Income Tax Appellate Tribunal - Hyderabad
K.Smita, Hyd, Hyderabad vs Ito, Ward-8(1), Hyd, Hyderabad on 10 November, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" (SMC), HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
I.T.A. No. 1062/HYD/2016
Assessment Year: 2008-09
K. Smita, Income Tax Officer,
HYDERABAD Vs Ward-8(1),
[PAN: AHCPK0009N] Now ITO, Ward-4(5),
HYDERABAD
(Appellant) (Respondent)
For Assessee : Shri V. Raghavendra Rao, AR
For Revenue : Smt. N. Swapna, DR
Date of Hearing : 06-11-2017
Date of Pronouncement : 10-11-2017
ORDER
This is an appeal by assessee against the order of the Ld.Commissioner of Income Tax (Appeals)-9, Hyderabad, dated 22-02-2016, dismissing the assessee's contentions.
2. Briefly stated, assessee has filed return of income declaring certain Long Term Capital Gains (LTCG) after claiming deductions. The return was processed and selected for scrutiny. In the course of scrutiny proceedings, information was called for and same was furnished by assessee as seen from para 3 of the assessment order. During the year under consideration, assessee has sold a property at Road No. 12, Banjara Hills for a consideration of Rs. 1,00,50,000/-. However, Sub-Registrar adopted the value for jurisdiction at Rs. 1,22,38,000/-. Invoking I.T.A. No. 1062/Hyd/2016 :- 2 -:
the provisions of Section 50C(1) of the Income Tax Act [Act] Assessing Officer (AO) added an amount of Rs. 21,88,000/-. It was the assessee's explanation that even though property sold was 330 Sq. Yds., an area of 60 Sq. Yds., is an approach road to the plot of 270 Sq. Yds., which is behind another plot and approach road is a must. Therefore, the consideration was only for 270 Sq. Yds., and not for entire 330 Sq. Yds., registered. Since the Sub-Registrar adopted the market value, the AO rejected assessee's contentions and made the addition. In addition to that, assessee claimed an amount of Rs. 90 Lakhs paid for purchase of a flat to M/s. Sobha Developers and Rs. 10 Lakhs that was deposited in REC Bonds as an exemption from capital gains (total of Rs. 1 Crore). The cost of acquisition adopted by assessee for the purpose of computing capital gains was from the date of assessee getting the gift of property from her father. AO made the addition of Rs. 21,88,000/-
u/s. 50C and excess claim of Rs. 60,000/- u/s. 54 after verifying the agreement of purchase. Assessee preferred an appeal before the Ld.CIT(A) contesting about the value adopted u/s. 50C and also the disallowance of Rs. 60,000/- u/s. 54. In addition, assessee also contested that the cost of acquisition has to be adopted from the time assessee's father acquired the property and therefore, requested the CIT(A) to consider the period of holding and grant cost of acquisition from the time, her father acquired the property. Even though assessee claim of deduction on investment in REC Bonds was allowed by the AO (as the computation started from the returned income) assessee, however, preferred an appeal before the Ld.CIT(A) wrongly contesting that AO has not allowed the amount. Ld.CIT(A), however, did not allow any of the contentions and rejected the grounds and dismissed the appeal.
I.T.A. No. 1062/Hyd/2016 :- 3 -:
3. Assessee raised the grounds on all the four issues. Additional grounds were submitted that the AO has already allowed the claim u/s. 54 on the REC Bonds, therefore, the dismissal of the grounds by the CIT(A) may result in disallowing the claim by AO. These additional grounds being legal in nature, are admitted.
