Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “SMC - A” BENCH : BANGALORE
Before: SHRI GEORGE GEORGE K
O R D E R This appeal at the instance of the assessee is directed against CIT(A)’s order dated 19.06.2023, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2016-17.
The grounds raised
read as follows:
1. Since the valuation Officer has determined the fair market value of the residential building at Door No.22-12-149, Voora Vari Street, Lalapet, Guntur, u/s.50C at Rs. 1,15,45,160, the National Faceless Appeal Centre (NFAC) erred holding Rs.1,26,25,000 as fair market value for the purpose of computation u/s.48 r.w.sec.50C.
2. Since the cost of improvement towards construction of residential building at Door No.22-12-149, Voora Vari Street, Lalapet, Guntur, was: f.y.89-90, Rs.5,00,000', the computation in the return of income as f.y.12-13, Rs.5,00,000', is an error.
3. The payment of Rs.92,579 on 17.12.2009 towards 'penalty for unauthorized construction', is claimed as cost of improvement.
Brief facts of the case are as follows:
Assessee, an individual, filed the return of income for Assessment year 2016-17 on 03.08.2017 declaring total income of Rs.7,28,230/-. The assessment was selected for scrutiny and notice under section 143(2) of the Act was issued on 09.08.2018. During the year, assessee had sold a residential property and computed long term capital gains in the return of income filed. The AO, during the course of assessment proceedings, noticed that assessee had disclosed a sale consideration of Rs.90 lakhs on account of the sale of the said residential property whereas the SRO value of the impugned property was Rs.1,26,25,000/-. The assessee was directed to explain why section 50C of the Act ought not be invoked in his case. Assessee submitted his reply vide letter dated 20.12.2018. However, the objections taken by the assessee was rejected and Assessment Order was passed under section 143(3) of the Act vide order dated 21.12.2018. In the said Assessment Order, the AO invoked section 50C of the Act and adopted the value of the property at Rs.1,26,25,000/- instead of Rs.90 lakhs as disclosed in the sale deed. Thus, the difference of Rs.36,25,000/- (Rs.1,26,25,000 – Rs.90,00,000/-) was added to the total income under long term capital gains and brought to tax.
Aggrieved, assessee filed appeal before the First Appellate Authority. The CIT(A) deleted the addition by observing as under:
“4.1 On perusal of facts of the case it is observed that the SRO value of the property was Rs. 1,26,25,000/-. The appellant had shown actual value received at Rs. 99,00,000/- while computing capital gain. The assessing officer took sale consideration at Rs. 1,26,25,000/- by invoking section 50C of the I.T. Act. The AO failed to refer the matter to DVO u/s 500(2)(a) of the I.T. Act, even after the vociferous protect of the appellant in this regard during assessment proceedings. It has been held by the Hyderabad Bench of ITAT in the case of ACTT V/s Lalitha Karan (ITA No. 1130/Hyd/2015, A.Y. 2011-12, dated 04/01/2017) that for the applying the provision of section 500(2), reference to DVO by the AO is mandatory. Similar decision also have been given in the case of Ramdos Ramvijay Kumar Vs ITO, ITAT Mumbai in A.Y. 2006-07, dated 15/02/2023, specially when objection to higher valuation had been communicated to the AO by the assessee during assessment proceeding. Therefore, addition is deleted.”
Assessee has filed the present appeal against the CIT(A)’s order. Assessee has filed a Paper Book comprising of 28 pages enclosing therein the valuation report, the acknowledgment for filing the return of income, the statement of income and the brief written submission. The learned AR submitted that in the OG to the CIT(A), the assessee has not got any relief. Hence, assessee has filed the present appeal.
The learned Standing Counsel was duly heard.
I have heard the rival submissions and perused the material on record. As regards ground No.1 referred supra, the learned AR had made the following submission in his written submissions.
“1. The comparative computation of capital gain as per return of income of income and as per claim hereby made before this Hon'ble ITAT is as under: As per return of Rs. claim hereby made Rs. income before ITAT Full value of . Full value of consideration as per 90,00,000 consideration u/s..48 sec.48 Sale deed r.w. sec.50C — as per 10.2.2016 valuation officer 1,15,45,160 2. During the pendency of appeal, the property was referred by the ITO, at the instance of the jurisdictional CIT(A)-4, Bengaluru, to the valuation officer u/s.50C and, accordingly, valuation officer has done valuation of property and a copy valuation report dated 03.06.2020 has also been issued to assessee determining the fair market value at Rs. 1,15,45,160, as against: (a) stamp duty value at Rs. 1,26,25,000; (b)actual consideration received at Rs.90,00,000. The NFAC ought to have taken Rs.1,15,45,160 as consideration for transfer u/s.48 r.w.50C and not Rs.1,26,25,000. Therefore, the NFAC was wrong in holding Rs.1,26,25,000 as consideration for transfer u/s.48 r.w.50C as against value arrived at by the valuation officer, of Rs.1,15,45,160.”
In view of the above submission, the AO is directed to examine the value fixed by the DVO and adopt the same for computing the long-term capital gains on account of sale of the impugned residential property.
As regards ground No.2, the relevant submission in the written submissions is as under:
“2. ……….He has spent towards construction expenses during financial years 1988-89 and 1989-90, Rs.10,15,000 and Rs.5,00,000 respectively. The total cost of construction of the property was Rs.15,15,000 which is reasonable having regard to year of construction of property. This fact was stated by him to his Chartered Accountant while preparing his return of income. Due to clerical mistake construction expenses was wrongly taken as `Rs.5,00,000 f.y.2012-13' instead of `Rs.5,00,000 f.y.1989-90'. The assessee was under bona fide impression that the return of income was filed as per his instruction. Also, the Income Tax Department Valuation Officer in his Annexure-III after inspection of the property and for the purpose of calculation of depreciation up to the date of sale deed 10.02.2016, has stated that the 'year of construction as 1990-91'. There was no way to believe that the assessee has constructed the property after a gap is 23 years. Therefore, the correct financial year for the completion of construction of property was f.y. 1989-90 and not f.y. 2012-13 as stated in the return of income. 3. 1t is also submitted that entry made in the return as 'Cost of improvement: Construction of building during f.y.12-13'is a clerical mistake and the same should have been: 'Cost of improvement: Construction of building during f .y.89-90'. It is further submitted that no reliance can be placed on a mistake of fact. Any assessment, if made, basing on the mistake is also mistake as mistake has no place in law unless rectified……………..”
The above issue raised in ground No.2 has not been considered by the AO nor the CIT(A). In the interest of justice and equity, the matter is restored to AO. The AO is directed to examine the claim of the assessee raised in ground No.2. It is ordered accordingly.
As regards ground No.3, the submission of the assessee in the written submission reads as under:
“1.The comparative computation of capital gain as per return of income of income and as per claim hereby made before this Hon'ble ITAT is as under:
As per return of Rs. claim hereby made Rs. income before ITAT 3.Cost of improvement: 3.Cost of improvement: Penalty for unauthorized Penalty for unauthorized Nil construction: f.y. :2009 - 10 construction: f.y. 2009-10 92,579*1081/632 92,579*1081/632 1,58,351 2.The document produced as evidence is: Proceedings of the Commissioner, Municipal Corporation, Guntur, dated 17-Dec-2009. The assessee has paid Rs.92,759 on 12.12.2009 under the A.P.Regulation and penalization of unauthorized constructed buildings and Buildings constructed in violation of the sanctioned plan rules, 2007, for having constructed the building without permission and deviating from the sanctioned plan, as shown therein . It is submitted that the payment of Rs.92,759 would constitute cost of improvement deductible in the computation of capital gain. Hence, it is hereby claimed as cost of improvement.”
The issue raised in ground No.3 has not been considered by the AO nor the CIT(A). In the interest of justice and equity, the matter is restored to AO. The AO is directed to examine the claim of the assessee raised in ground No.3. It is ordered accordingly.
In the result, appeal filed by the assessee is allowed for statistical purposes.
Pronounced in the open court on the date mentioned on the caption page.