Late R. Ramnivas Bhai Pansari, Hyderabad V. Commissioner of Income Tax-VI, Hyderabad

ITA 180/HYD/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77969 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 05-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIKAS MODI
• Keywords: Cost of acquisition; Fair market value; Wrong claim
• Section: 147; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 180/HYD/2014 ASSESSMENT YEAR 2008-09 LATE SRI R. RAMNIVAS BH AI PANSARI, (LR SRI MUKESH PANSARI), HYDERABAD PAN: AEIPP7862D VS. THE COMMISSIONER OF INCOME-TAX-VI HYDERABAD APPELLANT RESPONDENT APPLICANT BY: SRI VIKAS MODI RESPONDENT BY: SRI SOLGY JOSE T. KOTTARAM DATE OF HEARING: 29 .0 5 .2014 DATE OF PRONOUNCEMENT: 27 .06.2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX-VI, HYDERAB AD DATED 19.12.2013 FOR ASSESSMENT YEAR 2008-09. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED A RETURN OF INCOME FOR A.Y. 2008-09 ON 23.7.2008 ADMI TTING TOTAL INCOME OF RS. 2,09,007. IN ORDER TO VERIFY T HE SHORT TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS THE CASE WAS TAKEN UP FOR SCRUTINY BY ISSUING NOTICE U/S. 14 7 OF INCOME-TAX ACT, 1961 AND ASSESSMENT WAS COMPLETED ASSESSING TAXABLE INCOME AT RS. 8,46,125. WHILE DO ING SO, THE AO RECALCULATED THE LONG TERM CAPITAL GAINS AT RS. 11,26,125. 2 ITA NO. 180/HYD/2014 LATE SRI R. RAMNIVAS BHAI PANSARI ========================== 3. SUBSEQUENTLY, THE CIT-VI, HYDERABAD HELD THAT THE FOLLOWING ISSUES WERE NOT EXAMINED BY THE AO WHILE COMPLETING THE ASSESSMENT: 'THE ASSESSEE OFFERED LONG TERM CAPITAL GAINS OF RS. 1,08,480/- ON SALE OF A HOUSE ACQUIRED PRIOR TO 1981 AT AHMEDABAD. FOR COMPUTING LTCG, THE ASSESSEE ADOPTED THE COST OF LAND OF 130 SQ. YARDS AT RS. 2,000/- AS ON 1.4.1981. DURING SCRUTINY, AO REQUESTED SRO AHMEDABAD TO FURNISH THE MARKET VALUE OF PROPERTY AS ON 1.4.1981. SINCE NO INFORMATION WAS RECEIVED FROM SRO, AHMEDABAD, AO COMPLETED THE ASSESSMENT BY OBTAINING THE CPWD RATES FOR COST OF CONSTRUCTION OF THE HOUSE AND ADOPTED THE COST OF LAND AS DECLARED BY THE ASSESSEE I.E. 2000 SQ. YARDS AND CONSEQUENTLY ARRIVED AT EXCESSIVE INDEXED COST OF ACQUISITION OF RS. 23,03,874/-. IT IS PERTINENT TO MENTION THAT WHILE COMPLETING SCRUTINY ASSESSMENT THE CASE OF SRI CHEERA JANGAIAH FOR A.Y. 2007-08 ON 31.12.2010, THE AO ADOPTED FAIR MARKET VALUE OF PLOT AT SAIDABAD, HYDERABAD AT THE RATE OF RS. 15 PER SQ. YARD AS ON 1.4.1981 AS AGAINST RS. 45/- CLAIMED BY THE ASSESSEE. SINCE HYDERABAD AND AHMEDABAD ARE CITIES WITH EQUAL STATUS AND DEVELOPMENT, THE COST OF LAND ADOPTED AT THE RATE OF RS. 2,000/- PER SQ. YARDS AS ON 1.4.1981 WAS ON A VERY HIGH. IN THE ABSENCE OF SATISFACTORY EVIDENCE FOR FMV AS ON 1. 4 .1981, THE CLAIM FOR COST OF LAND @ 2000/- SHOULD HAVE BEEN DISALLOWED FOR COMPUTING INDEXED COST OF ACQUISITION' 4. IN RESPONSE TO THE SHOW-CAUSE NOTICE ISSUED, THE ASSESSEE'S AR ARGUED THAT THE AO HAS WRITTEN A LETT ER TO THE SRO DIRECTLY TO FURNISH THE MARKET VALUE OF THE PROPERTY AS ON 1.4.1981 IN THE COURSE OF ASSESSMENT PROCEEDINGS AND SINCE THERE WAS NO REPLY FROM THE S RO, HE PROCEEDED TO ADOPT CPWD RATES FOR DETERMINING TH E COST OF CONSTRUCTION AND THE REGISTRATION VALUE OF THE 3 ITA NO. 180/HYD/2014 LATE SRI R. RAMNIVAS BHAI PANSARI ========================== PROPERTY AS ON 1.4.1981 TO COMPUTE THE COST OF ACQUISITION OF THE PROPERTY IN ORDER TO ARRIVE AT L ONG TERM CAPITAL GAINS IN THE CASE OF THE ASSESSEE. IT WAS ARGUED THAT THE AO HAS DULY APPLIED HIS MIND AND ONLY AFTE R COMPLETE APPRECIATION OF THE FACTS COMPLETED THE ASSESSMENT AND RECOMPUTED THE CAPITAL GAINS. IT WA S SUBMITTED THAT THERE WAS NO ERROR IN THE ORDER OF T HE AO NOR WAS THE ORDER PASSED IS PREJUDICIAL TO THE INTE RESTS OF THE REVENUE AND, THEREFORE, THE NOTICE U/S. 263 IS TO BE DROPPED. 5. THE LEARNED AR FURTHER RELIED ON THE DECISION IN TH E CASE OF M. ACHYUTA RAMAIAH VS. DEPT. OF INCOME-TAX DATED 28.06.2013 WHERE THE ITAT HELD THAT THE ASSESSEE WA S RIGHT IN ADOPTING COMPARABLE VALUES FOR COMPUTATION OF COST OF ACQUISITION OF LAND AS ON 1.4.1981 AND THE SRO VALUE ADOPTED BY THE ASSESSEE WAS REJECTED IN THE COMPUTATION. THE AR ALSO RELIED ON THE CASE OF MS. RUBAB M. KAZERANI VS. JCIT (91 ITR 429)(MUM). 6. HOWEVER, THE CIT HELD THAT THE AO HAD WRITTEN LETTE R TO THE SRO, AHMEDABAD FOR ASCERTAINING THE MARKET V ALUE OF THE PROPERTY AS ON 1.4.1981 AND, THEREFORE, THE AO COULD HAVE OBTAINED THE SAME BEFORE COMPLETING THE ASSESSMENT RATHER THAN BASING HIS COMPUTATION ON TH E REGISTERED VALUER'S REPORT AND CPWD RATES. IT WAS OBSERVED BY THE CIT THAT THE SAME AO WHILE COMPLETI NG SCRUTINY ASSESSMENT IN ANOTHER CASE FOR A.Y. 2007-0 8 ADOPTED RS. 15 PER SQ. YARD (SQY) FOR THE PROPERTY SITUATED AT HYDERABAD WHEREAS IN THE INSTANT CASE HE HAS ADO PTED RS. 2000 PER SQY WHICH IS VERY HIGH AS BOTH THE CIT IES ARE SIMILARLY PLACED IN TERMS OF ECONOMIC DEVELOPMENT, ETC. 4 ITA NO. 180/HYD/2014 LATE SRI R. RAMNIVAS BHAI PANSARI ========================== THE CIT WAS OF THE OPINION THAT IF THERE HAD BEEN N O RESPONSE FROM THE SRO, THE AO COULD HAVE REQUESTED THE INVESTIGATION WING TO OBTAIN THE SAME FROM SRO, AHMEDABAD. IT WAS FURTHER OBSERVED BY THE CIT THAT IN THE RETURN OF INCOME THE ASSESSEE HAD DECLARED SHOR T TERM CAPITAL GAINS OF RS. 2,00,527 AND LONG TERM CAPITAL GAINS OF RS. 1,08,480 AND IN THE COMPUTATION OF SHORT TER M CAPITAL GAINS THE ASSESSEE HAS SHOWN THE COST OF ACQUISITION OF THE ASSET SOLD AT RS. 53,04,616 AND AS PER THE RETURN OF INCOME THE ASSESSEE IS NOT HAVING ANY OTHER SOURCE OF INCOME EXCEPT CAPITAL GAINS. THE CIT OPI NED THAT THE ASSESSEE IS NOT HAVING VERIFIABLE SOURCE F OR THE ACQUISITION OF THE ASSET SOLD AND, THEREFORE, THE C ASE WAS RIGHTLY REOPENED U/S. 147 OF THE ACT. FURTHER, THE REOPENED ASSESSMENT WAS COMPLETED WITHOUT OBTAINING THE INFORMATION FROM SRO, AHMEDABAD TO DETERMINE TH E VALUE OF THE PROPERTY AS ON 1.4.1981, THEREBY THE ASSESSMENT ORDER PASSED BY THE AO WAS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 7. THE CIT RELIED ON THE JUDGEMENT OF APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (243 ITR 83 ) (SC). THE CIT HELD THAT IT WAS ENTIRELY FALSE CLAIM MADE BY THE ASSESSEE DELIBERATELY TO REDUCE THE CAPITAL GAIN AN D EVADE LEGITIMATE PAYMENT OF TAX. THE CIT RELIED ON VARIO US JUDICIAL DECISIONS IN SUPPORT OF HIS ACTION, AS UND ER: A) RAMPYARI DEVI SAROGI VS. CIT, 67 ITR 84 (SC) B) MALABAR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83 (SC ) C) SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. VS. CIT, 197 ITR 412 (ALL). D) GEE VEE ENTERPRISES VS. ADDL. CIT & ORS., 99 ITR 37 5 (DEL). 5 ITA NO. 180/HYD/2014 LATE SRI R. RAMNIVAS BHAI PANSARI ========================== E) RAJALAKSHMI MILLS LTD. VS. ITO, 313 ITR (AT) 182. F) SRM SYSTEMS & SOFTWARE PVT. LTD. VS. ACIT, 2010- TIOL-646-HC-MAD-IT. G) DELOITTE HASKINS & SELLS, CHENNAI VS. DCIT (ITA NO. 1164/MDS/12 DTD. 4.7.2013). 8. THE CIT, THEREFORE, CONCLUDED THAT THE ASSESSMENT ORDER OF THE AO FOR A.Y. 2008-09 IS TO BE SET ASIDE . THE CIT PASSED HIS ORDER U/S. 263 WITH A DIRECTION TO T HE AO TO REDO THE ASSESSMENT AS PER LAW AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. WHILE DOI NG SO, HE DIRECTED THE AO TO OBTAIN DETAILS OF MARKET VALU E OF THE PROPERTY FROM THE SRO, AHMEDABAD EITHER DIRECTLY OR THROUGH HIS COUNTERPART WORKING AT AHMEDABAD. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE JUDGEMENT OF HONBLE AP HIGH COURT IN THE CASE OF C IT VS. ASHVEN DATLA IN ITTA 111 OF 2012 DATED 26.11.2012 WHEREIN IT HAS BEEN HELD BY THE JURISDICTIONAL HIGH COURT THAT THE SRO RATES CANNOT BE CONSIDERED AS FAIR MAR KET VALUE FOR THE PURPOSE OF ADOPTING THEM FOR ASCERTAI NING THE COST OF ASSETS AS ON 1.4.1981. THE LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE FINDING OF THE CIT THAT THE AO HAS NOT APPLIED HIS MIND AND COMPLETED THE ASSESSMENT WITHOUT PROPER APPRECIATION OF THE FACTS , IS FACTUALLY INCORRECT INASMUCH AS THE ORDER OF THE AO IS VERY DETAILED ONE AND THE AO HAS DISCUSSED THE ENTIRE IS SUE BEFORE MAKING THE ASSESSMENT. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE DECISION OF MALABAR INDUSTRIAL CO. LTD. (SUPRA). 10. WE HAVE HEARD BOTH THE PARTIES. WE ARE OF THE OPINION THAT THE AO HAS APPLIED IS MIND WHICH IS EV IDENT 6 ITA NO. 180/HYD/2014 LATE SRI R. RAMNIVAS BHAI PANSARI ========================== FROM THE FACT THAT THE AO HAS OBTAINED THE COMPARAB LE SALE INSTANCES FROM THE ASSESSEE. IN THE CASE OF C IT VS. RATLAM COAL ASH CO. (171 ITR 141) IT HAS BEEN HELD THAT THE VALUATION OF THE PROPERTY IS ALWAYS A MATTER OF ESTIMATE AND IN CASE THE CIT HAS DIFFERENCE OF OPIN ION WITH THAT OF THE AO WITH REGARD TO THE VALUATION OF THE PROPERTY, IT CANNOT BE A GROUND TO HOLD THAT THE OR DER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF THE REVENUE. 11. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE THE POWER OF REVISION UNDE R THIS SUB-SECTION VIZ . , (I) THE ORDER SHOULD BE ERRONEOUS; AND (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE MU ST HAVE BEEN CAUSED TO THE INTEREST OF THE REVENUE. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. SECTION 263 DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISS IONER FOR THAT OF THE INCOME-TAX OFFICER WHO, PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. AN ORD ER TO BE TERMED AS PREJUDICIAL TO THE INTERESTS OF THE REVEN UE, THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD T O SHOW THAT TAX WHICH WAS LAWFULLY ELIGIBLE HAS NOT B EEN IMPOSED. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GABRIEL I NDIA LTD. (203 ITR 108) (BOM) , HAS LAID DOWN THE PRINCIPLES FOR EXERCISING JURISDICTION UNDER SECTIO N 263 AS FOLLOWS: 'TWO CIRCUMSTANCES MUST EXITS TO ENABLE THE COMMISSIONER TO EXERCISE THE POWER OF REVISION UNDER THIS SUB-SECTION VIZ., (I) THE ORDER SHOULD B E ERRONEOUS; AND (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE MUST HAVE BEEN CAUSED TO THE INTEREST OF THE REVENUE. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH 7 ITA NO. 180/HYD/2014 LATE SRI R. RAMNIVAS BHAI PANSARI ========================== LAW. THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME-TAX OFFICER WHO, PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHERE THE INCOME TAX OFFICER WHILE MAKING AS ASSESSMENT EXAMINES THE ACCOUNT, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER, ON PERUSAL OF RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICE R CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ONE DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. THIS IS BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QUASI- JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT THAT BY ITSELF WOULD NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, NAMELY, THA T THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY IF AN ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THEN THE POWER OF SUO- MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEOUS ORDER CANNOT BE THE SUBJECT-MATTER OF REVISION BECAUSE THE SECOND REQUIREMENT MUST BE FULFILLED. THERE MUST BE SOME PRIMA FADE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED. WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF CERTAIN OBJECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SUCH POWER MUST HAVE MATERIALS ON RECORD TO SATISFY IN THAT REGARD. IN THE ACTION OF THE AUTHORITY IS CHALLENGED. BEFORE THE COURT IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIVE FACTORS WERE AVAILABLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORITY. 8 ITA NO. 180/HYD/2014 LATE SRI R. RAMNIVAS BHAI PANSARI ========================== 12. FURTHER IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA), THE HONBLE SUPREME COURT HAS CLEARLY LAID DOWN THE PRINCIPLE AS FOLLOWS: 'WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN WHICH HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE PLAUSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW.' 13. IN THE PRESENT CASE THE AO CHOSE TO COMPLETE THE ASSESSMENT BY TAKING THE REGISTERED VALUER'S REPORT AND THEREBY THE ASSESSMENT ORDER WAS PASSED BY THE AO. IN OUR OPINION, THE ORDER PASSED BY THE AO IS NOT ERRO NEOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE AS T HE AO HAS TAKEN ONE OF THE PLAUSIBLE VIEWS. HENCE, WE ALL OW THE ASSESSEE'S APPEAL ON THIS ISSUE. 14. IN THE RESULT, ASSESSEE'S APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2014 SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 27 TH JUNE, 2014 TPRAO COPY TO: 1. LA TE SRI R. RAMNIVAS BHAI PANSARI (LR SRI MUKESH PANSARI), C/O. SRI VIKAS MODI, 908B, 9 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2. THE COMMISSIONER OF INCOME - TAX - VI, HYDERABAD. 3. THE ADDL. CIT, RANGE - 9, HYDERABAD. 4. THE ITO, WARD - 9(3), HYDERABAD. 5. THE DR, B - BENCH, ITAT, HYDERABAD.