Venkat Ramana Reddy Vada, Hyderabad V. Income Tax Officer, Ward-15(2), Hyderabad

ITA 510/Hyd/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4860 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 19-07-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K J DIVYA
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 50C; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH SMC, HYDERABAD BEFORE SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO.510/HYD/2018 ASSESSMENT YEAR: 2009-10 SRI VENKAT RAMANA REDDY VADE, H.NO.5-77/4/201, VIVEKANANDA NAGAR, STREET NO. 8, HABSIGUDA, HYDERABAD. PAN: ACVPV 7024 J VS. INCOME TAX OFFICER, WARD-15(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI K.C. DEVDAS REVENUE BY: SMT. K.J. DIVYA, DR DATE OF HEARING: 19/07/2019 DATE OF PRONOUNCEMENT: 27/08/2019 ORDER PER A. MOHAN ALANKAMONY, AM.: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDE R OF THE LD. CIT(A)-7, HYDERABAD DATED 08/01/2018 IN APPEAL NO. 0041/CIT(A)- 7/2017-18 PASSED U/S. 143(3) R.W.S 147 & 250(6) OF THE ACT FOR THE ASSESSMENT YEAR 2009-10. 2, THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HIS APPEAL HOWEVER, THE CRUX OF THE ISSUE IS THAT THE LD. CIT (A) HAS ERRED IN PARTLY SUSTAINING THE ORDER OF THE LD. AO WHO HAD COMPUTED THE STCG OF THE ASSESSEE INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL RESIDENT FILED HIS RETURN OF INCOME IN RESPONSE TO NOTI CE U/S. 148 OF THE ACT ON 31/3/2016 DECLARING STCG OF RS. 4,58,842/-. THE LD. AO HAD REOPENED THE CASE OF THE ASSESSEE BECAUSE AS PER THE INFORMATION RECEIVED FROM THE SRO IT WAS OBSERVED THAT THE ASSESSEE HAD SOLD TWO IMMOVABLE RESIDENTIAL PROPERTIES FOR RS. 18 LAKHS AND RS. 22 LAKHS RESPECTIVELY AGGREGATING TO RS. 40 LAKHS AS AGAINST THE MARKET VALUE OF RS. 36,30,000/- AND RS. 43,95,000 AGGREGATING TO RS. 80,25,000/-. 4. THEREAFTER, THE LD. AO COMPUTED THE STCG OF THE ASSE SSEE BY INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT AS FO LLOWS: - ACTUAL SALE CONSIDERATION RS. 40,00,000 MARKET VALUE AS PER THE PROVISIONS OF SEC. 50C RS. 80 ,25,000 (FROM BOTH PROPERTIES) LESS: COST OF ACQUISITION (AS CLAIMED BY THE ASSESSEE) RS. 32,09,000 LEST OF COT OF IMPROVEMENT RS. 2,98,000 SHORT TERM CAPITAL GAIN RS. 45,18,000 5. ON APPEAL BEFORE THE LD. CIT (A) THE ASSESSEE HAD ARGUED STATING THAT THE LD. AO HAD REFERRED THE VALUATION TO THE VALUATION OFFICER AS PER THE REQUEST OF THE ASSESSEE HOWEVER, WITHOUT AWAITI NG FOR THE RECEIPT OF THE VALUATION REPORT PROCEEDED TO ADOPT THE VALUE STATED BY THE SRO 3 AND COMPUTED THE STCG OF THE ASSESSEE AT RS. 45,18,000/ -. IT WAS FURTHER SUBMITTED THAT SUBSEQUENTLY THE VALUATION REPORT WA S RECEIVED BY THE LD. AO WHEREIN THE VALUE DETERMINED WAS MUCH L ESSER THAN THE VALUE STATED BY THE SRO AND ACCORDINGLY ADDITIONAL EVI DENCE WERE FILED BEFORE THE LD.CIT(A). THE LD. CIT (A) AFTER EXAMININ G THE ISSUE AND OBTAINING THE REMAND REPORT FROM THE LD. A.O GRANTED O NLY PARTIAL RELIEF TO THE ASSESSEE BY SIMPLY ADOPTING THE VALUE DETERMINE D BY THE VALUATION OFFICER AT RS. 57,35,000/- WITHOUT APPLYING HIS MIND ON THE VALUE OF THE PROPERTY CONSIDERING ITS DRAWBACK. AGG RIEVED BY THE ORDER OF THE LD. CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THIS BENCH OF THE TRIBUNAL. 6. THE LD. AR VEHEMENTLY ARGUED BEFORE ME STATING THAT TH E LD. DVO HIMSELF HAS RECOGNIZED THE DRAWBACK OF THE LAND SOLD BY THE ASSESSEE AND ADOPTED THE VALUE AT RS. 57,35,000/- THOUGH THE VAL UATION OF THE SRO WAS DETERMINED AT 80,25,000/-. THE LD. AR FURTHE R ARGUED BY STATING THAT THE RELIEF GRANTED BY THE LD.DVO AS WELL A S THE LD.CIT(A) IS NOT APPROPRIATE AS THE ASSESSEE HAD SOLD THE PROPERTY A T THE REALISTIC ACTUAL MARKET VALUE. IT WAS THEREFORE PLEADED THAT THE A DDITION MADE BY THE LD. AO MAY BE DELETED. THE LD. DR ON THE OTHER HAND ARGUED IN SUPPORT OF THE ORDER OF THE LD. CIT (A) AND PRAYED FOR SUSTAINING THE SAME. 4 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FOR REFERENCE, I HEREBY EXTRACT THE RELEVANT PORTION OF THE VALUATION REPORT OF THE LD. DVO: - FAIR MARKET RATE OF THE PROPERTY PER SQ. YDS AS ON 15/12/2008 & 16/1/2009 SL NO INFLUENCING FACTORS ADOPTED % AGE ADOPTED RATE PER SQ. YD. 1. GUIDELINE / MARKET RAT VALUE AS PER THE SRO AZAMPURA, FOR THE AREA FALLS UNDER WARD-16, BLOCK-2 OF SAIDABAD COLONY, TRIVENI NAGAR, HYDERABAD IS ADOPTED SINCE SIMILAR TYPE OF COMPARATIVE SALE INSTANCES ARE NOT AVAILABLE ETC. 15000.00 2. DEDUCT FOR THE DISADVANTAGE AS THE PROPERTY IS HAVING NON PERFECT AND IRREGULAR SHAPE ETC. -5% -750.00 3. DEDUCT FOR THE DISADVANTAGE AS THE PROPERTY IS LOCATED IN LOW PROFILE AREA ETC -11% -1650.00 4. DEDUCT FOR REDUCTION IN MARKET RATE DUE TO NOT HAVING PROPER APPROACH ROAD TO REACH THE PROPERTY AND HAVING DEAD END ETC -5% -750.00 5. DEDUCT FOR REDUCTION IN MARKET RATE DUE TO IMPACT OF RECESSION DURING PROPERTY TRANSACTION PERIOD AND SEPARATE TELANGANA STATE BIFURCATION AGITATIONS ETC. -7% -1050.00 FAIR MARKET RATE OF THE PROPERTY PER SQ. YD AS ON (SINGLE PROPERTY, TWO SALE DEEDS ARE EXECUTED) 05.12.2008 & 16.01.2008 = 10800.00 PER SQ.YD FAIR MARKET VALUE OF THE TOTAL PROPERTY AS ON 05.12.2008 & 16.01.2008 = AREA IN SQ. YDS. (240 + 291) = 531 RATE PER SQ. YD FOR PLOT 531.0 10800.0 5734800.00 TOTAL 5734800.00 5 SAY RS. 57,35,000/- (RUPEES FIFTY-SEVEN LAKHS THIRTY FIVE THOUSANDS ONLY) 8. FROM THE ABOVE, IT IS APPARENT THE LAND SOLD BY THE A SSESSEE HAS DRAWBACKS SUCH AS IRREGULAR SHAPE, LOCATION OF THE L AND IN THE DEAD END OF THE LAY OUT & LOW PROFILE AREA, AND FURTHER THE VALU E OF THE PROPERTY IS HIT BY THE RECESSION IN THE REAL ESTATE MARKET DUE TO BIF URCATION OF THE STATE AS TELANGANA AND ANDHRA PRADESH. THE LD. DVO THO UGH IN HIS OWN WISDOM HAD ESTIMATED THE VALUE OF THE PROPERTY AT RS . 