K.E.M.I. KWAHA MOHIDEEN vs. THE INCOME TAX OFFICER

1 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 08.07.2019 CORAM : THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No. 434 of 2019 Shri. K.E.M.I. Kwaja Mohideen, No.40, Lemarie Street, Karaikal. .. Appellant

Vs. The Income Tax Officer, Ward I (1) Income Tax Department, Nagapattinam. .. Respondent Prayer : Tax Case Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal Chennai

'C'

Bench,

Chennai,

dated

04.04.2013

in I.T.A.No.49/Mds/2011 for the Assessment Year 2000 – 2001. For Appellant : Mr.A.S.Sriraman For Respondent : Mr.M.Swaminathan, Senior Standing Counsel * * * http://www.judis.nic.in 2 JUDGMENT [Judgment of the Court was delivered by T.S.Sivagnanam, J.] This appeal by the revenue filed under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) is directed against the order dated 04.04.2013 passed by the Income Tax Appellate Tribunal Chennai 'C' Bench in I.T.A.Nos.49/Mds/2011 for the Assessment Year 2000-01. 2. The assessee raised the following substantial questions of law arising for consideration: “(i) Whether the Appellate Tribunal is correct in Law in sustaining the recomputation of Long Term Capital Gains arising or accruing as a result of the transfer of the capital asset/immovable property for assessment purposes in substituting the value shown for cost of acquisition being the fair market value as on 1.4.1981 based on a reasonable method as against the value adopted based on wealth tax return by the Respondent, wherein the value was shown as per the statutory prescription on valuation in terms of rule 1BB of the Wealth Tax Rules, 1957? and (ii) Whether the Appellate Tribunal is http://www.judis.nic.in 3 correct in Law in sustaining the fair market value as on 1.4.1981 being the cost of acquisition for arriving at the assessable capital gains by overlooking the distinction based on the purpose of levy of wealth tax as against the purpose of imposing tax on Long Term Capital Gains?” 3. The short question involved in this case is regarding the valuation of the property, which was sold by the assessee for the purpose of computation of capital gain. The Tribunal held that the assessee for the purpose of valuation under the Wealth Tax Act has adopted a value and there is no going back on the said valuation. The assessee's case before the Assessing Officer was that valuation as adopted by the Assessing Officer at Rs. 1,26,080/- as on 01.04.1981 is incorrect. It was contended that the value adopted in the Wealth Tax Act may properly be under Rule 1BB of the Wealth Tax Act and not the fair market value. The Assessing Officer after taking note of the valuation of the other properties in the neighbouring area refused to accept the stand taken by the assessee and determined the value as proposed and completed the assessment vide order dated 28.03.2008. http://www.judis.nic.in 4 4. The assessee filed an appeal before the 'Commissioner Of Income Tax(Appeals), Tiruchurappali' (hereinafter referred to as CIT(A)). At that juncture, a notification was available with the assessee, issued by the Government of Puducherry in the year 2007, which had classified the property, sold by the assessee, as a heritage property. The assessee, therefore, adopted the value of the properties, which was neighbouring to the assessee's property, which was sold and determined the value. This valuation was different from the value adopted by the assessee in the Wealth Tax Assessment. The CIT(A) took note of the notification issued by the Government of Puducherry in the year 2007, giving a heritage tag to the property in the area and accordingly, allowed the assessee's appeal. 5. The Revenue preferred an appeal before the Tribunal contending among other things that the CIT(A) misdirected itself in accepting the contentions of the assessee that property is a heritage property and publication of the building in the calendar of the Government of Puducherry will yield high sale price, which does not have any impact in determining the market value as on 01.04.1981. The stand taken by revenue was accepted and the appeal was allowed and the assessee is before us by way of this Tax Case Appeal. http://www.judis.nic.in 5 6. After elaborately hearing the learned counsel for the parties and carefully perusing the materials placed on record, we find that the attempt of the assessee before the CIT(A) was to take advantage of the notification issued by Government of Puducherry, much after the relevant date, which is 01.04.1981. Therefore, any subsequent notification issued by the Government of Puducherry could have been taken advantage by the assessee that too before the CIT(A) for the first time. 7. In any event, the assessee himself has accepted before the Assessing Officer that the valuation of the property, as adopted by him, in the Wealth Tax Assessment may be taken into consideration. However, to the said extent the Assessing Officer did not grant relief. We find the reasons assigned by the Tribunal are perfectly legal and valid considering the factual position. However, valuation adopted by the assessee in the Wealth Tax Assessment was not adopted by the Assessing Officer and there has been a deduction even in that valuation. 8. In our considered view, the reasonable approach would have been to adopt the valuation in the Wealth Tax Assessment, since http://www.judis.nic.in 6 the Tribunal holds that the assessee could not have been taken two different values i.e., one valuation is under the Wealth Tax Assessment and another is under Income Tax Act. Therefore to that extent, we are of the view that the assessee is entitled to relief. 9. For the above reasons, the appeal is partly allowed and the matter is remanded to the Assessing Officer to compute the capital gain by taking the value of the land at Rs.1,65,600/- and the value of the building at Rs.80,000/- and the Assessing officer is directed to redo the assessment to the extent indicated. Consequently, substantial questions of law is left open. No costs. (T.S.S., J.) (V.B.S., J.) 08.07.2019 Speaking order: Yes/No Index: Yes/No mp/ska To The Income Tax Officer, Ward I (1) Income Tax Department, Nagapattinam.

http://www.judis.nic.in 7 T.S.SIVAGNANAM, J. and V.BHAVANI SUBBAROYAN, J. mp/ska

Tax Case Appeal No. 434 of 2019 08.07.2019 http://www.judis.nic.in