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TMI Blog2016 (2) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... of his family on 01-09-2004 which finally concluded on 30-09-2004. During the course of search cash of Rs. 5,50,000/- and FDR of Rs. 74,06,636/- were found and seized as per Annexure A to the Panchanama dated 05-09-2004. Simultaneous search action was also conducted at the residential premises of Shri Privthviraj S. Raut, Shri Sathyaraj S. Raut and Shri Sandeep Deo of Pune. 3. A statement u/s.132(4) of the I.T. Act of the assessee was recorded on 02-09-2004 and 20-10-2004. In response to the notice u/s.153A(a) the assessee filed his return declaring income of Rs. 1,42,580/- on 11-03-2005 which is the same figure as per the original return filed u/s.139(1). The assessee had claimed to have derived income from business and agricultural activity. He was the partner in the firm namely M/s. Raut Developers, M/s. Sushila Niketan, M/s. Palm village and M/s. Raut Horticulture. However, the income of Rs. 1,42,580/- shown in the original return as well as in the return in response to notice u/s.153A from capital gains. 4. During the course of assessment proceedings the AO examined the seized documents according to which the assessee has sold his TDR to M/s. Kumar and Company. The AO noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in short) acquired the irrevocable power of attorney from the Raut family in March 2001 for dealing in TDR allotted on the land belonging to them. It was stated by both the parties to the transaction that the payments were to be made as and when the TDR was sold. 8. The AO noted that during the search action loose papers No.73 of the loose paper Bundle No.12 was seized from the residence of Shri Sandeep Deo who was closely associated with the assessee and M/s. Kumar and Company. This page is written on both the sides. The front portion of this page has calculations related to conversion of balance amounts payable to the various members of the Raut family into DRC areas. For all these calculations first of all the total amount payable to the various members of the Raut family has been taken and the same has been divided into by 200 (i.e. the rate of DRC/TDR) and the area equivalent to the balance amount payable has been arrived at in sq.ft. Thereafter this area in sq.ft. has been converted into area in sq.mtrs by dividing it by 10.764. 9. After analyzing the various seized documents in the name of different persons the AO came to the conclusion that the financial events and transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. The AO asked the assessee to explain the notings on those seized material. It was submitted by the assessee that no addition on the basis of calculations of seized materials should be made since he did not receive any money. It was submitted that the assessee and his family members received money at the rate of Rs. 80/- per sq.ft. as per the agreement dated 02-10-2002. It was argued that during the search action no disproportionate assets like jewellery, cash etc. were found which supports the contention that no unaccounted cash was received. Relying on various decisions it was submitted that no addition can be made. 12. However, the AO was not satisfied with the explanation given by the assessee. The AO analysed the investments made by the assessee as appearing in the seized materials, the statements recorded of different persons and the statement recorded u/s.132(4) on 10-09- 2004 of Shri Satyaraj S. Raut and observed that in the books of Shri Satyaraj S. Raut the rate of sale of land was Rs. 140/- sq.ft. Further, the assessee has not produced the original sale deed between Raut family and M/s. Kumar and Company by which the rate of Rs. 80/- per sq.ft. was fixed. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion reports it was noted that the same land was valued at Rs. 45 lakhs in one valuation report and Rs. 35 lakhs in the other. The valuer has also quoted some actual sale instances of properties in the same area around 1981 according to which the land in same area was sold at Rs. 9/- per sq.ft. in 1984. 15. The AO summoned Shri S.R. Nimbal, the approved valuer and his statement was recorded u/s.131 on 15-09-2004. Both the reports were put before him and he was asked to explain why and in what situation the two different valuation reports were made for the same land. It was replied by him that the difference in valuation resulted because in the later report he had considered the fact that there was a water tank on that land which was overlooked by him in the first report. When he was asked to explain that in both of his reports he had mentioned that he had personally visited the site, then how he could overlook the presence of a water tank on the land, he stated that a mistake in valuation of land had occurred. He was further asked to explain that when he himself had quoted the actual sale of land in that area in 1984 at Rs. 9/- per sq.ft. then how he has valued the land at Rs. 20/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble High Court produced before him. Rejecting the explanation given by the assessee the AO determined the cost of acquisition at Rs. 8/- per sq.ft. as against Rs. 20/- per sq.ft. declared by the assessee. Thus, he determined the cost of acquisition for his share of land at Rs. 72,93,891/-.After deducting the same from the sale consideration of Rs. 2,69,47,879/- the AO determined the capital gain in the hands of the assessee at Rs. 1,96,55,678/-. 