SMT.KALA EASWARAN KUMAR,CHENNAI vs. ITO, NCW - 1 (5), CHENNAI

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ITA 2637/CHNY/2019Status: DisposedITAT Chennai03 March 2020AY 2016-176 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the matter needed reconsideration by the Assessing Officer. It observed that neither the assessee nor the department had provided comparative sale instances in the locality. The Tribunal found that the Registered Valuer's report lacked detailed discussion, and the Assessing Officer had simply relied on the guideline value provided by the Sub-Registrar, which is not necessarily the fair market value. The Tribunal emphasized that estimating fair market value requires considering factors like the locality, infrastructure, potential for future development, and access to facilities, in addition to guideline values and comparative sale instances. The Tribunal set aside the orders of the authorities below and remitted the issue of valuation back to the Assessing Officer. The Assessing Officer was directed to re-examine the matter, potentially refer it to the Valuation Officer, and ascertain any available comparative sale instances. The fact that the property was inherited by settlement deed, as brought to the Tribunal's notice by the assessee, was also to be considered by the Assessing Officer.

What were the facts?

The assessee, Smt. Kala Eswaran Kumar, filed an appeal against the order of the Commissioner of Income Tax (Appeals)-2, Chennai, for the assessment year 2016-17. The dispute centers on the estimation of the fair market value of a property as on April 1, 1981, for the computation of capital gains. The assessee claimed a fair market value of Rs. 5 lakhs per ground, supported by a valuation report from a Registered Valuer. The Assessing Officer, however, determined the fair market value to be Rs. 22,000/- per ground based on a letter from the Sub-Registrar. The assessee argued that in the same locality, the Assessing Officer had accepted Rs. 5 lakhs per ground, and this Tribunal had also confirmed it. The revenue contended that the Sub-Registrar's valuation was Rs. 22,000/- per ground.

What were the issues?

1. Whether the fair market value of the property as on April 1, 1981, for computing capital gains should be Rs. 5 lakhs per ground as claimed by the assessee, or Rs. 22,000/- per ground as determined by the Assessing Officer based on the Sub-Registrar's estimate? (Question of law and fact, concerning Section 48 of the Income Tax Act, 1961). Assessee's contentions: The assessee relied on the valuation report of a Registered Valuer estimating the value at Rs. 5 lakhs per ground. They also pointed out that in the same neighborhood, the Assessing Officer had accepted Rs. 5 lakhs per ground, a valuation previously confirmed by this Tribunal. The assessee also submitted that the property was inherited from her mother by way of a settlement deed, citing the Bombay High Court judgment in CIT vs. Manjula J. Shah. Revenue's contentions: The revenue relied on the valuation of Rs. 22,000/- per ground obtained from the Sub-Registrar. They stated that no comparative sale instances were brought on record.

Which sections of the Income-tax Act were involved?

Section 48

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI RAMIT KOCHAR

For Respondent: Shri AR.V. Sreenivasan, JCIT
Pronounced: 03.03.2020

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

This appeal of the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals)–2, Chennai dated 16.07.2019 and pertains to the assessment year 2016-17.

2.

Shri J. Prabhakar, the Ld. Representative for the assessee submitted that the only issue arises for consideration is estimation of 01.04.1981 for computing the capital gain. According to the Ld.Representative, the assessee adopted the fair market value as on 01.04.1981 at Rs.5 lakhs per ground. However, the Assessing Officer on the basis of the letter said to be received from Sub-Registrar adopted the fair market value as on 01.04.1981 at Rs.22,000/- per ground. Referring to the valuation report, the copy of which is available at page No.32 of the Paper-book, the Ld.Representative submitted that the Registered Valuer estimated the value of the property at Rs.5 lakhs per ground in the year 1981. On a query from the Bench, the Ld.Representative clarified that there is no comparative sale instances in the same locality during the relevant period. The Ld.Representative further submitted that in the very same neighborhood, just opposite to the Raja Annamalaipuram, 3rd Main Road, the Assessing Officer himself accepted the fair market value as on 01.04.1981 is at Rs.5 lakhs. This Tribunal has also confirmed the fair market value at Rs.5 lakhs per ground.

3.

On the contrary, Shri AR.V.Sreenivasan, the Ld. Departmental Representative submitted that during the year under consideration, the assessee sold a property at 3rd Main Road, Raja Annamalaipuram, Chennai – 28 for a total consideration of Rs.10.90 Crores. The 01.04.1981 at Rs.5 lakhs per ground. However, the Assessing Officer after referring the matter to the Sub-Registrar found that the fair market value as on 01.04.1981 is only Rs.22,000/- per ground. On a query from the Bench, the Ld.DR clarified that no comparative sale instances were brought on record.

4.

Having heard the Ld. Representative for the assessee and the Ld.DR, we also perused the materials available on record including the impugned orders of authorities below. As on 01.04.1981, the fair market value has to be estimated for computing the capital gain. The assessee claims that the fair market value was Rs.5 lakhs per ground. However, the Department claims that the fair market value was Rs.22,000/- per ground. Neither the assessee nor the Department could bring the comparative sale instances in the locality. We have also carefully gone through the Registered Valuers Report. The Registered Valuer without any discussion had simply estimated the fair market value at Rs.5 lakh per ground. For estimating the fair market value of the land, the locality of the land, infrastructure facilities available around the land, potential for future development, access to the infrastructure facilities has to be taken in to consideration. Guideline value is one of the factors to be considered for estimating the fair market value. As on 01.04.1981, if any comparative sale instances in the locality has also to be considered. In this case, neither the registered valuer nor the Assessing Officer has taken in to consideration all these factors. The Assessing Officer has simply taken the guideline value of the property as estimated by the Sub-Registrar. This Tribunal is of the considered opinion that the guideline is not the fair market value. The guideline value is only to guide the Sub-Registrar to ascertain the fair market value. The fair market value may not be a constant figure. It may vary depending upon various factors which was referred above. Moreover, it is for the willing purchaser and willing seller to determine the market value. In those circumstances, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer after considering all the factors referred above. Accordingly the orders of both the authorities below are set aside and the entire issue of valuation is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter, if necessary by referring the same to the Valuation Officer to determine the fair market value as on 01.04.1981. It is also necessary to ascertain the comparative sale Assessing Officer. Shri J. Prabhakar, the Ld. Representative for the assessee brought to the notice of this Tribunal that the property was inherited by the assessee from her mother by way of settlement deed. Therefore, the judgment of the Bombay High Court in CIT vs. Manjula J. Shah reported in 355 ITR 474 will come in to operation. This factor is also to be considered by the Assessing Officer whether the property was inherited by settlement deed or otherwise and thereafter the Assessing Officer shall decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

5.

In the result, the appeal filed by the assessee stands allowed for statistical purposes.

Order pronounced in the court on 3rd March, 2020 at Chennai.

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