KASU ANJI REDDY,RANGA REDDY vs. INCOME TAX OFFICER, WARD-8(2), HYDERABAD

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ITA 686/HYD/2019Status: DisposedITAT Hyderabad25 August 2021AY 2015-1610 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that neither the assessee nor the department had been able to file corresponding comparable cases for the relevant time span or as on 01.04.1981 to definitively establish the correct valuation. The assessee relied on a registered valuer's report, while the lower authorities relied on the Sub-Registrar Office (SRO) rate. The Tribunal noted that both the assessee's claimed rate (Rs. 313.60 per sq. ft.) and the revenue's relied-upon rate (Rs. 34.10 per sq. ft.) were presented. Recognizing the difficulty in establishing the precise market value, the Tribunal resorted to a 'thumb rule'. It directed the Assessing Officer to adopt the average of the assessee's rate and the revenue's rate, which calculated to Rs. 175 per sq. ft. The necessary computation was to be carried out based on this average rate. The Tribunal explicitly stated that this estimation would not be treated as a precedent in any other case. The appeal was partly allowed on this basis.

What were the facts?

The assessee, Shri Kasu Anji Reddy, filed an appeal against the order of the CIT(A)-12, Hyderabad, for Assessment Year 2015-16. The dispute concerns the computation of long-term capital gains arising from the sale of a house property. The Assessing Officer (AO) made an addition of Rs. 31,20,830/-. The assessee had offered capital gains based on a sale consideration of Rs. 1,70,00,000/- and claimed indexed cost of acquisition and improvements at Rs. 3,82,600/- and Rs. 39,28,175/- respectively. The AO, however, relied on the Sub-Registrar's Office (SRO) valuation of Rs. 34.10 per square foot for construction/improvements, rejecting the assessee's registered valuer's report of Rs. 313.60 per square foot. The CIT(A) upheld the AO's order.

What were the issues?

1. Whether the Tribunal had to decide whether the cost of construction as on 01/04/1981, before indexation, should be upheld at Rs. 3,82,600/- (as claimed by the assessee based on a registered valuer's report) or at Rs. 34.10 per square foot (as determined by the SRO and relied upon by the AO and CIT(A)) for computing capital gains, and consequently, whether the indexed cost of acquisition should be Rs. 39,28,175/- or a lower amount based on the SRO rate. Assessee's Contention: The assessee argued that the registered valuer's report should be accepted, citing cases like Thulasimani Ammal Vs. CIT and Usha Ramesh, Chennai Vs. Department of Income Tax, which held that SRO guideline values are estimates and not conclusive proof of market value. The assessee also relied on Ghansham Lekhraj Rupani vs ITO, International Taxation-1, Hyderabad, where the ITAT directed the AO to refer the matter to a DVO when the assessee challenged the SRO value with supporting evidence. Revenue's Contention: The revenue, through the AO and CIT(A), relied on the SRO valuation. The CIT(A) found no comparable cases presented by the assessee to support the registered valuer's higher valuation and held that the burden of proof lay with the assessee to demonstrate the SRO value was incorrect. The judgment does not explicitly record the revenue's arguments before the Tribunal, but it reflects their stance upheld by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 54,Section 54EC,Section 50C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD ‘ A ‘ BENCH, HYDERABAD.

Before: SHRI S.S. GODARA & SHRI L. P. SAHU

For Appellant: Shri A.V. Pavan Kumar
For Respondent: Shri Rohit Majumdar. (D.R.)
Hearing: 11.05.2021Pronounced: 25.08.2021

O R D E R Per Shri S.S. Godara, J.M. : This assessee’s appeal for Asst. Year 2015-16 arises from the Commissioner of Income Tax (Appeals)-12, Hyderabad’s order dt.8.2.2019 passed in case No.10220/2018-19 in proceedings under Section 143(3) of Income Tax Act, 1961 (‘the Act’).

Heard both the parties. Case file perused.

2.

The assessee has pleaded the following substantive grounds in the instant appeal :

“ 2. On the facts and circumstances of the case the learned CIT (A) ought to have upheld the Cost of Construction as on 01/04/1981 before indexation Rs. at Rs. 3,82,600/[@ Rs. 313.6/- per Sq. Ft ] and the indexed cost of acquisition thereon at Rs. 39,28,175/- as on 01/04/1981, while computing the capital gains.

3. The learned CIT(A) failed to note that the cost of Construction of the property as on 01/04/1981 at the option of the appellant was determined by the registered valuer at Rs. 3,82,600/- before indexation and at Rs. 39,28,175/- after indexation by the appellant and therefore ought to have upheld the aforesaid valuation for the purpose of computing capital gains."

3.

Both the learned representatives invited our attention to the CIT(A)’s detailed discussion reading as under :

4.

We have given our thoughtful consideration to rival contentions against and in support of correctness of both the lower authorities’ estimating the assessee's cost acquisition as on 1.4.1981 at Rs.34.10 per sq. ft. as against that claimed of Rs.313.60 per sq. ft.; respectively. It emerges during the course of hearing that the assessee has sought to place reliance of its registered valuer’s report whereas the learned lower authorities have gone by the Sub-Registrar Office rate at the relevant time. Both the learned representatives fairly informed us that the said rate remain unchanged for almost a period of two decades from 1976 to 1995. And also that the assessee had acquired his relevant capital asset way back on 27.11.1967 (agreement followed by the sale deed dt.13.6.1978) and alleged construction of first floor as well as an additional room on ground floor; respectively. We further find that neither the assessee nor the department have been able to file the corresponding comparable cases qua the relevant time span or as on 1.4.1981; as the case may be. Faced with this situation, we quote “thums rule” and direct the Assessing Officer to adopt average of the assessee's and revenue’s respective rate i.e. Rs.313.60 and Rs.30.10 per sq. ft.; respectively coming to Rs.175 per sq. ft. followed by the necessary commutation. It is further made clear that our instant estimation shall not be treated as a precedent in any other case.

5.

We lastly acknowledge that although the instant appeals are being decided after a period of 90 days Rule 34(5) of the IT(AT) Rules 1963, the same however, does not apply in the covid lockdown situation as per hon'ble apex court's recent directions dated 27-04-2021 in M.A.No.665/2021 in SM(W)C No.3/2020 'In Re Cognizance for extension of limitation' making it clear that in such cases where the limitation period (including that prescribed for institution as well as termination) shall stand excluded from 14th of March, 2021 till further orders. 6. This assessee's appeal is partly allowed in above terms.

Order pronounced in the open court on 25th August, 2021.

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