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TMI Blog2009 (4) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by HDFC Bank. Because of the sale of property and the question of capital gains attached to it, the return was taken up for scrutiny. The Assessing Officer found that the assessee had sold 177 cents of land in Maradu Village on 19-1-2006 for a total consideration of Rs. 11,02,71,200. The assessee purchased the said property in 1975 for Rs. 9000. In computing the capital gains, the assessee has estimated the Fair Market Value (FMV) of the property at Rs. 1,66,61,500 as on 1-4-1981. This works out to Rs. 94,132 per cent. The Assessing Officer did not accept the value estimated by the assessee and made his own enquiries and also compared an available case with the Sub-Registrar Office at Thripunithura and finally estimated the FMV as on 1-4-1981 at Rs. 1,77,000 at the rate of Rs. 1,000 per cent. Consequently, the Assessing Officer made a Long Term Capital Gains assessment for a sum of Rs. 7,35,05,097. The first appeal was dismissed. Therefore, the second appeal before us. 3. The grounds raised by the assessee in this appeal read as below : " 2. The learned Commissioner of Income-tax (Appeals) erred in not holding the Date of Capital Asset as 6-1-1994 in spite of judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained that the decision of the Apex Court was applicable only to the proceedings before an assessing authority and not to the adjudicative power of an Appellate Authority and therefore the CIT (Appeals) ought to have adjudicated the matter on merit. 6. On merit, the Chartered Accountant relied on the judgment of the Punjab and Haryana in the case of CIT v. Gurcharan Singh [2007] 292 ITR 387 and again in the case of CIT v. S. Hoshnak Singh (HUF) [2007] 292 ITR 390 (Punj. Har.). He explained that in both the above decisions, the Hon ble Court has upheld the contention of the assessees therein that that the FMV as on the date of agricultural land having notified as capital asset is to be adopted for the purpose of section 48 in computing the capital gains and it is not permissible to adopt the FMV. 7. The Chartered Accountant further explained that if the Assessing Officer was not able to arrive at the value of the capital asset, he should have initiated action under section 55A( b )( ii ) and the matter should have been referred to the Valuation Officer and the FMV should have been determined on the basis of the valuation report. 8. Shri C. Karthikeyan Nair, le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 - where the court has held that the fact that the capital gains on transfer of agricultural land which is a capital asset within the meaning of section 2(14) of the Act have been made assessable as a result of the amendment made by the Finance Act of 1970, does not mean that the value of agricultural land should be ascertained as on 28-2-1970. 13. The learned Additional Commissioner finally relied on the judgment of the jurisdictional High Court in the case of CIT v. M. Smt. Subaida Beevi [1986] 160 ITR 557 where the court has held that the cost of acquisition should be the market value of the property as on 1-01-1954 even though the agricultural land was Notified as a capital asset with effect form 1-04-1970. 14. The learned Addl. Commissioner, therefore, submitted that the law is clear on the subject and the arguments of the assessee do not have any force and therefore the Assessing Officer has rightly computed the capital gains on the basis of the FMV of the property as on 1-04-1981. 15. In reply, the Chartered Accountant submitted that the decision of the jurisdictional High Court in Smt. Subaida Beevi s case ( supra ) is distinguishable from the facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts and circumstances of the case as reflected in the decisions in Tuticorin Alkali Chemicals Fertilizers v. CIT [1997] 227 ITR 172 ; CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC); and CIT v. Karnal Co-op. Sugar Mills Ltd. [2000] 243 ITR 2 (SC), where the court was examining the head of income in the context Interest income earned by the assessees. He also submitted that the Supreme Court while considering the nature of penalty proceedings in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519 has held that "mens rea" has to be proved. Whereas in a recent judgment in the case of Union of India v. V. Dharmedra Textiles [2008] 306 ITR 277 (SC) - the court has held that penalty under the Income-tax Act is a civil liability and therefore mens rea is not an element to be considered. 18. The Chartered Accountant therefore submitted that each and every decision has to be considered on the facts and circumstances of each case and within the applicable time frame and one should not be automatically carried away by the judgment of the jurisdictional High Court, which was in fact rendered in a different scenario. 19. We heard both sides in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. Whether an asset is liable for capital gains tax and the question as to what would be the amount of capital gains are two different things. The date of Notification is relevant only in deciding the nature of the property. It is necessary to complete the first stage and not necessary to be carried over to the second stage. On the date of transfer once it is found that the asset is a capital asset exigible for capital gains tax, the relevance of the notification issued by the Central Government is complete. That part of exercise is over. It is the second stage to decide what should be the quantum of capital gains to be assessed. It is for the purpose of computation that the FMV is relevant. It is for finding out the FMV, the date of FMV is relevant. The FMV date is not relevant in deciding the character of the property. 21. Once the property is found to be a capital asset on the date of transfer, the transaction becomes liable for capital gains taxation and the date of notification cannot be used for any other purpose. The statutory date for the FMV cannot be substituted with a subsequent conversion date determined by the Central Government through a Notification. The Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Punjab Harayana High Court in the case of Gurcharan Singh ( supra ) and again in the case of S. Hoshnak Singh (HUF) ( supra ), in isolation. 26. This is more because the jurisdictional High Court in the case of Smt. Subaida Beevi ( supra ) has itself adjudicated the matter, by which we are bound. In that case, the statutory FMV date for the purpose of computing the quantum of capital gains was on 1-4-1954. The asset became a capital asset as on 1-4-1970. The court held that FMV has to be found out as on 1-4-1954 and not on the conversion date of 1-4-1970. Thus, this decision squarely applies to the present case. 27. Therefore, in the facts and circumstances of the case we find that the Assessing Officer has rightly adopted the FMV as on 1-4-1981. The first ground raised by the assessee thus fails. 28. The next ground raised by the assessee is that the CIT (Appeals) has erred in confirming the value of the land at Rs. 1000 per cent as on 1-4-1981. The value adopted by the assessee is Rs. 94,132 per cent. The actual cost of acquisition as explained by the CIT (Appeals) in page 3 of his order is Rs. 102 per cent. The property was acquired in 1975. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, again it is not mandatory. At this stage, we do not think that it is necessary to go through the valuation report of the approved valuer, which was not produced before the lower authorities. Nor there was any such prayer by the assessee before the Assessing Officer. Therefore, in these circumstances, we are not inclined to entertain the additional evidence, report of the Registered Valuer, placed by the assessee before us. 33. Now the question is whether the FMV fixed by the assessing authority is fair or not. One of the main grounds raised by the assessee in this regard is that when the property was purchased in 1975, it was Marshy land with no market attraction. By 1980 the alignment for National High Way 47 was made and tenders for the construction of roads and bridges were invited and the area became the center for potential development and in such circumstances the FMV would have been extremely higher than the nominal value adopted by the Assessing Officer at Rs. 1000 per cent. The stand of the assessing authority is that developments have not actually taken place as on 1-4-1981 and there was a contemplation of the development of roads and bridges and in such ci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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