2020 (8) TMI 186 - AT - Income Tax

Tribunal estimates capital asset cost in long-standing dispute, offers compromise solution

Hari Krishna Budhia (HUF), Nr. Surendra Nath Versus DCIT, Circle-1, Ranchi

The Tribunal partly allowed the assessee's appeal in a dispute over the cost of acquisition of a capital asset acquired in 1957 and sold in 2012. Unable ... Capital gain computation - Cost of acquisition of assessee’s capital asset acquired way back in the year 1957 and sold on 26.02.2012 - HELD THAT:- Neither of the two parties have been able to justify their valuations i.e., exact location and on sale consideration basis; respectively. We therefore are of the view that neither party’s stand deserves to be accepted in entirety. We thus conclude that a lump sum cost of acquisition on estimation basis of ₹ 3,00,000/- w.e.f. 01.04.1981 by adopting rule of thumb would meet the ends of justice. Both parties get part relief in same terms. Necessary computation including that of interest shall follow as per law keeping in mind hon'ble jurisdictional high court’s decision in Ajay Prakash Verma vs. ITO [2013 (1) TMI 140 - JHARKHAND HIGH COURT]. Issues:Dispute over cost of acquisition of capital asset acquired in 1957 and sold in 2012.Analysis:1. Cost of Acquisition Dispute:The appeal before the Appellate Tribunal involved a dispute regarding the cost of acquisition of the assessee's capital asset acquired in 1957 and sold in 2012. The assessee relied on a registered valuer's report stating the cost of acquisition as of April 1, 1981, at Rs. 60,54,687 after adopting the reverse indexation method. However, the Assessing Officer failed to support this valuation with cogent evidence, leading the lower authorities to consider the cost of acquisition at Rs. 1,86,000 based on revenue records. This significant difference in valuation formed the crux of the dispute between the parties.2. Judgment and Decision:After hearing both parties, the Tribunal noted that neither party could justify their respective valuations based on location and sale consideration. Consequently, the Tribunal concluded that neither party's stand deserved full acceptance. To resolve the impasse, the Tribunal decided to estimate a lump sum cost of acquisition at Rs. 3,00,000 effective from April 1, 1981, based on a rule of thumb approach. This decision aimed to provide partial relief to both parties. The Tribunal also directed that necessary computations, including interest, should follow as per the law, taking into account a decision of the jurisdictional high court in Ajay Prakash Verma vs. ITO (2010) TA No. 38 of 2010 reported in 2013(1) TMI 140.3. Outcome:Ultimately, the Tribunal partly allowed the assessee's appeal by determining the cost of acquisition on an estimation basis, providing a compromise solution to the conflicting valuations presented by the parties. The order was pronounced in the open court at the close of the hearing on Friday, March 6, 2020.This detailed analysis of the judgment highlights the core issue of the cost of acquisition dispute, the Tribunal's decision-making process, and the ultimate outcome of the appeal.