TMI Blog2010 (4) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... amwala. The grounds raised by the assessee, which reads as under: "1. On the facts and circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in enhancing the value of land from Rs. 400 sq. mtr. to Rs. 5,000 sq. mtr. 2. On the facts and circumstances of the case, the learned Commissioner of Income-tax ought to have taken view to accept the sales price at Rs. 400 per sq. mtr. shown by your appellant and deleted the addition of Rs. 21,24,472 being amount estimated at Rs. 700 per sq. mtr. by the Assessing Officer. 3. It is, therefore, prayed that the addition made by the Assessing Officer and thereafter enhancement made of Rs. 1,23,08,119 by the learned Commissioner of Income-tax Appeal-IV, may please be deleted." 3. The brief facts leading to the above issue are that the assessee along with other six family members owned an ancestral agricultural land at Survey No. 227 Bhestan, Surat admeasuring 88,700 sq. mt. agricultural land falling under Surat Urban Development Authority ( SUDA in short), whereby the land admeasuring 6,610 sq. mt. was acquired and the balance land of 62,090 sq. mt. was left with 14 co-owners of Rashamwala fami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n M. Reshamwala (HUF) 12,50,000 2,08,330 10. Naresh N. Reshamwala 15,00,000 2,50,000 11. Hasmukhlal D. Reshamwala (HUF) 15,00,000 2,50,000 12. Rasiklal D. Reshamwala (HUF) 15,00,000 2,50,000 13. Govardhan D. Reshwamwala (HUF) 15,00,000 2,50,000 14. Jaswantlal D. Reshamwala (HUF) 15,00,000 2,50,000 Total 3,00,00,000 49,99,990 4. Post survey proceedings, the revenue summoned the purchaser, Shri Hitendra D. Patel and recorded his statement under section 131 of the Act, wherein he admitted to have purchased the agricultural land for total consideration of Rs. 3 crores from Reshamwala Family, and they offered the above sale consideration in their respective return of income qua their individual shares. While framing the assessment, the Assessing Officer estimated the value of land at the rate of 700 per sq.mt. and worked out capital gains, accordingly, at Rs. 21,24,472, as against the capital gain declared by the assessee at Rs. 7,48,128 and thereby made addition of Rs. 19,76,374. The Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing since 1999 and was not revised since long and, hence, it was very much necessary to bring the Jantry at par with the prevailing market rates in order to eliminate leakages of revenue. The old Jantry Rate of the land under consideration was Rs. 400 whereas the New Jantry Rate is Rs. 5,000. Thus, there is a huge difference between the old and new jantry rates, which amply evidences that the prevailing market rates were very much higher as compared to the old jantry rates. Therefore, the sales consideration as shown by the appellant as per the old jantry rates, is not at all acceptable. Further, it is a matter of common sense that property prices would not increase abnormally from Rs. 400 per sq. mt. to Rs. 5,000 per sq. mt. in just a few months, but in fact this suggests that the actual market rates were much higher than the old Jantry prevailing during 2006, i.e., during the period when the deal under consideration was finalized. In the State of Gujarat, stamp duty is recovered as per the provisions of section 32(A) of the Bombay Stamp Act, 1958. The first jantry was prepare in 1984 and thereafter in 1999. The Jantry made applicable in 2008 was based on the market situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove." Aggrieved, the assessee came in second appeal before us in all 7 appeals. 6. The first grievance of the assessee is against the enhancement of value of land from Rs. 700 per sq.mt. to Rs. 5,000 sq.mt. by the CIT(A) as against the fair market value adopted by the assessee at Rs. 483 per sq.mt. (the circle rates fixed by Stamp Duty Registration Authority are at Rs. 400 per sq.mt.) Second, grievance of the assessee is that the agricultural land was ancestral agricultural land and, accordingly, fair market value as on 1-4-1981 for computation of capital gain, i.e., the cost of acquisition, is to be determined according to the assessee as per valuation report obtained from approved Valuer, Shri P.K. Desai, who valued the land as on 1-4-1981 at Rs. 60 per sq. mt. as against this, the Assessing Officer determined the fair market value at Rs. 25 per sq. mt. on the ground that the comparable sale instance given by the Registered Valuer ranges from Rs. 15 to Rs. 32 per sq. mt. 7. We find one more interesting fact from the orders of the lower authorities as well as from the submissions of the assessee s counsel and ld. CIT-DR that the total consideration of Rs. 3 crores was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is at the rate of Rs. 483 per sq.mt. We find that these co-owners have sold the land and received payment of Rs. 2,92,11,111 up to 14-12-2005 and due to death of co-owners in the intervening period, the sale deed could not be registered but the claim of the assessee is that the balance Rs. 8 lakhs was received as on 31-3-2006, Finally, the sale deed was registered in January and February 2007 through two sale deeds registered and the consideration of the sale deeds was amounting to Rs. 3,00,11,111. We find that the revenue could not bring any evidence that the entire consideration was not paid on or before 31-3-2006 and possession of land was not handed over by these co-owners to the seller. Even otherwise, we accept the claim of the revenue that the possession of this land and the balance payment of Rs. 8 lakhs was delivered at the time of registration of sale deed in January and February 2007, when the sale deeds were registered, the revenue cannot assess the capital gain in the assessment year under consideration, i.e., assessment year 2006-07. However, the vital issue before us is whether in the case of sale through registered sale agreement, the capital gain is to be com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. Explanation. For the purposes of this section "Valuation Officer" shall have the same meaning as in clause (R) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received on accruing as a result of the transfer." 