Sundaramurthy Sathyakumar v. Income Tax Officer

Parties Involved

Facts Summary

The assessee filed his Return of Income for the Assessment Year 2015-16 on 31/03/2016, admitting total income of Rs.32,02,760/-. The Return of income was processed under Section 143(1) on 22/07/2016. The deduction claimed by the assessee u/s.54F against long term capital gain earned on sale of immovable property, was not in accordance to law and hence the case was reopened for assessment and statutory notices were issued by the AO to the assessee for framing the correct total income under re-assessment. The assessee filed his return of income in response to notice u/s.148 on 09/07/2018 by declaring the same income as shown in the original return of income filed u/s.139(4). The Assessee has acquired a property measuring 10,403 sq.ft. of land along with building in the nature of sheds through public auction from DRT, Chennai on 07/07/2006 for Rs.62,16,336/-. The assessee paid additional cost of Rs.46,54,186/- to the owner of the property, which has been shown in the Balance Sheet for 2008-09. The assessee incurred cost on modification of the building for the purpose of letting it out and earning rental income. The cost incurred by the assessee for improvement / modification was Rs.10,00,000/- and Rs.1,38,75,750/- in 2006-07. The assessee sold the building during the AY 2016-17 and earned Long term Capital gains of Rs.53,32,205/-, after deducting indexed cost of acquisition and indexed cost of improvement.…

Legal Issues

• 1. The Commissioner(Appeals) National Faceless Appeal Centre erred in reproducing the same facts stated by the Assessing Officer for long pages in his order and finally confirming the order of the Assessing Officer without telling his own decision on the issues in an unequivocal manner.
• 2. The Commissioner(Appeals) National Faceless Appeal Centre had not acted as a fact finding authority independently and erred in confirming the order of the Assessing Officer more as a superior Officer giving approvals to the orders of the subordinate authorities rather than acting in a neutral role of a quasi judicial Authority enquiring and rendering justice in a dispute between two litigants.
• 3. The Commissioner(Appeals) National Faceless Appeal Centre ought to have appreciated the fact that the balance sheet is not a book of account and no addition under section 68 can be made in an order for the reason that the improvements made by the assessee after taking in auction an immovable property were not truly reflected in the accounts and in the balance sheet.
• 4. The Commissioner(Appeals) National Faceless Appeal Centre ought to have appreciated the fact that an immovable property sold in public auction by a bank for failure to pay the bank loan would not have been in a good condition and that the same is purchased by an individual only for its land value and every purchaser of the bank property had to spend a lot after its purchase in an auction for making the building fit for use.
• 5. The Commissioner(Appeals) National Faceless Appeal Centre ought to have appreciated the fact that the Income tax Officer who had completed the assessment had acted in a manner as though he had been possessed of a lot of technical knowledge to determine the extent of improvement expenditure that the assessee had incurred in the improvement of the immovable property taken in auction.
• 6. The Commissioner(Appeals) Faceless Appeal Centre ought to have got a valuation report from the valuation cell of the income tax department and for this purpose should have remanded the case to the Assessing Officer to take steps for getting a valuation report from the Valuation Cell and then forward the same to the Commissioner(Appeals) for further action.

Judgment Outcome

Decided in favour of Assessee.

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