1996 (6) TMI 98 - AT - Income Tax

Assessing Officer, Assessment Year, Capital Gains, Computation Of Capital, Fair Market Value, Valuation Date, Valuer s Report

Summary

Issues Involved:
1. Computation of capital gains on the sale of property.
2. Estoppel in income-tax matters.
3. Valuation of property as per wealth-tax returns versus approved valuer's report.

Detailed Analysis:

Computation of Capital Gains:
The assessee sold a property for Rs. 26 lakhs on 2-8-1993. The main issue was the computation of capital gains from this sale. The assessee opted to consider the fair market value of the property as on 1-4-1981 instead of the original cost. The fair market value was assessed at Rs. 8,48,000 based on a report by an approved valuer, which after indexing, resulted in an indexed cost of Rs. 20,69,120 and capital gains of Rs. 8,30,880.

Estoppel in Income-Tax Matters:
The Assessing Officer (AO) noted that the property was valued at Rs. 90,000 in the wealth-tax returns for the same period and recalculated the capital gains at Rs. 23,80,400. The assessee argued against this valuation, citing the Andhra Pradesh High Court's decision in Addl. CIT v. Smt. Indira Bai, which held that there is no estoppel in income-tax matters. The assessee contended that the wealth-tax valuation was arbitrary and not binding for income-tax purposes.

Valuation of Property:
The CIT(A) upheld the AO's valuation, noting that the assessee had consistently declared lower values in wealth-tax returns and was estopped from changing this valuation for income-tax purposes. The CIT(A) also found flaws in the approved valuer's report, including the use of sales data from more developed areas and inconsistencies in the valuation of the constructed portion of the property.

Legal Principles and Precedents:
The Tribunal considered the applicability of estoppel and consistency in valuations across different tax enactments. It referred to several cases, including H. J. Doshi v. CWT and Smt. R. V. Kamalam v. CWT, which emphasized the need for consistency in valuations. The Tribunal concluded that the valuation declared in wealth-tax returns should be considered for income-tax purposes unless strong reasons justify a departure.

Flaws in Valuer's Report:
The Tribunal noted several flaws in the approved valuer's report, such as using data from more developed areas and failing to provide a basis for bifurcating land and building values. The Tribunal agreed with the CIT(A) that the valuation report seemed tailor-made to suit the assessee's purpose of reducing capital gains.

Final Decision:
The Tribunal upheld the lower authorities' actions, considering the valuation of Rs. 90,000 as declared in the wealth-tax return for assessment year 1981-82 and accepted by the WTO as the fair market value for computing capital gains.

Conclusion:
The appeal filed by the assessee was dismissed, affirming the computation of capital gains based on the valuation declared in the wealth-tax returns.