VENKAT RAMANA REDDY VADA,HYDERABAD vs. INCOME TAX OFFICER, WARD-15(2), HYDERABAD

PER A. MOHAN ALANKAMONY, AM.:

This appeal is filed by the assessee against the order of the Ld.

CIT(A)-7, Hyderabad dated 08/01/2018 in appeal No. 0041/CIT(A)-

7/2017-18 passed U/s. 143(3) r.w.s 147 & 250(6) of the Act for the

assessment year 2009-10.

2, The assessee has raised several grounds in his appeal however,

the crux of the issue is that the Ld. CIT (A) has erred in partly sustaining

the order of the Ld. AO who had computed the STCG of the assessee

invoking the provisions of section 50C of the Act.

resident filed his return of income in response to notice U/s. 148 of the

Act on 31/3/2016 declaring STCG of Rs. 4,58,842/-. The Ld. AO had

reopened the case of the assessee because as per the information

received from the SRO it was observed that the assessee had sold two

immovable residential properties for Rs. 18 lakhs and Rs. 22 lakhs

respectively aggregating to Rs. 40 lakhs as against the market value of

Rs. 36,30,000/- and Rs. 43,95,000 aggregating to Rs. 80,25,000/-.

invoking the provisions of section 50C of the Act as follows: -

Actual sale consideration Rs. 40,00,000

Market Value as per the provisions of sec. 50C Rs. 80,25,000 (from both properties)

Less: Cost of acquisition (as claimed by the Assessee) Rs. 32,09,000

Lest of cot of improvement Rs. 2,98,000

Short Term Capital Gain Rs. 45,18,000

that the Ld. AO had referred the Valuation to the Valuation Officer as

per the request of the assessee however, without awaiting for the receipt

of the Valuation Report proceeded to adopt the value stated by the SRO

and computed the STCG of the assessee at Rs. 45,18,000/-. It was

further submitted that subsequently the Valuation Report was received

by the Ld. AO wherein the value determined was much lesser than the

value stated by the SRO and accordingly additional evidence were filed

before the Ld.CIT(A). The Ld. CIT (A) after examining the issue and

obtaining the remand report from the Ld. A.O granted only partial relief

to the assessee by simply adopting the value determined by the

Valuation Officer at Rs. 57,35,000/- without applying his mind on the

value of the property considering its drawback. Aggrieved by the order

of the ld. CIT (A), the assessee is in appeal before this Bench of the

Tribunal.

himself has recognized the drawback of the land sold by the assessee

and adopted the value at Rs. 57,35,000/- though the valuation of the

SRO was determined at 80,25,000/-. The Ld. AR further argued by

stating that the relief granted by the Ld.DVO as well as the Ld.CIT(A) is

not appropriate as the assessee had sold the property at the realistic

actual market value. It was therefore pleaded that the addition made

by the Ld. AO may be deleted. The Ld. DR on the other hand argued in

support of the order of the Ld. CIT (A) and prayed for sustaining the

same.

materials on record. For reference, I hereby extract the relevant portion

of the Valuation Report of the Ld. DVO: -

Fair Market Rate of the property per sq. yds as on 15/12/2008 & 16/1/2009 Sl Influencing factors Adopted % age Rate per no adopted sq. yd. 1. Guideline / Market rat value as per the SRO 15000.00 Azampura, for the area falls under Ward-16, Block-2 of Saidabad Colony, Triveni Nagar, Hyderabad is adopted since similar type of comparative sale instances are not available etc. 2. Deduct for the disadvantage as the property -5% -750.00 is having non perfect and irregular shape etc. 3. Deduct for the disadvantage as the property -11% -1650.00 is located in low profile area etc 4. Deduct for reduction in market rate due to -5% -750.00 not having proper approach road to reach the property and having dead end etc 5. Deduct for reduction in market rate due to -7% -1050.00 impact of recession during property transaction period and separate Telangana State bifurcation agitations etc. Fair Market Rate of the property per sq. yd as On (single property, two sale deeds are executed) 05.12.2008 & 16.01.2008 = 10800.00 Per sq.yd Fair Market Value of the Total property as on 05.12.2008 & 16.01.2008 = Area in sq. yds. Rate per (240 + 291) = 531 sq. yd

