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Shri Vipul T. Joshi Versus Dy. Commissioner of Income Cirle2 (2) , Baroad

2017 (5) TMI 834 - ITAT AHMEDABAD

Revision u/s 263 - enhancing the long term capital gain - order erroneous or prejudicial to the interest of Revenue - Held that:- From going through the above series of events occurred during the course of assessment proceedings we observe that to a specific query raised during the assessment proceedings the assessee has given a specific reply which was accepted by the Ld.AO which resulted in fetching more Revenue to the income tax department because of applying the rate of land as on 01/04/1981 .....

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he land as on 01/04/1999 and alternatively he has mentioned about the comparable price of gold in 1999 which was quite similar to the basis taken by the valuer in the revised valuation report of Mr.P.K.Desai dated 10/08/2011 submitted during the course of assessment proceedings. In such case, where there is adequate enquiry and observations of the Ld.AO are clearly mentioned in the body of assessment order and view taken by him is permissible in law such order cannot be said to be erroneous or p .....

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in short the Act ) of the Learned Commissioner of Income Tax-I, Baroda (in short Ld.CIT ), framed on 25/03/2014 by Commissioner of Income-tax-I, Baroda. 2. Through the sole ground, assesse has challenged the validity of the order of Ld.CIT(A) u/s.263 of the Act and has contended that the order of Learned Assessing Officer (in short Ld.AO ) u/s.143(3) of the Act dated 29/09/2011 is neither erroneous nor prejudicial to the interest to Revenue. 3. Briefly stated facts as culled out from the availab .....

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wned by the assessee with his brother Shri Yogeshchandra T Joshi held since prior to 01/04/1981. This agriculture land bearing no.165 situated at Gotri was sold at net sale consideration value of ₹ 1,89,60,000/-. Assessee being 50% owner has shown the sale consideration at ₹ 93,80,000/-. In order to calculate long term capital gain assessee adopted the fair market value as on 01/04/1981 at ₹ 25,37,260/- calculated by applying rate of ₹ 380 per Sq.mt. During the course of .....

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putation of income and copy of valuation report dated 10/08/2011, accordingly taxed long term capital gain of ₹ 25,46,017/- as against ₹ 12,57,226/- shown by the assessee in his original return of income. Income was assessed at ₹ 30,33,450/- 3.1 Subsequently Ld.CIT having jurisdiction over the assessee called for the assessment records of the assessee for A.Y. 2009-10. After examining the records Ld.CIT was of the view that Jantri rate was available as on 01/04/1999 of the impu .....

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to the interest of the revenue on account of the following: "1. Whereas it is noticed that you had computed LTCG on sale of land at Revenue survey no 165 of Gotri, Vadodara. The land hold (admeasuring 6,677 sq mts) jointly with your brother and sold it for consideration of ₹ 1,97,60,000/- on 22.09.2008. You had shown fair market value of the said land at Rs.l9,36,300/- as on 01.04,. 1981 on the basis of valuation report of a private valuer who had taken rate of then un-irrigated agric .....

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i rate of 2006, he FMV of land as on 01.04.1981 at ₹ 19,36,300/- @ 290 per sq mt. It was however noticed that Jantri rate of land was available from 1st April 1999 which was 220 per sq mt. Adopting the same method of private valuer (i.e. comparable price of gold in 1999 (167 per gram) and that of in 1981 (423.50 per gram) and after taking reference of jantri rate of 1999), the FMV of land as on 01.04.1981 comes to 579250.[FMV = {cost of gold as on 01.04.1981/cost of gold as on 01.04.1999} .....

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013 by submitting as follows :- LTCG on sale of this land comes to 48,09,415. Thus there was short LTCG of 22.63.3.08 (48,09,415 - 25,46,017 being computed LTCG by Assessing Officer)." 2. In view of the above, a notice u/s. 263(1) dated 18.12.2013 was issued and served upon the assessee, requiring him to attend on 03.01.2014. But no one attended on 31.01.2014, accordingly one more opportunity was given to the assessee to attend on 04.02.2014. After further non-compliance opportunity was giv .....

