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2016 (10) TMI 1284 - AT - Income TaxCapital gain from the transfer of agriculture land - Fair market value as on 01/04/1981 of the agricultural land - land transferred by the assessee and his father (each having half share) to M/s. Soma New Towns Private Limited - Revenue has objected to the additional evidences admitted by CIT(Appeals) in respect of fair market value of the land in question as on 01/04/1981 - HELD THAT - From the facts of the case, we find that the assessee was not granted sufficient opportunity of hearing by the AO for producing evidence in support of fair market value, which is evident from the assessment order and, therefore, in our opinion, the action of the CIT (Appeals) of admitting the additional evidence is in interest of justice and in accordance to the law. Thus, ground No. 2 of the appeal is dismissed. Fair market value as on 01/04/1981 of the agricultural land - We find that the Tehsildar has not provided any basis for taking four times of the stamp duty value as the fair market value of the land in question. Thus, the fair market value of ₹ 10,45,000/- as on 01/04/1981 stated by the Tehsildar is not based on value adopted by his office for the purpose of stamp duty valuation. The valuation of the Tehsildar is based on guesswork and not based on the sound evidences or Rules, which could justify the market value as four times the value adopted for stamp duty purposes. In such circumstances, in our opinion the directions given by the learned Commissioner of Income-tax (Appeals) to the Assessing Officer to adopt the fair market value of the agricultural land transferred as on 01/04/1981 at ₹ 10, 45,000/- is not justified. ' We feel it appropriate to restore the matter to the file of the Assessing Officer with the direction to make a reference to the valuation officer in terms of section 55A of the Act for ascertaining the fair market value of the land transferred by the assessee and then compute the capital gain in accordance with law. Eligibility for exemption u/s 54B - HELD THAT - We find from the plain language of section 54B of the Act that benefit under section would be allowed when the capital gain arising on transfer of land used for agricultural purposes, is invested in the purchase of new agricultural land within two years from the date of the agricultural land transferred. Thus, the thrust is on the utilization of the money received on sale of the agricultural land leading to capital gain towards purchase of new agricultural land. Sale consideration on transfer of the asset was received by the assessee on 24/10/ 2008 and investment in the new agricultural land was made on 13/10/2008 and 23/10/2008, which is prior to the receipt of sale consideration and, therefore, the money received on account of capital gains has not been utilized towards purchase of new asset - Assessee has not fulfilled the conditions for availing the benefit under section 54B of the Act. In our opinion, the order of the learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no interference on our part is required. Accordingly, the ground of the appeal is dismissed.
Issues Involved:
1. Adoption of Fair Market Value (FMV) of agricultural land as on 01.04.1981. 2. Acceptance of additional evidence by CIT(A). 3. Denial of exemption under Section 54B of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Adoption of Fair Market Value (FMV) of agricultural land as on 01.04.1981: The Revenue contended that the CIT(A) erred in directing the Assessing Officer (AO) to adopt the FMV of the agricultural land on 01.04.1981 at ?10,45,000/-, which was estimated by the Sub-Registrar without a sound basis. The Sub-Registrar's estimation was based on the assumption that the market rate would be four times the collector rate, which lacked supporting evidence. Upon review, the Tribunal found that the Tehsildar's certificate and subsequent explanation did not provide a sound basis for the FMV estimation. The Tehsildar had mentioned a sale instance from 1977 and applied a 10% annual increase to arrive at ?2,08,225/- per acre for 1981. However, the further assumption that the market rate was four times the collector rate was unsupported. Consequently, the Tribunal deemed the CIT(A)'s direction to adopt the FMV at ?10,45,000/- as unjustified. The matter was restored to the AO with instructions to refer the valuation to a valuation officer under Section 55A of the Act to ascertain the FMV and compute the capital gain accordingly, ensuring the assessee is provided sufficient opportunity for hearing. 2. Acceptance of additional evidence by CIT(A): The Revenue argued that the CIT(A) was not justified in accepting additional evidence under Rule 46A of the Income Tax Rules, as the assessee had sufficient opportunities during the assessment proceedings to provide evidence supporting the FMV as on 01.04.1981. The Tribunal noted that the assessee was not granted sufficient opportunity by the AO to produce evidence for the FMV, as evident from the assessment order. Therefore, the CIT(A)'s action of admitting additional evidence was deemed in the interest of justice and in accordance with the law. Thus, the Tribunal dismissed this ground of the Revenue's appeal. 3. Denial of exemption under Section 54B of the Income Tax Act, 1961: The AO denied the exemption under Section 54B, reasoning that the capital gain from the sale of agricultural land was not utilized for acquiring new agricultural land. The AO noted that the assessee received the sale consideration on 24.10.2008, while the investment in new agricultural land was made on 13.10.2008 and 23.10.2008, prior to receiving the sale proceeds. The assessee contended that the agreement for the sale was executed on 03.06.2008, and possession was handed over on the same date, implying that the capital gain accrued on 03.06.2008. Consequently, the investment in new agricultural land was within the permissible period, making the assessee eligible for deduction under Section 54B. The Tribunal examined the submissions and found that the sale consideration was received on 24.10.2008, and the investment in new agricultural land was made before this date. Thus, the capital gain was not utilized for purchasing new agricultural land as required by Section 54B. The Tribunal upheld the CIT(A)'s decision, which concluded that the assessee did not fulfill the conditions for availing the benefit under Section 54B. Conclusion: - The Revenue's appeal was partly allowed for statistical purposes, directing the AO to refer the valuation to a valuation officer for ascertaining the FMV. - The assessee's appeal was dismissed, upholding the denial of exemption under Section 54B. Pronouncement: The decision was pronounced in the open court on 21st October, 2016.
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