THANNERU MASTHAN RAO,NELLORE vs. INCOME TAX OFFICER, WARD-1, NELLORE

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ITA 1374/HYD/2024Status: DisposedITAT Hyderabad15 April 2025AY 2010-11Bench: SHRI VIJAY PAL RAO, HON’BLE (Vice President), SHRI MADHUSUDAN SAWDIA, HON’BLE (Accountant Member)10 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal acknowledged that the existence of a structure on the property at the time of sale was confirmed by physical inspection and photographic evidence, concurring with the lower authorities on this point. However, the Tribunal noted that the condition and market value of the structure at the time of sale needed to be evaluated. The assessee's claim that the structure was severely deteriorated and had lost commercial value, supported by details of loan default, machinery sale, and partial loan waiver by APSFC, was considered. The Tribunal held that the value adopted by the Stamp Valuation Authority cannot be blindly applied, especially when deterioration is claimed. It was found that the AO should have referred the matter to the DVO under Section 50C(2) of the Act, which was not done. Therefore, the Tribunal set aside the orders of the lower authorities and restored the matter to the file of the AO with a direction to refer the valuation of the property to the DVO under Section 50C(2). The assessee will be given an opportunity to present evidence regarding the condition and market value of the structure, and the AO will re-adjudicate the issue.

What were the facts?

The assessee, Thanneru Masthan Rao, is appealing an order from the NFAC, Delhi, for Assessment Year 2010-11. The assessee purchased land for Rs. 9 lakhs in 2007 and sold it for Rs. 9 lakhs in 2009. The Assessing Officer (AO) received information from the Sub-Registrar, Gudur, indicating the property was revalued at Rs. 61,67,500/- for stamp duty purposes due to an existing RCC structure. The buyer paid the differential stamp duty. The AO, believing the sale consideration was suppressed, issued a notice under Section 148 and completed the assessment under Section 144 r.w.s. 147, treating the sale consideration as Rs. 61,67,500/- and computing a short-term capital gain of Rs. 52,67,500/-. The CIT(A) dismissed the assessee's appeal.

What were the issues?

1. Whether the Commissioner of Income Tax (Appeals) erred in upholding the invocation of Section 50C of the Income Tax Act, 1961, and the reassessment under Section 147 read with Section 144, based on a remand report and third-party enquiry statements, which the assessee contends is arbitrary and unlawful? 2. Whether the CIT(A) and AO acted arbitrarily in re-assessing the short-term capital gain by determining the market value based on information from the Sub-Registrar, Gudur, for a property sale where the vendee voluntarily accepted an inflated valuation and paid excess stamp duty without the vendor's consent? Assessee's Contentions: - The CIT(A) did not properly examine the weightage and relevance of available information. - The valuation by the Sub-Registrar was at the instance of the vendee for their benefit, without the vendor's consent. - The assessee had purchased the property for Rs. 9 lakhs in 2007, and there was no improvement to the property since then. The same property was previously valued less than Rs. 9 lakhs as part of an OTS with APSFC. - The notice under Section 148 was served without specific reasons to believe income had escaped assessment and was time-barred under Section 149. - The AO was biased in penalizing only the assessee while the vendee, who accepted the inflated valuation, was not brought under Section 56. - The AO should have referred the matter to the Departmental Valuation Officer (DVO) under Section 50C(2) instead of relying solely on the Stamp Valuation Authority's value. Revenue's Contentions: - Relied on the orders of the Revenue Authorities. - The existence of a substantial RCC structure was confirmed by the Inspector during physical verification and documented with photographs. - The buyer paying deficit stamp duty supports the adoption of the stamp duty valuation as the correct sale consideration. - The sale consideration shown by the assessee was substantially understated, justifying the AO's addition.

Which sections of the Income-tax Act were involved?

Section 50C,Section 147,Section 144,Section 148,Section 149,Section 56,Section 50C(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD

Before: SHRI VIJAY PAL RAO, HON’BLE & SHRI MADHUSUDAN SAWDIA, HON’BLE ACCOUNTANT

For Appellant: Shri Kondireddi Vamsi Krishna
For Respondent: Shri Srinath Sadanala, SR-DR
Hearing: 07/04/2025Pronounced: 15/04/2025

O R D E R PER MADHUSUDAN SAWDIA, A.M.: This appeal is filed by Thanneru Masthan Rao (“the assessee") feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 21.10.2024 for the A.Y. 2010-11. 2. The assessee has raised the following grounds of appeal :

2 “1. CIT(A) has not examined a weightage of information available on the record and its relevance to this subject matter, just upheld the invocation of u/s 50C Income Tax Act. 1961 u/s 147r.w.s144 and reconfirmed the AO assessment order basing on the remand report called from the concerned AO with some third-party enquiry statements that is purely arbitrary and unlawful as per the Income Tax Act 1961.

2.

CIT(A) and the AO were arbitrary in the re-assessment of the short- term capital gain of the assessee for AY 2010-2011 of amount Rs. 52,67,500/- based on the information obtained via an email from the Sub-

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