2021 (7) TMI 1235 - AT - Income Tax

Addition u/s 50C - sale of land by four co-owners - applicability of the provisions of Section 50C for adoption of deemed full value consideration, while computing the capital gain arising from the sale of land in question - assessee has claimed that the land in question is a Bhumidari land and the ownership is vested with the State Government, hence, the assessee has transferred only the tenancy rights in the land - HELD THAT - In the case in hand as per the sale deed dt. 26th May 2004 the parties have specifically stated that the land in question is free from any encumbrance and does not fall in the category of ceiling, nazul or leasehold. Therefore, what is transferred by the assessees as per sale deed dt. 26th May 2004 is the ownership of the land for a consideration of ₹ 9,50,000/- whereas the land was valued for stamp duty purpose at ₹ 53,00,000/-. Neither the AO has conducted any inquiry regarding any change in the status of the land in question after the same was purchased in the year 1961 till it was sold in the year 2004 nor the assessee has brought on record any material to say that the land still remains Bhumidari land and the assessee was having only a tenancy rights in the land in question. Therefore, this factual aspect is required to be verified after conducting a proper inquiry particularly from the Revenue department of the State Government in respect of the status of the land at the time of sale on 26.06.2004. Hence, in the facts of circumstances the case and in the interest of justice, this issue is set aside to be record of the Assessing Officer for fresh adjudication after conducting a proper inquiry regarding the status of the land on the date of sale, and then decide the same as per law. Determination of fair market value as on 01.04.1981 - AO has accepted the fair market value of the land as on 01.04.1981 in the case of assessee whereas in the case of co-owner the Assessing Officer has adopted a different valuation. It transpires from the record that the Assessing Officer has accepted the fair market value as on 01.04.1981 in case of Mahendra Singh whereas the different valuation was adopted in case of Rajendra Singh. There cannot be two valuation of the same land when the land was jointly owned by the assesses and sold by one sale-deed. Accordingly addition made by the Assessing Officer by adopting a different fair market value as on 01.04.1981 in case of Rajendra Singh is deleted.

Summary

Issues:
1. Applicability of Section 50C provisions for capital gain computation.
2. Dispute over ownership rights and applicability of Section 50C.
3. Determination of fair market value as on 01.04.1981.
4. Addition of income from other sources.

Issue 1: Applicability of Section 50C provisions for capital gain computation:
The dispute centered around the application of Section 50C provisions for computing capital gains arising from the sale of land. The Assessing Officer invoked Section 50C based on stamp duty valuation, leading to a capital gain computation. The assessee contended that as a tenant with limited rights, Section 50C should not apply. The CIT(A) upheld the Assessing Officer's decision. The Tribunal noted conflicting arguments regarding land ownership and directed a proper inquiry to verify the land status at the time of sale for a fair decision.

Issue 2: Dispute over ownership rights and applicability of Section 50C:
The assessee claimed tenancy rights over the land, arguing against the application of Section 50C. The Assessing Officer asserted that the land was freehold and not leasehold, justifying the Section 50C application. The Tribunal emphasized the need for a thorough investigation into the land's status at the time of sale to determine the applicability of Section 50C accurately.

Issue 3: Determination of fair market value as on 01.04.1981:
Divergent valuations for the same land by the Assessing Officer raised concerns. While one co-owner's valuation was accepted, the other's differed. The Tribunal found inconsistencies in the valuation process and rectified the situation by deleting the addition based on the alternative valuation.

Issue 4: Addition of income from other sources:
The assessee raised concerns about the addition of income from other sources, which was later withdrawn during the hearing. Both parties agreed to dismiss this ground, leading to its removal from consideration. Consequently, the Tribunal partially allowed both appeals for statistical purposes, emphasizing the need for a fair and accurate assessment based on the specifics of each case.

This detailed analysis of the legal judgment highlights the key issues, arguments presented, and the Tribunal's directions for each matter, ensuring a comprehensive understanding of the case.