PAGE 1 OF 8 ITA NO.657/BANG/09 1 THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N L KALRA, A.M. AND SHRI GEORGE GEORGE K, J.M. ITA NO.657/BANG/2009 (ASST. YEAR 200-06) THE INCOME TAX OFFICER, WARD-7(3), BANGALORE. - APPELLANT VS SMT. MUNIAKKACHAMMA, NO.149, KODIHALLI, AIRPORT ROAD, BANGALORE. - RESPONDENT APPELLANT BY : SMT. V S SREELEKHA RESPONDENT BY : SHRI C RAMESH O R D E R PER GEORGE GEORGE K : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E CIT(A)'S ORDER DATED 13.4.2009. THE ASST. YEAR CONC ERNED IS 2005-06. 2. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE, AN INDIVIDUAL, SOLD THE FOLLOWING PROPERTIES DURING THE PREVIOUS YEAR: LOCATION OF THE PROPERTY DATE OF SALE SALE PROCEEDS NO.50/2, DEVARABISANAHALLI 27.05.2004 1,07,35,000/- NO.51/1, DEVARABISANAHALLI 27.05.2004 81,92,500/ - 1,89,27,500/- PAGE 2 OF 8 ITA NO.657/BANG/09 2 THE PROPERTY AT SY.NO.50/2 WAS PURCHASED BY THE RESPONDENT ON 24.3.1977. THE PROPERTY AT SY. NO.51/1 WAS PURCHASED BY SRI RAMAIAH, HUSBAND OF THE RESPONDENT ON 7.9.1977. ON HIS DEMISE, THE PROPERTY DEVOLVED TO H IS FIVE HEIRS, THE RESPONDENT BEING ONE OF THEM. IN THIS PROPERTY, THE RESPONDENT HAD 1/5TH SHARE. BOTH THE LANDS WERE SO LD ON 27.5.2004 FOR A CONSIDERATION OF RS.1,89,27,500/-. THE RESPONDENT INVESTED AN AMOUNT OF RS.19,50,000/- IN AN AGRICULTURAL LAND AND THEREFORE WAS ELIGIBLE FOR DE DUCTION U/S 54B OF THE ACT. ON THE BASIS OF AN ANNUAL INFORMATION REPORT IN REGARD TO THE ABOVE TRANSACTION, THE ASSESSING OFFI CER ISSUED A NOTICE U/S 142(1) OF THE ACT TO THE ASSESSEE. THE ASSESSEE, BEING AN ILLITERATE AND BELONGING TO A FAMILY OF AGR ICULTURIST, DID NOT UNDERSTAND THE SERIOUSNESS OF THE ISSUE. THE C ASE WAS POSTED ON 1.11.2007 AND 18.12.2007. THE ASSESSING OFFICER CONCLUDED THE ASSESSMENT U/S 144 DETERMINING THE EN TIRE SALE PROCEEDS OF RS.1,89,27,500/- AS INCOME OF THE RESPO NDENT. THE ISSUES ON WHICH THE ABOVE ORDER WAS APPEALED AGAINST BEFORE THE CIT(A) ARE AS UNDER:- 1) THE GROSS SALE PROCEEDS CANNOT BE THE INCOME OF THE RESPONDENT. CAPITAL GAIN HAS TO BE COMPLETED CONSIDERING THE COST OF INVESTMENT AND ALLOWING INDEXATION AS PROVIDED UNDER THE PROVISIONS OF THE ACT. PAGE 3 OF 8 ITA NO.657/BANG/09 3 2) IN RESPECT OF PROPERTY AT NO.51/1. DEVARABESANAHALLI, THE RESPONDENT HAS ONLY 1/5TH SHARE AND CAPITAL GAINS ONLY TO SUCH EXTENT CAN BE BROUGHT TO TAX. THE OTHER CO-OWNERS HAD ALREADY FILED RETURNS DECLARING THEIR SHARE OF INCOME. 3) DURING THE PREVIOUS YEAR, THE RESPONDENT HAS INVESTED IN AGRICULTURAL LAND AND THEREFORE, DEDUCTION U/S 54B IS REQUIRED TO BE ALLOWED. A DETAILED SUBMISSION INCORPORATING ALL THE ABOV E FACTS HAS BEEN MADE BEFORE THE COMMISSIONER OF INCO ME TAX (APPEAL), BANGALORE DURING THE APPELLATE PROCEEDING S. THE COMMISSIONER OF INCOME TAX (APPEAL) OBTAINED A REMA ND REPORT AND CALLED FOR FURTHER SUBMISSIONS. A REJOINDER WA S ALSO FILED BEFORE HIM. THE FACTS OF THE CASE, THE WRITTEN SUB MISSIONS AND THE REJOINDER TO THE REMAND REPORT HAVE BEEN BROUGH T OUT BY THE COMMISSIONER OF INCOME TAX (APPEAL) IN PARAS 4,5 & 6 OF HIS ORDER IN ITA NO.118/57/WARD-16(2)/CIT(A)-V/08-09 DA TED 13.4.2009. THE CIT(A) ALLOWED THE APPEAL OF ASSESS EE FOR HIS REASONS MENTIONED IN PARA 7, 7.1 AND 7.2 OF HIS ORD ER. 3. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BE FORE US RAISING FOLLOWING EFFECTIVE GROUNDS:- I) THE CIT(A) ERRED IN ALLOWING DEDUCTION TOWARDS THE COST OF THE PROPERTIES SOLD AND ALSO IN GIVING THE BENEFIT OF INDEXATION OF FAIR MARKET VALUE AS ON 1.4.1981 BASED ON THE EVIDENCE FURNISHED IN THE FORM OF REGISTERED VALUER'S REPORT WHICH WAS FURNISHED AT THE TIME OF APPELLATE PROCEEDINGS. PAGE 4 OF 8 ITA NO.657/BANG/09 4 II) WITHOUT PREJUDICE, THE COST OF LAND AS ADMITTED BY THE ASSESSEE BEFORE THE CIT(A) IS ON THE HIGHER SIDE. III) THE CIT(A) ERRED IN ALLOWING DEDUCTION U/S 54B ON THE BASIS OF THE CLAIM MADE BY THE ASSESSEE AT THE TIME OF APPELLATE PROCEEDINGS WITHOUT REQUIRING THE ASSESSEE TO PROVE THE LAND SOLD WAS USED FOR AGRICULTURAL OPERATIONS AND WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAD NOT MADE THE CLAIM FOR THE DEDUCTION AT THE TIME OF ASSESSMENT. 4. THE LEARNED DR SUBMITTED THAT THE FAIR MARKET VALUE ADOPTED BY THE ASSESSEE AND ACCEPTED BY THE CIT (A) AS ON 1.4.1981 IS VERY MUCH ON THE HIGHER SIDE AND IS WITH OUT ANY BASIS. SHE ALSO SUBMITTED THAT THE CIT(A) HAS ERRED IN GRA NTING THE BENEFIT OF DEDUCTION U/S 54B OF THE ACT. 5. PER CONTRA, THE LEARNED AR REITERATED HIS SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND S TRONGLY RELIED ON THE FINDINGS OF THE CIT(A). 6. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD, WE RENDER OUR FINDINGS GROUND-W ISE AS UNDER:- (I) THE CIT(A) ERRED IN ALLOWING DEDUCTION TOWARDS THE COST OF THE PROPERTIES SOLD AND ALSO IN GIVING THE BENEFIT OF INDEXATION OF FAIR MARKET VAL UE AS ON 1.4.1981 BASED ON THE EVIDENCE FURNISHED IN THE FORM OF REGISTERED VALUER'S REPORT WHICH WAS FURNISHED AT THE TIME OF APPELLATE PROCEEDINGS. PAGE 5 OF 8 ITA NO.657/BANG/09 5 6.1 IF THE CAPITAL ASSET IS ACQUIRED PRIOR TO 1.4 .1981, THE FAIR MARKET VALUE AS ON 1.4.1981 WOULD BE THE COST. AS PER THE PROVISIONS OF THE ACT, THERE IS NO ERROR IN THE COM PUTATION SUBMITTED BEFORE THE COMMISSIONER OF INCOME TAX (AP PEAL) AND ACCEPTED BY THE CIT(A). THE RESPONDENT ASSESSEE SU PPORTED HER CLAIM OF FAIR MARKET VALUE WITH THE VALUATION R EPORT OF REGISTERED VALUER. THIS WAS SUBMITTED ALONG WITH T HE WRITTEN SUBMISSION DATED 10.2.2009. THE SAME WAS FORWARDED TO THE AO FOR HIS REPORT. THE ASSESSING OFFICER HAS SENT THE REMAND REPORT VIDE HIS LETTER DATED 13.2.2009 AND HAS NOT OBJECTED TO THE REGISTERED VALUER'S REPORT AND HENCE VALUE ADOP TED BY COMMISSIONER OF INCOME TAX (APPEAL) IS IN ORDER. I N VIEW OF THIS, WE ARE OF THE VIEW THAT THERE IS NO ERROR IN THE DECISION OF THE COMMISSIONER OF INCOME TAX (APPEAL). THE COMMISSIONER OF INCOME TAX (APPEAL) IN PARA 7.1 OF HIS ORDER HAS DISCUSSED THE BASIS OF THE VAL UATION OF THE REGISTERED VALUER, AND ON FACTS, HAS ACCEPTED THE E STIMATION OF THE FAIR MARKET VALUE. AS PER THE DECISION OF HIGH COURT OF HIMACHAL PRADESH IN THE CASE OF CWT V RAGHUNATH SIN GH THAKUR (2008) 216 CTR 248 (HP), THE VALUATION SUPPORTED BY THE REPORT OF THE REGISTERED VALUER SHOULD BE RELIED UPON UNLE SS THE SAME IS REFERRED TO A VALUATION OFFICER. WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF THE CIT(A) IN PARA 7 AND 7.1 OF HIS ORDER AND HENCE, TH E ABOVE GROUND OF REVENUE IS DISMISSED. PAGE 6 OF 8 ITA NO.657/BANG/09 6 7. (II) WITHOUT PREJUDICE, THE COST OF LAND AS ADMITTED BY THE ASSESSEE BEFORE THE CIT(A) IS ON THE HIGHER SIDE. 7.1 THE COST AS ON 1.4.1981 CLAIMED BY THE RESPONDE NT ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX (APP EAL) IS SUPPORTED BY THE VALUATION REPORT OF A REGISTERED VA LUER. THIS WAS SENT TO THE ASSESSING OFFICER BEFORE THE COMMIS SIONER OF INCOME TAX (APPEAL) TOOK A DECISION IN THE MATTER. THE ASSESSING OFFICER HAS SENT A REMAND REPORT VIDE HIS LETTER DATED 13.2.2009 WHEREIN HE HAS NOT PASSED ANY COMMENTS ON THE ISSUE OF VALUATION. THE COMMISSIONER OF INCOME TAX (APPE AL) AFTER CONSIDERING THE EVIDENCES AND THE VALUATION REPORT HAS UPHELD THE CLAIM OF THE RESPONDENT ASSESSEE. THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEAL) IN PARA 7 & 7.1 OF HIS ORDER HAS NOT BEEN CONTROVERTED BY LEARNED DR, HENCE, THE ABOVE GROUND IS DISMISSED. 8. (III) THE CIT(A) ERRED IN ALLOWING DEDUCTION U/S 54B ON THE BASIS OF THE CLAIM MADE BY THE ASSESSEE AT THE TIME OF APPELLATE PROCEEDINGS WITHOUT REQUIRING THE ASSESSEE TO PROVE THE LAND SOLD WAS USED FOR AGRICULTURAL OPERATIONS AND WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAD NOT MADE THE CLAIM FOR THE DEDUCTION AT THE TIME OF ASSESSMENT. 8.1 THE ISSUE OF LONG TERM CAPITAL GAIN AROSE FOR THE REASON THAT THE LAND WAS SITUATED WITHIN EIGHT KILO METERS FROM THE CITY LIMITS OF BANGALORE. THE FACT, THAT THE LO CATION OF THE PAGE 7 OF 8 ITA NO.657/BANG/09 7 LAND AND THE PURPOSE FOR WHICH IT WAS BEING USED, H AS BEEN CERTIFIED BY THE REGISTERED VALUER. COPY OF THE VALU ATION REPORT ALONG WITH WRITTEN SUBMISSIONS WAS PROVIDED TO THE ASSESSING OFFICER. THE AO HAS SENT A REMAND REPORT WHEREIN H E HAS NOT COMMENTED ON THIS ISSUE. THE FACT REMAINS THAT THE LANDS WERE BEING USED FOR AGRICULTURAL PURPOSES AND OUT OF THE PROCEEDS, INVESTMENTS WERE MADE IN AN AGRICULTURAL LAND. THE COMMISSIONER OF INCOME TAX (APPEAL) HAS CONSIDERED ALL THE EVIDE NCES AND ALLOWED THE RELIEF. HENCE, WE DO NOT FIND ANY INFI RMITY IN THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEAL) IN PARA 7.2 OF HIS ORDER. 9. FOR THE AFORESAID REASONS, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND WE HOLD THE SAME AS CORRECT AND IN ACCORDANCE WITH LAW. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 11TH DECEMBER, 2009 . SD/- SD/- (N L KALRA) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED:11/12/2009 PAGE 8 OF 8 ITA NO.657/BANG/09 8 COPY TO :- 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT(A) CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR 6. GF 7. GF, ITAT, DELHI BENCH BY ORDER MSP/10/12/ ASSISTANT REGISTRAR, ITAT, BANGALORE.