2011 (12) TMI 576 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening u/s 147.
2. Merit of addition made in respect of long-term capital gain.

Summary:

Validity of Reopening u/s 147:
The assessee challenged the validity of reopening u/s 147. The return was initially processed u/s 143(1), and no opinion was formed by the Assessing Officer (AO) during this processing. As per the Supreme Court's verdict in Rajesh Jhaveri, 291 ITR 500, the passing of an intimation u/s 143(1) does not amount to an "assessment," and thus, there is no question of a "change of opinion." Therefore, the reassessment was held valid by the CIT(A), and the tribunal found no infirmity in this decision.

Merit of Addition in Respect of Long-Term Capital Gain:
The assessee sold agricultural land and declared long-term capital gains based on the actual sale consideration received. The AO noticed that the valuation of the land by the Stamp Duty Authority was higher than the actual consideration received and referred the matter to the District Valuation Officer (DVO). The DVO's valuation was lower than the Stamp Duty Authority's but higher than the actual sale consideration. The AO adopted the DVO's valuation for computing the capital gain, which was upheld by the CIT(A).

The assessee argued that the sale agreements were made when the property rates were low, and the entire sale consideration was received through account payee cheques. The assessee also provided a valuation report from a registered valuer, which the AO discarded without proper consideration. The DVO's report was criticized for contradictions and not considering the actual conditions at the time of sale.

The tribunal found that the DVO's rebate of 10% for heavy filling due to pits/trenches and 10% for green belt, nearby railway line, lower category occupancy, and industrial cluster was inadequate. The tribunal directed the AO to allow a 30% rebate for heavy filling and a 20% rebate for the other factors. Additionally, a 5% rebate was directed for adverse possession due to unauthorized encroachment by tribal people. The tribunal instructed the AO to recompute the capital gain accordingly.

Conclusion:
The appeal was allowed in part, with directions to the AO to recompute the capital gain after applying the revised rebates. The order was pronounced in the open court on 29th December 2011.