Manoj Mediratta vs ITO Ward-13(3), New Delhi | Assessment Year 2016-17 | Long Term Capital Gain Dispute

Manoj Mediratta vs ITO Ward-13(3), New Delhi: Assessment Year 2016-17

Case Number: ITA 6499/DEL/2019

Appellant: Manoj Mediratta, New Delhi

Respondent: ITO Ward-13(3), New Delhi

Assessment Year: 2016-17

Order Date: 28th April 2023

Pronounced On: 28th April 2023

Order Type: Final Tribunal Order

Background

In this case, Manoj Mediratta, the appellant, challenged the assessment made by the Income Tax Officer (ITO), Ward-13(3), New Delhi, for the assessment year 2016-17. The main issue under dispute was the addition of Rs. 30,13,432/- on account of Long Term Capital Gain (LTCG) arising from the sale of a house property.

Why the Case Was Filed

The case was filed by the appellant to contest the addition made by the Assessing Officer (AO) and upheld by the Commissioner of Income-tax (Appeals). The AO had calculated the LTCG on the sale of an immovable property by the appellant, which included disallowing part of the cost of acquisition as claimed by the appellant. The appellant argued that the authorities had incorrectly calculated the cost of acquisition, leading to an inflated capital gain and thus an erroneous tax liability.

Tribunal’s Findings

The Income Tax Appellate Tribunal (ITAT), consisting of Shri Kul Bharat (Judicial Member) and Shri Pradip Kumar Kedia (Accountant Member), examined the facts of the case and the arguments presented by both parties. The appellant had sold the roof rights of a property located at E-262, 3rd Floor, Ramesh Nagar, New Delhi. The dispute arose from how the cost of acquisition was divided and calculated by the authorities.

The appellant purchased the roof rights for Rs. 8,00,000/- in 1999 and later constructed two additional floors on the property. The appellant claimed the cost of acquisition should be divided between the two floors constructed, while the AO and the Commissioner of Income-tax (Appeals) divided it into three parts, thus reducing the cost of acquisition attributed to the floor sold and increasing the LTCG.

ITAT’s Decision

The ITAT found that the authorities below had not adequately considered the appellant’s claims and had instead based their decisions on assumptions without proper verification. The appellant had provided a technical report from an approved valuer during the appeal, which was not fully considered by the lower authorities. The Tribunal noted that while the AO and the Commissioner had agreed that construction of two floors took place, they failed to give appropriate credit for the cost of acquisition as claimed by the appellant.

Furthermore, the ITAT observed that the authorities below did not fully appreciate the cost of construction and other relevant factors that should have been considered in calculating the LTCG.

Conclusion and Final Judgment

The ITAT set aside the order of the Commissioner of Income-tax (Appeals) and remanded the case back to the Assessing Officer for fresh consideration. The AO was directed to re-examine the facts, consider the technical report provided by the appellant, and correctly calculate the cost of acquisition and the resulting LTCG. The appeal was allowed for statistical purposes, meaning the case would be reconsidered with instructions from the Tribunal to ensure a just resolution.

This case highlights the importance of accurate assessment and the necessity of considering all relevant evidence in tax disputes, particularly concerning the calculation of capital gains where property valuation and acquisition costs are involved.

Manoj Mediratta vs ITO Ward-13(3), New Delhi | Assessment Year 2016-17 | Long Term Capital Gain Dispute