2017 (9) TMI 636 - AT - Income Tax

Capital gain computation - acceptance of FMV of property - shops constructed on the land inherited from father - taxation on co-sharer of property - Held that - It is a true fact that the assessee alongwith his three brothers constructed ten shops on the land inherited from his father, which is situated in the main area of Sangwada. The assessee had specifically informed the fact of fair market value of the property, which was accepted by the revenue. No any instance was available on records showing the fair market value of the said property as on 01/4/1981. Once the department accepted the FMV with regard to the asset then there is no any reason to deviate from the accepted working of the capital gain as per Rule of consistency. The ld AR relied on the decision of Hon ble Punjab & Haryana High Court in the case of Jaswant Raj Vs CIT (1977 (2) TMI 22 - PUNJAB AND HARYANA High Court) wherein held that if during the same assessment year the same quantity of wealth in possession of one co-sharer is subjected to a lower rate of taxation, it would be highly improper to burden a similarly situated co-sharer with a higher rate of tax. If such an action on the part of the assessing authorities is sanctioned, it would militate against the principles of equality of law enshrined in Art. 14 of the Constitution. The assessee, who is also a co-owner of the property, is entitled to the benefit enjoyed by the other co-owner, whose valuation of the same property, at the same rate as that of assessee was accepted by the CIT. Allow the appeal of the assessee.

Summary

Issues:
1. Fair market value determination for capital gains calculation.

Analysis:
The appeal before the ITAT Jaipur stemmed from the order of the ld. CIT(A)-2, Jaipur for the A.Y. 2006-07. The primary issue revolved around the fair market value (FMV) of a property sold by the assessee and his brothers. The Assessing Officer estimated the FMV at &8377; 34 per sq. ft, leading to the addition of long-term capital gains in the assessee's income. The assessee contested this valuation, arguing that the FMV should be &8377; 200 per sq. ft based on the valuation accepted in the assessments of his brothers for the same property. The CIT(A) upheld the Assessing Officer's decision, emphasizing the lack of concrete evidence supporting the higher FMV claimed by the assessee.

Upon further appeal, the assessee presented various arguments before the ITAT. The appellant highlighted that the department had previously accepted the FMV at &8377; 200 per sq. ft in the assessments of his brothers, invoking the principle of consistency in valuation. Additionally, the appellant contested the application of a 'reverse method' by the Authorities Below to determine the FMV based on rates from subsequent years. The appellant also referenced a judicial citation from the Punjab and Haryana High Court to support the claim for equal treatment in valuation among co-owners of the property.

After considering the contentions from both sides, the ITAT ruled in favor of the assessee. The tribunal acknowledged the acceptance of the FMV at &8377; 200 per sq. ft in the assessments of the assessee's brothers and emphasized the importance of consistency in valuation. Drawing on the legal precedent cited by the appellant, the ITAT concluded that subjecting co-owners to varying rates of taxation for the same property would contravene the principles of equality under the law. Consequently, the ITAT allowed the appeal, overturning the previous decision and directing the deletion of the additional capital gains based on the revised FMV.

In summary, the judgment by the ITAT Jaipur centered on the determination of fair market value for calculating long-term capital gains on a property sale. The case highlighted the significance of consistency in valuation across co-owners and the need for equitable treatment in tax assessments for jointly held assets.