Dy.Director of Income-Tax -II(IT), Hyderabad V. Smt V.Sandhya Reddy, Hyderabad

ITA 1732/HYD/2014

• Counselvise Citation: 173222514 RSA 2014
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-07-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 10-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Cost of acquisition; Fair market value; Valuation report
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1732/HYD/2014 ASSESSMENT YEAR: 2011-12 DY. DIRECTOR OF INCOME-TAX II (INTERNATIONAL TAXATION), HYDERABAD. VS. V. SANDHYA REDDY, HYDERABAD PAN AUZPS 8710Q (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RAJAT MITRA ASSESSEE BY : SHRI K.A. SAI PRASAD D ATE OF HEARING 21-07-2015 DATE OF PRONOUNCEMENT -08-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST ORDER DATED 08/07/2014 OF LD. COMMISSIONER OF INCOME-TAX( A), HYDERABAD FOR AY 2011-12. 2. THE ONLY ISSUE RAISED IN THE AFORESAID APPEAL I S IN RELATION TO THE DETERMINATION OF FAIR MARKET VALUE (FMV) OF THE PROPERTY SOLD BY ASSESSEE FOR THE PURPOSE OF COMPUTING LONG TERM CAP ITAL GAIN (LTCG). 3. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIVIDUAL FI LED HER RETURN OF INCOME FOR THE AY UNDER CONSIDERATION ON 30/07/2011 DECLARING TOTAL INCOME OF RS. 1,57,08,480 WHICH INCLUDED INCOME FRO M LTCG AND INCOME FROM OTHER SOURCES TOWARDS INTEREST RECEIVED . IN COURSE OF ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE DUR ING THE RELEVANT PY HAS SOLD PROPERTY CONSISTING BUILDING AND LAND A DMEASURING 9650 2 ITA NO. 1732 /HYD/2014 SMT. V. SANDHYA REDDY SQ.FT. AT DOOR NO. 27, KILLPAUK GARDEN ROAD, CHENNA I FOR A TOTAL CONSIDERATION OF RS. 6,75,00,000. SINCE THE PROPERT Y WAS ACQUIRED BY ASSESSEE PRIOR TO 01/04/81 FOR THE PURPOSE OF COMPU TING CAPITAL GAIN, ASSESSEE HAD ADOPTED FMV OF THE LAND AS ON 01/04/81 AT RS. 17 LAKHS PER GROUND (1 GROUND ADMEASURES 2400 SQ.FT.) AND CONSIDERED THE SAME FOR COMPUTING COST OF ACQUISITION OF 9650 SQ.FT. OF LAND AT RS. 68,38,417. ON THE BASIS OF THE COST OF ACQUISIT ION AS ABOVE, ASSESSEE ARRIVED AT THE INDEXED COST OF ACQUISITION OF LAND AT RS. 4,85,99,813 WHILE COMPUTING THE CAPITAL GAIN. FOR V ERIFYING THE GENUINENESS OF ASSESSEES CLAIM OF FMV, AO IN EXERC ISE OF POWER CONFERRED U/S 133(6) OF THE ACT, CALLED FOR INFORMA TION FROM THE SUB- REGISTRAR OFFICE (SRO), CHENNAI TO FURNISH THE GUID E LINE VALUE OF THE LAND AS ON 01/04/81 AS PER THE BASIC VALUE REGISTER MAINTAINED BY THE SRO. AS STATED BY AO, SRO VIDE REPLY DATED 26/02/14 STATED THAT GUIDE LINE VALUE OF THE LAND AT KILPAUK GARDEN ROAD , CHENNAI WAS RS. 40,000 PER GROUND AS ON 0104/1981. ON THE BASIS OF THE INFORMATION OBTAINED FROM THE SRO, AO ISSUED A SHOW CAUSE NOTIC E TO ASSESSEE TO EXPLAIN WHY FMV OF THE LAND AS ON 01/04/1981 SHO ULD NOT BE ADOPTED AT RS. 40,000. THOUGH, ASSESSEE OBJECTED TO ADOPTION OF FMV OF THE LAND AT RS. 40,000 PER GROUND AND JUSTI FIED ADOPTION FMV OF RS. 17 LAKHS PER GROUND BY HER AND FOR THAT PURPOSE SHE RELIED UPON CERTAIN DECISIONS OF ITAT, HYDERABAD BENCHES