Naresh Bhat (HUF), Bangalore V. DCIT, Bangalore

ITA 161/BANG/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5572 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: H N KHINCHA
• Keywords: Depreciation; Cost of acquisition; Fair market value; Valuation report
• Section: 143(3)

Judgement Text

PAGE 1 OF 5 ITA NO.161/BANG/2011 1 IN THE INOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SMT. P MADHAVI DEVI, J.M. AND SHRI A MOHAN ALANKAMONY, A.M. ITA NO.161/BANG/2011 (ASST. YEAR 2007-08) DR. NARESH BHAT (HUF), NO.310, 5 TH MAIN ROAD, 3 RD CROSS, SADANANDANAGAR, BANGALORE-38. -APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5(1), BANGALORE. - RESPONDENT APPELLANT BY : SHRI H N KHINCHA, C.A. RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI, ADDL. C IT O R D E R PER P MADHAVI DEVI : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-II, BANGALORE DATED 26/11/2010 FOR TH E ASST. YEAR 2007-08. 2. IN THIS APPEAL, THOUGH THE ASSESSEE HAS RAISED A GROUND OF APPEAL WITH REGARD TO JURISDICTION OF THE AO IN PASSING THE ASSESSMENT ORDER, THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED AT THE TIME OF HEARING THAT THE ASSESSEE DOES NOT WISH TO PRESS THIS GROUND. ACCORDINGLY, THIS GROUND IS R EJECTED. PAGE 2 OF 5 ITA NO.161/BANG/2011 2 3. GROUND NOS.2 AND 3 RELATE TO THE COMPUTATION OF THE LONG TERM CAPITAL GAINS BY ADOPTING THE FAIR MARKET VALUE OF THE PROPERTY AS ON 1/4/1981 AT RS.30 PER SFT BY THE AO A ND RS.100 PER SFT BY THE CIT(A) AS AGAINST THE CLAIM OF THE ASSESS EE AT RS.1000 PER SFT. 3.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS THE KARTHA OF HUF WHO IN THE SAID CAPACITY FILED THE RE TURN OF INCOME FOR THE ASST. YEAR 2007-08 DECLARING TOTAL INCOME AT RS.15,60,780/- . DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE I T ACT, THE AO OBSERVED THAT THE ASSESSEE HAS DERIVED INCOME FR OM CAPITAL GAINS ON SALE OF PROPERTY. HE ALSO OBSERVED THAT T HE ASSESSEE ALONG WITH HIS TWO BROTHERS AND MOTHER SOLD A PROPE RTY ON 22.3.2007 FOR A SUM OF RS.4 CRORES, WHICH WAS INHER ITED BY THEM THROUGH A WILL EXECUTED BY SHRI MANIK BHAT ON 30.6.1 997. HE OBSERVED THAT THE ASSESSEE GOT RS.1 CRORE TO HIS SH ARE IN THIS SALE CONSIDERATION. SINCE THIS PROPERTY WAS ACQUIRED PRI OR TO 1/4/1981, THE FAIR MARKET VALUE AS ON 1/4/1981 WAS TO BE ARRI VED AT. THE ASSESSEE OBTAINED VALUATION REPORT FROM A REGISTERE D VALUER ON THE BASIS OF WHICH THE COST OF ACQUISITION OF THE PROPE RTY WAS COMPUTED AT RS.1000 PER SFT. THE AO, HOWEVER, OBSERVED THAT THIS ADOPTION OF THE COST OF LAND AT RS.1000 PER SFT IS WITHOUT A NY BASIS. HE OBSERVED THAT FOR THE VALUE OF REGISTRATION PURPOSE S NOTIFIED BY THE GOVT. OF KARNATAKA NEAREST TO 1981, THE VALUE I N INDIRA NAGAR AREA FOR RESIDENTIAL LAND WAS RS.272 PER SQ YARD. S INCE THE PROPERTY UNDER CONSIDERATION WAS A RESIDENTIAL PROPE RTY IN INDIRA PAGE 3 OF 5 ITA NO.161/BANG/2011 3 NAGAR, HE ADOPTED THE VALUE AT RS.272 PER SQ YARD. THUS, THE AO WORKED OUT THE FAIR MARKET VALUE OF THE LAND AT RS. 30 PER SFT AND ARRIVED AT THE VALUE OF THE LAND AT RS.1,25,550/-. THERE WAS ALSO A BUILDING ON THE SAID LAND, THE VALUE OF WHICH THE A SSESSEE CLAIMED AT RS.400 PER SFT FOR THE GROUND FLOOR AND RS.350 PER SFT FOR THE 1 ST AND 2 ND FLOORS AND AFTER DEPRECIATION OF AROUND 48% FOR A TOTAL PERIOD OF 26 YEARS, THE ASSESSEE CLAIMED THE COST OF CONSTRUCTION PER SFT. THE AO, HOWEVER, ADOPTED RS.100 PER SFT A S ON 1/4/1981 AND ARRIVED AT THE COST OF ACQUISITION OF THE BUILD ING AT RS.5,70,000/- AND COMPUTED THE LONG TERM CAPITAL GA INS FROM THE SALE OF THE PROPERTY. 