9911796707
TMI Blog2012 (3) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... d before us by the Revenue. Ld. senior standing counsel for the Revenue submits that the Assessing Officer was justified in making additions on the ground of understatement of sale consideration and computing the same by capitalizing the annual rent. He submits that the method adopted by the Assessing Officer was justified and in support of his submission has relied upon the decision of Madras High Court in Rane (Madras) Ltd. Vs. CIT (2003) 259 ITR 307. 3. The CIT(Appeals) deleted the said addition of Rs.3,52,66,096/- after referring to the factual matrix. Search operations were conducted during the relevant year but no incriminating material/ document regarding understatement sale transaction was found. The documents/ material did not ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not justified in estimating the sale consideration on the basis of rent capitalization method. Accordingly, we do not find any infirmity in the order of Ld. CIT (A) deleting the addition." 5. The reasoning and findings recorded by the CIT (Appeals) and the tribunal, we do not merit interference. The decision of the Madras High Court relied upon by the assessee in the case of Rane (Madras) Ltd. (supra) is in a different background and not apposite. In that case, fair market value of the property as on 01.01.1964 had to be estimated/ calculated for the purpose of Section 55 A of the Act. The assessee had submitted a report of a registered valuer. The Assessing Officer, estimated fair market value of the property as on 1.1.1964 by adopti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. This fact however, does not need any confirmation as far as reality is concerned." Therefore, the Assessing Officer held: - "The perusal of details submitted by the assessee company, indicate that sale consideration shown by the assessee company is absurd when compared with the rentals, these properties were fetching. The transactions have taken place in the F.Y. 2001-02 when the return on capital at the maximum, is estimated between 10-12% per annum. Even if the assessee is considered to have entered into a bad deal, return on capital for the buyer should not be more than 20% per annum by any stretch of imagination. It is important to mention here that the properties are brand new construction and given on rent to reputed companies. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise. He expressed his inability to verify and by applying the rent capitalization method, he held and concluded that the sale consideration was understated, if we take the rate of return as 15% to the buyer. This is only an assumption and cannot be accepted. The aforesaid observation does not mean that in no case, the Assessing Officer can rely upon rent capitalization method but there should be a justification and material to hold, show and establish that there was an understatement of the sale consideration. Once it is shown that consideration has been understated, it may be open to the Assessing Officer to quantify the same by reference to the market value arrived at by the rent capitalization method in the absence of any material to sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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