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Facts
The assessee sold ancestral agricultural land, converted to non-agricultural land, for Rs. 40 lakhs. The stamp duty valuation was Rs. 52,80,000. The assessee claimed a lower capital gain based on a valuation report and indexed cost of acquisition, while the AO and CIT(A) relied on the stamp duty value and disallowed indexed cost. The original land was inherited and divided among siblings.
Held
The Tribunal held that the cost of acquisition needs to be determined as per Section 49 of the Income Tax Act, considering the previous owner's cost. The AO and CIT(A) erred in rejecting the assessee's valuation report without proper reasons and in not allowing the indexed cost of acquisition.
Key Issues
Whether the AO and CIT(A) were justified in rejecting the assessee's valuation report and disallowing indexed cost of acquisition for Long Term Capital Gains, and whether the cost of acquisition should be determined under Section 49.
Sections Cited
250, 147, 144B, 50C, 48, 49, 2(14)(iii), 148, 148A
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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeal)[NFAC] passed under section 250 of the Income Tax Act, 1961 for the A.Y.2018-19 dated 06.05.2025 emanating from the Assessment Order passed under section 147 r.w.s 144B of the Income Tax Act, 1961 dated 06.03.2023. The assessee has raised the following grounds of appeal :
[A] “1. On the facts and circumstances of the case and in law the CIT(A), NFAC erred in confirming the action of the AO, NaFAC of computing the income from Long Term Capital Gains in the hands of the appellant at Rs.52,80,000 applying the provisions of Section 50C. The appellant submits as under, without prejudice to each other: a. The amount of actual sale consideration at Rs. 40,00,000 being the fair market value, it is incorrect on the part of the AO to proceed with the provisions of section 50C without referring the valuation to the Departmental Valuation Officer in terms of the provisions of the said section. b. The Long Term Capital Gain ought to have been calculated after allowing deduction u/s 48(1) of the indexed cost of acquisition. The appellant prays that the A. O be directed accordingly The appellant craves leave to add, amend, alter, modify, delete or add a new ground of appeal before or at the time of hearing. Submission of ld.AR :
2. Ld.AR for the Assessee filed a paper book.
Submission of ld.DR : 3. Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of Assessing Officer and ld.CIT(A).
Findings & Analysis : 4. We have heard both the parties and perused the records. In this case, Assessee had not filed Return of Income for A.Y.2018-19. The Assessing Officer received information. Accordingly, AO issued notice u/s.148 of the Act, on 31.03.2022. It is mentioned in 2 [A] the Assessment Order that an order u/s.148A(d) was passed on 31.03.2022. In compliance to notice u/s.148, Assessee filed Return of Income. Assessee submitted that Assessee is a Housewife and had Ancestral Land which was divided among the three sisters. The land was converted into Non-agricultural Land in 2012. The Assessee sold her share of land on 01.02.2018. As per the Agreement, the sale consideration was of Rs.40 lakhs. However, the value for the purpose of stamp duty adopted by the Deputy Registrar of Stamp Duties-Sawantwadi, Maharashtra was Rs.52,80,000/-. During the assessment proceedings, Assessee submitted these details along with a valuation report, wherein the said land was valued at Rs.38,22,000/- in F.Y.2012-13. Assessee had shown Computation of Capital Gain as under : Sale Consideration 52,80,000/- (-) Cost of Acquisition for the year 11-12 (184) 38,22,000/- 56,49,913/- (-) Indes Cost Acquisition for the year 17-18(272) Capital Loss (3,69,913)”
The Assessing Officer without giving any reason, rejected the valuation report submitted by the Assessee, then assessed the Capital Gain at Rs.52,80,000/-. Aggrieved by the Assessment Order, Assessee filed appeal before the ld.CIT(A).
5.1 The ld.CIT(A) confirmed the addition. 3 [A] 5.2 Thus, in this case, neither the ld.CIT(A), nor the Assessing Officer has allowed Index Cost of Acquisition to the Assessee. Both Assessing Officer and ld.CIT(A) has assessed the Capital Gain at Rs.52,80,000/- which is the value adopted by stamp duty authorities. Section 48 of the Income Tax Act, is reproduced here as under : Mode of computation.
