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Facts
The assessee entered into a joint development agreement in 2008 and offered capital gains in AY 2008-09 based on a cost of Rs. 1,620/- per sq.ft., which was accepted. For AY 2012-13, the assessee calculated capital gains using a cost of Rs. 1,790/- per sq.ft. The AO, following a revised order from the CIT, adopted a cost of Rs. 951/- per sq.ft., which was disputed.
Held
The Tribunal held that the cost of Rs. 951/- per sq.ft. adopted by the AO was incorrect as it was based on a direction that was set aside by this Tribunal earlier. The Tribunal directed the AO to adopt the cost of Rs. 1,620/- per sq.ft. as a yardstick for taxing the value for AY 2012-13, considering the value adopted in AY 2008-09 and the cost incurred in AY 2012-13.
Key Issues
The primary issue was the correct cost of construction to be adopted for computing capital gains for AY 2012-13, with the assessee claiming Rs. 1,790/-, the AO Rs. 951/-, and the Tribunal finally deciding on Rs. 1,620/-.
Sections Cited
250, 263, 55A, 234A, 234B, 234C, 271(1)(c), 147, 144, 143(3)
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 22/03/2025 in respect of the A.Y. 2012-13 and raised the following grounds: “
A. GENERAL GROUNDS:
1. The order dated 22 March 2025 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi ["CIT(A)"] under section 250 of the Income-tax Act, 1961 ("IT Act") in so far as it confirms the additions/adjustments made by the learned Assessing Officer ("Ld AO"), is contrary to law and facts of the case and is passed in contravention of principles of natural justice. B. GROUNDS IN RELATION TO SHORT TERM CAPITAL GAINS: 2. The CIT(A) and Ld AO have erred in law and on facts in computing additional short term capital gain of Rs.34,60,575/- by adopting the 'cost of construction' at Rs.951/- per sq ft as against the cost of Rs.1,790/- considered y the Appellant.
3. The CIT(A) erred in upholding the order of the Ld AO adopting the cost of Rs.951/- per sq ft as determined in the order passed by the CIT under section 263 of the Act without appreciating that this Hon'ble Tribunal had not accepted the said cost and had remanded the matter to the AO.
4. The CIT(A) and Ld AO have erred in determining the Appellant's share of the property as 1/5th without appreciating that this Hon'ble Tribunal in the challenge to the 263 order has specifically held that the Appellant had 1/4th share in the property.
5. The CIT(A) and Ld AO have erred in not appreciating that the Appellant had offered Capital gains on the property transferred under the JDA to tax in AY 2008-09 which had attained finality.
6. Without prejudice to the above, the CIT(A) and AO have erred in not appreciating that the cost of construction at Rs.1,620/- per sq ft was considered for computing the capital gains tax for AY 2008-09 and the same has attained finality under the Tax Dispute Resolution Scheme, 2016.
7. Without prejudice to the above, the CIT(A) and Ld AO despite holding that the methodology adopted for computing capital gains for AY 2008-09 should be applied for AY 2012-13, erred in adopting the cost of construction at Rs.951/- instead of Rs.1,620/-.
8. The CIT(A) and Ld AO erred in rejecting the valuation report submitted by the Appellant to substantiate the cost of construction.
9. The CIT(A) and Ld AO erred in not making a reference to the District Valuation Officer ("DVO") under section 55A of the Act when the cost of construction claimed by the Appellant was not acceptable.
C. CONSEQUENTIAL GROUNDS: 10. The CIT(A) and Ld AO erred in charging interest under section 234A, 234B and 234C of the Act. 11. The CIT(A) and Ld AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. Each of the above grounds is independent and without prejudice to the other grounds of appeal preferred by the Appellant. The Appellant reserves the right to further add, alter or amend each one of the above grounds of appeal”
2. The brief facts of the case are that the assessee is an individual and filed her return of income on 04/03/2014. The assessee alongwith the other co-owners entered into a joint development agreement on 31/01/2008 with the builder for developing the property as multi storied apartments. It was agreed that the owners will get 37% of the constructed area for the land given by them. The AO had estimated the capital gains u/s 147 and accepted the calculation made by the owners. The AO had taken the value at Rs 1,620/ and computed the capital gains. Since the assessment was made u/s 144 of the Act, the assessee challenged the said order before the Ld CIT(A). Later on the assessee withdrew the appeal and filed an application under the Direct Tax Disputes Resolution Scheme and settled the dispute and paid the tax determined by the authorities.
3. The assessee in the year 2012-13 received 7 flats and sold 3 flats and calculated the capital gains by adopting the cost at Rs 1,790/ based on the valuation report given by a valuer. The AO accepted the computation and passed an order on 27/03/2015. The CIT revised the assessment u/s 263 and directed the AO to adopt the cost of construction at Rs 951/sq.ft. The assessee questioned the order of the Ld CIT before this Tribunal. When the appeal was pending before this Tribunal, the AO gave effect to the order of the Ld CIT. The assessee challenged the said order before the Ld CIT(A).
Subsequently this Tribunal disposed the appeal filed by the assessee in on 18/04/2018. This Tribunal had set aside the 263 order of the CIT in which the rate at Rs 951/sq. ft adopted by the Ld CIT was set aside. This Tribunal also directed the AO to determine the cost after taking into consideration all the aspects with regard to determination of computation of capital gain on sale of land under JDA dated 31/01/2008 in the A/Y 2008-09. In effect the rate adopted by the Ld CIT has not been accepted by this Tribunal. In the meanwhile the Ld CIT(A) had disposed the appeal filed by the assessee and directed the AO to pass order based on the direction given by this tribunal.
The AO while giving effect to the directions of this Tribunal has again adopted the rate at Rs 951/sq.ft as directed by the Ld CIT. As against the said order the assessee filed an appeal which was dismissed by the Ld CIT. As against the said order the present appeal has been filed before this Tribunal.
At the time of hearing, the Ld.AR filed a paper book enclosing the written submissions, original assessment order dated 27/03/2015, 263 order passed by the Ld.PCIT, Tribunal order in CIT(A) order dated 28/09/2018, assessment order for the A.Y. 2008-09, assessment order for the A.Y. 2012-13 and the computation sheet and submitted that the JDA has been entered on 31/01/2008 i.e. in the A.Y. 2008-09 and during the said A.Y., the assessee had shown a value of Rs. 1,620/- per sq.ft. and the long term capital gains were offered to tax during that A.Y. which was also accepted by the revenue and also accepted by the assessee by filing an application under The Direct Tax Dispute Resolution Scheme, 2016 and therefore the value adopted at Rs. 951/- per sq.ft. in the A.Y. 2012-13 is not correct. The Ld.AR further submitted that the rate per sq.ft. adopted by the Ld.PCIT at Rs. 951/- per sq.ft. was set aside by the Tribunal vide its order dated 18/04/2018 and therefore adopting the very same rate by the AO as against the findings given by the Tribunal is not correct. The Ld.AR also submitted that when the assessee as well as the Rs. 1,620/- per sq.ft., in the A.Y. 2008-09, the cost of construction adopted by the authorities at Rs. 951/- per sq.ft. that too after a period of 3 years is not correct. The Ld.AR further relied on the findings given by the Tribunal in the earlier round in which the Tribunal had not accepted the rate adopted by the Ld.PCIT at Rs. 951/- per sq.ft. and therefore the authorities ought to have fairly estimated the cost of construction and not at the rate adopted earlier which was set aside by the Tribunal and therefore prayed that the appeal of the assessee in which the cost of acquisition at Rs. 1,790/- per sq.ft. may be adopted and the capital gains may be computed accordingly.
The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeal.
We have heard the arguments of both sides and perused the materials available on record.
