SRI Y A SUBRAMANYAM (HUF) V. THE DEPUTY COMMISSIONER OF INCOME TAX

ITA/281/2010

AI Insights

The case involves an appeal by Sri. Y.A. Subramanyam (HUF) against the Deputy Commissioner of Income-Tax concerning the valuation of inherited property for capital gains tax purposes. The appellant argued that the valuation accepted in previous years should be consistently applied, despite the property being assessed at a lower value by the Assessing Officer in the current year due to its location in an underdeveloped area. The Income Tax Appellate Tribunal had modified the valuation, which led to the appellant seeking relief from the High Court. The court found that the issue of consistent valuation over the years had not been adequately addressed by the lower authorities and thus remitted the matter back for re-assessment.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 766884 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 08-01-2020
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: S PARTHASARATHI
• Keywords: Capital Gains; Fair market value; Scrutiny assessment; Valuation
• Section: 143(1); 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 8TH DAY OF JANUARY 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE RAVI V.HOSMANI I.T.A. NO.281 OF 2010 BETWEEN: SRI. Y.A. SUBRAMANYAM (HUF) AGED ABOUT 58 YEARS S/O SRI. LATE SRI. Y.S. ADINARAYANA SETTY R/AT. SUDHAMA HOUSE CHICKPET, BANGALORE-560053. ... APPELLANT (By Sri. S. PARTHASARATHI, ADV.) AND: THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE 5(1), BANGALORE. ... RESPONDENT (By Sri. K.V. ARAVIND, ADV.) - - - THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 20-4-2010 PASSED IN ITA NO.1098/BNG/2009, FOR THE ASSESSMENT YEAR 2006-07, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THERIN. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT BANGALORE IN ITA No.1098/BNG/2009, DATED 20-4-2010, IN THE INTEREST OF JUSTICE AND EQUITY. 2 THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT Mr.S.Parthasarathi, learned counsel for the appellant. Mr.K.V.Aravind, learned counsel for the respondent. 2. This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been filed by the assessee which was admitted by a Bench of this Court on the following substantial question of law: When once the revenue accepts the valuation for the purpose of capital gains in the returns filed over a period of years, subsequently can they refuse to accept the said valuation as the basis, for the subsequent years? 3 3. Facts giving rise to the filing of the appeal briefly stated are that the appellant had filed return of income on 04.01.2007 which was processed under Section 143(1) of the Act. The appellant along with others had owned an inherited property. The appellant and other members of the family had different and specific shares in the said property. All the co-owners have constructed a residential complex on the aforesaid land in accordance with the terms and conditions of the agreement and sold the flats which came to their possession as their individual share. The capital gains which arose from the sales were declared. The appellant, for the purpose of capital gains, had shown the fair market value as per the report of the valuer in which the value was declared as `90.25 per square feet. During the assessment proceedings, the Assessing Officer was of the opinion that the fair market value declared by the appellant was on the higher side as the land was situated in an underdeveloped area. Finally, 4 the Assessing Authority concluded the assessment by adopting the fair market value so determined at the rate of `25.50 per square feet and reworked the capital gains and made certain disallowances. Being aggrieved by the order of assessment, the appellant filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) partly allowed the appeal with an observation that there is no reason to adopt the difference fair market value since sales were affected from the same survey and locality. Accordingly, the Appellate Authority adopted `38/- per square feet instead of `25.50 per square feet as adopted by the Assessing Authority. Being aggrieved, the appellant preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal, by an order dated 20.04.2010, partly allowed the appeal and the fair market value was modified as on 01.04.1981 by `50/- per square feet. Being aggrieved, the appellant has filed this appeal. 5 4. Learned counsel for the appellant submitted that none of the parties have adverted to the fact that once the revenue accepts the value for the purpose of capital gains in the return filed over a period of years, subsequently, they cannot refuse to accept the valuation for the consequent years. It is further submitted that in all the cases, the scrutiny assessment was made and therefore, the valuation report which was accepted for the purpose of capital gains in the previous years ought to have been accepted. However, the aforesaid aspect of the matter has not been adverted to by the authorities under the Act. 5. On the other hand, learned counsel for the respondent submitted that if the valuation for the purpose of capital gain has been accepted in scrutiny assessment for the previous years, the same shall be adverted to by the authorities under the Act. 6 6. In view of the aforesaid submissions and after perusal of the orders passed by the authorities under the Act, it is evident that the issue whether, when the valuation for the purpose of capital gains in the returns filed over a period of years, is accepted by the authorities, they cannot refuse to accept the same for the consequent years, has not been adverted to by the authorities under the Act. 7. For the aforementioned reasons, the substantial question of law framed by a Bench of this Court by an order dated 09.08.2010 is answered in favour of the assessee subject to the condition that the valuation report has been accepted in scrutiny assessment at the instance of the assessee. 8. In the result, the impugned order dated 20.04.2010 is hereby quashed and the matter is remitted to the Assessing Officer to decide the issue with 7 regard to valuation for the purpose of capital gains in the light of the observations made in this order supra. Accordingly, the appeal is disposed of. Sd/- JUDGE Sd/- JUDGE RV "