2016 (3) TMI 1061 - AT - Income Tax

Adoption of fair market value as at 1-4-1981 of the property sold by the assessee - Held that - The rates adopted by the AO by obtaining the same from the office of District magistrate for 1984 cannot be applied for determining fair market value of property as at 1-4-1981. Therefore we are also not approving the rates adopted by the AO as well as by assessee. Therefore according to the law it is for the assessee to substantiate fair market value of the property by submitting the valuation report obtained from authorized valuer. If the assessee does not exercise this option than AO does not have any option but to adopt the cost of acquisition for the purposes of determining the capital gain in the hands of the assessee. As admittedly assessee has not exercised this option, in the interest of justice one more opportunity is given to assessee to submit before AO the fair market value of the assets as at 1-4-1981 by submitting the valuation report of the property from authorized valuer not later than four months from the date of receipt of this order. After that AO may act according to the provision of section 55A of the Income tax Act and decide the issue on merits. In view of this ground no 1 of the appeal is set aside to the file of AO with above direction to consider the valuation report, if any, submitted by the assessee in above time frame. - Decided in favour of assessee by way of remand Addition of deduction u/s 54B - whether the assessee has purchased agricultural land in the name of his wife and the payment was made by the assessee from his own source through banking channel - Held that - There is no doubt that the property has been purchased by the assessee in the name of the wife of the assessee and according to the decision relied up on by the LD AR, assessee is eligible for deduction u/s 545B of the Act provided the funds from which this asset is acquired are invested by the assessee. By producing the bank account of the assessee it is apparent the cheque nos mentioned in the sale deed and the bank account are same and same has not be disputed by the ld DR. Hence assessee is entitled for the benefit of deduction u/s 54B of the act. - Decided in favour of assessee

Summary

Issues Involved:
1. Determination of fair market value as at 1-4-1981 for capital gain calculation.
2. Eligibility of deduction under section 54B for purchasing agricultural land in the name of the assessee's wife.

Issue 1: Determination of Fair Market Value as at 1-4-1981:
The appeal was against the adoption of the fair market value as of 1-4-1981 for the property sold by the assessee. The AO determined the fair market value based on the circle rate available as of 01.02.1984, as the assessee did not provide any valuation report or comparative sale rates. The CIT(A) upheld the AO's decision, stating that the fair market value was determined based on available information. The appellant argued that the AO's adopted rate of Rs. 70 per square yard was incorrect, presenting a valuation report claiming Rs. 150 per square yard. However, the Tribunal noted that the assessee did not exercise the option to substantiate the fair market value as of 1-4-1981 by submitting a valuation report from an authorized valuer. As per Section 55 of the Income Tax Act, the assessee must provide proper documentation to determine the fair market value. Therefore, the Tribunal set aside the appeal and directed the assessee to submit a valuation report within four months for the AO to reconsider the fair market value.

Issue 2: Eligibility of Deduction under Section 54B:
The second ground of appeal was related to the deduction under section 54B for the purchase of agricultural land in the name of the assessee's wife. The AO disallowed the deduction as the purchase was made beyond two years from the date of sale and the funds were not proven to be from the assessee. The CIT(A) upheld this decision. The appellant argued that the funds for purchasing the land in the wife's name came from the assessee's bank account, supported by bank statements and matching cheque numbers in the sale deed. The Tribunal found that the assessee was eligible for the deduction under section 54B, as the funds for the purchase were traced back to the assessee's bank account. Consequently, the Tribunal allowed the second ground of appeal.

In conclusion, the Tribunal allowed the appeal of the assessee with specific directions for each ground decided, emphasizing the importance of proper documentation and evidence in determining fair market value and eligibility for deductions under the Income Tax Act.