Smt. Indira Ramesh, Bangalore V. ITO, Bangalore

ITA 845/BANG/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1632 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-01-2011
• Assessment Year: misc
• Appeal Filed On: 28-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MEERA SRIVASTAV
• Keywords: Cost of acquisition; Fair market value; Valuation report
• Section: 143(3); 234B; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.845(BANG)/2010 (ASSESSMENT YEAR: 2003-04) SMT. INDIRA RAMESH, NO.155, LEELA NIVAS 4 TH MAIN, MALLESHWARAM, BANGALORE-560 003. VS. APPELLANT INCOME-TAX OFFICER, WARD 9(4), BANGALORE. RESPONDENT APPELLANT BY: SHRI S.PARTHASARATHI. RESPONDENT BY : SMT. MEERA SRIVASTAV. O R D E R PER SMT. P.MADHAVI DEVI, JM: THIS IS AN ASSESSEES APPEAL AND IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I I, [CIT(A)] BANGALORE, DATED 26-2-2010 FOR THE ASSESSMENT YEAR 2003-04. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER (A) OUGHT TO HAVE ALLOWED THE FAIR MARKET VALUE OF THE PROPERTY SOLD AS ON 1.4.1981 AS ACCEPTED BY ITA 845(BANG)/2010 PAGE 2 OF 7 THE REVENUE IN THE CO-OWNERS CASE WHILE COMPUTING THE CAPITAL GAINS ON THE SALE OF THE PROPERTY AS CLAIMED BY THE APPELLANT BEFORE HIM. 2. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT THE COMPUTATION OF CAPITAL GAINS IN THE HANDS OF THE CO-OWNERS HAVE BECOME FINAL AND THE MARKET VALUE OF THE PROPERTY AS ON 1.4.81 IN THE CASE OF THE ASSESSEE COULD NOT VARY AND ACCORDINGLY IN THE INTEREST OF JUSTICE HE OUGHT TO HAVE ALLOWED THE DEDUCTION AS CLAIMED IN FULL. 3. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE ALLOWED THE AMOUNT OF INTEREST PAID TO HDFC AS AVAILABLE U/S 48 OF THE ACT AS CLAIMED BY THE APPELLANT IN FULL. 4. THE LEARNED COMMISSIONER (A) ERRED IN NOT ENTERTAINING THE GROUND RELATING TO THE LEVY OF INTEREST U/S 234A, 234B AND 234C OF THE ACT. 5. WITHOUT PREJUDICE THE LEARNED COMMISSIONER (A) ERRED IN CONFIRMING THE CAPITAL GAINS AS ESTIMATED BY THE ASSESSING AUTHORITY. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. ITA 845(BANG)/2010 PAGE 3 OF 7 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL WHO FILED HER RETURN OF INCOME FOR THE A SSESSMENT YEAR 2003-04 ON 31-3-2004 DECLARING INCOME OF RS.3, 94,570/-. SHE IS ALSO A PARTNER IN A FIRM. DURING THE ASSESS MENT PROCEEDINGS U/S 143(3) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT'], THE ASSESSI NG OFFICER [AO] OBSERVED THAT THE ASSESSEE OFFERED INCOME FROM CAPI TAL GAINS, INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SO URCES. AS REGARDS COMPUTATION OF CAPITAL GAINS, HE OBSERVE D THAT THE ASSESSEE AND THREE OTHERS ARE THE LEGAL HEIRS OF LA TE TARA RAMADHYANI WHO DIED IN THE YEAR 1969 AND AS LEGAL H EIRS, GOT A BUILDING RECONSTRUCTED IN THE YEAR 1992 AND THE ASS ESSEES SHARE IS 25%. HE OBSERVED THAT THE ASSESSEE IS OFF ERING HER SHARE OF INCOME UNDER THE HEAD HOUSE PROPERTY AND THE ASSESSEE AND OTHERS HAVE ENTERED INTO A COLLABORATI ON AGREEMENT WITH M/S.PRERANA BUILDERS PVT. LTD. FOR D EVELOPING THE SAID PROPERTY AND AS PER THE TERMS OF AGREEMENT , THE BUILDERS WILL DEVELOP THE PROPERTY AND CONSTRUCT A RESIDENTIAL APARTMENT AT THEIR COST AND THE BUILDERS SHALL PAY A CONSIDERATION OF RS.2 CRORES TO THE OWNERS AND SHAL L HANDOVER FOUR FLATS IN ALL TO THE OWNERS AS THEIR SHARE IN L IEU OF UNDIVIDED SHARE OF INTEREST IN THE LAND BEING GIVEN AWAY BY T HE OWNERS TO THE BUILDERS. THE AO FURTHER OBSERVED THAT THE ASS ESSEES SHARE OF 25% OF RS.2 CRORES IS RS.50 LAKHS AND ALSO A FLA T AND THEREFORE COMPUTED RS.81,25,000/- AS HER SHARE OF CONSIDERATION BEING RS.50 LAKHS IN CASH AND RS.31,2 5,000/- ITA 845(BANG)/2010 PAGE 4 OF 7 BEING THE ESTIMATED VALUE OF ONE FLAT. THE ASSESSE E COMPUTED THE CAPITAL GAINS OF RS.47,72,500/- AFTER DEDUCTING INDEXED COST AND CLAIMED DEDUCTION UNDER SECTIONS 54 AND 54EC OF THE ACT BY INVESTING RS.10 LAKHS IN NHAI BONDS AND BUYING A PROPERTY AT DEHRADUN FOR RS.18,75,000/-. AFTER CONSIDERING THE ASSESSEES CONTENTIONS, THE AO OBSERVED THAT THE AS SESSEES VALUATION OF THE PROPERTY AS ON 1-4-1981 IS NOT ON THE BASIS OF ANY VALUATION AND IS ONLY AN AD HOC COMPUTATION. HE , THEREFORE, DISALLOWED THE SAME. HE ALSO DISALLOWED THE CLAIM U/S 54 ON THE GROUND THAT THE ASSESSEE IS HAVING MORE THAN ON E RESIDENTIAL HOUSE. AGGRIEVED BY THE SAME, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFO RE US. 4. SHRI S.PARTHASARATHI, THE LEARNED COUNSEL FOR T HE ASSESSEE SUBMITTED THAT IN THE ASSESSEES CO-OWNER S CASE, THEY HAVE SUBMITTED A CERTIFICATE GIVEN BY THE REGISTERE D VALUER WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT AND THERE FORE, THE SAME VALUATION REPORT MAY ALSO BE ADOPTED IN THE CA SE OF THE ASSESSEE ALSO FOR VALUATION OF THE PROPERTY AS ON 1 -4-1981 AND THE CAPITAL GAINS BE RECOMPUTED. THOUGH THE LEARNE D COUNSEL FOR THE ASSESSEE HAS NOT RAISED A SPECIFIC GROUND W ITH REGARD TO THE DENIAL OF EXEMPTION U/S 54 OF THE ACT, HE TRIED TO PRESS THIS POINT BEFORE US BY ALSO PLACING RELIANCE UPON THE D ECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANOTHER VS. SMT.K.G.RUKMINIAMMA (2010) 48 DTR (KAR) 377. ITA 845(BANG)/2010 PAGE 5 OF 7 SMT. MEERA SRIVASTAV, THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT IN THE OTHER CO-OWNERS CASES, THE ASSESSMENT WAS COMPLETED U/S 143(1) AND THEREFORE THE SAME CANNOT BE ADOPTED FOR VALUIN G THE ASSESSEES PROPERTY. 5. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THE BASIC ISSUE BEFORE US IS THE VALUATION OF THE PROPERTY AS ON 1-4-1981. ADMI TTEDLY, THE ASSESSEE HAS NOT FURNISHED VALUATION REPORT OF ANY REGISTERED VALUER FOR THE SAID PROPERTY, WHEREAS THE OTHER CO- OWNERS HAVE SUBMITTED REGISTERED VALUERS VALUATION REPORT WHIC H HAS BEEN ACCEPTED BY THE RESPECTIVE AOS. WE AGREE WITH THE ARGUMENT OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT EAC H ASSESSMENT IS INDEPENDENT AND AS THE ASSESSMENTS