Palaparthi Sundaram , Hyderabad V. Income Tax Officer, Ward-6(4), Hyderabad

ITA 1027/Hyd/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2386 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 19-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: N VENKATARAM
• Keywords: Capital asset; Fair market value; Valuation report
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1027/HYD/2017 ASSESSMENT YEAR: 2009-10 PALAPARTHI SUNDARAM PAN ACUPP 7381F VS. INCOME-TAX OFFICER, WARD 6(4), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N. VENKATARAM REVENUE BY : SMT. N. SWAPNA DATE OF HEARING 05/03/2018 DATE OF PRONOUNCEMENT 28/03/2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 3 RD FEBRUARY, 2017 OF CIT(A) 9, HYDERABAD FOR AY 200 9-10. 2. BRIEFLY THE FACTS OF THE CASE ARE, ASSESSEE FILE D HIS RETURN OF INCOME FOR THE AY 2009-10 ON 20/07/2009 DECLARING T OTAL INCOME OF RS. 2,51,925/-. THE CASE WAS TAKEN UP FOR SCRUTINY BY ISSUE OF NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHORT T HE ACT) ON 24/08/2010 AND THE SAME WAS SERVED ON THE ASSESSEE ON 16/09/2010. A NOTICE U/S 142(1) OF THE ACT WAS ISSUED ON 12/07/ 2011 CALLING FOR INFORMATION AND POSTING THE CASE FOR HEARING ON 22/ 07/2011. IN RESPONSE, THE AR OF THE ASSESSEE FILED THE INFORMAT ION AS CALLED FOR. 2.1 DURING THE ASSESSMENT PROCEEDINGS, THE AO OBSER VED THAT THE ASSESSEE SOLD PROPERTY SITUATED IN ANANTAPUR FOR A CONSIDERATION OF 2 ITA NO. 1027 /HYD/2017 PALAPARTHI SUNDARAM RS. 25,94,000/- AND DECLARED LONG TERM CAPITAL LOSS OF RS. 1,67,590/-. HE FURTHER OBSERVED THAT ASSESSEE ADOPTED MARKET V ALUE OF LAND AS ON 01.04.1981 AT RS. 330/- PER SQ. YARD AND THAT OF CONSTRUCTION AT RS. 91 PER SQ. FEET BASED ON VALUATION REPORT. ACCO RDING TO THE AO, AS PER THE ENQUIRIES CONDUCTED FROM SRO, THE MARKET V ALUE OF LAND WAS FOUND OUT TO BE 120 PER SQ.YD. AND CONSTRUCTION COS T AT RS. 21 PER SQ.FT. WHEN ASKED AS TO WHY THE SRO RATES BE NOT A DOPTED FOR FMV AS ON 01.04.1981, ASSESSEE REPLIED THAT RAMNAGAR AR EA WHERE THE PROPERTY SOLD IS SITUATED, WHICH IS PART OF KAKKALL APALLI VILLAGE, WHICH WAS ALREADY CONSIDERED AS DEVELOPED AREA SURROUNDED BY POLICE ACADEMY, STADIUM ETC., AND HENCE THE RATE ADOPTED B Y THE VALUER IS CORRECT. AO AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE STATED THAT THE VALUATION REPORT IS ONLY BASED ON ESTIMATE AND OPINION OF THE VALUER WHEREAS THE SRO RATES ARE REPRESENTATIVE OF THE EXISTING MARKET VALUE AS ON 01/04/1981 BASED ON SALE TRANSAC TIONS OF THE RELEVANT PERIOD. HE OPINED THAT THE ASSESSEES CON TENTION THAT THE PLOT AREA IS SURROUNDED BY VARIOUS AMENITIES IS HEL D TO BE THE CURRENT DAY POSITION AND NOT THAT OF 1981. AO OBSERVED THAT THE VALUER DID NOT GIVE ANY COMPARABLE INSTANCES BUT HAS SIMPLY GIVEN HIS OPINION. AO OBSERVED THAT COST OF CONSTRUCTION AS ON 01/04/198 1 EVEN IN HYDERABAD IN BANJARA HILLS AREA WAS RS. 34 PER SQ. FT. AND HENCE, CONSTRUCTION COST OF RS. 91 IN ANANTAPUR IS ON VERY HIGH SIDE. IN VIEW OF THE ABOVE OBSERVATIONS, AO DISMISSED THE CONTENT IONS OF THE ASSESSEE AND ADOPTED FMV AS ON 01/04/1981 AT RS. 12 0 PER SQ.YD. AND RS. 21 PER SQ.FT. RESPECTIVELY AND ARRIVED AT C APITAL GAINS ACCORDINGLY. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A) AND REITERATED THE SUBMISSIONS AS MADE BEFORE THE AO. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER: 3 ITA NO. 1027 /HYD/2017 PALAPARTHI SUNDARAM 4 I HAVE CONSIDERED THE ARGUMENTS OF THE ASSESSEE AND THE VALUERS REPORT. THE SURPRISING FAC T OR THE CASE IS THAT THE ASSESSEE SOLD THE PROPERTY AT RS. 25,94 ,000/- WHEREAS THE INDEXED COST BASED ON 01.04.1981 VALUE IS CLAIMED TO BE RS. 27,61,590/-. THE FMV AS ON 01.04.1981 WAS TAKEN BY VALUER AT RS. 7,34,045/- (RS. 2,59,545 FOR LAND AND RS. 4,74,500 FOR CONSTRUCTION). THE VALUE OF THE REAL ESTATE GEN ERALLY INCREASES MORE THAN INDEXATION COST AND HENCE IT IS UNNATURAL THAT THE ASSESSEE INCURRED LOSS BY SELLING A LONG T ERM CAPITAL ASSET SITUATED IN A FULLY DEVELOPED AREA. IT CAN BE OBSERVED THAT THE LOSS OCCURRED BECAUSE OF HIGHER ESTIMATION OF L AND/ CONSTRUCTION VALUE AS ON 01.04.1981 BY REGISTERED V ALUER. THE BASIS FOR SUCH ESTIMATION IS NOT ANY COMPARABLE CAS ES BUT THE OPINION OF THE REGISTERED VALUER. THE REASONS GIVEN BY THE VALUER THAT THE PLOT IS SITUATED IN A WELL DEVELOPE D-AREA MAY BE CORRECT AS ON TODAY BUT NOT APPLICABLE TO THE DATE OF VALUATION I.E. 01.04.1981. THE DECISION OF VALUER SEEMS TO BE DEPENDENT ON ITAT DECISIONS AS AGAINST THE VALUERS DECISION B ASED ON COMPARABLE CASES. VALUER QUOTING EXTENSIVELY FROM J UDICIAL DECISIONS STATED THAT SRO VALUE IS ONLY GUIDELINE V ALUE. THIS CONTENTION OF THE VALUER IS CORRECT IF THE VALUE IS NOT BASED ON REAL INSTANCES OF SALE. HOWEVER, IN THE PRESENT CAS E SRO GAVE THE VALUE ON THE BASIS OF INSTANCES OF SALE IN THE SAME LOCALITY AND THE SAME SURVEY NUMBER. THEREFORE VALUER'S CONT ENTION IN THIS REGARD IS BASELESS AND WITHOUT ANY MERITS, AS POINTED OUT BY THE ASSESSING OFFICER THE COST OF CONSTRUCTION A DOPTED BY THE VALUER IS 3 TIMES GREATER THAN THE COST OF CONSTRUC TION AS ON 01.04.1981 IN HYDERABAD. FURTHER, THE RATE GIVEN BY SRO IS BASED ON THE SALE OF A PROPERTY VIDE DOCUMENT NO. 8 551/1981, LOCATED IN THE SAME SURVEY NUMBER. THEREFORE, IT CA NNOT BE SAID THAT THE SRO RATE IS BASED ON BASE LINE VALUE BUT O N THE CONTRARY THE SAME IS BASED ON A COMPARABLE CASE OF SALE IN THE SAME SURVEY NUMBER. IN VIEW OF THE ABOVE, THE ASSES SEES ARGUMENT THAT THE RATE GIVEN BY THE SRO IS FOR PROP ERTY IN A VILLAGE AND NOT IN A DEVELOPED AREA OF RAMNAGAR IS WITHOUT ANY BASIS. 5. IN THE LIGHT OF THE ABOVE DISCUSSION, IT IS HELD THAT THE VALUE OF LAND/CONSTRUCTION ADOPTED BY THE REGISTERE D VALUER IS BASED PURELY ON ESTIMATE WITHOUT ANY COMPARABLE INS TANCES AND IS HIGHLY INFLATED ESTIMATE, WHICH IS GIVEN ONLY WI TH AN INTENTION TO HIKE UP THE VALUE OF THE PROPERTY AS ON 01/04/19 81. ON THE CONTRARY THE VALUE ADOPTED BY THE AO IS BASED ON CO MPARABLE CASE OF SALE IN THE SAME SURVEY NUMBER IN 1981 AND HENCE IS MORE RELIABLE AND ACCURATE. THEREFORE, I UPHOLD THE VALUE OF LAND AND CONSTRUCTION AS ADOPTED BY THE AO BASED ON THE SRO REPORT. THE DETERMINATION OF LONG TERM CAPITAL GAIN S BY THE AO IS THEREFORE UPHELD AND THE ASSESSEES GROUNDS ARE DISMISSED. 4 ITA NO. 1027 /HYD/2017 PALAPARTHI SUNDARAM 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS AND NOT BASED ON THE FACTS OF THE CASE. 2. THE CIT(A) OUGHT NOT TO HAVE IGNORED THE VALUERS REPORT AND ONLY GAVE VAGUE REASONS FOR NOT ADOPTING THE VALUES PROVIDED IN THE REPORT. 3. THE CIT(A) IGNORED THE FACT THAT THE SRO HAD PRO VIDED RATES/VALUES AT A PLACE WHICH IS DIFFERENT FROM THE ONE OWNED AND DISPOSED OFF BY THE ASSESSEE. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 5. LD. AR MADE SIMILAR SUBMISSIONS WHICH WERE MADE BEFORE TAX AUTHORITIES. 6. LD. DR RELIED ON THE ORDER OF CIT(A). 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS SOLD A RESIDENTIAL HOUSE D URING THIS AY. IN ORDER TO CALCULATE CAPITAL GAINS, HE RELIED ON THE VALUATION REPORT FROM REGISTERED VALUER TO ESTIMATE THE VALUE OF THE PROP ERTY AS ON 01/04/1981. BASED ON THE VALUATION REPORT, HE ARRI VED AT THE LONG TERM CAPITAL LOSS BY ESTIMATING THE VALUE OF COST O F ACQUISITION AND CONSTRUCTION. THE AO DID NOT AGREE WITH THE ABOVE V ALUATION REPORT AND ADOPTED THE SRO VALUE AS ON 01/04/1981 FOR THE NEAREST POSSIBLE PLACE I.E. KAKKALAPALLI, WHEREAS THE PROPERTY IS SI TUATED IN RAMNAGAR, ANANTHAPUR. AGGRIEVED WITH THE ORDER, ASSESSEE IS I N APPEAL BEFORE US. ON VERIFICATION OF RECORDS PLACED BEFORE US, WE OBSERVE THAT THE REGISTERED VALUER ADOPTED THE SRO VALUE AS EXISTED DURING THAT PERIOD AND FACTORED ABOUT 1.5 TIMES TO ARRIVE AT THE FMV. WHEREAS THE AO HAS COLLECTED INFORMATION FROM SRO FOR THE NEAREST POSSIBLE PLACE TO ARRIVE AT THE RATE ADOPTED FOR ASSESSMENT. THE LARG ER QUESTION BEFORE US IS, WHETHER THE SRO VALUE TO BE ADOPTED OR THE F MV BASED ON 5 ITA NO. 1027 /HYD/2017 PALAPARTHI SUNDARAM ESTIMATE. IN OUR VIEW, IN CASE, FMV IS SOUGHT FOR T HE CURRENT VALUATION, ONE CAN DEPEND UPON THE REASONABLE ESTIM ATE AND SRO VALUES ARE MERE GUIDELINE VALUES, SINCE THERE IS NO COMPARATIVE DATA AVAILABLE, THE REASONABLE ESTIMATE CAN BE ADOPTED O VERLOOKING THE SRO VALUES. THIS IS WHAT THE VARIOUS COURTS HAVE HE LD. BUT IN THIS CASE, WE ARE GOING BACK AGAINST TIME TO ESTIMATE TH E VALUE AS AT 1981. WE AGREE THAT THE AO HAS COLLECTED INFORMATIO N FROM SRO FOR THE NEAREST PLACE INSTEAD OF VALUE FOR THE ACTUAL L OCATION OF THE PROPERTY. THE SRO VALUES WILL VARY DEPENDING UPON T HE AREA. IN CASE, THERE ARE MORE NUMBER OF REGISTRATIONS HAPPENING IN FEW AREAS, THE VALUE IN THESE AREAS ARE COMPARATIVELY HIGH COMPARE D TO ADJACENT AREAS. THIS CANNOT BE A PROPER VALUE OF THE PROPERT Y. HENCE, THE METHOD ADOPTED BY THE AO IS NOT PROPER. 7.1 FURTHER, WE NOTICE THAT THE VALUER (G.S. MITTAL ) HAS VALUED THE PROPERTY AGAIN RELYING ON THE SRO VALUE (REFER HIS REPORT AT PAGE 5 OF PAPER BOOK) OF RS. 219 PER SQ.YD. IN 1981. BY CONSI DERING THE ABOVE RATE, HE FURTHER FACTORED IT TO 1.5 TIMES FOR FMV. WE FIND IT DIFFICULT TO UNDERSTAND FURTHER FACTORING TO ARRIVE THE FMV. SIN CE, WE ARE ESTIMATING THE VALUE AS ON 01/04/1981, THE BEST VAL UE THAT CAN BE RELIED UPON IS SRO VALUE, NOT ESTIMATION, WHEN AVAI LABLE. SINCE, THE VALUER HAS COLLECTED THE INFORMATION FROM SRO, ANAT HAPUR AND ARRIVED AT THE SRO VALUE AS ON 1981 AT RS. 219/-, IN OUR VI EW, THE SRO VALUE SHOULD BE ADOPTED AND NOT THE ESTIMATED FMV AS ARRI VED BY THE VALUER. HENCE, THE VALUE TO BE ADOPTED FOR THE LAND IS RS. 219/- PER SQ.YD. WE DIRECT THE AO TO CALCULATE THE CAPITAL GA INS BASED ON THE ABOVE RATE. 7.2 COMING TO THE VALUATION OF BUILDING, WE FIND TH AT THE VALUER HAS NO DOUBT ADOPTED THE METHOD APPROVED BY CBDT & CPWD . BUT THE COST OF INDEX FOR 1981 IS ADOPTED 190% OVER PAR OF 01/10/76. IN OUR VIEW, IT IS TOO ARBITRARY. THERE IS A GAP OF 4 YEAR S, THERE CANNOT BE FLUCTUATION OF INDEXATION TO THE EXTENT OF 190%. I N OUR VIEW, IT SHOULD 6 ITA NO. 1027 /HYD/2017 PALAPARTHI SUNDARAM BE BETWEEN 140-150%. WE DIRECT THE AO TO ADOPT 150% OF THE COST OF INDEXATION IN THE VALUE ARRIVED BY VALUER INSTEAD O F 190% AND ACCORDINGLY, ARRIVE THE VALUE OF BUILDING AND COMPL ETE THE ASSESSMENT. THEREFORE, THE GROUNDS RAISED BY THE AS SESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 28 TH MARCH, 2018 KV COPY TO:- 1) SHRI PALAPARTHI SUNDARAM, 6-3-597/11, G-4, SRI S AINATH APTS., VENKATARAMANA COLONY, HYDERABAD 500 004 2) ITO, WARD 6(4), IT TOWERS, HYD. 3) CIT(A) 9, HYD. 4) PR. CIT 6, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER