Naga Padmaja Vangara , Hyderabad V. Income Tax Officer, Ward-11(3) , Hyderabad

ITA 34/Hyd/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1737 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2016-2017
• Appeal Filed On: 07-01-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Cost of acquisition; Fair market value; Assessment record; Set aside; Capital Gains
• Section: 54; 54F; 142(1); 139(4)

Judgement Text

ITA No 34 of 2020 Naga Padmaja Vangara Page 1 of 11 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA No.34/Hyd/2020 Assessment Year:2016-17 Smt. Naga Padmaja Vangara, Hyderabad PAN:AFVPV8238F Vs. Income Tax Officer Ward 11(3) Hyderabad (Appellant) (Respondent) Assessee by : Shri A.V. Raghuram, Advocate Revenue by: Ms. N. Swapna, DR Date of hearing: 05/07/2022 Date of pronouncement: 29/07/2022 ORDER Per R.K. Panda, A.M This appeal filed by the assessee is directed against the order dated 13.11.2019 of the learned CIT (A)-5, Hyderabad relating to A.Y.2016-17. 2. Facts of the case, in brief, are that the assessee is an individual and derives income from partnership and income from other sources. She filed her return of income on 24.03.2017 declaring total income at Rs.3,61,600/-. The case was selected for limited scrutiny under CASS with the reasons (i) Large Cash Deposits in savings bank a/c and (ii) large investment in property. ITA No 34 of 2020 Naga Padmaja Vangara Page 2 of 11 3. During the course of assessment proceedings, from various details furnished by the assessee, the Assessing Officer noted that the assessee has entered into Development Agreement cum-GPA with M/s Dhanush Builders & Developers for development of 791 sq.yards bearing Plot No.27 & 28, R.S. No.189/4A, Narayanapuram, Rajahmundry, A.P vide doc No.2038/2016 dated 24.02.2016. As per the document she got 8 Flats of 1100 sq.ft. each and the total constructed area of 8800 square feet. The total market value of the project as per the document (SRO) is Rs.2,70,50,000/- (land value Rs.79,10,000/- and market value of constructed area is Rs. 1,91,40,000/-. Assessee has not disclosed the land transfer transaction in her return for the A.Y.2016-17. 3.1 As per the Development Agreement cum GPA, Builder share is 60% and the assessee being landowner share is 40%. He, therefore, calculated the assessee’s share in the project at Rs.1,08,20,000/- i.e.,(27050000 X 40%)”. The Assessing Officer noted that the assessee has not furnished the details of cost of acquisition of the land transferred. As per the document. she got this land through Will vide doc.No.124/1975 dated 03.11.1974 from her mother. Her mother acquired the property in the year 1965 vide doc.no.3576/1965 dated 27.09.1965. Hence, he allowed indexed cost of acquisition as per the fair market value as on 01.04.1981. Since the assessee got this property without any consideration and she has not produced any evidence for cost of acquisition of the property, the Assessing Officer obtained information from SRO, Rajuhmundry according to which the fair market value of the land as on 01.04.1981 was Rs.10,000/- per acre. He noted that in this case the transfer of property was in square yards. In the absence of information, he computed the fair market value of the transferred property i.e. 791 square yards proportionately at Rs.1,648/- (10000/4800 X ITA No 34 of 2020 Naga Padmaja Vangara Page 3 of 11 791). Basing on the information available, he computed the capital gains as under: Consideration on transfer of property Rs.1,08,20,000 (being 40% of the project as discussed in the order) Indexed cost of acquisition Rs. 11,717 as discussed in the order 1648 X 711 100 Long Term Capital Gains (LTCG) Rs.1,08,08,283 4. Before the learned CIT (A), the assessee challenged the addition of Rs.1,08,08,283/-on account of Long Term Capital Gain. The assessee also submitted that the capital gain cannot be added in the impugned A.Y since she didn’t get the possession of the flats during the impugned A.Y. It was submitted that the capital gain would be admitted in the A.Y relevant to the previous year in which the possession of the flat is handed over. 4.1 However, the learned CIT (A) was not satisfied with the arguments advanced by the assessee. Following the decision of the Hon'ble Andhra Pradesh High Court in the case of Potla Nageswara Rao in ITA No.245 OF 2014, dated 09-04-2014 wherein it has been held that transfer is complete on the execution of the JDA, the learned CIT (A) upheld the action of the Assessing Officer in computing the capital gain in the impugned assessment year. 5. Further, referring to the decision of the Hyderabad Bench of the Tribunal in the case of Smt. K. Vijaya Lakshmi v. ACIT (TS- 5722-ITAT-2018 (Hyderabad)-O) wherein it has been held that section 45(5A) cannot be applied retrospectively as they are substantive provisions, he rejected the argument of the learned Counsel for the assessee that the capital gain should have been ITA No 34 of 2020 Naga Padmaja Vangara Page 4 of 11 taxed as per section 45(5A) on the basis of completion certificate or on the basis of sale. 6. Aggrieved with such order of the learned CIT (A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal and one additional ground of appeal: Grounds of Appeal: “The order of the learned CIT(A) in dismissing the appeal is not only erroneous both on facts and in law but is perverse. 2. The learned CIT(A) erred in upholding the year of assessability of Capital gains as the year in which development agreement is entered into in spite of bringing to his notice the revenue's stand both before the jurisdictional high court and at New Delhi that it is only when possession is handed over. 3. The learned CIT(A) erred in upholding the computation of Capital gains by considering the Composite value adopted by the SRO of Rs.1,08,20,000 for registering the development agreement though it is demonstrated that it contains value of land and structure and what is to be deemed to have been consideration 1s only the value of super structure or the land and not both. The learned CIT(A) erred in upholding adoption of cost of acquisition as on 1-4- 1981 as per SRO which is per acres when it should have been for sq.yards observing that the assessee has not adduced any evidence instead of directing the AO to ascertain the value from the SRO which is the prayer of the assessee. 4. The learned CIT(A) erred in relying on the decision of the High Court in the case of Potla Nageswara Rao though it is brought to his notice the decision of the Supreme Court in the case of Jai Hind Cycles to the effect that it does not lay down any law as no question was framed and thereby erred in holding that the year of assessability is the year in which development agreement is entered into. 5. (Tax effect - Rs.33,39,760). For these and other grounds that may be urged, it is prayed that the Hon'ble Tribunal may be pleased to allow the appeal. 6.1 Additional Grounds: “ On the facts and circumstances of the case, the authorities below has erred in not considering the deduction claimed u/s.54F of the Act which was claimed in the return of income" ITA No 34 of 2020 Naga Padmaja Vangara Page 5 of 11 7. Referring to the decision of the Hon'ble Supreme Court in the case of NTPC Vs. CIT reported as (1998) 229 ITR 383, the learned Counsel for the assessee submitted that the additional ground being a legal ground and do not require fresh investigation of facts should be admitted for adjudication. 8. The learned DR, on the other hand, opposed the admission of the additional ground stating that it is not a legal one and requires verification of fact. He drew the attention of the Bench to the report of the Assessing Officer on admission of the additional ground which reads as under: “Office Of the Income Tax Officer, Ward 11(1) Room No 507, Signature Towers 5 th Floor Opp Botanical Garden, Kothaguda.HYD F No. ITO-11 1)JAFVPV8238F/2021-22 Date: 11.01 2022 To The Sr Authorized Representative 1. ITAT. A Bench Hyderabad (Through Addl CIT. Range -2. Hyderabad) Sir Sub: Proceedings before Hon'ble Vangara, ITAT In the case of Smt Naga Padmaja Hyderabad PAN: AFVPV8238F for the AY 2016-17 Report on additional grounds filed by assessee before the Hon'ble ITAT Regarding Ref: 1. Your office dated 30.12.2021 letter in F.No. SR.AR/ITATIA Bench/34H2020/2021-22 2. Assesee's petition filed in ITA No. 34/Hyd/2020 dated 11 12 2021 Please refer to the above. 2 The asssessee filed Rule petition under rule 11 of the Income Tax Appellate Tribunal 1963 for admission of Additional grounds which is reproduced as under: “ On the facts and circumstances of the case, the authorities below has erred in not considering the deduction claimed u/s 54F of the Act which was claimed in the return of income" Further in para 1 of petition, the appellant assessee submitted that she has been advised to raise specific ground with respect to the deduction u/s 54F of the IT Act 1961 though the same was claimed in the return of income. The appellant has been advised to take a legal ground which was not taken before the authorities below and which ground goes to the root of the matter in not considering the claim of the appellant u/s 54 F of the Act by the authorities below ITA No 34 of 2020 Naga Padmaja Vangara Page 6 of 11 4 In relation with the claim made by appellant assessee following facts Submitted for kind perusal (a) The assessee field her original return of income for AY 2016-17 u/s 1394 of IT Act. 1961 vide Ack No 688150130240317 dated 24 03 2017 On perusal of the return of income it is found that the assessee has declared following income particulars in her ITR (i) Profit or gains from business/ Profession Rs.30,000 (ii) Income from Long Term Capital Gain Rs.Nil (iii) Income from Other Sources Rs.3,36,886/- (iv) Gross Total Income Rs.3,66,886/- (v) Agricultural Income Rs.2,31,250/- Further on verification of "Schedule CG" of the ITR it is found that the assessee has not filed any detail of transfer of capital asset and not claimed any exemption u/s 54F of 1T Act. 1961. The copy of ITR enclosed herewith for ready reference. Subsequently, the assessee filed return of Income claiming it as Original against the notice Issued u/s 142(1) dated 30 11 2018 vide Ack No 393032940231218 dated 23 12 2018 declar1ng following income particulars: (i) Profit or gains from business/ Profession ... Rs 30.000/ (ii) Income from Long Term Capital Gain.. Rs. 54.27.033/- (iii) Income from Other Sources .. Rs.3,36,886 (iv) Gross Total Income - Rs 57,93, 919 (v) Agricultural Income - Rs 2,31,250 Further. on verification of "Schedule CG of the ITR, is found that the assessee has claimed gross value of sale consideration of Rs 76,56,000/- and arrived Iong term capital gain of Rs 63,84,033/- after reducing the indexed Cost Of Acquisition. The assessee claimed deduction u/s 54 of IT Act 1961 of Rs 000/- and determined taxable income chargeable under Long term capital Gain of Rs 54, 27, 033/-. 