Income Tax Appellate Tribunal - Panji
Late Devarasetti Venkata Subbarao, ... vs The Pr. Cit,, Guntur on 8 November, 2017
ITA No.499 & 500/Vizag/2016
Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist.
आयकर अपील य अ धकरण, वशाखापटणम पीठ, वशाखापटणम
IN THE INCOME TAX APPELLATE TRIBUNAL,
VISAKHAPATNAM BENCH, VISAKHAPATNAM
ी वी. दग
ु ाराव, या यक सद य एवं
ी ड.एस. सु दर "संह, लेखा सद य के सम%
BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER &
SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A.Nos.499 & 500/Vizag/2016
( नधारण वष / Assessment Years: 2007-08 & 2008-09)
Deverasetty Venkata Subba rao (Late) Principal CIT
Rep L/R Deverasetty Ravi Kumar, Guntur
Guntur Dist.
[PAN No.ASBPD9432C]
(अपीलाथ' / Appellant) (()याथ' / Respondent)
अपीलाथ क ओर से / Appellant by : Shri A. Chinna Gangaiah,
AR
याथ क ओर से / Respondent by : Shri T.S.N. Murthy, DR
सुनवाई क तार ख / Date of hearing : 31.10.2017
घोषणा क तार ख / Date of Pronouncement : 08.11.2017
आदे श / O R D E R
PER D.S. SUNDER SINGH, Accountant Member:
These appeals filed by the assessee are directed against order of the Principal Commissioner of Income Tax,(Pr.CIT), Guntur vide order dated 20.10.2016 for the assessment year 2007-08 and 2008-09. 1
ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist. ITA No.499/Vizag/2016 A.Y. 2007-08:
2. All the grounds of appeal of the assessee are against the order passed by the Principal CIT Guntur u/s 263 of the Income Tax Act, 1961 (hereinafter called as 'the Act'). In this case, the original assessment was completed u/s 143(3) r.w.s. 147 of the Act by an order dated 30.12.2011 on total income of ` 6,38,737/- which includes long term capital gain on transfer of godown site of ` 2,94,660/-. Subsequently, the case was taken up for revision u/s 263 of the Act and the Ld. Commissioner of Income Tax (CIT), Guntur has passed an order u/s 263 of the Act. The Ld. CIT has observed that the assessee had sold a godown on 21.12.2006 for a sum of ` 21,50,116/- and another godown for a sum of ` 25 lakhs on 21.9.2006 and the market value of the said godown was determined by the SRO at ` 25,34,000/- and ` 64,18,000/- respectively aggregating to the market value of ` 89,52,000/-. But the assessee has shown profit on sale of godown at ` 61,50,810/- and credited the same to the capital account instead of actual profit of Rs.18,48,926/- and the difference of ` 43,01,884/- remained unexplained. The Ld. CIT further noticed that the assessee also claimed the indexed cost of acquisition wrongly at ` 84,69,451/- as against the correct amount of ` 60,42,097/-. The CIT further observed that the benefit of indexation for the cost of construction of godowns claimed 2 ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist. was from the Financial years 1990-91, 1991-92 & 1992-93 instead of correctly claiming the same from the Financial years 1994-95, 1995-96 & 1996-97. As per the narration given in the registered sale deeds dated 31.9.2006 and 21.12.2006 the age of the godowns were 10 years old. The CIT(A) observed that since the construction of godowns was stated to have been spread over for 3 financial years the indexed cost of construction should have been allowed by the A.O. from the financial years 1994-95, 1995-96 & 1996-97 instead of F.Ys 1990-91, 1991-92 & 1992-93 as claimed by the assessee. The CIT worked out the cost of acquisition and correct indexed cost as under:
As claimed by the Correct computation
Description Cost of assessee
of the construction/ Year of Indexed Year of Indexed
property acquisition construction cost of construction cost of
construction construction
Site 27,190 1989-90 82.044 1989.90 82,044
Godown 9,22,000 1990-91 26,29,220 1994-95 18,47,560
-do- 16,29,600 1991-92 42,50,062 1995-96 30,09,831
-do- 6,48,000 1992-93 15,08,125 1996-97 11,02,662
Total 84,69,451 60,42,097
3. The CIT accordingly worked out the excess claim of indexed cost of acquisition to the extent of ` 24,74,534/- as above and issued the show cause notice. The assessee submitted his explanation and after examining the explanation of the assessee, the CIT held that the 3 ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist. assessment order passed by the A.O. was erroneous and prejudicial to the interest of the revenue and accordingly directed the A.O. to modify this assessment as per the directions given in the Ld. CIT as under:
"The assessee's claim of mentioning lesser amount of sale price for accommodating the purchaser of godowns and receipt of a very high amount on sale of the godowns has no evidence whatsoever. The sale deed contains the consideration that has passed hands and the consideration fixed by the sub registrar for fixation of stamp value of the transaction. As such, the assessee's claim that they received higher amount than what was mentioned in the sale deed is not tenable.
As regards indexation of cost of construction, the assessee claim to have indexed the same as per the period of construction and cost of construction accounted for. The period of construction are stated to be 1990-91 to 1992-93. A perusal of the record indicates that a Valuation Report was filed before the Assessing Officer during the course of assessment proceedings. The periodicity of the construction and the cost of construction incurred in each year were mentioned by the valuer. This valuation report can be used as a basis for working out the cost of construction and periodicity of the construction for the purpose of indexation of the cost of construction. However, the A.O. has not made any mention of this valuation report and nor examined the indexation made by the assessee for the cost of construction for working out the long term capital gain."
4. Consequent to the order of the Ld.CIT u/s 263 of the Act, the A.O. passed consequential order u/s 143(3) r.w.s. 263 of the Act on 16.9.2014 giving effect to the CIT's order u/s 263 of the Act dated 28.2.2014 and completed the assessment accepting the income assessed earlier as per the order dated 30.12.2011 without making any additions.
5. Subsequently, the Ld Pr.CIT has taken up the case for revision u/s 263 of the Act in the second round and observed that the A.O. while 4 ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist. computing the long term capital gains for sale of godowns allowed incorrect benefit of indexation, the assessee has claimed the benefit from the years 1990-91, 1991-92 & 1992-93 as per the recitals in registered sale deeds dated 21.9.2006 and 31.12.2006, the godowns were ten years old and accordingly indexation benefit required to have been allowed from the F.Y. 1994-95, 1995-96 & 1996-97, since the construction of godowns was stated to have been spread over three financial years. Accordingly, the correct amount of indexed cost of acquisition was ` 60,42,097/- as against ` 84,69,451/- wrongly allowed by the AO. Hence, excess claim of indexed cost of acquisition amounting to ` 24,27,534/- (` 84,69,451 - `60,42,097/-) resulted in under assessment of LTCG, as well as total income of the assessee. Accordingly the Pr.CIT held that order passed u/s 143(3) r.w.s. 263 of the I.T. Act, 1961 on 16.9.2014 was erroneous and prejudicial to the interest of revenue hence passed order under section 263 directing the AO to modify the order as per the following directions:
Further, regarding the excess claim of indexed cost of acquisition of ` 24,27,534/-, other than the narration given in the registered sale deeds regarding the age of the godowns sold by the assessee, there is no other evidence available on record to establish the age of the godowns. The valuation reports dated 15.9.2011 were obtained only during the course of assessment proceedings regarding the estimated value of the cost of construction of the godowns during each of the Financial years 1990-91, 1991-92 & 1992-93 cannot be regarded as evidencing the age of the godowns, since the valuation appears to have been carried out by the engineer as per the information furnished to him by the assessee. In the absence of any other contemporaneous evidence, the age of the godowns 5 ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist.
as mentioned n the registered sale deeds would have to be adopted as the basis of identifying the financial years during which the godowns were constructed for the purpose of indexing the cost of construction."
