G S Prabhakar, Hyderabad vs Assessee

This is an assessee's appeal filed against the order of the Commissioner of Income Tax(Appeals)-II, Hyderabad, dated 22-08-2014 on the following ground(s):

" 1. On the facts and in the circumstances of the case, the order of the learned Commissioner of Income Tax (Appeals)-II, Hyderabad, is perverse, illegal and unsustainable in law and against the directions given by the Hon'ble ITAT in earlier round of appeal.

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2. The Commissioner of Income Tax (Appeals) erred in sustaining the actions of the Assessing Officer in adopting the fair market value of land in question at Rs. 60 per sq. yard based on a gift and settlement deeds. The Commissioner (Appeals) failed to appreciate that the direction of the Hon'ble ITAT to the Assessing Officer was to inquire and ascertain comparable sale value, which the assessing officer has failed to do.

3. The Commissioner (Appeals) failed to appreciate that there was no reason for the assessing officer to reject the mortgage deed placed on record by the appellant in as much as the Assessing Officer in any case has failed to ascertain fair market value. The Commissioner (Appeals) failed to appreciate that the mortgage deed relied upon by the appellant is a reliable document as the same pertained to a loan transaction with Life Insurance of India.

4. The Commissioner (Appeals) ought to have directed the Assessing Officer to adopt the fair market value at Rs. 236.50 per sq. yard.

5. Without prejudice to any of the contentions raised in this appeal, the Commissioner (Appeals) failed to appreciate that in the second round of proceedings, the assessing officer himself adopted the fair market value of the land at Rs. 100 per sq. yard, and therefore in a situation where the assessing officer failed to adhere to the directions of the Hon'ble ITAT, there is no reason to go down from that value in as much as the Department did not have grievance against adoption of fair market value at Rs. 100 in the earlier round".

2. The brief facts of the case are that the assessee is a retired government servant. The appellant entered into a Development Agreement cum Power of Attorney on 23-06-2010 with M/s. R.G. Constructions for development of appellant's land being Plot No. 107, Srinagar Colony, Hyderabad. The development agreement envisaged sharing constructed area in the ration of 50% : 50% between the parties to the development agreement. The appellant was entitled for built up area of 11,012 sft out of total built up area of 22,823 sft. For the assessment year under consideration, the appellant filed return of income on 30-09-2003 admitting income of Rs. 3,10,080/-. The return of income was processed u/s. 143(1) and later on the assessment was reopened under the provisions of Section 147 of the Income Tax Act, 1961 [Act]. The reassessment was completed by determining the income at Rs. 83,52,190/-. While doing so, the capital gains were worked out by :- 3 -: I.T.A. No. 1635/Hyd/2014 Sri G.S. Prabhakar

the Assessing Officer (AO) in respect of the value of land surrendered in the development agreement, adopting a rate of Rs. 25 per sq. yard as against the rate adopted by the appellant at Rs. 234.50 per sq. yard.

3. Being aggrieved, the appellant filed appeal before the Commissioner (Appeals), who granted relief in computation of capital gains. The Commissioner (Appeals) determined the fair market value of the land as on 01-04-1981 to be Rs. 100 per sq. yards as against the claim of the appellant at Rs. 236.50 sq. yard. The Commissioner (Appeals) further granted the relief of deduction u/s. 54F of the Act.

4. Both the appellant and the Revenue filed cross appeals before the ITAT against the order of the Commissioner (Appeals). While the appellant filed the appeal aggrieved by the order of the Commissioner (Appeals) determining the value of the land at Rs. 100 as against Rs. 236.50 per sq. yard claimed by him and for other issues, the Revenue filed appeal against the order of the CIT(A) directing the AO to adopt the fair market of land at Rs. 100 per sq. yard. The ITAT considering the fact that the appellant had filed additional evidence has remitted back the entire matter to the file of the AO.

5. The AO passed fresh assessment order u/s. 143(3) r.w.s. 254 of the Act. In the fresh assessment order before the AO, the appellant filed a comparable case in the form of mortgage deed registered in the year 1980 showing the value at Rs. 236.50 per sq. yard. The AO did not accept the same holding that it is not a 'sale deed' but a 'mortgage deed' and further the AO found that the property involved in the mortgage deed consists of both land with super structure. However, the AO based on enquiries conducted had adopted the fair market value of land at :- 4 -: I.T.A. No. 1635/Hyd/2014 Sri G.S. Prabhakar

Rs. 100 per sq. yards, which is also the value directed by the Commissioner (Appeals) in the earlier round of proceedings.

6. The appellant, being aggrieved, had preferred appeal before the Commissioner (Appeals). The Commissioner (Appeals) allowed the appeal of the appellant directing the AO to adopt the value of land at Rs. 236.50 sq. yard based on the comparable instance found in the form of mortgage deed registered in the year 1980. The Revenue went in appeal against the order of the Commissioner (Appeals).

7. In this appeal filed by the Revenue, the ITAT considering the issue before it had again restored the matter back to the file of the AO with a direction to cause necessary enquiries and arrive at the fair market value of the land as on 01-04-1981 that was surrendered in the development agreement. It may be pointed out here that the grievance of the Revenue was that the Commissioner (Appeals) based on the mortgage deed had determined the fair market value of land at Rs. 236.50 per sq. yard as against Rs. 100 per sq. yard determined in the assessment order. Therefore, even if the Appellate Tribunal had set aside the matter to the file of the AO, it was only for the purpose of ascertaining the fair market value of the land surrendered as on 01-04-1981 which at any rate could not have gone below Rs. 100 per sq. yard in view of the fact that the AO himself had accepted the rate to be Rs. 100 per sq. yard. However, in the consequential proceedings to the order passed by the Appellate Tribunal, the AO again adopted the fair market value at Rs. 60 per sq. yard.