3.2 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BE FORE THE CIT(A), WHO CONFIRMED THE FINDING OF THE AO THA T THE VALUE ADOPTED BY THE ASSESSEE IS ON A HIGHER SIDE BUT HE A LSO HELD THAT THE VALUE ADOPTED BY THE AO WAS ALSO LOW. HE THERE FORE, ADOPTED THE FAIR MARKET VALUE OF THE PROPERTY AT RS.100 PER SFT. AS REGARDS THE COST OF CONSTRUCTION OF THE BUILDING, HE DIRECT ED THE AO TO ADOPT THE VALUE GIVEN BY THE REGISTERED VALUER. AGA INST THIS ORDER OF THE CIT(A) IN DIRECTING THE AO TO ADOPT THE VALU E OF THE SITE AT RS.100 PER SFT AS ON 1/4/1981, THE ASSESSEE IS IN S ECOND APPEAL BEFORE US. 3.3 THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT WHERE THERE WERE NO SALE INSTANCES FOR THE RELEVANT PERIOD AND THE PAGE 4 OF 5 ITA NO.161/BANG/2011 4 ASSESSEE HAS PROVIDED THE VALUATION BY A REGISTERED VALUER, THE ONLY OPTION LEFT BEFORE THE AO WAS TO EITHER REFER THE M ATTER TO THE DEPARTMENTAL VALUER OR ADOPT THE VALUE SUBMITTED BY THE ASSESSEE. HE SUBMITTED THAT THE AO HAS FAILED TO REFER THE MA TTER TO THE DEPARTMENTAL VALUATION OFFICER AND THEREFORE, HE HA S NO OPTION BUT TO ACCEPT THE VALUE CLAIMED BY THE ASSESSEE AND HE H AS NO BASIS TO ADOPT THE VALUE GIVEN BY THE REGISTRATION OFFICE OF THE GOVT. OF KARNATAKA, WHICH IS ONLY FOR THE PURPOSE OF COLLECTI ON OF STAMP DUTY. FURTHER HE ALSO SUBMITTED THAT THE CIT(A) HAS ALSO NOT CONSIDERED THE ISSUE IN PROPER PERSPECTIVE IN RESTR ICTING THE VALUE AT RS.100 PER SFT. 3.4 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AUTHORITIES HAVE BEEN MORE THAN JUST IN ARRIVING AT THE VALUE O F THE SITE AT RS.100 SFT AND THEREFORE, THE ORDER NEEDS NO INTERF ERENCE. 3.5 HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FI ND THAT IT IS THE ESTIMATION OF THE VALUE OF THE SITE AS ON 1/4/1981 THAT IS IN DISPUTE BEFORE US. THE SITE IS LOCATED AT INDRA NAGAR, WHI CH IS A POSH COLONY AS ON THE DATE OF SALE. HOWEVER, THE SAME MA Y NOT BE THE POSITION IN THE YEAR 1981 AND THE VALUE HAS TO BE AD OPTED AS PER THE MARKET VALUE AS ON 1/4/1981. FOR ARRIVING AT THE F AIR MARKET VALUE, THERE HAS TO BE THE SALE INSTANCES OR THE AO HAS TO CONDUCT AN ENQUIRY AS TO THE FAIR MARKET VALUE. THE AO HAS TAK EN THE VALUE PAGE 5 OF 5 ITA NO.161/BANG/2011 5 GIVEN BY THE REGISTRATION OFFICE OF KARNATAKA GOVT. AS ON 1/4/1981 FOR THE PURPOSE OF STAMP DUTY. FOR ARRIVING AT THIS VALUATION BY THE REGISTRATION OFFICE, ONE OF THE CONSIDERATIONS IS U NDOUBTEDLY THE MARKET VALUE OF THE AREA DURING THAT PERIOD. HOWEVE R, IT CANNOT BE SAID THAT THE SAME IS ALSO THE FAIR MARKET VALUE AS ON THE SAID DATE. IT IS BEYOND DOUBT THAT THE MARKET VALUE OF A SITE H AS ALWAYS BEEN ABOVE THE VALUE ADOPTED BY THE REGISTRATION OFFICE. THEREFORE, IT CANNOT BE SAID THAT RS.30 ARRIVED AT BY THE AO IS TH E CORRECT VALUATION. SIMILARLY, THE VALUATION ADOPTED BY THE A SSESSEE AT RS.1000 PER SFT IS ALSO NOT REALISTIC AND VERY EXCES SIVE. THEREFORE, WE DEEM IT FIT AND PROPER TO ESTIMATE THE FAIR MARK ET VALUE OF THE SITE AT RS.200 PER SFT AS ON 1/4/1981 AND THE AO IS DIRECTED TO COMPUTE THE CAPITAL GAINS ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED ON TUESDAY, THE 31 ST DAY OF MAY, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (P MADH AVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMB ER COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) THE CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. MSP/25.5 BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.