IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA No. 180/Hyd/2014
Assessment year 2008-09
Late Sri R. Ramnivas Bhai vs. The Commissioner of
Pansari, (LR Sri Mukesh Income-tax-VI
Pansari), Hyderabad Hyderabad
PAN: AEIPP7862D
Appellant Respondent
Applicant by: Sri Vikas Modi
Respondent by: Sri Solgy Jose T. Kottaram
Date of hearing: 29.05.2014
Date of pronouncement: 27.06.2014
ORDER
PER ASHA VIJAYARAGHAVAN, J.M.:
This appeal by the assessee is directed against the
order of the Commissioner of Income-tax-VI, Hyderabad
dated 19.12.2013 for assessment year 2008-09.
2. Brief facts of the case are that the assessee filed a
return of income for A.Y. 2008-09 on 23.7.2008 admitting
total income of Rs. 2,09,007. In order to verify the short
term capital gains and long term capital gains the case
was taken up for scrutiny by issuing notice u/s. 147 of
Income-tax Act, 1961 and assessment was completed
assessing taxable income at Rs. 8,46,125. While doing
so, the AO recalculated the long term capital gains at Rs.
11,26,125.
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3. Subsequently, the CIT-VI, Hyderabad held that the
following issues were not examined by the AO while
completing the assessment:
"The assessee offered long term capital gains
of Rs. 1,08,480/- on sale of a house acquired
prior to 1981 at Ahmedabad. For computing
LTCG, the assessee adopted the cost of land of
130 sq. yards at Rs. 2,000/- as on 1.4.1981.
During scrutiny, AO requested SRO
Ahmedabad to furnish the market value of
property as on 1.4.1981. Since no information
was received from SRO, Ahmedabad, AO
completed the assessment by obtaining the
CPWD rates for cost of construction of the
house and adopted the cost of land as
declared by the assessee i.e. 2000 sq. yards
and consequently arrived at excessive indexed
cost of acquisition of Rs. 23,03,874/-. It is
pertinent to mention that while completing
scrutiny assessment the case of Sri Cheera
Jangaiah for A.Y. 2007-08 on 31.12.2010, the
AO adopted fair market value of plot at
Saidabad, Hyderabad at the rate of Rs. 15 per
sq. yard as on 1.4.1981 as against Rs. 45/-
claimed by the assessee. Since Hyderabad
and Ahmedabad are cities with equal status
and development, the cost of land adopted at
the rate of Rs. 2,000/- per sq. yards as on
1.4.1981 was on a very high. In the absence of
satisfactory evidence for FMV as on 1. 4 .1981,
the claim for cost of land @ 2000/- should
have been disallowed for computing indexed
cost of acquisition"
4. In response to the show-cause notice issued, the
assessee's AR argued that the AO has written a letter to
the SRO directly to furnish the market value of the
property as on 1.4.1981 in the course of assessment
proceedings and since there was no reply from the SRO,
he proceeded to adopt CPWD rates for determining the
cost of construction and the registration value of the
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property as on 1.4.1981 to compute the cost of
acquisition of the property in order to arrive at long term
capital gains in the case of the assessee. It was argued
that the AO has duly applied his mind and only after
complete appreciation of the facts completed the
assessment and recomputed the capital gains. It was
submitted that there was no error in the order of the AO
nor was the order passed is prejudicial to the interests of
the revenue and, therefore, the notice u/s. 263 is to be
dropped.
5. The learned AR further relied on the decision in the
case of M. Achyuta Ramaiah vs. Dept. of Income-tax dated
28.06.2013 where the ITAT held that the assessee was
right in adopting comparable values for computation of
cost of acquisition of land as on 1.4.1981 and the SRO
value adopted by the assessee was rejected in the
computation. The AR also relied on the case of Ms.
Rubab M. Kazerani vs. JCIT (91 ITR 429)(Mum).
6. However, the CIT held that the AO had written letter
to the SRO, Ahmedabad for ascertaining the market value
of the property as on 1.4.1981 and, therefore, the AO
could have obtained the same before completing the
assessment rather than basing his computation on the
registered valuer's report and CPWD rates. It was
observed by the CIT that the same AO while completing
scrutiny assessment in another case for A.Y. 2007-08
adopted Rs. 15 per sq. yard (sqy) for the property situated
at Hyderabad whereas in the instant case he has adopted
Rs. 2000 per sqy which is very high as both the cities are
similarly placed in terms of economic development, etc.
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The CIT was of the opinion that if there had been no
response from the SRO, the AO could have requested the
Investigation Wing to obtain the same from SRO,
Ahmedabad. It was further observed by the CIT that in
the return of income the assessee had declared short term
capital gains of Rs. 2,00,527 and long term capital gains
of Rs. 1,08,480 and in the computation of short term
capital gains the assessee has shown the cost of
acquisition of the asset sold at Rs. 53,04,616 and as per
the return of income the assessee is not having any other
source of income except capital gains. The CIT opined
that the assessee is not having verifiable source for the
acquisition of the asset sold and, therefore, the case was
rightly reopened u/s. 147 of the Act. Further, the
reopened assessment was completed without obtaining
the information from SRO, Ahmedabad to determine the
value of the property as on 1.4.1981, thereby the
assessment order passed by the AO was not only
erroneous but also prejudicial to the interests of the
revenue.
7. The CIT relied on the judgement of Apex Court in
the case of Malabar Industrial Co. Ltd. (243 ITR 83) (SC).
The CIT held that it was entirely false claim made by the
assessee deliberately to reduce the capital gain and evade
legitimate payment of tax. The CIT relied on various
judicial decisions in support of his action, as under:
a) Rampyari Devi Sarogi vs. CIT, 67 ITR 84 (SC)
b) Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC)
c) Swarup Vegetable Products Industries Ltd. vs. CIT,
197 ITR 412 (All).
d) Gee Vee Enterprises vs. Addl. CIT & Ors., 99 ITR 375
(Del).
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e) Rajalakshmi Mills Ltd. vs. ITO, 313 ITR (AT) 182.
f) SRM Systems & Software Pvt. Ltd. vs. ACIT, 2010-
TIOL-646-HC-MAD-IT.
g) Deloitte Haskins & Sells, Chennai vs. DCIT (ITA No.
1164/Mds/12 dtd. 4.7.2013).
8. The CIT, therefore, concluded that the assessment
order of the AO for A.Y. 2008-09 is to be set aside. The
CIT passed his order u/s. 263 with a direction to the AO
to redo the assessment as per law after providing
reasonable opportunity to the assessee. While doing so,
he directed the AO to obtain details of market value of the
property from the SRO, Ahmedabad either directly or
through his counterpart working at Ahmedabad.
Aggrieved, the assessee is in appeal before us.
9. The learned counsel for the assessee relied on the
judgement of Hon'ble AP High Court in the case of CIT vs.
Ashven Datla in ITTA 111 of 2012 dated 26.11.2012
wherein it has been held by the jurisdictional High Court
that the SRO rates cannot be considered as fair market
value for the purpose of adopting them for ascertaining
the cost of assets as on 1.4.1981. The learned counsel for
the assessee submitted that the finding of the CIT that the
AO has not applied his mind and completed the
assessment without proper appreciation of the facts, is
factually incorrect inasmuch as the order of the AO is very
detailed one and the AO has discussed the entire issue
before making the assessment. The learned counsel for
the assessee also relied on the decision of Malabar
Industrial Co. Ltd. (supra).
10. We have heard both the parties. We are of the
opinion that the AO has applied is mind which is evident
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from the fact that the AO has obtained the comparable
sale instances from the assessee. In the case of CIT vs.
Ratlam Coal Ash Co. (171 ITR 141) it has been held that
the valuation of the property is always a matter of
estimate and in case the CIT has difference of opinion
with that of the AO with regard to the valuation of the
property, it cannot be a ground to hold that the order of
the AO is erroneous and prejudicial to the interests of the
revenue.
11. Two circumstances must exist to enable the
Commissioner to exercise the power of revision under this
sub-section viz., (i) the order should be erroneous; and (ii)
by virtue of the order being erroneous prejudice must
have been caused to the interest of the Revenue. An order
cannot be termed as erroneous unless it is not in
accordance with law. Section 263 does not visualize a
case of substitution of the judgment of the Commissioner
for that of the Income-tax Officer who, passed the order,
unless the decision is held to be erroneous. An order to be
termed as prejudicial to the interests of the Revenue,
there must be some prima facie material on record to
show that tax which was lawfully eligible has not been
imposed. The Hon'ble Bombay High Court in the case of
Gabriel India Ltd. (203 ITR 108) (Bom), has laid down the
principles for exercising jurisdiction Under Section 263 as
follows:
"Two circumstances must exits to enable the
Commissioner to exercise the power of revision
under this sub-section viz., (i) the order should be
erroneous; and (ii) by virtue of the order being
erroneous prejudice must have been caused to the
interest of the Revenue. An order cannot be termed
as erroneous unless it is not in accordance with
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law. This section does not visualize a case of
substitution of the judgment of the Commissioner
for that of the Income-tax Officer who, passed the
order, unless the decision is held to be erroneous.
Cases may be visualized where the Income tax
Officer while making as assessment examines the
account, makes enquiries, applies his mind to the
facts and circumstances of the case and
determines the income either by accepting the
accounts or by making some estimates himself.
The Commissioner, on perusal of records, may be
of the opinion that the estimate made by the officer
concerned was on the lower side and left to the
Commissioner he would have estimated the income
at a higher figure than the one determined by the
Income-tax Officer. That would not vest the
Commissioner with power to re-examine the
accounts and determine the income himself at a
higher figure. This is because the Income-tax
Officer has exercised the quasi- judicial power
vested in him in accordance with law and arrived
at a conclusion and such a conclusion cannot be
termed to be erroneous simply because the
commissioner does not feel satisfied with the
conclusion. It may be said in such a case that in
the opinion of the Commissioner the order in
question is prejudicial to the interests of the
Revenue. But that by itself would not be enough to
vest the Commissioner with the power of suo motu
revision because the first requirement, namely, that
the order is erroneous, is absent. Similarly if an
order is erroneous but not prejudicial to the
interests of the Revenue, then the power of suo-
motu revision cannot be exercised. Any and every
erroneous order cannot be the subject-matter of
revision because the second requirement must be
fulfilled. There must be some prima fade material
on record to show that tax which was lawfully
exigible has not been imposed. When exercise of
statutory power is dependent upon the existence of
certain objective facts, the authority before
exercising such power must have materials on
record to satisfy in that regard. In the action of the
authority is challenged. before the court it would be
open to the courts to examine whether the relevant
objective factors were available from the records
called for and examined by such authority.
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12. Further in the case of Malabar Industrial Co. Ltd.
(supra), the Hon'ble Supreme Court has clearly laid down
the principle as follows:
"When an ITO adopted one of the courses
permissible in which has resulted in loss of
revenue, or where two views are plausible and the
ITO has taken one view with which the
Commissioner does not agree, it cannot be treated
as an erroneous order prejudicial to the interests of
revenue unless the view taken by the ITO is
unsustainable in law."
13. In the present case the AO chose to complete the
assessment by taking the registered valuer's report and
thereby the assessment order was passed by the AO. In
our opinion, the order passed by the AO is not erroneous
or prejudicial to the interests of the revenue as the AO
has taken one of the plausible views. Hence, we allow the
assessee's appeal on this issue.
14. In the result, assessee's appeal is allowed.
Pronounced in the open court on 27th June, 2014
Sd/- Sd/-
(CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated the 27th June, 2014
tprao
Copy to:
1. Late Sri R. Ramnivas Bhai Pansari (LR Sri Mukesh
Pansari), c/o. Sri Vikas Modi, 908b, 9th Floor,
Babukhan Estate, Basheerbagh, Hyderabad.
2. The Commissioner of Income-tax-VI, Hyderabad.
3. The Addl. CIT, Range-9, Hyderabad.
4. The ITO, Ward-9(3), Hyderabad.
5. The DR, B-Bench, ITAT, Hyderabad.
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