TaxTMI 
TaxTMI 
2026 (7) TMI 876
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....rmed and the sites were registered in favour of the members in the year 1980. While forming the layout there were 2 sites remained in balance. As per the assessee, after a prolong discussion, the member agreed for sale of the 2 sites to outsider and utilise the sale proceeds for pending development in the layout. 4.1 The impugned 2 sites were sold during the year relevant to A.Y. 2015-16 for a consideration of Rs. 1.78 crores and Rs. 74 Lakh respectively. However, the assessee did not offer the sale proceeds of the impugned 2 sites to tax by contending that the receipts were in the nature of capital receipt of the society which is not taxable. Thus, the same was claimed as exempt in the return filed under section 148 of the Act. 4.2 However, the AO rejected the assessee's claim and proceeded to compute the long-term capital gain on transfer of the impugned property. The AO noted that the assessee has not provided the details of cost of acquisition, hence the cost of acquisition was taken at NIL. Accordingly, the AO treated the entire sales consideration of 2 sites for Rs. 2.52 crores in aggregate as long-term capital gain and added the same to the total income of the assessee....
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....ed in Survey No. 164/1B of Kethamaranahalli Village, Yeshwanthpura Hobli, Bangalore North Taluk, within the revenue administrative jurisdiction of Bruhat Bangalore Mahanagara Palike, Ward No. 014, measuring 2035 square feet. The sale deed records that the Bangalore Development Authority had released sites to the Society vide letter dated 19.09.1977. The Appellant respectfully submits that the above two properties were old and identifiable immovable properties of the Society as demonstrated by the sale deeds placed on record. Therefore, while computing capital gains, if at all the receipts are held to be chargeable under that head, the cost of acquisition could not have been adopted at Nil merely because the Appellant could not produce all old cost records during the reassessment proceedings. The Appellant Society is now defunct. The records relating to acquisition, allotment, development and retention of the sites pertain to a very old period. In view of lapse of time and the present defunct status of the Society, the Appellant is not in a position to obtain and produce exact historical cost details with mathematical precision. For the year under....
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.... difficulty cannot lead to the conclusion that the cost itself was Nil. 1.2 It is respectfully submitted that section 55 is directly relevant to the computation of capital gains in respect of old capital assets. For the assessment year under appeal, where a capital asset became the property of the assessee before 01.04.1981, the assessee is entitled, at its option, to adopt the fair market value as on 01.04.1981 as the cost of acquisition. The sale deed relating to the West of Chord Road property records that the Bangalore Development Authority had released sites to the Society vide letter dated 19.09.1977. Therefore, in respect of the said property, the Appellant is entitled to adopt the fair market value as on 01.04.1981 as the cost of acquisition and to claim indexation thereon in accordance with law. 1.3 Insofar as the Vidyaranyapura property is concerned, the sale deed records that the Vendor Society had purchased the schedule property under an earlier sale deed dated 17.02.1994. Therefore, unless any further old document demonstrates that the property became the property of the Appellant before 01.04.1981, the Appellant respectfully submits that at the minim....
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....nale underlying the aforesaid decisions is that where reliable market evidence is unavailable for the valuation date, a scientific and objective backward-working exercise based on recognised inflation indices constitutes a reasonable method of estimation. The approach avoids arbitrary valuation and ensures that the determination is linked to verifiable market data available for a later period. In circumstances where the earliest available guidance value itself arises several years after the statutory valuation date, reverse indexation represents a fair and reasonable basis for arriving at the historical value. 1.8 Accordingly, in the present case, the fair market value as on 01.04.1981 has been computed by adopting the earliest available guidance value for the financial year 1996-97 and applying the Cost Inflation Index in reverse. The resulting value represents a bona fide estimate founded upon an objective methodology recognised in judicial precedents and is therefore liable to be accepted for the purposes of computation of long-term capital gains. The Appellant has sold 2 properties during the year - 1 in Kethmaranahalli which was acquired in 1977 and another in Chikkab....
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....ding the cost of acquisition despite adequate opportunities. In the absence of supporting records, the AO was justified in adopting the cost at Nil. However, if additional material is produced, the matter may be remanded to the AO for verification as per law. 8. We have heard the rival submissions of both the parties and perused the materials available on record. The only effective issue which survives for our consideration is whether the lower authorities were justified in computing the capital gain by adopting the cost of acquisition of the two sites at Nil. 8.1 The relevant facts are not in dispute. The assessee is a housing cooperative society. It was formed for providing residential sites to its members. The layout was formed and sites were registered in favour of the members in the year 1980. According to the assessee, after formation of the layout, two sites remained with the society. These two sites were sold during the year relevant to A.Y. 2015-16 for consideration of Rs. 1.78 crores and Rs. 74 lakhs respectively. The assessee did not offer the sale proceeds to tax by claiming that the receipts were capital receipts of the society and not taxable. The AO rejected th....
