SMT. NANDAMUDI TULASI,SECUNDERABAD vs. THE DCIT, KAKINADA

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ITA 284/VIZ/2015Status: DisposedITAT Visakhapatnam12 September 2018AY 2010-1110 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that for ascertaining the fair market value of the land as on 01/04/1981, the SRO value is not the fair market value. The Assessing Officer overlooked the valuation certificate issued by the Government Registered Valuer, which valued the land at Rs. 100/- per sq.yrd. However, the assessee also did not file any sale deed to support the fair market value. Therefore, the Tribunal opined that the fair market value of the land as on 01/04/1981 would be Rs. 65/- per sq.yrd. and directed the Assessing Officer to adopt this value and recalculate the capital gains. Regarding the cost of construction of the building, the Tribunal noted a significant variation between the Government Registered Valuer's certificate (Rs. 200/- per sq.ft.) and the SRO's certificate (Rs. 34.10 ps. per sq.ft.). In the interest of justice, the Tribunal directed the Assessing Officer to take the cost of construction as Rs. 65/- per sq.ft. as on 01/04/1981 and recompute the long-term capital gains. For the cost of improvement, the Tribunal found that the assessee could not produce bills/vouchers to substantiate the expenditure. The CIT(A) had allowed 50% of the claimed expenditure, which the Tribunal considered fair, reasonable, and justifiable, and thus dismissed this ground of appeal. The issue regarding the assessee's share in the property was not pressed before the CIT(A) and was dismissed. The appeals were partly allowed.

What were the facts?

These appeals by four assessees (Shri Pasala Venkata Chalapathi, Smt. Nandamudi Tulasi, Shri Pasala Naga Ratna Mouli, and Smt. Pasala Nagaveni) are against the orders of the CIT(A)-2, Visakhapatnam, for Assessment Year 2010-11. There was a delay in filing the appeals, which was condoned by the Tribunal after considering affidavits and hearing arguments. The core dispute revolves around the computation of long-term capital gains arising from the sale of property. The assessees had adopted specific values for the cost of acquisition of land and construction of buildings as of April 1, 1981, based on valuation reports. The Assessing Officer, however, relied on the Sub-Registrar's (SRO) valuation, which was confirmed by the CIT(A). The assessees also claimed expenditure for improvement of the building.

What were the issues?

1. Whether the Tribunal erred in law and facts by adopting the Sub-Registrar's values as on 01-04-1981 for computing capital gains, instead of the values claimed by the assessee based on a valuation report? (Section 48 of the Income Tax Act, 1961, concerning capital gains calculation). 2. Whether the Tribunal erred in confirming the Assessing Officer's action of taking Rs. 45/- per Sq. Yard for land and Rs. 34.10 per Sq. Ft. for building, when the assessee claimed Rs. 100/- per sq. yard and Rs. 200/- per Sq. Ft. based on a valuation report? 3. Whether the Tribunal erred in law and facts by not accepting the entire improvement cost incurred and recorded in the books of account, and allowing only 50% of the claimed cost of improvement, without considering indexation? Assessee's Contentions: - The CIT(A) and AO erred in adopting SRO values as on 01-04-1981 for capital gains computation, which are not fair market values. The assessee relied on a Government Registered Valuer's certificate for higher values. - The entire improvement cost incurred and recorded in books should have been accepted, and indexation should have been allowed. Revenue's Contentions: - The Assessing Officer considered the valuation certificate from an Executive Engineer (Retd.) Government Registered Valuer and also called for a report from the SRO, Tadepalligudem. Based on the SRO's certificate, the value was adopted. - The AO called for a report from the SRO, Tadepalligudem, and adopted the value at Rs. 34.10 ps. per sq.ft. for the building cost. - The CIT(A) fairly and reasonably considered the claim of improvement cost to the extent of 50% in the absence of bills and vouchers.

Which sections of the Income-tax Act were involved?

Section 48

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM

Before: SHRI V. DURGA RAO, HON’BLE & SHRI D.S. SUNDER SINGH, HON’BLE

For Appellant: Shri M.V. Anil Kumar, Adv
For Respondent: Smt. V. Mini Chandram, Sr.DR
Hearing: 20/08/2018Pronounced: 05/09/2018

Heard together (4 matters)

ITA No. 283/VIZ/2015
ITA No. 284/VIZ/2015
ITA No. 290/VIZ/2015
ITA No. 291/VIZ/2015

Read from the judgment's own cause title. This page is filed under one of them.

PER V. DURGA RAO, JUDICIAL MEMBER

These appeals by the different assessees are directed against the separate orders of Commissioner of Income Tax (Appeals)-2, Visakhapatnam, all dated 23/03/2015 for the Assessment Year 2010-11. 2. There is a delay of 24 days in ITA Nos. 283 & 284/VIZ/2015 and 28 days in ITA Nos. 290 & 291/VIZ/2015. In all the appeals, assessees are filed affidavits explaining the delay. Ld. counsel for the assessee has submitted that the delay in filing the appeals has been explained in the affidavits and prayed that same may be condoned.

3.

On the other hand, Id. Departmental Representative strongly opposed the condonation of delay.

4.

We have heard both the sides and gone through the affidavits filed in each of the case and find that there is a sufficient cause to condone the delay. Accordingly, we condone the delay in all the appeals filed by the assessees and are admitted for hearing.

5.

In all the appeals, similar grounds have been raised by the assessees. For the sake of convenience, grounds raised in ITA No.

283/VIZ/2015 are extracted as under:-

“1. Your Appellant submits that the CIT (A) as well as Assessing Officer erred in law and facts of the case in adopting values as on 1-4-1981 as per the Sub-Registrar for computation of capital gains, which is not correct.

2.

Your Appellant submits that the CIT (A) erred in confirming the action of Assessing Officer in taking Rs. 45/- per Sq. Yard for the land and Rs. 34.10 Sq. Ft. for building as per SRO, ought to have accepted Rs. 100/- per sq. yard and Rs. 200/- per Sq. Ft. as claimed in the return of income based on a valuation report.

3.

Your Appellant submits that the CIT (A) ought to have accepted the contention that correct share of your appellant only ought to have been taxed as long term capital gains and not 25% as contented by the Assessing Officer.

4.

Your Appellant submits that the CIT (A) erred in law and facts of the case in not accepting the entire improvement cost incurred and recorded in the books of account.

5.

The CIT (A) erred in allowing only 50%,of the entire cost of improvement as claimed by your Appellant and submits that index cost should be allowed while computing the long term capital gains.

For these and such other grounds that may be urged at the time of hearing, your Appellant pray that the Income may be considered

6.

4 ITA Nos.283, 284, 290 & 291/VIZ/2015 as capital gains.”

Ground Nos. 1 & 2 relate to indexed cost of acquisition on 01/04/1981 and also cost of construction of the building.

7.

In the assessment order, the Assessing Officer has observed

in respect of cost of land as on 01/04/1981 as under:-

“The property transferred by the assessee includes a site of 2981.30 sq.yds. For arriving at the long term capital gain, the assessee has taken the cost in 1981-82 @ Rs.100 per sq.yd. The assessee has not furnished any basis whatsoever in support of the cost adopted @ Rs.100 per Sq.yd. but adopted this rate as per the certificate from the Chartered Engineer, Sri Ganti Subba Rao. During the course of assessment proceedings the assessee relied on the cost inflation index of 100 as on 1.04.1981 to adopt the cost at Rs.100 per sq.yds. From the Photostat copy of the sale-deed and its enclosures, it is seen that in Annexure-11 to the sale-deed, a note has been appended to the effect that the market value of the site at D.No.2-12-17, Tadepalligudem in the year 1981 was Rs.65 per sq.yd. as per the market value guidelines'. This note appears to be an undermining one. In fact, there is no specific column prescribed for the SRO to append such note in Annexure II. Therefore, in order to get a clear picture about the market value of the site in the year 1981, a reference has been made to the Sub-Registrar, Tadepalligudem requesting him to furnish the value of the land as on 01-04-1981. On being pursued, the SRO, vide his letter, dated 26-11-2012, stated that the value of the site @ Rs.45 per sqyd. Therefore, the cost of site in respect of 2981.30 sq.yds. under consideration has to be adopted @ Rs.45 for computing the long term capital gain.”

8.

On appeal, Id. CIT(A) confirmed the order of the Assessing Officer.

9.

Before us, Id. counsel for the assessee has drew our

attention at page No. 33 of the paper book and submitted that issued by the Government Registered Valuer. The Assessing Officer ignoring the same, considered the SRO value which is not a fair market value and therefore, the rate adopted by the Assessing Officer is not correct.

10.

On the other hand, Id. Departmental Representative has submitted that the Assessing Officer has considered the valuation certificate issued by the Executive Engineer (Retd.) Government Registered Valuer and also called report from the SRO, Tadepalligudem. Based on the certificate issued by the SRO, Tadepalligudem, value is adopted at Rs. 45 per sq. Yrd and strongly supported the orders passed by the authorities below.

11.

We have heard both the sides, perused the material available on record and orders of the authorities below.

12.

The assessee sold the property along with 3 others. For the purpose of calculation of long term capital gain, the assessee has taken the cost of land as on 01/04/1981 at Rs. 100/- per sq.yrd. Before the Assessing Officer, the assessee has filed certificate issued by the Government Registered Valuer to support his claim, however, the Assessing Officer has not accepted the valuation certificate and obtained report from the SRO, Tadepalligudem. As per the report of the SRO, the value of the site was at Rs. 45/- per

6 ITA Nos.283, 284, 290 & 291/VIZ/2015 sq.yrd., the same was adopted for computing long term capital gain. We find that for the purpose of ascertaining the value of the land as on 01/04/1981, the fair market value has to be adopted by the Assessing Officer. In our opinion, the fair market value is not the SRO value. The Assessing Officer ignoring the above fact, simply accepted the value of the land based on the certificate issued by the SRO, Tadepalligudem. The Assessing Officer totally overlooked the valuation certificate issued by the Government Registered Valuer, wherein he has valued the land at Rs. 100/- per sq.yrd. The assessee has also not filed any sale deed before us which shows the fair market value of the property as on 01/04/1981. He simply relied on the certificate issued by the Government Registered Valuer. Under these facts and circumstances of the case, we are of the opinion that the fair market value of the land as on 01/04/1981 would be of Rs. 65/- per sq.yrd. and accordingly direct the Assessing Officer to adopt the same and recalculate the capital gains.

13.

So far as cost of building as on 01/04/1981 is concerned, the Assessing Officer has observed as under: -

“Similarly, the assessee has adopted the value of construction of the building Rs.200 per Sft. in respect of 7900 sft. of built-up area. This is very much on the higher side. Evidently, this value is adopted by the assessee as per the certificate given by the Chartered Engineer, Sri Ganti

7 ITA Nos.283, 284, 290 & 291/VIZ/2015 Subba Rao.

As discussed above, the value of site as on 01-04-1981 was Rs.65 per syd. as per the note appended to Annexure-11 to the sale-deed and as per the certificate from the Chartered Engineer, Sri Ganti Subba Rao, the value of the said site in the year 1980-81 was certified at Rs.100 per Sq.yd and the same was adopted as the value of site at Rs.100 per sq.yd. for computation of long term capital gain. However, the value of site was finally certified by the SRO, Tadepalligudem at Rs.45, as stated above.

