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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 ..... sale consideration is concerned, we find the Ld.CIT(A) on the basis of the entries found on the seized documents of the loose paper Bundle No.12 has computed rate per sq.ft. at ₹ 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 ₹ 80/- per sq.ft. as against ₹ 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 ₹ 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 ₹ 120.98 per sq.ft. is upheld and the ground raised on this issue is accordingly dismissed. Determination of FMV per sq.ft. as on 01-04-1981 - in absence of any satisfactory reply from the valuer whose statement was recorded u/s.131 on 15-09-2004 the AO rejected the valuation report given by the valuer - Held that:- We find a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng F.Y. 2000-01 the assessee has sold 28.81 sq.mtrs to Shri Sayed Abbas Zaidi on 16-12-2002. These are only some of the examples. The various certificates filed in the paper book show sale of TDR in different financial years and the entire sale does not relate to the current assessment year. Although documents were very much available with the AO as well as the CIT(A) they have not considered the year of taxability on the basis of sale of TDR. Therefore, we find some force in the submission of the Ld. Counsel for the assessee that correct income has to be taxed in the impugned assessment year. We therefore direct the AO to verify from the details furnished before him from the utilization of DRC and transfer certificates and bring to tax the correct income for the impugned assessment year. So far as sale proceeds in the assessment years other than the impugned assessment year the AO will follow due process of law for bringing to tax the capital gain on transfer of TDRs in respective years. We hold and direct accordingly. Actual area transferred by the Raut family - Held that:- Restore the issue to the file of the AO with a direction to verify the exact area considering the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mooted a plan according to which it acquired certain lands for its development plans. In lieu of the acquisition of the land, it gives certain development right to the person whose land is acquired. If an owner hands over the possession of the reserved land to the PMC free of cost and without any encumbrance, a Development Right Certificate (DRC) will be granted to him to entitle him to construct built up area equivalent to the permissible FSI of the land handed over by him on one or more plots in the zone specified. These development rights can be transferred by the holder to a third party. The transaction of transferring TDR is done on the basis of notarized power of attorney. By granting power of attorney to a person, the land owner hands over the power for transacting in TDR pertaining to the said plot of land to the builder. When he gets the power of attorney he virtually becomes the owner of the TDR for that plot of land. The TDR for one plot of land may change many hands. 5. The AO noted that the assessee has been holding the following DRC in his hands along with other family members : DRC No. Location of the land Area in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived 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 transactions recorded on these pages are very much true and real and the same are not mere assumptions. He further noted that the documents found and seized from the residence of assessee and the other family members contain, the rate at which the Raut family has transferred the land to Kumar and Company. The rates as per the seized documents are as under : Shri Sushilabai S. Raut Rs.100 per sq.ft. Shri T.S. Raut Rs.100 per sq.ft. Shri Jaywardhan S. Raut Rs.100 per sq.ft. Shri Narendra S. Raut Rs.100 per sq.ft. Shri Satyaraj S. Raut Rs.140 per sq.ft. Shri Prithviraj S. Raut Rs.141 per sq.ft. Miss Pushplata S. Raut Rs.7,05,000 lump sum Miss Hemlat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culations 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 ₹ 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 ₹ 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 ₹ 80/- per sq.ft. was fixed. He, therefore, held that the sale consideration shown in the return of income has no basis at all. He noted that in the seized document there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khs 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 ₹ 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 ₹ 9/- per sq.ft. then how he has valued the land at ₹ 20/- per sq.ft. in 1981. He replied that this calculation was based on certain assumption that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the explanation given by the assessee the AO determined the cost of acquisition at ₹ 8/- per sq.ft. as against ₹ 20/- per sq.ft. declared by the assessee. Thus, he determined the cost of acquisition for his share of land at ₹ 72,93,891/-.After deducting the same from the sale consideration of ₹ 2,69,47,879/- the AO determined the capital gain in the hands of the assessee at ₹ 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 ₹ 80/- per sq.ft. to ₹ 120/- per sq.ft. yet the AO chose to held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation 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 ₹ 120/- per sq.ft. as against ₹ 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 ----------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e too low considering the market value prevailing at the relevant time. The approved valuer, in his report, has referred to an instance of sale @ ₹ 9/- per sq.ft. for unreserved land. Considering all the facts before me, therefore, I am of the view that the fair market value of the lands in question as on 01-04-1981 should be adopted at ₹ 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 ₹ 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02. 26. The Ld. Counsel for the assessee submitted that the additional ground raised is legal in nature and all the facts are on record. Therefore, the same may be admitted for adjudication. Relying on various decisions he submitted that since no new facts are required to be investigated and the additional ground is legal one, therefore, the same should be admitted. For the above proposition 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 FS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the TDR certificates are issued by PMC in the month of March 2000 and in some of the cases land has been acquired by PMC on 12-07-1999. Referring to the copy of the assessment order he submitted that the AO in Para 1.7 of the order has also mentioned that the date of issue of DRC is 03-01-00 for a part of the land bearing DRC No. 2195 to 2198 and for the other part 03-03-00 for DRC No.2340 to 2399. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e determination of FMV as on 01-04-1981. The assessee had adopted the FMV at ₹ 1230 per sq.mtr. whereas the AO adopted the FMV at ₹ 15.30 per sq. mtr. The Tribunal considered the fact that stamp valuation authorities had determined the FMV of the land as on 01-04-1989 at ₹ 1000 per sq.mtr. The Tribunal noted that the Town Planning Department of Pune has issued a Circular as per which the rate of the said land as on 01-04-1981 would be adopted 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 ₹ 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 ₹ 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 ₹ 55.74 per sq.ft. 34. Referring to page 355 of the paper book the Ld. Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 120/- per sq.ft. as against ₹ 80/- per sq.ft. declared by the assessee. Similarly, the AO considered the cost of acquisition as on 01-04-1981 at ₹ 8/- per sq.ft. which was enhanced by the CIT(A) to ₹ 9/- per sq.ft. The AO completed the assessment u/s.153A r.w.s. 143(3) on 29-12-2006. The CIT(A) passed the order on 28-11-2012. He submitted that the question of year of taxability was neither raised before the AO or before the CIT(A) and the assessee in the additional ground before the Tribunal has raised for 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th his family members owned an ancestral land near Parvati, Pune which was reserved and subsequently acquired by PMC. On acquisition of the land the PMC granted the TDR to the assessee and other members. The land was under reservation since 1965. In the year 1992 the Raut family executed an agreement to sell the land under reservation to M/s. Kumar and Company. However, later on Shri Vimalkumar Jain of Kumar Company acquired irrevocable power of attorney from Raut family for dealing in TDR which would be allotted on account of acquisition 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 ₹ 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 ₹ 20/- per sq.ft. and the sale value of TDR at ₹ 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 ₹ 8/- per sq.ft. and the sale consideration of the TDR at ₹ 120/- per sq.ft. We find in appeal the Ld.CIT(A) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by PMC. It is not a case that the value of the land is not ascertainable. Therefore, the argument of the Ld. Counsel for the assessee that the assessee is not liable to capital gain tax at all or that it cannot be taxed in this year because it relates to A.Y. 2000- 2001 is without any merit. Therefore the additional ground on this issue is dismissed. 45. So far as adoption of rate of ₹ 120.98 per sq.ft. as the sale consideration is concerned, we find the Ld.CIT(A) on the basis of the entries found on the seized documents at page 41 of the loose paper Bundle No.12 has computed rate per sq.ft. at ₹ 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 ₹ 80/- per sq.ft. as against ₹ 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 ₹ 120.98 per sq.ft. and in absence of any cogent material brought to our notice by the Ld. Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,500/- per sq.mtr. As per Circular No.9 dated 03-10-1989 the ready reckoner rates for stamp valuation have been notified w.e.f. 1989 only and as per the circular dated 03-10-1989 the value of land in the year 1981 will be 40% of the value in 1989 (i.e. 40% of ₹ 1,500/- per sq.mtr, i.e. ₹ 600 per sq.mtr). 48. We find a somewhat similar case had come up before the Pune Bench of the Tribunal in the case of Sathe Biscuit and Chocolate Company Ltd. (Supra). In that case the issue involved was regarding the determination of FMV as on 01-04-1981. The assessee had adopted the FMV at ₹ 1,230/- per sq.mtr whereas the AO adopted the FMV of ₹ 15.23/- 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 ₹ 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year of taxability on the basis of sale of TDR. Therefore, we find some force in the submission of the Ld. Counsel for the assessee that correct income has to be taxed in the impugned assessment year. We therefore direct the AO to verify from the details furnished before him from the utilization of DRC and transfer certificates and bring to tax the correct income for the impugned assessment year. 50. So far as sale proceeds in the assessment years other than the impugned assessment year the AO will follow due process of law for bringing to tax the capital gain on transfer of TDRs in respective years. We hold and direct accordingly. 51. The other grievance of the Ld. Counsel for the assessee 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 Tapowar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirming the Assessing Officers action of computing Capital Gains income on estimated basis at ₹ 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 @ ₹ 120.98 per sq. ft as against ₹ 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 @ ₹ 20/- sq. ft and arbitrarily estimating @ ₹ 9/- and the action may be held as illegal and suitably modified. 5. On the facts and circumstances of the case, Assessing Officer and CIT(A) erred in relying on documents and statements without giving due opportunity to assessee and following principles of natural justice, and therefore this action may be held as nullity . 6. On the facts and circumstances of the case, Assessing Officer, and CIT(A) may be directed to delete the additions made and confirmed, to vacate the s ..... 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