2015 (8) TMI 85 - AT - Income Tax

Determination of the value of the land for the purpose of computation of capital gains in the hands of the assessee - Held that - The value of the land has to be taken only as ₹ 10.50 Crores. In case the value shown in the sale agreement as ₹ 10.50 Crores is less than the value determined by the stamp authorities, then at the best, the guideline value can be taken as value of the land. Therefore, the lower authorities are not justified in estimating the value of the land on the basis of the material relatable to M/s Coromandel Cables Pvt. Ltd. Income-tax proceeding, being a judicial proceeding, the assessment has to be made on the basis of material available on record. Documents relating to other assessees cannot be placed reliance in the case of present assessee unless there is sufficient reason to rely upon that document. This Tribunal is of the considered opinion that there is no material available on record to suggest that the assessee received more than ₹ 10.50 Crores as disclosed in the sale agreement dated 1.04.2008. Therefore, the lower authorities are not correct in estimating the value of the land on the basis of the materials relating to M/s Coromandel Cables Pvt. Ltd. this Tribunal is of the considered opinion that in the absence of any other material, the lower authorities have no other way except to accept the value of the land at ₹ 10.50 Crores as disclosed in the sale agreement dated 1.04.2008. Accordingly the orders of the lower authorities are set aside and the appeals of the assessee are allowed. Sharing ratio of the developed project - CIT(Appeals) reduced it to 40% as against 45% determined by the Assessing Officer - Held that - By efflux of time, the cost of construction or cost of land might have increased. However, the percentage of the share would not increase. If the assessee entered into an agreement for sharing the constructed area at 37.5% in the year 2005, the same sharing ratio would continue in 2008 also. By efflux of time, the cost may increase, accordingly the price may also increase, it does not mean that the share in constructed area would also increase due to efflux of time. This Tribunal is of the considered opinion that the CIT(Appeals) has rightly reduced the sharing ratio to 40% as against the ratio determined by the Assessing Officer at 45%. Therefore, this Tribunal do not have any reason to interfere with the order of the CIT(Appeals) and accordingly, the same is confirmed. - Decided against revenue. Penalty levied under Section 271(1)(c) - Held that - As during the course of survey, the so-called incriminating material, including joint development agreement dated 23.11.2005, in respect of M/s Coromandel Cables Pvt. Ltd. was found. In fact, no material was found relating to the present assessee. On the basis of the material found in the case of M/s Coromandel Cables Pvt. Ltd., the value of the land was estimated. In the earlier part of this order, while considering the quantum addition made by the Assessing Officer, this Tribunal found that there cannot be any addition on the basis of the material relatable to M/s Coromandel Cables Pvt. Ltd. In the absence of any material in respect of the present assessee other than the agreement for sale dated 1.04.2008, which discloses the sale consideration at ₹ 10.50 Crores, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the penalty. - Decided in favour of assessee.

Summary

List of Issues:
1. Reopening of assessment under Section 147 of the Income-tax Act.
2. Determination of sale consideration of the land for computation of capital gains.
3. Validity of reassessment proceedings under Section 148 for the assessment years 2009-10 and 2010-11.
4. Estimation of land value based on materials found in another entity's case.
5. Penalty levied under Section 271(1)(c) of the Income-tax Act.
6. Sharing ratio of the developed project.

Issue-Wise Detailed Analysis:

1. Reopening of Assessment under Section 147 of the Income-tax Act:
The assessee contended that the reopening of the assessment was based on erroneous information regarding the period of holding of the property, which led to the determination of short-term capital loss instead of long-term capital loss on mutual funds. The assessment was reopened solely to assess the capital loss on mutual funds, but no income was found to have escaped in this respect. The assessee argued that since no addition was made on the reasons for which the assessment was reopened under Section 148, no other addition could be made during reassessment proceedings under Section 147, citing the Bombay High Court judgment in CIT v. Jet Airways (I) Ltd. (2011) 331 ITR 236. Additionally, the time limit for issuing notice under Section 148 had expired for the assessment years 2009-10 and 2010-11, rendering the reassessment proceedings invalid.

2. Determination of Sale Consideration of the Land for Computation of Capital Gains:
The primary issue was the determination of the sale consideration of the land. The assessee argued that no material was found during the survey in their premises, and the entire assessment was based on materials found in the case of M/s Coromandel Cables Pvt. Ltd. The Assessing Officer assumed that the assessee received the same amount for the transfer of its land as M/s Coromandel Cables Pvt. Ltd. did, without any concrete evidence. The tribunal held that the assessment could not be based on assumptions and presumptions, and there was no material to suggest that the assessee received any money over and above the amount shown in the sale deed.

3. Validity of Reassessment Proceedings under Section 148 for the Assessment Years 2009-10 and 2010-11:
The tribunal noted that the reassessment proceedings were initiated based on erroneous information and that the time limit for issuing notice under Section 148 had expired for the assessment years 2009-10 and 2010-11. Therefore, the reassessment proceedings for these years were deemed invalid.

4. Estimation of Land Value Based on Materials Found in Another Entity's Case:
The tribunal found that the estimation of the land value based on materials found in the case of M/s Coromandel Cables Pvt. Ltd. was not justified. The assessment proceedings are judicial in nature, and assumptions and presumptions have no role. The tribunal emphasized that unless there is concrete material to establish that the assessee received money over and above the value disclosed in the sale agreement, no addition could be made. The tribunal concluded that the value of the land should be taken as Rs. 10.50 Crores, as disclosed in the sale agreement, and set aside the orders of the lower authorities.

5. Penalty Levied under Section 271(1)(c) of the Income-tax Act:
The Revenue's appeals regarding the penalty levied under Section 271(1)(c) were dismissed. The tribunal noted that no material was available on record to suggest that the assessee suppressed any part of the income arising from the transfer of the land. The addition was made based on materials found during the survey of M/s Coromandel Cables Pvt. Ltd., which could not be a basis for levying penalty on the present assessee. The tribunal upheld the CIT(Appeals)' decision to delete the penalty.

6. Sharing Ratio of the Developed Project:
The Revenue contended that the CIT(Appeals) reduced the sharing ratio of the developed project from 45% to 40%, which was not justified. The tribunal held that the sharing ratio would not change due to the efflux of time, and the CIT(Appeals) rightly reduced the ratio to 40%. The tribunal confirmed the order of the CIT(Appeals).

Conclusion:
The tribunal allowed the appeals of the assessee and dismissed the appeals of the Revenue. The orders of the lower authorities were set aside, and the value of the land was determined to be Rs. 10.50 Crores as disclosed in the sale agreement. The reassessment proceedings for the assessment years 2009-10 and 2010-11 were deemed invalid, and the penalty levied under Section 271(1)(c) was deleted. The sharing ratio of the developed project was confirmed at 40%.