2021 (5) TMI 389 - AT - Income Tax

Long term capital gain - determination of actual date of purchase of the capital asset - Fair Market Value (FMV) thereof u/s. 48(ii) r.w.s. Expl (iii) r.w.s. 55A - assessee s endeavour herein to claim the fair market value of its capital asset as per her registered valuer s report going by sec. 55A(a) its amendment and therefore this valuation report to have been adopted @ Rs. 1308 per sq. yard as on 1.4.1981 - HELD THAT - All the assessee s arguments fail to evoke our concurrence. This is mainly for the reason that there is hardly any time gap worth counting between the date of assessee s purchase deed i.e. 1.9.1980 and the statutory clauses of cost of acquisition i.e. 1.4.1981 respectively. And also that her registered valuer s report dt.30.1.2015 does not even make a mention if at all he had even tried to find any comparable case in the concerned Masab Tank locality. This registered valuer s report deserves rejection only on account of these clinching aspect(s). We rather notice that the DVO s report dt.30.3.2016 has duly considered comparable case(s) resulting in average FMV of Rs. 118.05 per sq. yard only. The assessee s legal as well as technical pleas seeking to claim her FMV as per registered valuer s report go against the comparable cases and stand declined for the very reasons therefore. Legislature has used the clinching statutory expressions fair market value only - We find prima facie force in her stand that the purpose of stamp valuation is to collect revenue only than that of the FMV which is required to compute capital gains arising from transfer of a capital asset. The fact also remains that this issue of FMV of a capital asset w.e.f. 1.4.1981 has witnessed many booms and slumps in the intervening time span of four decades as on date. We keep in mind all these aspects and hold that FMV of the assessee s capital asset @ Rs. 400 per sq. yard by applying thumb rule would be just and proper in the given facts and circumstances with a rider that the same shall not be treated as a precedent. Ordered accordingly. This former issue is partly accepted in above terms. Assessee s claim of her husband to have spent Rs. 1, 60, 000 (Rs. 1, 40, 000 in A.Y. 1989-90 and Rs. 20, 000 in A.Y. 1990-91); respectively and that too when the Assessing Officer had not made any such disallowance - This is a clear cut instance of enhancement u/s.251(1)of the Act without even issuing notice to this effect. We thus reverse the CIT(A) s impugned action on this count alone.

Summary

Issues Involved:
1. Acceptance of Capital Gains admitted by the Appellant.
2. Estimation of Cost of Acquisition (FMV) of land as on 01-04-1981.
3. Validity of reference to DVO under Section 50C for valuation of acquisition cost of land.
4. Consideration of the cost of construction spent by the appellant's husband in computing capital gains.
5. Admission of additional grounds at a later stage.

Detailed Analysis:

1. Acceptance of Capital Gains Admitted by the Appellant:
The appellant contended that the authorities erred in not accepting the capital gains of Rs. 819.54 lakhs admitted on the sale of property. The tribunal reviewed the objections and found that the authorities had based their calculations on a different FMV, leading to a discrepancy in the capital gains computation. The tribunal partially accepted the appellant's claim by revising the FMV to Rs. 400 per sq. yard, which would affect the capital gains calculation.

2. Estimation of Cost of Acquisition (FMV) of Land as on 01-04-1981:
The appellant argued that the FMV of the land as on 01-04-1981 should be Rs. 21.90 lakhs as determined by a registered valuer, whereas the authorities estimated it at Rs. 2.51 lakhs. The tribunal noted that the property was purchased on 22.01.1980 for Rs. 2.48 lakhs, and the registered valuer's report lacked a rational basis. The tribunal found the DVO's estimation of Rs. 2.50 lakhs to be reasonable but ultimately revised the FMV to Rs. 400 per sq. yard, taking into account the market conditions and other factors.

3. Validity of Reference to DVO under Section 50C for Valuation of Acquisition Cost of Land:
The appellant claimed that the reference to the DVO under Section 50C for determining the FMV as on 01-04-1981 was invalid. The tribunal clarified that the reference was made under Section 55A, not 50C, and upheld the validity of the reference. The tribunal emphasized that the AO is entitled to seek expert opinion for accurate FMV determination.

4. Consideration of the Cost of Construction Spent by the Appellant's Husband in Computing Capital Gains:
The appellant contended that the authorities erred in not considering Rs. 3.74 lakhs spent by her husband on constructing a house property. The CIT(A) had disallowed this claim, enhancing the assessment without issuing a notice. The tribunal found this to be a procedural lapse and reversed the CIT(A)'s decision, accepting the appellant's claim of construction costs.

5. Admission of Additional Grounds at a Later Stage:
The appellant sought to raise additional grounds related to the disallowance of construction costs. The tribunal admitted the additional grounds, referencing the Supreme Court judgment in NTPC Ltd Vs. CIT, which allows raising new grounds in Section 254 proceedings to determine the correct tax liability. The tribunal found no merit in the Revenue's objection to admitting these grounds.

Conclusion:
The tribunal partially allowed the appellant's appeal by revising the FMV to Rs. 400 per sq. yard and accepting the additional grounds related to construction costs. The tribunal emphasized procedural correctness and the necessity of rational and logical explanations in valuation reports. The appeal was partly allowed, with necessary computations to follow as per law.