KANDASWAMY CHETTY LAKSHMANAN,CHENNAI vs. ITO NON CORPORATE WARD 11(5), CHENNAI

The assessee filed these appeals against the orders of Commissioner of Income Tax – 13, Chennai in dated 11.07.2017 against re-assessment order passed u/s. 143(3) r.w. 147 for ay 2011-12 and ITA No. 188/CIT(A)-13/2011-12 dated 05.09.2017 against the order of penalty levied u/s. 271(1)(c) for ay 2011-12, respectively.

Shri Kandaswamy Chetty Lakshmanan, the assessee, along with two others sold three units of property on 21.10.2010 for Rs. 51 lakhs and his share was Rs. 17 lakhs. The capital gain arising out of these transactions was assessed to tax u/s. 143(3) and the assessment was completed on 23.12.2013. Subsequently, it came to the notice of the Assessing Officer that the guideline value of the property was re-fixed by the Sub-Registrar u/s. 47A of the Registration Act by which the sale consideration was worked out at Rs. 2,17,08,500/-. Applying the provisions of section 50C, the assessee’s share of capital gains worked out at Rs. 65,14,966/-, for this reason the AO re-opened the assessment u/s. 147. After due consideration completed the re- assessment adopting the assessee’s share at Rs. 72,36,166/-, from which he reduced the cost of acquisition at Rs. 7,21,200/- and arrived the long term capital gains at Rs. 65,14,966/-.

We have considered the rival submissions and gone through the relevant materials. While working out the long term capital gains during the assessment proceedings u/s. 143(3), the AO had no information about the valuation of property made u/s. 47A of the Registration Act. On receipt of information of Stamp Valuation of the property u/s. 47A and finding that the value arrived by them, i.e., the value u/s. 50C was different, then the value of sale consideration, the assessment was re-opened u/s. 147 and hence the plea made by the assessee on the validity of re-opening of the assessment is held as untenable. On the above facts and circumstances, it is held that the :-4-: & 2546/Chny/2017 re-opening of assessment is validly done. Thus, the assessee’s grounds relating to re-opening of the assessment u/s. 147 is dismissed. With regard to the computation of long term capital gains, the relevant portion from the order of the ITAT in the case of Shri K. Ramaswamy, supra, is extracted as under:

Unit-I: Old Municipal Door No.10, part of Municipal Door No.9/il, New No.23, Fourth Lane Beach Road, Muthialpet, George Town Chennai, measuring 1100 sq. feet. Unit-II: Old Municipal Door. No.1 /11 and now New Municipal Door No. 9/11, New No.24, Fourth lane Beach Road, Muthialpet, George Town, Chennai, measuring 684 Sq. Feet Unit III: Old Municipal Door No.2/11, New Municipal Door No. 9/11, New No.25, Fourth Lane Beach Road, measuring 1142 sq. feet. Thus, the assessee’s share in the above mentioned unit was 1/3d of 2926 sq.ft. comes to .72,36,166/- 2. In the Survey No.RS.3748/1 at Dorr No.35,Fourth Lane, Muthialpet George Town, Chennai -600 001 .The total comes to 784 sq. ft.

In the above Unit-I, Unit-Il, and Unit-Ill, the full value of the sale consideration was taken at . 2,1 7,08,500/- (51,00,000+1,65,78,500+30000) in 3 Units since the above assessee is having 113rd Share of .2,17,08500/- Vide Serial No.1 as Rs. 72,36,166/- (Serial No.2 as .23,21,080/- and Serial No.3 as Rs. 18,15,103/-. Considering the above facts, the total Long Term Capital gains was worked out at Rs. 1,06,51,033/- and assessed the total income of the assessee at Rs. 1,10,16,091/-.

We have heard both sides, perused the materials on.. record and gone through the orders of authorities below. The tale consideration of the property sold by the assessee was Rs. 51,00,000/-. The value adopted by the Joint Sub-Registrar Was Rs. 1,65,78,5000/-. On appeal against the above valuation under section 47A of the Indian Stamp Act, 1899, the District Revenue Officer has fixed the value of the property at Rs. 1,08,76,189/- and as per the above directions, the Joint Sub- Registrar has collected the deficit registration fee of .57,560I-. Therefore, the value of the property should be Rs. 1,08,76,000/- [rounded off]. By filing copy of the sale deed, the Ld. Counsel for the assessee has submitted that the assessee alone has not enjoyed the entire sale consideration of the property and the assessee was :-6-: & 2546/Chny/2017 holding only 1I3 share of the said property. We find force in the argument advanced by the Ld. Counsel for the assessee Accordingly, we direct the Assessing Officer to examine the sale deed of the property and work out the capital gains afresh.

In the result, the assessee’s appeal in is partly allowed.

Shri. K. Lakshmanan, the assessee, admitted income for assessment year 2011-12 from business as a wholesale merchant, income from house property and interest income. He sold a property, but has not admitted the :-7-: & 2546/Chny/2017 transaction of sale of property in the return as income. During the course of assessment, the Assessing Officer found that he and his two brothers sold the property for Rs. 51 lakhs and his share was Rs. 17 lakhs. When the AO proposed to assess the capital gains, the assessee claimed deduction u/s. 54 on the investments made in residential property at Linghi Chetty Street, Chennai. The Assessing Officer found that the property sold was a godown, a commercial property and hence the assessee was not eligible for claim of deduction u/s.

Then the assessee claimed deduction u/s. 54F. Since, the assessee owned more than one residential house property and has been admitting income from them, the AO did not grant deduction u/s. 54F also.

Per contra, the DR submitted that the assessee has not disclosed the sale of property at all. Inviting our attention to the order of the CIT(A), the DR submitted that the assessee’s case was taken up for scrutiny and the capital gains was brought to tax. If the scrutiny was not taken, the long term capital gains would have remained untaxed on account of the assessee having concealed particulars are thereby concealed the income. Since, the concealment and furnishing of inaccurate particulars and apparent and obvious, the case laws relied on by the assessee and the facts of the assessee’s case are clearly distinguishable, as they have no direct implication on assessee’s case. Even if the assessee was to make a claim of exemption or deduction, he support them with evidence. The assessee depending on the :-9-: & 2546/Chny/2017 situation kept on changing his stand on the eligibility of claim of exemption u/s. 54 or 54F to suit his convenience but without evidence or material.

We heard the rival submissions and gone through the relevant materials. The fact remains that the assessee admitted income from business, house property and interest income, but, he has not disclosed the sale of property in the return of income at all. In fact, based upon the AIR report, the case was selected for scrutiny by CASS to examine the taxability of sale of property. Thus, if there was no Annual Information Report gathered by the Revenue and that was not linked to the CASS, the fact that assessee sold the property, realised the gains would not have come to the notice of the Revenue at all. The Revenue having gathered all these information and on due processing detected this income. When the AO proposed to assess this income, first the assessee claimed deduction u/s. 54, when such claim was found untenable, the assessee sought alternative claim u/s. 54F, which was also found untenable. From the above facts and circumstances, it is clear that the assessee has not disclosed the sale of property and its consequential gains in his return at all. On such facts, the case clearly falls within the scope of section 271(1)(c) and hence, the penalty levied by the AO u/s. 271(1)(c)

In the result, assessee’s appeal in is partly allowed and the appeal in ITA No. 2546/2017 is dismissed.