Dr. M. Muniprasad, Warangal, Hanamkonda V. ACIT, Cirlce-1, Warangal, Warangal

ITA 1019/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2714 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 15-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K V CHALAMAIAH
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Valuation report; Revised return
• Section: 50C; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 1019/HYD/16 2007-08 DR. M. MUNIPRASAD, HANMAKONDA, WARANGAL [PAN: ABMPM7478F] ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, WARANGAL 1020/HYD/16 2007-08 DR. K. VANAJA, HANMAKONDA, WARANGAL [PAN: ACTPK1377M] FOR ASSESSEE : SHRI K.V. CHALAMAIAH, AR FOR REVENUE : SHRI PRABHAT KUMAR GUPTA, DR DATE OF HEARING : 02-01-2018 DATE OF PRONOUNCEMENT : 10-01-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE ARE APPEALS BY TWO ASSESSEES AGAINST THE ORDER S OF THE COMMISSIONER OF INCOME TAX (APPEALS)-10, HYDERABAD, DATED 28-03-2016, ON THE ISSUE OF COMPUTATION OF THE CAPITAL G AINS. 2. BRIEFLY STATED, ASSESSEES HEREIN BEING WIFE AND H USBAND AND HAVING THE PROFESSION OF DOCTORS, SOLD PROPERTY AT TIRUPATHI BEING RESIDENTIAL HOUSE ON 22-03-2007 FOR A CONSIDER ATION OF I.T.A. NOS. 1019 & 1020/HYD/2016 :- 2 - : RS. 26 LAKHS AND OFFERED SHORT TERM CAPITAL GAIN, TAKI NG THE COST OF PURCHASE ON 17-11-2005 AT ABOUT RS. 24 LAKHS. TH E CAPITAL GAINS OFFERED WAS RS. 88,565/- IN EACH CASE. IN THE COURSE OF SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER (AO) ISS UED A SHOW CAUSE NOTICE ON THE CAPITAL GAINS WHY IT CANNOT BE RE-W ORKED OUT BY INVOKING THE PROVISIONS OF SECTION 50C OF THE INCO ME TAX ACT [ACT], WHEREIN MARKET VALUE WAS CONSIDERED AT RS. 55, 12,000/-. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAD I NDEED FILED A REVISED RETURN ON 22-12-2009, ADMITTING THE SHORT TERM CAPITAL GAIN AS WORKED OUT BY THE AO, ACCEPTING THE DEEMED SALE CONSIDERATION U/S. 50C OF THE ACT. HOWEVER, FOR THE RE ASONS BEST KNOWN TO THE AO, HE REJECTED THE REVISED RETURN FILED A S IT WAS FILED AFTER THE DUE DATE, BUT COMPUTED THE INCOME CONSIDERING THE DEEMED SALE CONSIDERATION AT RS. 27,56,000/- IN EACH CASE AND ALLOWING PURCHASE COST OF RS. 12,11,435/-. 3. BEFORE THE LD.CIT(A), ASSESSEES CONTENDED THAT EVE N AT THE TIME OF PURCHASE ALSO THE MARKET VALUE OF THE PROPE RTY WAS HIGHER AT RS. 47,54,500/-,THOUGH ASSESSEES PURCHASED THE PROPERTY FOR A LESSER CONSIDERATION OF RS. 20 LAKHS [EXCLUDING REGISTRATION CHARGES]. LD.CIT(A), HOWEVER, DID NOT AGR EE WITH ASSESSEES CONTENTIONS AND REJECTED THE CONTENTIONS STATIN G AS UNDER: 7.3 THOUGH HE RAISED VARIOUS GROUNDS OF APPEAL THE CONDUCT OF THE ASSESSE DURING THE ASSESSMENT PROCEEDINGS SHOWS THA T HE DID NOT OBJECT TO THE ADOPTION OF FAIR MARKET VALUE AS PER THE PRO VISIONS OF SEC. 50C OF THE I.T. ACT, 1961 FOR COMPUTATION OF SHORT TERM CAPITA L GAINS ON THE SALE OF PROPERTY. SECTION 50C READS AS UNDER: '50C: WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILD ING OR BOTH, IS LESS THAN THE VALUE I.T.A. NOS. 1019 & 1020/HYD/2016 :- 3 - : ADOPTED OR ASSESSED [OR ASSESSABLE] BY ANY AUTHORIT Y OF A STATE GOVERNMENT {HEREAFTER IN THIS SECTION REFERRED TO AS THE 'STAMP VALUATION AU THORITY'] FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE S O ADOPTED OR ASSESSED {OR ASSESSABLE] SHALL, FOR THE PURPOSES OF SECTION 48 BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER' 7.4 THE CONTENTION OF THE ASSESSEE THAT THE VALUE A S PER SEC. 50C IS TO BE TAKEN EVEN AT THE TIME OF PURCHASE IS NOT VALID AS THE ASSESSEE CLAIMED THAT HE PAID ONLY RS. 12,11,435/- TOWARDS HIS SHARE . THERE IS NO EVIDENCE THAT I HE HAS PAID MORE THAN THAT FOR ACQUIRING THI S PROPERTY. THE PROVISIONS OF SEC. 50C ARE ONLY APPLICABLE TO THE S ELLER OF THE PROPERTY AND THE PROVISIONS OF SEC. 48 ARE APPLICABLE FOR WORKIN G OUT THE COMPUTATION OF CAPITAL GAINS. IN SEC. 48 NOWHERE IT IS MENTIONED T HAT THE COST OF ACQUISITION SHALL BE TAKEN AS PER THE PROVISIONS OF SEC. 50C OF THE I.T. ACT, 1961. THEREFORE, THE ALTERNATE CONTENTION OF THE AS SESSEE IS REJECTED. THEREFORE THE GROUNDS RAISED OF THIS APPEAL ARE DIS MISSED AS THEY LACK MERIT. 3.1. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEES ARE IN APPEAL BEFORE THIS FORUM AND RAISED THE GROUNDS ORIGI NALLY AS UNDER: 1. THE LEARNED CIT(APPEALS)-10, ERRED IN ADOPTING THE S.R.O. VALUE FOR SALE CONSIDERATION ONLY BY IGNORING THE S.R.O. VALUE FOR PURCHASE OF THE PROPERTY FOR CALCULATION OF SHORT TERM CAPITAL GAIN . 2. THE LEARNED CIT(APPEALS)-10 SHOULD HAVE CONSIDER ED THE SUBMISSIONS OF THE APPELLANT IN ADOPTING THE S.R.O. VALUE IN ARRIVING THE COST OF THE PROPERTY. GROUND NO. 3 IS GENERAL IN NATURE. 3.2. IN THE COURSE OF APPELLATE PROCEEDINGS, ASSESS EE FILED ADDITIONAL GROUNDS OF APPEAL AS UNDER: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS WHIL E CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ADOPTING THE SRO VALUE AS DEEMED SALE CONSIDERATION FOR PURPOSES OF WORKING OUT TAXABLE C APITAL GAINS IGNORING THE DEEMED VALUE OF PURCHASE CONSIDERATION OF THE P ROPERTY IN QUESTION AS ADOPTED BY THE SRO AT THE TIME OF ACQUIRING THE SAI D PROPERTY. I.T.A. NOS. 1019 & 1020/HYD/2016 :- 4 - : 2. THE LD. CIT(A) OUGHT TO HAVE REFERRED THE MATTE R BACK TO THE ASSESSING OFFICER TO DETERMINE THE CORRECT VALUE OF DEEMED SALE CONSIDERATION U/S. 50C OF THE INCOME-TAX ACT 1961 U NDER SECTION 142A OF THE ACT TO MEET THE ENDS OF JUSTICE IN VIEW OF THE FACT THAT BOTH PURCHASE AND SALE CONSIDERATION OF THE PROPERTY VALUES ARE F AR BELOW THE SRO VALUES. GROUND NO. 3 IS GENERAL IN NATURE. 4. IT WAS THE CONTENTION OF LD. COUNSEL THAT LD.CIT(A) SHOULD HAVE REMITTED THE MATTER TO DVO FOR FINDING OUT THE MARKET VALUE WHEN ASSESSEE HAS NOT ACCEPTED THE SRO VALUATIO N. IT WAS THE PRAYER THAT MATTER MAY BE REFERRED TO DVO FOR ARRIVIN G AT THE SALE CONSIDERATION. 5. LD.DR, HOWEVER, RELIED ON THE ORDERS OF CIT(A) A ND SUBMITTED THAT THE PROVISIONS OF SECTION 48 DOES NOT ALLOW ADOPTING A HIGHER VALUE OTHER THAN THE ACTUAL COST WHILE COMPUTIN G THE CAPITAL GAINS. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE ORDERS OF THE AUTHORITIES AND DOCUMENTS PLACED ALON G WITH THE APPEAL (I.E., FORM NO.35). AS PER THE PROVISIONS OF SECTION 50C, AO IS COMPETENT TO ADOPT THE SUB-REGISTRAR VALUE U/S. 50C . HOWEVER, THESE PROVISIONS ARE SUBJECT TO CERTAIN RESTRICTIONS AND IF ASSESSEE OBJECTS THE VALUE, THEN AO IS BOUND TO REFER THE ISSUE TO THE DEPARTMENTAL VALUATION OFFICER FOR FIXING THE MARKET VAL UE FOR THE PURPOSE OF SECTION 50C. EVEN THOUGH ASSESSEE HAS NOT FURNISHED ANY VALUATION REPORT NOR GIVEN ANY EXPLANATION WHY TH E PROPERTY WAS SOLD FOR LESS VALUE THAN THE VALUE AS PER SRO. T HE GROUNDS RAISED BEFORE THE CIT(A) GIVES AN INDICATION THAT THE PR OPERTY IS BEING DEMOLISHED IN THE MASTER PLAN NOTIFIED BY THE G OVERNMENT I.T.A. NOS. 1019 & 1020/HYD/2016 :- 5 - : FOR TIRUPATHI AND HAS SOLD THE PROPERTY AS A DISTRES S SALE. ASSESSEES BEING RESIDENTS OF WARANGAL, SOLD THE PROP ERTY IN TIRUPATHI WITHIN THREE YEARS OF PURCHASE OF PROPERT Y. THE VARIATION IN THE MARKET VALUE AS PER THE SRO, BETWEEN THE PURCHA SE TIME AND SALE TIME INDICATE THAT THE GENERAL APPRECIATION SHOW N IS THE GAIN OBTAINED BY ASSESSEES. HOWEVER, THERE IS NO PROV ISION TO ADOPT THE SRO VALUE AT THE TIME OF PURCHASE, AS PURCHASE CON SIDERATION AS ONLY THE ACTUAL COST TO BE ALLOWED TO ASSESSEES. IN THIS CASE, AT THE TIME OF PURCHASE, NEITHER ASSESSEES HAVE CLAIMED TH E HIGHER PURCHASE CONSIDERATION NOR THE DEPARTMENT CONSIDERED THE PAYMENT AS UNEXPLAINED INVESTMENT. THEREFORE, ASSES SEES CONTENTION THAT SRO VALUE SHOWN IN THE DOCUMENT AT THE TIME OF PURCHASE CANNOT BE CONSIDERED AS ACTUAL COST FOR TH E PURPOSE OF COMPUTING CAPITAL GAINS. THEREFORE, WE ARE OF THE OPIN ION THAT LD.CIT(A) IS CORRECT IN REJECTING THE CONTENTIONS AND T HE GROUNDS RAISED ON THIS ORIGINALLY ARE TO BE REJECTED. 6.1. HOWEVER, LD.CIT(A) HAS NOT CONSIDERED THE GROUN DS FULLY WHILE DISPOSING OF THE APPEALS. ASSESSEES HAVE RAISED THE CONTENTIONS THAT AO SHOULD HAVE GIVEN OPPORTUNITY TO FIL E THE VALUATION REPORT OR TO HAVE REFERRED THE MATTER TO THE VA LUATION CELL AS LAID DOWN U/S. 50C OF THE ACT. THESE CONTENTIONS BEF ORE THE CIT(A) HAVE NOT BEEN DISPOSED OF BY THE CIT(A). ASSE SSEES HAVE RAISED THE ADDITIONAL GROUNDS BEFORE THIS FORUM AS THES E GROUNDS WERE NOT TAKEN ORIGINALLY AT THE TIME OF FILING THE APPEA LS EVEN THOUGH THEY ARE RAISED BEFORE THE CIT(A). THEREFORE, CONSIDERING THE ADDITIONAL GROUNDS, WE DIRECT THE AO TO REFER THE MARKE T VALUE AT THE TIME OF SALE TO THE DVO FOR VALUATION AS PER THE PROV ISIONS OF I.T.A. NOS. 1019 & 1020/HYD/2016 :- 6 - : SECTION 50C R.W.S. 142A AND RE-COMPUTE THE CAPITAL GAIN S AFTER GIVING DUE OPPORTUNITY TO ASSESSEES IN THIS MATTER. 6.2. THEREFORE, WHILE REJECTING THE ORIGINAL GROUNDS RAISED, WE ALLOW THE ADDITIONAL GROUNDS RAISED AND RESTORE THE ISSUE(S) TO THE FILE(S) OF AO FOR CONSIDERING THE SALE CONSIDERATI ON IN VIEW OF THE PROVISIONS OF SECTION 50C, AFTER REFERRING THE MATTER TO VALUATION CELL AS REQUESTED BY ASSESSEES. NEEDLESS TO STATE THAT A SSESSEES SHOULD BE GIVEN DUE OPPORTUNITY IN THIS MATTER. 7. IN THE RESULT, BOTH THE APPEALS ARE CONSIDERED ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JANUARY, 2018 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 10 TH JANUARY, 2018 TNMM I.T.A. NOS. 1019 & 1020/HYD/2016 :- 7 - : COPY TO : 1. DR. M. MUNIPRASAD, #3-2-72, NEW RAIPURA, HANMAKONDA, TELANGANA STATE. 2. DR. K. VANAJA, #3-2-72, NEW RAIPURA, HANMAKONDA, TELANGANA STATE. 3. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, WARANGAL. 4. CIT (APPEALS)-10, HYDERABAD. 5. CIT-(IT & TP), HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.