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Mr. SRK Thirunarayanamoorthy Versus The Joint Commissioner of Income Tax (i/c) , Range-XIV, Chennai

2017 (7) TMI 417 - ITAT CHENNAI

Invoking provisions of section 50C(2) - Disallowance to cost of improvement in the property and expenses in relation to transfer - reference to DVO - Held that:- From the facts of the case it is apparent that the learned Assessing Officer and the learned Commissioner of Income Tax (Appeals) did not comply with the provisions of section 50C(2) of the Act. Further, no opportunity was given to the assessee to establish the correct market value of the land sold by him. It also appears that the asses .....

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essee is allowed for statistical purposes. - I.T.A.No.1294/Mds/2016 - Dated:- 10-1-2017 - SHRI N.R.S.GANESAN, JUDICIAL MEMBER, AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER For The Appellant : Mr. B.Suresh, C.A. For The Respondent : Mr. A.V.Sreekanth, JCIT ORDER Per A. Mohan Alankamony, AM:- This appeal is filed by the assessee aggrieved by the order of the learned Commissioner of Income Tax (Appeals)- VII, Chennai dated 08.08.2014 in ITA No.984/13-14 passed under section 143(3) r.w.s. 250(6) o .....

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/- in spite of furnishing proof for the expenses. iii) The learned Commissioner of Income Tax (Appeals) has erred in confirming a non-existent income of ₹ 1,00,000/- without having any proof or valid evidence but on suspicion only. iv) The learned Commissioner of Income Tax (Appeals) has erred in confirming the adoption guideline value of ₹ 2,77,10,000/- as sale consideration instead of ₹ 2,10,00,000/- in spite of the jurisdictional High Court decision that market value is diff .....

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e assessee is an individual deriving income from house property and capital gains filed his return of income on 11.11.2009 admitting total income of ₹ 1,59,28,400/-. The case was taken up for scrutiny and notice under section 143(2) was issued to the assessee on 06.09.2010. Subsequently the learned Assessing Officer completed the assessment under section 143(3) of the Act on 23.12.2011 wherein he made certain disallowances. 4. During the course of assessment proceedings, it was noticed by .....

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rned Assessing Officer proposed to invoke the provisions of section 50C of the Act. The assessee raised objections for adopting the market value of the property in accordance with section 50C(2) of the Act. Hence the matter was referred to DVO. Since the valuation report could not be obtained within the stipulated period for completing the assessment as the case was time barring on 31.12.2011, the learned Assessing Officer proceeded to compute the capital gains of the assessee as per the market .....

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), Chennai, from Sub- Registrar, Anna Nagar, Chennai regarding the property sold reveals that the property was sold for a consideration of ₹ 2,10,00,000/- whereas market value of the property was ₹ 2, 77,10,000/-. But the computation of capital gains by the assessee reveals that ₹ 2,10,00,000/- only was taken into account by the assessee. The AO was of the opinion that sec.50C(l) of the Act was applicable to the facts of the case and informed the assessee accordingly. As the as .....

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not object to the value adopted by the stamp valuation authority nor any reference has been made before any other authority, Court or the High Court. It is to be observed here that the valuation fixed by the stamp valuation authority is not an arbitrary one. It is fixed after following the prescribed procedure under the Stamps Act. The constitutional validity of sec.50C of the Act was upheld by the Madras High Court in the case of Palanisamy KR vs Union of India (2005) 306 ITR 61. In this case, .....

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n the same locality. In view of the above, I am of the considered view that there is no infirmity in the order of the AO in adopting the value at ₹ 2,77,10,000/-. The value adopted by the AO is in accordance with section 50C(1) of the Act and due procedure was followed by the AO in adopting the value for the purpose of computing capital gains. The grounds of appeal raised on this issue are therefore dismissed. 4.2 The assessee furnished a copy of notice issued by Corporation of Chennai for .....

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al opinion charges. The payment to Chennai Corporation is not related to the transfer of the property and hence disallowed. 4.2 The assessee furnished a copy of notice issued by Corporation of Chennai for a sum of Rs.l1,56,130/- which was claimed by the assessee as deduction in computing capital gains. The assessee also enclosed a copy of cheque for ₹ 11,56,130/- in favour of Commissioner, Corporation of Chennai for perusal. Close scrutiny of letter issued by the Corporation of Chennai to .....

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sts of two categories i.e. commercial and school and they have to be valued differently. It was also contended that the assessee paid to Chennai Corporation ₹ 11,55,130/- for demolition and ₹ 19,00,000/- for construction of school and both the expenses are incurred in connection with the transfer of property. It was also claimed that the school was 100 years old and the assessee is a honorary correspondent of the school which is an aided school. Perusal of a letter written by Headmis .....

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school Headmistress insisted the landlord to construct an AC sheet shed in the second floor over the existing school building in plot B to enable them to shift the premises functioning in plot A. 4.4 The letter clearly shows that the assessee misused his position as the correspondent of the school and wanted to sell the part of the property which was given to the school by his forefathers. In order to facilitate his wish to part with the property of the school, a letter was obtained from the sch .....

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assessee got part of the land which was given by the assessee's forefathers to the school as a philanthropic gesture. The events narrated above clearly shows that the expenditure incurred by the assessee are not incurred in connection with the transfer of property. The expenses incurred made him richer by ₹ 2,10,00,000/- as per sale consideration mentioned in the document. Therefore, the sum of ₹ 11,56,130/- and ₹ 19,00,000/- for demolition, construction of building respect .....

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in return was ₹ 30,55,130/- (Rs.ll,55,130 + ₹ 19,00,000). Perusal of deed of settlement dated 13.02.2007 made by the settler Mrs. J. Vijayalakshmi in favour of the assessee reveals that the late husband of the settler established a school in the said premises and managed the same. Some part of the said premises was given to the assessee by the above settlement deed. The settled portion of the land was sold by the assessee which resulted in the capital gains. The land that was allott .....

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ersigned. The AR in his letter dated 05.11.2013 stated as under: "With regard to legal fees the amount was paid at the time of drafting the partitions and settlement made by my relatives. Hence it is part of the cost of acquisition. The legal fees for drafting the sale deed was neither paid by me nor I claimed it as a deduction while computing the capital gain." But in the computation of capital gains worked out by the assessee a sum of ₹ 25,80,883/- was claimed as expenses on le .....

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nsaction between the assessee and the buyers. They are persons of no means. They could not get involved in this type of transaction which involves huge money. They themselves stated that they do not know the buyer and seller. The alleged receipt by them were ₹ 2,15,000/- (Rs.1,00,000/- by Nagarajan and ₹ 1,15,OOO/- by Balakrishnan). Another person who received Rs.l,00,000/- was not produced for examination. In view of the above finding, the AO is directed to disallow the brokerage of .....

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t submitted before us that neither the learned Assessing Officer nor the learned Commissioner of Income Tax (Appeals) has provided opportunity to the assessee in accordance with section 50C(2) of the Act and therefore pleaded that the matter may be remitted back to the file of the learned Assessing Officer for fresh consideration. The learned Authorized Representative further requested that with respect to the other issues raised in the appeal also may be remitted back to the file of the Ld.A.O .....

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