2025 (3) TMI 1427 - AT - Income Tax

LTCG on sale of agricultural land (inherited from late father of the appellant) - AO observed that the land was ancestral land which the assessee has inherited and the relevant value as on 01.04.1981 is Rs. 20 per sq.yds - HELD THAT -the solatium was awarded for other purposes that cannot be considered. Therefore the assessee can adopt the value of Rs. 85 per sq.yds. as on 1962 and assessee has to determine the value as on 01.04.1981. We noticed that there is a gap of 19 years between 1962 to 1981. Since there is no data available on record in order to dispense the justice however even if we take 3% year on year increase of index cost the total index cost for 19 years would be 57%. By adopting the same the cost of acquisition as on 01.04.1981 would be Rs. 150/- (i.e. Rs. 85 57 x 100). Therefore even though the cost of acquisition determined by Hon ble Supreme Court for compulsory acquisition however the rate determined by Hon ble Supreme Court for the lands within the vicinity of the lands of the assessee. Therefore nothing wrong in adopting the same rate as on 1962. We are inclined to direct the Assessing Officer to determine the value of Rs. 150 as on 01.04.1981 and direct the AO to recalculate the index cost of acquisition and allow the difference. Deduction u/s 54F on purchase of one house in the name of his widow mother - This is a peculiar case wherein assessee has declared as a single owner and sold the property however purchased two properties and registered one property in the name of his mother on the basis of inheritance. This fact cannot be denied. Considering the peculiar facts on record we are inclined to allow the claim of the assessee based on the facts brought on record. The AO has not disputed the fact nor brought any material to dispute the above facts on record. Therefore we are inclined to allow the claim of the assessee in Ground No.3 and additional grounds. Even otherwise if we consider the inheritance as per Hindu Succession Act the property sold by the assessee has to be apportioned on the basis of inheritance and the portion of sale consideration in the name of the mother of the assessee will have tax neutral considering the fact that the relevant sale consideration is already invested in the property and the same would be available for deduction u/s 54F. Therefore it will lead to tax neutral and considering the peculiar facts on record we are inclined to allow the claim of the assessee. Appeal filed by the assessee is partly allowed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the valuation of the cost of acquisition of the ancestral land for determining long-term capital gains was correctly assessed by the Assessing Officer.
Whether the assessee was entitled to claim a deduction under Section 54F of the Income Tax Act, 1961, for the purchase of a property in the name of his mother.
Whether the entire capital gains from the sale of inherited agricultural land should be assessed in the hands of the assessee or apportioned between the assessee and his mother.
Whether the penalty under Section 271(1)(c) for concealment of income was justifiably initiated and imposed by the CIT(A).

ISSUE-WISE DETAILED ANALYSIS

Valuation of Cost of Acquisition:

Relevant Legal Framework and Precedents: The valuation of the cost of acquisition was disputed based on the rate determined by the Supreme Court in a compulsory acquisition case (GDA vs. Anoop Singh).
Court's Interpretation and Reasoning: The Tribunal observed that the Assessing Officer had incorrectly adopted a lower rate of Rs. 20 per sq. yd. for the valuation as of 01.04.1981, whereas the assessee had relied on a Supreme Court decision to adopt a rate of Rs. 200 per sq. yd., which was deemed reasonable by the Tribunal.
Key Evidence and Findings: The Tribunal noted the absence of specific data for the valuation date and adopted a reasonable approach by calculating an adjusted rate of Rs. 150 per sq. yd. for 1981, using a 3% annual increase from the 1962 rate of Rs. 85 per sq. yd.
Application of Law to Facts: The Tribunal applied the adjusted rate to determine the indexed cost of acquisition, leading to a partial allowance of the assessee's claim.
Conclusions: The Tribunal directed the Assessing Officer to recalculate the index cost of acquisition using the revised rate, partially allowing the assessee's appeal on this ground.

Deduction under Section 54F:

Relevant Legal Framework and Precedents: Section 54F of the Income Tax Act allows for exemption of capital gains if the sale proceeds are invested in a residential property.
Court's Interpretation and Reasoning: The Tribunal considered the assessee's claim for deduction under Section 54F for two properties, one in his name and another in his mother's name, and the applicability of precedents such as CIT vs. Kamal Wahal.
Key Evidence and Findings: The Tribunal found that the entire sale consideration was invested in the two properties, and the purchase in the mother's name was part of an understanding to partition inherited property.
Application of Law to Facts: The Tribunal held that the investment in the mother's name was valid under the circumstances and allowed the deduction under Section 54F.
Conclusions: The Tribunal allowed the assessee's claim for deduction under Section 54F, leading to a tax-neutral position.

Apportionment of Capital Gains:

Relevant Legal Framework and Precedents: The Hindu Succession Act, specifically Section 20, was relevant for determining the rights of the unborn child in inheritance.
Court's Interpretation and Reasoning: The Tribunal acknowledged the legal right of the assessee to inherit his father's property along with his mother, despite the sale being conducted solely in the assessee's name.
Key Evidence and Findings: The Tribunal noted that the property was inherited from the father and should have been shared between the assessee and his mother.
Application of Law to Facts: The Tribunal found that the mother's share in the property was indirectly acknowledged through the purchase of a property in her name.
Conclusions: The Tribunal concluded that the capital gains should be apportioned, leading to a tax-neutral outcome.

Penalty under Section 271(1)(c):

Relevant Legal Framework and Precedents: Section 271(1)(c) deals with penalties for concealment of income or furnishing inaccurate particulars.
Court's Interpretation and Reasoning: The Tribunal found that the penalty was not justified as the additions made by the CIT(A) were deleted.
Conclusions: The Tribunal deleted the penalty imposed under Section 271(1)(c).

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal established that reasonable adjustments in valuation should be made when specific data is unavailable, and that inheritance rights under the Hindu Succession Act must be respected in tax assessments.
Final Determinations on Each Issue: The Tribunal partly allowed the quantum appeal by recalculating the index cost of acquisition and fully allowed the deduction under Section 54F, leading to the deletion of the penalty.
Verbatim Quotes: "The assessee can adopt the value of Rs. 85 per sq.yds. as on 1962 and assessee has to determine the value as on 01.04.1981."

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