TaxTMI 
TaxTMI 
2021 (4) TMI 716
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and his brother was having equal share in the property. 3. The AO observed that in view of the judgment of the Hon'ble High Court of A.P in the case of Sri Potla Nageswara Rao vs. DCIT in ITTA No.245 of 2014, the capital gain arising out of a Development Agreement is taxable in the year of entering into the Development Agreement and handing over of possession. Since the assessee did not offer capital gains arising from the development agreement to tax, AO was of the opinion that there is a reason to believe that the income chargeable to tax has escaped assessment. Accordingly, the assessment was reopened by issuance of a notice u/s 148 of the Act on 14.09.2016. In response to the same, the assessee filed his reply on 1.9.2016, Thereafter, the assessee expired on 2.1.2017 and his daughter Ms. Mangamma was brought on record as his legal heir. During the assessment proceedings, the legal heir filed a letter dated 11.12.2017 stating as under: "7.1 With reference to the subjected cited above, I would like to state that as per the information available with me, my father Late Sri C.N. Vittal Rao & his brother Sri C.N. Ramesh, were the joint owners of the property bearing No.6 (Ne....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the developer during the year. Further, while computing the capital gains indexed cost of land and indexed cost of old residential building that was existing at the time of giving the property on development is allowable. The old residential complex comprising of Ground plus 3 upper floors was constructed in the year 1982 after obtaining permission from the then Municipal Corporation of Hyderabad vide Permit No. 128/41/E of 1981-82. A copy of the old permission plan is enclosed herewith for your perusal. The said building was dismantled at the time of giving the property on development. Therefore, the indexed value of the building is allowable as deduction in computation of capital gains. Further, deduction u/s 54 of IT Act, 1961, is allowable in respect of residential flats being allotted by the developer in terms of Development Agreement, in exchange of old residential property consequent to which there will be no capital gains on this count also. Kindly complete the assessment as per the return filed on 23-07-2013 by treating the same as one filed in response to notice u/s 148 of LT. Act, 1961, since no portion of Capital gains is assessable to Income Tax in the year under....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the builder. 5) Any other grounds your Appellant may urge at the time of hearing". 1.7. The ground no.2 with respect to the year of assessability and ground 4 are not pressed". 5. At the time of hearing, the learned Counsel for the assessee submitted that Grounds 1 & 5 are general nature and Ground No.2 with regard to the year of assessability and ground No.4 with regard to the value of built up area allotted by the builder are not pressed by the assessee. Therefore, ground No.2 & 4 are rejected as not pressed. The only ground to be considered now is Ground No.3. 6. The learned Counsel for the assessee reiterated the submissions made by the assessee before the authorities below, while the learned DR supported the orders of the authorities below. 7. Having regard to the rival contentions and the material on record, we find that the assessee has submitted registered valuer's report, whereas the AO has adopted the SRO value for arriving at the value of land and building as on 1.4.1981. It is settled law that where an assessee disputes the SRO value, and the AO is not satisfied with the report submitted by the assessee, in such circumstances, the AO ought to have referred th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ber, 2011 was served upon the appellant. The assessment was completed by the Assistant Commissioner of Income-Tax on 30.Q3.2012 under section 143(3) of the Act at a total income of Rs. 17,90,52,975 after making additions on account of short-term capital gains of Rs. 2,33, 77,352 and Rs. 3,47,28,818 on account of long term capital gains. The sale deeds in question were for composite sale of land and building (i.e., sale deed did not mention the break-up of consideration for land and building separately) for Rs. '18,31,00,000 and Rs. 9,09,45,000. The dispute between the appellant company and the Assessing Officer is three folds; one related to the apportionment of sale price of the two sale deeds between land component and the building and second related to non-consideration of the fair market value (FMV) of land as on 1-4-1981 as per the approved valuer's report and lastly inclusion of stamp duty paid by the appellant as part of sale consideration. The learned CIT - A has dealt with the whole issue as per ground number 4 of the appeal at para number 7 of his order. The only grievance of the learned assessing officer is that that assessee should not have been granted the dedu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng to the A.O., when asset is acquired by the assessee by way of one of the mode specified uls. 49(1) of the Act, the assessee can either adopt cost to the previous owner or fair market value of the property as on 1.4 .1981. According to the A.O., the fair market value of the property as on 1.4.1981 is as per the SRO value. . 10. It is the contention of the assessee that he has adopted fair market value of the property based on the certificate of the registered valuer. The assessee further contended that the A.O. was not correct in applying SRO value as fair market value of the property, as the SRO value fixed by the State Government is not correct market value of the property. The A.O. was erred in equating with full value of consideration as a result of transfer to the fair market value of the property for the purpose of computation of cost of acquisition. We find force in the argument of the assessee for the reason that the A.O. was erred in adopting SRO value to substitute fair market value of the property for the purpose of computation of cost of acquisition of the property. Section 48 of the Act deals with the mode of computation of income chargeable under the head "capital....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se is used in section 45(2) [relating to capital gains] and section 55(2)(b) (relating to cost of acquisition). (para 44) The legislature has expressly drawn a distinction between the two phrases: 'full value of the consideration' and 'fair market value. The former would be the price received on transfer of a capital asset and the latter would be the price that a capital asset would ordinarily fetch on sale in open market on the relevant date. (para 47) Assessee had provided the reasons for determining Rs. 225/- per sq. ft. as the fair market value of the property by producing the relevant material, including valuation report of a registered valuer, which all have been ignored while arriving at the price of Rs. 84/- per sq. ft. The Assessing Officer assessed the value of the property as on 1.4.1981 on the basis of sale deeds of some nearby properties registered for such price in the year 1981 and thus, arrived at that figure. In our opinion, the same cannot be the proper mode of arriving ~t the 'fair market value' of the property in question as on 1.4.1981, for the purpose of determining 'Capital gains' under the Act. (para 48) Tribunal was not jus....