appellant hereby reserves the right to add, alter, amend or delete any grounds of appeal. 3. Shri Vipin Gujarathi appearing on behalf of the assessee submitted that the assesse .....

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amp valuation, the value of land sold by the assessee was determined at ₹ 5,75,81,250/-. Since the land in question was under litigation and was encroached from all sides, the value of land diminished considerably. The father of assessee during his lifetime had entered into multiple sale agreements in respect of the said land. One Ramesh Gopal Yadav on the basis of forged power of attorney, fraudulently executed various Sale Deeds in respect of the land in question and got the names of pur .....

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al before the Commissioner of Income Tax (Appeals). The DVO vide report dated 23.12.2013 (placed on record at page No. 69 to 84 of the paper book) determined the fair market value of property at ₹ 3,14,86,000/-.The Commissioner of Income Tax (Appeals) adopted the valuation of property as determined by the DVO and granted part relief to the assessee. The ld. A.R contended that there is marginal difference between actual sale consideration as per sale deed and the fair market value determine .....

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/s. DCIT reported as 38 DTR 19. The ld. A.R further submitted that the Hon ble Patna High Court in the case of Bimla Singh V/s. CIT reported as 308 ITR 71 has held that no addition is warranted if the difference in value adopted by the assessee and the valuation made by the DVO is less than 15 per cent. The ld. A.R Prayed for adopting the value of property at ₹ 3,07,71,470/- i.e as per Sale Deed for the purpose of computing long term capital gain. 4. In respect of ground No.2, the ld. A.R .....

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was under litigation. Mr. Mansoor Aaga and Mrs. Shagufta Aaga had acquired part of land by way of sale agreement executed by Ramesh Gopal Jadhav on the basis of forged power of attorney. The assessee in order to settle the protected litigation compromised with Mr. Mansoor Aaga & Mrs. Shagufta M. Aaga. The ld. A.R placed on record a copy of compromise decree of Civil Court, Pune drawn on the basis of compromise between the aforenamed parties. The ld. A.R contended that since ₹ 23,00,000 .....

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page 26 to 39 of the paper book to show that ₹ 8,00,000/- and ₹ 15,00,000/- ( total ₹ 23,00,000/-) were directly paid by the purchaser to Mansoor Aaga and Shagufta Aaga, respectively by way of cheque. In support of his contentions that the payment made to unauthorized occupants of land is allowable, the ld. A.R placed reliance on the following decisions:- 1) CIT V/s. Shakuntala Kantilal 190 ITR 56 ( Bom.) 2) CIT V/s Abrar Albi 247 ITR 312 ( Bom.) 3) CIT V/s. Raman Kumar Suri 2 .....

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roperty as determined by the DVO and addition of ₹ 23 Lacs on account of part consideration paid by the purchaser of land directly to Mr. Mansoor Abdul Gani Aaga and Smt. Shagufta M. Aaga. 7. In respect of first ground of appeal relating to valuation of property, it is an admitted fact that as per Sale Deeds, the total sale consideration is ₹ 3,07,71,470/-. The Assessing Officer adopted sale value of property for the purpose of determining long term capital gain as per stamp duty val .....

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property at ₹ 3,14,86,000/-. The Commissioner of Income Tax (Appeals) adopted the fair market value of property as determined by the DVO. The contention of the assessee is that since the difference between actual sale consideration and value determined by the DVO is marginal, actual value of sale consideration should be adopted for computing long term capital gain. 8. We find merit in the submission of Ld. A.R. The difference between the fair market value determined by the DVO and actual .....

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Bench after considering the provisions of Section 50C of the Act and the provision of section 23A and 24(5) of the Wealth Tax Act held as under :- 13. A combined reading of the above provisions shows that the valuation adopted by the DVO is subject to appeal and the same is not final. In the instant case we find that as Aagainst the value of ₹ 28,73,000/- adopted by the stamp valuation authorities, the DVO has determined the FMV on the date of transfer at ₹ 20,55,000/- . This itself .....

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and the value adopted by the DVO is less than 10 per cent. 14. We find that the Pune Bench of the Tribunal in the case of Asstt. CIT V/s. Harpreet Hotels (p) Ltd. vide ITA Nos. 1156- 1160/pn/2000 and relied on by the learned counsel for the assessee had dismissed the appeal filed by the Revenue where the CIT(A) had deleted the unexplained investment in house construction on the ground that the difference between the figure shown by the assessee and the figure of the DVO is hardly 10 percent. 15 .....

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o be ignored and the addition made by the A.O cannot be sustained. 16. Since in the instant case such difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference bound to occur, we are of the considered opinion that the A.O. in the instant case is not justified in substituting the sale consideration at ₹ 20,55,000 as Aagainst the actual sale consideration of ₹ 19,00,000/- disclosed by the assessee. We, t .....

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ng less than 15 per cent, the same is to be ignored for the purposes of addition. The Hon ble Delhi High Court in the case of CIT V/s. Sadna Gupta 352 ITA 595 held that unless and until there was some other evidence to indicate that extra consideration had flowed in transaction for purchase of property, report of DVO could not form basis of any addition on part of revenue. In absence of any evidence no reliance could be placed on the report of DVO for making addition. 10. Thus, in view of the fa .....

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rket value for determining the long term capital gain. 11. The second ground raised in appeal is with regard to addition of ₹ 23 Lacs. Part of sale consideration alleged to have been directly paid by purchaser to Mr. Mansoor Abdul Gani Aaga and Smt. Shagufta M. Aaga. The Commissioner of Income Tax (Appeals) in the impugned order has placed reliance on some of covenants of the Sale Deed dated 08.12.2009 jointly executed by the assessee, Mr. Mansoor Abdul Gani Aaga and Smt. Shagufta M. Aaga .....

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with the view taken by the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) cannot make addition by drawing references from selective sections of the Sale Deed. The content of the Sale Deed has to be read in whole. A perusal of Clause-9 of the Sale Deed show that it was mutually decided between the assessee who is seller No.1 in the sale Deed, Mansoor Abdul Gani Aaga and Smt. Shagufta M. Aaga seller No. 2 and 3 respectively in the Sale Deed that Mansoor Abdul Gani .....

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eller No.2 and 3 have arrived at a compromise on the prolonged litigation and accordingly on account of investment in the illegal transaction, court case expenses and compensation, the seller No.1 had and has agreed to pay an amount of ₹ 8,00,000/-( Rupees eight lakhs only) and ₹ 15,00,000/- ( Rupees fifteen lacs only) to the seller No. 2 and 3 respectively and accordingly in the same Civil Suit the sellers herein have filed a compromise purshis on receipt of the total amount as stat .....

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have been paid to seller No. 3, Smt. Shagufta M. Aaga vide pay order No. 016359 dated 03.12.2009 drawn on Vishweshwar Sahakari Bank Ltd, Branch Pune on the instruction of assessee. The assessee has also placed on record a copy of the compromise drawn before the Civil Judge, Senior Division, Pune in Civil Suit No. 1741/2015 in suit titled Shri Dattatraya Keraba Lonkar V/s. Shri Ramesh Gopalrao Jadhav and others. A perusal of the said compromise Deed shows that Mr. Mansoor Abdul Gani Aaga and Smt. .....

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is not subject matter of any other legal matter. 14. The Hon ble Bombay High Court in the case of CIT V/s. Shakuntala Kantilal (supra) has held that where the expenditure has been incurred to remove encumbrances for transferring land, the same is deductable. The relevant extract of the judgment is reproduced herein below: The legislature, while using the expression full value of consideration ; in our view, has contemplated both additions to as well as well as deductions from the apparent value. .....

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