The Income Tax Officer, Ward-2(3), Vijayawada V. Smt. Indira Makhija Hotchand, Vijayawada

ITA 552/VIZ/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0877 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 20-09-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 18-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Fair market value; Condonation of delay; Set aside; Capital Gains

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM ‘SMC’ BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER आयकर अपील सं./I.T.A.No.552/Viz/2019 (ननधधारण वर्ा / Assessment Year : 2011-12) Income Tax Officer Ward-2(3) Vijayawada Vs. Smt.Indira Makhija Hotchand D.No.32-2-9, Anjamma St. Rajakashakthi Nagar Vijayawada [PAN : ABYPH7085H] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri GVN Hari, AR प्रत्यधथी की ओर से / Respondent by : Shri ON Hari Prasada Rao, DR सुनवधई की तधरीख / Date of Hearing : 21.09.2022 घोर्णध की तधरीख/Date of Pronouncement : 13.10.2022 O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : Condonation of Delay : This appeal is filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [in short, [CIT(A)], Vijayawada in Appeal No.10256/CIT(A)/VJA/18-19 dated 11.06.2019 for the Assessment Year (A.Y.) 2011-12 with the delay of 11 days. The revenue filed petition for condonation of delay, submitting that the appeal ought to have been filed by the revenue on or before 08.09.2019, however, the appeal could not be filed due to passage of some considerable time in submission of report on adverse appellate order by the AO and authorization u/s 253(2) 2 ITA No.552/Viz/2019, A.Y.2011-12 Indira Makhija Hotchand, Vijayawada of the Income Tax Act, 1961 (in short ‘Act’) was received from the O/o Pr.CIT on 16.09.2019 and steps were immediately taken to prepare the appeal petition by 17.09.2019 and dispatch the same to the ITAT on 18.09.2019 and the delay is reckoned from 09.09.2019 to 19.09.2019. The revenue, therefore, pleaded to condone the delay and admit the appeal for hearing. We have heard the Ld.DR, gone through the condonation petition filed and since there is reasonable cause for condonation of delay, we condone the delay and admit the appeal for hearing. 2. Brief facts of the case are that the assessee is an individual, derived income from house property, capital gains and income from other sources, filed her return of income for A.Y.2011-12 on 24.03.2012, admitting total income of Rs.3,14,875/-. The assessee sold her 50% share in the immovable property consisting of a building with 3 floors during the year and admitted LTCG income of Rs.64,093/- in the return of income. The property was purchased by the assessee’s husband on 10.12.1978 by incurring a cost of Rs.51,000/- including registration charges. The said property was inherited by the assessee and her son on the death of her husband on 27.10.2007. Since the property was acquired by the assessee by way of inheritance and the previous owner acquired the property prior 3 ITA No.552/Viz/2019, A.Y.2011-12 Indira Makhija Hotchand, Vijayawada to 01.04.1981, it was stated by the Assessing Officer (AO) that the Fair Market Value (FMV) of the property as on 01.04.1981 has to be taken as the cost of acquisition of the property from the purpose of computing the income from LTCG arising on sale of the said property. The assessee could not obtain the certificate of market value of the property as on 01.04.1981 as the records of the Sub-Registrar were destroyed for the period prior to 01.01.1989 due to riots. The assessee therefore obtained the certificate issued by the Joint Sub-Registrar, Vijayawada regarding Market Value of the said property as on 01.01.1989 and adopted the said value of Rs.4,25,215/- as the cost of acquisition of the property. The cost of acquisition of the 50% share in the property of the assessee was accordingly adopted at Rs.2,12,608/- while computing the LTCG income in the return of income. The AO observed that the adoption of the market value as on 01.01.1989 as the market value against the market value as on 01.01.1981 cannot be accepted in view of the long gap of 8 years between the two dates. The AO therefore, rejected the same and adopted the FMV of the property as on 01.04.1981 at Rs.60,000/- on the basis of estimate after taking into consideration the fact that the actual cost of purchase of the property on 10.02.1978 was Rs.51,000/-. The FMV of 50% share in the property of the assessee as on 01.04.1981 was therefore worked out at 4 ITA No.552/Viz/2019, A.Y.2011-12 Indira Makhija Hotchand, Vijayawada Rs.30,000/-. The AO recomputed the LTCG income at Rs.10,89,702/- by considering the said FMV of Rs.30,000/- as the cost of acquisition, as against the LTCG income of Rs.64,093/- disclosed by the assessee. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and disputed the action of the AO in adopting the FMV of the property as on 01.04.1981 at Rs.60,000/- without any basis for the purpose of determining the cost of acquisition of the property while computing the income from LTCG arising on sale of the said property. After careful consideration of the facts of the case, assessment order and the written submissions of the assessee, the Ld.CIT(A) observed that as the assessee became owner of 50% of the property on account of inheritance from her husband, which is one of the modes of acquisition specified in Sec.49(1) and the previous owner acquired the property before 01.04.1981, the cost of purchase of the property by the previous owner or the FMV of the property as on 01.04.1981, at the option of the assessee, is required to be adopted as the cost of acquisition of the property for the purpose of computing the capital gains income arising from the sale of the property as per the provisions of Sec.55(2)(b). The assessee opted to adopt the FMV of the property as on 01.04.1981 as the cost of acquisition of the property. But the AO worked out the LTCG income at Rs.10,89,702/-, 5 ITA No.552/Viz/2019, A.Y.2011-12 Indira Makhija Hotchand, Vijayawada estimating the market value of the property as on 01.04.1981 at Rs.60,000/- on adhoc basis without specifying the manner of arriving at the same, though she made a reference to the actual cost of purchase of the property at Rs.51,000/- by the previous owner on 10.02.1978. The Ld.CIT(A) held that in the absence of availability of the data regarding the market value of the property as on 01.04.1981 with the Sub-registrar, there is no other option but to estimate the said value on a logical method and not on adhoc basis. The logical method for estimating the market value as on 01.04.1981 would be to consider the market value of the property as on 01.01.1981 would be to consider the market value of the property as on 01.01.1989 as per the certificate issued by the Joint Sub-registrar and work out the market value as on 01.04.1981 backwards by taking into account the cost inflation index of 100 and 161 for the F.Y.1981-82 and 1988-89 respectively. The market value of the property as on 01.04.1981 works out to Rs.2,64,108/- (Rs.4,25,215/- x 161/100) as per the said method. The market value of 50% share in the property of the assessee therefore works out to Rs.1,32,054/-. Accordingly, the Ld.CIT(A) has partly allowed the appeal of the assessee, directing the AO to adopt the cost of acquisition of the assessee’s 50% share in the property at Rs.1,32,054/- instead of 6 ITA No.552/Viz/2019, A.Y.2011-12 Indira Makhija Hotchand, Vijayawada Rs.30,000/- adopted in the assessment order and recompute the long term capital gains accordingly. 4. Aggrieved by the order of the Ld.CIT(A), the revenue filed appeal before the Tribunal and raised the following grounds of appeal : 1. The Ld.CIT(A) is not justified in allowing the appeal without taking into account the facts and merits of the case. 2. The Ld.CIT(A) simply allowed the appeal filed by the assessee ignoring the fact that the “reverse formula” adopted by the CIT(A) would work out the market value to Rs.18,77,808/- as against the market value of Rs.2,48,66,400/- adopted by teh SRO at the time of registration of the property through the Regd.deed dated 25.11.2010 (Rs.2,64,108/- x 711/100 = Rs.18,77,808) which is far below the market value adopted by the SRO at the time of Registration i.e. on 25.11.2010. 3. Any other grounds that may be urged at the time of hearing. Besides the merits in facts and in law, it is also submitted that there is a RAP objection in the case which has been accepted by the Department. For these and other grounds that may be urged at the time of appeal hearing, it is prayed that additions made may be restored. 5. Ground No.1 and 3 are general in nature, which do not require specific adjudication. 6. Ground No.2 is related to adoption of market value at Rs.18,77,808/- by the Ld.CIT(A) as against the market value of Rs.2,48,66,400/- adopted by the SRO at the time of registration. 7 ITA No.552/Viz/2019, A.Y.2011-12 Indira Makhija Hotchand, Vijayawada 7. The Ld.DR argued that the Ld.CIT(A) is not justified in allowing the appeal of the assessee ignoring the fact that the “reverse formula” adopted by the CIT(A) would work out the market value to Rs.18,77,808/- as against the market value of Rs.2,48,66,400/- adopted by the SRO at the time of registration of the property through the Regd.deed dated 25.11.2010 (Rs.2,64,108/- x 711/100 = Rs.18,77,808) which is far below the market value adopted by the SRO at the time of Registration i.e. on 25.11.2010, which is erroneous and prejudicial to the interest of the revenue. The Ld.DR, therefore, pleaded to set aside the order passed by the Ld.CIT(A) and allow the appeal of the revenue on this ground. 8. On the other hand, the Ld.AR relied on the orders passed by the Ld.CIT(A) and also relied on the decision of Hon’ble jurisdictional High Court in the case of Commissioner of Income Tax -1, Hyderabad Vs. Ashven Datla [2013] 37 taxmann.com 261 (Andhra Pradesh)/[2013] 218 Taxman 74 (Andhra Pradesh) and pleaded to uphold the order passed by the Ld.CIT(A) and dismiss the appeal of the revenue. 9. I have heard both the parties and perused the material placed on record. The assessee relied on the decision of Hon’ble Jurisdictional High Court in the case of in the case of Commissioner of Income Tax-1, 8 ITA No.552/Viz/2019, A.Y.2011-12 Indira Makhija Hotchand, Vijayawada Hyderabad Vs. Ashven Datla (supra). Relevant part of order is extracted as under : “....it is prudent on the part of the lower authorities to estimate the fair market value as on 01.04.1981 on the basis of the valuation officer’s report, which was arrived at by the reverse indexation method. Consequently the Tribunal ruled as a question of fact that the property would fetch Rs.750/- per sq.yard if sold in the open market as on 01.04.1981; that the assessee had reasonably estimated the fair market value as on 1.4.1981 at Rs.750/- per sq.yard; that the Assessing Officer and the CIT were not justified in fixing the fair market value as on 1.4.1981 at Rs.8/- per sq.yard and consequently orders of the Commissioner (Appeals) and the Assessing Authority are set aside and remitted the matter to the Assessing Officer to reassess the return considering the fair market value as on 1.4.1981 at Rs.750/-per sq.yard and compute the capital gain accordingly.” Respectfully following the decision of the Hon’ble jurisdictional High Court, I am of the view that the Ld.CIT(A) has considered the reverse indexation method submitted by the Ld.AR and has rightly directed the AO to adopt the same. Therefore, I find no interference in the order of the Ld.CIT(A) and accordingly dismiss the grounds raised by the revenue. 9. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 13 th October, 2022. Sd/- (द ु व्वूरु आर.एल रेड्डी) (DUVVURU RL REDDY) न्याधयकसदस्य/JUDICIAL MEMBER Dated : 13.10.2022 L.Rama, SPS 9 ITA No.552/Viz/2019, A.Y.2011-12 Indira Makhija Hotchand, Vijayawada आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– Smt.Indira Makhija Hotchand, D.No.32-2-9, Anjamma St.Rajakashakthi Nagar, Vijayawada 2. रधजस्व/The Revenue –The Income Tax Officer, Ward-2(3), C.R.Buildings, M.G.Road, Governorpet, Vijayawada 3. प्रधान आयकर आयुक्त /The Principal Commissioner of Income Tax, Vijayawada 4. आयकर आयुक्त (अपील)/ The Commissioner of Income-Tax (Appeals), Vijayawada 5. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/ DR,ITAT, Visakhapatnam 6.गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam