VIMALA HARIHARAN,ERNAKULAM vs. INCOME TAX OFFICER, NON CORP WARD 1(1), COCHIN

This appeal filed by the assessee-trust is directed against the order of the National Faceless Assessment Centre / Commissioner of Income- tax (Appeals) [“the CIT(A)”] dated 08.02.2024 passed u/s.143(3) of the Income-tax Act, 1961 (“the Act”) for the assessment year 2016-2017.

Briefly the facts of the case are that the appellant is an individual. The return of income for the assessment year 2016-2017 was filed on 27th July, 2016 disclosing income of Rs.25,94,020. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income-tax, Non-Corporate Ward 1(1), Kochi (“the AO”) vide order dated 13th December, 2018 passed u/s.143(3) of the Income-tax Act, 1961 (“the Act”) at a total income of Rs.1,37,20,831. While doing so, the AO made addition under the head long term capital . Vimala Hariharan. gains on the sale of immovable property situated at Survey No.429, M.G.Road, Kochi, in which the appellant was holding share of 16.07%. The factual background leading to the above addition is that, during the previous year relevant to the assessment year under consideration, the appellant sold immovable property situated at Survey No.429, M.G.Road, Kochi, which was inherited by him and jointly held with others and the share of the appellant was 16.07%, for a total consideration of Rs.6,75,01,948. While computing the capital gains, the appellant adopted the Fair Market Value (FMV) of the property sold at the rate of Rs.2 lakh per cent, accordingly arrived at the long term capital gains of Rs.3,11,49,599. The computation of the capital gains as adopted by the appellant is extracted by the AO at pages 2 and 3 of the assessment order. When the appellant was called upon to furnish the basis of adopting the FMV as on 01.04.1981 of Rs.2 lakh per cent, it was submitted that it is based on the value fixed by the ITAT in the case of Cochin Bakery v. ITO in &219/Coch/2004. However, the AO made a reference to the Sub Registrar Office (SRO) vide letter dated 28.11.2018 in order to ascertain the FMV of the property as on 01.04.1981. The SRO in turn submitted that the FMV of the property in Survey No.429 is Rs.54,800 per cent is based on the sale instances in the same locality as per document No.1712 of 1981. When the AO had asked the appellant to explain as to why the SRO value cannot be adopted as FMV, it is submitted that the value as per SRO record does not represent FMV and placing reliance on the decision of the Tribunal in the case of Cochin Bakery in & 219/Coch/2004, the FMV of the property should be adopted at Rs.2 lakh per cent. However, the AO rejected the above submission by holding that the decision of . Vimala Hariharan. the ITAT have no application, inasmuch as, the subject property is situated at a distance of 500 meters as that of the property which was decided by the ITAT. Accordingly, the AO made addition under the head capital gains by adopting the FMV of the property at Rs.54,800 per cent as on 01.04.2018.

Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO by holding that for the purpose of valuation of the FMV, the ITAT is not a right forum to decide the FMV of the particular property.

Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal. It is submitted that the AO was not justified in adopting the FMV at the rate of Rs.56,800 per cent based on the sale instance in the same locality furnished by the SRO, as it does not represent FMV. It is submitted that the value of Rs.2 lakh per cent adopted by the appellant is very reasonable in view of the decision of the ITAT in the case of Mrs.Leela Muralidharan v. ITO (ITA No.137/Coch/2013).

On the other hand, the learned Sr.DR supporting the orders of the lower authorities submits that no interference is called for.

We heard the rival submissions and perused the material available on record. The issue that arises for my consideration is with regard to the adoption of FMV of the property sold as on 01.04.1981 for the purpose of computing the cost of acquisition in terms of provisions of sec.55(2) of the Act. The appellant adopted the FMV of the property . Vimala Hariharan. sold as on 01.04.1981 at Rs.2 lakh per cent based on the decision of the Cochin Bench of the Tribunal in the case of Cochin Bakery (supra), whereas the AO had adopted the FMV of the property as on 01.04.1981 based on the sale instances in the same locality furnished by the SRO. It is an admitted fact that the appellant had not filed valuation report by a registered valuer during the course of assessment proceedings or before the CIT(A). It is only before this Tribunal, the appellant had filed the Valuer’s report from Er.Gangadharan K.T., Ernakulam. No doubt, ITAT is not a right forum to decide on the issue of valuation of the immovable property, but it can only go into the correctness or otherwise of the due process adopted by the assessing authority to arrive at the valuation. In this regard, reference can be made to the decision of the Hon’ble Calcutta High Court in the case of Namita Sarkar v. CIT (2005) 275 ITR 590 (Cal.). In the absence of any valuation report by Registered Valuer in support of the value adopted by the appellant, we are of the considered opinion that the AO was justified in adopting the FMV based on the sale instance in the same locality as furnished by the SRO, in the absence of any other evidences. In this regard, reference can be made to the decision of the Hon’ble Madras High Court in the case of CIT v. J.V.K.Rao (2002) 258 ITR 90 (Mad.). Since the valuation report was furnished before the Tribunal for the first time, we do not find any merit in the appeal filed by the assessee.

In the result, the appeal filed by the assessee stands dismissed.