TaxTMI 
TaxTMI 
2017 (5) TMI 834
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.... sources and share of profit from partnership firm. Return of income was filed on 10/03/2010 declaring total income of Rs. 18,54,660/- Case was selected for scrutiny under CASS and notice u/s.143(2) of the Act followed by u/s.142(1) of the Act was duly served upon the assessee. During the course of assessment proceedings the Ld.AO examined the transaction of sale of agriculture land jointly owned 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 Rs. 1,89,60,000/-. Assessee being 50% owner has shown the sale consideration at Rs. 93,80,000/-. In order to calculate long term capital gain assessee adopted the fair market value as on 01/04/1981 at Rs. 25,37,260/- calculated by applying rate of Rs. 380 per Sq.mt. During the course of assessment proceedings assessee was asked about the quality of land and basis of reasonability of adopting the rate of Rs. 380 per sq.mt. Subsequently assessee filed another valuation report on 10/08/2011 which has shown the fair market value calculated on the basis of Rs. 290 per sq.mt. Assessee accordingly offered the....
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....ice 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} x (rate of land as per Jantri as on 1.4.1999 x area of land sold)]. As such LTCG on sale of this land comes to 48,09,415 as under: Sale consideration = 1/2 of 1,87,60,000 - 10,00,000 paid to confirming party = 93,80,000/- Less : Indexed cost = 5,79,250 x 5.82 = 33,71,235 Less : claim u/s.54F = 11,99,350 LTCG = 48,09,415/- Thus there was short LTCG of 22,63,398 (48,09,415 - 25,46,017 being computed LTCG by Assessing Officer 4. Assessee replied to the showcause notice u/s.261 of the Act on 18/12/2013 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 giv....
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....ant Assessment Year. It was after thorough examination of all these valuation reports and after due deliberations and thinking that the Assessment was made. Such an assessment cannot be considered to be erroneous and prejudicial 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 when value claimed by the assessee is more than its FMV. (a) Income Tax Officer, Wd. 7(1) Ahmedabad v. Nitin Jayantilal Shah ITA No.1988/Ahd/2009. (b) Ms. Rubab M. Kazerani u. Jt. Commissioner of Income Tax [2004] 91 ITD 429 (Mum.)(TM). (c) Income Tax Officer v. Smt. Lalitaben V. Kapadia [2008] 115 TTJ 938 (Mum) Copies of orders in the above referred cases are enclosed, marked as Annexure-l. 2. The assessee reli....
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....omparable 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 etc. The Registered Valuer then proceeded to assert that gold price index provide the basis for fixing land value rate as on April, 1981 when the instances of the sales are not available or available in few numbers and thereafter he made that observation basis for his valuation for fixing the land value as on April, 1981 on the basis of gold price. 3.3. There is basic fallacy in the observation of the registered Valuer. The sweeping generalization that comparable sale Instances are net reliable because 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. F....
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.... also prepared on the initiation of the Ld.AO and assesse agreed to pay additional income tax on the increased long 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 assessment. ii) It is further submitted that the Commissioner failed to appreciate that valuation is by very nature a subjective matter and a matter of opinion. Large number of factors may or may not be considered by a valuer and different valuers may consider different factors and assign different weightage to each factor. It was not for the Commissioner to substitute his opinion for the opinion of the valuer. iii) It is further submitted that the Commissioner was not justified in ignoring two decisions of Hon'ble Gujarat High Court reproduced in the order under secti....
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....u/s.263 of the Act being not justified in contrary to law. We notice that assessee was jointly holding agriculture land bearing no.165 at gotri with his brother Shri Yogeshchandra T. Joshi, acquired prior to 1981. This land was sold on 22/09/2008 at Rs. 1,97,60,000/-. Transfer expenses were incurred at Rs. 10,00,000/- and out of remaining consideration at Rs. 1,87,60,000/- assessee's 50% share works out to Rs. 93,80,000/- which is not under dispute by the Revenue. It is only the cost of acquisition which is in dispute. In the computation of income filed with the income tax return asseessee on the basis of valuation report of the valuer Mr. Space Age Consulting took the rate at Rs. 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 Rs. 380 per sq.mt. Assessee in order to satisfied the Ld.AO again furnished valuation report on 10/08/2011 from Mr.P.K. Desai who in absence of necessary sale instance and Government records shown the Jantri ....
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....ural 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 Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views 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....
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.... matter. The present valuation report has assessed the FMV at a rate lower than as compared to the earlier valuation report. However to avoid any litigation and buy peace of mind the assessee has voluntarily paid the differential tax along with interest as per FMV of the latest valuation report. We trust the same to meet your valued satisfaction. However, need be of 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 10.8.2011 is also examined. Taking into consideration of the submission, the Fair Market Value as on 1.4.1981 is taken at Rs. 290 per Sq.mt the FMV worked at Rs. 19,36,300/-. The Long term Capital Gain is worked as under: - Sale Consideration. Rs. 93,80,000/- (1/2 of Rs. 1,87,60,000) (i.e Rs. 1,97,60....
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....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 the body of assessment order and view taken by him is permissible in law such order cannot be said to be erroneous or prejudicial to the interest of Revenue. 12.1 We further observe that Hon'ble Karnataka High Court in the case of CIT V/s Sarvana Developers (supra) adjudicated similar type of issue relating to the development expenses allowed by the Ld.AO but were found to be not just and reasonable by Ld.CIT, resulting in invoking power u/s.263 of the Act, setting aside the order of Ld.AO. Hon'ble 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 asse....
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....tion, it cannot be said that it is a case of 'lack of inquiry'. In this context, it is held that the opinion of the assessing officer in treating the expenditure as revenue expenditure was plausible and thus, there was no material before the CIT to vary that opinion and ask for fresh inquiry by tanking Section 263 of the Act. The Division Bench of this Court 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 this Court in the case of Digital Global Soft Ltd. (supra), considering the judgment of this Court in 'Malabar Industrial Co. LTd." (supra) it is categorically held that even if an order of the Assess:ng Officer is erroneous, unless the said erroneous order is prejudicial to the interest of the revenue, the Commissioner could n....
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....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 reliance on the Judgment of this Court in the case of Dr. L. Narendra Prasad (supra) to contend that generally in the business of real estate, the net profit would be 8% as accepted by the Department. In the present case, the profit declared by the assessee works out to More than 8% that is normally adopted and accepted by the Department. However, in the computation of work-in-progress made by the, Appellate Commissioner, the profit margin works out to more than 31.8% which is practicably not acceptable. 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 bef....