Vishal Varma Siruvuri, Visakhapatnam V. The Income Tax Officer, Ward-3(3), , Visakhapatnam

CO 33/VIZ/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4886 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-03-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 30-05-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Salary income; Tax effect; Cost of acquisition; Capital Gains
• Section: 147; 131; 148; 143(3); 54F; 48

Judgement Text

आयकर अपीऱीयअधिकरण, विशाखापटणम पीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री ऱलऱत क ु मार, न्याययक सदस्य एिं श्री एस बाऱाक ृ ष्णन, ऱेखा सदस्य के समक्ष BEFORE SHRI LALIET KUMAR, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अऩीऱ सं./ I.T.A. No.26/Viz/2021 (ननधाारण वषा / Assessment Year : 2012-13) Income Tax Officer, Ward-3(3), Visakhapatnam. Vs. Sri Vishal Varma Siruvuri, D. No. 54-12-27/1, Flat No.202, Vamsa Apartments, Bhanu Nagar, Visakhapatnam, Andhra Pradesh. PAN: CLOPS 4511 F (अऩीऱाथी/ Appellant) (प्रत्यथी/ Respondent) C.O. No.33/Viz/2021 (In आयकर अऩीऱ सं./ I.T.A. No.26/Viz/2021) (ननधाारण वषा /Assessment Year :2012-13) Sri Vishal Varma Siruvuri, D. No. 54-12-27/1, Flat No.202, Vamsa Apartments, Bhanu Nagar, Visakhapatnam, Andhra Pradesh. PAN: CLOPS 4511 F Vs. Income Tax Officer, Ward-3(3), Visakhapatnam. (अऩीऱाथी/ Appellant) (प्रत्यथी/ Respondent) ननधााररती की ओर से / The Assessee by : Sri G.V.N. Hari राजस्व की ओर से /The Revenue by : Sri SPG Mudaliar, Sr. AR स ु नवाई की तारीख / Date of Hearing : 28/03/2022 घोषणा की तारीख/Date of Pronouncement : 31/03/2022 O R D E R PER S. BALAKRISHNAN, Accountant Member : The captioned appeal ( I.T.A. No.26/Viz/2021 ) is filed by the Revenue against the order of the Ld. CIT (A)-1, Visakhapatnam in ITA No. 2 10156/2017-18/CIT(A)-1/VSP/2019-20, dated 21/01/2020 passed U/s. 143(3) r.w.s 147 and U/s. 250(6) of the Act for the AY 2012-13. 2. Brief facts of the case are that the assessee is an individual deriving income from salary filed his return of income for the AY 2012-13 on 26/07/2012 admitting a total income of Rs. 1,79,460/- including capital gains arising from sale of property. The case was selected for scrutiny under CASS and an order u/s. 143(3) was passed assessing the total income of Rs. 2,01,740/- by making addition towards difference in salary income. Subsequently, the case was reopened U/s. 147 and a notice U/s. 148 of the Act was issued and served on the assessee. In response to the notice issued U/s. 148, the assessee’s representative appeared and filed the details as required by the Ld. AO. The main issue of reopening of assessment was with respect to escapement of income with respect to capital gains as claimed by the assessee. The Ld. AR in his written submission before the Ld. AO submitted the calculation of capital gains arising out of impugned structure ie., First Floor of the said property. The Ld. AO after considering the submissions made by the assessee’s Representative disallowed the claim with respect to cost of acquisition for the First Floor of the property amounting to Rs. 2,56,520/- on the ground that the said First Floor was demolished before the transfer of the said property. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A)-1, Visakhapatnam. The Ld. CIT(A) after considering the submissions made by the Ld. AR 3 with respect to a confirmation letter filed by the Ld. AR from Greater Vishakapatnam Municipal Corporation (GVMC) stating that there exists a building with Ground + First Floor before 2012 and reconstructed after 2012 as Cellar + G + 4 building. The AR stated that this endorsement by the GVMC was given in response to the RTI application made to GVMC. The Ld. CIT(A) also found that electricity bills were issued by the Electricity Department for both Ground and First Floor of the impugned structure. The Ld. CIT(A) therefore endorsing the corroborative evidence on the existence of the First Floor directed the Assessing officer to include the cost of construction of the First Floor while calculating the cost of acquisition with respect to computation of capital gains earned by the assessee. 3. Aggrieved by the order of the Ld. CIT(A), Revenue is in appeal before the Tribunal by raising the following grounds of appeal: 1. The order of the Ld. CIT(A) is erroneous in both law and facts. 2. The Ld. CIT(A) ought not have allowed the cost of acquisition of the first floor when it did not form part of the asset that was transferred as per the sale deed and facts of the case. 3. The Ld. CIT(A) erred in ignoring the fact that the Assessing Officer has not disputed the existence of the first floor prior to the transfer of the asset, but has established that the first floor did not exist at the time of transfer during registration of sale deed. 4. The Ld. CIT(A) erred in directing the Assessing Officer to include the cost of construction of the first floor for the purpose of calculating the cost of acquisition solely basing on the corroborative evidence of GVMC endorsement/tax receipts and electricity bills. 