The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :— (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: 5.3 Thus, as per Section 48, Index Cost of Acquisition for the purpose of Long-Term Capital Gain needs to be reduced from the full value of consideration. In this case, there is no dispute that the Impugned Asset is Long Term Capital Asset. Assessee had submitted Valuation Report during the Assessment Proceedings and before the ld.CIT(A). Assessee had also submitted copy of the Registered Sale Deed. The Assessing Officer has not pointed out any defect in Valuation Report filed by the Assessee. During the proceedings, ld.DR for the Revenue has not brought on record any defect in the valuation report.
[A] 6. In the registered sale deed, it is specifically mentioned that as per the order dated 16.06.2011 of Tahsildar-Sawantwadi, the Impugned Ancestral Agricultural Land was divided among the Siblings. Accordingly, Assessee received Agricultural Land having Survey No.149/1A. These entries have been made in the Land Revenue Records and separate 7/12 extracts have been prepared. This entire history was mentioned in the Registered Sale Deed. It is also mentioned that the impugned land was converted into Non- Agricultural Land on 23.10.2012. Copy of the 7/12 extract was enclosed with the Registered Sale Deed. Thus, all the details of the impugned land were available before the Assessing Officer and ld.CIT(A).
6.1 Since the assessee has received Ancestral Agricultural Land as per the order of the Tahsildar-Sawanthwadi, the Cost of Acquisition is to be determined as per Section 49 of the Act.
6.2 Section 49 of the Act, is reproduced as under : Cost with reference to certain modes of acquisition. 49. (1) Where the capital asset became the property of the assessee— (i) on any distribution of assets on the total or partial partition of a Hindu undivided family; (ii) under a gift or will; 5 [A] (iii) (a) by succession, inheritance or devolution, or (b) on any distribution of assets on the dissolution of a firm, body of individuals, or other association of persons, where such dissolution had taken place at any time before the 1st day of April, 1987, or (c) on any distribution of assets on the liquidation of a company, or (d) under a transfer to a revocable or an irrevocable trust, or (e) under any such transfer as is referred to in clause (iv) or clause (v) or clause (vi) or clause (via) or clause (viaa) or clause (viab) or clause (vib) 71[or clause (vic)] or clause (vica) or clause (vicb) or clause (vicc) or clause (xiii) or clause (xiiib) or clause (xiv) of section 47; (iv) such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) of section 64 at any time after the 31st day of December, 1969, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. Explanation.—In this sub-section the expression "previous owner of the property" in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) or clause (iv) of this sub-section.”
The Assessee claimed that the Agricultural Land was not Capital Asset, therefore, Cost of Acquisition should be considered from the year when the Impugned Land was converted into Non- Agricultural Land.
7.1 Section 2(14)(iii) of the Income Tax Act, is reproduced here as under : (14) "capital asset" means— (a) ………………….. (b) ………………. 6 [A] ………………………. (iii) agricultural land in India, not being land situate— (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or (b) in any area within the distance, measured aerially,— (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. Explanation.—For the purposes of this sub-clause, "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year; 7.2 Section 2(14)(iii) of the Income Tax Act, explains when an Agricultural Land is to be considered as Capital Asset. The Assessing Officer should decide the issue whether Agricultural Land received in inheritance by the Assessee is Capital Asset or not, in the light of Section 2(14)(iii) of the Act!, after obtaining the necessary details. Assessee has not submitted the specific distance of the Land from Municipal Corporation Limits and population of the area.
7.3 However, without giving any reason, the Assessing Officer and ld.CIT(A) rejected the valuation report filed by the Assessee and accordingly, rejected the cost of acquisition. However, ld.Assessing 7 Officer should have referred the issue to the Departmental Valuation [A] Officer to arrive at Cost of Acquisition. In these facts and circumstances of the case, we set-aside the order of Assessing Officer to ld.Assessing Officer with a direction to obtain Valuation Report from Departmental Valuation Officer regarding Cost of Acquisition and accordingly calculate the Long-term Capital Gain of the Assessee after giving benefit of Indexation. The AO shall provide opportunity of hearing to the assessee. The Assessee shall file all necessary documents before the Assessing Officer. Therefore, grounds of appeal raised by the assessee are allowed for statistical purpose.
In the result, appeal of the Assessee is allowed for statistical purpose. Order pronounced in the open Court on 25 September, 2025.