In view of the above contradictions with regard to the value of site, the value @ 200 per Sft. m respect of the built-up area adopted by the assessee as certified by the Chartered Engineer cannot be relied upon. Therefore, a letter has-been issued to the SRO Tadepalligudem requesting him to furnish the values of the building as on 01-04-1981. The SRO vide his certificate dated 20.12.2012 has certified the value of the, built-up area Rs.34.10 per Sft. Accordingly, this has to be adopted for computation of long term capital gain.”

14.

On appeal, Id. CIT(A) confirmed the order of the Assessing Officer.

15.

Before us, Id. counsel for the assessee has relied on the Paper book at page No. 33 wherein certificate issued by the Government Registered Valuer is placed. According to the certificate, cost of construction of value is at Rs. 200/- per sq. ft. as on 01/04/1981 and submitted that certificate issued by the Registered Valuer may be considered.

16.

On the other hand, Id. Departmental Representative has submitted that Assessing Officer called the report from the SRO, Assessing Officer has adopted the value at Rs. 34.10 ps. per sq.ft.

17.

We have heard both the sides, perused the material available on record and orders of the authorities below.

18.

In this case, the assessee has adopted the cost of construction of building at Rs. 200/- per sq.ft. based on the certificate issued by the Government Registered Valuer. The Assessing Officer has not considered the same and called the report from the SRO, Tadepalligudem. Based on the certificate issued by the SRO, he adopted the cost of building at Rs. 34.10 ps. per sq.ft. and the same is adopted for cost of construction. We find that there is a lot of variation between the certificate issued by the Government Registered Valuer and SRO, Tadepalligudem. Therefore, in the interest of justice, the cost of construction as on 01/04/1981 would be of Rs. 65/-. Accordingly, we direct the Assessing Officer to recompute the long term capital gain. Thus, these grounds of appeal raised by the assessee are partly allowed.

19.

Ground No. 3 relates to share of the assessee in the property, which is not pressed before the Id. CIT(A), therefore, same is dismissed.

20.

Ground Nos. 4 & 5 relate to cost of improvement.

21.

The assessee has claimed huge expenditure relating to improvement of the building, which is as under: -

Financial Year | Amounts per)Amount as_ per computation details furnished statement during assessment

proceedings 1983-84 4,00,000 4,15,390 1984-85 1,50,000 1,73,486 1985-86 5,00,000 5,06,568 1990-91 8,00,000 8,11,250 1995-96 3,00,000 3,08,563

The Assessing Officer asked the assessee to produce the details of the expenditure. The assessee has not filed any bills/vouchers, therefore the Assessing Officer disallowed the entire claim made by the assessee.

22.

On appeal, Id. CIT(A) has allowed 50% of the expenditure claimed by the assessee and directed the Assessing Officer to re-compute the long term capital gain. Even before us, assessee is not able to file any _ bills/vouchers to substantiate the expenditure incurred for development and maintenance of the property. In our opinion, the Id. CIT(A) has fairly and reasonably considered the claim of the assessee and is allowed to the extent of 50%. In absence of the bills and vouchers, the order passed by the Id. CIT(A) is fair, reasonable and justifiable and our interference is not called for. Thus, this ground of appeal raised

by the assessee is dismissed.

23.

So far as ITA Nos. 284, 290 & 291/VIZ/2015 are concerned, facts and circumstances are similar to the facts involved in ITA No. 283/VIZ/2015. In view of our above decision, the Assessing Officer is directed to re-compute the capital gains as directed in ITA No. 283/VIZ/2015. Thus, these appeals filed by the assessees are partly allowed.

24.

In the result, all appeals filed by the assessees are partly allowed.

Order Pronounced in open Court on this 05" day of Sep., 2018. (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member

Dated : 05°" Sep., 2018. vr/- Copy to:

1.

The Assessee. The Revenue. The CIT

The CIT(A) The D.R. Guard file.

AuNKWN

By order

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.

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