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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi
Per Shri P.M. Jagtap :- This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals), Central-II, Kolkata dated 19.12.2012 and although there are as many as twelve grounds raised therein, the only common issue involved therein, as submitted by the ld. counsel for the assessee, relates to the determination of fair market value of land of the assesese as on 01.04.1981 for the purpose of computation of capital gain.
The assessee in the present case is an individual. In the assessment originally completed under section 143(3) vide an order dated 05.12.2008, total income of the assessee was determined by the Assessing Officer at Rs.4,93,480/-. Subsequently, it was noticed by the Assessing ./2013 Assessment year: 2006-2007 Page 2 of 8 Officer from the capital account and bank account of the assessee that a sum of Rs.29,00,000/- was received by the assessee in the year under consideration against sale of land at Asansol. Since the said land was not reflected in the balance-sheet of the assessee as on 31.03.2005 and the income arising from sale thereof was not declared in the return of income, the Assessing Officer entertained a belief that the income of the assessee had escaped assessment. He, therefore, issued a notice under section 148. In reply, a letter was filed by the assessee requesting the Assessing Officer to treat the return originally filed by the assessee as the return filed in response to notice under section 148. During the course of reassessment proceedings, the assessee submitted that the land at Asansol was purchased by his father on 20.12.1971 and after his death, the assessee inherited the property from him. It was also submitted by the assesese that the sale of the said land did not give rise to any capital gain and, therefore, there was no question of declaring such capital gain in the return of income. This explanation of the assessee was not found acceptable by the Assessing Officer. He noticed that the land in question was jointly purchased by the assessee with his father and since the source of funds utilized for the said purchase could not be established by the assessee, he added the entire amount of Rs.29,00,000/- to the total income of the assessee being unexplained receipt in the assessment completed under section 143(3) read with section 147 vide order dated 29.03.2011.
Against the order passed by the Assessing Officer under section 143(3) read with section 147, an appeal was preferred by the assessee before the ld. CIT(Appeals) and elaborate submissions were made by him before the ld. CIT(Appeals) raising various contentions in support of its stand that the addition of Rs.29,00,000/- made by the Assessing Officer on account of unexplained credit was not sustainable. The said submission made by the assessee was forwarded by the ld. CIT(Appeals) to the Assessing Officer and after taking into consideration the remand report submitted by the Assessing Officer, the counter comments offered ./2013 Assessment year: 2006-2007 Page 3 of 8 by the assessee as well as other material available on record, the ld. CIT(Appeals) discussed and decided the issue vide paragraph no. 9 to 9.4 of his impugned order as under:- “9. I have considered the submission of the appellant and perused the assessment order. I have also gone through the valuation report of the approved valuer, copy of certificate of T.K. Mitra, Planner & Estimator, certifying the distance of the land under reference from Asansol municipal area, copies of purchase and sale deed, copy of Wealth tax return and the remand report. The facts of the case have already been discussed as above. During the course of assessment proceedings it was observed by the AO that the appellant had sold land in Asansol for a consideration of Rs.29 lakhs and credited the amount in his capital account. However, the land was not appearing in the appellant's balance sheet and he also did not disclose capital gain on transfer of aforesaid land. Therefore, he made addition of Rs.29 lakhs to the income of the appellant as undisclosed receipt. On careful consideration of the facts and in law, after going through the relevant documents, I am of the opinion that the addition of entire sum of Rs.29 lakhs, which was credited to the capital account, cannot be made in the hands of appellant. I am of the considered opinion that the addition of Rs.29 lakhs cannot be made under the head 'unexplained receipt' because it is an undisputed fact on the record that the receipt of Rs.29 lakhs was on account of sale of land at Asansol and duly disclosed in the books of account and the financial statements. There is no dispute that the receipt of Rs.29 lakhs was on account of sale of a capital asset and, therefore, liable for capital gain tax, if any. In fact, in the assessment order the AO himself has mentioned that although the assessee sold the property during the year under assessment, but no capital gain was shown by him in the return of income. Hence, I am of the opinion that there cannot be any dispute about the source of receipt of Rs.29 lakhs credited to the capital account.
9.1. On perusal of purchase deed dated 20.12.1971, it is observed that the appellant's father Shri Gopal Prasad and the appellant purchased the property jointly from Smt. Bela Devi for a consideration of Rs.50,000/-. As per the purchase deed, the property purchased by the appellant and his father was plots of land together with constructions, erections, structures standing thereon with ancient lights ways paths and common passages etc. It is observed that though his share in this property was not shown by the appellant in his balance sheet, but he disclosed the one-half portion of the property in his Wealth tax returns as agricultural land at Asansol. Thus, the appellant was the owner of the one-half property purchased in the year 1971. The balance one- half property was owned by the appellant's father. The appellant's father died intestate on 20.05.1984. After the death of Shri Gopal Prasad, his one-half portion in the property was divided amongst two brothers i.e. the appellant, Shri Gopeshwar ./2013 Assessment year: 2006-2007 Page 4 of 8
Prasad and his brother, Shri Gyaneshwar Prasad. Thus, the appellant became the owner of 75% of property and his brother, Shri Gyaneshwar Prasad became the owner of 25% property. Subsequently, by way of family settlement, Gyaneshwar Prasad Agarwal released and relinquished his 25% right, title interest in the said property in favour of appellant. In this manner, the appellant became the absolute owner of the property. It is observed that the appellant entered into a Memorandum of Agreement dated 27.03.2006 with his brother Gyaneshwar Prasad Aqarwal for sale of said property for a consideration of Rs.29 lakhs. The sale proceed was received by him vide cheque no. 378142 dated 27.03.2006 drawn on Allahabad Bank, Red Cross Place, Kolkata. The said receipt was credited by the appellant in his capital account. However, as mentioned in the assessment order, no capital gain was computed by the appellant in his return of income for A.Y. 2006-07.
9.2. During the course of appellate proceedings it is argued by the appellant that no capital gain is taxable in the year under appeal because the appellant had only taken the advance for the sale of land. However, on the facts of the case and on examination of various documents, I am not inclined to agree with the submission of the appellant. He has entered into an agreement for sale of property in the year under appeal and he has also received the full consideration as per the agreement and hence, there is no question that the capital gain will not be computed in the year under consideration. Therefore, the aforesaid contention of the appellant is rejected.
9.3. In the course of appellate proceedings, it is also submitted by the appellant that the land under question was agricultural land and, therefore, it does not fall within the definition of "Capital Asset" as per the provisions of section 2(14)(iii) of the Act. It is contended by the appellant that in the Wealth tax return the land was shown as agricultural land. Further, in the purchase deed dated 20.12.1971, the major portion of the land had been shown as "Rayati Sthitiban", clearly indicating thereby that the plots of land were agricultural in nature. It is submitted by the appellant that the land was beyond the prescribed limit of 8 kms. from the boundary of any urban area. In support of his claim the appellant also filed a certificate from T. K. Mitra, planner & estimator. However, on careful consideration of the facts, I am not inclined to agree with the submission of the appellant that the land sold by him was agricultural land because he has not brought any evidence to prove the same. As mentioned earlier in this order, the land under reference was not only the land as evidenced by page no.5 of the purchase deed dated 20.12.1971. As per this deed, the plots of land were transferred by the original owner/seller together with all constructions, erections, structures standing thereon with all benefits of ancient lights ways paths and common passages etc. etc. Thus, what was purchased and sold by the appellant, were not merely plots of land. However, in the ./2013 Assessment year: 2006-2007 Page 5 of 8 course of appellate proceedings the appellant did not submit any information about the structures on the said land. I am of the opinion that merely for the reason that the appellant: had mentioned the land as agricultural land in the wealth tax return, it does not mean that it was agricultural land only. The appellant also filed a certificate of Mr. Mitra which says the land was situated 10 kms. and 14 kms. out of Asansol Municipal Area. However, I find no weight in this certificate because it is not supported by any Government document or notification etc. On the contrary, as per the valuer's report in Form O-1, the land was situated near Old Age Home, close to Dhakeshwari Cotton Mill and Damodar River, Burnpur. The classification of locality has been stated as 'High and Middle Class' and the proximity to the civic amenities, like school, hospitals, offices, market, cinema etc. have been stated to be close by. Thus, it is difficult to accept that the property under question was the agricultural land unless some evidence and proof is there. Under the circumstances, the contention of the appellant that the property sold by him was the agricultural land, is rejected and it is held that the land sold by the appellant was liable for capital gain tax.
