Income Tax Officer, Ward-1, Madanapalle V. Sri J. Charan Kumar, Madanapalle

ITA 1055/HYD/2012

• Counselvise Citation: 105522514 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 09-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: S RAMA RAO
• Keywords: Reopening of assessment; Unexplained cash credit; Cost of acquisition; Fair market value; Validity of assessment; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1055/HYD/2012 ASSESSMENT YEAR 2004-05 THE INCOME TAX OFFICER WARD-1 MADANAPALLE VS. SRI J. CHARAN KUMAR MADANAPALLE PAN: AACHC2701E APPELLANT RESPONDENT CO NO. 35/HYD/2013 ARISING OUT OF ITA NO. 1055/HYD/2012 ASSESSMENT YEAR 2004-05 THE INCOME TAX OFFICER WARD-1 MADANAPALLE VS. SRI J. CHARAN KUMAR MADANAPALLE PAN: AACHC2701E APPELLANT RESPONDENT (CROSS OBJECTOR) REVENUE BY: SRI RAJAT MITRA ASSESSEE BY: SRI S. RAMA RAO DATE OF HEARING: 29 .1 0 .2014 DATE OF PRONOUNCEMENT: 31. 1 2.2014 O R D E R PER ASHA VIJAYARAGHAVAN, JM: THE ABOVE APPEAL BY THE REVENUE AND THE CROSS OBJECTION (CO) BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A), GUNTUR DATED 6.5.2011 FOR ASSE SSMENT YEAR 2004-05. 2. THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) FOR GRANTING QUANTUM RELIEF ON THE ITA NO. 1055/HYD/2012 CO NO. 35/HYD/2013 SRI J. CHARAN KUMAR =================== 2 CAPITAL GAIN ARISING FROM SALE OF LAND DETERMINED B Y THE AO BY AN ORDER OF RE-ASSESSMENT. THE AO ADOPTED COST OF ACQUISITION AT RS. 2.48 PER SQ. YARD AS AGAINST RS. 8 PER SQ. YARD ACTUALLY ALLOWED IN THE ORIGINAL ASSESSMENT. IN ADDITION, THE AO ALSO TREATED AN AMOUNT OF RS. 3 LA KHS AND ACCOUNTED AS ADVANCE TAKEN FROM SALE OF SITE AS CAS H CREDIT. THERE ARE OTHER ISSUES OF TAXING AT NORMAL RATE EVEN ON THE CAPITAL GAIN REWORKED OUT AND LEVY OF I NTEREST. ASSESSEE ALSO CONTESTED THE ISSUE OF REOPENING OF ASSESSMENT U/S. 147 OF THE ACT EVEN THOUGH THE LEAR NED CIT(A) HAS NOT DECIDED THE ISSUE. 3. FACTS OF THE CASE ARE THAT AN ADDITION OF RS. 1,31,340/- WAS MADE BEING THE DIFFERENCE ARISEN BY ADOPTING THE COST OF INDEXATION AS ON 1981. IN THI S RECORD, THE ASSESSEE HAS SUBMITTED HIS EXPLANATION, BEFORE THE CIT(A), AS UNDER:- 'THE ASSESSEE HEREIN IS A HUF. HE FILED HIS RETURN OF INCOME FOR THE AY 2004-05 DECLARING INCOME OF RS. 65900/- UNDER THE HEAD 'OTHER SOURCES' AND AN AMOUNT OF RS. 2,200/- WAS SHOWN AS LOSS UNDER THE HEAD 'LONG TERM CAPITAL GAINS'. THEREAFTER, THE THEN ASSESSING OFFICER ISSUED NOTICE U/S 143{2} AND PASSED ORDER U/S 143{3} ON 23.08.2006, DETERMINING THE TOTAL INCOME AT RS. 2,07,146/-. A PART OF THE SAID ASSESSED INCOME OF RS. 2,07,146/- IS LONG TERM CAPITAL GAIN OF RS. 1,41,246/-. WHILE ARRIVING AT THE CAPITAL GAIN, THE THEN ASSESSING OFFICER OBSERVED THAT THE INDEXED COST OF THE ASSET HAS TO BE WORKED OUT BASED ON THE DATE ON WHICH THE ASSESSEE OBTAINED THE OWNERSHIP OF THE PROPERTY ON PARTITION FROM THE MAJOR HUF. BUT, THE THEN ASSESSING OFFICER HAS FAILED TO CONSIDER THE FACT THAT THE ASSET WAS HELD BY THE ORIGINAL OWNER EVEN PRIOR TO 01.04.1981. IN THE SAID ASSESSMENT ITA NO. 1055/HYD/2012 CO NO. 35/HYD/2013 SRI J. CHARAN KUMAR =================== 3 ORDER, THE THEN ASSESSING OFFICER, THEREFORE DEVIATED TO THE EXTENT OF RS. 1,41,246/- UNDER THE HEAD 'LONG TERM CAPITAL GAINS.' THE THEN ASSESSING OFFICER, HOWEVER, ALLOWED INDEXED COST OF IMPROVEMENTS MADE, DURING THE A.YS. 1998-99 AND 1999-00 SEPARATELY AND ARRIVED AT THE CAPITAL GAIN AT RS. 1,41,246/-. AGAINST THE SAID ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE HON'BLE CIT(A), TIRUPATI. THE THEN HON'BLE CIT (APPEALS) ALLOWED THE APPEAL AND HELD THAT THE INDEXED COST IS TO BE RECKONED, TAKING THE DATE OF ACQUISITION OF THE SAID PROPERTY BY THE MAJOR HUF AS THE DATE OF ACQUISITION BY THE ASSESSEE HEREIN. ACCORDINGLY, THE THEN HON'BLE CIT (APPEALS) DIRECTED THE AO TO TAKE THE MARKET VALUE AS ON 01.04.1981 AS CLAIMED BY THE ASSESSEE AND WORK OUT THE INDEXED COST OF THE LAND. BUT THERE IS AN ERROR IN THE MODIFICATION ORDER DATED 18.03.2008 PASSED BY THE PRESENT AO, WHICH ERROR IS SEPARATELY DEALT IN BY THE ASSESSEE BY FILING AN APPLICATION U/S 154, BEFORE THE AO. THE PRESENT AO AGAIN ENTERTAINED A DOUBT WITH REGARD TO THE COMPUTATION OF CAPITAL GAINS AND ISSUED A NOTICE U/S 148 ON 06.03.2009 AND SERVED ON 18.03.2008. AGAIN, THE AO CHOSE TO ISSUE NOTICE U/S 143(2) IN RESPONSES TO WHICH THE ASSESSEE'S REPRESENTATIVE WAS PRESENT AND FILED THE DETAILS. THE AO PROCEEDED TO COMPLETE THE RE-ASSESSMENT U/S 143(3) R.W.S. 147 ON 07.12.2009 AND DETERMINED THE TOTAL INCOME AT RS. 16,07,837/-. WHILE DOING SO, THE ASSESSING OFFICER IS OF THE VIEW THAT THE MARKET VALUE AS ON 01.04.1981 PER SQ. YARD WAS RS. 2.48 AND ACCORDINGLY, WORKED OUT THE ADDITION OF RS. 1,31,340/-. THE AO WHILE DOING SO, DID NOT CONSIDER THE CERTIFICATE OF THE MARKET VALUE OF THE PROPERTY PRODUCED BY THE ASSESSEE AS ISSUED BY THE SUB REGISTRAR, MADANAPALLE, DATED 01.08.2003, MENTIONING THAT THE MARKET VALUE OF THE LAND, AS ON 01.04.1981 WAS RS. 8 PER SQ. YARD.' ITA NO. 1055/HYD/2012 CO NO. 35/HYD/2013 SRI J. CHARAN KUMAR =================== 4 4. THE CIT(A) AFTER CONSIDERING THE FACTS AND PERUSING THE RECORD HAS ALLOWED ASSESSEE'S CONTENTIONS ON ME RIT BY STATING AS UNDER: '6.2 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND GONE THROUGH THE ASSESSMENT ORDER MADE UNDER SECTION 148. IT MAY BE NOTED HERE THAT IN THIS CASE ORIGINALLY THE APPELLANT HAS FILED A RETURN DISCLOSING INCOME OF RS. 65,000/- UNDER OTHER SOURCES AND LONG TERM CAPITAL LOSS OF RS. 2,200/-. IN THE SCRUTINY ASSESSMENT MADE ON 23.08.2006, INCOME WAS RECOMPUTED AT RS. 2,07,146/- INCLUDING LONG TERM CAPITAL GAINS OF RS. 1,41,246/-. THE THEN ASSESSING OFFICER, HOWEVER, ALLOWED INDEXED COST OF IMPROVE- MENTS MADE DURING THE A.YS. 1998-99 AND 1999-00 SEPARATELY AND ARRIVED AT THE CAPITAL GAIN AT RS. 1,41,246/-. THE THEN CIT(A), TIRUPATI HAS ALLOWED THE APPEAL DIRECTING THE AO TO TAKE THE MARKET VALUE AS ON 01.04.1981 AS CLAIMED BY THE APPELLANT AND WORK OUT THE INDEXED COST OF THE LAND. AS PER THE APPELLANT, WHILE GIVING EFFECT TO THE ORDER OF THE CIT(A), TIRUPATI, THE AO MADE A MISTAKE FOR WHICH 154 PETITION HAS BEEN MADE AND ACTION IS PENDING BEFORE THE AO. IN LIGHT OF THIS, THE ACTION OF THE AO IN ADOPTING RS. 1,31,340/- AS THE DIFFERENCE ARISEN BY ADOPTING THE COST OF INDEXATION AS ON 1981 IS NOT APPROVED.: 5. WITH RESPECT TO ADDITION OF RS. 3 LAKHS RECEIVED FR OM FOUR PERSONS AS ADVANCE FOR SALE OF SITE, THE LEARN ED CIT(A) EXAMINED THE RECORD AND NOTED THAT THE SALES TOOK P LACE IN THE NEXT YEAR AND THE ADVANCES WERE CONVERTED INTO SALES. THEREFORE, THE ADVANCES FOR SALE CANNOT BE TREATED AS SALE CONSIDERATION. ACCORDINGLY, HE DELETED THE ADDITION . 6. AGGRIEVED, THE REVENUE RAISED THE FOLLOWING FOUR GROUNDS IN APPEAL BEFORE US: ITA NO. 1055/HYD/2012 CO NO. 35/HYD/2013 SRI J. CHARAN KUMAR =================== 5 1. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,31,343/- TOWARDS DIFFERENCE IN INDEXED COST OF ACQUISITION WITHOUT GOING INTO THE REASON MENTIONED IN THE ASSESSMENT ORDER FOR THE ADDITION. THE LEARNED CIT(A) OUGHT TO HAVE RELIED ON THE CERTIFICATE OF THE SRO AND SUSTAINED THE ACTION OF THE ASSESSING OFFICER IN ADOPTING THE FAIR MARKET VALUE OF THE LAND AS ON 01/04/1981 ON THE BASIS OF THE SAID CERTIFICATE. 2. THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF COST OF IMPROVEMENT IN THE COMPUTATION OF LONG TERM CAPITAL GAINS BY STATING THAT THE CLAIM WHICH WAS ALLOWED IN THE ORIGINAL ASSESSMENT ORDER CANNOT BE DISALLOWED IN THE REASSESSMENT ORDER. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE FAILED TO ADDUCE ANY EVIDENCE IN SUPPORT OF CLAIM FOR INCURRING COST OF IMPROVEMENT AND THAT THE ISSUE WAS AMENABLE FOR FRESH EXAMINATION DURING THE REASSESSMENT PROCEEDINGS. 3. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF ADVANCES FOR SALE OF LAND MADE BY TREATING THEM AS UNEXPLAINED CASH CREDITS BY STATING THAT THE SAME CANNOT BE TREATED AS 'SALES' FOR THE IMPUGNED ASSESSMENT YEAR. THE LEARNED CIT(A) FAILED TO APPRECIATE THE REASONS STATED IN THE ASSESSMENT ORDER FOR THE ADDITION. 4. THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION TOWARDS UNEXPLAINED CASH CREDITS HAVING DUE REGARD TO NARRATION IN THE SALE DEEDS EXECUTED IN THE SUBSEQUENT YEAR WHEREIN IT WAS MENTIONED THAT THE ENTIRE SALE CONSIDERATION WAS PAID AT THE TIME OF REGISTRATION AND NOT AS ADVANCE. 7. ON PERUSING THE LEARNED CIT(A) ORDER, WE DO NOT FIN D ANY MERIT IN THE REVENUE GROUNDS. HENCE, REVENUE A PPEAL IS DISMISSED. ITA NO. 1055/HYD/2012 CO NO. 35/HYD/2013 SRI J. CHARAN KUMAR =================== 6 C.O. NO. 35/HYD/2013 8. THE ASSESSEE HAS RAISED A CROSS OBJECTION AGAINST REOPENING OF ASSESSMENT. THE CO IS BELATEDLY FILED WITH A DELAY OF 323 DAYS. THE ASSESSEE EXPLAINED THE DELA Y STATING THAT WHEN HE APPROACHED A COUNSEL FOR REPRESENTING THE ASSESSEE IN THE APPEAL FILED BY HI M, THE COUNSEL ADVISED HIM TO FILE CROSS OBJECTION AGAINST THE REOPENING OF ASSESSMENT, WHICH HAD BEEN DECIDED BY THE CIT(A) AGAINST THE ASSESSEE. AS THE ISSUE GOES TO THE VERY ROOT OF VALIDITY OF ASSESSMENT AND AS WE ARE OF THE OPINION THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS REASO NABLE WE CONDONE THE DELAY IN FILING THE CO BY THE ASSESS EE AND PROCEED TO DECIDE THE APPEAL BY REVENUE AND THE CO ON MERITS. 9. THE ONLY ISSUE CONSIDERED BY THE ASSESSING OFFICER IS THE SALE OF LAND. THE ASSESSING OFFICER HAS EXA MINED IN DETAIL WITH REFERENCE TO THE SAME IN HIS ASSESSMENT ORDER. THE AO HAS SPECIFICALLY MENTIONED AS FOLLOWS: NET CONSIDERATION RECEIVED - RS. 11,08,380 INDEXED COST AS CALCULATED ABOVE - RS. 46,885 (I) INDEXED COST OF IMPROVEMENTS DURING 1998-99 - RS. 6,63,027 (II)INDEXED COST OF IMPROVEMENTS DURING 1999-2000 - RS. 2,57,222 LONG TERM CAPITAL GAINS - RS. 1,41,246 10. THE ABOVE ISSUE WAS SUBJECT MATTER OF APPEAL AS REGARDS THE YEAR FROM WHICH THE INDEXATION HAS TO B E APPLIED ON THE COST OF ACQUISITION OF LAND. FOR WH ICH THE MARKET VALUE OF LAND AS ON 1.4.1981 WAS TAKEN. THE CIT(A) HAS PASSED THE ORDER ON 4.2.2008 ALLOWING THE ASSES SEE'S APPEAL. GIVING EFFECT TO THE ORDER OF THE CIT(A) W AS PASSED ON 18.3.2008 DETERMINING THE CAPITAL GAINS AS RS. 1 ,29,127. ITA NO. 1055/HYD/2012 CO NO. 35/HYD/2013 SRI J. CHARAN KUMAR =================== 7 SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U /S. 148 ON 6.3.2009 PROPOSING TO REOPEN THE ASSESSMENT. AT THE REQUEST OF THE ASSESSEE THE ASSESSING OFFICER GAVE THE REASONS FOR REOPENING ON 12.8.2010 WAS ON THE GROUN D THAT THE INFORMATION FROM SUB-REGISTRAR'S OFFICE WOULD S HOW THAT THE VALUE OF LAND AS ON 14.1981 IS RS. 2.46 PE R SQ. YARD INSTEAD OF RS. 8 PER SQ. YARD TAKEN BY THE ASSESSEE . 11. ON APPEAL BEFORE US, THE LEARNED COUNSEL CONTENDED THAT ALL THE MATERIALS WERE BEFORE THE ASSESSING OF FICER WHILE MAKING THE ORIGINAL ASSESSMENT AND HENCE REOPENING OF ASSESSMENT WAS WITHOUT JURISDICTION. 12. THE LEARNED DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND THE CIT(A) AND STATED THAT RE OPENING WAS VALIDLY DONE. 13. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT AT TH E TIME OF ASSESSMENT ALL THE DETAILS HAVE BEEN FURNIS HED AND THE ASSESSING OFFICER AFTER TAKING INTO ACCOUNT ALL THE DETAILS ARRIVED AT THE CAPITAL GAINS. FURTHER, THE COMPUTATION OF CAPITAL GAIN WAS SUBJECT MATTER OF A PPEAL BEFORE THE CIT(A). THE CIT(A) HAS PASSED THE ORDER AND THE DEPARTMENT HAS ACCEPTED THE SAME. THE ORIGINAL ASSESSMENT WAS MADE ACCEPTING THE VALUE OF LAND AS ON 1.4.1981 AT RS. 8 PER SQ. YARD WHEREAS THE AO HELD THAT ANOTHER SRO HAS GIVEN THE VALUE AS ON 1.4.1981 AT R S. 2.48 PER SQ. YARD. HOWEVER, THE COMPUTATION OF CAPITAL GAIN ON THE SALE OF LAND HAD REACHED FINALITY WITH THE ORDE R OF THE CIT(A) DATED 9.2.2008. 14. THE ASSESSMENT ORDER INSOFAR AS COMPUTATION OF CAPITAL GAINS IS CONCERNED HAS MERGED WITH THE ORDE R OF ITA NO. 1055/HYD/2012 CO NO. 35/HYD/2013 SRI J. CHARAN KUMAR =================== 8 THE CIT(A). THEREFORE, THE ASSESSING OFFICER HAS E XCEEDED HIS JURISDICTION IN REOPENING THE ISSUE WHICH HAS M ERGED WITH THE ORDER OF THE CIT(A). 15. WE HOLD THAT THE RE-ASSESSMENT ORDER DATED 7.12.2009 REOPENED FOR RE-WORKING THE CAPITAL GAINS IS WITHOUT JURISDICTION AND REQUIRES TO BE SET ASIDE. ONCE THE BASIS FOR REOPENING DOES NOT SURVIVE OTHER ADDITION S MADE IN THE ASSESSMENT ORDER ALSO CANNOT SURVIVE. HENCE THE ORDER OF THE RE-ASSESSMENT IS ALSO QUASHED. 16. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED A ND CO OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31 ST DECEMBER, 2014. SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED 31 ST DECEMBER, 2014 TPRAO COPY FORWARDED TO: 1. THE INCOME TAX OFFICER, WARD - 1, MADANAPALLE. 2. SRI J. CHARAN KUMAR, C/O. SRI S. RAMA RAO, ADVOCATE , FLAT NO. 102, SHRIYA'S ELEGANCE, H. NO. 3-6-643, ST . NO. 9, HIMAYATNAGAR, HYDERABAD-500 029. 3. THE CIT(A), GUNTUR . 4. THE CIT , TIRUPATI . 5. THE DR ' B ' BENCH, ITAT, HYDERABAD