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and (FMV) as on 01/04/1981determined by registered valuer at Rs. l9,36,300/- while according to the calculation in the notice it is ₹ 5,79,250/- It also appears that the above issue is based on Audit Objection raised by the Revenue Audit party. We may be permitted to submit on facts of the case and in view of direct decisions available on the subject, that the above matter does not warrant any action u/s 263. It seems full facts have not been placed before your honour. Kindly permit us to .....

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stated that in case of another assessee assessed by him earlier, the FMV as on 01.04.1981 adopted was less than the value adopted by the valuer of the assessee. Hence, at the instance of the Assessing Officer, the assessee approached another Valuer and obtained another valuation report. (ii) During the course of assessment proceedings the assesses had filed valuation report dated 10.08.2011 from the said Registered valuer competent to value agricultural lands. The said report valued the land at .....

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icial to the interest of the Revenue on the ground that an audit officer, who has no mandate to do am/ valuation, speculates a different value as market value as on 01/04/1981. (iv) The assesses relies on the following judicial pronouncements, where it was held that as per section 554 (a) the valuation done by the registered valuer can be disregarded and referred to the DVO only when the AO is of opinion that the value claimed as per the report of registered valuer is less than its FMV and not w .....

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humbly states that no action u/s 263 is warranted in his case. (a) Commissioner of Income Tax u. Amit Corporation [2012] 21 Taxman.com 64 (Guj.) It was held that when, during course of framing of assessment, Assessing Officer had access to all records of assessee, and after perusing said records, he framed assessment, said assessment could not be re-opened in exercise of revision power under section 263 for making further inquiries. (b) Commissioner of Income Tax v. ArvindJewellers [2002] 124 Ta .....

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ion of assessee Ld.CIT inclined to held that order passed by the Ld.AO dated 29/09/2011 suffers from serious infirmities and error and prejudicial to the interest of Revenue. Ld.CIT accordingly set aside the order of Ld.AO for framing afresh after working out capital gain by observing as follows: 3.1. I have examined this contention and as noted above, I Find that the long term capital gains worked out by the Assessing Officer on the basis of registered valuer's report contains basic infirmi .....

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but they are few in numbers and these instances are unreliable because of involvement of unaccounted money in all those land dealings and because of Restriction of ULC(C&R) Act, 1976. According to Registered Valuer open and free transactions were not available, hence comparable sale instances were not used. It was further-stated by the Registered Valuer that sale instances were also not comparable because of other things like, locations, situation, fertility, yield, crops and type off soil e .....

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ecause o-f under valuation is not sustainable in law. He has no evidence that the sale instances were undervalued. The same allegation can be made against every sale/purchase instance but they will not be worth the paper they are written, if they are not supported by evidence. Therefore, the basis for rejection of comparable sale instances are not sustainable and, therefore, the whole report based on such flawed premises and observation suffers from serious error. Further, registered Valuer has .....

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Valuer is accepted the working of the long term capital gains on the same reasoning as given by the Registered Valuer is ₹ 48.09 lacs and not ₹ 25.46 lacs as worked out by the assessee. Keeping in view the above facts, it is hereby held that the order passed by the Assessing Officer suffers from serious infirmities and error which is also prejudicial to the interest of revenue. Accordingly the order is set aside to be framed afresh after working out capital gains in view of the abov .....

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cost of acquisition applying the rate of ₹ 380 Per sq.mt. as on 01/04/1981 on the basis of valuation report of the valuer M/s. Space Age Consulting. During the assessment proceedings after discussion with the Ld.AO a fresh valuation report was obtained from Mr.P.K. Desai who valued the land at ₹ 290 per sq.mt. as on 01/04/1981 in place of ₹ 380 per sq.mt mentioned in the earlier valuation report. Assessee accordingly prepared revised computation of income and offered for tax th .....

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term capital gain due to lowering down of index cost. 7.1 Ld.Counsel further submitted that the order under section 263 is contrary to law in view of the following: i) The Commissioner was not justified in observing that the Assessing Officer had made the assessment without investigation. It is submitted that the Assessing officer was very much seized of the matter as seen from the Assessment order and it was in pursuance of discussions with him that a fresh valuation was obtained during assess .....

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ons of Hon'ble Gujarat High Court reproduced in the order under section 263 according to which the action under section 263 was not justified as this is a matter which was examined during the assessment and possibility of a different viewpoint does not justify action under section 263. iv) It is finally submitted that there is also no merit in the order under section 263 which requires valuation based on Jantri value as on, a date which is 20 years after the relevant date and then adjusting .....

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ITAT Chandigarh Bench -CIT V. Fitwell Logic System P. Ltd. 1 ITR 286-ITAT Delhi Bench -CIT V. Smt. Anshu Jain- 36 SOT 263- ITAT Jaipur Bench -CIT V. Smt. Shweta Bhuchar- 192 Taxman 67-Punjab and Haryana High Court. -CIT V. Chandni Bhuchar-323 ITR 510-Punjab and Haryana High Court -CIT V. Raj Kumar Bimla Devi -279 ITR 360-Allahabad High Court -ITO V. Harley Street Pharmaceutical Ltd.- 38 SOT 486-ITAT Ahmedabad Bench -ITO V. Venu Protein Industries (195 Taxman 14(Magazine)-ITAT Ahmedabad Bench. -R .....

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vehemently argue supporting the order Ld.CIT u/s.263 of the Act. 9. We have heard the rival contentions and perused the records placed before us. After going through the judgments and decisions relied on by the Ld.Counsel and also perusing the order of Ld.CIT qua the assessment order dated 29/09/2011 qua the query raised during the assessment proceedings. Solitary grievance of the assessee is challenging the order of Ld.CIT u/s.263 of the Act being not justified in contrary to law. We notice tha .....

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led with the income tax return asseessee on the basis of valuation report of the valuer Mr. Space Age Consulting took the rate at ₹ 380 per sq.mt. as on 01/04/1981 and after going through the cost index calculated the cost of acquisition and offered long term capital gain for tax. Assessee case was selected for scrutiny assessment and impugned transaction was inquired by the Ld.AO and he was not satisfied with the rate applied at ₹ 380 per sq.mt. Assessee in order to satisfied the Ld .....

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rm capital gain. Ld.AO accepted the submission of the assessee and framed the assessment order accordingly. Thereafter, Ld.CIT called for the assessment records within his power u/s.263 of the Act and after examining them took a stand that the Ld.AO should have taken the basis of Jantri rate of land in question as on 01/04/1999 wherein per sq.mt. of land stood at ₹ 220 per sq.mt. Ld.CIT was of the view that assessee should have calculated the index cost by taking the basis of rate as on 01 .....

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A bare reading of provisions of section 263 of the Income-tax Act, 1961 makes it clear that the prerequisite to exercise of jurisdiction by the CIT suo motu under it, is that the order of the (TO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, namely, (i) the. order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the ITO is e .....

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l orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. I due to an erroneous order of the ITO, the Reve .....

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ews are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law 9.2 Let us examine facts of the case in light of above ratio whether the assessment u/s.143(3) of the Act has been made on an incorrect assumption of facts or incorrect application of law. From going through the para 4 of the assessment order u/s.143(3) of the Act we obser .....

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is specific query assessee submitted letter dated 22/09/2011. The content of this letter are reproduce below: Apropos to the subject matter and reference and as per instructions and authority from our above referred valued client, most respectfully we submit as under: 1.Please find enclosed a Valuation Report dated 10.08.2011 in respect pf Agricultural land bearing RS No. 165 situated, at Gotri, Vadodara, The same is marked as Annexure1. 2. At the time of filing the return of Income, your assess .....

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dated 08.03.2008, the assessee offers to pay the differential LTCG on sale of agricultural land on the basis of valuation report dated 10.08.2011. Accordingly the assessee has paid the differential LTCG along with differential interest u/s 234B and 234C till September' 2011. A revised computation of total income and tax is enclosed for your kind perusal, marked as Annexure-2. Also enclosed is a copy of challan, dated 21.09.2011, marked as Annexure-3. 4. The assessee had offered tax on LTCG .....

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any further information, explanations and/or evidence in the matter, please apprise us with the same for our compliance and provide us an opportunity of personal hearing. 10. Ld.AO after giving due cognizance of the assessee s submission made a specific findings in the body of assessment order and calculated the revised long term capital gain. The relevant extract of the assessment order is as under: The submission of the assessee is carefully examined. The copy of valuation report dated 10.8.2 .....

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4 F ₹ 11,99,350/- Long term capita! Gain. ₹ 25,46,017/- In view of the above, Long term capital gain is taxed at ₹ 25,46,017/- as against ₹ 13,57,2267- shown by the assessee. The assessee has voluntarily paid taxes also on the increased capital Gain. 11. From going through the above series of events occurred during the course of assessment proceedings we observe that to a specific query raised during the assessment proceedings the assessee has given a specific reply which .....

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d records, he framed assessment, said assessment could not be re-opened in exercise of revision power under section 263 for making further inquiries . 11.1 We further observe in jurisdictional High Court in case of CIT V/s. Arvind Jewellers (supra) wherein it was held that It was held that since material was there on record and said material was considered by ITO and a particular view was taken mere fact that different view could be taken, should not have been basis for an action under section 2 .....

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of the Act is focusing on conducting additional enquiry on different pattern and also to apply fair market value of the land as on 01/04/1999 and alternatively he has mentioned about the comparable price of gold in 1999 which was quite similar to the basis taken by the valuer in the revised valuation report of Mr.P.K.Desai dated 10/08/2011 submitted during the course of assessment proceedings. In such case, where there is adequate enquiry and observations of the Ld.AO are clearly mentioned in th .....

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e High Court upheld the order of Tribunal, setting aside the order passed u/s.263 of the Act and allowed the assessee s appeal by observing as follows: 15. The method of computation adopted by the assessee is as follows : Net development expenses in respect of sites sold ₹ 3,52,56,499/- (Rs. 4,12,60,000 - ₹ 60,03,501 closing work-in-progress) vis-a-vis, the sites sold of 1,40,400 sq. ft. which works out to ₹ 251.11/- per sq. ft. 16. For the assessment year 2007-08, the developm .....

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ct. One mode of computation which we have examined, stated above at para. 14, works out to ₹ 296.68/- per sq. ft. The development charges of ₹ 251.11/- per sq. ft. claimed by the assessee is just and reasonable ate does not result in any loss to the revenue. Thus, the CIT invoking the provisions of Section 263 of the Act, is uncalled for as the order passed by the Assessing Officer is no way prejudicial to the interest of the revenue. The revenue has miserably failed to satisfy us th .....

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g it by entire area of the project of 3,84,000 sq. ft. While computing the work-in-progress value. 17. In Sunbeam's case (supra), Delhi High Court placing reliance on the Judgments of the Apex Court in the case of Parashuram Pottery Works Co. Ltd. vs ITO ((1977) 106 ITR 1) and Malabar Industrial Co. Ltd. (supra) has held that the Commissioner having conceded the position that the Assessing Officer made enquiries, elicited replies and thereafter passed the assessment order, the grievance of t .....

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in the case of D. G. Gopala Gowda (supra) while considering the power of revision conferred under Section 263 of the Act has held that the condition precedent for exercising the revisional power under Section 263 of the Act is that the order under revision should not only be erroneous, but such erroneous order should result in prejudice to the interest of the revenue. Mere error would not confer the jurisdiction to exercise the revisional power under Section 263 of the Act. In the Judgment of t .....

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laid down the principles in the context of Section 263 of the Act. The relevant portion of para 5 of the said Judgment is reproduced below : A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the CIT suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it .....

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an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue's is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not (conferred) to loss of tax. 19. In the light of the Judgments discussed above, we are of the .....

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in question, a detailed examination is made by the Tribunal, Tribunal is of the view that the Assessing Officer has applied his mind before accepting the figure declared by the assessee in the work-in-progress report. Such an order cannot be held to be erroneous and prejudicial to the interest of the revenue. It is not a case of 'lack of inquiry'. Further inquiry ordered by the CIT would amount to fishing/ rowing inquiry in the matter already concluded. 20. Learned counsel placed relianc .....

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e. Accordingly, on this count also, we are not inclined to accept the order passed by the CIT computing the margin at more than 31% which is not normally workable in the business of real estate as pointed out by the learned counsel for the assessee and this view is also supported by the Division Bench Judgment of this Court in Dr. L. Narendra Prasad's case (supra). 21. The ITAT having considered the material placed before it, rightly set-aside the order passed under Section 263 of the Act, a .....

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