THE ACIT RG 1(1), MUMBAI vs. M/S. ASSOCIATED CEMENT CO., MUMBAI

While expressing my considered agreement with my learned brother, I may add, particularly with respect to his thought-provoking observations in paragraphs 9.7 to 9.10, that the suppression of sale consideration in real estate transactions in the olden days, such as in 1981, was so common that the sale instances could seldom be conclusive, or even reasonable standalone evidence, to suggest the market value of the real estate in that era. As learned brother has aptly quoted from Hon’ble Supreme Court’s judgment in the case of K P Verghese (supra), which in turn has quoted from the Finance Minister’s speech, that was a time “when particularly every transaction of sale of property is for a much lower figure than what is actually received” and when “the deed of registration mentioned a particular amount; the actual money which passes hands is much more”. The reduction in use of unaccounted monies in the reals estate sector, particularly in a large metropolitan city like Mumbai and even its suburbs, has been, even if slow, a steady process, and today, due to conscious deincentivization of such practices by the law and as also by the emerging overall economic realities, is, if at all, rather drastically reduced if not altogether eliminated. On a practical note, thus, while examining the valuation of an asset as of 1st April 1981, 28. one has to bear in mind the fact that the prices stated in the sale instances of real estate being on the lower side than the actual market price was quite common in the eighties as well, and, therefore, such sale instances, as standalone and conclusive evidence of the market valuation, could not be put to the disadvantage of the assessee- unless, of course, there is no reasonable evidence, in support of the valuation claimed by the assessee, placed on record at all by the assessee, or unless it is corroborated by some other indicators supporting that valuation. 29. Coming to the specific facts of the case before us, as learned brother rightly takes note of, the valuation report submitted by the assessee has been simply brushed aside by observing that it lacks any comparable sale instances having been given in support of the valuation. The learned Assessing Officer has been dismissive of the method of valuation adopted by the Valuer for this short reason alone, but then such an approach, given the limitation of the relevance of the comparable sale instances at the relevant point of time, was wholly unwarranted and justified. It was open to the Assessing Officer to deal with the approach adopted by the Valuer on merits, and take a call on that, but then just because it did not have the support of comparable sale instances, such a valuation could not have been rejected straight away. What was even more inappropriate that is the Assessing Officer picked up sale price stated in a transaction of sale of land, which was admittedly not even comparable, and proceeded to note that since this sale transaction at Rs 260.00 per square meter, the market price of a nearby land could not have been as high as Rs 1,986.57 per square meter- as has been claimed by the assessee. When the matter travelled in appeal before the learned CIT(A), he deleted the addition in entirety by relying upon a coordinate bench decision in the case of Jethalal D Mehta (supra), but, as learned counsel for the assessee fairly conceded, that decision was not applicable on the facts of this case, and that is how the computation of capital gain has become relevant before us. Learned CIT(A) thus had no occasion to deal with the valuation aspect, as on 1st April 1981, at all. The valuation report submitted by the assessee has not been faulted, for legally sustainable reasons, by the authorities below. Yet, the Assessing Officer simply brushed it aside and proceeded to adopt the valuation on the basis of the sale instance of land in a different locality. Such an approach cannot meet any judicial approval, and since it is a very old matter, inasmuch as relevant financial period was almost two decades back, there is no point in remitting the matter back for fresh valuation exercise either.

It is in this backdrop that I am in most considered agreement with my learned brother, on this point, as indeed all the other points so comprehensively dealt with in the proposed draft order. 31. With these observations, I agree with my learned brother.