DCIT, Trivandrum V. Shri Santhosh Wilson, Trivandrum

ITA 796/COCH/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58331 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 16-02-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 02-07-2008
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: P VENUGOPAL
• Keywords: Capital asset; Opportunity of being heard; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE: SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.796/COCH/2008 ASSESSMENT YEAR : 2005-06 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, TRIVANDRUM. SHRI SANTHOSH WILSON, T.C. 2/3240, ED HEIGHTS, OPP. TO LIC BUILDING, PATTOM POST, TRIVANDRUM. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: SMT. VIJAYAPRABHA, JR. DR RESPONDENT BY: SHRI P.VENUGOPAL, FCA DATE OF HEARING: 16/02/2012 DATE OF PRONOUNCEMENT: 29/02/2012 ORDER PER SHRI B.R.BASKARAN, ACCOUNTANT MEMBER:- THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 04-03-2008 PASSED BY THE LD. CIT(A)-I, KOCHI AND IT RELATES TO THE ASSESSMENT YEAR 2005-06. 2. THE EFFECTIVE GROUNDS OF APPEAL RAISED BY THE RE VENUE READ AS UNDER:- 2. THE CIT(A) ERRED IN DIRECTING THE ASSESSING O FFICER TO ADOPT THE FAIR MARKET VALUE OF PROPERTY @ 62000/- BASED ON TRANSACTION I N 1990 INSTEAD OF THE FAIR MARKET VALUE AS ON 01.04.1981 ADOPTED BY THE ASSES SING OFFICER. 3. THE CIT(A) ERRED IN ADMITTING ADDITIONAL EVI DENCES PRODUCED BEFORE THE CIT(A) WITHOUT GIVING AN OPPORTUNITY TO THE ASSESS ING OFFICER IN CONTRAVENTION OF THE PROVISIONS OF RULE 46A OF THE INCOME TAX RULES . 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE CONSTRUCTED A BUILDING COMPLEX IN THE NAME ED HEIGHTS ON A LAND ADMEASURING 9280 SQ. FT. AND SOLD FLOOR SPACES TO VARIOUS PARTIES. THE ASSESSEE COMP UTED SHORT TERM CAPITAL GAINS ON SALE I.T.A. NO.796 /COCH/2008 2 OF FLOOR SPACES AS WELL AS ON SALE OF PROPORTIONATE SHARE IN THE LAND. SINCE, THE LAND HAD BEEN ACQUIRED PRIOR TO 1.4.1981, THE ASSESSEE O PTED TO ADOPT FAIR MARKET VALUE AS ON 1.4.1981 FOR THE PURPOSE OF COMPUTING CAPITAL GA INS, AS PER THE PROVISIONS OF S. 55 OF THE ACT. HOWEVER, THE ASSESSEE ADOPTED DIFFERENT COST AS ON 1.4.1981 FOR DIFFERENT PORTION OF PROPORTIONATE LAND SOLD TO THE BUYERS OF FLOOR SPACES. THE FOLLOWING TABLE EXTRACTED IN THE ASSESSMENT ORDER HIGH LIGHT THIS F ACT CLEARLY. NAME OF THE PARTY T.C.NO. LAND AREA PLINTH AREA FMV SALE PRICE ( `) MR. GOUTHAMAN 2/3240-2 0.58 CENTS 1161 SQ. FT. 2,25 ,000 3,500,000 MR. SITARAM 2/3240-7 0.70 CENTS 1420 SQ. FT. 2,10,0 00 3,350,000 MR. ABUBAKER 2/3240-5 0.16 CENTS 331 SQ. FT. 3 6,500 500,000 MR. RAVEENDRAN NAIR 2/3240-6 0.16 CENTS 331 SQ. FT. 36,500 500,0 00 4. THE ASSESSING OFFICER DID NOT ACCEPT THE VALUE A DOPTED AS ON 1.4.81 ADOPTED BY THE ASSESSEE. HE ALSO REJECTED THE CLAIM OF THE AS SESSEE TO ADOPT DIFFERENT RATES FOR DIFFERENT PORTIONS OF LAND. BEFORE THE AO, THE ASS ESSEE PLACED RELIANCE ON A SALE DOCUMENT REGISTERED IN 1982 TO SUPPORT THE VALUE AD OPTED BY HIM. HOWEVER, THE AO MADE ENQUIRIES WITH THE SRO AND ADOPTED THE RATE OF ` 4000 PER CENT OF LAND AND ACCORDINGLY RECOMPUTED THE INCOME FROM CAPITAL GAIN S. IT IS PERTINENT TO NOTE THAT BOTH THE ASSESSEE AS WELL AS THE ASSESSING OFFICER DEDUC TED THE INDEXED VALUE OF COST OF LAND FOR THE PURPOSE OF ARRIVING AT THE SHORT TERM CAPIT AL GAINS. 