17. Before CIT(A) the assessee submitted that although the AO had admitted that the seized documents do not contain any handwritten or signature of any member of either the Raut family or the Kumar company, yet the AO presumed that the documents are true and based his assessment order on the same. It was argued that the AO had chosen to rely on the same as authentic without even questioning the person who has supposedly written the same namely Shri Deo. It was submitted that Shri Deo in his statement u/s.132(4) stated that all such calculations are estimates and not relevant to actual. The assessee submitted that the various notes prepared by Shri Deo shows that the rates ranging from Rs. 80/- per sq.ft. to Rs. 120/- per sq.ft. yet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was flawed. It was reiterated that the presumption of the AO that the land was under reservation was incorrect as the lands were in the residential zone as per the Development Plan of Pune city in 1966. The next development plan was released only in 1987. 20. However, the CIT(A) was not fully satisfied with the explanation given by the assessee. So far as the adoption of value of sale rate at Rs. 120/- per sq.ft. as against Rs. 80/- per sq.ft admitted by the assessee is concerned, the Ld.CIT(A) analysed the document whose English translation reads as under : 21. After careful analysis of the above seized document, the rate of compensation per sq.ft. was worked out by him as under : Total area of land - 9,13,262.64 sq.ft. Original consideration - 9,20,01,264/- Add : Enhanced compensation @25% - 1,81,84,816/- Total Consideration - 11,04,94,080/- Thus, rate per sq.ft. = Total consideration ------------------------- Total area Rs.11,04,94,080 = -------------------- 9,13,262.64 Rs.120.98 = per sq.ft. 22. He accordingly directed the AO to recompute the taxable capital gain by adopting Rs. 120.98 per sq.ft as the sale consideration as against Rs. 120/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/- per sq.ft. for working out the cost of acquisition. In consequence of the discussions above, this ground of appeal may be treated as partly allowed." 24. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds : "1. On the facts and circumstances of the case, Assessing Officer erred in computing total income at Rs. 1,96,53,988/- and CIT(A) erred in confirming the same ignoring the facts and legal position and their action may be held as erroneous and bad in law. 2. CIT (A) erred in confirming the Assessing Officers action of computing Capital Gains income on estimated basis at Rs. 140/- per sq. ft. ignoring evidence on record and their action may be held as erroneous and vacated. 3. Without prejudice to ground no. 2, it may be held CIT(A) 's action in directing Assessing Officer to adopt rate @ Rs. 120.98 per sq. ft as against Rs. 120/- results in enhancing assessment without due process & may be held as bad in law and be set aside as illegal. 4. On the facts and circumstances of the case Assessing Officer and CIT(A) ignored the valuation report of registered valuer determining market value as on 01/04/1981 @ Rs. 20/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition he relied on the following decisions : 1) NTPC Ltd. 222 ITR 383 (SC) 2) Jute Corporation of India Ltd. 187 ITR 688 3) Ahmedabad Electricity Co. 199 ITR 351 (Bombay) 27. After hearing both the sides, the additional grounds raised by the assessee are admitted for adjudication. 28. The Ld. Counsel for the assessee submitted that TDR is a notional right and therefore profit on sale of TDR does not result into any capital gain. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Sambhaji Nagar Cooperative Housing Society Ltd. vide ITA No.1356 of 2012 order dated 11-12- 2014, a copy of which was filed during the course of hearing, he submitted that the Hon'ble High Court in the said decision has held that gains on sale of TDR received as additional FSI as per DC Regulations has no cost of acquisition and is not chargeable to capital gains. 29. Referring to the decision of the Hon'ble Supreme Court in the case of CIT Vs. Shelly Products and another reported in 261 ITR 367 he submitted that the Hon'ble Apex Court in the said decision has held that in a case where an assessee chooses to deposit by way of abundant caution advance tax or self-asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, when the PMC has acquired the land in March 2000 and has issued TDR in lieu of the acquisition of the land, the capital gain, if any, arising on acquisition of the land is in A.Y. 2000-01 and the same cannot be taxed in A.Y. 2001-02. He submitted that in subsequent year, i.e. A.Y. 2001-02, the assessee sold TDR which was received in lieu of the acquisition of the land and since there is hardly any difference in the time period of allotment of TDR and the sale thereof, no capital gain is chargeable to tax on sale of TDR since the selling price of the TDR would be equivalent to the cost price of the TDR which was allotted. Therefore, according to the Ld. Counsel for the assessee no capital gain can be taxed in A.Y. 2001-02. For the above proposition, he relied on the following decisions : 1. Atul G. Puranik Vs. ITO - (2011) 30 CCH 0239 (Mum) (Trib) 2. ACIT Vs. Shri Nirmal Bhogilal - ITA No.2942/Mum/02 31. So far as adoption of sale consideration at Rs. 120.98 per sq.ft. by the CIT(A) is concerned he submitted that the actual consideration received was only Rs. 80/- per sq.ft. and there was no concrete evidence with the department to demonstrate that the actual conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate of 40% of the value determined as on 01-04-1989. The Tribunal therefore considered the rate of land as on 01-04-1981 at Rs. 400/- per sq.mtr and considering the fact that the property of the assessee was having at better location and the fact that the stamp valuation rates are generally lesser than the FMV, the Tribunal determined the FMV at Rs. 630/- per sq.mtr. Adopting the above principle laid down by the Tribunal in the case of Sathe Biscuit and Chocolate Company Ltd. (Supra) the Ld. Counsel for the assessee submitted that by considering the ready reckoner rate of 1989 the FMV of the said land as on 01-04-1981 will be Rs. 55.74 per sq.ft. 34. Referring to page 355 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the calculation of land rate by following the above proposition as on 01-04-1981 as per ready reckoner according to which the rate per sq.ft. comes to Rs. 55.74 per sq.ft., the details of which are as under : "Ready Reckoner rate of Parvati Area - Basis Ready reckoner 1989 Rate per sq.mtr - Rs. 1,500/- Further, as per Circular No.9 dated 03/10/1989 - "The value of land as on 1981 is 40% of value of land as on 1989 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first time the issue regarding the year of taxability. He submitted that the assessee is now stating that capital gain can be brought to tax only in A.Y. 2000- 01 and not in A.Y. 2001-02 because possession was given to the Government before March 2000 and Government has also issued TDR before March 2000. He submitted that it cannot be said that by mistake or ignorance capital gain be shown in A.Y. 2001-02. Therefore, it cannot be said that AO committed mistake. He submitted that the same counsel was appearing before the AO as well as the CIT(A) and it cannot be said that the counsel was not aware of it especially when no ground was taken before the CIT(A) on this issue. He submitted that only after the time limit for all remedial measures were lapsed the assessee took a ground before the ITAT that the capital gain if any can be brought to tax only in A.Y. 2000-01 and not in A.Y. 2001-02. 38. So far as sale of TDR in A.Y. 2001-02 and 2002-03 are concerned he submitted that the submission of the Ld. Counsel for the assessee that no 147 proceedings can be initiated in 153A assessment is incorrect. He submitted that this cannot be the proposition. He submitted that the Tribunal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the land by PMC. The assessee in the return filed declared the capital gain on account of sale of TDR as long term capital gain at Rs. 1,42,580/- for the impugned assessment year. While doing so, the assessee has considered the cost of acquisition as on 01-04-1981 at Rs. 20/- per sq.ft. and the sale value of TDR at Rs. 80/- per sq.ft . The AO on the basis of documents seized during the course of search from the premises of the assessee and other family members on 01-09-2004 determined the FMV as on 01-04-1981 at Rs. 8/- per sq.ft. and the sale consideration of the TDR at Rs. 120/- per sq.ft. We find in appeal the Ld.CIT(A) on the basis of the seized documents found from the premises of the assessee considered the rate per sq.ft. of TDR at Rs. 120.98 per sq.ft. and the cost of acquisition as on 01-04-1981 at Rs. 9/- per sq.ft. 41. It is the case of the Ld. Counsel for the assessee that the adoption of sale consideration at Rs. 120.98 per sq.ft. by the CIT(A) is not justified since the actual consideration received was only Rs. 80/- per sq.ft. and there was no concrete evidence with the department to demonstrate that the actual consideration received was Rs. 120.98 per sq.ft The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per sq.ft. at Rs. 120.98 per sq.ft. The Ld. Counsel for the assessee could not controvert the factual analysis done by the Ld.CIT(A) on the basis of the seized document. Merely because the department did not find any unaccounted asset cannot be a ground to adopt the sale consideration at Rs. 80/- per sq.ft. as against Rs. 120.98 per sq.ft. computed by the CIT(A) on the basis of the seized document. In view of the detailed reasoning given by the CIT(A) adopting the rate per sq.ft. at Rs. 120.98 per sq.ft. and in absence of any cogent material brought to our notice by the Ld. Counsel for the assessee against the same the order of the CIT(A) determining the rate per sq.ft. at Rs. 120.98 per sq.ft. is upheld and the ground raised on this issue is accordingly dismissed. 46. Now coming to the issue of FMV per sq.ft. as on 01-04-1981, we find the assessee on the basis of valuation report prepared by the Government approved valuer namely Shri S.R. Nimbal, valued the cost of this land at Rs. 20/- per sq.ft. as on 01-04-1981. We find the AO referred to the 2 valuation reports prepared by the same valuer for the same piece of land found during the course of search and noted that one valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23/- per sq.mtr. The Tribunal after considering the above circular noted that the stamp valuation authorities had determined the FMV of the land as on 01-04-1989 at Rs. 1,000/- per sq.mtr. The Tribunal after considering the above circular considered the rate of the land as on 01-04-1981 at 40% of the value determined as on 01-04-1989. After considering the fact that the property of the assessee was having at a better location and holding that the stamp valuation rates are generally lesser than the FMV, the Tribunal determined the FMV at Rs. 630/- per sq.mtr. Adopting the principle laid down by the Pune Bench of the Tribunal in the case of Sathe Biscuit and Chocolate Company Ltd. (Supra) we find the FMV of the said land as on 01-04-1981 comes to Rs. 55.74 per sq.ft. if the ready reckoner rate of 1989 at Rs. 1,500/- per sq.mtr is considered. Since the assessee has adopted the rate of Rs. 20/- per sq.ft. as against Rs. 55.74 per sq.ft. as per the ready reckoner rate of 1989 and proportionately brought down to 1981 rate the same appears to be reasonable. In this view of the matter, we direct the AO to adopt the rate of Rs. 20/- per sq.ft. as the cost of acquisition as on 01-04-1981 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is that there has been an error in considering the actual area transferred by the Raut family. According to him, in the return of income the assessee has computed the capital gain by considering the area of land at 231426 sq.ft. whereas the AO has considered the area at 224565 sq.ft. According to the Ld. Counsel for the assessee the total area allotted was 1212360 sq.ft. and the share of the family members as per page 357 of the paper book is as under : Shri Tapowardhan V. Raut 200393 sq.ft. Shri Jaywardhan S. Raut 200393 sq.ft. Shri Narendra S. Raut 200393 sq.ft. Miss Sushilabai S. Raut 200393 sq.ft. Miss Pushplata S. Raut 200393 sq.ft. Miss Hemlata S. Raut 200393 sq.ft. We therefore restore the issue to the file of the AO with a direction to verify the exact area considering the actual area of TDR sold and compute the capital gain accordingly. The grounds as well as the additional grounds raised by the assessee are accordingly decided in the terms indicated above. 52. Identical grounds have been taken by the other family members, the details of which are given below : Sl.No. ITA No. Name of the assessee Asst. Year 1 ITA No.273/PN/2013 Jayawardhan S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised and/or produce additional evidence at the time of hearing." 55. The Ld. Counsel for the assessee at the time of hearing did not press grounds of appeal No. 1 to 3 and grounds of appeal No.5 for which the Ld. Departmental Representative has no objection. Accordingly, the above grounds raised by the assessee are dismissed as 'not pressed'. 56. So far as the remaining grounds are concerned, the only dispute is regarding the order of the CIT(A) in estimating the value of land at Rs. 9/- per sq.ft. as on 01-04-1981 as against Rs. 20/- per sq.ft. considered by the assessee. 57. After hearing both the sides, we find this issue had come up in A.Y. 2001-02 in ITA No.276/PN/2013 for A.Y. 2001-02. We have already decided the issue in the preceding paras and the rate of Rs. 20/- per sq.ft as on 01-04-1981 has been accepted. Accordingly, the grounds raised by the assessee on this issue are allowed. 58. In the result, the appeal filed by the assessee for the impugned assessment year is partly allowed. 59. Identical grounds have been taken by the other family members, the details of which are given below : Sl.No. ITA No. Name of the assessee Asst. Year 1 ITA No.274/PN/2013 Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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