6. Aggrieved by the order of the Ld. Pr.CIT, the assessee is in appeal before this Tribunal. Appearing for the assessee, the Ld. A.R. argued that while giving effect to the CIT order, the A.O. has verified the cost of construction, age of the godowns, and given effect to the order of the CIT correctly. Since the A.O. has verified the issue in detail and taken a conscious decision, there is no case for revision u/s 263 of the Act and the Ld. A.R. vehemently argued that the order passed by the Principal CIT beyond the jurisdiction, which require to be quashed.
7. On the other hand, the Ld. D.R. supported the order of the Principal CIT.
8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. In this case, the assessee has sold the properties for a consideration of ` 21,50,116/- and ` 25 lakhs aggregating to ` 46,50,116/-and shown the profit on sale of godowns at ` 61,50,810/- as under:
Sale consideration - ` 89,52,000/-
Less:Cost of godown - ` 28,01,190/-
Profit on sale of godown- ` 61,50,810/-
6
ITA No.499 & 500/Vizag/2016
Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist. 8.1 The actual profit on sale of godowns works out to ` 18,48,926/- as under:
Sale consideration - ` 46,50,116/-
Less: Cost of godown - ` 28,01,190/-
Profit on sale of godown- ` 18,48,926/-
8.2 The CIT further observed that the difference amount of ` 43,01,884/- credited to capital account remained unexplained. Further, in sale deed dated 21.9.2006 and 21.12.2006, the assessee has wriiten that the godowns were constructed 10 years back i.e. the age of the godowns was 10 years old. According to the recitals of the sale deed, the godowns would have been constructed in F.Y.1994-95, 1995-96 & 1996-97 as rightly observed by the CIT. According to the recitals of the sale deed and the value declared in the office of the sub registrar in sale document f the CIT has worked out the indexed cost of acquisition at ` 60,42,097/- and excess claim at ` 24,27,534/- and directed the A.O. to re work the capital gains. The A.O. while giving effect to the order u/s 263 of the Act, presumed that the age of godowns was 10 years old was incorrect. Further observed that the narration given in the registered sale deed was false as the plan approval was given in 1992 and also presumed that it was a regular practice of the document writers while drafting the document and there is no sanctity for the recitals of the sale deed, accordingly, reworked the capital gains as claimed by the assessee for 1990-91, 1991-92 & 1992-93. From the order of the A.O., it is very clear that the A.O. ignored the recitals of the sale deed document which was signed and registered by the assessee and accepted by the purchaser before 2 witnesses. The registered 7 ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist. document is a final document, which is a valid piece of evidence unless otherwise it is proved wrong as held by Hon'ble Punjab & Haryana High Court in [2010] 195 TAXMAN 273 (PUNJ. & HAR.) Paramjit Singh .v.Income-tax Officer on similar facts held that "It is a well-known principl e th at no oral evidence is admissible onc e th e documen t c on tains all the terms and c ondi tions. Sections 91 and 92 of the Indian Evidence Ac t, 1872 incorpora te the af oresaid principle. Acc ording to sec tion 91, wh en terms of a con trac t, gran ts or o th er di spositions of property have been reduced to the f orm of docu men ts, th en no evidenc e is permissible to be given in proof of any such terms of such gran t or dispos ition of the proper ty exc ep t th e documen t itself or th e sec ondary evidence thereof . According to sec tion 92 , once th e docu men t is tendered in evidence and proved as per th e requiremen ts of sec tion 91, th en no evidenc e of any oral agreemen t or s ta temen t would be admissibl e as between the parties to any such ins tru men t f or th e purposes of con tradic ting, varying, adding to or sub trac ting f rom its terms. Theref ore, it f ollows th a t no oral agreemen t contradic ting/vary ing th e terms of a documen t can be of f ered. Once the af oresaid principal is clear, th en in the instan t case, ostensible sale consideration disclosed in th e sale deed had to be accep ted and it could not be c on tradic ted by adducing any oral evidenc e. Th eref ore, th e order of th e Tribunal did not suff er f rom any legal inf irmity in reaching to the conclusion th a t the amount sh own in th e reg is tered sale deed was rec eived by the vendors and deserved to be added to the gross income of th e assessee. [Para 4]. "
9. In the instant case, the assessee has not produced any evidence before the A.O. to show that the recitals of the documents of sale deed were incorrect and the assessee has not filed any affidavit before the registering authority for modification of the sale deed recitals and no modification order was passed by the registering authority. Therefore, we hold that there is no reason to disbelieve the recitals of sale deed and to adopt the sale deeds recitals for working out the indexed cost of acquisition. Accordingly, we are of the view that the A.O. has simply disbelieved the recitals of the sale deed and did not follow the directions of the CIT and passed the order without making any further verifications or getting fresh evidence with regard to the date of construction of the 8 ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist. godowns. Therefore, the order passed by the A.O. was erroneous and prejudicial to the interest of the revenue and the Ld. Principal CIT has rightly taken up the case for revision and we uphold the order of the Ld. Principal CIT passed u/s 263 of the Act and dismiss the appeal of the assessee.
ITA 500/Vizag/2016 A.Y. 2008-09:
10. In this appeal also all the grounds of appeal are against the order passed u/s 263 of the Act on 20.10.2016 by the Pr.CIT, Guntur. In this case, the assessment was completed u/s 143 r.w.s. 147 of the Act on 30.12.2011 and the A.O. has computed the long term capital gains at ` 82,002/-. The Ld.CIT has taken up the case for revision u/s 263 of the Act and observed that the assessee has sold godowns on 7.12.2007 for ` 9.00 lakhs. Market value of the godown was ` 19,04,000/- as determined by the SRO. But in capital account, the profit on sale of godowns was shown at ` 13,02,467/- in spite the sale consideration of the godown was ` 9.00 lakhs. The actual profit on sale of godown worked out to ` 2,98,467/- i.e. {` 9 lakhs (-) ` 6,01,533/-}, against which the assessee's capital account was credited with the profit of ` 13,02,467/- resulting in excess credit of ` 10,04,000/-. Hence, the Ld.CIT, Guntur has issued show cause notice to the assessee calling for his objections for revision of the order. The assessee filed his objections 9 ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist. and after considering the objections, the Ld.CIT passed an order u/s 263 directing the A.O. to modify the assessment order by making the addition of ` 10,04,000/- to the assessed income. The A.O. has passed consequential order u/s 143(3) r.w.s. 263 on 16.9.2004 accepting the income assessed as earlier without making any addition to the income already assessed. While giving effect to the order u/s 263 of the Act, the A.O. did not carry out the directions given in the revision order u/s 263. Therefore, the Ld.CIT has taken up the case for revision u/s 263 of the Act in the second round and passed order u/s 263 of the Act and observed as under:
4. The submissions made by the assessee considered carefully. In the reply, the "The submissions made by the assessee considered carefully. In the reply, the statement of legal representative of the assesse that 'the properties sold on 07.12,2009 for Rs.19,04,000/- and the value adopted by the SRO are also same' is not correct. In the sale deed No.6650/2007 dated 07.12.2007, it was clearly mentioned that the sale consideration received by the assessee is Rs.9,00,000/- as against the market value of Rs.19,04,000/-. Though, the market value of the godown as assessed by the stamp duty authorities is required to be adopted as the full value of the godown as sale consideration for the purpose of computing the long term capital gains as per the provisions of Sec.50C of the I.T. Act, the same cannot be treated as the actual sale consideration received by the assessee for the purpose of arriving at the profit derived from sale of godown in the books of account. The sale consideration which is mentioned in the Registered sale deed is the actual consideration which is received by the assessee and the same needs to be adopted for computing the profit from the sale of godown to be credited to the assessee's capital account. There is no explainable sources in the record for the excess amount credited of Rs.10,04,000/- to the capital account.3 10
ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist.
