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TMI Blog2010 (4) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... of convenience and brevity we will discuss ITA No.3374/Ahd/2009 in the case of Kaushik Sureshbhai Reshamwlal. The grounds raised by the assessee, which reads as under:- 1. On the facts and circumstances of the case and in law The Learned Commissioner of Income Tax (Appeal) has erred in enhancing the value of land from ₹ 400/- Sq. Mtr. to ₹ 5000/- Sq. Mtr. 2. On the facts and circumstances of the case The Learned Commissioner of Income Tax ought to have taken view to accept the sales price at ₹ 400/- per Sq. Mtr. Shown by your appellant and deleted the addition of ₹ 21,24,472/- being amount estimated at ₹ 700/- per Sq. Mtr. By the Assessing Officer. 3. It is therefore prayed that the addition made by The Assessing Officer and there after enhancement made of ₹ 1,23,08,119/- by the Learned Commissioner of Income Tax Appeal-IV, may please be deleted. 3. The brief facts leading to the above issue are that the assessee along with other six family members owned an ancestral agricultural land at Survey No.227 Bhestan, Surat ad measuring 88700 sq. mt. agricultural land falling under Surat Urban Development Authority (SUDA in short), whereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37,50,000 6,25,000 4. Rameshchandra J Reshamwala 37,50,000 6,25,000 5. Arvind C Reshamwala (HUF) 25,00,000 4,16,670 6. Indravadan M Reshamwala (HUF) 12,50,000 2,08,330 7. Bhupendra M Reshamwala (HUF) 12,50,000 2,08,330 8. Kaushik S Reshamwala 12,50,000 2,08,330 9. Ashwin M Reshamwala (HUF) 12,50,000 2,08,330 10. Naresh N Reshamwala 15,00,000 2,50,000 11. Hasmukhlal D Reshamwala (HUF) 15,00,000 2,50,000 12. Rasiklal D Reshamwala (HUF) 15,00,000 2,50,000 13. Govardhan D Reshwamwala (HUF) 15,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in December 2005, he would not have waited to enter into a registered sales deed for a period of more than 1 year. This fact clearly signifies that the sales consideration as shown by the appellant is not correct and just because the unaccounted cash portion of the sales consideration was found and impounded during Survey, the appellant has thereafter, not shown any further receipt and thereby evaded the balance portion which is ought to have been received during the period between December 2005 to February 2007, when the sales deed was registered. Hence, the sales consideration has to be estimated in the present case as per Section 45. It is pertinent to note that as already discussed above, the New Jantry as made applicable from April 2008 was worked out by the State Government on the basis of the market rates prevailing during the period 2005 and 2006. Another important fact to be noted is that the old Jantry was prevailing since 1999 and was not revised since long and hence, it was very much necessary to bring the Jantry at par with the prevailing market rates in order to eliminate leakages of revenue. The old Jantry Rate of the land under consideration was ₹ 400/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for the entire 88700 sq. mtrs. of land. Hence, the capital gain in the case of the appellant considering the sales area at 62090 sq. mtrs., sales price at ₹ 5,000/- per sq. mtr. and FMV as on 1-4- 1981 at ₹ 25 per sq. mt. for 88,700 sq. mtrs. would work out as follows. Particulars Amount (Rs) Sales Price (62,090 sq. mtrs. X ₹ 5,000) 31,04,50,000 Less: Indexed Cost of Acquisition (88,700 sq. mtrs. X 25 X 497 / 100) 1,10,20,975 1,10,20,975 Total Capital Gains of the co-owners 1,24,56,247/- Appellant s share at 4.16% of ₹ 29,94,29,025/ 1,48,128/- 1,23,08,119/- Less: Shown in the return of income Additions In the result the appeal is partly allowed and income enhanced as above. Aggrieved, the assessee came in second appeal before us in all 7 appeals. 6. The first grievance of the assessee is against the enhancement of value of land from ₹ 700/- per sq. mt. t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entered into any registered sale deed and therefore, the provisions of Section 50C are not applicable. On the other hand, Ld. counsel for the assessee stated that the assessee had received the full sales consideration of ₹ 3,00,11,111/- for the said agricultural land up to March 06 and had also given the possession of the said agricultural land in the year under consideration itself but the registration of the sale deed was done later on 02-02-2007 on account of death of 3 co-owners. This is not a case where no sale deed has been registered but in this case, the registration of the sale deed got delayed on account of death of co-owners and therefore, the provisions of Section 50C are clearly applicable. 8. In view of the above facts and circumstances, we find that the circle rates fixed by Stamp Duty Authorities of land at Bhestan for financial year 2005-06 relevant to assessment year under consideration was fixed at ₹ 400/- per sq.mt and the sale consideration received by the assessee is @ ₹ 483/- per sq.mt. We find that these co-owners have sold the land and received payment of ₹ 2,92,11,111/- up to 14-12-2005 and due to death of co-owners in the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result of such transfer. 2) Without prejudice to the provisions of sub-section (1), where (a) the assessee claimed before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (30, (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act Explanation For the purposes of this section Valuation Officer shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003-04 and subsequent years [Section 4] . 10. We further find that this provision was elaborated in the Notes on clauses and Memo. Explaining Provisions in the Finance Bill, 2002 as under:- Notes on Clauses:- Clause 24 seeks to insert a new section 50C in the Income-tax Act to provide for a special provision for full value of consideration in certain cases. The proposed sub-section (1) of the said section seeks to provide that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration received or accruing as a result of such transfer. The proposed sub-section (2) of the said section seeks to provide that where the assessee claims before any Assessing Officer that the value adopted or assessed by the authority under sub-section (1) exceeds the fair m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he has not dispute the value so adopted or assessed in any appeal or revision or reference before any authority or Court, the Assessing Officer ma refer the valuation of the relevant asset to a Valuation Officer in accordance with section 55A of the Income-tax Act. If the fair market value to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the Assessing Officer shall not adopt such fair market value and will take the full value of consideration to be the value adopted or assessed for stamp duty purposes. It is also proposed to provide that if the value adopted or assessed for stamp duty purposes is revised in any appeal, revision or reference, the stamp duty purposes is revised in any appeal, revision or reference, the assessment made shall be amended to re-compute the capital gains by taking the revised value as the full value of consideration. These amendments will take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003-2004 and subsequent years. [Clauses 24 and 59] 11. In view of the above provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Andhra Pradesh High Court in Addl. CIT v. Durgamma P. (1987) 167 1TR 776 (AP) held that it is not possible to extend the fiction beyond the field legitimately intended by the statute. The Hon'ble court was dealing with the provisions of sec. 171(1) of the I.T.Act in the context of which it was held that joint family shall be deemed to continue for the limited purpose of assessing cases of joint families which have been hitherto assessed as such. It Is not possible to extend that fiction to other cases. Similar view was taken by the Hon'ble Kerla High Court in CIT v. Kar Valves Ltd. (1987) 168 ITR 416 (Ker.) wherein it is held that legal fiction is limited to the purpose for which they are created and could not be extended beyond that legitimate frame, Hon'ble Kerala High Court was dealing with the case where assessee sought to take advantage of sec.41(2) by submitting that if liabilities are not liquidated and outstanding are not collected, then business could be deemed to continue. Hon'ble Allahabad High Court in Controller of estate Duty v. Krishna Kumar Devi (1988) 173 ITR 561 (All) held that in interpreting the legal fiction the court should ascertain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment than what is stated in the sale deed. We are in full agreement with the arguments of the assessee that Section 50C is applicable in the present case and this provision being a deeming provision will apply for determining the full value of consideration as a result of transfer of capital assets for the purposes of computation of capital gains u/s.48 of the Act. We further find that there is no evidence on record to show that the consideration over and above, what has been recorded in the sale deed/agreement, has been made by the assessee and in the absence of the same, no addition can be made by estimating and substituting the market value. Accordingly, we delete the addition made by the lower authorities in these appeals. 13. As regards to the issue of cost of acquisition to be estimated by adopting fair market value as on 01-04-1981 for the purposes of computing the indexation value, the Assessing Officer has estimated the cost of acquisition at ₹ 25/- per sq.mt. on the basis of report of assessee s registered valuer approved by the Department, taking comparable sale instances given by the valuer, which ranged from ₹ 15/- to ₹ 32/- per sq.mt. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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