Smt. Radha Venkatraman, CHENNAI V. ITO, CHENNAI

ITA 554/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2541 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-03-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 12-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DR S MOHARANA
• Keywords: Cost of acquisition; Fair market value; Valuation report; Competent authority
• Section: 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI. BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 651/MDS/2012 ASSESSMENT YEAR : 2005-06 THE INCOME TAX OFFICER, BUSINESS WARD II(3), CHENNAI 600 034. VS. SMT. RADHA VENKATARAMANAN, B-21, ASHOK TAPASVI, 9, LOCK STREET, CHENNAI 85. [PAN : AABPV5479P] (APPELLANT) (RESPONDENT) ITA NO. 554/MDS/ 2012 ASSESSMENT YEAR : 2005-06 SMT. RADHA VENKATARAMANAN, B-21, ASHOK TAPASVI, 9, LOCK STREET, CHENNAI 85. VS. THE INCOME TAX OFFICER, BUSINESS WARD II(3), CHENNAI 600 034. (APPELLANT) (RESPONDENT) ASSESSEE BY : DR. S. MOHARANA, CIT DEPARTMENT BY : SHRI VIKRAM VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 14.03.2013 DATE OF PRONOUNCEMENT : 09.05.2013 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE; RE SPECTIVELY, ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS) VI, CHENNAI DATED 23.12.2011 RELEVANT TO THE ASSESSMENT YEAR 2005-06. 2. AFTER PERUSING THE GROUNDS RAISED BY THE REVENU E, WE FIND THAT ITS I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .651 651651 651 & & & & 554 554554 554/M/ /M/ /M/ /M/1 11 12 22 2 2 GRIEVANCES ARE THE CIT(APPEALS) HAS ERRED IN HOLDIN G THAT THE FAIR MARKET VALUE OF THE PROPERTY HAS TO BE ADOPTED AT 50% OF T HE REGISTERED VALUERS REPORT SUBMITTED BY THE ASSESSEE INSTEAD OF ADOPTIN G GUIDELINE VALUE AS THE FAIR MARKET VALUE AS ON 01.04.1981. FURTHER, THE RE VENUE, BY RELYING ON THE DECISION IN THE CASE OF HIRALAL LOKCHANDANI VS. ITO [(2007) 106 ITD 45 ( KOL.) (SB)] SUBMITS THAT THE FAIR MARKET VALUE OF T HE PROPERTY AS ON 01.04.1981 CANNOT BE ARRIVED AT BY APPLYING THE COS T INFLATION INDEX IN A REVERSE MANNER. THE NEXT GROUND RAISED BY THE REVEN UE IS THAT THE CIT(APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THA T ACCORDING TO SECTION 49(1) THE COST OF THE PREVIOUS OWNER IS TO BE ADOPT ED FOR THE PURPOSE OF COST OF ACQUISITION AND THE BASE YEAR FOR THE PURPOSE OF COST INFLATION INDEX IS TO BE TAKEN AS THE YEAR IN WHICH THE PROPERTY WAS INHE RITED BY THE ASSESSEE. 3. COMING TO ASSESSEES APPEAL, IT CHALLENGES THE FAIR MARKET VALUE OF 1981 AS DETERMINED BY THE REGISTERED VALUER AT THE RATE OF 488/- PER SQ.FT. WAS CORRECT AND ALSO DISCOUNTING THE VALUE ARRIVED AT BY THE REGISTERED VALUER BY 50% WITHOUT ANY BASIS. 4. IN THE COURSE OF HEARING, THE LD. COUNSEL FOR T HE ASSESSEE SUBMITS THAT THE REGISTERED VALUER, AFTER DETAILED SURVEY AND EN QUIRY AND COMPARING WITH OTHER PROPERTIES, VALUED THE SAID PROPERTY AT ` .488 PER SQ.FT. HOWEVER, THE ASSESSING OFFICER WITHOUT MAKING ANY ENQUIRY SIMPLY ADOPTED THE GUIDELINE VALUE AS ON 01.04.1981 OF ` 37.5 PER SQ.FT. HE, FURTHER SUBMITS THAT THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .651 651651 651 & & & & 554 554554 554/M/ /M/ /M/ /M/1 11 12 22 2 3 GUIDELINE VALUE IS NOT REVISED YEAR BY YEAR AND SIN CE 1977 TO 1992, NO SALE WAS TAKEN PLACE AS PER THE RECORDS OF CONCERNED REG ISTRAR. THEREFORE, THE GUIDELINE VALUE OF THE PROPERTY AS FAIR MARKET VALU E IS NOT CORRECT. EVEN, THE CIT(APPEALS), WITHOUT CONSIDERING THE VALUE DETERMI NED BY THE REGISTERED VALUER, REDUCED THE VALUE TO THE EXTENT OF 50% WITH OUT GIVING ANY REASON. THEREFORE, HE PRAYS FOR FIXING THE FAIR MARKET VALU E AS ON 01.04.1981 AT THE RATE OF ` .488/- AS DETERMINED BY THE REGISTERED VALUER. 5. ON THE OTHER HAND, THE LD. DR HAS STRONGLY SUPP ORTED THE ORDER PASSED BY THE ASSESSING OFFICER AND TO DETERMINE TH E FAIR MARKET VALUE, THE GUIDELINE VALUE AS NOTIFIED BY THE REGISTRATION DEP ARTMENT IS ONLY CORRECT. HE FURTHER SUBMITS THAT THE LD. CIT(APPEALS) WITHOUT G IVING ANY REASON 50% DISCOUNT WAS GIVEN TO THE VALUE ADOPTED BY REGISTER ED VALUER, WHICH IS ACCORDING TO HIM NOT CORRECT. 6. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL, FILED HER RETURN ON 28.07.2005 BY DECLARING TOTAL INCOME OF ` .15,419/-, WHICH WAS SUMMARILY PROCESSED AND ASSESSMENT WAS COMPLE TED UNDER SECTION 143(3) OF THE ACT BY DETERMINING LONG TERM CAPITAL GAINS OF ` .1,91,40,185/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER HAS OBSERVED THAT DURING THE YEAR THE ASSESSEE SOLD PROPERTY CONSISTING OF LAND AND BUILDING. THE ASSES SEES TRANSACTION I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .651 651651 651 & & & & 554 554554 554/M/ /M/ /M/ /M/1 11 12 22 2 4 WAS ASCERTAINED IN THE AIR. THE SALE VALUE OF THE P ROPERTY IS FOUND TO BE THE MARKET VALUE AS PER REGISTERED DOCUMENT. THE COMPUTATION OF CAPITAL GAINS AS DISCUSSED BY THE ASSESSING OFFICER READS AS UNDER: INCOME UNDER THE HEAD CAPITAL GAINS: SHORT AS ADMITTED 3,419.50 LONG TERM I. NET REALIZATION ON SALE AS ADMITTED : 4,03,73,350 II. VALUE ON 01.04.1981 11420 X 37.5 : 4,28,250 III. VALUE OF THE BUILDING AS ADMITTED : 83,000 IV. INDEXED COST 511250 X 480/199 : 12,33,165 V. LONG TERM CAPITAL GAINS : 3,91,40,185 VI. EXEMPTION U/S 54EC : 2,00,00,000 VII. ADD: LONG TERM CAPITAL GAINS : 1,91,40,185 TOTAL INCOME 1,91,43,604.50 7. AS PER THE ANNEXURE 12 TO THE LETTER DATED 26.0 9.2006 SUBMITTED BY THE ASSESSEE TO THE ASSESSING OFFICER, THE PROPE RTY AT NO. 1, TURN BULLS ROAD EXTENSION, NANDANAM WAS ORIGINALLY PURCH ASED BY SMT. PADMA SRINIVASAN ON 19.02.1965. SHE HAD BUILT A BUI LDING ON THIS PIECE OF LAND AND WAS IN CONTINUOUS OWNERSHIP TILL HER DEATH ON 25.05.1991. AS HER ONLY CHILD, THE ASSESSEE INHERIT ED THE PROPERTY. WHILE COMPUTING THE CAPITAL GAINS, THE ASSESSEE ADO PTED VALUE OF ` .49,63,000/- AS THE VALUE AS ON 01.04.1981 FOR THE LAND AND BUILDING BASED ON A VALUATION REPORTED FILED BY THE ASSESSEE . 8. SHRI T.R. BALARAMAN, REGISTERED VALUER PREPARED THE VALUATION OF THE IMMOVABLE PROPERTY AS PER FORM O-1 THAT THE ACT UAL COST OF THE PROPERTY IN THE YEAR 1960 WAS ` .36,408/-. THE VALUE OF THE BUILDING WAS I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .651 651651 651 & & & & 554 554554 554/M/ /M/ /M/ /M/1 11 12 22 2 5 ARRIVED AT ` .58,100/-. THE VALUE OF THE LAND IN THE YEAR 1992 I S MENTIONED AS ` .85,41,900/- TAKING THE COST INFLATION INDEX OF THE YEAR 1992 AS ` .199/-. THE VALUE OF THE LAND PER SQ.FT. AS ON 01.0 4.1981 WAS WORKED OUT TO ` .376/-. AS THE PROPERTY AT TURN BULLS EXTENSION APP EARS TO BE 30% HIGHER THAN THE ABOVE PROPERTY, THE VALUE OF ` .488/- PER SQ.FT. WAS ADOPTED BY THE REGISTERED VALUER. ACCORD INGLY, THE VALUE OF THE LAND AND BUILDING AS ON 01.04.1981 WAS ARRIVED AT BY THE VALUER AS ` .49,63,000/-. THE DEPARTMENT OBTAINED GUIDELINE VAL UE OF THE LOCALITY FROM THE JOINT SUB REGISTRAR, DISTRICT REGISTRARS OFFICE, CHENNAI CENTRAL, AS AT ` .90,000/-, WHICH IS EQUAL TO ` .37.5 PER SQ.FT. FROM THE VALUERS REPORT, SMT. PADMA SRINIVASAN HAD PURCHASE D THE PROPERTY IN THE YEAR 1960 FOR ` .46,408/-, WHICH WORKS OUT TO ` .4 PER SQ.FT. AS PER THE SUBMISSIONS OF THE ASSESSEE, THE PROPERTY HAS B EEN PURCHASED IN THE YEAR 1965 ONLY. ADOPTING THAT THIS PROPERTY HAS BEEN PURCHASED IN THE YEAR 1960, THE VARIATION OF THE PRICE FROM 1965 AND 1981 IS ` .33.5/- ONLY FOR OVER A PERIOD OF 21 YEARS. IT IS COMMON KN OWLEDGE THAT PRICES HAVE INCREASED AT AN ACCELERATED PACE DURING THE EA RLIER NINETIES AND AFTER BRIEF LULL IN THE LATE NINETIES HAVE GAIN PIC KED UP. THIS COMMON KNOWLEDGE SERVES ONLY PURPOSE OF PROVIDING A BROAD GUIDANCE TO EVALUATE IF THE ESTIMATES HAVE BEEN BASED ON RELIAB LE PRECEPT. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .651 651651 651 & & & & 554 554554 554/M/ /M/ /M/ /M/1 11 12 22 2 6 THEREFORE, THE ASSESSING OFFICER ADOPTED THE VALUAT ION PROVIDED BY THE JOINT SUB REGISTRAR AND REJECTED THE COST ESTIMATED BY THE REGISTERED VALUER. 9. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MA TTER BEFORE THE CIT(APPEALS). IT WAS SUBMITTED BEFORE THE CIT(APPEA LS) THAT THE GUIDELINE VALUE ARE NOT REVISED YEAR BY YEAR. NO SA LE WAS TAKEN PLACE IN THE AREA SINCE 1992 AND THEREFORE, THE GUIDELINE VALUE AS ON 01.04.1981 CANNOT BE EQUATED TO THE FAIR MARKET VAL UE AND SUBMITTED THAT THE REGISTERED VALUER, AFTER EXAMINING NEIGHBO URING PROPERTIES, HE HAS ARRIVED AT THE VALUE AT ` .49,63,000/- AND THE SAME MAY BE ACCEPTED. THE LD. CIT(APPEALS), AFTER CONSIDERING T HE VALUE ADOPTED BY THE REGISTERED VALUER AND ALSO SUBMISSIONS OF THE A SSESSEE HAS OBSERVED THAT THE OBJECTIVE PROCESS OF VALUATION OF THE PROPERTY SHOULD START WITH GUIDELINE VALUE AND THEREAFTER DEMONSTRA TE WITH COGENT AND VERIFIABLE REASONS FOR VARIATION IN THE PROPERTY VA LUED VIS-A-VIS GUIDELINE VALUE SO THAT THE RESULTANT VALUE WILL BECOME MOST OBJECTIVE WHICH HAS NOT BEEN DONE IN THIS CASE. HE FURTHER OBSERVED THA T WHEN GUIDELINE VALUE IS NOTIFIED FOR A LOCALITY BY THE STATE GOVER NMENT BEING THE COMPETENT AUTHORITY, THE STARTING POINT FOR VALUATI ON SHOULD ONLY BEGIN WITH THAT VALUE AND NO OTHER VALUE CAN SUBSTITUTE. AS AGAINST THE I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .651 651651 651 & & & & 554 554554 554/M/ /M/ /M/ /M/1 11 12 22 2 7 GUIDELINE VALUE OF ` .37.5 PER SQ.FT., THE REGISTERED VALUER HAS VALUED THE PROPERTY AT ` .488 PER SQ.FT. AND IN VIEW OF THE SERIOUS DISCREPA NCY IN THE BASIS OF VALUATION ADOPTED BY THE REGISTERED VALUER, THE CIT(APPEALS) DISCOUNTED THE VALUE BY 50% AND ESTIMA TED THE VALUE OF THE PROPERTY AS ARITHMETIC MEAN OF THE GUIDELINE VA LUE AND 50% DETERMINED BY THE REGISTERED VALUER. 10. AGGRIEVED, THE ASSESSEE AS WELL AS REVENUE CAR RIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 11. WE HAVE HEARD BOTH SIDES, PERUSED THE ORDERS O F LOWER AUTHORITIES AND PAPER BOOK FILED BY THE ASSESSEE. T HE ASSESSEE HAS INHERITED THE PROPERTY AND TITLE OF THE PROPERTY IS NOT UNDER DISPUTE. THE ASSESSEE SOLD THE HOUSE PROPERTY CONSISTING OF LAND AND BUILDING, LOCATED AT NO.1, TURN BULLS ROAD EXTENSION, NANDANA M, WHICH WAS ORIGINALLY PURCHASED BY SMT. PADMA SRINIVASAN ON 19 .02.1965. THE ASSESSEE ADOPTED THE FAIR MARKET VALUE OF THE PROPE RTY AT ` .49,63,000/- AS ON 01.04.1981 BASED ON THE VALUE DETERMINED BY T HE REGISTERED VALUER. THE REGISTERED VALUER WORKED OUT THE FAIR M ARKET VALUE OF THE LAND AT THE RATE ` .488/- PER SQ.FT. THE ASSESSING OFFICER HAS ADOPTED THE VALUE OF THE PROPERTY AT ` .37.5 PER SQ.FT. BASED ON THE JOINT SUB- REGISTRAR, DISTRICT REGISTRARS OFFICE, CHENNAI. TH E LD. CIT(APPEALS) I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .651 651651 651 & & & & 554 554554 554/M/ /M/ /M/ /M/1 11 12 22 2 8 REJECTED THE FAIR MARKET VALUE DETERMINED BY THE RE GISTERED VALUER ON THE GROUND THAT THE VALUER DETERMINED THE VALUATION WITHOUT CONSIDERING THE GUIDELINE VALUE AND THEREFORE, HE HAS REDUCED 5 0% FROM THE VALUE ADOPTED BY THE REGISTERED VALUER. IN THIS CASE, THE ASSESSEE HAS SUBMITTED BEFORE THE LOWER AUTHORITIES THAT PROPERT Y SALE COULD NOT BE IDENTIFIED BY THE ASSESSEES VALUE DESPITE HIS BEST EFFORTS UNTIL 1992 IN WHICH ASSESSEES LAND IS SITUATED. THEREFORE, THE V ALUE AS WELL AS CIT(APPEALS) FIND IT DIFFICULT TO DETERMINE FAIR MA RKET VALUE AS ON 01.04.1981. THE ASSESSING OFFICER ADOPTED FAIR MARK ET VALUE AS ON 01.04.1981 BASED ON THE GUIDELINE VALUE O THE LOCAL ITY OBTAINED FROM THE JOINT SUB-REGISTRARS OFFICE OF ` .37.5 PER SQ.FT. THE REGISTERED VALUER TAKING INTO COST INFLATION INDEX FOR 1992 AS ` .199/- WORKED OUT THE VALUE OF THE PROPERTY AT ` .372/- AND SINCE VALUE OF ASSESSEES LAND IS 30% HIGHER THAN THE ABOVE PROPERTY THE VALUE ARR IVED AT BY THE REGISTERED VALUER IS ` .488/- PER SQ.FT. THE CIT(APPEALS) SIMPLY REDUCED 50% OF THE VALUE ADOPTED BY THE REGISTERED VALUER AND DIRECT THE ASSESSING OFFICER TO DETERMINE THE FAIR MARKET VALUE WITHOUT ASSIGNING ANY PROPER REASON IS FOUND TO BE INCORREC T. THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY CONTENDED THAT THE GUID ELINE VALUE IS NOT REVISED YEAR BY YEAR AND THEREFORE, IT CANNOT BE TH E SOLE FACTOR TO I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .651 651651 651 & & & & 554 554554 554/M/ /M/ /M/ /M/1 11 12 22 2 9 DECIDE THE FAIR MARKET VALUE OF THE PROPERTY. WE FI ND THAT THIS ASPECT WAS NOT EXAMINED BY THE ASSESSING OFFICER AS WELL A S CIT(APPEALS). IN OUR OPINION, THIS ASPECT NEEDS TO BE CONSIDERED PRO PERLY. IN SO FAR AS THE FAIR MARKET VALUE DETERMINED BY THE REGISTERED VALUER IS CONCERNED, HE HAS NOT CONSIDERED THE GUIDELINE VALU E AT ALL. THEREFORE, THE REPORT OF THE REGISTERED VALUER CANNOT BE TAKEN AS SOLE BASIS FOR THE PURPOSE OF DETERMINING THE FAIR MARKET VALUE. T HE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN HIS PAPER BOOK P AGE 32, HE HAS GIVEN FIVE COMPARABLES AGAINST NEARBY AREA OF THE L AND SITUATED AND THE ASSESSING OFFICER MAY CONSIDER THE VALUE OF THE PROPERTY SITUATED IN BOAT CLUB AREA TO DETERMINE THE FAIR MARKET VALU E OF THE ASSESSEES PROPERTY. IN VIEW OF THE ABOVE, WE SET ASIDE THE OR DER PASSED BY THE CIT(APPEALS) AND REMIT THE MATTER BACK TO THE ASSES SING OFFICER TO CONSIDER THE ISSUE DE NOVO KEEPING IN MIND THE COMP ARABLES OF VALUATION REPORT FURNISHED BY THE ASSESSEE IN THE P APER BOOK AT PAGE 32 AFTER ALLOWING ADEQUATE OPPORTUNITY OF HEARING T O THE ASSESSEE. 12. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS THAT THE CIT(APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THA T ACCORDING TO SECTION 49(1) THE COST OF THE PREVIOUS OWNER IS TO BE ADOPTED FOR THE PURPOSE OF COST OF ACQUISITION AND THE BASE YEAR FO R THE PURPOSE OF COST I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .651 651651 651 & & & & 554 554554 554/M/ /M/ /M/ /M/1 11 12 22 2 10 INFLATION INDEX IS TO BE TAKEN AS THE YEAR IN WHICH THE PROPERTY WAS INHERITED BY THE ASSESSEE. THE CIT(APPEALS) AFTER C ONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FOLLOWING THE DECIS ION IN THE CASE OF ITO V. PS. KALYANA RAMAN DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN I.T.A. NO. 1935/MDS/2008 VIDE ORDER DAT ED 11.09.2009, DIRECTED THE ASSESSING OFFICER TO ALLOW INDEXATION BENEFIT FROM 01.04.1981. THE REVENUE HAS NOT FILED ANY HIGHER CO URTS DECISION TO CONTROVERT THE FINDINGS OF THE TRIBUNAL IN THE ABOV E SAID CASE. FILING APPEAL BEFORE THE HONBLE HIGH COURT CANNOT A SOLE GROUND TO TAKE DIFFERENT VIEW. ACCORDINGLY, WE CONFIRM THE FINDING S OF THE CIT(APPEALS) ON THIS ISSUE. 13. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLO WED AND ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 9 TH OF MAY, 2013 AT CHENNAI. SD/ - SD/ - (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 09.05.2013 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.