2010 (4) TMI 1225 - AT - Income Tax

Summary

Issues Involved:
1. Enhancement of the value of land from Rs. 700 per sq. mt. to Rs. 5,000 per sq. mt. by the CIT(A).
2. Determination of the fair market value of the land as on 01-04-1981 for computing capital gains.
3. Applicability of Section 50C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Enhancement of the Value of Land:
The primary issue in these appeals was the enhancement of the value of land by the Commissioner of Income Tax (Appeals) [CIT(A)] from Rs. 700 per sq. mt. to Rs. 5,000 per sq. mt. The CIT(A) justified this enhancement by noting that the cash receipts found during a survey indicated a higher sale consideration than what was declared by the assessee. The CIT(A) argued that the delay in registering the sales deed indicated that additional payments must have been received after December 2005. The CIT(A) also referenced the new jantry rates applicable from April 2008, which were based on market rates from 2005-2006, suggesting that the actual market rates were much higher than the old jantry rates of Rs. 400 per sq. mt. The CIT(A) concluded that the sales consideration should be estimated at Rs. 5,000 per sq. mt. based on these new jantry rates.

2. Determination of Fair Market Value as on 01-04-1981:
The second issue was the determination of the fair market value of the land as on 01-04-1981 for the purpose of computing capital gains. The Assessing Officer (AO) had adopted a value of Rs. 25 per sq. mt. based on comparable sale instances ranging from Rs. 15 to Rs. 32 per sq. mt. provided by the assessee's registered valuer. However, the assessee argued for a value of Rs. 60 per sq. mt. based on a valuation report from an approved valuer. The CIT(A) rejected the higher valuation provided by the assessee and upheld the AO's valuation of Rs. 25 per sq. mt.

3. Applicability of Section 50C:
The Tribunal examined whether the provisions of Section 50C of the Income Tax Act, 1961, which deals with the adoption of stamp duty value as the deemed sale consideration for computing capital gains, were applicable in this case. The Tribunal noted that the sale consideration received by the assessee was Rs. 483 per sq. mt., which was higher than the circle rates fixed by the Stamp Duty Authorities at Rs. 400 per sq. mt. The Tribunal emphasized that Section 50C creates a legal fiction where the apparent consideration is substituted by the valuation done by Stamp Valuation Authorities, and capital gains are calculated accordingly. The Tribunal concluded that there was no evidence of any additional consideration over and above what was recorded in the sale deed, and hence, no addition could be made by estimating and substituting the market value.

Conclusion:
The Tribunal allowed the appeals of the assessees, reversing the orders of the lower authorities. The Tribunal held that the value adopted by the assessee at Rs. 483 per sq. mt. was appropriate and that the provisions of Section 50C were applicable, thus rejecting the CIT(A)'s enhancement to Rs. 5,000 per sq. mt. Additionally, the Tribunal accepted the fair market value of Rs. 60 per sq. mt. as on 01-04-1981 for computing capital gains, based on the valuation report provided by the assessee's approved valuer. The Tribunal directed the Assessing Officer to adopt this value for the computation of capital gains.

Order Pronounced:
The appeals of the assessees were allowed, and the order was pronounced in open court on 23/04/2010.