5. On verification of assessment record, it is evident that the notice u/s 1432) was issued on 16. 09. 2017 selecting the case for scrutiny against the return tiled oy as U/s 139(4) dated 24 03.2017. The notice u/s 142(1) of IT Act 1951 issued 12 01 2018. 19.06 2018 and 19 09 2018 to call for the information as specified in said notices as per the clause (i) of sub section (1) of section 142 and no notice has been issued to call for the return of income from the assessee as per clause Sub section (1) of section 142 dated 30.11.2018 as the assessee has already filed valid return of income u/s 139(4) of IT Act, 1961 and same was selected i Scrutiny assessment. In the above circumstances, the return filed by assessee u/s 142(1) of IT Act, claiming it as "Original Return" is not a valid return. Further, the assessee has not filed any revised return during the assessment proceedings declaring the long-term capital gain with the claim of deduction u/s 54F of the Act 1961. The copy of Notices issued under sub section 1 of section 142 are enclosed herewith for ready reference. 6. In view of the above facts, it is evident that the clam of the assessee that she has claimed deduction u/s 54F of IT Act. 1961 is not factually correct and question of adjudication of the same by lower authority does not arise as the assessee has never claimed the said deduction. ITA No 34 of 2020 Naga Padmaja Vangara Page 7 of 11 7. The assessee in her additional ground seeking the relief for the claim which she never claimed before assessing officer and before Ld CIT(A) and no inference has been drawn by the revenue authority on the said claim and therefore the ground raised by appellant assessee is factually incorrect and not tenable and Hon'ble’ ITAT may be requested to reject the additional ground. 8 Assessment record in 01 Vol. enclosed herewith. Encl: as above Yours faithfully Sd/- (Alok Kumar Dixit) Income-Tax Officer Ward-11(1) Hyderabad” 8.1 He accordingly submitted that the additional ground should not be admitted. 9. We have heard the rival arguments made by both sides regarding the admissibility of the additional ground. We find the additional ground raised by the assessee is not a legal ground, but it requires verification of facts especially when the assessee during the course of assessment proceedings had categorically stated before the Assessing Officer that the assessee has not made any investment in movable or immovable asset during the financial year 2015-16. Therefore, the additional ground raised by the assessee, being not a legal one, but requires verification of facts, the additional ground raised by the assessee is liable to be dismissed. Accordingly, we dismiss the additional ground raised by the assessee. 10. The learned Counsel for the assessee strongly challenged the order of the learned CIT (A) in confirming the action of the Assessing Officer. He submitted that the first question that has to be adjudicated in the instant case is that for the purpose of computation of capital gain whether the date of development agreement or the date of delivery of the flats are to be considered ITA No 34 of 2020 Naga Padmaja Vangara Page 8 of 11 and the 2 nd question that arises is regarding the bifurcation of the composite value of the land and building. So far as the computation of the capital gain on the basis of the JDA is concerned, the learned Counsel for the assessee referring to various decisions submitted that the capital gain arises when possession of constructed flat is given. 11. Soi far as the computation of capital gain is concerned, he submitted that the Assessing Officer has considered the sale consideration by taking 40% of the value adopted by the SRO in the development agreement for land and building and arrived at Rs.1,08,20,000/-. He submitted that the development agreement itself is for transfer of 60% of land, and the assessee received 40% constructed area. What is sale consideration is value of the 40% super structure only since value of 40% of land cannot be treated as sale consideration as it is owned by the assessee. He submitted that the Assessing Officer in the instant case adopted the composite value as sale consideration. Referring to page 9 of the development agreement, he submitted that it is clear from the market value statement that value of land per sq. yard is 10,000/- and the value of super structure is Rs.870/- per s.ft. Therefore, the Assessing Officer should have considered the value of land of 60% taking it at Rs.10,000 per sq. yard which would come to Rs.47,46,000/-. He submitted that there was no clarity with regard to the basis for adopting sale consideration as several methods are adopted in several cases. In some cases it is cost of construction, in some cases it is land value and in some cases super structure value as per SRO. In such circumstances, it would be correct to look into section 45(5A) though introduced from 1.4.2017 as it is from the I.T. Act only and as per this provision it is the SRO value ITA No 34 of 2020 Naga Padmaja Vangara Page 9 of 11 of land transferred. Therefore, the sale consideration should have been adopted at Rs.47,46,000/-. Further the cost of acquisition adopted by the Assessing Officer is value which is per acre when it should have been verified with the SRO to find out the value of per sq. yard on 1.4.1981 and such value should have been indexed and allowed as cost of acquisition. However, the learned CIT (A) has not properly appreciated this issue also and therefore, the order of the learned CIT (A) should be set aside on this issue. He also relied on various decisions. 12. The learned DR, on the other hand, drew the attention of the Bench to the detailed order passed by the learned CIT (A) on the issue of computation and or taxability of capital gain and submitted that the learned CIT (A) in his detailed order has rejected the claim of the assessee. His decision is based on the decision of the ITAT Hyderabad Bench in the case of Smt. K. Vijaya Lakshmi (Supra) where it has been held that provision of section 45(5A) cannot be applied retrospectively. 13. Further, the Hon'ble A.P High Court in the case of Potla Nageswara Rao (Supra) has held that transfer is complete on the execution of the JDA and thus was liable to be taxed in the impugned A.Y. He accordingly submitted that the order of the learned CIT (A) being based on the basis of the decision of the jurisdictional High Court and jurisdictional Tribunal, the grounds raised by the assessee should be dismissed. 14. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the ITA No 34 of 2020 Naga Padmaja Vangara Page 10 of 11 various decisions cited before us by both sides. We find the assessee in the instant case has entered into a Joint Development Agreement cum-GPA with M/s Dhanush Builders & Developers for development of 791 sq.yards bearing Plot No.27 & 28, R.S. No.189/4A, Narayanapuram, Rajahmundry, A.P vide doc No.2038/2016 dated 24.02.2016. As per the agreement, she got 8 Flats of 1100 sq.ft. each. The total market value of the project as per the document (SRO) is Rs.2,70,50,000/- (land value Rs.79,10,000/- and market value of constructed area is Rs. 1,91,40,000/-. Since the assessee had not disclosed the land transfer transaction in her return of income, the Assessing Officer after considering the share of the assessee in the project at 40% determined the consideration and transfer of the property at Rs. 1,08,20,000/-. After deducting the indexed cost of acquisition of Rs. 11,717/- he determined the LTCG at Rs. 1,08,08,283/-. We find in appeal, the learned CIT (A) following the decision of the Coordinate Bench of the Tribunal in the case of K. Vijaya Lakshmi (Supra) held that the provisions of section 45(5A) cannot be applied retrospectively. Similarly, following the decision of the Hon'ble A.P High Court in the case of Potla Nageswar Rao (Supra) where it has been held that the transfer is complete on the execution of the JDA, he held that the assessee is liable to capital gain tax in the impugned A.Y i.e. A.Y 2016-17 when the Jt.Development Agreement was entered into between the assessee and M/s. Dhanush Builders & developers for development of the property. We do not find any infirmity in the order of the learned CIT (A) on this issue. Since the learned CIT (A) in his detailed order has decided the issue regarding the year of taxation of the capital gain and also the manner in which the capital gain should be computed which is based on the decision of the jurisdictional High Court and the Coordinate Bench of the Tribunal. Therefore, we do not find any ITA No 34 of 2020 Naga Padmaja Vangara Page 11 of 11 infirmity in the order of the learned CIT (A) in dismissing the grounds raised before him. Accordingly, the grounds raised by the ass are dismissed. 15. So far as the argument of the learned Counsel for the assessee that the development agreement is for 60% of the land and the assessee has received 40% constructed area and therefore, the value comes to Rs.47,46,000/- is concerned, the same in our opinion, is without any basis and cannot be accepted. 16. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the Open Court on 29 th July, 2022. Sd/- Sd/- (LALIET KUMAR) JUDICIAL MEMBER (R.K. PANDA) ACCOUNTANT MEMBER Hyderabad, dated 29 th July, 2022. Vinodan/sps Copy to: S.No Addresses 1 Smt. Naga Padmaja Vangara, C/o Shri A.V. Raghuram Advocate, Flat No.610, 6 th Floor, Babukhan Estate, Basheerbagh, Hyderabad 500001 2 Income Tax Officer Ward 11(3) Signature Towers, Opp: Botanical Gardens, Kondapur Hyderabad 500084 3 CIT (A)-5 ,Hyderabad 4 Pr. CIT-5, Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File By Order