4 5. The appellant craves leave to add or delete or amend or substitute any ground of appeal before and / or at the time op hearing of the appeal. 6. Though the tax effect involved in this case is less than the monetary limit prescribed in CBDT Circular No. 17/2019, second appeal is being preferred in this case as the case is covered under exception 10(c) of the said Circular as the issue before the appellate authority emanated from RAP Audit Objection accepted by the Department. For these and other grounds that may be urged at the time of appeal hearing, it is prayed that these above additions made on relevant disallowances be restored.” 4. Before us, the Ld. DR forcibly argued that there was no structure existing at the time of transfer of the asset. The Ld. DR produced a sworn statement recorded by the Ld. AO from Sri BVV Prasad, Chartered Engineer and Valuer arising during the course of proceedings U/s. 131 of the Act. The Ld. DR invited our attention to question No.9 of the sworn statement that there is no approved plan by the Municipal Authorities for the construction of the building and hence he argued that the building did not exist. 5. Per contra, the Ld. AR submitted that the construction in the First Floor was demolished before the transfer of asset as the buyer wished to get relief from stamp duty. The Ld. AR also relied on the following decisions: 1. CIT Vs Sri Ved Prakash Rakhra in ITA No 1081/2006 Bangalore High court. 2. Shri L. Subramanian vs. ITO in ITA No. 2197/Mds/2015 (AY 2005-06), dated 15/07/2016. 5 6. We have heard both the sides and perused the materials available on record and the orders of the Authorities below. The submission of the Ld. AO with respect to endorsement by GVMC, Zone-2, Visakhapatnam in response to the reply to RTI Application No.246/17/A4/Zone-2, dated 21/12/2017, we find that there existed the First Floor building in the impugned structure. The endorsement by GVMC is enclosed in page 63 of the paper book. We also find from the paper book submitted by the assessee that the Valuation Report in page 34 stated that there exists the Ground Floor and First Floor on August 18 th , 1980 which was inspected and valued by Sri BVV Prasad, Chartered Engineer and Valuer during the year 2012. Admitted facts are that there is no denial regarding the existence of First Floor in the impugned structure. The only contention of the Ld. DR is that there existed no structure in the First Floor when the asset was transferred by the assessee. The fact remains that there was a building in First Floor and it was demolished by the assessee before registering the property to the buyer. Section 48 of the Act describes the mode of computation and for convenience it is extracted below: The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :— 7. In the instant case since the building in the First Floor was demolished before the transfer of asset and on the date of transfer only 6 the ground floor existed in the impugned structure there is no transfer of first floor. In our view one cannot sell or transfer an asset which was not in existence on the date of transfer. Therefore the cost of construction of the First Floor which in effect was not part of transfer of property shall not be considered for computing capital gains. The Hon’ble Bangalore High Court in its judgement passed an obiter dicta regarding application of Sec 54F of the Act, which cannot be applied in the instant case. Similarly Chennai Bench in Para 11 has considered only the cost of land and hence cannot be applied in the instant case. In view of the above discussions, we find merit in the arguments of the Ld. DR and we are of the considered opinion that the order of the Ld. CIT(A), be hereby quashed and we uphold the order of the AO. 8. In the result, ground No 2, 3 and 4 raised by Revenue is allowed. 9. Ground No 6 is dismissed, since the appeal is allowed. 10. Ground No 1 and 5 is general in Nature and needs no adjudication. C.O. No.33/Viz/2021 (In I.T.A. No.26/Viz/2021) 11. Since the appeal of the Revenue is partly allowed, the Cross Objection raised by the assessee is dismissed. 12. Conclusively, the appeal filed by the Revenue is partly allowed and the Cross Objection filed by the assessee is dismissed. 7 Pronounced in the open Court on the 31 st March, 2022. Sd/- Sd/- (ऱलऱत क ु मार) (एस बाऱाक ृ ष्णन) (LALIET KUMAR) (S.BALAKRISHNAN) न्याययकसदस्य/JUDICIAL MEMBER ऱेखा सदस्य/ACCOUNTANT MEMBER Dated : 31.03.2022 OKK - SPS आदेश की प्रतिलिपि अग्रेपिि/Copy of the order forwarded to:- 1. ननधााररती/ The Assessee– Sri Vishal Varma Siruvuri, D.No.54-12-27/1, Flat No.202, Vamsa Apartments, Bhanu Nagar, Visakhapatnam, Andhra Pradesh. 2. राजस्व/The Revenue – Income Tax Officer, Ward-3(3), Infinity Towers, Sankaramatam Road, Santhipuram, Visakhapatnam, Andhra Pradesh – 530016. 3. The Principal Commissioner of Income Tax-1, Visakhapatnam. 4. आयकर आय ु क्त (अऩीऱ)/ The Commissioner of Income Tax (Appeals)-1, Visakhapatnam. 5. ववभागीय प्रनतननधध, आयकर अऩीऱीय अधधकरण, ववशाखाऩटणम/ DR, ITAT, Visakhapatnam 6. गार्ा फ़ाईऱ / Guard file आदेशान ु सार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam