2021 (1) TMI 1085 - AT - Income Tax

Determination of long term capital gain from sale of land - taking jantri value at ₹ 618/- - valuation of the property for the purpose of section 50C - which rate is to be deemed as full consideration for the sale of this property for purpose of section 48? - HELD THAT - In the present case, the payments have been made through account payee cheque, and time gap between the presentation of the sale deed for registration vis- -vis revision of rates for the purpose of charging higher stamp duty is not substantive and considerable. The sale deed was presented on 24.5.2011 where as the rates were revised on 18.4.2011. The time gap between the agreement vis- -vis sale deed is also not substantive. Agreement is dated 31.12.2010 and sale deed was presented for registration on 24.5.2011. Considering this hardship for the vendors, section 50C was amended and second proviso has been brought on the statute book, which authorized an assessee to argue that where the amount of consideration or part thereof has been received by way of account payee cheque, then the appointing day for the purpose of valuation of the property for the purpose of section 50C is to be taken the date of agreement. This proviso has been held to be applicable with retrospective effect by case of Dharamshibhai Sonani 2016 (9) TMI 1259 - ITAT AHMEDABAD Assessee has submitted before the ld.CIT(A) that simultaneous sale deed was registered on survey no.932, 951, 899 and 894 where stamp duty valuation authority has also accepted the rate at ₹ 200/- per sq.meter and the sale agreement were entered on 30.12.2010. We are satisfied that for the purpose of computation of long term capital gain on sale of land, the value shown by the assessee at the rate of ₹ 200/- per sq.meter is to be adopted. We accordingly direct the AO to take value disclosed at the rate of ₹ 200/- per sq.meter, and thereafter calculate the long term/short term capital gain, if any, leviable in the hands of the assessee. First ground of appeal is accordingly allowed. Disallowance expenditure on account of banakhat agreement, land leveling and its fencing on the ground that the same are excessive - HELD THAT - We find that disallowance of expenditure in respect of land leveling, fencing and banakhat expenses totaling to ₹ 37,55,750/- a meager amount of ₹ 34,567/- has been allowed by the Revenue, without any realistic consideration. Even before making such disallowance no explanation was called for by the Revenue, and the assessee was not given any opportunity to furnish the details of the expenses. It is not the case of the Revenue that the expenses incurred by the assessee were not related to the land or the expenses incurred for any other purposes, as he has not called for any details from the assessee. It seems that the disallowance has been made simply on the basis of some surmises that the assessee fabricated the expenses to reduce the tax effect, such assumption of the AO is not tenable. We, therefore, in the interest of justice and fair play remit the issue of disallowance back to the file of the AO for re-adjudication and to decide the issue on the basis of details furnished/to be furnished by the assessee.

Summary

Issues:
1. Determination of long term capital gain from the sale of land at different jantri values.
2. Disallowance of expenses related to banakhat agreement, land leveling, and fencing.
3. Charging of interest under section 234A/VB/C/D.
4. Initiation of penalty under section 271(1)(c) of the Act.

Issue 1: Determination of Long Term Capital Gain

The appellant contested the calculation of long term capital gain from the sale of land, challenging the use of jantri value at ?618 per sq.meter instead of ?140 per sq.meter. The Assessing Officer (AO) found a discrepancy in the sale consideration reported by the appellant and determined a net capital gain of ?3,86,58,478 after indexation and deductions. The appellant argued that the sale was agreed upon at ?140 per sq.meter, with the sale deed executed at ?200 per sq.meter, which was accepted by the stamp valuation authority. The AO rejected this explanation, insisting on the jantri rate. The Tribunal considered the agreement date, payment details, and stamp duty valuation, concluding that the value disclosed by the appellant at ?200 per sq.meter should be adopted for computing capital gain, allowing the appeal on this ground.

Issue 2: Disallowance of Expenses

The appellant challenged the disallowance of expenses related to banakhat agreement, land leveling, and fencing, totaling ?37,55,750, with only ?34,567 allowed by the Revenue. The Tribunal noted that the disallowance was made without seeking explanations from the appellant or verifying the expenses. It was observed that the disallowance seemed based on assumptions without realistic consideration. The Tribunal remitted the issue back to the AO for re-adjudication based on details provided by the appellant, emphasizing fair play and justice.

Issue 3: Charging of Interest

The Tribunal disposed of the issue related to charging interest under sections 234A/VB/C/D as consequential and mandatory, without further elaboration.

Issue 4: Initiation of Penalty

The Tribunal dismissed the premature appeal regarding the initiation of penalty under section 271(1)(c) of the Act, deeming it premature at that stage.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, directing the AO to reconsider the computation of long term capital gain and the disallowance of expenses based on detailed submissions by the appellant. The issues related to interest charges and penalty initiation were disposed of accordingly.