S Venkatarama Reddy , Bangalore V. Additional Commissioner of Income Tax Range-9 , Bangalore

ITA 1095/BANG/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9215 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-08-2020
• Assessment Year: 2007-2008
• Appeal Filed On: 04-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH BENGALURU
• Assessee Lawyers: G S PRASHANTH
• Keywords: Capital asset; Opportunity of being heard; Cost of acquisition; Fair market value; Set aside
• Section: 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B R BASKARAN, ACCOUNTANT MEMBER ITA NO.1095/BANG/2018 ASSESSMENT YEAR: 2007-08 SHRI S. VENKATARAMA REDDY, AVALAHALLI SELVEL LINES, ANJANAPURA POST, OFF KANAKAPURA ROAD, BENGALURU 560 062. PAN: AASPR 0617A VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 9, BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI G.S. PRASHANTH, CA RESPONDENT BY : SHRI MANJEET SINGH, ADDL. CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 10 .0 8 .2020 DATE OF PRONOUNCEMENT : 12.08.2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER D ATED 06.02.2018 OF THE CIT(APPEALS)-3, BENGALURU RELATING TO ASSESS MENT YEAR 2007-08. 2. THE ONLY DISPUTE IN THIS APPEAL IS WITH REGARD T O CORRECTNESS OF COMPUTATION OF LONG TERM CAPITAL GAIN ON SALE OF 4 SITES BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. 3. THE ASSESSEE IS AN INDIVIDUAL. DURING THE RELEV ANT PREVIOUS YEAR THE ASSESSEE SOLD 4 SITES MEASURING 9600 SQ.FT. @ RS.70 0/SQ.FT FOR A TOTAL CONSIDERATION OF RS.67,20,000. THE COMPUTATION OF LONG TERM CAPITAL GAIN ITA NO.1095/BANG/2018 PAGE 2 OF 4 ON SALE OF THE AFORESAID SITE BY THE ASSESSEE IN TH E RETURN OF INCOME WAS AS FOLLOWS:- SITE NO. SIZE AMOUNT (RS.) 337 2400 SFT 338 2400 SFT 323 2400 SFT 324 2400 SFT 9600 SFT X 700 6720000 LESS: LAND COST & DEVELOPMENT CHARGES @ 300 PER SFT X 9600 2880000 3840000 4. THE AO, HOWEVER, ADOPTED THE COST OF ACQUISITION @ 180 / SFT AND MADE THE ADDITION OF RS.11,52,000 TO THE INCOME UND ER THE HEAD LONG TERM CAPITAL GAIN. THE FOLLOWING WERE THE RELEVANT OBSE RVATIONS OF THE AO:- 'DURING THE YEAR, THE ASSESSEE SOLD 4 SITES MEASUR ING 9,600 SQ FT @ RS. 700/- PER SQ FT. AND REALIZED RS, 67,20,000/- . FURTHER THE ASSESSEE DEDUCTED LAND COST AND DEVELOPMENT CHARGES @ RS,300/- PER SQ FT. DURING THE YEAR RELEVANT TO THE AY 2006- 07, THE DEPARTMENT HAD ACCEPTED THE LAND COST AND DEVELOPME NT CHARGES AT RS. 152/- PER SQ FT. THIS YEAR, ON INTERROGATION , THE ASSESSEE HAS ACCEPTED TO ADOPT THE COST OF LAND AT RS. 180/- PER SQ FT DUE TO COST INFLATION. ACCORDINGLY, THE INCOME FROM SALE O F SITE IS WORKED OUT AS UNDER; SALE OF SITE RS. 67,20,000/- LESS: LAND COST AS STATED ABOVE @ RS. 180/- PER SQ FT FOR 9,600 SFT RS. 17,28 000 /- PROFIT ON SALE OF LAND RS. 49,92,000/- LESS: DECLARED AS PER R/I RS. 38,40,000 DIFFERENCE RS.11.52,0000 5. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(APPEALS). ONE ON THE SPECIFIC GROUNDS BEFORE THE CIT(A) WAS T HAT THE AO IN ADOPTING THE COST OF ACQUISITION OF THE SITE @ 180/SFT. HAS FOLLOWED THE COMPUTATION IN AY 2006-07 AND DOING SO WAS ERRONEOUS. THE CIT(APP EALS), HOWEVER, ITA NO.1095/BANG/2018 PAGE 3 OF 4 CONFIRMED THE ORDER OF THE AO FOR THE REASON THAT I N A HEARING ON 17.12.2009, THE AR OF THE ASSESSEE WHEN CONFRONTED BY THE AO WITH THE FACT THAT IN AY 2006-07 COST OF ACQUISITION FOR IDE NTICAL PROPERTY WAS ADOPTED AT RS.152/SFT. ACCEPTED TO ADOPT RS.180/SFT IN AY 2007-08. 6. AGGRIEVED BY THE AFORESAID ORDER OF CIT(APPEALS) , THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. APART FROM THE GENERAL GROUNDS, IN GROUND NO.5 T HE ASSESSEE HAS SPECIFICALLY RAISED A PLEA THAT THE COST OF ACQUISI TION OF THE PROPERTY AT RS.180/SFT. ON THE BASIS OF AGREEMENT BY THE AR IS NOT VALID IN LAW. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS. FROM A PER USAL OF THE COMPUTATION OF LONG TERM CAPITAL GAIN FILED BY THE ASSESSEE IN THE RETURN OF INCOME, IT IS CLEAR THAT HE HAS NOT GIVEN THE BASIS ON WHICH THE COST OF RS.300/SFT. HAS BEEN ADOPTED AS COST OF ACQUISITION . FROM THE SUBMISSIONS MADE BEFORE THE TRIBUNAL, IT APPEARS THAT THE SITES THAT WERE SOLD WERE PROPERTIES BELONGING TO A HUF AND WERE ACQUIRED PRI OR TO 1.4.1981. THE ASSESSEE IS ENTITLTED TO ADOPT FAIR MARKET VALUE AS ON 1.4.1981 AS COST OF ACQUISITION FOR THE PURPOSE OF COMPUTING THE LONG T ERM CAPITAL GAIN. UNDER SECTION 48 OF THE ACT, THE CAPITAL GAIN IS COMPUTED BY REDUCING FROM THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RE SULT OF TRANSFER OF CAPITAL ASSET, THE FOLLOWING TWO SUMS VIZ., (I) EXPENDITURE INCURRED FULLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER; & (II ) COST OF ACQUISITION AND COST OF ANY IMPROVEMENT THERETO. SECTION 49 DESCRI BES THE COST WITH REFERENCE TO DIFFERENT MODES OF ACQUISITION OF PROP ERTY. BESIDES, THE ASSESSEE IS ALSO ENTITLED TO BENEFIT OF INDEXATION TOWARDS COST OF ACQUISITION AND COST OF IMPROVEMENT. WHEN A METHODOLOGY IS PRE SCRIBED UNDER THE ACT FOR COMPUTING THE CAPITAL GAIN, THEN THE CAPITAL GA IN HAS TO BE COMPUTED IN THAT MANNER. NEITHER THE ASSESSEE NOR THE AO HAVE GIVEN ANY BASIS FOR THE COMPUTATION OF CAPITAL GAIN WITH REFERENCE TO PROVI SIONS OF SECTIONS 48 & 49 ITA NO.1095/BANG/2018 PAGE 4 OF 4 OF THE ACT RELATING TO COST OF ACQUISITION & IMPROV EMENT AND INDEXED COST OF ACQUISITION & IMPROVEMENT. WE ARE THEREFORE OF TH E VIEW THAT IT WOULD BE JUST AND APPROPRIATE TO SET ASIDE THE ORDER OF CIT( APPEALS) ON THE ISSUE OF DETERMINATION OF COST OF ACQUISITION AND COST OF IM PROVEMENT AND REMAND THE ISSUE TO THE AO FOR FRESH CONSIDERATION. THE A SSESSEE IS DIRECTED TO FURNISH THE COMPUTATION OF LONG TERM CAPITAL GAIN I N THE SET ASIDE PROCEEDINGS BEFORE THE AO AND THE AO IS DIRECTED TO COMPUTE THE LONG TERM CAPITAL GAIN ON THE BASIS OF SUCH COMPUTATION IN ACCORDANCE WITH THE LAW AND AFTER AFFORDING THE ASSESSEE OPPORTUNITY OF BEING HEARD. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF AUGUST, 2020. SD/- SD/- ( B R BASKARAN ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRE SIDENT BANGALORE, DATED, THE 12 TH AUGUST, 2020. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.