1978 (1) TMI 83 - AT - Income Tax

Summary

Issues Involved:
1. Determination of the fair market value of land as on 1st January 1954.
2. Comparison of agricultural land with developed land for colonization.
3. Validity of the certificates provided by the Tehsildar regarding land quality and value.
4. Whether the Income Tax Officer (ITO) failed to conduct necessary inquiries.

Detailed Analysis:

1. Determination of the Fair Market Value of Land as on 1st January 1954:
The assessee HUF received 35,090 sq. yds. of land in February 1970 from a partition of a larger HUF. The larger HUF was allotted about 43 acres in 1949 in lieu of land left in Pakistan. The assessee converted the land into small plots for commercial-cum-residential purposes. The ITO determined the cost of acquisition of the land as it stood on 1st January 1954, using 17 sale deeds provided by the assessee that indicated an average rate of Rs. 12.50 per sq. yd. The ITO also obtained a certificate from the village Patwari, which showed average rates of Rs. 12.41 and Rs. 12.82 per sq. yd. Based on these, the ITO estimated the fair market value at Rs. 12 per sq. yd.

2. Comparison of Agricultural Land with Developed Land for Colonization:
The Commissioner found that the ITO erred by relying on sale rates from 17 sale instances related to developed plots in Miller Ganj, a developed residential area within Ludhiana City's Municipal limits. The Commissioner argued that the land in dispute was agricultural on 1st January 1954 and thus incomparable to developed land. However, the Tribunal found that the ITO was aware of this distinction and did not base his valuation solely on the 17 sale deeds. The ITO had also asked for additional evidence from the Patwari, which supported the valuation.

3. Validity of the Certificates Provided by the Tehsildar:
The Commissioner suggested that the land of the assessee should be compared with the land of village Jodhewal, adjacent to the assessee's land. The Tehsildar's certificates, however, indicated that the land in village Jodhewal was inferior and not comparable to the assessee's land, which was more fertile and valuable. The Tribunal found no reason to disbelieve the Tehsildar's certificates, which stated that the land in dispute was superior and could not be compared with the land of village Jodhewal.

4. Whether the Income Tax Officer (ITO) Failed to Conduct Necessary Inquiries:
The Tribunal concluded that the ITO made necessary inquiries to determine the fair market value of the land as on 1st January 1954. The ITO did not rely solely on the 17 sale deeds but also obtained a certificate from the Patwari. The Tribunal found no error in the ITO's approach or in the valuation determined. The Commissioner's suspicion that agricultural land could not have been sold for Rs. 60,000 per acre in 1954 was deemed insufficient to invoke jurisdiction under section 263 of the IT Act, 1961.

Conclusion:
The Tribunal found that the Commissioner did not establish any patent error or failure on the part of the ITO in making necessary inquiries. The appeal by the assessee was allowed, and the order of the Commissioner was set aside.