8. In the set aside proceedings u/s. 143(3) r.w.s. 254 of the Act dt. 24-02-2014, as per the directions of the Hon'ble ITAT, the AO caused necessary enquiries and her observers are as under:

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"As directed by ITAT, necessary enquiries have been made. Apart from calling for details of sale transaction during 19680/1981, fair market value of the land per square yard as on 1.4.1981 has also been called for from the SRO. The SRO vide his letter dt. 2.9.2013 stated that market value of the property situated in Srinagar Colony is Rs. 60 per square yard as on 1.4.1981 as per market value guidelines. With regard to comparable cases of sale as per copies of documents obtained, it has been observed that there were not much sale transactions of open lands during the year 1980 and 1981 except one or two gift deeds and settlement deeds. As observed from the gift deed the market value was mentioned as Rs. 25 and in settlement deed the value was Rs. 50 per square metre or Rs. 65 per square yard. In one relinquishment deed, the value was computed at Rs. 43.60 per sq. yard. To find put the comparable case, real sale transactions after 1981 have also been verified. In the year 1983, it is observed that in one sale transaction, the sale value was Rs. 58.70 per square yard (Document No. 920 of 1983). In one case, a property of residential building constructed on a land of 220.56 square yards was sold for Rs. 95,000. The Rate per square yard for open land naturally differs when compared to the land with buildings. So land per square yard for open land is only considered. Assessee's claim of land per square yard for Rs. 236 is not considered, since the issue involves independent enquiries as per ITAT directions.

Thus as per the enquiries, the land value varied from Rs. 25 to 65 per square yard during that period. Considering the material available and also enquiries made with the SRO, it is considered that Rs. 60 per square yard is reasonable for determining the capital gains".

9. Aggrieved by the above assessment order, the appellant filed before CIT(A)-II, Hyderabad who vide order dt. 22-08-2014, dismissed the appeal by making the following observation vide para 4 as follows:

"In the third round of proceedings, the Assessing Officer once again adopted the value at Rs. 60 per sq. yard. In this order, the Assessing Officer obtained the information from the Sub Registrar Office and also collected the information about the comparable cases of real estate transactions in 1981 as well as in 1983. Therefore, the Long Term Capital Gains computed by the Assessing Officer adopting the value of land at Rs. 60 per sq. yard, is sustained".

Hence, the appellant had come up with the present appeal.

10. It was argued before us by the Ld. Counsel for the appellant that the AO had reiterated the same mistake though it was not mentioned in the assessment order the AO adopted only the values as per SRO and thereby he has not followed the directions of Hon'ble ITAT, Hyderabad in :- 6 -: I.T.A. No. 1635/Hyd/2014 Sri G.S. Prabhakar

ITA No. 1004/Hyd/2010 dt. 27-07-2012 and therefore he submitted that the assessment order passed consequent to the Hon'ble Tribunal's direction in the above mentioned appeal should be quashed. On the other hand, the Ld. DR supported the orders of lower authorities.

11. We heard the rival parties and perused the orders of lower authorities. In this case, the AO is bound by the order of the Hon'ble Trinual 1004/Hyd2010 dt. 27-07-2012. The mandate of the Hon'ble Tribunal in the said appeal was to make necessary enquiries and find out the comparable case of sale of land in the same locality for ascertaining the fair market value of land as on 01-04-1981 for the purpose of computing the capital gains. While passing the assessment order, consequent to the Hon'ble Tribunal's order, the Ld. AO had again adopted the values as per Sub-Registrar Office as can be seen from the body of the assessment order vide page No.2 of the order. There is no gain saying that the value as per Sub-Registrar Office may not be the market value. In this connection, we rely on the following cases:

(i) Tawjaee Nagnatham Vs. Revenue Divisional Officer, Adilabad [1994] [4 SCC 595];

(ii) Prakashwati Vs. Chie Controlling Revenue Authority, U.P. [1996] [4 SCC 657];

(iii) State of Punjab Vs. Mohabir Singh [1996] [1 SCC 609].

Thus, the AO had travelled beyond the findings given in the Tribunal's order. The Revenue had not gone on appeal against the order of the Tribunal. Therefore, the Tribunal order had attained finality and the AO is bound to pass the consequential assessment order within the four corners of the Tribunal order. Since in the present case, the AO had :- 7 -: I.T.A. No. 1635/Hyd/2014 Sri G.S. Prabhakar

gone beyond the scope of the Tribunal order, we have no hesitation to quash the order dt. 24-02-2014 passed by the ITO, Ward-13(2), Hyderabad.

12. In the result, appeal filed by the appellant is allowed.

Order pronounced in open Court on 22nd May, 2015

Sd/- Sd/- (ASHA VIJAYARAGHAVAN) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 22nd May, 2015

TNMM

Copy to :

1. Sri G.S. Prabhakar, H.No. 10-2-289/111, Shanthinagar, Hyderabad. C/o. K. Vasantkumar, A.V. Raghu Ram, Advocates, 610, Babukhan Estate, Basheerbagh, Hyderabad.

2. Income Tax Officer, Ward-13(2), Hyderabad.

3. CIT(Appeals)-II, Hyderabad.

4. CIT-I, Hyderabad.

5. D.R. ITAT, Hyderabad