MYNENI SURESH,VISAKHAPATNAM vs. INCOME TAX OFFICER WARD(INTERNATIONAL TAXATION), VISAKHAPATNAM
No AI summary yet for this case.
Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE
PER DUVVURU RL REDDY, Judicial Member :
This appeal filed by the assessee is against the final assessment order of the Ld. AO, Ward (International Taxation), Vizag in DIN & Order No. ITBA/AST/S/147/2023- 24/1058483184(1), dated 5/12/2023 for the AY 2018-19.
2 2. Brief facts of the case are that the assessee an individual
offered one of his immovable properties as a collateral security
against the loan availed by Jayanthi Steel Enterprises (I) Private
Limited from Axis Bank, Gajuwaka Branch, Visakhapatnam.
Since the loan availed by Jayanthi Steel Enterprises (I) Private
Limited has become Non-Performing Asset [NPA] the Axis Bank
auctioned the property of the assessee for recovery of the loan
given to Jayanthi Steel Enterprises (I) Private Limited. In the
auction conducted by the Axis Bank which was held on
25/01/2018, the assessee’s property was purchased by M/s.
Bhashyam Educational Society being a highest bidder. The
auction sale was contested by the assessee before the Ld. Debts
Recovery Tribunal [DRT], Visakhapatnam and the sale was set-
aside by the Ld. DRT vide its order dated 24/09/2019 by holding
that the auction purchaser is not a bonafide purchaser of the
schedule mentioned property since the Axis Bank conducted sale
held on 25/01/2018 without following the Rules prescribed under
SARFAESI Rules, 2002 and accordingly treated the sale held on
25/1/2018 is not maintainable. Against this order of the Ld. DRT,
Axis Bank preferred an appeal before the Hon’ble Debts Recovery
Appellate Tribunal, Kolakata [DRAT] and the appeal is still
pending for adjudication. During the course of assessment
3 proceedings, the Ld. AO observed that the assessee has not filed
his return of income for the AY 2018-19. Accordingly, the Ld. AO
conducted the assessment proceedings U/s. 148A and issued
notice U/s. 148 of the Act. In response, the assessee filed his
return of income on 30/04/2022 declaring total income of Rs.
NIL. Subsequently, notice U/s. 143(2) was issued electronically
on 10/10/2022 calling for certain information in support of the
return of income. Further, notices U/s. 142(1) of the Act were
issued on 27/10/2022 and 15/11/2022 and called for the
relevant information. Later on, the case has been transferred to
ITO, Ward-International Taxation Vizag due to change of
incumbency and a notice U/s. 129 was issued on 27/12/2022.
Thereafter, the Ld. AO called for the information from the Axis
Bank, Gajuwaka Branch U/s. 133(6) of the Act on 27/12/2022
and called for the details ie., on auction sale whether the money
received of Rs. 3,70,10,000/- and debited to loan account, the
loan account statement from 1/4/2017 to 27/12/2022, whether
the sale certificate got cancelled by bank authorities consequent
to the Ld. DRT direction, whether any appeal was filed by the
bank against the Ld. DRT order etc. In response, the Axis Bank
has furnished the relevant details on 5/1/2023. Considering the
reply from the Axis Bank, the Ld. AO issued another notice U/s.
4 142(1) of the Act on 25/01/2023 and called for the relevant
details. In reply the assessee has filed written submissions,
relevant documents and also uploaded the registered valuer’s
report in support of the cost of acquisition of the building
(disputed property). The Ld. AO also obtained details of market
value construction rates for the property from the SRO by issuing
a notice U/s. 133(6) of the Act and the SRO has furnished the
details on 27/03/2023. Accordingly, the Ld. AO issued a final
show cause notice on 27/03/2023 electronically. In response, the
assessee filed its objections by way of written submissions dated
29/03/22023. However, the Ld. AO did not consider the
objections filed by the assessee and accordingly the Ld. AO
computed the Long Term Capital Gains at Rs. 43,70,373/- and
assessed income was determined at Rs. 43,70,373/- in the order
passed U/s. 144C(1) of the Act dated 30/03/2023. Aggrieved by
the draft assessment order of the Ld. AO, the assessee filed its
objections before the Ld. Dispute Resolution Panel-1, Bengaluru.
On the assessee’s petition U/s. 35A of the Act, the Ld. DRP
dismissed the objections raised by the assessee vide their
directions dated 30/11/2023 passed in F.No. 41/DRP-
1/BNG/2023-24 for the AY 2018-19. Thereafter, the Ld.AO
passed the final assessment order on 5/12/2023 giving effect to
the directions of the Ld. DRP and assessed the total income at
Rs. 43,70,373/-. Against the final assessment order as well as
the directions of the Ld. DRP, the assessee filed the present
appeal by raising the following grounds of appeal:
“1. The order of the Hon’ble DRP is contrary to the facts and also the law applicable to the facts of the case.
The Hon’ble DRP ought to have quashed the notice U/s. 148 of the Act as invalid and ought to have quashed the consequential reassessment proceedings as void ab initio.
Without prejudice to the above, the Hon’ble DRP ought to have directed the AO to delete the addition of Rs. 43,70,370/- made towards LTCG.
Without prejudice to Ground No.2 and Ground No.3, the Hon’ble DRP ought to have held that the Assessing Officer is not justified in adopting the cost of construction of the building at Rs. 1,27,76,050/- as per the values provided by the SRO as against the cost of construction estimated by the Registered Valuer at Rs. 1,96,77,000/-.
The Hon’ble DRP ought to have directed the AO to give credit for the TDS amount of Rs. 3,96,088/- deducted by the purchaser from the consideration paid to the bank. Any other ground may be urged at the time of hearing.” 6.
At the outset, the Ld. AR submitted that on the auction sale
conducted by the Axis Bank, the assessee preferred an appeal
before the Ld. DRT and the appeal was allowed in favour of the
assessee by setting aside the auction sale conducted by the Axis
6 Bank. The Ld. AR further submitted that since the auction sale
itself conducted by the Axis Bank was quashed by the Ld. DRT,
legally, there is no sale of the property and accordingly the
question of computation of capital gains in the hands of the
assessee does not arise and there is no sale at all as on today.
However, the Ld. AO did not consider the above submission of the
assessee and held that though the Ld. DRT allowed the appeal in
favour of the assessee, since the Axis Bank preferred an appeal
before the Hon’ble DRAT, Kolkata which is pending for
adjudication, till such time there exists the sale conducted by the
Axis Bank. Before the Tribunal, the Ld. AR reiterated the
submissions made before the Ld. AO as well as the Ld. DRP and
pleaded that the appeal filed by the assessee may be allowed.
On the other hand, the Ld. Departmental Representative
[Ld. DR] submitted that since the appeal is filed by the Axis Bank
against the order of the Ld. DRT, which is pending before the
Hon’ble DRAT, the action of the Ld. AO while computing the
LTCG cannot be faulted with. The Ld. DR therefore pleaded to
uphold the orders passed by the Ld. Revenue Authorities.
I have heard both the sides and perused the material
available on record as well as the order of the Ld. DRT, dated
7 24/01/2019. It is a fact that since the borrower Jayanthi Steel
Enterprises (I) Private Limited has not repaid the loan availed
from the Axis Bank, Gajuwaka, Visakhapatnam, the loan has
become NPA and therefore on 25/01/2018 the Axis Bank has
conducted the auction sale of the immovable property of the
assessee which stood as collateral security against the loan given
by the Axis Bank. Against this auction sale, the assessee
preferred an appeal before the Ld. DRT and the Ld. DRT set-aside
the sale vide its order dated 24/09/2019 which was challenged
by the Axis Bank before the Hon’ble DRAT, Kolkata and the
appeal is pending for adjudication. It is the view of the Ld. AO
that since the sale was affected on 25/01/2018, the capital gains
are assessable in the hands of the assessee for the AY 2018-19
for the sale of immovable property. The case of the assessee is
that since the Ld. DRT set-aside the auction sale conducted by
the Axis Bank itself vide its order dated 24/09/2019, there is no
valid sale of the property even though the order of the Ld. DRT
was challenged before the Hon’ble DRAT, Kolkata. I find merit in
the argument of the Ld. AR that since the auction sale itself
conducted by the Axis Bank was quashed by the Ld. DRT
therefore legally there is no valid sale of the property as on today
and accordingly the question of computation of capital gains in
8 the hands of the assessee does not arise and hence the grounds raised by the assessee are allowed. Considering the facts and circumstances of the case, I hereby allow the appeal of the assessee subject to the outcome of the decision of the Hon’ble DRAT. If the Hon’ble DRAT set-aside the orders passed by the Hon’ble DRT dated 24/09/2019, and uphold the auction sale conducted by the Axis Bank, then the Revenue is entitled to levy the tax on capital gains according to the outcome of the order of the Hon’ble DRAT. It is ordered accordingly.
In the result, appeal filed by the assessee is allowed.
Pronounced in the open Court on 28th February, 2024.
Sd/- (दु�वू� आर.एल रे�डी) (DUVVURU RL REDDY) �या�यकसद�य/JUDICIAL MEMBER Dated : 28/02/2024 OKK - SPS आदेश क� ��त�ल�प अ�े�षत/Copy of the order forwarded to:- 1. �नधा�रती/ The Assessee– Myneni Suresh, D.No. 24-111-41, Near Tempany School, Chinnagantyada, Gajuwaka, Visakhapatnam, Andhra Pradesh – 530026. 2. राज�व/The Revenue – Income Tax Officer, Ward (International Taxation), Income Tax Office, Infinity Towers, Sankaramatam Road, Visakhapatnam, Andhra Pradesh-530016.
9 3. The Principal Commissioner of Income Tax, 4.आयकर आयु�त (अपील)/ The Commissioner of Income Tax (Appeals), 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, �वशाखापटणम/ DR, ITAT, Visakhapatnam 6.गाड� फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam
