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TMI Blog2013 (2) TMI 578X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 1961 (hereinafter referred to as "the Act") without proper application of mind. 4. The learned Commissioner of Income Tax (Appeals)-V in this regard failed to appreciate that (a) Initially the Appellant had executed a document of sale in respect of 15,311 Sq. Yards of land, while physically, on the ground, land to that extent was not available. (b) Subsequently on realizing the actual area available the Appellant had executed a Rectification Deed rectifying the sale deed originally executed and substituting revised extent of land in the sale deed. (c) That upon execution of such Rectification Deed original sale deed stood modified from the date of its execution. (d) That to the whole world the title of the transferee was only referable to 13,500 Sq. Yards of land and not 15,311 Sq. Yards. (e) And consequently the value as per the register maintained by the stamp authority had to be computed with reference to 13,500 Sq. Yard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; (b) Failure on the part of the District Valuation Officer to physically measure the land available, having regard to the assertion of Mr. B. Vikram Reddy, son of the Appellant that the land as a matter of fact was never measured. (c) The fact that the Collector had given "No Objection" Certificate only in respect of 7139 Sq. Yards equivalent to Ac. 1.19 Guntas with respect to which layout was sanctioned, whereas the land that was eventually sold was 13,500 Sq. Yards based on the link documents. (d) The fact that the property was under the cloud of proceedings under Urban Land (Ceiling and Regulation) Act, 1976 having been in excess of limit of 1000 Sq. Mts., prescribed under the said Act. 10. The District Valuation Officer also had committed serious error in relying upon three sale deeds of comparatively smaller plots and that too in Jubilee Hills without having regard to the fact that the Jubilee Hills land was more valuable and also while plotting the effective land available for actual sale would be reduced to 60%. &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had prior Agreements of Sale. 15. The Learned Commissioner of Income Tax (Appeals)-V failed to appreciate that merely because these persons had not enforced agreement of sale by filing a suit for specific performance in view of the various litigation which was going on in respect of the property in question, the legal right of the respective parties was not extinguished. Having regard to the principles of law that only the remedy was barred and not right under the Agreement, it was perfectly just and proper for the Appellant to have honoured the Agreements in favour of third parties and to have agreed to pay them compensation in view of their foregoing right to receive the property by payment of consideration. 16. In any event the Learned Commissioner of Income Tax (Appeals)-V failed to appreciate that the Appellant had to give a representation / warranty in the sale deed executing in favour of the 3,,1 party to the effect that there were no prior agreements of sale in respect of the property that was sold and the Appellant would have made deliberate false statements had these agreements been suppressed. Consequently the payment of compens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t village in Town Survey No. 3 of Ward 12, Block - K, Road No. 12, Banjara Hills, Hyderabad. This agreement was entered into with Zade Realtors for a consideration of Rs. 13.5 crores. The possession of the land was handed over on 01.04.2006. The Assessing Officer found that 15,311 sq. yards of the property had been sold and the market value was Rs. 15,31,10,00. The appellant, on the other hand, had shown the sale consideration only at Rs. 13,50,00,000/-. By giving the following reasons, an addition Rs. 1,81,10,000/- was made under section 50C of the Act: "It is noticed from the Registered Sale Deed that market value of the property was Rs. 15,31,10,000/- whereas, the consideration offered by the assessee is Rs. 13,50,00,000/- only. The Authorized Representative was asked vide order sheet entry dated 23.11.2009 to explain why the sale consideration should not be adopted at Rs. 15,31,10,000/- as per the provisions of section 50C of the I.T. Act. Section 50C reads as under: "where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s beyond human probability and too in present days it does take such a long time to locate the mistake in mentioning the area of land transferred. He submitted that the DVO inspected the property on 12.12.2009 and confirmed the area transferred is 15,311 sqy. He submitted that the valuation report submitted by the registered valuer cannot be acted upon as it is very vague and the value mentioned cannot be adopted. He relied on the order of the CIT(A). 