A S WELL AS HONBLE AP HIGH COURT, BUT, AO WAS NOT CONVINCED WI TH THE EXPLANATION OF ASSESSEE. AS IT APPEARS, ASSESSEE AL SO SUBMITTED BEFORE AO THAT THE COST OF LAND OF FMV ADOPTED BY ASSESSEE IS REASONABLE CONSIDERING VARIOUS LOCATIONAL ADVANTAGE S OF THE PROPERTY. SHE ALSO STATED A NEIGHBOR WANTED TO BUY THE PROPE RTY FOR CONSIDERATION OF RS. 14 LAKHS PER GROUND. IN SUPPOR T OF HER CLAIM, ASSESSEE ALSO SUBMITTED VALUATION REPORT BY A REGIS TERED VALUER ESTIMATING THE VALUE OF LAND AS ON 01/04/81 AT RS. 15,60,000 PER GROUND. AO, HOWEVER, HELD THAT THE VALUE OF LAND S ITUATED AT KILPAUK GARDEN ROAD, CHENNAI CANNOT BE DECIDED ON THE BASIS OF FMV OF PROPERTY AT HYDERABAD. AS FAR AS ASSESSEES CLAIM O F LOCATIONAL 3 ITA NO. 1732 /HYD/2014 SMT. V. SANDHYA REDDY ADVANTAGES OF THE PROPERTY, AO OBSERVED THAT KEEPIN G THAT IN VIEW THE SRO HAS FIXED GUIDELINE VALUE. AS FAR AS ASSESSEES RELIANCE UPON LETTER OF NEIGHBOR SHRI P.N. NAYAR, AO REFUSED TO A CCEPT THE SAME BY STATING THAT THERE WAS NO ACTUAL TRANSACTION MADE B Y THE SAID NEIGHBOR. AO ALSO REJECTED THE VALUATION REPORT OF THE REGISTERED VALUER BY OBSERVING THAT REGISTERED VALUER HAS NOT DISCLOSED IN THE VALUATION REPORT THE INFORMATIONS GATHERED AS A RES ULT OF ENQUIRY ON THE BASIS OF WHICH HE HAS ADOPTED FMV. THUS, AFTER REJECTING ALL CONTENTIONS OF ASSESSEE, AO RELYING UPON THE INFORM ATION OBTAINED FROM THE SRO ADOPTED THE FMV OF THE LAND AS ON 01/0 4/81 AT RS. 40,000 PER GROUND AND ULTIMATELY, ON THAT BASIS DET ERMINED LTCG AT RS. 6,29,10,170. BEING AGGRIEVED OF SUCH DETERMINAT ION OF LTCG, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 4. IN COURSE OF HEARING OF APPEAL BEFORE LD. CIT(A) , THE PRIMARY CONTENTION OF ASSESSEE WAS THAT SOLELY ON THE BASIS OF THE GUIDELINE VALUE FIXED BY SRO FMV OF PROPERTY CANNOT BE DETERM INED. IN THIS CONTEXT, ASSESSEE RELIED UPON A NUMBER OF DECISIONS OF ITAT, HYDERABAD BENCHES AND HONBLE AP HIGH COURT AS WELL AS DECISIONS OF ITAT, CHENNAI BENCHES AND HONBLE MADRAS HIGH CO URT. FURTHER, FOR JUSTIFYING THE ADOPTION OF FMV AT RS. 17 LAKHS PER GROUND, ASSESSEE BROUGHT TO THE NOTICE OF LD. CIT(A), FMV O F PROPERTIES LOCATED AT DIFFERENT PLACES OF HYDERABAD BY AS DETE RMINED BY ITAT. 5. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE IN THE LIGHT OF DECISIONS RELIED UPON HELD THAT SOLELY REL YING UPON THE GUIDELINE VALUE OF SRO, FMV OF LAND CANNOT BE DETE RMINED. HAVING HELD SO, LD. CIT(A) PROCEEDED TO DETERMINE THE FMV OF THE PROPERTY. THOUGH, HE TOOK NOTICE OF THE VALUATION REPORT OF T HE REGISTERED VALUER, BUT, HE OPINED THAT THE FMV ADOPTED BY REGI STERED VALUER ALSO CANNOT BE ACCEPTED AS HE HAS NOT BROUGHT ANY COMPAR ABLE CASE TO JUSTIFY THE FMV FIXED BY HIM. LD. CIT(A) THEREAFTER RELYING UPON CERTAIN INSTANCES OF FMV ADOPTED BY THE APPELLATE A UTHORITIES IN CASE OF PROPERTY SOLD AT HYDERABAD, ULTIMATELY, HELD THA T THE FMV OF THE 4 ITA NO. 1732 /HYD/2014 SMT. V. SANDHYA REDDY PROPERTY SOLD BY ASSESSEE AS ON 01/04/81 CAN BE REA SONABLY FIXED AT RS. 15 LAKH PER GROUND. ACCORDINGLY, HE DIRECTED AO TO DETERMINE CAPITAL GAIN. 6. LD. DR RELYING UPON A DECISION OF THE HONBLE MA DRAS HIGH COURT IN CASE OF CIT VS. J.V.K. RAO, [2002] 258 IT R 0090 SUBMITTED, SRO GUIDELINE VALUE CAN BE CONSIDERED AS ONE OF THE FACTOR FOR DETERMINING THE FMV. LD. DR SUBMITTED, ON THE BASI S OF FMV ADOPTED FOR PROPERTIES LOCATED AT HYDERABAD, LD. CI T(A) CANNOT DETERMINE THE FMV OF A PROPERTY SITUATED AT KILPAUK GARDEN, CHENNAI. THUS, IT WAS SUBMITTED BY LD. DR AS NONE OF THE AUT HORITIES HAVE PROPERLY DETERMINED FMV OF THE PROPERTY, THE MATTER MAY BE REMITTED TO AO FOR DETERMINING THE FMV OF PROPERTY AFTER PRO PER ENQUIRY. 7. LD. AR, ON THE OTHER HAND, STRONGLY SUPPORTING T HE FINDING OF LD. CIT(A) SUBMITTED BEFORE US, NOT ONLY DIFFERENT BENC HES OF ITAT, BUT ALSO DIFFERENT HIGH COURTS HAVE HELD THAT SRO GUIDE LINE VALUE CANNOT BE ADOPTED FOR THE PURPOSE OF DETERMINING FMV. LD. AR REFERRING TO THE DECISION OF ITAT, HYDERABAD IN CASE OF ASHVEN DATLA VS. ITO, ITA NO. 107/HYD/10, DATED 29 TH OCTOBER, 2010 AND IN CASE OF ACIT VS. SHRI O.V. RAMANA REDDY, HUF, ITA NO. 1670/HYD/ 2011, DATED 25/10/13 SUBMITTED, SRO GUIDELINE VALUE CANNOT BE A DOPTED AS FMV AS IT HAS NO NEXUS WITH THE ACTUAL FMV. LD. AR SUBM ITTED, DIFFERENT APPELLATE AUTHORITIES INCLUDING ITAT IN A NUMBER OF INSTANCES OF SALE OF PROPERTIES AT DIFFERENT LOCATIONS IN HYDERABAD H AVE ENHANCED THE FMV RANGING FROM 31.25 TIMES TO 94 TIMES OF SRO RAT E. IN THIS CONTEXT, HE REFERRED TO THE LIST CONTAINING THE VAL UE OF FMV PROPERTY LOCATED AT HYDERABAD AS EXTRACTED IN THE ORDER OF LD. CIT(A). IT WAS SUBMITTED BY LD. AR, IRRESPECTIVE OF THE FACT WHETH ER THE PROPERTY IS SITUATED AT HYDERABAD OR CHENNAI, DIFFERENCE BETWEE N FMV ADOPTED BY APPELLATE AUTHORITIES AND SRO GUIDELINE VALUE CA N BE CONSIDERED AS AN INDICATOR TO DETERMINE THE VALUE OF THE PROPE RTY SOLD BY ASSESSEE. IT WAS SUBMITTED, LD. CIT(A) HAVING CONSI DERED THE AFORESAID PARAMETERS DETERMINED THE FMV OF THE PROP ERTY AT RS. 15 5 ITA NO. 1732 /HYD/2014 SMT. V. SANDHYA REDDY LAKH PER GROUND AS ON 01/04/81, THERE IS NO REASON TO INTERFERE WITH THE SAME. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIAL ON RECORD AS WELL AS ORDERS OF REVENUE AUTHORITIES. AS COULD BE SEEN, PROPERTY SOLD BY ASSESSEE IS AT KILP AUK GARDEN, CHENNAI. WHILE AO ON THE BASIS OF INFORMATION OBTAI NED FROM THE SRO, PERIAMET, CHENNAI ADOPTED GUIDELINE VALUE OF LAND AT KILPAUK GARDEN ROD, STOOD AT RS. 40,000 PER GROUND AS ON 0 1/04/81, ASSESSEE HAS ADOPTED RATE OF RS. 17 LAKHS PER GROUN D. TO SUBSTANTIATE, ITS CLAIM ASSESSEE HAS RELIED UPON A VALUATION REPORT OF REGISTERED VALUER AND LETTER FROM A PERSON CLAIMED TO BE THE NEIGHBOR OF ASSESSEE. HOWEVER, MUCH IMPORTANCE CANNOT BE ATT ACHED TO THESE TWO EVIDENCES BECAUSE AS RIGHTLY POINTED OUT BY AO , THE PRICE OFFERED BY NEIGHBOR, ULTIMATELY HAS NOT RESULTED IN A FINAL SALE TRANSACTION. SIMILARLY, AS FAR AS THE REPORT OF REG ISTERED VALUER IS CONCERNED, LD. CIT(A) HIMSELF HAS FOUND THAT THE