Judgment:
1 R IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE14H DAY OF JULY, 2015 PRESENT THE HON'BLE MR. JUSTICE VINEET SARAN AND THE HON’BLE MR. JUSTICE ARAVIND KUMAR ITA NO.775/2009 THE COMMISSIONER OF INCOME TAX, C.R. BUILDING, QUEENS ROAD, BANGALORE. BETWEEN:
1.
2. (BY SRI. K.V. ARAVIND AND SRI. G. KAMALADHAR, ADVOCATES) AND: THE ASST. COMMISSIONER OF INCOME TAX CIRCLE-9(1), C.R. BUILDING, QUEENS ROAD, BANGALORE. …APPELLANTS M/S KHIVRAJ MOTORS, NO.10/2, KASTURBA ROAD, BANGALORE-560 001. (BY SRI.A. SHANKAR AND SRI. M. LAVA, ADVOCATES) THIS APPEAL IS FILED UNDER SECTION260 OF INCOME TAX ACT, 1961 PRAYING TO FORMULATE THE …RESPONDENT2SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDER
PASSED BY THE ITA No.286/BNG/2009, DATED1007.2009, CONFIRMING THE ORDER
OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER
PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-9(1), BANGALORE. ITAT BANGALORE IN THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, VINEET SARAN J, DELIVERED THE FOLLOWING: JUDGMENT
This is an appeal filed by the revenue against the order of the Income Tax Appellate Tribunal, Bengaluru Bench ‘A’ dated 10.07.2009.
2. Brief facts of the case are that: For the assessment year 2005-06, respondent – assessee had declared capital gains of `1,76,88,000/- towards the full value of consideration of the property plus ` 20 lakhs received by the assessee as non-refundable deposit in lieu of surrendering tenancy rights. Assessing Officer, by order dated 28.12.2007 assessed the 3 capital gains at ` 2,30,14,568/- plus ` 20 lakhs. Challenging the said order, respondent – assessee filed an appeal which was allowed by appellate Commissioner vide order dated 11.06.2008. The revenue challenged the order of appellate Commissioner in an appeal before the Tribunal which was dismissed on 31.03.2009. Said order of the Tribunal is the subject matter of appeal in ITA No.426/2009. In the meantime, after appellate Commissioner had passed an order dated 11.06.2008, Commissioner of Income Tax exercising powers under Section 263 of the Act, passed an order dated 19.03.2009 setting aside the order of assessment and directing the assessing Officer to re- do the assessment and work out capital gains by taking into account market value of the property and value of undivided share in the land. Challenging the said order passed by the Commissioner under Section 263 of the Act, assessee filed an appeal before 4 the Tribunal which has been allowed on 10.07.2009 primarily on the ground that it is not the market value of the property which has to be considered for purpose of calculating the capital gains but full value of the consideration. Tribunal had observed that there was no provision under the Act to treat the market value as full value of the consideration when the assessee has received built up area in exchange of tenancy rights. Tribunal has further held that if the assessing Officer has taken one of the possible view and full value of the consideration is the cost incurred by the developer, then Commissioner of Income Tax (Appeals) would not be justified in invoking power under Section 263 of the Act. Challenging the aforesaid order, this appeal has been filed and admitted on the following two substantial questions of law: “(i) Whether the Tribunal was correct in setting aside the order passed by the Commissioner U/s. 263 of the Act on the ground that the 5 issues considered U/s. 263 were the Appellate adjudicated by taking Commissioner without into consideration that issues adjudicated Appellate Commissioner are different from the issues considered by the Commissioner U/S. 263 of the Act?. by (ii) Whether the Tribunal was correct in holding that the order of assessment is not erroneous and prejudicial to the interest of the revenue when the Assessing Officer has failed to take into consideration the market value of the property as the undivided interest acquired by the assessee for the purpose of computation of capital gains?.” 3. We have heard Sri K.V.Aravind, learned counsel for the revenue-appellant and Sri A.Shankar, learned counsel for the assessee – respondent and perused the records.
4. Sri Aravind, learned counsel for the appellant has argued the second substantial question of law first and has submitted that the Commissioner 6 vide order dated 19.03.2009 had rightly directed the value of the property to be considered on the market value which was in the interest of revenue. Sri Shankar however submitted that the concept of market value is not there for the purpose of calculation of capital gains under Section 45(1) and Section 48 of the Act and as such the order passed by the Commissioner under Section 263 of the Act has rightly been quashed by the Tribunal. He has also contended that the order of the Commissioner has rightly been set aside also on the ground that when two views are possible and assessing Officer has chosen to take one of the said views, Commissioner would not be justified in invoking powers under Section 263 of the Act.
5. Having heard the learned counsel for the parties, we are satisfied that the Commissioner, in the facts of the present case, was not justified in invoking powers under Section 263 of the Act. 7 Tribunal was fully justified in setting aside the order on the ground that if the assessing Officer had taken one of the two views which were possible, jurisdiction under Section 263 of the Act could not have been invoked. We are satisfied that market value of the property is not to be taken into consideration for calculation of capital gains and it is the full value of the consideration which is to be considered and on this ground also, Tribunal was justified in setting aside the order of Commissioner passed under Section 263 of the Act. As such, in our view, the answer to the second question would be in favour of the assessee and against the Revenue.
6. At this stage, Sri Aravind, learned counsel for the appellant submitted that since the appeal was being dismissed on the second substantial question of law, first substantial question of law remains academic and need not be gone into and answered by 8 this Court. Sri A.Shankar, learned counsel for the respondent also supported the view.
7. Accordingly, for the reasons given herein above, this appeal stands dismissed and second substantial question of law is answered against the revenue and in favour of the assessee. No order as to costs. JUDGE Sd/- JUDGE Sd/- *sp