4.4 We have heard both the parties and perused the material on record. Admittedly, in this case the assessee made a rectification deed correcting the area mentioned therein in the sale deed. The assessee also explained the reasons for delay in executing the rectification deed that the assessee is an old lady of 86 years old and she is not aware of the income-tax law. On behalf of the assessee, assessee's son B. Vikram Reddy has been appearing before the Revenue authorities. The mistake mentioned in the area in the sale deed was found at a later stage and on this count rectification deed was executed on 11.12.2009 and registered on 16.12.2009. Further on calling the Remand Report by CIT(A) from the Assessing Officer, the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to the value adopted by the State authorities for stamp duty valuation. Being so, the addition cannot be sustained on this count. Accordingly, this addition is deleted. This is so, because the Rectification Deed is in writing duly executed by both the parties and then it would reckon back to the date of sale deed and it is to be considered as correct as per Evidence Act s. 114 unless it is proved contrary by the Department. Accordingly, we allow this ground. 5. The next ground is with regard to the disallowance of indexed cost of acquisition at Rs. 2,18,52,625. Brief facts of the issue are that while calculating the capital gains, the Assessing Officer took the SRO value as on 1.4.1981 at Rs. 25 per sqy and gave the benefit of indexing on this amount. On the other hand, the assessee submitted that a valuation report from a private valuer stating that the cost of land as on 1.4.1981 was Rs. 300 per sqy. The Assessing Officer did not accept the plea of the assessee and made an addition of Rs. 2,18,52,625 by giving the following reasons: "The assessee claimed the cost of land as on 1.4.1981 at Rs. 300 per sq. yards as per the valuation report of a private valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct as well as to the District Administration who fix the SRO rates. The SRO rates may not reflect the exact sale price of each and every property but they are scientifically based on the actual market rates of the area. They are not at all fixed randomly on whims and fancies. The difference between the SRO rates and market rates is never 1200% as has been claimed by the assessee. A further look at the valuation report of the private valuer shows that he has not quoted a single instance of sale and purchase above the SRO rates in the area. He merely stated that he had made some local enquiries and adopted the rate of Rs. 300/- per sq. yard. Such vague and fanciful statements have no evidentiary value whatsoever. The valuer has not even quoted the name and address of any agent or contractor whom he had contacted. It is also worth noting that he is stated to have visited the site on 30.07.2007 and has collected all the relevant information, without stating any details of any information collected. 5.3 We have heard both the parties on this issue. The Assessing Officer adopted the FMV of the land as on 1.4.1981 at Rs. 25 per sqy. The assessee wants to substitute it at Rs. 300 per sqy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sad and his wife, an amount of Rs. 28 lakhs was paid to surrender the land which they have legally accepted and in order to get rid of long pending litigation. The assessee furnished copies of cheques dated 10.03.2006 for Rs. One lakh and Rs. 4 lakhs respectively and also two receipts for Rs. 13 lakhs each. Thus, as per the agreement dated 10.03.2006 the assessee claimed to have been paid Rs. 28 lakhs. Further, the assessee had not furnished any further evidence such as confirmation from Sri Rajendra Prasad. In view of the above, the claim of the assessee is rejected." 6.1 The AR submitted that the assessee had paid compensation because of breach of contract. The assessee had entered in to agreements of sale with five persons for sale of plots in 1993. She had also produced the copies of the agreements before the Assessing Officer. She had committed breach of agreements and had to pay compensation aggregating to Rs. 2,36,00,000 to those parties. She had explained that she had committed breach of contract and was legally liable to compensate the parties before she could go ahead with the present deal. Actually she had obtained confirmations from the parties and approached the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate proceedings with the CIT(A) Remand Report was called from the Assessing Officer. The Remand Report on this issue reads as follows: "2. Disallowance of compensation claimed to have been paid: 2.1 During the course of assessment proceedings, the assessee claimed the payment of compensation of Rs. 2,36,00,000, but no confirmations were filed. Hence, the claim of the assessee was disallowed devoid of merit. 2.2. The assessee filed confirmations from the payees of compensation viz., Shri P. Pratap Reddy for Rs. 64,00,000/-, Smt. K. Jayasree for Rs. 64,00,000, from Shri K.V. Narasimha Reddy for Rs. 24,00,000, Shri B. Rajendra Prasad for Rs. Rs. 4,00,000, Rs. 1,00,000 and Rs. 13,00,000 respectively and requested the CIT(A) to admit the same as additional evidence. 2.3 I have examined the bank account pass book of the assessee and the entries regarding the debit of these payments. Inspector of Income Tax of this office was deputed to enquire from the persons who have received the compensation paid by the assessee. A copy of the Enquiry report of the Inspector and the letters along with copies of Bank A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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