11. Accordingly the Ld. Pr. CIT, Guntur passed an order u/s 263 setting aside the assessment order u/s 143(3) r.w.s.263 dated 16/09/2014 and directed the AO to redo the assessment on the lines of directions given in the revisional order dated 20/10/201.
Against the order passed u/s 263 of the Act dated 20/10/2016, the assessee filed appeal before this Tribunal. During the appeal hearing the Ld.AR vehemently opposed and has reiterated the arguments made in appeal No.499/2016 discussed in para No.6 of this order. On the other hand the Ld. D.R. relied on the orders of the Principal CIT.
12. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The Ld. CIT in his order u/s 263 of the Act directed the A.O. to adopt the sale consideration at ` 9 lakhs and re-compute the capital gains by making addition of ` ` 10,04,000/-. The Ld. CIT has given a clear finding that the assesse has excess credited to the capital account to the extent of ` 10,04,000/- as the sale consideration was ` 9 lakhs against which the assessee has taken a sale consideration at ` 19,04,000/-. The assessee has adopted the market value of the property for working out the profit without explaining the source. In fact as per the sale deed, the assessee 11 ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist. had received a sum of ` 9.00 and the profit was ` 2,98,467/- since the cost of godown was ` 6,01,533/-. The CIT did not set aside the order and instead directed the A.O. to modify the assessment order made u/s 143(3) r.w.s. 147 of the Act by making addition of ` 10,04,000/- for which the source was not explained. Therefore, the A.O. has no business except to carry out the directions of the Ld.CIT mutatis mutandis and no further enquiry/ verification required to be made. Careful verification of the assessment order, reveals that the A.O. also did not make any verification and simply adopted the sale consideration at ` 19,04,000/- as against the actual sale consideration of ` 9.00 lakhs. As held by Hon'ble Punjab & Haryana High Court in [2010] 195 TAXMAN 273 (PUNJ. & HAR.) Paramjit Singh .v.Income-tax Officer, the sale consideration recorded in the registered sale deed construed to be final unless otherwise it is proved to be wrong. Therefore, the assessment order passed by the A.O. u/s 143(3) r.w.s. 263 of the Act is erroneous and prejudicial to the interest of the revenue and the Principal CIT has rightly taken up the case for revision u/s 263 of the Act. Accordingly, we uphold the order passed by the Principal CIT and dismiss the appeal of the assessee.
12
ITA No.499 & 500/Vizag/2016 Late Deverasetty Venkata Subbarao, LR Deverasetty Ravi Kumar, Guntur Dist.
13. In the result, the appeals filed by the assessee in ITA Nos.499 & 500/Vizag/2016 are dismissed.
The above order was pronounced in the open court on 8th Nov'17.
Sd/- Sd/-
(वी. दग
ु ाराव) ( ड.एस. सु दर "संह)
(V. DURGA RAO) (D.S. SUNDER SINGH)
या यक सद य/JUDICIAL MEMBER लेखा सद य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam:
'दनांक /Dated : 8.11.2017 VG/SPS आदे श क त)ल#प अ*े#षत/Copy of the order forwarded to:-
1. अपीलाथ / The Appellant - Late Deverasetty Venkata Subba Rao, LR Deverasetty Ravi Kumar, 18-1-41, Sattenapalli-522 403, Guntur Dist.
2. याथ / The Respondent - The Principal CIT, Guntur
3. आयकर आयु+त / The Principal CIT, Guntur
4. आयकर आय+ ु त (अपील) / The CIT (A), Guntur
5. #वभागीय त न.ध, आय कर अपील य अ.धकरण, #वशाखापटणम / DR, ITAT, Visakhapatnam
6. गाड फ़ाईल / Guard file आदे शानुसार / BY ORDER // True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM 13