C.SATYANARAYANA REDDY,HYDERABAD vs. INCOME TAX OFFICER, WARD-13(1), HYDERABAD

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ITA 1504/HYD/2018Status: DisposedITAT Hyderabad03 July 2019AY 2008-095 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the assessee failed to represent their case before the revenue authorities, leading to the addition of Rs. 4,25,000 as short-term capital gain based on the difference between the SRO value and the sale consideration adopted by the assessee. However, the Tribunal observed that the property in question was in litigation, and therefore, the SRO value could not be applied without verification. Since the assessee had not adequately represented their case before the tax authorities, the Tribunal deemed it fit to grant one more opportunity. Accordingly, the issue was remitted back to the file of the AO with a direction to redo the assessment denovo after providing an opportunity of being heard to the assessee. The assessee was also directed to represent their case properly before the AO. The Tribunal did not decide the merits of the addition but remanded the matter for fresh consideration.

What were the facts?

The assessee, C. Satyanarayana Reddy, sold an immovable property in FY 2007-08 (AY 2008-09) along with another GPA holder. The sale deed value was Rs. 17,50,000, but the Sub-Registrar's Office (SRO) adopted a value of Rs. 30,00,000. The Assessing Officer (AO) invoked Section 50C(1) and issued a notice u/s 148. The assessee's representative confirmed the transaction but cited litigation and unauthorized possession as reasons for selling at a lower rate. Despite multiple opportunities, the assessee did not file a return or provide bank details. The AO completed the assessment under Section 144 r.w.s. 147, adding Rs. 4,25,000 to the short-term capital gains, representing the difference between the SRO value (Rs. 15,00,000 for the assessee's share) and the sale consideration adopted by the assessee (Rs. 10,75,000). The CIT(A) dismissed the assessee's appeal in limine for non-compliance.

What were the issues?

1. Whether the First Appellate Authority was justified in not giving proper opportunities to the appellant (mixed law and fact, turning on principles of natural justice and procedural fairness). 2. Whether the Assessing Officer was justified in adopting the SRO rate under Section 50C without referring the matter to the valuation cell, given the specific claim of litigation concerning the property (mixed law and fact, turning on Section 50C(2) and principles of valuation). 3. Whether the addition made under Section 50C is unjustified since the Assessing Officer did not refer the matter to the valuation cell (mixed law and fact, turning on Section 50C(2)). 4. Whether the First Appellate Authority was justified in sustaining the addition of Rs. 4,25,000 made by the Assessing Officer (mixed law and fact, turning on Section 50C and principles of capital gains computation). Assessee's contentions: The assessee argued that the First Appellate Authority did not provide proper opportunities. They further contended that the AO was not justified in adopting the SRO rate under Section 50C without referring the matter to the valuation cell, especially in light of the property being in litigation. Therefore, the addition made under Section 50C was unjustified and the CIT(A) erred in sustaining it. Revenue's contentions: The judgment does not record specific contentions from the revenue before the Tribunal.

Which sections of the Income-tax Act were involved?

Section 50C,Section 148,Section 144,Section 147,Section 143(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCH ‘B(SMC

Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN

For Appellant: Shri K.A. Saiprasad
For Respondent: Shri Nilanjan Dey
Hearing: 13/06/2019Pronounced: 03/07/2019

PER S. RIFAUR RAHMAN, AM: This appeal filed by the assessee is directed against the order of CIT(A) – 4, Hyderabad, dated, 09/05/2018 for AY 2008-09.

2.

Brief facts of the case are, the assessee is an individual retired from the State Government of Telangana and drawing pension. As per the information available with the department, during the FY 2007-08 relevant to the AY 2008-09, the assessee along with Sri B. Hanumanthu (both are GPA holders as per the agreement of sale vide document No. 21276/2006) sold immovable property vide sale deed document No. 14450/2007, dated 04/12/2007. The document value of the property is Rs.17,50,000/- whereas as the value adopted by sub-registrar Office(SRO) authorities is Rs.30,00,000/-. Hence, the AO observed that since the value of the property as per SRO authorities is more than the

2 I.T.A. No. 1504/Hyd/18 C. Satyanarayana Reddy, Hyd.

document value, the value so adopted by the sub-registrar Office is deemed to be the full value of sale consideration received as per Section 50C(1) of the Income Act, 1961. In order to bring the escaped income of assessee's share to tax, the AO issued notice u/s 148 on 26.03.2015 and same was served on 27.03.2015. In response to the said notice, the assessee appeared on 27.07.2015 and filed copies of sale deeds. In response to notice under section 142(1) and Subsequent show cause letters issued providing opportunities on various dates i.e., on 10.08.2015, 27.10.2015, 02.11.2015, 19.11.2015, 30.11.2015, 22.12.2015, 08.01.2016, 28.01.2016, the assessee's authorized representative Sri V. Ramachandra Rao, FCA, appeared from time to time. The assessee's AR Sri.V.Ramachandra Rao vide letter dated 20.08.2015 confirmed the transaction and stated that the assessee has sold the property for lesser rate because of litigation on account of unauthorized possession by local gundas and requested to consider the same. Even after taking/availing several adjournments, the assessee/AR has not filed return of income and not produced the relevant bank details.

2.1 In view of the above, the AO issued a show cause letter dated 03.02.2016 with date of hearing on 15.02.2016, informing that it is proposed to complete the assessment under 144 r.w.s. 147 of the I.T. Act, 1961.

2.2 The assessee's AR appeared on 16.02.2016 and requested time upto 17.02.2016 to file the information called for. The assessee's AR appeared on 08.03.2016 and filed return of income for the A.Y.2008-09 declaring a total income of Rs.3,57,770/- which includes short term capital gains of Rs. 1,90,020/-, income from pension at Rs. 1,54,970/- and income from house property at Rs.12,600/-.

3 I.T.A. No. 1504/Hyd/18 C. Satyanarayana Reddy, Hyd.

2.3 The AO observed that in computation of short term capital gains the assessee increased his share of sale consideration by Rs.2 lakhs i.e. at Rs.10,75,000/- against deemed value of sale consideration (as per SRO authorities value) to be admitted at Rs. 15,00,000/- as per provisions of section 50C. A notice under section 143(2) was issued on 08.03.2016 with date of hearing on 14.03.2016. The assessee's AR appeared and requested time upto 17.03.2016 to furnish Bank account statement. But no one appeared on the said date.

2.4 The AO observed that in view of the provisions of section 50C(1) of the Income tax Act, 1961, the assessee's explanation submitted vide letter dated 20.08.2015 is not acceptable. Hence the difference in the value so adopted by the Sub-Registrar Office authorities (Rs. 15,00,000/-) and the sale consideration adopted (Rs. 10,75,000/-) by the assessee in computation of tax i.e. at Rs. 4,25,000/- is added to the short term capital gains offered and assessment is completed accordingly.

3.

Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A), the CIT(A) dismissed the appeal of the assessee in-limine on the ground that though several opportunities were offered to the assessee, there was no compliance from the assessee.

4.

Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds:

“1. The Learned First Appellate Authority is not justified in not giving proper opportunities to the appellant.

4 I.T.A. No. 1504/Hyd/18 C. Satyanarayana Reddy, Hyd.

2.

The Learned First Appellate Authority failed to appreciate the fact that in spite of the specific claim that the property in question is in litigation, the Assessing Officer is not justified in adopting SRO rate u/s 50C without referring the matter to the valuation cell. 3. The Learned First Appellate Authority failed to appreciate the fact that since, the Assessing Officer has not referred to the valuation cell, the addition made u/s 50C is unjustified. 4. The Learned First Appellate Authority is not justified in sustaining the addition of Rs. 4,25,000 made by the Assessing Officer. 5. The appellant craves leave to add or amend or alter any of the grounds at the time of hearing of appeal.”

5.

Considered the rival submissions and perused the material on record. On perusal of orders of revenue authorities, we find that assessee failed to represent his case before them. Therefore, the AO made the addition of Rs. 4,25,000/- as short term capital gain by treating the difference between the SRO value of Rs. 15,00,000/- and sale consideration adopted by the assessee at Rs. 10,75,000/-. We noticed that the property in question is in litigation. Therefore, SRO value cannot be applied without verification. Since assessee has not represented his case before tax authorities, we deem it fit to give one more opportunity to assessee. Accordingly, we remit this issue back to the file of AO with a direction to redo the assessment denovo after giving opportunity of being heard to the assessee. At the same time, we direct the assessee to represent the case before AO properly.

5 I.T.A. No. 1504/Hyd/18 C. Satyanarayana Reddy, Hyd.

6.

In the result, appeal of the assessee is treated as allowed for statistical purposes. Pronounced in the open court on 3rd July, 2019.

Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 3rd July, 2019. kv Copy forwarded to: 1. C. Satyanarayana Reddy, C/o Ch. Parthasarathy & Co., 1-1- 298/2/B/3, 1st Floor, Sowbhagya Avenue, St. No. 1, Ashoknagar, Hyderabad – 500 020 2. ITO, Ward – 13(1), AC Guards, Masab Tank, Hyd-04. 3. CIT(A) - 4, Hyderabad 4. Pr. CIT - 4, Hyderabad 5. The DR, ITAT, Hyderabad 6. Guard File

Description Date Intls S.No. 1. Draft dictated on Sr.P.S./P.S 2. Draft placed before author Sr.P.S/PS Draft proposed & placed JM/AM 3. before the second Member 4. Draft discussed/approved by JM/AM second Member 5. Approved Draft comes to the Sr.P.S./P.S Sr.P.S./PS 6. Kept for pronouncement on Sr. P.S./P.S. 7. File sent to the Bench Clerk Sr.P.S./P.S 8. Date on which file goes to the Head Clerk 9. Date of Dispatch of order

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