As seen from the documents furnished by the assessee, the JDA was entered on 31/01/2008 and during the A.Y. 2008-09, itself, the assessee had offered the capital gains by calculating the value at Rs. 1,620/- per sq.ft. which was also accepted by the revenue. Later on, the assessee disputed the assessment by filing an appeal but they availed The Direct Tax Dispute Resolution Scheme, 2016 and also paid the amount determined by the revenue and also withdrawn the appeal filed before the Ld.CIT(A) and therefore the value adopted by the assessee at Rs. 1,620/- per sq.ft. during the A.Y. 2008-09 becomes final. If the value adopted by the assessee during the A.Y. 2008-09 are found by the authorities as not correct value, the said assessment order could have been interfered u/s. 263 of the Act but no such proceeding was initiated. Even after the assessee had filed an application under The Direct Tax Dispute Resolution Scheme, 2016, the authorities could have very well revoked the settlement certificate issued to the assessee on the ground that the assessee had suppressed the material facts. No such action was also taken by the authorities. In such
We have also perused the assessment order dated 29/12/2017 in which the AO had taken the cost of construction at Rs. 951/- per sq.ft. as directed by the Ld.PCIT. We do not know how the Ld.PCIT has also adopted the cost of construction at Rs. 951/- per sq.ft. as against Rs. 1,790/- per sq.ft. offered by the assessee. In the assessment order dated 29/12/2017, the AO had stated that as per the direction given by the Ld.PCIT, the cost of construction has been taken at Rs. 951/- per sq.ft. But unfortunately the said order directing the AO to adopt the cost of construction at Rs. 951/- per sq.f. was set aside by this Tribunal in dated 18/04/2018 and therefore we do not think that the value adopted by the AO in the assessment order dated 29/12/2017 is a correct one. The Tribunal had considered the order of the Ld.PCIT passed u/s. 263 of the Act and gave the following findings: “9. We have heard the rival submissions. It is seen that the CIT has adopted the cost of construction of the flat at 1/5th of the sale consideration received on transfer under the JDA dated 31/1/2008. The assessee's share is only 1/4 in the entire property and, therefore, this basis adopted by the CIT was not correct. It is a different matter that in the asst. year 2008-09 capital gain on sale of land under JDA was assessed on the basis that the assessee has 1/5th share. Apart from the above, we do not know the basis of the determination of full value of consideration received on sale of the land under JDA dated 31/1/2008 at Rs. 4,44,57,660/-. In these circumstances, we are of the view that the order u/s 263 of the act has to be modified. The question of determination of cost of acquisition of the flats sold by the assessee during the previous year should be left open for adjudication of the AO. The direction with regard to adopting the cost per Sq ft of built up area of flats sold by the assessee at Rs. 955/- Sq ft is deleted/modified and AO is directed to determine the cost after taking into consideration all the aspects with regard to determination of computation of capital gain on sale of land under JDA dated 31/1/2008 in asst. year 2008-09. With these modifications, we uphold order of the CIT and direct the AO to compute short term capital gain after affording reasonable opportunity of being heard to the
On going through the said finding, it is clear that the Tribunal was of the view that the order of the Ld.PCIT has to be modified and the cost of construction per sq.ft. of built-up area of flats sold by the assessee at Rs. 955/- per sq.ft. is to be deleted. Thereafter the Tribunal had directed the AO to determine the cost after taking into consideration all the aspects for computing the capital gains and also by considering the capital gain on sale of land under JDA arrived in the A.Y. 2008-09.
Therefore the Tribunal had set aside the cost of construction adopted at Rs. 951/- per sq.ft. by the AO based on the direction of the Ld.PCIT and also directed to consider the cost adopted for the A.Y. 2008-09 while computing the capital gains. Again the AO adopted the rate at Rs951/sq.ft which was confirmed by the Ld CIT(A). In our view the rate adopted by the AO is against the directions of this Tribunal and also against the rate adopted at the time of entering the JDA.
In such circumstances and also considering the entire facts, we are of the view that the cost of construction adopted by the AO at Rs. 951/- per sq.ft. is not correct and therefore we are directing the AO to adopt the cost of construction at Rs. 1,620/- instead of Rs. 1,790/- per sq.ft. adopted by the assessee while filing the return of income. We have adopted the value at Rs. 1,620/ per sq.ft. by taking into consideration the value adopted during the A.Y. 2008-09 and the cost incurred during the A.Y. 2012-13 and therefore in order to meet the ends of justice, we direct the AO to adopt the rate at Rs. 1,620/- per sq.ft. instead of Rs. 951/- per sq.ft. as adopted by him based on the direction of the Ld.PCIT since the said directions are already set aside by this Tribunal.
Order pronounced in the open court on 03rd December, 2025.