OF THE OTHER CO-OWNERS WERE COMPLETED U/S 143(1), THERE WAS NO O CCASION TO INVESTIGATE INTO THE VERACITY OF THE SAID CERTIFICA TE AND THEREFORE, THE SAID ASSESSMENT ORDERS CANNOT BE FOL LOWED. BUT HOWEVER, WE FIND THAT THE ASSESSEE HAD SUBMITTED VA LUATION WITHOUT ANY BASIS WHEREAS THE OTHER CO-OWNERS HAVE SUBMITTED THE VALUATION REPORT OF A REGISTERED VALUER WHICH H AS BEEN ACCEPTED BY THE DEPARTMENT. THERE CANNOT BE A DIFF ERENT VALUE FOR THE SAME PROPERTY ON THE SAME DATE IN THE HANDS OF DIFFERENT PERSONS. WHILE REJECTING THE ASSESSEES ADOPTION OF A VALUATION WITHOUT ANY BASIS, WE ARE OF THE OPINION THAT THE DEPARTMENT OUGHT TO HAVE AT LEAST CONSIDERED THE VA LUATION ITA 845(BANG)/2010 PAGE 6 OF 7 GIVEN BY OTHER CO-OWNERS BEFORE ADOPTING A VALUE FO R THE PROPERTY AS ON 1-4-1981. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE TO THE FILE OF THE A O TO RE- CONSIDER THE VALUATION OF THE PROPERTY AS ON 1-4-19 81 ON THE BASIS OF VALUATION ADOPTED IN THE CASE OF OTHER CO- OWNERS AND PASS NECESSARY ORDERS. AS REGARDS EXEMPTION U/S 54 IS CONCERNED, WE FIND THAT THE ASSESSEE HAS NOT RAISED ANY SPECIFIC GROUND OF APPEAL ON THIS ISSUE AND THEREFORE THIS C ANNOT BE ADJUDICATED BY THIS TRIBUNAL. 6. AS REGARDS GROUND NO.3, WE FIND THAT THE AO HAS DISALLOWED THE INTEREST PAID TO HDFC BANK FOR RENOV ATION OF THE PROPERTY. THE CIT(A) HAS OBSERVED THAT IN HER COMP UTATION OF CAPITAL GAINS, THE ASSESSEE AND OTHERS ARE ADOPTING THE INDEXED COST OF ACQUISITION AND THEREFORE, THE ALLOWABILITY OF FURTHER CLAIM OF INTEREST ON LOAN IS ALSO DOUBTFUL. HE FUR THER OBSERVED THAT RETURNS OF INCOME FILED BY OTHER CO-OWNERS ARE ACCEPTED U/S 143(1) AND THOSE RETURNS WERE NOT SUBJECTED TO SCRUTINY U/S 143(3) AND THEREFORE THEY ARE NO RELIABLE FOR TAKIN G DECISION IN THE CASE OF THE ASSESSEE. AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE DE TAILS AS REGARDS THE LOAN TAKEN BY THE ASSESSEE AND OTHERS F ROM HDFC BANK FOR RENOVATION OF THE PROPERTY ARE NOT AVAILAB LE AT THE TIME OF HEARING OF THE APPEAL. AS RIGHTLY OBSERVED BY T HE CIT(A), THE ASSESSEE HAS GOT THE PROPERTY IN 1969 I.E. PRIOR TO 1-4-1981 AND THEREFORE THE COST OF ACQUISITION HAS TO BE ADO PTED BY WAY ITA 845(BANG)/2010 PAGE 7 OF 7 OF TAKING THE COST OF ACQUISITION AND THEREFORE, IF THE LOAN IS TAKEN PRIOR TO 1-4-1981, INTEREST ON THE SAID LOAN CANNOT BE ALLOWED. IT CAN BE ALLOWED ONLY IF IT IS SUBSEQUEN T TO 1-4-1981 AS COST OF IMPROVEMENT. IT IS SEEN THAT THE PROPERT Y WAS RECONSTRUCTED IN 1992 BUT AS THESE DETAILS ARE NOT AVAILABLE BEFORE US, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE ALSO TO THE FILE OF THE AO TO VERIFY THE DETAILS OF THE LOAN TAKEN AND ALLOW THE SAME ONLY IF IT IS TAKEN AFTER 1-4-1981. 7. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JANUARY, 2011. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (SMT.P.MADHAVI DEVI) JUDICIAL MEMBER EKS COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE