2020 (4) TMI 852 - AT - Income Tax

Tribunal accepts LTCG computation based on valuation reports, emphasizes consistency & cites SC precedents

Smt. Santhi Krishnan Versus The Income Tax Officer, Ward-1 (3), Thiruvananthapuram

Smt. Santhi Krishnan Versus The Income Tax Officer, Ward-1 (3), Thiruvananthapuram - TMI Issues Involved:1. Computation of Capital Gain on Sale of Residential Building.2. Rejection of Valuation Report and Fair Market Value (FMV) as on 01/04/1981.3. Credence to Affidavit and Valuation Reports.4. Denial of Natural Justice.Detailed Analysis:1. Computation of Capital Gain on Sale of Residential Building:The primary issue revolves around the computation of long-term capital gains (LTCG) on the sale of a residential building in Chennai. The assessee declared a total income of Rs. 51,238 for the assessment year 2006-07, including LTCG on the sale of the property. The Assessing Officer (AO) recalculated the LTCG at Rs. 18,88,840, significantly higher than the assessee's computation of Rs. 3,68,299. The AO's computation was based on guideline values and CPWD rates, while the assessee's computation relied on valuation reports from two chartered engineers.2. Rejection of Valuation Report and Fair Market Value (FMV) as on 01/04/1981:The AO rejected the FMV of the land and building as on 01/04/1981, calculated by the assessee based on the valuation reports of two chartered engineers. Instead, the AO adopted the guideline value from the Sub Registrar, Chennai, and CPWD rates for construction. The CIT(A) upheld the AO's method, noting that the valuation by the assessee was on an estimate basis and lacked substantial evidence.3. Credence to Affidavit and Valuation Reports:The assessee argued that the valuation by a Registered Valuer is a valid method to determine FMV as on 01/04/1981 and that the affidavit filed regarding the cost of the building and improvements should be given credence. The CIT(A) and AO, however, did not consider these submissions and relied on their own methods and evidence.4. Denial of Natural Justice:The assessee claimed that the CIT(A) did not consider any of the arguments advanced and thus denied natural justice. The CIT(A) summarily rejected the valuation reports and the affidavit without providing substantial reasoning or evidence to contradict the findings of the AO.Tribunal's Findings:The Tribunal noted that the assessee's computation of LTCG was based on valuation reports from two chartered engineers, which provided a legitimate basis for the FMV as on 01/04/1981. Importantly, in the case of one of the co-owners, the AO had accepted a similar computation of LTCG in a scrutiny assessment. The Tribunal emphasized the principle of consistency, stating that the liability of LTCG should not differ between co-owners of the same property. Citing the Hon'ble Supreme Court's rulings in Union of India & Others vs. Kaumudini Narayan Dalal and Another and Berger India Ltd., the Tribunal concluded that differential treatment on identical facts is impermissible.Conclusion:The Tribunal ruled in favor of the assessee, accepting the computation of LTCG based on the valuation reports of the two chartered engineers. The appeal of the assessee was allowed, and the Tribunal ordered that the long-term capital gains computed by the assessee be accepted.Result:The appeal of the assessee was allowed, and the Tribunal pronounced the judgment in the open court on 25th February 2020.