57,35,000/- BY ACCEPTING THE DRAWBACKS OF THE PROPERTY AND THE MARK ET SCENARIO, WHILE SUBSTANTIATING THE QUANTUM FOR GRANTING RELIEF TO TH E ASSESSEE, IN MY VIEW HE HAS NOT MADE REALISTIC WORKING. FURTHER, O N PERUSING THE FACTS, I FIND THAT: - (I) THE COST OF ACQUISITION OF THE PROPERTY WHICH FALLS L ITTLE LESS THAN THE PERIOD OF 2 YEARS FROM THE DATE OF THE SALE IS RS. 32,09,000/- (II) THE AGGREGATE ACTUAL SALE PROCEEDS RECEIVED BY THE AS SESSEE WITHIN THE SPAN OF 2 YEARS FROM THE DATE OF PURCHASE O F THE PROPERTY IS RS. 40 LAKHS, THUS THERE IS AN APPRECIATIO N OF 25% IN THE VALUE OF THE PROPERTY [RS. 32,09,000 + (RS. 32 ,09,000 X 25%) = APPROX. RS.40,00,000]. (III) THE MARKET VALUE OF THE PROPERTY SOLD ESTIMATED BY THE LD. DVO IS 57,35,000/-. THUS, THE APPRECIATION OF THE PROPERTY IS 6 ESTIMATED AT 79% WITHIN A SPAN OF 2 YEARS. [RS. 32,0 9,000 + (RS. 32,09,000 X 79%) = APPROX. RS.57.44 LAKHS] (IV) THE MARKET VALUE DETERMINED BY THE LD. STATE STAMP VAL UATION AUTHORITY (SSVA) WHICH IS ADOPTED BY THE LD. AO FOR C OMPUTING THE STCG BY INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT IS RS. 80,25,000/-. THUS, THE APPRECIATION IN VALUE O F THE PROPERTY DETERMINED BY THE LD.SSVA AND ADOPTED BY THE LD. AO IS 150%. [RS. 32,09,000 + (RS. 32,09,000 X 150%) = APPROX. RS.80.22 LAKHS]. 9. FROM THE ABOVE, IT IS APPARENT THAT IT WOULD NOT BE P OSSIBLE OR REASONABLE TO ESTIMATE THE INCREASE IN THE MARKER VALUE OF THE PROPERTY AT THE TIME OF THE SALE OF THE PROPERTY BY 150% OR 79% W ITHIN A SPAN OF TWO YEARS ESPECIALLY WHEN THERE IS NO EVIDENCE ON RE CORD TO SUGGEST THAT THE LOCALITY UNDERWENT MASSIVE TRANSFORMATION. FURTHER, THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE HAD PUR CHASED THE PROPERTY BELOW THE MARKET VALUE OF RS. 32,09,000/- W ITHIN THE PERIOD OF 2 YEARS FROM THE DATE OF SALE. IN THIS SITUATION, IN O RDER TO ADDRESS THE ISSUE SIMPLER AND TO RENDER SPEEDY JUSTICE, I AM OF THE CONSIDERED VIEW THAT THE REASONABLE ESTIMATION OF THE APPRECIATION OF THE P ROPERTY WITHIN THE SPAN OF 2 YEARS MAY BE ADOPTED AT 35% FROM THE ACQ UISITION COST WHICH WORKS OUT TO APPROXIMATELY RS. 43 LAKHS [32,09,0 00 + (RS. 7 32,09,000 X 35% = APPROX. RS. 43 LACKS], WHICH CAN BE CONSIDERED AS THE DEEMED FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUED TO THE ASSESS FOR THE PURPOSE OF DETERMINING THE SHORT-TERM C APITAL GAIN BY INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT. TH EREFORE, I HEREBY DIRECT THE LD. AO TO COMPUTE THE STCG OF THE ASSESSEE BY TREATING THE MARKET VALUE OF THE PROPERTY INVOKING THE PROVISIONS O F SECTION 50C OF THE ACT AT RS. 43 LAKHS INSTEAD OF RS. 57,35,000/- SUSTA INED BY THE LD.CIT(A). IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY A LLOWED AS INDICATED HEREINABOVE. PRONOUNCED IN THE OPEN COURT ON 27 TH AUGUST, 2019. SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER HYDERABAD, DATED: 27 TH AUGUST, 2019 OKK COPY TO:- 1) SRI VENKAT RAMANA REDDY VADE C/O. B. NARSING RAO & CO., CHARTERED ACCOUNTANTS, PLOT NO.554, ROAD NO. 92, JU BILEE HILLS, HYDERABAD 500 096. 2) ITO, WARD-15(2), HYDERABAD. 3) THE CIT(A)-7, HYDERABAD 4) THE PR. CIT-7, HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE