Mr.Rajeev Krishna Murthy Purnaiya , Bangalore V. Assistant Commissioner of Income Tax Circle-6(1), Bangalore

ITA 586/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7459 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 15-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI
• Keywords: Principle of natural justice; Fair market value
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N.V VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.586/ BANG/2017 (ASST. YEAR 2005-06) MR. RAJEEV KRISHNAMURTHY PURNAIYA, NO.39, PURNA KRUPA, CRESENT ROAD, BENGALURU. . APPELLANT PAN AFFPP5977D VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 6(1), BENGALURU. . RESPONDENT APPELLANT BY : SHRI BALRAM R RAO, ADVOCATE RESPONDENT BY : SMT. PADMAMEENAKSHI, JCIT DATE OF HEARING : 11-10-2017 DATE OF PRONOUNCEMENT : 13-10-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) - 1, BANGALORE DATED 8/12/2016 FOR ASST. YEAR 2005-06. 2. BRIEFLY STATED, THE FACTS OF THE CASE RELEVANT F OR THIS APPEAL ARE AS UNDER:- ITA NO.586/B/17 2 2.1 THE ASSESSEE FILED HIS RETURN OF INCOME FOR ASS T. YEAR 2005-06 ON 24/3/2006 DECLARING INCOME OF RS.58,77,923/- ON ACCOUNT OF SALARY, HOUSE PROPERTY, SHORT TERM CAPITAL GAINS ( STCG) ON SALE OF MUTUAL FUNDS AND LONG TERM CAPITAL LOSS (LTCL) OF RS.12,57,986/- ON ACCOUNT OF SALE OF UNDIVIDED SHARE OF LAND AT N O.51, PALACE ROAD, BANGALORE OF WHICH THE ASSESSEE WAS ONE OF THE 4 CO -OWNERS; THE OTHERS BEING SHRI SANJEEV PURNAIYA, SHRI MADHAV PUR NAIYA AND RAJEEV PURNAIYA, EACH HAVING AN EQUAL SHARE OF 25% THEREIN. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT W AS COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT) VIDE ORDER DATED 13/11/2007,WHEREINTHE TOTAL INCOME OF THE ASS ESSEE WAS DETERMINED AT RS.76,55,677/-; WHICH WAS INCLUSIVE O F THE ASSESSEES SHARE IN THE LONG TERM CAPITAL GAIN (LTCG) ON SAL E OF THE SAID PROPERTY BEING COMPUTED AT RS.51,67,140/-. THE ONL Y ISSUE OF ADDITION OF RS.51,67,140/- PERTAINED TO THE COMPUTA TION OF THE ASSESSEES SHARE OF LTCG ON SALE OF UNDIVIDED SHAR E IN LAND AT 51, PALACE ROAD, BANGALORE FOR WHICH THE ASSESSEE HAD D ECLARED LTCL OF RS.12,57,986/- IN THE RETURN OF INCOME FILED FOR AS ST. YEAR 2005-06. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 13/1 1/2007 FOR ASST. YEAR 2005-06, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A)-I, BANGALORE, WHO DISMISSED THE ASSESSEES A PPEAL VIDE ORDER DATED 8/12/2016. 3.1 THE ASSESSEE, BEING AGGRIEVED BY THE ORDER OF T HE CIT(A)-1, BANGALORE DATED 8/12/2016 HAS PREFERRED THIS APPEAL , WHEREIN HE HAS RAISED THE FOLLOWING GROUNDS:- ITA NO.586/B/17 3 1.THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I, BENGALURU DATED 08.12.2016 IN ITA NO. 11/CIT(A)-1/BR/14-L5FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS AND IN TH E CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT TH E VALUE ARRIVED ON REVERSE INDEX METHOD WERE UPHELD BY VARI OUS HIGHER AUTHORITIES IN CASE IF THE VALUE AS AT 01.04 .1981 IS NOT AVAILABLE. 3 THE CIT(A) CONFIRMING THE ORDER PASSED U/S 143(3) W.R.T THE COST OF PURCHASE AS RS.126 PER SQ.FT. AS AT 01.04.1981 EVEN THOUGH THE HONORABLE ITAT HAVE CONSIDERED RS.200 PER SQ FT. IN THE OTHER CO-OWNERS HAND, WITHOUT ASSIGNING PROPER REASONS AND JUSTIFIC ATION IS AGAINST EQUITY AND LAW. 4 THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE HONORABLE ITAT IN THE HANDS OF OTHER CO- OWNERS HAV E HELD THAT THE COST AS ON 01.04.1981 TO BE ADOPTED A T RS.200 PER SQ.FT. AGAINST RS. 126 PER SQ.FT. AS ADO PTED BY THE ASSESSING OFFICER. 5 THE CIT(A) FAILED TO APPRECIATE THAT THERE WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING THE IMPUGNE D ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRIN CIPLES OF NATURAL JUSTICE IS NULLITY IN LAW. ITA NO.586/B/17 4 6 THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS/ARGUMENTS AT THE TIME OF HEARING. CAPITAL GAINS ON SALE OF PROPERTY AT 51, PALACE ROAD, BANGALORE 3.2 THE GROUNDS RAISED BY THE ASSESSEE (SUPRA) ALL PERTAIN TO SOLE ISSUE OF THE COMPUTATION OF THE ASSESSEES SHARE OF 25% OF THE CAPITAL GAINS ARISING ON SALE OF THE SAID PROPERTY AT 51, P ALACE ROAD, BANGALORE, ALONG WITH THREE OTHER CO-OWNERS. THE A SSESSEE CONTENDS THAT THE LD CIT(A) HAD GROSSLY ERRED IN UPHOLDING T HE COST OF PURCHASE OF THE SAID PROPERTY AT RS.126/- PER SQ. FT. AS ON 1/4/2981 WITHOUT ASSIGNING ANY REASON EVEN THOUGH IT WAS BROUGHT TO HIS NOTICE THAT A CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD THE COS T OF PURCHASE AT RS.200/- PER SQ. FT. IN THE HANDS OF THE OTHER CO-O WNERS AS ON 1/4/1981 IN ITS ORDER IN ITA NOS.1361 & 1386/BANG/2011 DATED 25/4/2014. IT WAS PRAYED BY THE LD AR THAT THE ASSESSEES CASE IS COVERED BY THE AFORESAID ORDER OF THE TRIBUNAL IN CASE OF THE OTHE R CO-OWNERS, MADHAV PURNAIYA AND SANJEEV PURNAIYA (SUPRA) AND TH EREFORE THE COST AS ON 1/4/1981 BE ADOPTED AT RS.200 PER SQ. FT. AS AGAINST RS.126 PER SQ. FT. ADOPTED BY THE ASSESSING OFFICER (AO). 3.3. PER CONTRA, THE LD DR FOR REVENUE SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. 3.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENT CITED. THE FACTS OF THE MATTER AS EMANATE FROM THE ITA NO.586/B/17 5 RECORD ARE THAT THE ASSESSEE HAD INHERITED PROPERTY AT NO.51, PALACE ROAD, BANGALORE ALONG WITH HIS MOTHER AND TWO BROTH ERS WHICH WAS TRANSFERRED IN THE YEAR UNDER CONSIDERATION I.E. AS SESSMENT YEAR 2005- 06. THE ASSESSEE IN HIS RETURN OF INCOME HAD DECLA RED A LTCL OF RS.12,57,986 ON ACCOUNT OF SALE OF HIS SHARE OF THE UNDIVIDED SHARE OF LAND IN THE SAID PROPERTY BY ADOPTING THE FMV AS ON 1.4.1981 AT RS.700 PER SQ. FT. THE ASSESSEE MADE THIS ESTIMATI ON OF FMV AS ON 1.4.1981 AT RS.700 PER SQ. FT. USING THE COST INFLA TION INDEX IN THE REVERSE DIRECTION ON THE BASIS OF THE REGISTERED SA LE DEED DT.31.3.2005. THE ASSESSING OFFICER, IN THE CASE ON HAND DID NOT AGREE WITH THE METHOD ADOPTED BY THE ASSESSEE TO ESTIMATE THE FMV AS ON 1.4.1981. THE ASSESSEE FOUND THAT IN THE CASE OF THE ASSESSEE 'S BROTHER, SRI RAJEEV PURNAIYA, WHO ALSO HAD A SHARE IN THE SAME P ROPERTY, THE ACIT, CIRCLE 6(1), BANGALORE HAD MADE A REFERENCE T O THE DISTRICT VALUATION OFFICER(DVO) AND THE DVO VIDE HIS REPORT DT.30.3.2007 ESTIMATED THE FMV OF THE SAID PROPERTY AS ON 1.4.19 81 AT RS.126 PER SQ. FT. THE ASSESSING OFFICER, IN THE CASE ON HAND , ADOPTED THE SAME VALUE; VIZ. RS.126 PER SQ. FT. AS FMV AS ON 1.4.198 1, AS ESTIMATED BY THE DVO, AND COMPUTED THE LTCG OF THE ASSESSEE AT R S.51,67,140. 3.4.2 WE FIND THAT THIS VERY SAME ISSUE ON IDENTICA L FACTS PERTAINING TO THE COMPUTATION OF LTCG/LTCL ON SALE OF THE SAID PR OPERTY SITUATED AT 5/1, PALACE ROAD, BANGALORE IN THE CASES OF TWO OTHER CO-OWNERS, VIZ., SHRI SANJEEV PURNAIYA AND SHRI MADHAV PURNAIY A HAS BEEN CONSIDERED AND ADJUDICATED BY A CO-ORDINATE BENCH O F THIS TRIBUNAL IN ITA NO.586/B/17 6 ITS ORDER IN ITA NOS.1361 & 1386/BANG/2011 DATED 25 /4/2014 FOR ASST. YEAR 2005-06. AT PARA 5.4 OF ITS ORDER (SUP RA) THE CO-ORDINATE BENCH WAS OF THE VIEW THAT THE COST OF PURCHASE OF THE SAID PROPERTY AS ON 1/4/1981 TO BE RS.200 PER SQ. FT AND HELD AS UND ER:- 5.4 THE ONLY ISSUE BEFORE US FOR ADJUDICATION IS WHETHER THE FMV OF THE SAID PROPERTY AS ON 1.4.1981 HAS TO BE ADOPTED AT RS.126 PER SQ. FT. AS DONE BY THE ASSESSING OFFICER OR RS.200 PER SQ. FT. AS DIRECTED BY THE LEARNED CIT (APPEALS). EVIDENTLY, BOTH THESE VALUES ARE ESTIMATES ONLY. THE DVO IN HIS REPORT HAS ESTIMATED THE FMV AT RS.126 BASED ON THE SALE PRICE OF CERTAIN PROPERTIES NEARBY. AS PER THE DETAILS ON RECORD, I T IS A MATTER OF FACT THAT THE TWO PROPERTIES USED FO R COMPARISON BY THE DVO ARE SMALL PROPERTIES AND NOT COMPARABLE WITH THE SIZE OF THE PROPERTY IN QUESTION. WE ALSO FIND THAT WHILE THE DVO HIMSELF HAS MENTIONED THAT THE SAID PROPERTY IS IN A PRIME LOCALITY, HE HAS NOT FACTORED IN OR GIVEN DUE WEIGHTAGE TO THE SAME IN HIS REPORT. WE ALSO FIND THAT THE ASSESSING OFFICER, IN HIS ORDER OF ASSESSMENT, HAS NOTED THAT COMMERCIAL PROPERTY IN AN AREA LIKE KEMPEGOWDA ROAD WAS FETCHING* THE PRICE OF RS.200 PER SQ. FT., BASED ON PROPERTIE S ITA NO.586/B/17 7 REGISTERED IN 1981. THIS BEING THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ESTIMATION OF RS.200 PER SQ. FT. AS THE FMV AS ON 1.4.1981 FOR THIS LAND ADOPTED BY THE LEARNED CIT (APPEALS) TO TAKE INTO ACCOUNT THE FACT OF THE LARGE SIZE AND LOCATION OF THE PROPERTY IN A PRIME AREA APPEARS TO BE IN ORDER. WE ALSO NOTE THAT BEFORE US, REVENUE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO CONTROVERT THE FINDING OF THE LEARNED CIT (APPEALS). IN THIS VIEW OF THE MATTER, FINDING NO REASON TO INTERFERE WITH THE FINDING OF THE LEARNED CIT (APPEALS), WE CONCUR WITH AND, THEREFORE, UPHOLD HIS ORDER. 3.4.3 FOLLOWING THE AFORESAID ORDER OF THE CO-ORDIN ATE BENCH OF THIS TRIBUNAL IN THE CASES OF MADHAV PURNAIYA AND SANJEE V PURNAIYA IN ITA NOS.1361 & 1386/BANG/2011 DATED 25/3/2014 FOR A SST. YEAR 2005-06 WHICH COVERS THIS ISSUE SQUARELY IN FAVOUR OF THE ASSESSEE, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON T HIS ISSUE AND DIRECT THE AO TO ADOPT RS.200/- PER SQ. FT. AS THE FMV AS ON 1/4/1981 WHILE RE-COMPUTING THE ASSESSEES SHARE OF LTCG/LTCL ON S ALE OF THE SAID PROPERTY AT 51, PALACE ROAD, BANGALORE. WE HOLD AN D DIRECT ACCORDINGLY. CONSEQUENTLY, THE GROUND RAISED BY TH E ASSESSEE ARE ALLOWED. ITA NO.586/B/17 8 4. IN THE RESULT, THE ASSESSEES APPEAL FOR ASST. Y EAR 2005-06 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH OCTOBER, 2017 . SD/- SD/- (N.V VASUDEVAN) (JASO N P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEM BER BANGALORE DATED : 13/10/2017 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVAT E SECRETARY, ITAT, BANGALORE