VA LUE ADOPTED BY HIM IS NOT ON ANY REASONABLE BASIS. AS COULD BE SEEN FR OM THE ORDER OF LD. CIT(A), HE HAS ADOPTED THE VALUE OF THE PROPERTY AT RS. 15 LAKHS PER GROUND BY RELYING UPON FMV ADOPTED BY APPELLATE AUT HORITIES IN RESPECT OF INSTANCES OF SALE OF PROPERTY AT DIFFERE NT PLACES OF HYDERABAD. HOWEVER, IN OUR VIEW, FMV DETERMINED IN CASE OF PROPERTIES LOCATED AT HYDERABAD CANNOT FORM THE BAS IS FOR DETERMINING THE FMV OF PROPERTY SITUATED AT KILPAUK, GARDEN ROA D, CHENNAI NOT ONLY BECAUSE OF THEIR GEOGRAPHICAL LOCATION BUT AL SO VARIOUS OTHER FACTORS WHICH WILL NOT BE SIMILAR FOR BOTH THE PLAC ES. THEREFORE, WITHOUT BRINGING COMPARABLE INSTANCES OF SALE EITHE R AT KILPAUK GARDEN OR EVEN IN NEAR BY AREA, FMV OF THE PROPERTY SOLD BY ASSESSEE CANNOT BE DETERMINED. IT IS ALSO PERTINENT TO MENTION HERE THAT THOUGH LD. CIT(A) HAS REJECTED THE VALUATION R EPORT OF THE REGISTERED VALUER BY OBSERVING THAT FMV DETERMINED BY HIM IS WITHOUT ANY REASONABLE BASIS AS HE HAS NOT BROUGHT ANY COMP ARABLE CASES TO SUBSTANTIATE THE FMV ADOPTED BY HIM, BUT, ULTIMATEL Y, LD. CIT(A) HAS HIMSELF ESTIMATED THE VALUE OF THE PROPERTY AT RS. 15 LAKHS PER GROUND 6 ITA NO. 1732 /HYD/2014 SMT. V. SANDHYA REDDY WITHOUT ANY REASONABLE BASIS. IN OUR VIEW BEFORE AD OPTING THE FMV OF THE PROPERTY AT A PARTICULAR PLACE, IT IS NECESSARY AND INCUMBENT UPON AUTHORITY CONCERNED TO BRING EVIDENCE/MATERIAL ON R ECORD TO JUSTIFY THE FMV. THOUGH, IT MAY BE A FACT THAT SOLELY ON THE B ASIS OF SRO GUIDELINE, FMV OF PROPERTY CANNOT BE DETERMINED, AT THE SAME TIME, THERE MUST BE OTHER EVIDENCES BROUGHT ON RECORD TO JUSTIFY THE ADOPTION OF FMV AT PARTICULAR RATE. IN THE PRESENT CASE, SINCE FMV ADOPTED BY LD. CIT(A) IS PURELY ON ESTIMATE BASIS B Y RELYING UPON THE FMV ADOPTED IN CASE OF PROPERTIES SITUATED AT HYDER ABAD, WE ARE UNABLE TO ACCEPT THE FMV DETERMINED BY LD. CIT(A). IN THE AFORESAID VIEW OF THE MATTER, WE ARE INCLINED TO SET ASIDE TH E IMPUGNED ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO FOR DETERMINING THE FMV AFTER MAKING PROPER ENQUIRY AND BRINGING CO MPARATIVE INSTANCES OF SALE EITHER AT KILPAUK GARDEN, CHENNAI OR NEARBY VICINITY. ASSESSEE ON ITS PART CAN ALSO JUSTIFY THE FMV ADOPT ED BY HER OR LD. CIT(A) BY BRINGING COGENT EVIDENCE ON RECORD. WITH THE AFORESAID DIRECTIONS, WE REMIT THE ISSUE BACK TO THE FILE OF AO TO DECIDE AFRESH AND IN ACCORDANCE WITH LAW AFTER PROVIDING DUE OPPO RTUNITY OF HEARING TO ASSESSEE. 9. IN THE RESULT, DEPARTMENTS APPEAL IS ALLOWED FO R STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN ON 12 TH AUGUST, 2015. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 12 TH AUGUST, 2015 KV 7 ITA NO. 1732 /HYD/2014 SMT. V. SANDHYA REDDY COPY TO:- 1) DY. DIRECTOR OF INCOME-TAX-II (INTERNATIONAL T AXATION), 3 RD FLOOR, D-BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2) SMT. V. SANDHYA REDDY, D. NO. 8-2-703/A/1, ROAD NO. 12, HYDERABAD 500 001. 3 CIT(A)-V, HYDERABAD 4) DIT (IT & TP), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.