Sudhir S Karkal, Bangalore V. Assistant Commissioner of Income tax, Circle- 2(2)(1), Bangalore

ITA 1003/BANG/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9464 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 09-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R PREMI
• Assessee Lawyers: R E BALASUBRAMANYAM
• Keywords: Rectification of order; Additional evidence; Valuation report; Set aside; Capital Gains
• Section: 143(3); 54F; 54EC; 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.1003/BANG/2019 ASSESSMENT YEAR : 2013-14 SUDHIR S KARKAL #A-9, ANANDASHRAM HOUSING CO-OP SOCIETY, 10 TH MAIN ROAD, MALLESHWARAM, BENGALURU-560 003. PAN ABAPK 4695 E. VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(2)(1), BENGALURU. APPELLANT RESPONDENT APPELLATE BY : SHRI R.E BALASUBRAMANYAM, C.A RESPONDENT BY : SHRI R PREMI, JCIT (DR) DATE OF HEARING : 23.09.2019 DATE OF PRONOUNCEMENT : 27.09.2019 O R D E R PER B.R BASKARAN,ACCOUNTANT MEMBER THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 27/3/2019 PASSED BY CIT(A)-II, BENGALURU AND IT RELATES TO ASST. YEAR 2013-14. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE RECTIFICATION ORDER PASSED BY THE AO U/S 154 OF THE ACT. ITA NO.1003/BANG/2019 PAGE 2 OF 8 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF: THE ORIGINAL ASSESSMENT IN THE HANDS OF ASSESSEE WA S COMPLETED U/S 143(3) OF THE ACT ON 21/3/2010 BY THE AO. THE ASSESSEE HAD DECLARED LONG TERM CAPITAL GAIN ARISIN G ON ACCOUNT OF ENTERING JOINT DEVELOPMENT AGREEMENT ON 18/9/2012 B Y THE ASSESSEE WITH M/S S.L.N.S CONSTRUCTION FOR DEVELOP MENT OF LAND AND BUILDING BELONGING TO THE ASSESSEE. AS PER THE AGREEMENT, THE ASSESSEE WAS GIVEN CASH OF RS.233 LAKHS AND TWO FLA TS WITH TWO COVERED CAR PARKING IN THE RESIDENTIAL COMPLEX TO B E BUILT BY THE DEVELOPER. WHILE WORKING OUT LONG TERM CAPITAL GAI NS, THE ASSESSEE TOOK SALE CONSIDERATION OF LAND AND BUILDING AT 317 LAKHS. THE ASSESSEE DEDUCTED INDEXED COST OF RS.40.81 LAKHS. THE ASSESSEE ALSO CLAIMED FOLLOWING EXEMPTIONS A) COST OF CONSTRUCTION OF 2 FLATS U/S 54 - 104 LAKH S B) DEDUCTION U/S 54 FOR DEPOSIT IN CAPITAL GAINS ACCOUNT SCHEME 60 LAKHS C) DEDUCTION U/S 54EC OF THE ACT - 50 LAKHS THE AO HAD ACCEPTED THE LONG TERM CAPITAL GAINS AS COMPUTED BY THE ASSESSEE. 4. SUBSEQUENTLY, THE AO NOTICED THAT FROM THE JOINT DEVELOPMENT AGREEMENT THAT THE ESTIMATED COST OF CO NSTRUCTION OF TWO FLATS ALLOTTED TO THE ASSESSEE ALONG WITH THE 2 COVERED CAR PARKING WAS MENTIONED AS 267 LAKHS. AS STATED EARL IER, THE ASSESSEE WAS ALSO PAID RS.233 LAKHS OVER AND ABOVE THE 2 FLATS. ACCORDINGLY THE AO TOOK THE VIEW THAT THE SALE CONS IDERATION ACCRUED TO THE ASSESSEE SHOULD BE TAKEN AS RS.500 L AKHS (RS.233 ITA NO.1003/BANG/2019 PAGE 3 OF 8 LAKHS + RS.267 LAKHS). THE AO ALSO NOTICED THAT TH E ASSESSEE HAD CLAIMED DEDUCTION OF RS.60 LAKHS U/S 54F. SINCE TH E ASSESSEE HAD BEEN ALLOTTED TWO FLATS, THE AO TOOK THE VIEW THAT DEDUCTION CLAIMED BY THE ASSESSEE U/S 54F FOR RS.60.00 LAKHS IS NOT ALLOWABLE. ACCORDINGLY THE AO PASSED A RECTIFICATI ON ORDER U/S 154 OF THE ACT AND COMPUTED LONG TERM CAPITAL GAIN BY T AKING THE SALE CONSIDERATION AS 500 LAKHS AND ALSO REJECTING THE C LAIM OF 60 LAKHS RELATING TO THE AMOUNT DEPOSITED INTO CAPITAL GAIN ACCOUNT SCHEME, APPARENTLY ON THE REASONING THAT THE ASSESSEE IS NO T ENTITLED FOR DEDUCTION U/S 54F OF THE ACT. 5. THE ASSESSEE FIELD APPEAL BEFORE THE LD CIT(A) C HALLENGING THE RECTIFICATION ORDER PASSED BY THE AO, BUT COULD NOT SUCCEED. HENCE, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 6. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E LD AR SUBMITTED THAT THE AO HAS PLACED RELIANCE ON THE RE CITAL MADE IN THE JOINT DEVELOPMENT AGREEMENT, AS PER WHICH THE E STIMATED COST OF CONSTRUCTION OF THE 2 APARTMENTS ALLOTTED TO THE AS SESSEE IN THE PROPOSED BUILDING AND 2 COVERED CAR PARKING WAS MEN TIONED AS 2.67 CRORE. HE SUBMITTED THAT THE CONSTRUCTION COS T OF 2 FLATS MEASURING AROUND 3400 SFT, BY NO STRETCH OF IMAGINA TION, SHALL WORK OUT TO 2.67 CRORES AS MENTIONED IN THE JOINT D EVELOPMENT AGREEMENT (JDA). HE SUBMITTED THAT THE AMOUNT SO M ENTIONED IN THE JDA MAY BE A MISTAKE AND IN ANY CASE, IT CANNO T OVERRIDE REAL FACTS. THE LD AR SUBMITTED THAT THE AO HAS EXAMINE D THE CLAIM OF LONG TERM CAPITAL GAIN MADE BY THE ASSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND HENCE THE AO HA S PASSED AN ITA NO.1003/BANG/2019 PAGE 4 OF 8 IMPUGNED RECTIFICATION ORDER ON MERE CHANGE OF OPIN ION. HE SUBMITTED THAT THE POSSIBILITY IS THAT THE AMOUNT O F RS.2.67 CRORES MENTIONED IN THE JOINT DEVELOPMENT AGREEMENT MAY RE PRESENT EXPECTED MARKET VALUE UPON COMPLETION OF CONSTRUCTI ON AND THE SAME WOULD ALSO INCLUDE THE PROPORTIONATE COST OF L AND. ACCORDINGLY HE SUBMITTED THAT THE AO WAS NOT JUSTIF IED IN ADOPTING THE SAME AS SALE CONSIDERATION OF LAND WHILE WORKIN G OUT CAPITAL GAIN, AS THE SAME IS ONLY AN EXPECTED FUTURE VALUE OF FLATS. 7. THE LD AR FURTHER SUBMITTED THAT THE AO IS REQUI RED TO CONSIDER ACTUAL COST OF CONSTRUCTION OF 2 FLATS ALL OTTED TO THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS OBTAI NED A VALUATION REPORT FROM A REGISTERED VALUER, AS PER WHICH THE C OST OF CONSTRUCTION WORKS OUT TO RS.68.78 LAKHS ONLY. HE SUBMITTED THAT THE ASSESSEE HAS MOVED AN APPLICATION UNDER RULE 29 OF THE INCOME-TAX RULES FOR ADMITTING THE VALUATION REPORT AS ADDITIONAL EVIDENCE. ACCORDINGLY HE SUBMITTED THAT THE VALUAT ION MENTIONED IN THE VALUATION REPORT WAS LESS THAN VALUE ADOPTED BY THE ASSESSEE FOR WORKING OUT THE SALE CONSIDERATION OF THE LAND AND HENCE THERE IS NO MISTAKE IN THE AMOUNT OF LONG TERM CAPITAL GA IN DECLARED BY THE ASSESSEE. 8. WITH REGARD TO THE REJECTION OF CLAIM OF RS.60.0 0 LAKHS, THE LD AR SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED DEDU CTION U/S 54F OF THE ACT AS PRESUMED BY THE AO. THE DEPOSIT MADE IN THE CAPITAL GAIN AMOUNTS SCHEME WAS ALSO CLAIMED U/S 54 OF THE ACT ONLY. ACCORDINGLY HE SUBMITTED THAT THE AO WAS NOT RIGHT IN LAW IN ITA NO.1003/BANG/2019 PAGE 5 OF 8 REJECTING THE CLAIM OF RS.60.00 LAKHS CLAIMED BY TH E ASSESSEE U/S 54 OF THE ACT. 9. THE LD DR, ON THE CONTRARY, SUBMITTED THAT THE J OINT DEVELOPMENT AGREEMENT ENTERED BY THE ASSESSEE WITH THE BUILDER MENTIONS THE COST OF CONSTRUCTION OF THE TWO FLATS ALLOTTED TO THE ASSESSEE AS RS.2.67 CRORES. SHE SUBMITTED THAT THE AGREEMENT ENTERED BETWEEN THE PARTIES HAS MORE EVIDENTIARY VA LUE. ACCORDINGLY SHE SUBMITTED THAT THE TAX AUTHORITIES WERE JUSTIFIED IN ADOPTING THE SAME FOR COMPUTING THE LONG TERM CAPIT AL GAIN. IN THE ALTERNATIVE, THE LD DR SUBMITTED THAT THE COST OF C ONSTRUCTION OF FLATS COULD BE ASCERTAINED FROM THE BUILDER, WHICH COULD BE ADOPTED FOR COMPUTING THE SALE CONSIDERATION. ACCORDINGLY SHE SUBMITTED THAT, FOR THE LIMITED PURPOSE OF ASCERTAINING THE C OST OF CONSTRUCTION OF TWO FLATS AND TWO COVERED CAR PARKING, THE MATTE R MAY BE RESTORED TO THE FILE OF AO, SINCE THE ASSESSEE IS D ISPUTING THE VALUE MENTIONED IN THE JOINT DEVELOPMENT AGREEMENT. 10. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH ERE IS A MISTAKE APPARENT FROM THE RECORD WITH REGARD TO ADOPTION OF SALE VALUE OF CONSIDERATION OF THE LAND ARISING ON ACCOUNT OF ENT ERING INTO JOINT DEVELOPMENT AGREEMENT. THE ONLY DISPUTE IS WITH RE GARD TO THE VALUE TO BE ADOPTED IN RESPECT OF 2 FLATS AND 2 COV ERED CAR PARKING ALLOTTED TO THE ASSESSEE IN THE PROPOSED BUILDING. IT IS THE CONTENTION OF THE ASSESSEE THAT THE VALUE OF 2.67 C RORE MENTIONED IN THE JOINT DEVELOPMENT AGREEMENT WAS THE EXPECTED MA RKET VALUE OF THE FLAT INCLUDING THE VALUE OF PROPORTIONATE LAND ATTACHED TO THE ITA NO.1003/BANG/2019 PAGE 6 OF 8 FLATS. THERE IS NO DISPUTE BETWEEN THE PARTIES THA T THE COST OF CONSTRUCTION OF THE TWO FLATS AND VALUE OF TWO COVE RED CAR PARKING CAN BE TAKEN AS PART OF SALE CONSIDERATION. HENCE THE DISPUTE BOILS DOWN TO THE VALUATION OF TWO FLATS AND TWO COVERED CAR PARKING. 11. THE ASSESSEE HAS FURNISHED THE VALUATION REPORT OBTAINED FROM A REGISTERED VALUE, WHILE THE LD DR SUBMITS TH AT THE COST OF CONSTRUCTION INCURRED BY THE BUILDER CAN BE ADOPTED FOR DETERMINING THE SALE CONSIDERATION OF LAND/BUILDING FOR DEVELOPMENT. WE ALSO FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE COST OF CONSTRUCTION OF TWO FLATS ALONG WI TH TWO COVERED CAR PARKING COULD NOT BE RS.267 CRORES. IN OUR VIEW, T HE MANNER OF ASCERTAINING THE COST OF CONSTRUCTION SHOULD BE LEF T TO THE WISDOM OF THE ASSESSING OFFICER. ACCORDINGLY, WE ARE OF THE V IEW THAT THIS ISSUE NEEDS TO BE EXAMINED AT THE END OF THE AO. ACCORDI NGLY WE SET ASIDE THE ORDER PASSED BY THE LD CIT(A) ON THIS ISS UE AND RESTORE THE SAME TO THE AO FOR DETERMINING THE VALUE OF COST OF CONSTRUCTION. 12. THE LD A.R SUBMITTED THAT THE VALUE OF TWO F LATS AND TWO COVERED CAR PARKING AS DETERMINED BY THE AO SHOULD BE ALLOWED AS DEDUCTION U/S 54 OF THE ACT, SINCE THE SAME WOULD R EPRESENT THE VALUE OF NEW FLATS CONSTRUCTED BY THE ASSESSEE FOR THE PURPOSES OF SEC.54 OF THE ACT. WE DIRECT THE AO TO EXAMINE THI S CLAIM OF THE ASSESSEE ALSO. 13. WITH REGARD TO THE REJECTION OF CLAIM OF RS.60 LAKHS CLAIMED BY THE ASSESSEE, WE NOTICE FROM THE RETURN OF INCOM E FILED BY THE ASSESSEE THE SAME HAS BEEN CLAIMED U/S 54 OF THE AC T ONLY. ITA NO.1003/BANG/2019 PAGE 7 OF 8 ACCORDINGLY, WE RESTORE THIS ISSUE ALSO THE FILE OF AO WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH BY EXAMINING THE RETURN OF INCOME FILED BY THE ASSESSEE 14. AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE, THE AO MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER, 2019. SD/ - (BEENA PILLAI) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 27 TH SEPTEMBER, 2019. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NO.1003/BANG/2019 PAGE 8 OF 8 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. DICTATION NOTE ENCLOSED . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SECTION FOR DISPATCH OF THE TRIBUNAL ORDER .