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....ent and expenditure incurred wholly and exclusively in connection with transfer while computing capital gains. Section 55 further provides for adoption of fair market value as on the statutory base date, where applicable, in respect of old capital assets. Therefore, once transfer of capital asset is brought to tax under the head "Capital Gains", the AO is duty bound to compute the gain in the manner prescribed under the Act. The entire sale consideration cannot be treated as capital gain unless the law permits such computation on the facts of the case. 8.5 In the present case, the West of Chord Road/Kethamaranahalli property appears to have been connected with BDA released in the year 1977. Therefore, for this property, the assessee's claim for adoption of fair market value as on 01.04.1981 requires proper verification. In respect of the Chikkabettahalli/Vidyaranyapura property, the sale deed records acquisition under sale deed dated 17.02.1994. Therefore, at least the actual or estimated cost relatable to the acquisition in the year 1994, together with eligible indexation and allowable expenses, requires examination. The AO was not justified in rejecting the entire claim only o....
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.... estimated cost. These are matters requiring factual verification. The AO is the proper authority to examine the guidance value, the relevant year of acquisition, the Cost Inflation Index used, and the allowability of transfer-related expenditure, if any. 8.10 Therefore, in the interest of justice and fair play, we deem it proper to restore the issue to the file of the AO for the limited purpose of determining the correct cost of acquisition of the two properties. The AO shall examine the computation furnished by the assessee. The AO shall also consider the applicability of reverse indexation/time-gap method in the facts of the case in accordance with law. 8.11 Needless to say, the AO shall provide adequate opportunity of being heard to the assessee. The assessee shall be at liberty to file all relevant documents, including sale deeds, guidance value certificates, valuation material, computation working and any other supporting evidence. The AO shall consider the same objectively and pass a speaking order limited to the determination of cost of acquisition, indexation and consequential re-computation of capital gains. The AO shall not revisit the grounds which have been dismi....
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....r adjudication of the issue. The relevant dates relating to issuance of notice u/s 148 of the Act, filing of return of income and computation of interest are already part of the assessment records. Therefore, determination of the issue would only require examination of the legal implications arising from the admitted facts already on record. 10.2 It is well settled by a catena of judicial precedents that an additional ground involving a pure question of law and not requiring further investigation into new facts can be raised at any stage of appellate proceedings. The Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT reported in 229 ITR 383 (SC) has held that the Tribunal has jurisdiction to examine a question of law arising from the facts as found by the authorities below and having a bearing on the tax liability of the assessee, even though such question was not raised before the lower authorities. Similar principles have been reiterated in various decisions relied upon by the assessee in the application seeking admission of the additional ground. 10.3 In the present case, the ground raised goes to the correctness of the computation of interest ....
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....of income had already expired. Thereafter, until the issuance of notice u/s 148 of the Act on 29.03.2022, the assessee had no statutory avenue to file a valid return of income for the relevant assessment year. Therefore, the assessee could not have been treated as being in default for the entire intervening period. The law does not compel a person to do an act which is impossible in law. Hence, where the assessee was not legally enabled to file a valid return, interest u/s 234A cannot be levied by treating the assessee as being in continuing default. 10.8 It was further submitted that the nature of interest u/s 234A is compensatory. The object of the provision is to compensate the Revenue for delay in filing the return where such delay is legally attributable to the assessee. However, the provision cannot be used to charge interest for a period during which no valid return could have been filed by the assessee. In the present case, the assessee filed the return in response to the notice issued u/s 148 of the Act. Therefore, the computation of interest cannot proceed on the assumption that the assessee remained in default for the entire period from the original due date u/s 139 u....
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....234A of the Act should be recomputed by excluding the period during which the assessee could not have filed a valid return of income. The learned AR prayed that the AO may be directed to recompute the interest u/s 234A of the Act in accordance with the above judicial precedents and grant of consequential relief to the assessee. 11. The learned DR per contra strongly supported the orders of the AO and the learned CIT(A). It was submitted that interest u/s 234A of the Act is mandatory in nature and is leviable whenever there is a failure to furnish the return of income within the prescribed time. The learned DR contended that the assessee had admittedly not filed the return of income within the due dates prescribed under the Act and, therefore, the AO was justified in levying interest u/s 234A of the Act. 12. We have carefully considered the rival submissions and perused the materials available on record. The issue arising for our consideration is whether interest u/s 234A of the Act has been correctly levied in the peculiar facts of the present case where the return of income was filed for the first time only in response to the notice issued u/s 148 of the Act. The undisput....
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....he Tribunal in the case of Ms. Priti Pithawala v. ITO [2003] 129 Taxman 79 (Mumbai) (Mag.), wherein the Tribunal held that interest u/s 234A of the Act cannot be charged for the period during which it was not possible for the assessee to file a valid return and applied the principle that law does not compel performance of an impossible act. The relevant finding of tribunal is extracted as under: 14. The only dispute posed before me pertains to the period for which the interest is to be charged. The contention of the learned counsel was that the assessee's should not be made liable to pay interest for the period during which it was not possible on their part to file the returns. Having regard to the facts of the present case and considering the precedents relied upon; I find sufficient force in the contention of the learned counsel on this aspect. I direct the Assessing Officer to recompute the interest in the light of the aforesaid discussion. Accordingly on this aspect I set aside the impugned orders and restore the matter to the file of Assessing Officer, with direction to make fresh computation, after providing adequate opportunity to the assessee's of being heard. 1....