2014 (8) TMI 1235 - AT - Income Tax

ITAT affirms deletion of capital gain addition on godown sale, emphasizes consistent treatment for co-owners

Asstt. Commissioner of Income Tax, Circle-5, Baroda Versus Shri Mahesh Chunilal Shah, C/o Shah Enterprise

The ITAT upheld the Ld. CIT(A)'s decision to delete the addition of long term capital gain on the sale of a godown in Cuttack for A.Y. 2007-08. The ITAT ... Capital gain computation - cost of construction of the godown - Assessee after considering the cost of acquisition had worked out the capital gains which was not acceptable to AO - CIT(A) while allowing the appeal of Assessee has noted that the valuation report of the valuer had also estimated the cost of construction of the godown and therefore the Assessee’s share of ½ worked and thus he has considered the cost of acquisition of Rs. 27 lacs considered by Assessee to be in order - HELD THAT:- Before us, Revenue has not brought any material to controvert the finding of ld. CIT(A). Assessee has submitted that the balance ½ share which belonged to his brother and in his assessments, the cost of acquisition of the same godown has been accepted by the Revenue. Before us, no material has been brought on record to show that the valuation of the godown in the case of Assessee’s brother has been challenged in appeal before Tribunal. We further find that in the case of CIT vs. Kumararani Meenakshi Achi [2006 (10) TMI 123 - MADRAS HIGH COURT] has held that the differential treatment cannot be meted out to another co-owner while making the assessment of same property or while valuing the same property. In view of the aforesaid facts and relying on the aforesaid decision of Hon’ble Madras High Court, we find no reason to interfere with the order of Ld. CIT(A) and thus these grounds of Revenue are dismissed. Issues:1. Dispute over the addition of long term capital gain on the sale of a godown situated at Cuttack for A.Y. 2007-08.Analysis:The appeal was filed by the Revenue against the order of Ld. CIT(A)-IV, Baroda for the assessment year 2007-08. The Assessee, an individual deriving income from various sources, filed a return declaring income of Rs. 7,82,950/-. The case underwent scrutiny, and the assessment framed by the AO determined the total income at Rs. 45,26,558/-. The primary issue revolved around the addition of Rs. 37,43,606/- as long term capital gain on the sale of a godown in Cuttack. The Revenue contended that the Ld. CIT(A) erred in deleting this addition due to discrepancies in the valuation and purchase details provided by the Assessee.During the assessment proceedings, the AO observed that the Assessee had sold a godown in Cuttack and claimed capital gains. However, the Assessee failed to provide the purchase deed for the godown. The AO questioned the authenticity of the declared purchase price and indexed cost of acquisition. In the absence of concrete evidence, the AO estimated the cost of acquisition at Rs. 5 lacs instead of the Assessee's claimed Rs. 27 lacs, resulting in the addition of Rs. 37,43,606/- to the total income. The Ld. CIT(A) later deleted this addition after considering the construction details, rent income, loan documents, and valuation report related to the godown.The Revenue, dissatisfied with the Ld. CIT(A)'s decision, appealed before the ITAT. The ITAT, after hearing both parties, upheld the Ld. CIT(A)'s order. The ITAT emphasized that the cost of acquisition at Rs. 27 lacs, as claimed by the Assessee, was justifiable based on the construction cost, rental income, and valuation report. The ITAT also highlighted the principle that differential treatment cannot be applied to co-owners of the same property, citing relevant judicial decisions. Consequently, the ITAT dismissed the Revenue's appeal, affirming the deletion of the addition of long term capital gain on the sale of the godown in Cuttack.In conclusion, the ITAT's judgment favored the Assessee by accepting the cost of acquisition claimed and rejecting the Revenue's challenge based on valuation discrepancies. The decision underscored the importance of consistent treatment for co-owners of a property and upheld the Ld. CIT(A)'s order in favor of the Assessee.