ITO, Bangalore V. Smt. Indira Nair, Bangalore

ITA 101/BANG/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7752 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Fair market value
• Section: 54

Judgement Text

PAGE 1 OF 7 ITA NO.101/BANG/2011 & C.O.NO.17/BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.101/BANG/2011 (ASSESSMENT YEAR 2006-07) THE INCOME TAX, WARD-1(2), BANGALORE. VS MR. K A SANKARAN NAIR, HUSBAND MS. SUCHITHRA, DAUGHTER LEGAL HEIRS OF SMT. INDIRA NAIR (LATE), NO.2B, BELVEDERE COURT, NO.6, SPENCER ROAD, FRAZER TOWN, BANGALORE-560005. PA NO. AAMPN 5629A (APPELLANT) (RESPONDENT) C.O.NO.17/BANG/2011 (IN ITA NO.101/BANG/2011) (ASSESSMENT YEAR 2006-07) (BY ASSESSEE) DATE OF HEARING : 12.06.2012 DATE OF PRONOUNCEMENT : 12.06.2012 REVENUE BY : SHRI SARAVANAN B, JCIT ASSESSEE BY : SHRI R KRISHNAMOORTHY, ADVOCATE ORDER PER GEORGE GEORGE K : THIS APPEAL FILED BY THE REVENUE AND THE CROSS OBJEC TION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-I, BANGALORE DATED 23.11.2010. THE RELEVANT ASST. YEAR IS 2006-07. PAGE 2 OF 7 ITA NO.101/BANG/2011 & C.O.NO.17/BANG/2011 2 2. THE APPEAL AND THE CROSS OBJECTION ARE DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE ASSESSEE, THE DECEASED, IS REPRESENTED BY HER HUSBAND. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE CONCERNED ASSESSMENT YEAR ON 5/10/2006 DECLARING A SUM OF RS.7 ,93,570/- FROM INCOME FROM OTHER SOURCES (INTEREST INCOME). ON 1/4/2005, THE ASSESSEE SOLD A PROPERTY FOR A CONSIDERATION OF RS.2 .4 CRORES. IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED EXEMPTION FR OM LONG TERM CAPITAL GAINS ON THE SALE OF THIS PROPERTY. THE NOT E MENTIONED IN THE COMPUTATION STATEMENT FILED ALONG WITH THE RETURN O F INCOME READS AS FOLLOWS:- DURING THE YEAR I SOLD MY HOUSE AT NO.388, RMV EXTENSION, BANGALORE FOR CONSIDERATION OF RS.2,40,00,000/-, OUT OF WHICH I DEPOSITED RS.1,40,00,000/- IN RURAL ELECTRIFICATION BONDS. THE BALANCE SUM HAS BEEN INVESTED IN CAPITAL GAINS SCHEME IN CANARA BANK, RMV EXTENSION FOR THE PURPOSE OF CONSTRUCTING A RESIDENTIAL HOUSE FOR ME. HENCE, ON THE SAID SALE, NO CAPITAL GAIN ARISES. 3.1 THE ASSESSING OFFICER RECALCULATED THE LONG TE RM CAPITAL GAINS AS UNDER:- TOTAL SALE PROCEEDS RECEIVED RS.2,40,00,000/- LESS INDEXED COST (415000 X 497/100) RS. 20,62,55 0/- RS.2,19,37,450/- LESS: 1. DEDUCTION U/S 54EC 1,40,00,000 2. DEDUCTION U/S 54 51,24,934 RS.1,91,24,934/- TAXABLE LONG TERM CAPITAL GAIN RS. 28,12,516/- PAGE 3 OF 7 ITA NO.101/BANG/2011 & C.O.NO.17/BANG/2011 3 3.2 THE ASSESSEE BEING AGGRIEVED BY THE RECOMPUTATI ON OF LONG TERM CAPITAL GAINS FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY RAISING THE FOLLOWING GROUNDS:- 1. THE LEARNED ASSESSING OFFICER ERRED IN BRINGING TO TAX A SUM OF RS.28,12,516/- AS LONG TERM CAPITAL GA INS TAX. 2. THE LEARNED ASSESSING OFFICER ERRED IN TAKING THE FMV OF THE PROPERTY SOLD AT RS.4,15,000/- AS ON 1/4/1981. 3. THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THAT IN VIEW OF THE PROVISO TO SECTION 54 IF THERE IS A SHORT FALL IN CONSTRUCTION THE SAID SHORT FALL CAN BE SUBJECTED TO ASSESSMENT ONLY IN THE ASSESSMENT YEAR 2009-2010. 3.3 THE CIT(A) ALLOWED THE ASSESSEES THIRD GROUND RAISED BEFORE HIM AND HELD THAT THE ISSUE OF ADDITION ON A CCOUNT OF LONG TERM CAPITAL GAINS, IF ANY, SHOULD BE CONSIDERED ONLY IN T HE ASSESSMENT YEAR 2009-2010 AND NOT IN THE CONCERNED ASSESSMENT YEAR, NAMELY, 2006- 07. THEREFORE, THE ASSESSMENT OF LONG TERM CAPITAL GAINS WAS DELETED FOR THE ASSESSMENT YEAR 2006-07. SINCE THE CIT(A) DELETED THE ADDITION FOR THE CONCERNED ASSESSMENT YEAR, THE ISSU E RAISED IN GROUND NO.2 BEFORE HIM WITH REGARD TO FAIR MARKET V ALUE OF THE IMPUGNED PROPERTY AS ON 1/4/1981 WAS NOT CONSIDERED. 3.4 THE REVENUE BEING AGGRIEVED BY THE CIT(A)S DIR ECTION TO DELETE THE ADDITION FOR THE ASSESSMENT YEAR 2006-07 AND TO CONSIDER THE SAME IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2 009-2010, IS IN APPEAL BEFORE US. PAGE 4 OF 7 ITA NO.101/BANG/2011 & C.O.NO.17/BANG/2011 4 3.5 THE ASSESSEE IN THE CROSS OBJECTION HAS RAISED THE FOLLOWING GROUNDS:- 1. THE HONBLE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT HOLDING THAT THE ORDER OF ASSESSMENT DATED IS VOID AB INITIO FOR THE REASON THAT THE MANDATORY NOTICE UNDER SECTION 143(2) WAS NOT SERVED WITHIN THE PERIOD OF TWELVE MONTHS AS ENVISAGED IN LAW. (VIDE GROUND NUMBER 5 RAISED). 2. ASSUMING BUT NOT ADMITTING THAT THE ASSESSMENT MADE WAS VALID IN LAW, THE HONBLE CIT(A) ERRED IN NOT DEALING WITH GROUND NUMBERS 1 AND 2 RAISED, THE SAI D GROUND BEING THAT THE LEARNED ASSESSING OFFICER ERRED IN COMPUTING THE LONG TERM CAPITAL GAIN AT RS.26,12,516/- BY TAKING THE FAIR MARKET VALUE OF TH E HOUSE AS ON 1/4/1981 AT RS.4,15,000/- ADOPTING RENT CAPITALIZATION METHOD AS FILED IN WEALTH TAX PROCEEDING. 3.6 AT THE VERY OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE HAS THE INSTRUCTION TO CONCEDE IN VIEW OF THE ADVANCED AGE OF THE LEGAL REPRESENTATIVE OF THE ASS ESSEE AND TO PUT AN END TO THE ISSUE/MATTER, THE LONG TERM CAPITAL G AINS COULD BE ASSESSED IN THE ASSESSMENT YEAR 2006-07 AND THEREFOR E, THE ASSESSMENT OF LONG TERM CAPITAL GAINS FOR THE ASSES SMENT YEAR 2009- 2010 NEED NOT BE REOPENED. IT WAS SUBMITTED THAT I N THIS CONTEXT, THE DEPARTMENTS APPEAL MAY BE ALLOWED. 3.7 THE LEARNED DR PRESENT WAS DULY HEARD. HE DID NOT HAVE ANY GRIEVANCE TO THE ABOVE SUBMISSION OF THE ASSESSE E. HENCE, THE DEPARTMENTS APPEAL IS ALLOWED AND WE HOLD, WITHOUT GOING INTO THE PAGE 5 OF 7 ITA NO.101/BANG/2011 & C.O.NO.17/BANG/2011 5 MERITS, THAT THE LONG TERM CAPITAL GAINS IS TO BE A SSESSED IN THE ASSESSMENT YEAR 2006-07 INSTEAD OF ASSESSMENT YEAR 20 09-10. 