Smt. T. Padma, Hyderabad V. ITO, War-6(1), Hyderabad

ITA 1218/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53720 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 22-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K C DEVADAS
• Keywords: Gift; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.1218/HYD/2011 (ASSESSMENT YEAR 200 7-08) SMT.T.PADMA, HYDERABAD ( PAN ABKPT 0212 A) V/S. INCOME TAX OFFICER, WARD-6(1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.C.DEVADAS RESPONDENT BY : SMT. T.H.VIJAYA LAKSHMI DATE OF HEARING 5.10.2011 DATE OF PRONOUNCEMENT O R D E R PER G.C.GUPTA, VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YE AR 2007-08 IS DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME- TAX(APPEALS). 2. GROUNDS OF APPEAL OF THE ASSESSEE ARE AS UNDER- 1) THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A PPEALS) IV, HYDERABAD IN SUSTAINING THE ORDER PASSED BY THE INC OME TAX OFFICER IN RELATION TO DETERMINATION OF THE COST OF THE PROPERTY TRANSFERRED IS WHOLLY UNSUSTAINABLE BOTH ON FACTS A ND IN LAW. 2) THE LEARNED CIT(APPEALS) IV HYDERABAD, OUGHT TO HAVE UPHELD THE COST OF THE IMMOVABLE PROPERTY AT RS.9,04,150 P RIOR TO INDEXATION AS VALUED BY THE REGISTERED VALUER WHO I S AN EXPERT IN THE FIELD OF VALUATION AND ERRED IN CONFIRMING THE VALUE ADOPTED BY THE INCOME TAX OFFICER. 3) THE LEARNED CIT(APPEALS) IV, HYDERABAD, ERRED IN NOT ALLOWING THE REGISTRATION CHARGES AT RS.4,92,170 INCURRED FO R FLATS ALLOTTED TO THE APPELLANT AS PART OF THE COST IN CO MPUTING THE CAPITAL GAINS OR IN THE ALTERNATIVE OUGHT TO HAVE C LEARLY HELD THAT THE SUM OF RS.4,92,170 WAS DEDUCTIBLE FROM THE COST OF FLATS RECEIVED IN EXCHANGE FOR THE LAND TRANSFERRED . 4) THE LEARNED CIT(A) IV, HYDERABAD, FAILED TO NOTE THAT THE INCOME TAX OFFICER HAVING GIVEN A CLEAR FINDING AT PARAGRAPH 4.4 THAT THE SUM OF RS.3,27,950 INCLUDED COST OF CI VIL WORKS ITA NO.1218/H/2011 SMT. T.PADMA, HYDERABAD 2 ERRED IN HOLDING THAT IT DOES NOT FORM PART OF THE COST OF THE PROPERTY TRANSFERRED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SUBMITTED VALUATION REPORT OF THE PROP ERTY AS ON 1.11.1986 FOR THE PURPOSE OF CALCULATION OF LONG TE RM CAPITAL GAINS. HE SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO A D EVELOPMENT AGREEMENT-CUM-IRREVOCABLE GPA WITH MS/. UDAYA HEIGH TS PVT. LTD. ON 25.5.2006 FOR DEVELOPMENT OF HER PROPERTY ADMEASURI NG 773 SQ. YARDS OF LAND AND BUILDING THEREON AT BAKARAM, HY DERABAD. THE SAID PROPERTY WAS ACQUIRED BY THE ASSESSEE THROUGH A GIFT SETTLEMENT DEED IN THE YEAR 2000. IN CONSIDERATION OF THE DEV ELOPMENT AGREEMENT, ASSESSEE WAS TO GET TWO FLATS AND A NON- REFUNDABLE DEPOSIT OF RS.45 LAKHS. THEREAFTER, THE ASSESSEE E NTERED INTO ANOTHER MOU WITH