2024 (4) TMI 983 - AT - Income Tax

LTCG - Correctness of long-term capital gain /loss from sale of immovable property - FMV determination - assessee is an individual and on the basis of information about sale of immovable property, case of the assessee was reopened u/s 147 after obtaining necessary approval from the Competent Authority - assessee is 50% owner of the immovable property - HELD THAT - For calculating the long-term capital gain, indexed cost of acquisition is reduced from the sale consideration. AO has merely reduced the cost as on 01.04.1981 and has calculated the impugned addition. AO has not made any efforts to get the information about the Circle rate of the immovable property as on 01.04.1981. Under these given facts and circumstances, where fair market value of the property as on 01.04.1981 as calculated by the Registered Valuer has been accepted by the AO and there being no other evidence of the fair market value of property as on 01.04.1981, we are inclined to hold in favour of the assessee observing that considering the cost of acquisition as on 01.04.1981 at Rs. 5,00,370/- (adopted by AO), the indexed cost of acquisition would be Rs. 54,09,000/-, and since it is higher than the sale consideration, it would result into a long-term capital loss. Therefore, we set aside the finding of CIT(Appeals) and delete the impugned addition made in the hands of assessee. Grounds of appeal of the assessee are allowed.

Summary

Issues involved:
The judgment involves a dispute regarding the calculation of long-term capital gain u/s 147 of the Income Tax Act for the assessment year 2016-17.

Issue 1 - Addition of long-term capital gain:
The assessee's grievance was against the addition made by the Assessing Officer on account of long-term capital gain. The Assessing Officer estimated the indexed cost of acquisition due to the absence of Circle rate of the property as on 01.04.1981, resulting in an addition for long-term capital gain. The CIT(Appeals) confirmed this addition, dismissing the appeal of the appellant.

Issue 2 - Valuation report and indexation benefit:
The Registered Valuer valued the property sold at Rs. 1,08,18,000/- as on 22.12.2015, but the Assessing Officer calculated the cost of acquisition at Rs. 5,00,370/-. The appellant claimed to incur long-term capital loss, arguing that the indexation benefit was not given on the cost of the property. The Tribunal found that the Assessing Officer and the CIT(Appeals) did not consider the benefit of indexation, which resulted in the incorrect calculation of the long-term capital gain.

Judgment Summary:
The Tribunal observed that the Assessing Officer did not give the benefit of indexation while calculating the long-term capital gain, even though the cost of acquisition was noted at Rs. 5,00,370/-. Considering the fair market value of the property as on 01.04.1981 accepted by the Assessing Officer, the Tribunal held in favor of the assessee. It was concluded that the indexed cost of acquisition would be Rs. 54,09,000/-, resulting in a long-term capital loss higher than the sale consideration. Therefore, the Tribunal set aside the CIT(Appeals) decision and deleted the impugned addition made in the hands of the assessee. The grounds of appeal of the assessee were allowed, and the appeal was allowed in favor of the assessee.