Shri. Paras Dave Suri, Bengaluru V. Deputy Commissioner of Income-tax, Circle-2(1), Bangalore

ITITA 881/BANG/2022

AI Insights

The case involves an appeal by Shri Paras Dave Suri against the assessment order passed by the Deputy Commissioner of Income Tax, Circle 2(1), Bangalore, for the assessment year 2019-20. The primary contention revolves around the incorrect computation of the indexed cost of acquisition of a villa sold by the assessee, which the AO adjusted based on the guidance value rather than the actual cost substantiated by the assessee. The assessee argued that the AO and the Dispute Resolution Panel (DRP) erred in not accepting the documentary evidence provided and in not waiting for the DVO's valuation report before concluding the assessment. The Tribunal found that the DRP and AO did not adequately consider the evidence and remitted the matter back to the AO for a fresh assessment.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 124964 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 11-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-12-2022
• Assessment Year: 2019-2020
• Appeal Filed On: 20-09-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Cost of acquisition; Valuation report; Capital Gains
• Section: 143(3); 144C; 143(2); 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND Ms. PADMAVATHY S, ACCOUNTANT MEMBER IT(IT)A No.881/Bang/2022 Assessment year : 2019-20 Shri Paras Dave Suri, Khata 370/3, Epsilon Ventures, Yamalur Main Road, Yamalur, Bengaluru – 560 037. PAN: ACIPS 8992B Vs. The Deputy Commissioner of Income Tax, Circle 2(1), Bangalore. APPELLANT RESPONDENT Appellant by : Shri B.R. Sudheendra, CA Respondent by : Shri Manjunath Karkihalli, CIT(DR)(ITAT), Bengaluru. Date of hearing : 06.12.2022 Date of Pronouncement : 12.12.2022 O R D E R Per Padmavathy S., Accountant Member This appeal is against the final order of assessment passed by DCIT, Circle 2(1), Bangalore u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 [the Act] dated 14.7.2022 for the assessment year 2019-20. 2. The assessee raised the following grounds:- IT(IT)A No.881/Bang/2022 Page 2 of 9 “Each of the grounds and/or sub-grounds of the appeal are independent and without prejudice to each other. 1. General Ground 1.1. The orders passed by learned Deputy Commissioner of Income Tax, Circle 2(1), Bangalore (hereinafter referred as "AO" for brevity), and the learned Dispute Resolution Panel - 2, Bengaluru (hereinafter referred as "DRP" for brevity) ("AO" and "DRP" collectively referred as "lower authorities" for brevity) are bad in law and liable to be quashed. 2. Ground relating to issue and service of notice under section 143(2) 2.1. The ACIT, National e-Assessment Centre-1(2)(2) erred in issuing the notice under section 143(2) without jurisdiction. There being no other notice under section 143(2) issued and served by the residual jurisdiction (i.e., International Tax charges) the impugned assessment order passed is invalid, bad in law and liable to be quashed. 2.2. Without prejudice to the above, the assessment order passed by the learned AO is without jurisdiction. Hence the impugned assessment order passed is non-est, invalid, bad in law and liable to be quashed. 3. Ground relating to principles of natural justice 3.1. The learned DRP erred in passing final directions under section 144C(5), without (a) providing an effective opportunity of being heard; and (b) adjudicating on the objections relating to issue of notice under section 143(2). 3.2. The lower authorities have erred in issuing directions / passing the assessment order, without IT(IT)A No.881/Bang/2022 Page 3 of 9 (a) considering all the submissions and/or without appreciating properly the facts and circumstances of the case and the law applicable. (b) passing a speaking order and providing any cogent reasons for rejecting the submissions of the Appellant; (c) providing an opportunity to show cause against the proposed action of restricting Ile cost of acquisition claimed by the Appellant on sale of property. 3.3. On facts and circumstances of the case, the impugned orders of the lower authorities are unreasoned, arbitrary, bad in law and in gross violation of principles of natural justice and therefore is liable to be quashed. 4. Ground relating to the adjustment to cost of acquisition 4.1. The learned AO erred in making an adjustment to the total income by re-computing the indexed cost of acquisition of the villa at Yamalur, Bangalore at Rs. 1,22,35,956 and the learned DRP erred in confirming the impugned adjustment. 4.2. The lower authorities erred in not appreciating that: (a) the indexed cost of acquisition claimed by the Appellant was in accordance with the provisions of sections 48 and 49 of the Act; (b) the Appellant has actually paid or borne an economic sufferance to the extent of the said claim; and (c) the stamp duty value cannot be adopted as the cost of acquisition in the absence of a specific mandate in the law. 4.3. The lower authorities erred in concluding that the Appellant failed to submit documentary evidence in support of cost of acquisition of property, without appreciating that the Appellant has submitted the bills in evidence of the cost of construction incurred by him. IT(IT)A No.881/Bang/2022 Page 4 of 9 4.4. The lower authorities have erred in (a) Ignoring the commercial and economic reality of incurrence of actual cost of acquisition; (b) Ignoring the valuation report of property obtained from the independent valuation expert which confirmed the cost of acquisition claimed by the Appellant; and (c) Computing the cost of construction of the property computed with reference to the guidance value of Rs. 880 per square feet as on 01.04.2007 which takes into account only the standard cost of construction as against the premium materials utilized in the present case. 4.5. On facts and circumstances of the case and law applicable, the indexed cost of acquisition of the villa as claimed by the Appellant in return of income, should be allowed as a deduction while computing /he capital gains. 5. Grounds relating to reference to valuation cell 5.1. The lower authorities have erred in making a reference to the District Valuation officer, valuation Officer for determining the value of the property as on 01.04.2007. The reference made to the valuation cell is bad in law. 5.2. Without prejudice, the learned AO erred in passing the impugned assessment order without complying with the directions of the learned DRP of giving effect to the valuation report of the District Valuation Officer. The impugned order so passed is therefore bad in law. 6. Grounds relating to set off of brought forward capital loss 6.1. The learned AO erred in computing the assessed income without setting off the available long-term capital loss brought forward amounting to Rs. 7,98,91,470 from Assessment year 2015-16, despite allowing a sum of Rs. 3,76,68,860 (as claimed in the return of income) in the draft assessment order. IT(IT)A No.881/Bang/2022 Page 5 of 9 6.2. The learned DRP erred in concluding that no details in relation to brought forward losses were submitted, without appreciating that (a) all details in relation to brought forward losses were submitted before the lower authorities; (b) the said brought forward losses were also examined during the assessment proceedings for AY 2017-18; (c) the genuineness of such brought forward losses was not doubted by the learned AO. 6.3. On facts and circumstances of the case, the Appellant should be entitled to set off brought forward capital loss carried forward from AY 2015-16 against the impugned capital gains. 7. Prayer:- 7.1. The Appellant prays that directions be given to grant all such relief arising from the grounds of appeal mentioned supra and all consequential relief thereto. 7.2. The grounds of appeal raised by the Appellant herein are without prejudice to each other. The Appellant craves leave to add to and/or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing of this Appeal. The Appellant prays accordingly.” 3. The assessee is a non-resident individual and has filed the original return of income for the AY 2019-20 on 31.8.2019 declaring a total income of Rs.78,22,990. Notice u/s. 143(2) was issued and the AO called for various details pertaining to the capital gains in respect of transfer of property. The AO did not accept the indexed cost of acquisition considered by the assessee at Rs.1,80,05,734 on the ground that it is much more than the guidance value fixed by the Sub IT(IT)A No.881/Bang/2022 Page 6 of 9 Registrar. The AO accordingly called for the documentary evidence and the assessee submitted bills and the payment details. The AO did not accept the evidence and made a reference to the Valuation Officer. As per the provisions of section 144C of the Act, the AO proceeded to pass the draft assessment order considering the guidance value as the cost of acquisition and accordingly made addition of Rs.2,68,46,257. The AO in the said order had observed that the valuation report will be submitted to the DRP. 4. The assessee filed its objections before the DRP. The DRP upheld the fair market value adopted by the AO since the valuation report from DVO was not received. Aggrieved, the assessee is in appeal before the Tribunal. 5. During the year under consideration, the assessee has sold a residential villa along with land on 20.9.2018 and declared a long term capital gain as per below table:- Particulars Ref Land Residential property / Villa Total Sale consideration (A) 87,10,3997,12,89,601 8,00,00,000 Cost of acquisition (B) 12,64,7611,80,05,734 1,92,70,495 Indexed cost of acquisition (C) 32,48,9273,90,82,213 4,23,31,140 Long term capital gains (A-C) 54,61,4723,22,07,388 3,76,68,860 IT(IT)A No.881/Bang/2022 Page 7 of 9 6. The AO called for details with regard to the capital gains computation and the documentary evidence with regard to the cost of acquisition, expenses in connection with transfer, guideline value of the property etc. The assessee also submitted the valuation report by a Civil Engineer wherein the cost of construction as on the date of acquisition i.e. 31.3.2008 was certified at Rs.1,80,00,000. The AO was of the view that the cost of construction claimed as cost of acquisition is much more than the guidance value fixed by the Sub Registrar. The AO proceeded to pass the draft assessment order by considering the guideline value on the ground that the assessee failed to prove his claim of cost of construction with proper bills and payment details and the assessee produced kuccha bills in support of his claim. The AO also mentioned in the draft assessment order that the report of the DVO will be submitted to the DRP or the CIT, as the case may be, for consideration. The AO also did not consider the brought forward long term capital loss claimed by the assessee. 7. During the course of hearing, the ld. AR submitted that the assessee had produced all the details including the contractors PAN, address and other details and also the details of payment before the DRP. The ld. AR also submitted that the AO has considered the guideline value of the property at Rs.880 per sq.ft. and the basis of such valuation was not made available to the assessee. Further, the assessee has sold the land along with the building and the guideline value applied by the AO does not have the split between the land cost and building cost and therefore cannot be relied upon. The ld. AR IT(IT)A No.881/Bang/2022 Page 8 of 9 argued that the AO and the DRP concluded without waiting for the valuation report of the DVO. 8. The ld. DR relied on the orders of the lower authorities. 9. We have heard the rival submissions and perused the material on record. The basis on which both the AO and the DRP have concluded the impugned issue is that the assessee has not substantiated the cost of acquisition claimed while completing the long term capital gains. The DRP upheld the action of the AO on the ground that the cost of acquisition is much more than the guideline value. We notice that the DRP has not gone into the facts and also did not consider the evidence submitted by the assessee. We also notice that the assessee is owning more than one villa and the details of whether the cost of acquisition is with respect to the villa that is sold is not coming out clearly from the records. Therefore, we remit the issue back to the AO with a direction to consider the issue afresh based on the evidence submitted by the assessee and may make a reference to the DVO in case the evidences submitted are not satisfactory and decide the issue in accordance with law. The assessee is directed to produce details with regard to the specific asset that is sold by the assessee during the year under consideration and cooperate with the proceedings. It is ordered accordingly. IT(IT)A No.881/Bang/2022 Page 9 of 9 10. In the result, the appeal by the assessee is allowed for statistical purposes. Pronounced in the open court on this 12 th day of December, 2022. Sd/- Sd/- ( N V VASUDEVAN ) ( PADMAVATHY S ) VICE PRESIDENT ACCOUNTANT MEMBER Bangalore, Dated, the 12 th December, 2022. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.