4. After considering the contentions of assessee's counsel and perusing the arguments of the Ld.DR, I am of the opinion that the issues are to be re-considered by the AO afresh. Even though the sale deed, on the basis of which the value of the Sub-Registrar was adopted by the AO, indicates that piece of 60 Sq. Yds., is shown separately leading to the main plot which is behind another plot, the contention that it is an approach road and has no value separately has not been considered by the AO at all. Just because the Sub-Registrar adopted the value as per the prescribed guide lines given by the Government, individual value of the property may depend on various factors. Even the provisions of Section 50C(2) allows that assessee can claim before the AO that the value adopted or assessed is more than the fair market value of the property. In such case, the AO has to refer the value to Valuation Officer before invoking the provisions of Section 50C(1). I am of the opinion that since the land itself is shown an approach road, but for which the plot behind could not be reached, the contention of assessee requires examination. AO may inspect and verify whether assessee's contentions are correct or he may refer the valuation to the Valuation Officer as provided u/s. 50C(2), giving proper opportunity to assessee to explain the contentions. Therefore, to the extent of addition of Rs. 21,88,000/-, I am of the opinion that I.T.A. No. 1062/Hyd/2016 :- 4 -:
AO is statutorily bound to refer the matter to Valuation Officer with specific direction whether 60 Sq. Yds., can be considered at market value. With these directions, the grounds pertaining to the addition u/s. 50C, for that purpose is restored to the file of AO.
4.1. Coming to the cost of acquisition, even though Ld.CIT(A) has not entertained the claim on the reason that assessee has not made the claim in return of income, the ignorance of assessee could not come in any way of making proper claim as per the provisions of the Act. Since the law provides for cost of acquisition and period of holding from the previous owner in case of devolution by way of gift, succession and inheritance etc., the assessee has merit in claiming cost of acquisition and period of acquisition before the Ld.CIT(A). I am of the opinion that since it is a statutory claim, the same can be allowed to assessee.
However, since these aspects are not examined by the AO, I am of the opinion that AO can re-examine the issue of cost of acquisition by giving due opportunity to assessee to make a proper claim and consider the same on merits as per the provisions of law and facts.
4.2. Coming to the next issue of addition of Rs. 60,000/- towards excess deduction u/s. 54, it is on record that assessee has paid an amount of Rs. 90 Lakhs to M/s. Sobha Developers. The cost of property as per the sale agreement was Rs. 41,30,000/- as agreed by the AO and stamp duty thereon at Rs. 3,10,000/-. The development agreement for completion of semi-finished flat was taken at Rs. 45 Lakhs. AO has allowed only these amounts even though assessee has paid balance amount for the purpose of VAT and registration charges etc. AO should have subjected these for I.T.A. No. 1062/Hyd/2016 :- 5 -:
proper verification by giving due opportunity to assessee before disallowing the amount. I am satisfied that assessee has invested Rs. 90 Lakhs in purchase of flat and claim was proper. However, since AO has not examined the expenditure on Rs. 60,000/- made towards investment in the house (in the form of VAT and other amounts), AO is directed to examine the payment and allow the same.
4.3. Last of the issue was with reference to rejection of assessee's claim on investment in REC Bonds by the CIT(A). In fact, assessee claimed investment of Rs. 10 Lakhs in REC Bonds which in fact was allowed by the AO. Therefore, raising a ground before the CIT(A) is itself a mistake. Ld.CIT(A), without examining the facts, dismissing the ground has caused un-necessary problem wherein AO may have to disallow the claim because of the order of the CIT(A), whereas the AO after due verification allowed in the assessment order. Therefore, to that extent, the order of CIT(A) is modified and assessee's additional ground on that is allowed. AO is directed to examine the issues of (1) adoption of Sub-Registrar value u/s. 50C, (2) adoption of correct cost of acquisition and (3) allowing the claim u/s. 54 to an extent of Rs. 60,000/- as directed above. The grounds are considered allowed for statistical purposes.
5. In the result, appeal of assessee is allowed for statistical purposes.
Order pronounced in the open court on 10th November, 2017 Sd/-
(B. RAMAKOTAIAH) ACCOUNTANT MEMBER Hyderabad, Dated 10th November, 2017 TNMM I.T.A. No. 1062/Hyd/2016 :- 6 -:
Copy to :
1. K. Smita, 3-6-116, Street No. 18, Himayat Nagar, Hyderabad.
2. The Income Tax Officer, Ward-8(1), Now ITO, Ward-4(5), Hyderabad.
3. CIT (Appeals)-9, Hyderabad.
4. Pr.CIT-6, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.