Smt. Mangamma, Bangalore V. DCIT, Bangalore

ITA 797/BANG/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0366 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: H GURUSWAMY ITP
• Keywords: Sale consideration of property below Jantri Value; Valuation report
• Section: 50C; 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI A .K. GARODIA , ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 797 /BANG/201 4 (ASSESSMENT YEAR : 20 07 - 08 ) SMT. MANGAMMA, W/O SHRI N. VENKATARAMAPPA, NO.57/4, 9 T H MAIN ROAD, SRIRAMAPURAM, BANGALORE - 560 021 PAN APMPM 6337 D VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 7(1), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SHRI H. GURUSWAMY, ITP. RESPONDENT BY : DR.P.K. SRIHARI, ADDL. CIT (D.R.) DATE OF H EARING : 24.05. 2016. DATE OF P RONOUNCEMENT : 30.5. 201 6 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 3/3/2014 OF COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2007 - 08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE APPELLATE ORDER DT.3.3.2014 PASSED BY THE LEARNED CIT (APPEALS) II, BANGALORE IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO. 797 /BANG/ 2014 2. THE LEARNED CIT (APPEALS) II, BANGALORE HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE CAPITAL GAINS BY TAKING THE COST OF CONSTRUCTION AT RS.1,20,0 00 PER SQ. WITHOUT CONSIDERING THE COST OF CONSTRUCTION VALUED BY THE APPROVED VALUER AT RS.2,75,000 PER SQ EXCLUSIVE OF THE COST OF OTHER AMENITIES. 3. THE LEARNED CIT (AP PEALS) II, BANGALORE HAS ERRE D IN HOLDING THAT THE COST OF CONSTRUCTION WAS TO B E TAKEN AT RS.1,20,000 PER SQ WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER IN THE REMAND REPORT DT.21.2.2012 HAS ACCEPTED THE VALUE AT RS.1,50,000 PER SQ EXCLUSIVE OF THE VALUE RELATING TO THE OTHER AMENITIES AS CERTIFIED BY THE APPROVED VALUE R. 4. THE LEARNED CIT (APPEALS) II, BANGALORE HAS ERRED IN NOT ADJUDICATING THE GROUNDS URGED BY THE APPELLANT AS REGARDS THE QUANTUM OF DEDUCTION ADMISSIBLE UNDER SECTION 54F OF THE ACT. 5. THE LEARNED CIT (APPEALS) II, BANGALORE HAS ERRED IN HOLD ING THE COST OF CONSTRUCTION WAS T BE TAKEN AT RS.1,20,000 PER SQUARE WITHOUT ANY SUPPORTING MATERIAL EVIDENCE IGNORING THE VALUATION REPORT OF AN APPROVED VALUER. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND DELETE ANY OF THE GROUNDS AT THE T IME OF HEARING. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT RESPECTFULLY PRAYS THAT YOUR HON'BLE AUTHORITY MAY BE PLEASED TO PASS AN ORDER SETTING A SIDE THE ORDERS OF THE AUTHORITIES BELOW AND TO DIRECT THE ASS ESSING OFFICER TO ALLOW THE DEDUCTION UNDER SECTION 54F OF THE ACT AMOUNTING TO RS.1,00,75,940 AS CERTIFIED BY AN APPROVED VALUER IN THE VALUATION REPORT, DATED 3.12.2010 AND FURTHER BE PLEASED TO PASS SUCH OTHER ORDERS GRANTING SUCH OTHER RELIEF TH A T YOU R HON'BLE AUTHORITY MAY DEEM FIT IN THE INTEREST OF EQUITY AND JUSTICE. 3. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE SOLD A PROPERTY BEARING NO.104 (BBMP KATHA NO.5 PROPERTY ID 47 - 57 - 5), NEW KALISIPALYA EXTENSION LAYOUT, 4 TH CROSS, BANGALO RE . THE SALE CONSIDERATION AS PER THE SALE DOCUMENT IS SHOWN AS RS.60 LACS. THE ASSESSEE HAS REPORTED A LONG TERM CAPITAL GAIN OF 3 ITA NO. 797 /BANG/ 2014 RS.8,85,244/ - IN THE RETURN OF INCOME. THE AO RECOMPUTED THE CAPITAL GAIN BY ADOPTING THE SALE VALUE CONSIDERATION OF THE PROP ERTY AS DETERMINED BY THE STAMP DUTY AUTHORITIES AT RS.1,01,81,000/ - . THUS, THE AO HAS TAKEN INTO CONSIDERATION THE GUIDANCE VALUE OF THE PROPERTY AS DETERMINED BY THE SUB - REGISTRAR IN TERMS OF SECTION 50C OF INCOME TAX ACT, 1961 ( IN SHORT THE ACT ). THE AO ALLOWED THE EXEMPTION UNDER SECTION 54F OF THE ACT TO THE EXTENT OF RS.26,55,734/ - FOR THE INVESTMENT OF RS.45 LACS MADE IN THE CAPITAL GAIN ACCOUNT SCHEME OUT OF THE SALE CONSIDERATION. CONSEQUENTLY THE AO BROUGHT TO TAX THE BALANCE AMOUNT OF CAPIT AL GAIN OF RS.50, 66, 244/ - . AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(APPEALS) AND CONTENDED THAT THE ASSESSEE HAS INVESTED A SUM OF RS.1,01,81,000/ - IN CONSTRUCTION OF A NEW HOUSE WHICH IS WITHIN THE TIM E PERIOD AS PER SECTION 54F OF THE ACT. THUS, THE ASSESSEE CLAIMED THE DEDUCTION UNDER SECTION 54F FOR THE FULL AMOUNT OF CAPITAL GAIN DETERMINED BY THE AO. THE CIT(A) ISSUED A REMAND ORDER AND AFTER CONSIDERING THE REMAND REPORT HAS ESTIMATED THE COST OF CONSTRUCTION OF THE HOUSE AT THE RATE OF RS.1,20,000/ - PER SQUARE THOUGH THE SPECIFIC UNIT WHETHER FEET OR YARD OR METER HAS NOT BEEN MENTIONED. THUS, THE GRIEVANCE OF THE ASSESSEE IS ONLY REGARDING THE ESTIMATED 4 ITA NO. 797 /BANG/ 2014 COST OF CONSTRUCTION AS DIRECTED BY TH E CIT(APPEALS) A S AGAINST THE CLAIM OF THE ASSESSEE AT RS.2,75,000/ - PER SQ.FT. 4. BEFORE US, THE LEARNED A.R. OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS GIVEN THE FULL DETAILS OF THE COST OF CONSTRUCTION WHICH IS INCLUSIVE OF PURCHASE OF SIT E FOR RS.21.00 LACKS AND THE OTHER EXPENSES OF CONSTRUCTION OF THE HOUSE, TOTAL AMOUNTING TO RS.1,01,81,000/ - . THE LEARNED A.R. OF THE ASSESSEE HAS CONTENDED THAT SINCE THE ENTIRE SALE CONSIDERATION AS DETERMINED BY THE AO BY INVOKING THE PROVISIONS OF SE CTION 53C HAS BEEN INVESTED BY THE ASSESSEE IN CONSTRUCTION OF NEW HOUSE WITHIN THE TIME PERIOD AS PRESCRIBED UNDER SECTION 54F THEN, THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 54F OF THE ACT FOR THE FULL AMOUNT OF CAPITAL GAIN COMPUTED BY THE AO. HE HAS RELIED UPON THE DECISION OF HONOURABLE JURISDICTIONAL HIGH COURT IN CASE OF GO U LI MAHADEVAPPA VS. ITO REPORTED IN 356 ITR 90 AND SUBMITTED THAT THE HONOURABLE HIGH COURT HAS HELD THAT WHATEVER AMOUNT IS INVESTED IN THE NEW RESIDENTIAL HOUSE, WIT HIN THE PRESCRIBED PERIOD UNDER SECTION 54F OF THE ACT, THE ASSESSEE SHOULD GET THE BENEFIT OF DEDUCTION IRRESPECTIVE OF THE FACT THAT THE FUNDS FROM OTHER SOURCES ARE UTILISED FOR THE CONSTRUCTION OF NEW RESIDENTIAL HOUSE. 5 ITA NO. 797 /BANG/ 2014 5. ON THE OTHER HAND, THE LEARNED DR HAS SUBMITTED THAT THE CIT(APPEAL) ISSUED A REMAND ORDER AND AFTER THE REMAND REPORT BY THE AO THE CIT(APPEAL) HAS ESTIMATED THE COST OF CONSTRUCTION THEREFORE, NO INTERFERENCE IS REQUIRED IN THE IMPUGNED ORDER OF THE CIT(APPEAL). HE HAS REL IED UPON THE ORDER OF THE CIT(APPEAL). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE DISPUTE BEFORE US IS LIMITED REGARDING THE DETERMINATION OF COST OF CONSTRUCTION FOR THE PURPOSE OF THE AMOUNT INVESTED IN CONSTRUCTION OF NEW HOUSE FOR CLAIMING DEDUCTION UNDER SECTION 54F OF THE ACT. THE ASSESSING OFFICER RESTRICTED THE DEDUCTION UNDER SECTION 54F ONLY TO THE EXTENT OF THE AMOUNT WHICH WAS DEPOSITED BY THE ASSESSEE IN THE CAPITAL GAIN ACCOUNT AND THEREFORE, THE PROPORTIONATE DEDUCTION WAS ALLOWED IN RESPECT OF THE CAPITAL GAIN COMPUTED BY APPLYING THE PROVISIONS OF SECTION 50C OF THE ACT. THE CIT(APPEAL) ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS MADE AN INVESTMENT FOR CONSTRUCTION OF NEW HOUSE HOWEVER THE VALUE OF THE CONSTRUCTION AS CLAIMED BY THE ASSESSEE HAS NOT ACCEPTED BY THE CIT(APPEAL). THE CIT(APPEAL) HAS ESTIMATED THE COST OF CONSTRUCTION BY OBSERVING IN PARAGRAPH 3.8 AS UNDER: 6 ITA NO. 797 /BANG/ 2014 3.8 THE OBJECTIONS TAKEN BY THE APPELLANT S AUT HORIZED REPRESENTATIVE ARE WELL FOUNDED. AS RIGHTLY CONT4ENDED BY HIM, SECTION 142A OF THE ACT DOES NOT COME INTO PLAY IN THE APPELLANT S CASE IN AS MUCH AS NO ASSET REFERRED TO IN SECTIONS 69, 69A AND 69D IS IN QUESTION. HENCE, THE REPORT, IF ANY, OF THE DVO ON THE BASIS OF THE ASSESSING OFFICER S REFERENCE UNDER SECTION 142A OF THE ACT WILL NOT BE BINDING ON THE APPELLATE AUTHORITY AS MUCH AS ON THE ASSESSING AUTHORITY. I WOULD, THEREFORE, ESTIMATE THE COST OF CONSTRUCTION AT RS.1,20,000 TO BE FAIR IN THE CASE. MOREOVER. AS OBSERVED BY THE ASSESSING OFFICER, IT IS NOT CLEAR AS TO HOW MANY UNITS HAVE BEEN CONSTRUCTED IN THE FOUR FLOORS. THE ASSESSING OFFICER HAS NO OPTION BUT TO INVOKE THE PROVISIONS OF SECTION 50C OF THE ACT FOR TAKING THE VALUE OF THE LAND IF THE COST OF THE LAND INDICATED IN THE SALE DEED IS LESSER THAN THE VALUE OF THE LAND AS ESTIMATED BY THE REGISTERING AUTHORITY ON THE BASIS OF THE GUIDANCE VALUE ISSUED BY THE STATE GOVERNMENT FOR REGISTRATION OF IMMOVABLE PROPERTIES. IN VIEW OF THE FOREGOING, THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE CAPITAL GAINS BY TAKING THE COST OF CONSTRUCTION AT RS.1,20,000 PER SQUARE. AS IT IS CLEAR FROM THE FINDING OF CIT(APPEAL) THAT THE FACT OF THE CONSTRUCTION OF NEW HOUSES IS ACCEPTED HOWEVER THE CIT(APPEAL) HAS NOT GIVEN ANY BASIS FOR ESTIMATING THE COST OF CONSTRUCTION AT RS.1.20 LACS PER SQ. IT IS APPARENT FROM THE IMPUGNED ORDER THAT EVEN THE RATE PER SQ. UNIT IS NOT CLEAR WHETHER IT IS SQ. FT. OR METER OR YARD. THEREFORE IT IS FU LL OF AMBIGUITY AND NOT CLEAR WHAT EXACT UNIT OF SCALE ON WHICH THE RATE OF CONSTRUCTION IS APPLIED. FURTHER, WHEN THE BASIS OF ESTIMATION OF THE COST OF CONSTRUCTION IS NOT MADE OUT BY THE CIT(APPEAL) AND ALL THE FACTS ARE NOT FOUND TO BE CLEAR BEYOND THE DOUBT, THEN IN OUR CONSIDERED OPINION, THIS ISSUE REQUIRES PROPER VERIFICATION AND EXAMINATION. ACCORDINGLY, WE SET ASIDE THIS ISSUE OF ESTIMATION OF COST OF CONSTRUCTION TO THE 7 ITA NO. 797 /BANG/ 2014 RECORD OF THE ASSESSING OFFICER FOR CONDUCTING THE PROPER ENQUIRY EVEN IF NEE D ARISES BY REFERRING THE ISSUE OF VALUATION TO THE DVO AND THEN DECIDE THE SAME . 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF MAY, 201 6 . SD/ - (A .K. GARODIA ) ACCOUNTANT MEMBER SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, BANGALORE