For plot 531.0 10800.0 5734800.00 Total 5734800.00

Say Rs. 57,35,000/-

(Rupees Fifty-Seven Lakhs thirty five thousands only)

drawbacks such as irregular shape, location of the land in the dead end

of the lay out & low profile area, and further the value of the property is

hit by the recession in the real estate market due to bifurcation of the

State as Telangana and Andhra Pradesh. The Ld. DVO though in his

own wisdom had estimated the value of the property at Rs. 57,35,000/-

by accepting the drawbacks of the property and the market scenario,

while substantiating the quantum for granting relief to the assessee, in

my view he has not made realistic working. Further, on perusing the

facts, I find that: -

(i) The cost of acquisition of the property which falls little less than

the period of 2 years from the date of the sale is Rs. 32,09,000/-

(ii) The aggregate actual sale proceeds received by the assessee

within the span of 2 years from the date of purchase of the

property is Rs. 40 lakhs, thus there is an appreciation of 25%

in the value of the property [Rs. 32,09,000 + (Rs. 32,09,000 X

25%) = Approx. Rs.40,00,000].

(iii) The market value of the property sold estimated by the Ld. DVO

is 57,35,000/-. Thus, the appreciation of the property is

estimated at 79% within a span of 2 years. [Rs. 32,09,000 +

(Rs. 32,09,000 X 79%) = Approx. Rs.57.44 lakhs]

(iv) The market value determined by the Ld. State Stamp Valuation

Authority (SSVA) which is adopted by the Ld. AO for computing

the STCG by invoking the provisions of section 50C of the Act

is Rs. 80,25,000/-. Thus, the appreciation in value of the

property determined by the Ld.SSVA and adopted by the Ld.

AO is 150%. [Rs. 32,09,000 + (Rs. 32,09,000 X 150%) = Approx.

Rs.80.22 lakhs].

reasonable to estimate the increase in the marker value of the property

at the time of the sale of the property by 150% or 79% within a span of

two years especially when there is no evidence on record to suggest that

the locality underwent massive transformation. Further, there is

nothing on record to suggest that the assessee had purchased the

property below the market value of Rs. 32,09,000/- within the period of

2 years from the date of sale. In this situation, in order to address the

issue simpler and to render speedy justice, I am of the considered view

that the reasonable estimation of the appreciation of the property within

the span of 2 years may be adopted at 35% from the acquisition cost

which works out to approximately Rs. 43 lakhs [32,09,000 + (Rs.

32,09,000 X 35% = Approx. Rs. 43 lacks], which can be considered as

the deemed full value of the consideration received or accrued to the

assess for the purpose of determining the short-term capital gain by

invoking the provisions of Section 50C of the Act. Therefore, I hereby

direct the Ld. AO to compute the STCG of the assessee by treating the

market value of the property invoking the provisions of section 50C of

the Act at Rs. 43 lakhs instead of Rs. 57,35,000/- sustained by the

Ld.CIT(A). It is Ordered accordingly.

indicated hereinabove.

Pronounced in the open Court on 27th August, 2019.

Sd/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER

Hyderabad, Dated: 27th August, 2019 OKK Copy to:-

1) Sri Venkat Ramana Reddy Vade C/o. B. Narsing Rao & Co., Chartered Accountants, Plot No.554, Road No. 92, Jubilee Hills, Hyderabad – 500 096. 2) ITO, Ward-15(2), Hyderabad. 3) The CIT(A)-7, Hyderabad 4) The Pr. CIT-7, Hyderabad 5) The DR, ITAT, Hyderabad 6) Guard File