9.4. Without prejudice, it is submitted by the appellant that if indexed cost of acquisition as on 01.04.1981 is deducted from the sale proceed, the capital gain would be in negative figure. The appellant filed the copy of Approved Valuer's report who determined the fair market value of the property as on 01.04.1981 at Rs.6,10,857/-. The appellant calculated the indexed cost in F.Y. 2005-06 at Rs.30,35,959/- and the net capital loss at Rs.1,35,959/-. On perusal of the valuer's report it is observed that he has valued the property on the basis of local market enquiry. His report is not based on any purchase or sale instance and not supported by any Government records or documents. He has valued the property on estimation without any supporting evidence. Hence, the valuation made by the valuer at Rs.6,10,857/- as on 01.04.1981 cannot be accepted. In the course of appellate proceedings this point was brought to the knowledge of the Ld. A.R. of the appellant but he was having nothing to say in this regard. Under the circumstances, I estimate the value of the property as on 01.04.1981 at Rs.1,50,000/- considering the fact that it was purchased for Rs.50,000/- in December, 1971. In view of above, the AO is directed to compute the capital gain income on sale of property sold for Rs.29 lakhs, by adopting the fair market value as on 01.04.1981 at Rs.1,50,000/- and deducting the indexed cost of acquisition in F.Y. 2005-06 and restrict the addition to the extent of capital gain. In view of above, the ground nos. 3 and 4 are allowed and the ground nos. 5 and 6 are dismissed”.
We have heard the arguments of both the sides and also perused the relevant material available on record. Although the ld. CIT(Appeals) vide ./2013 Assessment year: 2006-2007 Page 6 of 8 his impugned order has decided various aspects of the issue relating to the addition of Rs.29,00,000/- made by the Assessing Officer on account of the transaction of the assessee of sale of land, the ld. counsel for the assessee has raised limited contention to dispute only one aspect relating to the determination of the fair market value of the assessee’s property as on 01.04.1981 for the purpose of computing the long-term capital gain arising from the land. He has contended that the fair market value of the assessee’s property as on 01.04.1981 was determined by the approved valuer as per his report at Rs.6,10,857/- but the same has not been accepted by the ld. CIT(Appeals) and the valuation is adopted by him at Rs.1,50,000/- without giving any sound or convincing basis. The ld. D.R., on the other hand, has contended that the property was purchased by the assessee for Rs.50,000/- in December, 1971 and by taking the same as basis, the ld. CIT(Appeals) has adopted or estimated the value of property as on 01.04.1981 at Rs.1,50,000/-, which is quite fair and reasonable. He has also contended that while estimating the fair market value of the assessee’s property as on 01.04.1981, the Registered Valuer in his valuation report has not cited any comparable cases specifically in this regard.
During the course of hearing, the ld. counsel for the assessee has invited our attention to the copy of the report of the Registered Valuer placed at page no. 45 and 46 of the paper book to point out that the fair market value of the assessee’s property as on 01.04.1981 was determined by the Registered Valuer on consultation of records from Sub-registry Office and inquiries made from the local market. As specifically noted by the registered valuer in the said report, the rate of 350 rupees per Cottah as on 01.04.1981 was adopted by him to determine the fair market value of the property on consultation of records from Sub-Registry Office and inquiries made from local market, which revealed that similar land in the locality was sold at about Rs.350/- per Cottah. Although no specific sale instance was pointed out by the Registered Valuer in his report as rightly submitted by the ld. D.R., we find that the fair market value of the ./2013 Assessment year: 2006-2007 Page 7 of 8 assessee’s property as on 01.04.1981 was estimated by the Registered Valuer on the basis of prevailing market rate as found by him from the relevant records of Sub-Registry Office as well as inquiry made from local market and it, therefore, cannot be said that the valuation done by the Registered Valuer was without any basis. On the other hand, the value of assessee’s property as estimated by the ld. CIT(Appeals) at Rs.1,50,000/- as on 01.04.1981 by taking purchase price of the said property at Rs.50,000/- in December, 1971, in our opinion, cannot be said to be made on sound or convincing basis because the value of properties does not vary at a fixed or constant rate periodically and it varies at different rates during different periods depending on several factors affecting such values. As such, having regard to all the facts and circumstances of the case, we are of the view that the fair market value of the assessee’s property as on 01.04.1981 can reasonably be taken at Rs.6,10,857/- as estimated by the Registered Valuer for the purpose of computing long- term capital gain and if it is done so, there would be no capital gain arising from the sale of the property as rightly contended on behalf of the assessee before the authorities below as well as before us. We, therefore, delete the addition made by the Assessing Officer and sustained by the ld. CIT(Appeals) on this issue and allow this appeal of the assessee.