2022 (9) TMI 53 - AT - Income Tax

Gain on land sold - FMV determination - estimating the cost of acquisition of the immovable property as on 1/4/1981 at Rs. 350/- per sq yd relying on the market value of the property certified by the Joint Sub-Registrar, Rajahmundry as on 17/2/1987 - HELD THAT - Fair market value of a capital asset is the value which would ordinarily fetch on sale in the open market on the relevant date and not on the value adopted for stamp duty purposes. In the absence of a confirmed fair market value as on 1/4/1981, the Ld. AO has also not referred the matter to the DVO for valuation of the property as on 1/4/1981. We also find that the Ld. CIT (A) has estimated the value at Rs. 350/- per sq yd based on the valuation provided by the Joint Sub-Registrar, Rajahmundry as on 17/2/1987. In the absence any evidence of fair market value, not being provided by both assessee and Revenue, we are therefore of the considered view that, since the property is located within a distance of one kilometre from the RTC Complex, within the Rajamundhry municipal limits, we find that the estimate made by Ld.CIT(A) is reasonable and hence no interference is required. Thus, the grounds No. 2 and 3 raised by the Revenue are dismissed. Cash expenses for the purpose of development of land - The admitted facts are that there are certain expenses incurred by the assessee in the development of land into plots. This was never denied by the Revenue Authorities. The only contention of the Revenue is that since the assessee has incurred certain expenditure by way of cash and documents evidencing by way of self-made vouchers, these expenses are not genuine. The expenses incurred by the assessee in the development of land is also evidenced from the inspection report submitted by the ACIT, Rajamahendravaram. The only dispute is with respect to the amount of expenditure actually incurred by the assessee for the development of land into plots. We find that the Ld. CIT(A) has rightly estimated the cost of development at Rs. 2,000/- per sq yd which in our view is reasonable and hence no interference is required on this issue in the order of the Ld. CIT(A). It is ordered accordingly. Thus, Grounds No. 4, 5 6 raised by the Revenue are dismissed. Levy of penalty Notice u/s 274 r.w.s. 271D - Cash sale of immovable property - Receipt of cash in relation to transfer of immovable property by the assessee attracting the provisions of section 269SS of the Act - HELD THAT - Any person is barred from receiving from any amount otherwise by cheque or through banking channels in relation to transfer of the immovable property. Section 269SS of the Act prohibits receipt of any amount by way of cash in relation to the transfer of any immovable property. The Memorandum explaining the provisions of Finance Bill 2015 with respect to amendment proposed w.e.f 1/6/2015 in section 269SS. The objective of the amendment proposed in 269SS of the Act is to curb generation of black money. In the instant case the fact is that cash received by the assessee has been recorded in the sale deed and deposited by the assessee into the bank account, hence does not attract the provisions of section 269SS of the Act since there is no suppression of cash receipts by the assessee. The assessee has also offered the capital gains to tax. Therefore, in our opinion the order of the Ld JCIT deserves to be quashed. It is also found that the Ld.AO has not recorded satisfaction regarding the initiation of penalty proceedings. The Ld AO merely proposed to initiate penalty proceedings u/s 271(1)(c) of the Act - Thus the order Ld JCIT deserves to be quashed as relying on Jai Laxmi Rice Mills 2015 (11) TMI 1453 - SUPREME COURT and therefore the order of the Ld. CIT(A) does not require interference and hence the appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Determination of the cost of acquisition of property as on 1/4/1981.
2. Deduction towards the cost of improvement of the property.
3. Receipt of cash in relation to the transfer of immovable property and the applicability of Section 269SS of the Income Tax Act.
4. Validity of self-made vouchers and statements of labor contractors as evidence for incurred expenses.

Issue-Wise Detailed Analysis:

1. Determination of the Cost of Acquisition of Property as on 1/4/1981:
The Revenue contested the Ld. CIT(A)'s direction to adopt the cost of acquisition of the property at Rs. 350/- per sq yd based on the fair market value certified by the Joint Sub-Registrar, arguing that the District Registrar's value of Rs. 1.65 per sq yd should be considered. The Tribunal found that neither party provided conclusive evidence of the fair market value as on 1/4/1981. The Tribunal upheld the Ld. CIT(A)'s estimation of Rs. 350/- per sq yd as reasonable, considering the property's location within Rajahmundry municipal limits. Grounds 2 and 3 raised by the Revenue were dismissed.

2. Deduction Towards the Cost of Improvement of the Property:
The Revenue argued that the Ld. CIT(A) erred in allowing a deduction of Rs. 1,25,70,000/- for the cost of improvement based on self-made vouchers and untrustworthy statements from labor contractors. The Tribunal noted that the Revenue did not disprove the veracity of the evidence provided by the assessee. The Tribunal found the Ld. CIT(A)'s estimation of Rs. 2000/- per sq yd for development expenses reasonable and upheld the deduction. Grounds 4, 5, and 6 raised by the Revenue were dismissed.

3. Receipt of Cash in Relation to the Transfer of Immovable Property and Applicability of Section 269SS:
The Revenue appealed against the Ld. CIT(A)'s decision to partly allow the appeal regarding the penalty imposed under Section 271D for violating Section 269SS by receiving Rs. 2,32,04,500/- in cash. The Tribunal noted that the cash receipts were recorded in the sale deeds and deposited into the bank, thus not attracting Section 269SS as there was no suppression of cash receipts. The Tribunal also found that the Ld. AO did not record satisfaction for initiating penalty proceedings, citing the Supreme Court's decision in CIT Vs Jai Laxmi Rice Mills. The Tribunal upheld the Ld. CIT(A)'s order, dismissing the Revenue's appeal.

4. Validity of Self-Made Vouchers and Statements of Labor Contractors as Evidence for Incurred Expenses:
The Revenue contended that self-made vouchers and statements from labor contractors were unreliable. The Tribunal observed that the Revenue did not provide evidence to disprove the expenses claimed by the assessee. The Tribunal found the Ld. CIT(A)'s estimation of development expenses reasonable and upheld the deduction.

Conclusion:
The Tribunal dismissed both the appeals filed by the Revenue and the cross objections filed by the assessee, upholding the Ld. CIT(A)'s decisions. The Tribunal found the estimations and deductions made by the Ld. CIT(A) reasonable and supported by the evidence provided by the assessee. The Tribunal also emphasized the importance of recording satisfaction for initiating penalty proceedings, following the Supreme Court's precedent.