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TMI Blog2013 (9) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax (Appeals) was not proper. 3. That the Commissioner of Income-tax (Appeals) has erred in not considering the reply filed by the Tehsildar who had responded to enquiries made by the Assessing Officer under section 133(6) and gave the fair market value of the land as on April 1, 1981 after making detailed enquiries from the various prominent persons, viz., Nambardars/Sarpanchs who confirmed the market rate of Rs. 5 lakhs per acre. 4. That the Commissioner of Income-tax (Appeals) has failed to appreciate that fair market value of land and registry value are different as in the case of the assessee himself the sale was made for Rs.43,25,000 per acre and circle rate was Rs. 5 lakhs per acre and, thus, if fair market value has been declared at Rs. 43,25,000 per acrethen the same basis should have been adopted as cost of acquisition as on April 1, 1981, based on fair market value. Thus, the contradictory stand have been confirmed by the Commissioner of Income-tax (Appeals) against the facts and circumstances of the case. 5. Notwithstanding the above ground of appeal the Assessing Officer having already accepted fair market value of the land in the same area at Rs. 1,80,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has adopted fair market value of the land as on April 1, 1981 on the basis of certificate of Halka Patwari, as endorsed by the Tehsildar, issued on the basis of enquiries conducted from the field staff, various Sarpanches and Panchayat members, with their signature appended thereon. The learned authorised representative further pointed out that the fair market value of the land vis-a-vis sale consideration as recorded in registered sale deed cannot be the same. The relevant part of the brief synopsis is reproduced hereunder: "2. The facts in brief are that the assessee is an agriculturist and had sold some land to G. K. Colonizers and during the course of search on G. K. group of cases, one agreement was seized from where, it came to the notice of the Department that the assessee had sold agricultural land at the rate of Rs. 43.25 lakhs per acre, against the circle rate of Rs. 5 lakhs per acre and the assessee accepted that rate of sale as per agreement and filed the return of income and adopted the sale rate as per agreement. 3. For the justification of land rate as on April 1, 1981, the assessee filed the certificate from the Revenue Officer, wherein he had certified the 'fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Appellate Tribunal, is the final authority in determining the value of the pro-perty and not the Assessing Officer. The enquiries are detailed and even the Commissioner of Income-tax (Appeals) has mentioned that reason, given by the assessee, are logical. As per the Commissioner of Income-tax (Appeals), the registered documents has to be considered. We have demonstrated, firstly, that on the basis of compensation being paid to farmers, which is much higher than the registered rate, no reliance could be placed on such finding of the Commissioner of Income-tax (Appeals). Then, there is a difference in wording in section 55(2)(b)(ii) and on other sections, the Commissioner of Income-tax (Appeals) has not been able to find any fault in explanation of the assessee, coupled with the documentary evidences. The Commissioner of Income-tax (Appeals) has stated that the sale value was on the basis of agreement to sell and as such the same basis had to be adopted for determining the cost. The Commissioner of Income-tax (Appeals) has failed to consider that if the sale value is being taken into consideration, much more than the circle rate and, accordingly, for determining the 'fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Patwari on the basis of local enquiries. In the course of assessment proceedings, Patwari Shri Gurvinder Singh S/o. Shri Banta Singh, appeared before the Assessing Officer, on November 9, 2010, and explained that he had enquired from the prominent persons of the area about fair market value of the land, situated on the main Rahon Road, as prevailing during the year 1980-81 and accordingly, on the basis of such enquiries, issued the certificate specifying the market value of the land at Rs. 5 lakhs per acre. The Assessing Officer, with a view to verifying the veracity of the said certificate, requisitioned certain details and made enquiry under section 133(6) of the Act, in the assessee's case, from the Tehsildar (East) Ludhiana, vide letter dated December 13, 2010. The Tehsildar, vide letter dated December 20, 2010, intimated that average value of the land of Shri Manjit Singh S/o. Tirath Singh, resident of village Meharban is Rs. 27,030 per acre. He, further informed that Shri Mohan Singh S/o. Shri Budh Singh, S/o. Shri Attar Singh had sold 16 kanal 2 marla of his land to M/s. Amar Industries Ltd. at Rs. 54,300 per acre. The Tehsildar, further, stated that as per report of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of section 48 of the Act at Rs. 43,25,000 per acre. It is, further, argued that circle rate is the guiding factor for computing stamp duty, for the purpose of registry. Such factum validly confirms that registry rate has no relevance with the market rate or "fair market value" of asset/land. By following the same proposition, it can be reasonably concluded that registries, during the period April 1, 1980 to January 31, 1981, were made at quite lower rates, as compared to the market rates, as pointed out by the assessee, before the Assessing Officer. The explanation filed by the assessee did not find favour with the Assessing Officer and he adopted average rate of land at Rs. 27,030, as the "fair market value" of the land as on April 1, 1981, for the purpose of computing the capital gain, in this case. The Assessing Officer, observed that the assessee has not brought on record any comparable instance, for the purpose of adoption of "fair market value" at Rs. 5 lakhs per acre of the land in question, as on April 1, 1981. The Assessing Officer, adopted average rate of land, as reported by the Tehsildar. However, in the same some communication, the Tehsildar has reported t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ago when clear documentary evidence was available with the said authority. The authorised representative's claim that registered value or the value for the purpose of stamp duty does not represent the fair market value is not acceptable because it leads you from position of certainty as contained in the registered document to complete uncertainty and unverifiability as expressed in the report based upon verbal opinions. The authorised representative has claimed that the assessee adopted sale consideration at Rs. 43,25,000 per acre as against circle rate of Rs. 5,00,000 per acre which means that the fair market value was different from the circle rate. Here it needs to be kept in mind that the sale value adopted by the assessee is on account of documents found and seized during the course of search operation and there was no option but to adopt this value as it happen to be the actual sale consideration and was based upon a documentary evidence. The language in section 55(2)(b)(ii) was not intended to have different values for the purpose of calculation of the capital gain and the intension was not to place reliance on any evidence other than documentary evidence in determining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the 1st day of April, 1981, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of April, 1981, at the option of the assessee. 55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer- (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is less than its fair market value ; (b) in any other case, if the Assessing Officer is of opinion- (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf ; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do, and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the sale consideration at Rs.4,50,000 of the land measuring 4 karnal 10 marlas, sold by the appellant, whereas in the course of search operations, the appellant's agreement to sell of the same land records the sale consideration at Rs.43,25,000 per acre, i.e., Rs. 5,40,000 per kanal. However, as per registered sale deed, the sale rate is worked out at Rs. 1 lakh per "karnal". Therefore, there is invariably a wide gap between the sale consideration, as shown in the registered sale deed vis-a-vis sale consideration as recorded in the "agreement to sell". It is in view of this hard fact, the Legislature introduced the provisions of section 50C of the Act, as special provision for full value of consideration, in certain cases, whereby, for the purpose of section 48 of the Act, full value of consideration received or accruing as a result of transfer of the asset, the value adopted or assessed or assessable by any authority of the State Government for the purpose of payment of stamp duty, in respect of transfer, is deemed, as the full value of consideration, for the purpose of section 48 of the Act. The average rate at Rs.27,030, as on April 1, 1981, adopted by the Assessing Officer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax (Appeals), further, observed that assessee would have proceeded to adopt the price as recorded in the registered sale deed, as the full value of consideration of the land, had there been no search action in his case, leading to discovery of actual sale consideration, as specified in the "agreement to sell". The learned Commissioner of Income-tax (Appeals), further, observed that in the circumstances, the assessee cannot turn back and rely on generally prevalent practice, in real estate transactions, to support the actual sale consideration and rubbish the evidentiary value of registered sale price, reported by the Revenue authorities. The line of argument and logic, adopted by the Commissioner of Income-tax (Appeals), does not stand the test of rationality and, hence, not tenable in the light of the sale consideration of Rs. 43.25 lakhs per acre, as adopted by the Assessing Officer, as a full value of consideration of the land sold by the appellant, while computing capital gains.The appellant is not relying on prevalent practice in real estate transactions, as construed by the learned Commissioner of Income-tax (Appeals), but his contention is founded on the sale considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the field staff for the year 1980-81 contains data related to the agricultural land for which mutations were made. Further, as per wasika No. 4312 dated November 14, 1980 Sh. Mohan Singh S/o. Budh Singh s/o. Attar Singh sold agricultural land area measuring 16 karnal 2 marlas at the rate of Rs. 54,300 per acre to M/s. Amar Industry, Ludhiana. As per the report of the fields-staff, the market price of agricultural land situated on the main Rahon Road is verified as about Rs. 5,00,000 per acre during the year 1980-81 as per the inquiries made from the village Sarpanch and prominent citizens. The information is submitted for further necessary action. Sd/- Tehsildar Ludhiana (East)" A bare perusal of the certificate issued by the Tehsildar, as reproduced above clearly reveals that average price of the agriculture land in the area, has been worked out at Rs. 27,030 per acre during the year 1980-81, based on the report of mutations. Thus, the average price of agricultural land in the area has been worked out by the Tehsildar, on the basis of the sale consideration as recorded in the mutations. However, Tehsildar has mentioned in the same letter, the market price of the agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the appellant, in the matter of adoption "fair market value" of the land in question as on April 1, 1981. The relevant part of the decision of the Chandigarh Bench is reproduced hereunder: "Capital gains-Cost of acquisition-Fair market value as on 1st April, 1981-In terms of an agreement to sell dated 6th February, 1981, with one Z, assessee had agreed to sell a portion of the impugned land at the rate of Rs. 11.50 lakhs per acre-Though that agreement did not materialize, it supports the fair market value adopted by the assessee-Second primary evidence is the report of the registered valuer wherein also the value of the land has been estimated at Rs. 11.50 lakhs per acre-This rate is adopted on the basis of a sale deed of a comparable property located in the vicinity of asses-see's land-Comparable instance considered by the registered valuer was also considered by the DVO to evaluate a property in the same village in the case of one K, and the valuation report of the DVO valuing that property as on 1st January, 1981 has been accepted by the Assessing Officer in the case of K- That apart, assessee's land enjoyed an advantageous position because of its location-Aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c purpose of ascertaining "fair market value" of the asset, as on January 1, 1981, by the expert valuer. Further, it is pertinent to mention that the "fair market value" in relation to a capital asset has been defined under section 2(22B) of the Act. The fair market value in relation to capital asset, means the price that the capital asset would ordinarily fetch on its sale in the open market on the relevant date. Sale consideration, as found recorded in the sale agreement in question, which was seized in the course of search operation, is nothing but "fair market value", as negotiated and arrived at by the purchaser and the seller, in respect of said land, having regard to the market conditions, location of the land and other relevant factors. Such sale consideration, as recorded in "agreement to sell" is not the same as recorded in the registered sale deed of the said land. Therefore, adoption of the average value of land by the Revenue, at Rs. 27,030 per acre, on the basis of registered sale deeds, cannot be considered as "fair market value" within the definition of fair market value in relation to a capital asset, as contained under section 2(22B) of the Act. The rationale and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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