2018 (11) TMI 1831 - AT - Income Tax

Computation of long-term capital gain on transfer of the property - Adoption of fair market value of the property as on 1.4.1981 - AO adopted fair market value of the property at Rs. 80/- per sq.yard in the cases of other three family members who have sold land in same survey number and thereafter computed capital gain - HELD THAT - Way back in 1955 Board has issued a circular bearing No.14/XN dated 11.4.1955 prohibiting its authorities not to take advantage of ignorance of assessees in order to collect more tax. This circular has not been questioned till date. The quasi-judicial authorities are being respected not on account of their power to legalise injustice on technical ground but because they are capable of removing injustice and is expected to do so. Once a piece of land has been valued in the case of other co-owners and accepted by the AO then for other co-owners that rate should not be differed with unless some other substantial circumstances are there showing more potentiality of the land viz. the land is abutted to National high-ways or some other factors which fetch more value to the area. No such factor has been noticed by the AO or available in the present case. Therefore we allow first fold of grievance raised by the assessee. We direct the AO to compute long term capital gain after adopting fair market value of the property as on 1.4.1981 at Rs. 80/- per sq.yard. AO shall thereafter give benefit of indexation at this rate and calculate along with cost which is to be reduced from the ultimate sale consideration deemed in the hands of the assessee under section 50C - AO has further granted total deduction of Rs. 15, 24, 464/- being deduction under section 54D for new agricultural land of Rs. 4, 67, 720/- and Rs. 10, 56, 744/- under section 54F for purchase of residential house. These deductions are not being disturbed by us. They will be granted to the assessee after computation of long term capital gain as indicated above.

Summary

Issues Involved:
1. Reopening of assessment
2. Computation of long term capital gains
3. Valuation of property under section 50C(2)(a) for determining full value of consideration

Detailed Analysis:
1. Reopening of Assessment:
The assessee appealed against the order of the ld. CIT(A)-4, Surat for the Assessment Year 2006-07. The grounds of appeal were found to be descriptive and argumentative, not in line with Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963. The first contention regarding the reopening of the assessment was not pursued by the assessee during the proceedings, and hence was rejected by the Tribunal.

2. Computation of Long Term Capital Gains:
The dispute mainly revolved around the computation of long-term capital gains on the transfer of a property. The Assessing Officer (AO) had revalued the property based on stamp duty valuation, which was significantly higher than the sale consideration shown by the assessee. The assessee contended that the fair market value of the property as on 1.4.1981 should be considered for determining the acquisition cost. Additionally, the assessee argued that the valuation of the property should be referred to the District Valuation Officer (DVO) under section 50C(2)(a) of the Income Tax Act. The AO rejected both contentions, leading to an appeal to the CIT(A) which did not favor the assessee.

3. Valuation of Property under Section 50C(2)(a):
The Tribunal analyzed the case thoroughly and found discrepancies in the AO's treatment of the property valuation compared to similar cases of other co-owners. The Tribunal emphasized the need for consistency in valuation methods unless substantial circumstances justify a different approach. Referring to a circular from 1955, the Tribunal highlighted the importance of fair treatment and removal of injustice by quasi-judicial authorities. Ultimately, the Tribunal allowed the first fold of grievance raised by the assessee, directing the AO to compute long term capital gain based on the fair market value of the property as on 1.4.1981 at a specific rate per sq. yard. The Tribunal also upheld certain deductions under sections 54D and 54F for the assessee.

In conclusion, the Tribunal partly allowed the appeal of the assessee, addressing the issues related to the computation of long term capital gains and the valuation of the property. The judgment highlighted the importance of fair treatment, consistency in valuation methods, and adherence to legal principles in determining tax liabilities.