4. IN SO FAR AS THE CROSS OBJECTION IS CONCERNED, THE LEARNED AR SUBMITTED THAT HE IS NOT PRESSING GROUND NO.1 RE LATING TO THE JURISDICTIONAL ASPECT. THE SURVIVING EFFECTIVE GRO UND IN THE CROSS OBJECTION, NAMELY GROUND NO.2 RELATES TO THE ISSUE O F DETERMINING OF FAIR MARKET VALUE AS ON 1/4/1981 OF THE IMPUGNED PR OPERTY. THE CIT(A) DID NOT CONSIDER THE ISSUE, SINCE HE HELD TH AT THE LONG TERM CAPITAL GAINS IS TO BE ASSESSED IN THE ASSESSMENT YE AR 2009-2010 INSTEAD OF 2006-07. BEFORE US, THE LEARNED AR SUBM ITTED THE FOLLOWING:- IT IS RESPECTFULLY SUBMITTED THAT THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1/4/1981 WAS TAKEN @ RS.4,15,000/- THE VALUE ADOPTED BY THE ASSESSEE FOR PURPOSES OF WEALTH TAX ON RENT CAPITALIZATION METHOD. IT IS RESPECTFULLY SUBMITTED THAT THE RENT CAPITALIZATION METHOD OF VALUATION IS APPLICABLE ON LY FOR WEALTH TAX PURPOSES AND THAT THE SAME CANNOT BE INVOKED FOR DETERMINING THE FAIR MARKET VALUE OF THE PROPERTY FOR PURPOSES OF INDEXATION. THIS IS BECAUSE WHEN A PROPERTY IS SOLD, THE CONSIDERATION IS PAID IS FOR LAND AS WELL AS BUILDING. AND IT IS COMMON KNOWLEDGE THAT LAND APPRECIATES AND BUILDING DEPRECIATES. IN RENT CAPITALIZATION METHOD, THE VALUE IS ARRIVED AT ON THE BASIS OF THE RENT RECEIVED FOR THE BUILDING. BUT, ON THE OTHER HAND, WHEN AN IMMOVABLE PROPERTY IS SOLD MOST OF THE CONSIDERATION IS FOR THE LAND AND THE DEPRECIATED VALUE OF THE BUILDING IS TAKEN FOR THE PURPOSES OF DETERMINING THE SALE CONSIDERATION. IN VIEW OF THE FACT THAT THE CONTEXT OF VALUATION IS I N PAGE 6 OF 7 ITA NO.101/BANG/2011 & C.O.NO.17/BANG/2011 6 RESPECT OF THE SALE OF THE PROPERTY, THE PROPER METHOD OF VALUATION AS ON 1/4/1981 IS LAND AND BUILDING METHOD AND NOT RENT CAPITALIZATION. IN TH E HUMBLE SUBMISSION OF THE APPELLANT TAKING THE FMV OF THE PROPERTY AS ON 1/4/1981 @ RS.4,15,000/- WAS VERY LOW. 4.1 THE LEARNED DR PRESENT WAS DULY HEARD. 4.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD. THE ASSESSING OFFICER HAS TAK EN THE FAIR MARKET VALUE AS ON 1981 AT RS.4,15,000/- BY ADOPTING THE RE NT CAPITALIZATION METHOD. IT IS THE CONTENTION OF THE ASSESSEE THAT THE PROPER METHOD OF VALUATION TO BE ADOPTED FOR DETERMINING THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1/4/1981 IS THE LAND AND BUILDING METHOD INSTEAD OF RENT CAPITALIZATION METHOD ADOPTED BY THE ASSESSING OFFICER. THE CIT(A) HAS NOT CONSIDERED THIS OBJECTION OF THE ASS ESSEE. THE CIT(A) SHALL CONSIDER THIS ISSUE AND DISPOSE OF THE MATTER AS EXPEDITIOUSLY AS POSSIBLE. NEEDLESS TO SAY, REASONAB LE OPPORTUNITY OF HEARING SHALL BE AFFORDED TO THE ASSESSEE BEFORE TH E MATTER IS DECIDED. IT IS ORDERED ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED AND THE ASSESSEES CROSS OBJECTION IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. THE ORDER PRONOUNCED ON THE 12 TH DAY OF JUNE, 2012 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER PAGE 7 OF 7 ITA NO.101/BANG/2011 & C.O.NO.17/BANG/2011 7 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.