Ita/775/2009 Of The Commissioner Of Income Tax v. M/S Khivraj Motors

1| R IN THE HIGH COURT OF KARNATAKA, BENGALURU DATBD THIS THR 14 DAY OF JULY, 2015 PRESENT THE HON'BLE MR. JUSTICE VINEET SARAN ANIL THE HON’BLE MR. JUSTICE ARAVIND KUMAR ITA NO.775/2009 BETWEEN: 1.)THR COMMISSIONBR OF | INCOME TAX, C.R. BUILDING, QUEENS ROAD, BANGALORE. iaTHE ASST. COMMISSIONER OF INCOME TAX CIRCLE-9(1), C.R. BUILDING, QUEENS ROAD, BANGALORE. _. APPBLLANT (BY SRI. K.V. ARAVIND AND SRI. G. KAMALADHAR,ADVOCATES) AND: M/S KHIVRAJ MOTORS,NO.10/2, KASTURBA ROAD,BANGALORE-560 OO1. .. RESPONDENT (BY SRI.A. SHANKAR AND SRI. M. LAVA, ADVOCATES) THIS APPEAL IS FILED UNDER SECTION J6O0A OFINCOME TAX ACT, 1961 PRAYING TO FORMULATE THE| 2 SUBSTANTIAL QUESTIONS OF LAW STATED THEREINAND ALLOW THE APPEAL AND SEI ASIDE THE ORDER.PASSEKD BY THR ITAT BANGALORE JIN [TTA N2860/BNG/2009, DATED 10.07.2009, CONFIRMING THEORDER OF THR APPEKLLATK COMMISSIONER ANDCONFIRM THR ORDER PASSKHD BY THR ASSISTANTCOMMISSIONER.OF|INCOME|TAX,CIRCLE-9(1),BANGALORE.| THIS APPEAL COMING ON FOR ADMISSION,|THISDAY,VINEET|SARANJyDELIVERE)LTHE.KOLLOWING: 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:HOTtheassessmentyear2005-006,respondent — assessee had declared capital gains ofV1,76,88,000/-towardsthefullvalueot consideration of the property plusS|2O lakhsreceived by the assessee as non-refundable deposit inlieu of surrendering tenancy rights. Assessing|Officer, by order dated 28.12.2007 assessed the| ° capital gains atzy2,30,14,568/- pluszy20 lakhs. |Challenging the said order, respondent — assessee|filed an appeal which was allowed by appellate|Commissioner vide order dated 11.06.2008. § =ThTEVEeETLchallengedtheorder.ot appellateCommissioner in an appeal before the Tribunal which was dismissed on 31.03.2009. #$=Said order of thTribunal is the subject matter of appeal in ITA|No.426/2009. In the meantime, aiter appellate|Commissionerhadpassedallorder.dated11.06.2008, Commissioner of Income Tax exercising|powers under Section 263 of the Act, passed an.order dated 19.03.2009 setting aside the order ofassessment 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 thesaid 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 valueof 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 ifthe assessing Officer has taken one of the possible|view and full value of the consideration is the cost|incurred by the developer, then Commissioner ofIncome 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: “(1)Whether the Tribunal was correctin 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)adjudicatedbytheAppellateCommissionerwithouttaking|into consideration that issues|adjudicatedbyAppellateCommissioner are ditferent from|the issues considered by the)Commissioner U/S. 263 of theAct? “(1)Whether the Tribunal was correctin 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)adjudicatedbytheAppellateCommissionerwithouttaking|into consideration that issues|adjudicatedbyAppellateCommissioner are ditferent from|the issues considered by the)Commissioner U/S. 263 of theAct? $--%Whether the Tribunal was correctin holding that the order of)assessment is not erroneous and!prejudicial to the interest of theTEVENUECwhentheASSeSsSingOfficer has failed to take into§consideration the market value otthe property as the undivided|interest acquired by the assessee|for the purpose of computation of|capital gains?”in holding that the order of)assessment is not erroneous and!prejudicial to the interest of theTEVENUECwhentheASSeSsSingOfficer has failed to take into§consideration the market value otthe 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. 4sri Aravind, learned counsel for the| appellant has argued the second substantial questionof 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. Sr|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 bythe 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 oft the Act. 5Having 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. — 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, jurisdictionunder 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 ofthe 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 ofthe assessee and against the Revenue. 6. At this stage, Sri Aravind, learned counselfor the appellant submitted that since the appeal wasbeing 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. TSAccordingly, 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. Sd/- JUDGE Sd/-| JUDGE