2013 (9) TMI 563 - AT - Income Tax

Valuation u/s 50C - Enhancement of sale consideration - Held that - Commissioner of Income-tax (Appeals) called a specific report from the Tehsildar-cum-Sub-Registrar, Ludhiana, regarding location and applicable circle or collector rate in the financial year 2006-07 and the stamp valuation authority informed him that the land sold was situated at village Dhandari Khurd and applicable circle of collector rate for the said land in the year 2006-07 was Rs. 1,300 per sq. yd. and the sale consideration actually received by the assessee was much higher than the above circle rate. CIT(A) rightly held that unless the property transferred has been registered by sale deed for the purpose of the value has been assessed and stamp duty has been paid by the parties then section 50C of the Act cannot come into operation. In such a situation, the position existing prior to section 50C of the Act would apply and the onus would be upon the Revenue to establish that the sale consideration declared by the assessee was understated with some clinching or comparable evidences. Assessing Officer was working on the wrong location of the land sold and the learned Commissioner of Income-tax (Appeals) passed the impugned order on the basis of report submitted by the Revenue authority as well as the Sub-Registrar and he rightly held that the land sold was located at village Dhandari Khurd and the applicable collecteral rate on that land was Rs. 1,300 per sq. yd. and the assessee sold the land at much higher price than the collector or circle rate. Therefore, we are constrained to hold that the findings of the learned Commissioner of Income-tax (Appeals) in the impugned order are based on the reports of the Revenue authorities and there is no reason before us to interfere with the same - Decided against Revenue.

Summary

Issues Involved:
1. Deletion of the addition of Rs. 65,05,425 by the Commissioner of Income-tax (Appeals) under section 50C of the Income-tax Act, 1961.

Detailed Analysis:

1. Deletion of the Addition of Rs. 65,05,425 under Section 50C of the Income-tax Act, 1961:

The Revenue appealed against the Commissioner of Income-tax (Appeals) order, which deleted the addition of Rs. 65,05,425 made by the Assessing Officer. The Assessing Officer had enhanced the sale consideration of land under section 50C of the Income-tax Act, 1961, based on the Valuation Officer's report, which adopted a circle rate of Rs. 5,500 per square yard. The assessee had sold land for a total consideration of Rs. 85,50,000, but the Assessing Officer, relying on the Valuation Officer's report, determined the fair market value of the land at Rs. 1,50,55,425.

The Commissioner of Income-tax (Appeals) found that the land sold was located at Dhandari Khurd, not Dhandari Kalan, and the applicable circle rate was Rs. 1,300 per square yard, not Rs. 5,500 per square yard. The Commissioner of Income-tax (Appeals) based this conclusion on the letters from the Tehsildar and Sub-Registrar, Ludhiana, which confirmed the circle rate of Rs. 1,300 per square yard. The Commissioner of Income-tax (Appeals) held that the Valuation Officer's report was incorrect as it did not accurately reflect the location of the land.

The Commissioner of Income-tax (Appeals) also noted that the actual sale consideration received by the assessee was higher than the circle rate, and therefore, the provisions of section 50C of the Act were not applicable. The Commissioner of Income-tax (Appeals) relied on the judgment of the Jodhpur Bench in the case of Navneet Kumar Thakkar v. ITO, which held that the value adopted by the stamp valuation authority should be the same as the property transferred for calculating capital gains.

The Departmental representative argued that the land was situated within 300 feet of the G.T. Road, and the stamp valuation rate for such land was Rs. 5,500 per square yard. However, the Commissioner of Income-tax (Appeals) found that the land was located at Dhandari Khurd, and the circle rate applicable was Rs. 1,300 per square yard.

The Tribunal upheld the Commissioner of Income-tax (Appeals) decision, stating that the Assessing Officer had worked on the wrong location of the land sold. The Tribunal found that the Commissioner of Income-tax (Appeals) had correctly determined the location and applicable circle rate based on the reports from the Revenue authorities and the Sub-Registrar. The Tribunal concluded that the addition made by the Assessing Officer was not sustainable and dismissed the Revenue's appeal.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the Commissioner of Income-tax (Appeals) order that deleted the addition of Rs. 65,05,425 under section 50C of the Income-tax Act, 1961. The Tribunal agreed with the Commissioner of Income-tax (Appeals) that the land sold was located at Dhandari Khurd, with an applicable circle rate of Rs. 1,300 per square yard, and the actual sale consideration received was higher than this rate.