SURYANARAYANAN RAMACHANDRAN,KOCHI V. ITO, WARD 3, ALUVA

ITA 155/COCH/2025

AI Insights

The case revolves around the appeal by Sri. Suryanarayanan Ramchandran against the order of the National Faceless Assessment Centre / Commissioner of Income-tax (Appeals) which confirmed the addition made by the AO under the head of capital gains for the assessment year 2015-2016. The appellant contested the method used by the AO to calculate the fair market value of a property sold, which was inherited from his father. The property was sold for Rs.2,80,00,000, and the appellant had adopted a fair market value as of 01.04.1981 significantly higher than that adopted by the AO, who based his valuation on the sale deed's value. The Tribunal criticized the AO's approach, emphasizing the need for a DVO's assessment when disputing the fair market value and the lack of evidence to support the AO's valuation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33546 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL; SENIOR
• Assessee Lawyers: K.SANKARANARAYANAN
• Keywords: Fair market value; Salary income; Cost of acquisition; Capital Gains; Valuation report

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, COCHIN Before Shri Inturi Rama Rao, Accountant Member ITA No.155/Coch/2025 : Asst.Year 2015-2016 Sri.Suryanarayanan Ramchandran, 22/47D MNRA No.83, Nandanam, 7th Cross, Pipeline Road, Changampuzha Nagar PO Cochin – 682 033. PAN : AITPR9384F. v. The Income Tax Officer Ward - 3 Aluva. (Appellant) (Respondent) Appellant by : Sri.K.Sankaranarayanan, CA Respondent by : Smt.Leena Lal, Senior AR Date of Hearing : 13.03.2025 Date of Pronouncement : 28.03.2025 O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Assessment Centre / Commissioner of Income- tax (Appeals) [“CIT(A)” for short] dated 07.01.2025 for the assessment years 2015-2016. 2. The brief facts of the case are that the appellant is an individual, deriving income from salary, capital gain and income from other sources. The return of income for the assessment year 2015-2016 was filed on 18th August, 2015 disclosing income of Rs.3,80,670. Against the said return of income, the assessment was completed by the Assessing Officer (“the AO” hereinafter) vide order dated 5th December, 2017 passed u/s.143(3) of the Act at a total income of ITA No.155/Coch/2025. Sri.Suryanarayanan Ramachandran. 2 Rs.11,62,150. While doing so, the AO made an addition under the head capital gains. 3. The brief factual background of the case is that during the previous year relevant to the assessment year under consideration, the appellant sold a property inherited from his father situated at 40/905, Karithala Deson, Kanayannur Taluk, Ernakulam (Survey No.686). The said property was sold for a total consideration of Rs.2,80,00,000. While computing capital gains, the appellant had adopted fair market value of the property as on 01.04.1981 at Rs.4,89,900 and the cost of improvement at Rs.2 lakh in the financial year 1990-1991. However, the AO rejecting the above method, had adopted the fair market value of the property at Rs.2,12,108 by adopting backward calculation based on the value as per the sale deed. The Assessing Officer adopted the cost of improvement at Rs.1,50,000 as against Rs.2 lakh claimed by the assessee, in the absence of proof. Based on the above methodology, the appellant’s share worked out at Rs.16,00,000 after allowing sec.54EC of Rs.50 lakh and balance capital gain of Rs.10,71,015 was brought to tax. 4. Being aggrieved by the above, the appellant filed an appeal before the CIT(A) contending that the method of working adopted while computing the capital gains is unfair. However, the CIT(A) confirmed the action of the AO by holding that in the absence of valuation report from the registered Valuer in respect of cost of acquisition as on 01.04.1981, the AO was justified in adopting the SR value. ITA No.155/Coch/2025. Sri.Suryanarayanan Ramachandran. 3 5. Being aggrieved, the appellant is in appeal before me in the present appeal. It is submitted that the lower authorities were not justified in adopting the value provided by the Sub-Registrar as per document No.386/1981 as the location of the property is not clear and whereas the property sold by the appellant is residential area. 6. The learned Sr.DR placing reliance on the orders of the lower authorities and submits that no interference is called for therein. 7. I heard the rival submissions and perused the material available on record. The issue in the present case is adoption of fair market value as on 01.04.1981 as well as the cost of improvement done in the year 1981. As regards the adoption of fair market value as on 01.04.1981 is concerned, the methodology adopted by the AO is erroneous and strange to the law. When the AO disputes the cost of fair market value adopted by the appellant, the only option available to the AO is to refer the matter to the DVO for estimation of fair market value as on 01.04.1981, which the AO had failed to do so. Further, there is no material brought on by the AO to show that the fair market value adopted by the assessee is wrong. Similarly, with regard to the cost of improvement is concerned, in the absence of any evidence on record, the AO should have accepted the cost of improvement as shown by the appellant. Therefore, in the facts and circumstance of the case, I am of the considered opinion that the CIT(A) was not justified in confirming the addition made by the AO. I, therefore, direct the AO to delete the addition. ITA No.155/Coch/2025. Sri.Suryanarayanan Ramachandran. 4 8. In the result, the appeal filed by the assessee is allowed. Order pronounced on this 28th day of March, 2025. Sd/- (Inturi Rama Rao) ACCOUNTANT MEMBER Cochin; Dated : 28th March, 2025. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT, Cochin. 4. The DR, ITAT, Cochin. 5. Guard File. Asst.Registrar/ITAT, Cochin "