5. IN THE APPEAL BEFORE THE LD. CIT(A), THE FIRST A PPELLATE AUTHORITY HELD THAT THE VALUE OF ` 62,500/- PER CENT ADOPTED BY THE ASSESSEE AS THE CO ST AS ON 1.4.1981 IS REASONABLE. IN ARRIVING AT THIS CONCLUSION, THE LD. CIT(A) PLACED RELIANCE ON THE CONVEYANCE DEED NO. 3305/90 WHICH WAS PRODUCED BEFO RE HIM. THE CONTENTION OF THE DEPARTMENT IS THAT THE SAID DOCUMENT WAS PRODUCED B EFORE THE LD. CIT(A) FOR THE FIRST TIME AND THE FIRST APPELLATE AUTHORITY HAS FAILED T O CONFRONT THE SAME WITH THE ASSESSING OFFICER AND HENCE, THERE IS VIOLATION OF RULE 46A O F INCOME TAX RULE. THE DEPARTMENT I.T.A. NO.796 /COCH/2008 3 IS ALSO OBJECTING TO THE DECISION OF THE LD CIT(A) IN APPROVING THE COST AS ON 1.4.1981 AT RS.62,500/- PER CENT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE RECORDS. WE NOTICE THAT THE ASSESSEE INITIALLY PLACED RELIANCE ON A DOCUMENT REGISTERED IN 1982 BEFORE THE ASSESSING OFFICER TO SUPPORT THE COST AS ON 1.4.1981 ADOPTED BY HIM. HOWEVER, BEFORE THE LD. CIT(A) HE HAS PLACED RELIAN CE ON DOCUMENT NO. 3305/90 AND APPARENTLY THE LD,. CIT(A) DID NOT CONFRONT THE SAM E WITH THE ASSESSING OFFICER. BEFORE US, THE ASSESSEE HAS FILED ONE MORE DOCUMENT NO. 37 38/83, WHICH WAS NOT PRODUCED BEFORE BOTH THE AUTHORITIES BELOW. HENCE, IN OUR V IEW, THE ISSUE OF DETERMINATION OF FAIR MARKET VALUE AS ON 1.4.1981 NEEDS TO BE EXAMINED AF RESH ON THE BASIS OF THE DOCUMENTS FILED BEFORE THE LD. CIT(A) AS WELL AS BE FORE US. 7. IT IS ALSO PERTINENT TO MENTION HERE THAT TH E INDEXATION BENEFIT IS AVAILABLE AS PER THIRD PROVISO TO S. 48 WHILE COMPUTING INCOME FROM LONG TERM CAPITAL GAINS. IN THE INSTANT CASE, BOTH THE ASSESSEE AS WELL AS THE ASSE SSING OFFICER HAS COMPUTED THE SHORT TERM CAPITAL GAINS ON SALE OF LAND, THOUGH IT IS A LONG TERM CAPITAL ASSET. HENCE, THERE IS A MISTAKE IN APPLYING THE CORRECT PROVISIONS OF LAW ALSO. THE COST OF LAND AS ON 1.4.1981 NEEDS TO BE STEPPED UP IN TUNE WITH THE CO ST INFLATION INDEX IN ORDER TO ARRIVE AT THE INCOME FROM LONG TERM CAPITAL GAINS. HENCE THE INDEXATION BENEFIT IS ALSO LINKED WITH THE COST AS ON 1.4.1981 THAT SHOULD BE DETERMI NED. HENCE, IN OUR VIEW, IT IS NECESSARY TO APPLY CORRECT PROVISIONS OF LAW IN COM PUTING THE CAPITAL GAIN, WHETHER IT IS DETERMINED AS SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE M ATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DETERMINE THE FAIR MARKET VALUE AS O N 1.4.1981 ON THE BASIS OF DOCUMENTS THAT WERE PRODUCED BEFORE THE LD CIT(A) AS WELL AS THE TRIBUNAL AND ALSO ON THE BASIS OF ANY OTHER MATERIAL THAT MAY BE PRODUCED BY THE A SSESSEE AND COMPUTE THE CAPITAL GAINS IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION, THE ASSESSEE SHOULD BE GIVEN NECESSARY OPPORTUNITY OF BEING HEARD. I.T.A. NO.796 /COCH/2008 4 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ON 29-02-2012 SD/- SD/- (N.R.S.GANESAN) (BR BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER ERNAKULAM DATED: 29TH FEBRUARY, 2012 GJ COPY TO 1 SHRI SANTHOSH WILSON, T.C. 2/3240, ED HEIGHTS, OPP . TO LIC BUILDING, PATTOM POST, TRIVANDRUM. 2 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CI RCLE, TRIVANDRUM. 3 THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, KOCHI. 4 THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI 5. THE DR, ITAT, COCHIN BENCH. 6 GUARD FILE. BY ORDER A SSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH