2018 (11) TMI 1836 - AT - Income Tax

Capital Gain in respect of sale of agricultural land - Addition invoking provision of section 50C - difference between the sale value declared by the assessee and the sale value determined by the Assessing Officer by 13% - approval of tolerance limit of 15% variation in estimating sale value - DR submitted that in proceedings before the First Appellate Authority the assessee had offered addition over and above 10% of the difference between the sale value disclosed by the assessee and Government valuation - contentions of the assessee is that where the difference in the sale value declared by the assessee and value determined by the Assessing Officer is less than 15% no addition is warranted - HELD THAT - We find in the present case there is difference of 13% in the value declared by the assessee and as determined by the Assessing Officer. The Co-ordinate Bench of the Tribunal in the case of Rahul Constructions Vs. Deputy Commissioner of Income Tax 2012 (1) TMI 229 - ITAT PUNE has taken a tolerance limit of difference in two valuations as 10%. Similar view has been taken in the case of Honest Group of Hotels (P) Ltd. Vs. Commissioner of Income Tax 2001 (11) TMI 1016 - HIGH COURT OF JAMMU KASHMIR . The assessee before the Commissioner of Income Tax (Appeals) had voluntarily offered for the addition of sale consideration over and above the difference of 10%. Taking into consideration entirety of facts and the decisions cited by the assessee to meet the ends of justice the benefit of 10% difference of sale value is allowed. The sale consideration over and above 10% is added for the purpose of determining Capital Gains. The appeal of assessee is partly allowed in the terms aforesaid.

Summary

Issues involved:
1. Interpretation of provisions of section 50C of the Income Tax Act, 1961 regarding the valuation of sale consideration for capital gains tax on the sale of agricultural land.
2. Determination of the permissible tolerance limit for the difference between the sale value declared by the assessee and the value determined by the Assessing Officer.

Detailed Analysis:
Issue 1: The primary issue in this case revolved around the application of section 50C of the Income Tax Act, 1961, concerning the valuation of sale consideration for capital gains tax on the sale of agricultural land. The assessee had sold agricultural land for a declared value of ?45,00,000 and offered the gain under the head Capital Gains. However, the Assessing Officer invoked section 50C and determined the sale value as ?51,75,000, resulting in an addition of ?6,75,000 to the capital gains. The assessee contested this addition through appeals, arguing that a difference of less than 15% between the declared value and the value determined by the Assessing Officer should not warrant an addition.

Issue 2: The second issue involved determining the permissible tolerance limit for the difference between the sale value declared by the assessee and the value determined by the Assessing Officer. The assessee cited various legal precedents to support their contention, including the decision of the Hon'ble Supreme Court of India in the case of C.B. Gautam Vs. Union of India & Ors., which approved a tolerance limit of 15% variation in estimating sale value. Additionally, the assessee referred to the Pune Bench of Tribunal and the Hon'ble Jammu & Kashmir High Court decisions to establish a tolerance limit of 10% for such differences.

Judgment: After considering the arguments presented by both parties and reviewing the relevant legal precedents, the Tribunal acknowledged that there was a 13% difference between the declared value and the value determined by the Assessing Officer in this case. Citing the decisions of the Co-ordinate Bench of the Tribunal and the Hon'ble Jammu & Kashmir High Court, the Tribunal concluded that a tolerance limit of 10% for such differences was appropriate. Consequently, the Tribunal allowed the benefit of a 10% difference in the sale value and directed that the sale consideration over and above this limit should be added for the purpose of determining Capital Gains. As a result, the appeal of the assessee was partly allowed, modifying the impugned order to reflect the adjustment based on the permissible tolerance limit.

In conclusion, the Tribunal's decision provided clarity on the interpretation and application of section 50C in cases involving the sale of agricultural land, establishing a 10% tolerance limit for differences in sale values declared by the assessee and determined by the Assessing Officer.