M/S. UDAYA HEIGHTS PVT. LTD. AS PER WHICH THE ASSESSEE SHOULD GET FOUR MORE FLATS AT ASHOK NAGAR AND KONDA PUR IN LIEU OF THE NON-REFUNDABLE DEPOSIT OF RS.45 LAKHS. HE SUBMITTE D THAT THE APPROVED VALUER HAS ESTIMATED THE VALUE OF THE LAND MEASURING 773 SQ. YARDS AND BUILDING THEREON AT BAKARAM, HYDERAB AD AS ON 1.11.1986 AT RS.9,04,150 PRIOR TO INDEXATION AS ALL OWABLE UNDER THE ACT. HE SUBMITTED THAT THE ASSESSING OFFICER HAS R EJECTED THE VALUATION REPORT MADE BY THE APPROVED VALUER WITHOU T ANY REFERENCE MADE TO THE DEPARTMENTAL VALUATION OFFICER. HE SUB MITTED THAT THE APPROVED VALUER IS A QUALIFIED AND TECHNICAL PERSON AND HAS BEEN APPROVED BY THE GOVERNMENT OF INDIA FOR THE PURPOSE OF VALUATION AND THAT THE ASSESSING OFFICER COULD NOT REJECT THE VALUATION REPORT AS PREPARED BY THE APPROVED VALUER. HE VEHEMENTLY ARG UED THAT IN CASE THE VALUATION MADE BY THE APPROVED VALUER IS ALLOWE D TO BE REJECTED IN THIS MANNER BY THE ASSESSING OFFICER, THE WHOLE PURPOSE OF THE INSTITUTION OF APPROVED VALUER BEING NOTIFIED BY TH E CBDT ON BEHALF OF THE GOVERNMENT OF INDIA WOULD COME TO A NULLITY. HE REFERRED TO ITA NO.1218/H/2011 SMT. T.PADMA, HYDERABAD 3 THE RELEVANT PORTIONS OF THE APPROVED VALUERS REPO RT FILED IN THE COMPILATION BEFORE THE TRIBUNAL. HE SUBMITTED THAT THE VALUE OF COST OF SUNDRY CIVIL ITEMS INCLUDING BOREWELL AND WARD R OBE/SHOW CASES ESTIMATED AT RS.3,27,950 BY THE APPROVED VALUER AS ON 1.11.1986 WAS WRONGLY EXCLUDED BY THE ASSESSING OFFICER. HE R ELIED ON THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN ACIT V/S. NARASIMHA RAO HUF AND ANR IN ITA NO.1240/HYD/2007 A ND OTHERS DATED 26.9.2008 AND ALSO THE MUMBAI BENCH DECISION OF THE TRIBUNAL IN SMT.SARLA N.SAKRANEY V/S. ITO (2011) 140 TTJ (MU M) 418 AND OF THE AHMEDABAD BENCH DECISION OF THE TRIBUNAL IN ITO V/S. CHANDRAKANT R. PATEL AND OTHERS (2011) 140 TTJ (AHD ) 430 IN SUPPORT OF HIS ARGUMENTS. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER ARGUED THAT THE ASSESSEE HAS SPENT A SUM OF RS.4,92,170 ON REGISTRATION CHARGES OF THE FLATS ALLOTTED TO HER A ND THEREFORE, AT LEAST HALF OF THIS AMOUNT SHOULD BE DEDUCTED WHILE COMPUT ING THE LONG TERM CAPITAL GAINS DUE TO COST INCURRED FOR THE AS HOKNAGAR FLATS ALLOTTED TO HER ON WHICH THE BENEFIT OF S.54 HAS BE EN ALLOWED BY THE ASSESSING OFFICER. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS OPP OSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSE SSEE. SHE SUBMITTED THAT THE FACTS OF THE CASE ARE NOT CLEAR AND THEREFORE, THE WHOLE MATTER MAY BE RESTORED TO THE FILE OF THE ASS ESSING OFFICER FOR FRESH DECISION. SHE SUBMITTED THAT NO EVIDENCE WHAT SOEVER WAS SUBMITTED BY THE ASSESSEE FOR THE INCLUSION OF SUND RY CIVIL ITEMS VALUING RS.3,27,950 IN THE COST OF CONSTRUCTION OF THE ERSTWHILE BUILDING AS ON 1.11.1986. SHE SUBMITTED THAT THERE ARE A NUMBER OF DEFECTS IN THE REPORT OF THE APPROVED VALUER AND T HE APPROVED VALUERS REPORT IS NOT BINDING ON THE ASSESSING OFF ICER AS THE VALUATION ITA NO.1218/H/2011 SMT. T.PADMA, HYDERABAD 4 OF A PROPERTY IS A MATTER OF ESTIMATION ONLY. SHE RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND HAVE PERUSED THE ORDERS OF THE ASSESSING OFFICER AN D THE CIT(A) AND ALSO THE COPIES OF VARIOUS DOCUMENTS FILED IN THE C OMPILATION BY THE ASSESSEE, INCLUDING THE COPY OF THE VALUATION REPOR T DATED 20.5.2006 OF THE APPROVED VALUER. WE FIND THAT IT IS WELL ES TABLISHED THAT THE VALUATION OF THE PROPERTY IS ALWAYS A MATTER OF EST IMATION AND IS ESSENTIALLY A QUESTION OF FACT TO BE DETERMINED AF TER CONSIDERING ALL THE RELEVANT FACTS AND CIRCUMSTANCES OF A PARTICULA R CASE. THERE IS NO PROVISION IN LAW MAKING THE APPROVED VALUERS REPOR T BINDING ON THE AUTHORITIES. ALTHOUGH THE APPROVED VALUER IS A TEC HNICALLY QUALIFIED PERSON AND HIS REPORT OF VALUATION HAS TO BE CONSID ERED BEFORE ARRIVING AT A REASONABLE FIGURE OF VALUATION, IT IS ONLY AN IMPORTANT PIECE OF EVIDENCE AND IS NOT A CONCLUSIVE AND FINAL WORD ON THE ISSUE OF VALUATION. WE FIND THAT IN THIS CASE THERE ARE NUMBER OF DEFECTS IN THE VALUATION REPORT PREPARED BY THE APPROVED VALUE R. THE APPROVED VALUER HAS ADOPTED THE VALUE OF THE LAND AT RS.50 PER SQ. YARD AS ON 1.4.1981 AND HAS HIMSELF MENTIONED IN COLUMN 38 OF HIS REPORT THAT IT IS ON THE BASIS OF THE INFORMATION ORALLY OBTAINE D FROM SUB-REGISTRAR OFFICE(SRO), HYDERABAD. WE FIND THAT THE ASSESSING OFFICER HAS GATHERED THE INFORMATION FROM THE SUB-REGISTRAR OFF ICE HYDERABAD REGARDING SUCH RATE IN THE AREA AS ON 1.4.1981 AT RS.120 PER SQ. YARD AND HAS ACCORDINGLY APPLIED THE SAME TO THE LA ND OF THE ASSESSEE TO ARRIVE AT THE FAIR MARKET VALUE OF THE LAND AS ON 1.4.1981. THIS APPROACH OF THE APPROVED VALUER IN GETTING THE ORAL INFORMATION FROM THE SUB-REGISTRAR OFFICE HYDERABAD IS NOT SUSTAINABLE. WE FIND THAT THERE IS A SPECIFIC CLAUS E IN THE APPROVED VALUERS REPORT IN WHICH THE APPROVED VALUER HAS T O MENTION THE ITA NO.1218/H/2011 SMT. T.PADMA, HYDERABAD 5 SPECIFIC DATE ON WHICH HE HAS PHYSICALLY INSPECTED THE PROPERTY. IN THIS CASE BEFORE US, THIS COLUMN MEANT TO INDICATE THE DATE OF PERSONAL INSPECTION OF THE PROPERTY BY THE APPROVED VALUER AT PAGE 6 OF THE VALUATION REPORT WAS LEFT BLANK AND ACCORDIN GLY IT COULD NOT BE SAID THAT THE APPROVED VALUER HAS IN FACT INSPECTED THE PROPERTY. THE APPROVED VALUER HAS APPLIED A RATE OF RS.350 PER SQ . FT TO THE PLINTH AREA DURING THE YEAR 1985-86 AND THERE IS NO BASIS FOR ADOPTING SUCH A HIGH PLINTH AREA RATE. THE APPROVED VALUER HAS AD DED A SUM OF RS.3,27,950 ON ACCOUNT OF SUNDRY CIVIL ITEMS INCLUD ING RS.1,50,000 FOR THE BOREWELL AND RS.68,750 FOR WARD-ROBES AND S HOW-CASES WITHOUT MENTIONING ANY BASIS FOR ADOPTING THE HIGH VALUE FOR THE SAME AND WHETHER THESE ITEMS WERE IN EXISTENCE AS ON THE DATE OF VALUATION I.E. 1.11.1986 AS THE VALUATION REPORT W AS PREPARED ONLY ON 20.5.2006, AFTER A LAPSE OF 20 YEARS. IN THESE FACTS OF THE CASE, IT COULD NOT BE SAID THAT THE VALUATION REPORT HAVING BEEN PREPARED BY A TECHNICALLY QUALIFIED PERSON, HAS TO BE ACCEPTED IN SPITE OF VARIOUS DISCREPANCIES THEREIN. IT WAS FOR THE ASSESSEE TO SUBSTANTIATE THE EXISTENCE OF THE VARIOUS CIVIL ITEMS AS ON 1.11.198 6 FOR WHICH THE ASSESSEE COULD NOT FILE ANY FOOLPROOF EVIDENCE. T HE PLINTH AREA RATE APPLIED AT RS.350 PER SQ. FT. DURING THE YEAR 1985 -86 COULD NOT BE SUBSTANTIATED BY THE ASSESSEE. IN ACIT V/S. NARASIM HA RAO HUF (SUPRA), IN THE CASE OF SARLA SAKRANEY (SUPRA) AND IN THE CASE OF CHANDRAKANT PATEL (SUPRA), THE ISSUE INVOLVED WAS WITH REGARD TO VALIDITY OF THE REFERENCE TO THE DEPARTMENTAL VALUA TION OFFICER UNDER S.55A OF THE ACT, WHICH IS NOT THE ISSUE INVOLVED I N THIS CASE, AND AS SUCH THE DECISIONS RELIED UPON BY THE LEARNED COUNS EL FOR THE ASSESSEE ARE DISTINGUISHABLE ON FACTS. HOWEVER, WE FIND THAT THE ASSESSING OFFICER HIMSELF HAS ADMITTED IN PARA 4.5 OF THE ASSESSMENT ORDER THAT THERE IS NO SUBSTANTIVE MATERIAL AVAILAB LE ON RECORD TO ARRIVE AT THE ACTUAL COST OF CONSTRUCTION OF THE B UILDING IN QUESTION IN ITA NO.1218/H/2011 SMT. T.PADMA, HYDERABAD 6 THE YEAR 1986 EITHER TO THE ASSESSEE OR TO THE REVE NUE. IN THESE CIRCUMSTANCES, WE ARE LEFT WITH NO OTHER OPTION, BU T TO MAKE A FAIR AND REASONABLE ESTIMATE OF VALUATION OF THE BUILDIN G AS ON 1.11.1986, AFTER TAKING INTO ACCOUNT ALL THE RELEVANT FACTS AN D CIRCUMSTANCES OF THE CASE. WE FIND THAT THE LAND RATE OBTAINED BY T HE ASSESSING OFFICER AT RS.120 PER SQ. YARD ON THE BASIS OF THE REPORT O F THE SRO HYDERABAD IS REASONABLE AND IS EVEN HIGHER THAN THE RATE AS ADOPTED BY THE APPROVED VALUER OF THE ASSESSEE AND ACCORDIN GLY NEEDS NO INTERFERENCE. WITH REGARD TO THE PLINTH AREA RATE OF THE TOTAL BUILT UP AREA OF THE BUILDING, THE ASSESSING OFFICER HAS APP LIED A RATE OF RS.100 PER SQ. FT AS AGAINST RS.350 PER SQ. FT. APPLIED B Y THE APPROVED VALUER OF THE ASSESSEE. THE PLINTH AREA RATE OF RS. 350 SQ. FT AS ON 1.11.1986 IS CLEARLY ON THE HIGHER SIDE. HOWEVER, CONSIDERING THE SPECIFICATIONS OF THE ERSTWHILE BUILDING AS DETAILE D BY THE APPROVED VALUER IN HIS REPORT, WE CONSIDER THAT IT SHALL BE REASONABLE TO ADOPT A RATE OF 150 PER SQ.FT. TO THE TOTAL BUILT UP AREA O F 1667 SQ. FT OF THE PROPERTY, AND ACCORDINGLY, TOTAL INDEXED COST OF TH E ACQUISITION OF THE BUILDING AS DETERMINED BY THE ASSESSING OFFICER SHA LL BE INCREASED BY RS.4,32,500. ACCORDINGLY, THE ASSESSEE GETS A RELI EF OF RS.4,32,500 ON THIS SCORE, OUT OF THE NET LONG TERM CAPITAL GA INS DETERMINED BY THE ASSESSING OFFICER. 6. WITH REGARD TO THE ARGUMENT OF THE LEARNED COUN SEL FOR THE ASSESSEE THAT ALTERNATIVELY, THE ASSESSEE IS EN TITLED FOR DEDUCTION OF 50% OF THE REGISTRATION CHARGES WITH REGARD TO A SHOKNAGAR FLATS. WE ARE OF THE VIEW THAT WITHOUT INCURRING THE REGIS TRATION CHARGES THE ASSESSEE COULD NOT HAVE ACQUIRED THE FLATS IN ASHOK NAGAR AND SINCE THE ASSESSING OFFICER HAS ALLOWED THE BENEFIT OF DE DUCTION UNDER S.54F ON THE AMOUNT OF THE TWO FLATS AT ASHOKNAGAR, THE A SSESSEE IS ENTITLED FOR DEDUCTION OF THE REGISTRATION CHARGES WITH REGA RD TO THESE TWO ITA NO.1218/H/2011 SMT. T.PADMA, HYDERABAD 7 FLATS AT ASHOKNAGAR AT 50% OF THE TOTAL REGISTRATIO N CHARGES OF RS.4,92,170, WHICH COMES TO RS.2,46,000. ACCORDING LY, WE DIRECT FURTHER DEDUCTION OF RS.2,46,000 ON THIS SCORE, FRO M THE NET TAXABLE LONG TERM CAPITAL GAINS DETERMINED BY THE ASSESSING OFFICER. 7. WITH REGARD TO THE DEDUCTION OF RS.3,27,950 CL AIMED BY THE ASSESSEE ON ACCOUNT OF SUNDRY CIVIL ITEMS, WE F IND THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE EXISTENCE OF BO REWELL VALUING RS.1,50,000/- WARD-ROBES/SHOW-CASES VALUING RS.68,7 50 AS ON 1.11.1986. HOWEVER, THE EXISTENCE OF OTHER EIGHT S UNDRY CIVIL ITEMS DETAILED IN THE VALUATION REPORT OF THE APPROVED VA LUER COULD NOT BE DENIED AS THEY SEEM TO BE ESSENTIAL ITEMS FOR A BUI LDING USED FOR RESIDENTIAL PURPOSE THE VALUE OF THESE EIGHT ITEMS EXCLUDING BORE- WELL AND WARD-ROBES/SHOW-CASES ARE ESTIMATED AT RS. 1 LAKH AND APPLYING INDEXATION AT 519/133, THE INDEXED VALUE OF THESE ITEMS WOULD, IN ROUND SUM FIGURE, COME TO RS.3,90,000. AC CORDINGLY, WE DIRECT A FURTHER DEDUCTION ON THIS SCORE OF RS.3,90 ,000 FROM THE NET LONG TERM CAPITAL GAINS DETERMINED BY THE ASSESSING OFFICER. 8. IN VIEW OF THE ABOVE DISCUSSION, WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE NET LONG TERM CAPITAL GAIN S TAXABLE IN THE HANDS OF THE ASSESSEE, AFTER ALLOWING RELIEFS ON V ARIOUS SCORES DIRECTED ABOVE, AND ACCORDINGLY, GROUNDS OF APPEAL OF THE ASSESSEE IN THIS APPEAL ARE PARTLY ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE COURT ON 4 TH NOVEMBER, 2011 SD/- SD/- (CHANDRA POOJARI) (G.C.GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT DT/- 4 TH NOVEMBER, 2011 ITA NO.1218/H/2011 SMT. T.PADMA, HYDERABAD 8 COPY FORWARDED TO: 1. SMT.T.PADMA, 6 - 3 - 1219/8 UMA NAGAR, BEGUMPET, HYDERABAD 2. INCOME - TAX OFFICER, WARD - 6(1), HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) I V , HYDERABAD 4. COMMISSIONER OF INCOME - TAX III HYDERABAD 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S