2015 (1) TMI 250 - HC - Income Tax

Revision of taxable income by Commissioner - Market value of property to be taken as ₹ 40/- or ₹ 600/- per square yard u/s 48(ii) Held that - Assessee stated that the cost of acquisition is ₹ 600/- per square yard and it was accepted by the AO, after verification, and passed the order of assessment dated 15.01.1997 - assessee categorically stated that the cost was mentioned as ₹ 40/- per square foot, obviously, for the constructed area, and it was mistaken by the Commissioner to be the cost of land per square yard - If ₹ 40/- is the cost in respect of square feet of constructed area, in terms of square yards, it would not only be nine times that figure, but also subject to addition of cost of the land, be it the one, on which the building was constructed or the proportionate open land. When such is the devastating effect of the treating of the figure vis-a-vis square yard instead of square feet, it was basic and fundamental duty of the Commissioner to have shared that information with the respondent and to take his view point in this behalf, into account - However, he straightaway proceeded to pass the order - the sole basis for the Commissioner to revise the order passed by the AO was the information said to have been received by him from the Sub Registrar, the Tribunal asked the departmental representative to furnish a copy for verification - The representative expressed his inability and it ultimately emerged that copy was not furnished even to the department revenue is not able to point out as to how the order passed by the Tribunal suffers from any factual or legal error Decided against revenue.

Summary

Issues:
1. Appeal against order of Income Tax Appellate Tribunal
2. Revision under Section 263 of the Income Tax Act
3. Computation of capital gains under Section 48 of the Act
4. Discrepancy in cost of acquisition of property

Analysis:
1. The High Court heard an appeal by the Revenue against the order of the Income Tax Appellate Tribunal related to the respondent, an NRI who sold inherited property. The Assessing Officer accepted the income details provided by the respondent initially.

2. The jurisdictional Commissioner initiated a suo-motu review under Section 263 of the Act, questioning the market value of the property used in assessment. The Commissioner revised the taxable income based on a lower market value, leading to an appeal by the respondent before the Tribunal.

3. Section 48 of the Act outlines the procedure for computing capital gains. It involves determining the consideration from the property transfer and deducting expenses and acquisition costs. The case illustrated the impact of various costs on capital gains, emphasizing the importance of accurate cost of acquisition in reducing taxable amount.

4. The discrepancy arose when the Commissioner revised the assessment based on a lower cost of acquisition per square yard compared to what was accepted earlier. The respondent clarified that the initial figure was per square foot for constructed area, not land. The Commissioner's failure to consider this crucial distinction led to the Tribunal questioning the lack of evidence provided by the department.

In the end, the High Court dismissed the appeal, noting the lack of factual or legal errors in the Tribunal's decision. The Court highlighted the importance of accurate information and proper procedure in tax assessments, emphasizing the need for thorough verification and communication to avoid discrepancies in determining taxable amounts.