TaxTMI 
TaxTMI 
TaxTMI 
2021 (7) TMI 196
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....d notice u/s. 143(2) of the act was issued on 8th August, 2013. The Assessing Officer has passed assessment order u/s. 143(3) of the Act on 31st March, 2015 and assessed the total income of the assessee at Rs. 1,07,53,050/. Subsequently, Pr. CIT-4, Ahmedabad has initiated proceedings u/s. 263 of the Act by issuing of show cause notice dated 22nd December, 2016 stating that in respect of assessee's claim of interest expenses of Rs. 64,46,142/-, the Assessing Officer has failed to examine the admissibility of interest expenses under the head income from business. It is also pointed out that assessee has declared the sale price of the property sold at survey no. 174/1, Moja Chandlodiya, Taluka City Ahmedabad at Rs. 2,02,50,000/- and the Assessing Officer has referred the matter to the valuation officer who had determined the fair market value of the said sold property at Rs. 2,32,04,000/-. However, the Assessing Officer has taken the sale consideration at Rs. 2,02,50,000/- instead of Rs. 2,32,04,000/- while determining the capital gain as per order passed u/s. 143(3) of the Act. The relevant portion of the show cause notice is reproduced as under:- "By an order u/s.143(3) of the I.....
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....entative a/so. The hearing for this purpose is fixed on 30.12.2016 at 11.30 A.M. " The assessee explained that during the course of assessment proceedings the Assessing Officer has verified the claim of interest expenditure of Rs. 64,46,142/- which is established from the specific details along with the documentary evidences furnished in response to the specific query raised by the Assessing Officer. Vide letter dated 9th July, 2014, the Assessing Officer has sought specific information pertaining to the unsecured loan and also asked the detail of utilization of funds on which interest of Rs. 64,46,142/- has been paid. The assessee has submitted that during the course of assessment proceedings the Assessing Officer vide letter dated 27th Feb, 2015 has specifically asked to prove nexus between interest payment of Rs. 64,46,142/- and the income earned. The assessee has submitted that vide letter dated 28.08.2014 and 09.03.2015 the necessary explanation and detail were provided to the Assessing Officer and after considering the detail the assessment order u/s. 143(3) was finalized. In respect of second point regarding the sale price of property sold, the assessee has specifically sub....
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....rned under the some head i.e. income from other sources, We have again replied wide our letter dated 09.03.2015, explaining nexus between the interest on borrowed funds, by providing the personal balance sheet, cash book, bank book and for the opening balances, the statement of tax calculations, and the assessment orders u/s.143(3) of the A.y.2009-10, and A.Y.2CG7-08. wherein also the similar points have been replied, f copies enclosed of our reply dated 09/03/2015, other attachments are already in your file. So, considering the above facts, which are already on records of assessment proceedings, and well elaborated and explored by the learned assessing officer, how can the order be considered fo be erroneous, without any additional materials, or documents, being produced for order to be prejudicial of the revenue? We request you to consider all the above facts and drop the proceedings u/s.263. 2. The Second point is regarding the sale price of the property sold by us, located at sur. No. 174/1, Mole Chandlodiya of Rs. 2,02,50,500/-. Here also, we enclose the copies of the letter given to the learned assessing officer, particularly letter dated 31/03/2015, atongwifh fhe copies ....
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....that assessee has shown long term capital gain of Rs. 79,10,832/- on sale of land situated at survey no. 174/1 moje Chandlodiya, Taluka City Ahmedabad. However, the Assessing Officer has taken sale consideration as per sale deed of Rs. 2,02,50,000/- instead of Rs. 2,32,40,00/- determined by the DVO. The ld. Pr. CIT has also observed that the decision of Hon'ble Supreme Court in the case of C.B. Gautam Vs. Union of India 199 ITR 530 (SC) was in respect of compulsory purchase made u/s. 269 UD as per the provisions of chapter XXC of the Act. The ld. Pr. CIT was of the view that there was no discretion available for the Assessing Officer not to adopt the valuation decided by the DVO in view of the provision of section 50C of the Act. Therefore, the ld. CIT held that the Assessing Officer was required to take sale consideration at Rs. 2,32,04,000/- as determined by the DVO for computation of long term capital gain and not as per sale deed of Rs. 2,02,50,000/- and the assessment order passed u/s. 143(3) dated 31st March, 2015 was held erroneous in so far as it is prejudicial to the interest of the revenue. 4. During the course of appellate proceedings before us, the ld. counsel has file....
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....t sold land was having some encroachment and they have tried to get this property vacated but failed to clear the encroachment therefore the property was sold during the F.Y. 2011-12. The ld. counsel has further contended that the value of land shown in the sale deed was less than the valuation as per the jantri rate because of encroachment on the land and the same was sold at the discounted value. The matter was referred to the DVO who has valued the loan at Rs. 2,32,04,000/- as against the sale consideration of Rs. 2,02,50,000/-. During the course of assessment it was explained to the Assessing Officer vide letter dated 31st March, 2015 that DVO has not considered the material fact that the land was fully encroached by unauthorized person and it was virtually and legally impossible to get it vacated. During the course of assessment the assessee has also brought to the notice of the Assessing Officer the decision of Hon'ble Supreme Court in the case of C.B. Gautam vs. Union of India 199 ITR 530 wherein the Hon'ble Supreme Court has allowed to consider the actual consideration, if the valuation report of DVO is within the tolerance limit of 15%. The ld. counsel has submitted that P....
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....ue of the sold property at Rs. 2,32,04,000/-, however, the Assessing Officer has taken the sale consideration of Rs. 2,02,50,000/- as per the sale deed instead of Rs. 2,32,04,000/- determined by the DVO. After perusal of the material placed in the record it is noticed that during the course of assessment proceedings vide notice u/s. 142(1) dated 9th July, 2014 the Assessing Officer has made specific investigation and verification on the issue of claim of interest expenditure of Rs. 64,46,142/-. The Assessing Officer has asked the assessee vide point no. 28 in the notice u/s. 142(1) dated 9th July, 2014 to furnish the copies of ledger accounts detail of lenders and purpose for which borrowed funds have been used. Again vide notice u/s. 142(1) dated 27-02-2015, the Assessing Officer has also asked the assessee to prove nexus between deduction claimed of Rs. 64,46,142/- and income earned. In response to query raised by the Assessing Officer, the assessee has duly furnished the copies of ledger account of interest paid on borrowed fund of Rs. 64,46,142/- along with copies of ledger account of all the parties to whom the interest was paid. In his submission dated 22nd August, 2014 the a....
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....this zoppad patti therefore the land was sold to realize what they could have fetched. During the course of assessment, the assessee has also submitted the copies of purchase deed and sale deed wherein it has been specifically mentioned the fact about the encroachment on the land. It was also discussed during the course of assessment that DVO has valued the land at Rs. 2,34,04,000/- and there was small variation of only 12.73% against the value shown in the sale deed. Vide submission dated 31st March, 2015 it was specifically brought to the notice of the Assessing Officer that DVO has not considered that there was encroachment on the impugned land by the unauthorized person and it was virtually and legally impossible to get it vacated. In support of his submission the assessee has also submitted copies of court cases pending for this land before the Assessing Officer during the course of assessment proceedings. Apart from this during the course of assessment, the assessee has also brought to the notice of the Assessing Officer the decision of Hon'ble Supreme Court in the case of C.B. Gautam vs. Union of India 199 ITR 53 (SC) wherein the Apex Court has allowed to consider the actua....
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....can be ignored. As summarized above, the facts of the cases referred by the Ld. Departmental Representative are distinguishable from the case of the assessee as in those cases the issue was pertained to adopting of higher value than the value determined by the DVO and in one of case the value determined by the DVO was adopted since there was no litigation pending in that case. During the course of appellate proceedings before us, the ld. counsel has filed the copy of order of Hon'ble High Court of Gujarat vide Special Appeal No. 67 to 71 in the case of the assessee vs. State of Gujarat & 4 wherein direction was sought against the corporation not to regularize the unauthorized and illegal constructions of the respondents therein on the land of the petitioners. It was demonstrated from the order of the Hon'ble High Court as referred above that there was unauthorized and illegal construction on the impugned land which was sold by the assessee. The assessee has also filed a copy of order of Hon'ble High Court of Gujarat vide Special Appeal 6089 of 2014 in the case of the assessee pointing out that there was illegal encroachment on the impugned land of the assessee and the Hon'ble Guja....
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....le recognizing variation less than 15% as to tolerable limits. The relevant para no. 21 from the decision of the Hon'ble Supreme Court is reproduced as under:- "The conclusion that the provisions of Chapter XX-C are to be resorted to only where there is significant under-valuation of the immoveable property to be sold in the agreement of sale with a view to evading tax finds support from the decision of this court in the case of K.P. Varghese Vs. ITO [1981] 597 ITR 597. Section 52 in the 1961 Act which has now been deleted, came up for consideration before a Bench comprising two learned Judges of this Court, Very briefly put that section provided that where a person acquired a capital asset from an assessee connected with him and the ITO had reason to believe that the transfer was effected with a view to avoid or reduce the liability of the assessee under section 45 of the Act to the tax on capital gains any with that object that the transfer of the capital asset was being made at an under- value of not less than 15 per cent for the purposes of taxing the assessee, the full value of the consideration was, taken to be its fair market value on the date of the transfer. It was poi....
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....nsideration for the transfer is under-stated or, in other words only where the assessee has actually received a larger consideration for the transfer than that what is declared in the instrument of transfer and it could have no application in the case of a bona fide transaction where the full value of the consideration for the transfer is correctly declared by the assessee (see page 606 of the report), We may point out that although it was submitted by the learned Attorney General that the decision in the case of K.P. Varghese (supra)requires reconsideration, he did not seriously challenge the correctness of that decision. No argument has been advanced by him which could lead us to the conclusion that the said case was not correctly decided nor has he pointed out any error in the judgment in that case." We have also gone through the decision of Gujarat High Court in the case of Arvind Jewellers (259 ITR 502) held that:- "Held, that the finding of fact by the Tribunal was that the assesses had produced relevant material and offered explanations in pursuance of the notices issued under section 142(1) as well as section 143(2) of the act and after considering the material and exp....
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....assessee could not take the possession of the land because of existence of encroachment. The DVO has not discussed any of these factors in his report. Further, we have noticed that on the similar facts Pune Bench of ITAT in the case of CIT vs. Harpreet Hotels Pvt. Ltd. vide ITA 1156 to 1160/Pn/2000 held that the difference between the figure shown by the assessee and the figure of the DVO is hardly 10% therefore addition was deleted. The ITAT Pune in the case of ITO vs. Kaaddu vide ITA No. 441/Pn/20004 following the decision of Hon'ble J & K High Court in the case of Honest Group of Hotel Pvt. Ltd. vs. CIT (2002) 177 CTR ( J & K) 232 had held that when the margin between the value as given by the assessee and the department valuer was less than 10% the difference is liable to be ignored and the addition made by the Assessing Officer cannot be sustained. We have also noticed that ITAT Jaipur in the case Sitebia Khetan Vs. ITO vide ITA 826/JP/2013 held that valuation is a matter of estimation and some degree of difference is bound to be there. If the difference between the stamp duty valuation and the declared sale consideration is less than 10% then addition u/s. 50C should not be ....