9. The relevant provision of section 50C of the Act was explained and elaborated in the following portion of the Departmental Circular No. 8 of 2002, dated 27-8-2002, as under: "37. Computation of capital gains in real estate transactions. 37.1 The Finance Act, 2002 has inserted a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property. 37.2 It provides that where the consideration declared to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed sub-section (2) of the said section seeks to provide that where the assessee claims before any Assessing Officer that the value adopted or assessed by the authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer and the value so adopted or assessed by the authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, Court or a High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer, and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause ( i ) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957, shall, with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. The Valuation Officer shall be the Valuation Officer as defined in clause (R) of section of the Wealth-tax Act, 1957. The proposed sub-section (3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. These amendments will take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003-04 and subsequent years. [Clauses 24 and 59]" 11. In view of the above provision and explaining the provision, we are of the view that the law under section 50C had been provided adequate protection to the taxpayers against adoption of arbitrary values for the computation of capital gains and the following precautionary are provided: ( i )The value which is considered as the proper value of the property as fixed by the authority for registration for stamp duty purposes is presumed to be the fair market value for the purposes of computation of capital gains on the sale of property. ( ii )It is open to the taxpayer to plead that such stamp value is abnormal and contest the same in appeal under the stamp law requiring adoption of reduced value. If such value is reduced in appeal under the provisions of the relevant stamp law, such reduced value would alone be adopted. ( iii )Where such stamp value is not disputed, it is open to the assessee to require the Assessing Officer to refer the valuation to the Valuation Officer, who shall fix the valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted, then business could be deemed to continue. Hon ble Allahabad High Court in CED v. Smt. Krishna Kumar Devi [1988] 173 ITR 561 held that in interpreting the legal fiction the Court should ascertain the purpose for which it was created and after doing so assume all facts which are logical to give effect to the fiction, Hon ble Supreme Court in CIT v. Mother India Refrigeration Industries Ltd. [1985] 155 ITR 711 held that legal fictions are created only for some definite purpose and they must be limited to that purpose and should not be extended beyond that legitimate field. In CIT v. Bharani Pictures [1981] 129 ITR 244 (Mad.), it is held that legal fictions are for a definite purpose and are limited to the purpose for which they are created and should not be extended beyond its legitimate field. The statutory fiction introduced in one enactment cannot be incorporated in another enactment. The point that legal fiction cannot be extended to a new field was highlighted by Hon ble Madras High Court in CIT v. T.S. Rajam [1980] 125 ITR 207 wherein it is held that section 41(2) creates a legal fiction under which the balancing charge is treated as business income charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sq.mt. on the basis of report of assessee s Registered Valuer approved by the department, taking comparable sale instances given by the valuer, which ranged from Rs. 15 to Rs. 32 per sq.mt. The assessee has adopted the value at Rs. 60 per sq.mt. on the basis of report given by Registered Valuer approved by department, who has valued on the basis of many factors as locality, traffic jam, fertility of land, etc. We find that the revenue could not substantiate the value adopted by the lower authorities at Rs. 25 per sq.mt. which has no basis. The value adopted by the assessee of land at Rs. 60 per sq.mt. is based on a technical report of Registered Valuer approved by the department. Accordingly, we accept the value adopted by the assessee for computation of capital gains at Rs. 60 per sq.mt. and directing the Assessing Officer to adopt this value for the computation of capital gains in these appeals. 14. Similar being the issues and facts in ITA Nos. 3375 to 3380/Ahd./2009 in the cases of Ashwin M. Reshamwala (HUF), Hasmukh D. Reshamwala (HUF), Jaswantial D. Reshamwala (HUF), Mohanlal J. Reshamwala, Arvindlal C. Reshamwala (HUF) and Rameshchandra J. Reshamwala (HUF), these appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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