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Income Tax Appellate Tribunal, HYDERABAD BENCH “SMC”, HYDERABAD
Before: SHRI A. MOHAN ALANKAMONY
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.
The brief facts of the case are that the assessee is an individual
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/-.
Thereafter, the Ld. AO computed the STCG of the assessee by
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
On appeal before the Ld. CIT (A) the assessee had argued stating
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.
The Ld. AR vehemently argued before me stating that the Ld. DVO
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.
I have heard the rival submissions and carefully perused the
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)
From the above, it is apparent the land sold by the assessee has
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].
From the above, it is apparent that it would not be possible or
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.
In the result the appeal of the assessee is partly allowed as
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