Manikya Surya Prakash (HUF), Hyderabad, Hyderabad V. ITO, Ward-4(2), Hyderabad, Hyderabad

ITA 1665/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2553 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 08-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Capital asset; Tangible material; Fair market value; Reason to believe; Reassessment proceedings
• Section: 50C; 147; 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1665/HYD/2016 ASSESSMENT YEAR: 2008-09 M/S. MANIKYA SURYA PRAKASH (HUF), HYDERABAD [PAN: AAHHM8727K] VS THE INCOME TAX OFFICER, WARD-4(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHU RAM, AR FOR REVENUE : SMT. KOMALI KRISHNA, DR DATE OF HEARING : 18-01-2018 DATE OF PRONOUNCEMENT : 31-01-2018 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, HYDERABAD, DATED 23-08-2016 FOR THE AY. 2008-09. THE ISSUES IN THIS A PPEAL ARE (A) WHETHER THE REOPENING OF ASSESSMENT U/S. 147 OF T HE INCOME TAX ACT [ACT] IS VALID OR NOT AND (B) WHETHER THE ASSESSING OFFICER (AO) IS CORRECT IN ADOPTING THE SR O VALUE, AS SALE CONSIDERATION WITHOUT CONSIDERING THE ASSESSEES OBJECTIONS. 2. BRIEFLY STATED, ASSESSEE, A HUF, FILED ITS RETURN OF INCOME FOR THE AY. 2008-09 ON 29-12-2008 DECLARING INCOME O F RS.1,04,490/- INCLUDING INCOME FROM LONG TERM CAPITAL GAINS OF RS.1,04,485/- AND CLAIMING LONG TERM CAPITAL GAIN EXE MPTION U/S. 54 OF THE INCOME TAX ACT [ACT] TO THE EXTENT OF RS.9,68,600/-. THEREAFTER, THE ASSESSING OFFICER (AO ) ON THE I.T.A. NO. 1665/HYD/2016 :- 2 -: GROUND THAT THERE IS ESCAPEMENT OF INCOME HAS REOPENED ASSESSMENT UNDER SECTION 147 OF THE ACT, BY ISSUING A NOTICE DT. 18-10-2013 U/S. 148 OF THE ACT, WHICH APPARENTLY B EYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR . THE CONTENTION OF THE AO WAS THAT ASSESSEE ALONG WITH ANOTH ER PERSON HAS SOLD A HOUSE PROPERTY AT SANATHNAGAR, HYDE RABAD VIDE SALE DEED NO.1161/2007, IN MAY 2007 FOR A RECO RDED CONSIDERATION OF RS.30,00,000/- AS AGAINST THE GUIDEL INE VALUE OF THE PROPERTY AT RS.55,30,000/-. SINCE THE ASSESSEE HAD OFFERED CAPITAL GAINS AS PER THE RECORDED CONSIDERATIO N OF RS.30 LAKHS, AO REOPENED THE ASSESSMENT TO APPLY THE PROVISIO NS OF SECTION 50C OF THE ACT. IN RESPONSE TO THE NOTICE U/S. 14 8 OF THE ACT, ASSESSEE REQUESTED THE AO TO TREAT THE RETURN FILED O N 29- 12-2008 AS RETURN FILED IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. 3. IN THE COURSE OF REASSESSMENT PROCEEDINGS, AO CALL ED FOR DETAILS OF THE CLAIMS MADE BY THE APPELLANT IN THE COMPU TATION. ASSESSEE HAS NOT FILED ANY OBJECTIONS. AFTER SATISFYIN G HIMSELF ABOUT THE GENUINENESS OF THE CLAIM OF COST OF ORIGINAL ASSET, COST OF NEW CAPITAL ASSET, AO ADOPTED THE GUIDELINE VALU E OF THE SUB-REGISTRAR AT RS.55,30,000/- AS THE CONSIDERATION F OR SALE OF THE PROPERTY AND ARRIVED AT THE SHARE OF THE APPELLA NT AT RS.27,65,000/-. AFTER ALLOWING THE DEDUCTION FOR IND EXED COST AND DEDUCTION U/S. 54 OF THE ACT, THE AO COMPUTED THE L ONG TERM CAPITAL GAIN OF RS.12,65,000/-. 4. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE CI T(A). IT WAS THE CONTENTION THAT REOPENING WAS BAD IN LAW AND AO I.T.A. NO. 1665/HYD/2016 :- 3 -: OUGHT TO HAVE REFERRED THE MATTER TO THE VALUATION CELL FOR DETERMINING THE FAIR MARKET VALUE OF THE ASSET-IN-QUES TION, AS REQUIRED U/S. 50C(2) OF THE ACT, IN AS MUCH AS THE M ARKET VALUE IN SO FAR AS THE PROPERTY IN QUESTION WAS REVI SED BY STATE GOVERNMENT ONLY FEW MONTHS BACK AND THE FAIR MARKET VA LUE ADOPTED BY ASSESSEE WAS REASONABLE. 5. LD.CIT(A), HOWEVER, REJECTED THE CONTENTIONS IN HER BRIEF ORDER. 6. IT WAS THE SUBMISSION OF LD. COUNSEL THAT THERE IS NO REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AN D THERE IS NO TANGIBLE MATERIAL BEFORE THE AO TO COME TO A CONCLUSION AS ASSESSEE HAS DISCLOSED THE CAPITAL GAIN S AND RETURN OF INCOME WAS ACCEPTED U/S. 143(1) OF THE ACT. LD. COUNSEL RELIED ON THE FOLLOWING CASE LAW: I. CO-ORDINATE BENCH DECISION OF ITAT IN THE CASE OF THE PRUDENTIAL COOP URBAN BANK LTD., VS. ACIT IN ITA NO. 508/HYD/2010 (AY. 2005-06), DT. 26-11-2013; II. CO-ORDINATE BENCH DECISION OF ITAT IN THE CASE OF M/S . ESS ESS CONSTRUCTIONS IN ITA NOS. 632 & 633/HYD/2012 AND 645 & 646/HYD/2012, DT. 20-06- 2014; 6.1. ON THE MERITS OF ADDITION, IT WAS SUBMITTED THAT THE SR O VALUATION WAS REVISED AND THE LOCATIONAL DISADVANTAGE W AS NOT CONSIDERED. IN FACT THE GROUND NO. 3 RAISED BEFORE TH E CIT(A) THAT AO SHOULD HAVE REFERRED THE VALUATION TO DVO HAS N OT I.T.A. NO. 1665/HYD/2016 :- 4 -: BEEN DISPOSED-OFF BY LD.CIT(A) AND SO THE CONFIRMATIO N OF AOS ORDER IS BAD IN LAW. 7. LD.DR, HOWEVER, SUBMITTED THAT ASSESSEE HAS RECEIVE D THE INFORMATION ON SRO FROM INTERNAL SOURCES AND THAT WAS THE BASIS FOR REOPENING AND ASSESSEE HAS NOT CHALLENGED THE ISSUES BEFORE THE AO AND SO THE ISSUES NOW RAISED HAVE NO ME RIT. 8. I HAVE CONSIDERED THE RIVAL CONTENTIONS. WITH REFE RENCE TO REOPENING OF ASSESSMENT, AO ITSEEMS GOT INFORMATION SEPARATELY ABOUT THE SRO VALUES AND THAT WAS THE BASIS FOR REOPENING. IN FACT, AS SEEN FROM THE COMPUTATION OF I NCOME EXCEPT STATING THE VALUE OF PROPERTY AND OFFERING CAPI TAL GAINS, NO OTHER DETAILS WERE FILED BY THE ASSESSEE. THE SAL E DEED WAS NOT EVEN ENCLOSED. SINCE THE RETURN WAS PROCESSED U/S . 143(1), I AM OF THE OPINION THAT AO GOT TANGIBLE MATERIAL AND SO HAS VALIDLY REOPENED THE ASSESSMENT. RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF R AJESH JHAVERI STOCK BROKERS P.LTD VS ACIT291 ITR 500 (SC). I HAVE ALSO PERUSED THE CASE LAW RELIED ON BY THE LD. COUNSE L. IN THE CASE OF THE PRUDENTIAL COOP URBAN BANK LTD., VS. ACIT (SUPRA) THERE IS A FINDING THAT THERE IS NO TANGIBLE MATERIAL B EFORE THE AO. IN THE CASE OF M/S. ESS ESS CONSTRUCTIONS (SUPRA) , THE FINDINGS OF ITAT WAS THAT THERE IS NO ESCAPEMENT OF IN COME AS THE AO HAS ONLY REWORKED OUT THE WORK-IN-PROGRESS WHI CH HAVE NO EFFECT ON RETURNED/ASSESSED INCOME. THE FACTS BEI NG SEPARATE, THE SAID CASE LAW DOES NOT APPLY TO THE PR ESENT CASE. THE REOPENING OF ASSESSMENT U/S. 147 IS HELD VALID. THE GROUNDS ON THAT ISSUE ARE REJECTED. I.T.A. NO. 1665/HYD/2016 :- 5 -: 8.1. COMING TO THE ISSUE OF ADDITION OF THE AMOUNT IN VOKING PROVISIONS OF SECTION 50C, ASSESSEE HAS NOT FILED ITS OBJECTIONS BEFORE THE AO. BUT HE HAS RAISED A GROUND BEFORE THE LD.CIT(A) AS UNDER: 3. THE ASSESSING OFFICER ERRED IN APPLYING PROVISI ON OF SECTION 50C OF THE INCOME TAX ACT AND APPLYING THE SUB-REGI STRAR RATE OF MARKET VALUE AT RS. 55,30,000 WITHOUT REFERRING THE MATTER TO VALUATION OFFICER ESPECIALLY WHEN THE APPELLANT HAD FILED A REPLY TO NOTICE UNDER SECTION 147 OF THE ACT, FALLING BACK O N THE RETURN OF INCOME THAT WAS ALREADY FILED ON 29.12.2008. LD.CIT(A) HAS NOT ADJUDICATED THE GROUND. THEREFORE, CONSIDERING THE OBJECTION RAISED BY ASSESSEE, THE MATTE R HAS TO BE REFERRED TO VALUATION CELL U/S. 50C(2). CONSEQUEN TLY, I SET ASIDE THE ORDERS OF AO/CIT(A) ON THE MERITS OF THE ADDI TION AND RESTORE THE ISSUE OF ADOPTION OF VALUE U/S. 50C TO AO, WITH A DIRECTION TO REFER THE MATTER OF VALUATION TO DVO AND AF TER GIVING DUE OPPORTUNITY TO ASSESSEE, RE-COMPUTE THE CAP ITAL GAINS AS PER THE PROVISIONS OF THE ACT. THE GROUNDS O N THIS ISSUE ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2018 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST JANUARY, 2018 TNMM I.T.A. NO. 1665/HYD/2016 :- 6 -: COPY TO : 1. M/S. MANIKYA SURYA PRAKASH (HUF), C/O. A.V. RAGH U RAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-4(2), HYDERABAD. 3. CIT (APPEALS)-1, HYDERABAD. 4. PR.CIT-1, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.