Smt. A.Indira( Representing Late ... vs Assessee

Smt. A. Indira, Vs. The Income Tax Officer, Ward-1, (Representing Late R. Ganesh Aluva. Kumar), Arunesh, Bishop's Quarters, North Kalamasery-683 104. [PAN:ADOPG 7194A] (Assessee-Appellant) (Revenue-Respondent)

Assessee by Shri C.B.M. Warrier, CA Revenue by Shri K.K. John, Sr. DR

Date of hearing 13/01/2015 Date of pronouncement 06/03/2015

ORDER

Per CHANDRA POOJARI, Accountant Member:

This appeal filed by the assessee is directed against the order dated 27-

06-2013 passed by the CIT(A)-II, Kochi for the assessment year 2006-07.

2. The assessee has raised the following additional grounds:

(1) The assessment is completed u/s. 147 as per the notice u/s. 148 dated 31/03/2011. As per the provisions of the Act the Income Tax Officer is entitled to issue notice u/s. 148 only with the approval of Joint Commissioner of Income Tax. The notice issued is without the above approval and hence the notice is invalid and hence the assessment is also invalid.

2 I.T.A. No.384/Coch/2014 (2) The assessment as per the order dated 22/03/2013 is the assessment of Capital Gains on the transfer of property u/s. 53A of the Transfer of Property Act as per para 2 of the assessment order. The possession as per the agreement is given on the 1st day of March, 2005 and hence the transfer of property is relating to the A.Y. 2005-06. But the assessment is completed for the A.Y. 2006-07 and hence the assessment may be declared as null and void.

3. The Ld. AR has also filed a petition for admission of the additional grounds

stating that he inadvertently omitted to raise these grounds on an earlier

occasion and hence, these grounds may be admitted in the interest of justice.

4. The Ld. DR did not raise any serious objection for admission of these

additional grounds. Accordingly, these additional grounds may be admitted as

the same were not raised on an earlier occasion due to inadvertent mistake of

the assessee's Counsel. We find the reason given by the assessee's Counsel as

bona fide and hence, the additional grounds are admitted for adjudication.

5. However, the Ld. AR has not pressed the first additional ground at the

time of hearing. Hence, the first additional ground is dismissed as not pressed.

6. Coming to the second additional ground, the Ld. AR submitted that the

possession of the property as per the agreement was on the 1st day of March,

2005 and hence the taxability of capital gains would arise only in the assessment

year 2005-06 and not in the assessment year 2006-07.

3 I.T.A. No.384/Coch/2014

7. On the other hand, the Ld. DR submitted that the assessee vide letter

dated 14-08-2006 has informed the Assessing officer that during the financial

year 2005-06, he has given the possession of the impugned property to M/s.

Nikunjam Constructions Pvt. Ltd., Thiruvananthapuram as per separate

agreement executed with the said company. The Ld. DR further drew our

attention to the letter dated 02/08/2006 from the above builder addressed to the

assessee wherein it was stated that they have taken possession of the property

on 11th May, 2005. The Ld. DR also drew our attention to the computation of

income attached to the return of income for assessment year 2006-07 filed by

the assessee wherein he confirmed that the possession of the property was

handed over to the builder in May, 2005 vide agreement dated 1st March, 2005.

Being so, the Ld. DR submitted that there is no merit in the argument of the Ld.

AR.

8. We have heard both the parties and perused the record. As per

agreement dated 1st March, 2005, the possession of the property was handed

over the builder on the first day of March, 2005. However, later on, it was

brought to the notice of the Assessing officer that the deceased assessee, Shri R.

Ganesh Kumar vide letter dated 14/08/2006 handed over the possession of the

property to M/s. Nikunjam Constructions Pvt. Ltd. in the financial year 2005-06.

It was also submitted that vide letter dated 02-08-2006 issued to Shri R. Ganesh

Kumar by M/s. Nikunjam Constructions Pvt. Ltd. that they have taken possession 4 I.T.A. No.384/Coch/2014

of the property bearing Sy.No.1863/A and situated in Vanchiyoor village,

Thiruvananthapuram Taluk, Thiruvananthapuram District in May, 2005. Further,

the assessee has also clarified in the statement of income attached to the return

of income for assessment year 2006-07 that the actual date of handing over

possession of the said property was 11th May, 2005 which falls in the assessment

year 2006-07. All these facts support the contention of the Ld. DR that there

was no handing over the possession of the said property during the assessment

year 2005-06. Being so, there is no merit in the contention of the assessee's

Counsel that there was no transfer of property in A.Y. 2006-07. In our opinion,

the transfer of property took place in terms of section 2(47)(v) only in

assessment year 2006-07 and the taxability of capital gain is to be considered in

assessment year 2006-07 only. Accordingly, this ground of the assessee is

rejected.

8.1 Further, at the time of hearing, the Ld. AR raised one more argument that

there was no proper service of notice u/s. 148 of the I.T. Act. The Ld. AR

submitted that Shri R.Ganesh Kumar expired on 10/07/2009 (wrongly mentioned

as 01/07/2009 in para 3 of the assessment order) and the notice u/s. 148 was

issued on 31/03/2011 in the name of Shri Ganesh Kumar who was not alive on

that date. According to the Ld. AR, as per section 159(2)(b) of the Act, the

notice should have been addressed to the legal heirs which was not done and

hence the assessment is to be quashed.

5 I.T.A. No.384/Coch/2014

9. The Ld. DR submitted that in compliance with the notice u/s. 148 issued

on 31/03/2011, no return of income was filed by the assessee, Smt. A. Indira,

wife of the deceased. However, she filed a letter dated 30/03/2011 to treat the

original return filed u/s. 139 as return filed in response to notice u/s. 148 of the

I.T. Act. According to the Ld. DR, for the notice dated 31/03/2011, the assessee

cannot file a letter dated 30/03/2011, since it was served on her only on

01/04/2011.

10. We have heard both the parties and perused the record. Admittedly, in

this case, notice was issued in the name of the deceased person, Shri R. Ganesh

Kumar on 31-03-2011 and was served on the assessee's wife on 01/04/2011.

However, she filed a letter dated 30-03-2011 (filed on 04-04-2011) requesting to

treat the original return of income filed on 19-09-2007 as the return of income

filed in response to the notice u/s. 148 of the I.T. Act. The notice u/s. 143(2)

was issued on 16-05-2011 and in response to the notice, Shri K. Jayachandran,

Advocate appeared before the Assessing officer and after verification of the

details, the assessment was completed. Thus the contention of the assessee's

Counsel that there was no proper service of notice u/s. 148 is not proper. If the

assessee has any objection regarding service of notice, it would have been

brought to the notice of the Assessing officer and should not have filed the letter

before the Assessing officer on 04/04/2011 (dated 30-03-2011) requesting the 6 I.T.A. No.384/Coch/2014

Assessing officer to treat the original return of income filed on 19-09-2007 as the

return of income in response to the notice u/s. 148 of the Act. This action of the

assessee shows that the assessee is well aware of the proceedings initiated

under section 148 in respect of the deceased assessee, Shri R. Ganesh Kumar.

The assessee has not raised the issue of improper notice u/s. 148 of the I.T. Act

before the Assessing officer/CIT(A). Once the assessee has co-operated with the

Department, it does not lie in her mouth and turn around and contend that there

was no valid service of notice to the assessee. Accordingly, this ground of the

assessee is also rejected.

11. Now coming to the main ground, the Ld. AR submitted that during the

assessment proceedings, the Fair Market Value as on 01/04/1981 was claimed at

Rs.33,600/- per cent as against Rs.85,000/- per cent as claimed in the original

return of income. According to the Ld. AR, the assessee has filed before the

Assessing officer a document relating to the property transaction in 1986 for the

transfer of a property of 9.775 cents for a consideration of Rs.4,60,000/-. The

Ld. AR submitted that this property was purchased by Kerala State Govt. Nurses

Welfare Fund, a Govt. society, Trivandrum and it was near to the property

transferred by the assessee. It was submitted that the average value of the

property per cent was Rs.47,060/- and for ascertaining the value as on

01/04/1981 by reverse indexation 100/140 *47,060 = Rs.33,600/- per cent was

arrived at.

7 I.T.A. No.384/Coch/2014

12. The Ld. AR submitted that the Assessing officer adopted Rs.5,000/- per

cent on the basis of a certificate of land value of the Sub-Registrar, Trivandrum

which is not with respect to any particular property transaction. According to the

Ld. AR, the value and locality of this particular property was not mentioned in the

assessment order and hence, the value of Rs.5000/- may not be accepted as a

comparable transaction. According to the Ld. AR, the example given by the

assessee was transfer to the Kerala Govt. organization and the value as per the

document can be accepted as face value. Ld. AR submitted that in the absence

of any other transaction the market value as on 01/04/1981 of Rs.33,600/- per

cent may be accepted and the Long Term Capital Gains may be computed.

13. The Ld. DR relied on the order of the CIT(A).

14. We have heard both the parties and perused the record. In this case, the

assessee had sold property of 38.3 cents of land at Vanchiyoor,

Thiruvananthapuram to M/s. Nikunjam Constructions Pvt. Ltd. for a consideration

of Rs.114,29,000/-. For the purpose of computing capital gain, the assessee

adopted fair market value (FMV) u/s. 49 of the Act as on 01/04/1981 at

Rs.33,600/- per cent which is based on the reversed indextion of the value of the

property measuring 9.775 cents at Rs. 47,060/- per cent as on 19/11/1986

acquired by the Government which is situated nearby to the property sold by the 8 I.T.A. No.384/Coch/2014

assessee. However, the Assessing officer adopted the FMV of the property as on

01/04/1981 at Rs.5000/- per cent. In our opinion, the value adopted by the

assessee for fixing FMV as on 01-04-1981 on the basis of the property acquired

by the Government on 19/11/1986 by applying reversed indexation is not

correct. At the same time, the FMV adopted by the Assessing officer at

Rs.5000/- per cent based on Sub-Registrar's value is also not correct. In our

opinion, it is not proper to refer the Sub-Registrar value to determine the FMV of

the property as on 01-04-1981 as held by this Tribunal in the case of R.

Vidyadharan vs. DCIT (2013) (141 ITD 7) wherein it was observed as under:

"4. We have considered the rival submissions on either side and also perused the material available on record. The only dispute is with regard to the fair market value as on 01-04-1981. Wherever the land was acquired prior to 01- 04-1981 the taxpayers are given option to adopt the fair market value as on 01-04-1981 as the basis for computing the capital gain. It is not in dispute that the property was acquired in the year 1978 by the taxpayers. Therefore, the taxpayers opted to adopt the market value as on 01-04-1981. It is well settled principles of law that fair market value is nothing but a price that probably may be agreed between a willing purchaser and a willing seller. The fair market value may fluctuate depending upon the area of the land, location, accessability to the infrastructure facilities, potentiality for future development, etc. Therefore, for the purpose of estimating the fair market value as on 01-04-1981 we have to take into consideration the locality in which the land is situated, the accessability to infrastructure facilities, comparative sale instances in the locality, potentiality for future development, distance between the land and the bus stand, railways station, air port, etc. The guideline value fixed by the Sub Registrar is only a guideline value to ascertain the market value. The guideline value fixed by the government to guide the Sub Registrar may be a basis for fixing the formal market value for collection of stamp duties. Therefore, though the guideline value fixed by the government to guide the Sub Registrar may be one of the factors to be taken into consideration for estimating the fair market value, however it cannot be the sole basis for fixing the fair market value as on 01-04-1981. In the case before us the assessing officer has taken the fair market value as on 01-04- 9 I.T.A. No.384/Coch/2014

1981 fixed by the government as sole basis for taking the fair market value. The taxpayers now claim that in the case of the neighbour Shri C.R. Ravindran Nair, the fair market value as on 01-04-1981 was fixed at Rs.2,300. If the land is nearer to the taxpayer's land and it was similarly located then this also has to be taken into consideration while fixing the fair market value. Unfortunately, all these facts were not considered by the assessing authority. Therefore, this Tribunal is of the considered opinion that the assessing officer has to reconsider the issue in the light of all factors mentioned above and thereafter take a decision. Accordingly the orders of the lower authorities are set aside and the issue is remitted back to the file of the assessing officer. The assessing officer shall reconsider the issue afresh in the light of the factors referred above and thereafter determine the fair market value as on 01-04-1981 after providing opportunity of hearing to the taxpayer."

15. In view of the above observation, we are inclined to remit this issue back

to the file of the Assessing officer to decide the issue afresh by referring the

matter of valuation of the property to DVO and decide accordingly. Accordingly,

this ground of the assessee is partly allowed.

16. In the result, the appeal filed by the assessee is partly allowed.

Pronounced in the open court on 06/03/2015.

sd/- sd/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Kochi Dated: 06/03/2015 GJ Copy to:

1. Smt. A. Indira, (Representing Late R. Ganesh Kumar), Arunesh, Bishop's Quarters, North Kalamasery-683 104.

2. The Income Tax Officer, Ward-1, Aluva.

10 I.T.A. No.384/Coch/2014

3. The Commissioner of Income-tax(Appeals)-II, Kochi.

4. The Commissioner of Income-tax, Kochi.

5. D.R., I.T.A.T., Cochin Bench, Cochin.

6. Guard File.

By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin