2024 (11) TMI 307 - AT - Income Tax

Reopening of assessment u/s 147 - Assessment of Long Term Capital Gain on sale of land - transaction of transfer of the land in question took place in Financial Year 2005-06 relevant to the A.Y. 2006-07 which was rejected by the AO - Adoption of full value consideration by AO - Claim of exemption u/s 54B - HELD THAT - From the assessment order it is manifested that after rejecting the objection against issue of notice u/s 148 AO has not issued any show cause notice to the assessee for adopting the full valuation consideration u/s 50C(1) of the Act and hence, it appears that the assessee was not given an opportunity before adopting the full valuation consideration as per Section 50C(1) and consequent addition by the A.O on account of Long Term Capital Gain arising from sale of land in question. Though the assessee challenged the order before the CIT(A) however, still the assessee did not raise any specific ground regarding full valuation consideration or allowing the cost of acquisition or exemption u/s 54B. So far as assessing the entire sale consideration u/s 50C(1) of the Act is concerned the A.O is not justified in making the addition of the entire sale consideration without allowing the cost of acquisition. Even the AO has not made any attempt to ascertain the cost of acquisition or fair market value as on 01.04.1981 while assessing the Long Term Capital Gain in the hands of the assessee therefore, to that extent the order of the A.O is not sustainable. Assessee has also disputed the fair market value of the land in question as adopted by the A.O being full valuation consideration u/s 50C(1) of the Act in view of the fact reported by the registered valuer in the valuation report that the guideline value of the land situated at the main road is Rs. 5 crores per hectare whereas the A.O has adopted the full value consideration for a land measuring 0.101 hectare which is prime facie more than the guideline prescribed for the land in question reported by the registered valuer. Thus, in the facts and circumstances when the registered valuer has reported the guidelines value which is less than the full valuation consideration adopted by the A.O this aspect is required to be properly verified and examined by ascertaining the correct fact from the record. Even otherwise once the assessee has questioned the adoption of full value consideration, the fair market value is required to be determined as per Section 50C(2) of the Act. Accordingly, in the facts and circumstances of the case and in the interest of justice the matter is set aside to the record of the A.O for fresh adjudication after considering the cost of acquisition of the land in question as well as the fair market value in terms of Section 50C(2) of the Act. The assessee has also raised the claim of exemption u/s 54B of the Act which is also required to be verified and adjudicated by the A.O after giving an opportunity of hearing to the assessee. Assessee appeal allowed for statistical purpose.

Summary

Issues:
- Assessment of Long Term Capital Gain on sale of land
- Validity of notice issued under section 148
- Adoption of full value consideration by Assessing Officer
- Allowance of cost of acquisition or fair market value
- Claim of exemption under section 54B of the Act

Analysis:
The judgment by the Appellate Tribunal ITAT INDORE, delivered by Shri Vijay Pal Rao, JM, pertains to three appeals by individual co-owners of land against orders of the Commissioner of Income Tax (Appeals) for the Assessment Year 2013-14. The appeals were clubbed together as they arose from the same transaction of sale of land. The assessee(s) contended that the land was sold in the Financial Year 2005-06, challenging the reopening of the case. The Assessing Officer (A.O) assessed Long Term Capital Gain for the assessment year 2013-14. The assessee(s) challenged this before CIT(A) but were unsuccessful.

Before the Tribunal, the assessee's representative argued that the agreements for sale were unregistered and the consideration was in cash, citing relevant case law. The representative also disputed the full value consideration adopted by the A.O, claiming it was not as per the guideline value of the area. The representative sought admission of a valuation report as additional evidence and claimed exemption under section 54B of the Act. The Tribunal noted that the A.O did not issue a show cause notice regarding the full value consideration under Section 50C(1) and did not allow the cost of acquisition. The Tribunal found the A.O's order unsustainable and set aside the matter for fresh adjudication, directing the A.O to consider the cost of acquisition and fair market value in accordance with Section 50C(2). The claim for exemption under section 54B was also to be verified and adjudicated.

The Departmental Representative argued that the assessee's claims were not valid due to lack of registered agreements and non-filing of the return of income in response to the notice u/s 148. The Tribunal, after considering the submissions and material on record, found that the A.O's assessment lacked justification in assessing the entire sale consideration without allowing the cost of acquisition. The Tribunal directed a reevaluation of the fair market value and cost of acquisition, and verification of the exemption claim under section 54B. Consequently, all three appeals of the assessee(s) were allowed for statistical purposes.

In conclusion, the judgment addressed issues related to the assessment of Long Term Capital Gain, validity of notice under section 148, adoption of full value consideration, allowance of cost of acquisition or fair market value, and claim of exemption under section 54B of the Act, providing detailed analysis and directions for fresh adjudication by the Assessing Officer.