SH. JAI PRAKASH S/O SH. GIRDHARI LAL,MEERUT vs. ITO, MEERUT

O R D E R PER PRASHANT MAHARISHI, A. M. 01. This appeal is preferred by the assessee against the order of the CIT(A), Meerut dated 05.09.2014 for the Assessment Year 2009-10 on the following grounds : “

1. That Ld. A.O. as well as CIT(A) is in error in taking and confirming cost of acquisition as on 01-04-1981 @ 70/- persq. yd. of the assessee's agriculture land situated at Village Nagla Tashi. In village Nagla Tashi circle rate was Rs. 100/- to 150/- persq. yd, and other rate quoted by the A.O. are not relevant, because all the area quoted by the A.O. is more than 15 Km away from the assessee's land. Hence, the assessee's claim® 125/- persq. yd. is quite justified.

2. That Ld. A.O. as well as Ld. CIT(A) is in error that rebate U/s 54B is not available to the assessee, when assessee purchased agriculture land in the name of his wife and payment was made by the assessee's bank account 1 | P a g e and Ld. CIT(A) ignored the bank account and sale deed already filed before the CIT(A) in paper-book..

2. Ground No 1 of the appeal is against adoption of fair market value as at 1-4- 1981 of the property sold by the assessee. Brief facts of the case are that the assessee is an individual and along with other co-owners sold a piece of land which was acquired prior to 1-4-1981. Therefore for working out the capital gain liability of the assessee fair market value as at 1-4-1981 was required to be determined. The assessee neither furnished any valuation report of authorized valuer determining the market value of the property as on 01.04.1981 nor submitted any comparative prevailing sale rate which can be helpful in determining the cost of acquisition. Therefore AO obtained circle rate fixed by district Magistrate Meerut as on 01.02.1984 and based on that determined the rates as at 1-4-1981 @ Rs 70/- per square yard. AO was constrained to adopt that rate because no rate was fixed in the village to which the land was situated in and AO could not obtain rates as at 1-4-1981. The assessee was aggrieved with the adoption of this rate by AO preferred an appeal before the learned Commissioner of Income-tax (Appeals) who in turn dismissed the appeal by holding that the AO has determined the fair market value of the property based on the circle rate available as on 01.02.1984 in absence of any information from the assessee. The assessee being aggrieved by this has preferred of appeal before us. 2 | P a g e

3. The ld DR submitted that the AO was not justified in taking the valuation rate of Rs. 70/ sq mtr. For this he submitted valuation report of one Smt Sarala Kumari and others dated 22.03.2011, wherein the rate of Rs. 150/- per sq yard is taken by authorized valuer. He also submitted that the AO does not have any power to estimate the fair market value as at 01.04.1981 therefore he requested that the AO may be directed to take fair market value by adopting rate of Rs 150/- per square yard as claimed by the assessee. 03. In response to this the ld DR relied on the orders of the learned Commissioner of Income-tax (Appeals). 04. We have carefully considered the rival contention. For the purpose of working out capital gains on sale of capital assets, assessee is granted deduction of cost of acquisition of that capital assets from the sale consideration. According to section 55 of the Income tax Act cost of acquisition where the capital asset became the property of the assessee before the 1st day of April,1981, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on the 1st day of April, 1981 at the option of the assessee. The fair market value of the assets can be determined u/s 55A of the income tax act according to the option of AO. Therefore assessee has been given an option to get deduction of the cost of acquisition of the assets or the fair market value of the property as at 1-4- 3 | P a g e 1981 in the case assets is acquired before 1-4-1981. In this case assessee has not exercised option to adopt the fair market value of the property as at 1-4- 1981 by substantiating the value as on that date by the report of authorized valuer. Assessee is also adopting hypothetical rates and claiming deduction of that value as the cost of acquisition of the property which is not permissible. Rates adopted by AO cannot be accepted in view of any sanctity attached to them. Valuation report obtained in some other case cannot be relied up on by the assessee for this purpose. Furthermore AO is also not empowered to make valuation himself as it is the job of a person possessing requisite qualification. Therefore the rates adopted by the AO by obtaining the same from the office of District magistrate for 1984 cannot be applied for determining fair market value of property as at 1-4-1981. Therefore we are also not approving the rates adopted by the AO as well as by assessee. Therefore according to the law it is for the assessee to substantiate fair market value of the property by submitting the valuation report obtained from authorized valuer. If the assessee does not exercise this option than AO does not have any option but to adopt the cost of acquisition for the purposes of determining the capital gain in the hands of the assessee. As admittedly assessee has not exercised this option, in the interest of justice one more opportunity is given to assessee to submit before AO the fair 4 | P a g e market value of the assets as at 1-4-1981 by submitting the valuation report of the property from authorized valuer not later than four months from the date of receipt of this order. After that AO may act according to the provision of section 55A of the Income tax Act and decide the issue on merits. In view of this ground no 1 of the appeal is set aside to the file of AO with above direction to consider the valuation report, if any, submitted by the assessee in above time frame. Needless to say that the AO was required to give proper opportunity of hearing and the assessee is also free to adduce the value claimed by it supported by proper valuation report in accordance with law. In view of this ground No.1 is allowed with above direction.

5. Ground No.2 is against the addition of deduction u/s 54B to the assessee whether the assessee has purchased agricultural land in the name of his wife and the payment was made by the assessee from his own source through banking channel. The assessee has purchased this agricultural land by investment of Rs.10 lac on 12.10.2010 which is beyond two years from the date of sale i.e. 05.05.2008 and therefore the AO has disallowed the claim. Regarding the other agricultural land the assessee has purchased same in the name of his wife Smt. Kunta and not in the name of the assessee. Due to this AO disallowed the deduction of Rs. 6 lacs u/s 54B of the act claimed by the assessee. Aggrieved by this the assessee preferred an appeal before learned 5 | P a g e