TMI Blog2013 (9) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplate a deeming situation in respect of full value of consideration, for the purpose of levy of capital gains - Conceptually and factually, there is wide difference between the sale consideration, as recorded in the registered sale deed and the "fair market value" of the asset. The "fair market value" represents the price that a seller is willing to accept and a buyer is willing to pay in the open market. The price or sale consideration as specified in the registered sale deed of an asset in India represents the price or sale consideration negotiated or determined not in the open market but in the parallel operating market where such transactions crystallised in a clandestine manner. In view of this, the sale consideration of an asset, as recorded in the registered sale deed is generally understated and, hence, cannot be taken as the "fair market value" as on April 1, 1981 for the purpose of computation of "capital gains" - Having regard to the fairness, the fair market value of the land in question, deserves to be taken at Rs. 3.50 lakhs per acre, as on April 1, 1981, for the purpose of computation of capital gains – Appeal of assessee partly allowed. - - - - - Dated: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r location, size and shape, the rate should have been adopted at higher than Rs.1,80,000 per acre as accepted by the Assessing Officer under section 143(3) of the Act for the assessment year 2005-06. 6. The Commissioner of Income-tax (Appeals) has not been able to rebut the identical case of Shri Abdul Rashid Rather of Amritsar Bench as cited before him and other detailed submissions as made before him. 7. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of." In the course of present appellate proceedings, before the Bench, the learned authorised representative contended that the grounds of appeal revolve around non-adoption of circle rate of Rs. 5 lakhs per acre as fair market value as on April 1, 1981, for the purpose of computation of capital gains by the Assessing Officer and upholding the findings of the Assessing Officer by the Commissioner of Income-tax (Appeals). The learned authorised representative referred to various pages of the paper book, such as pages from 50 to 62, 39. The learned authorised representative also placed reliance on the decision of the Amritsar Bench in the case of Abdul Rashid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith that certificate, the Assessing Officer made enquiries from the Tehsildar for 'fair market value' of land as on April 1, 1981 and that letter has been reproduced by the Assessing Officer in the assessment order. The Tehsildar made detailed enquiries from the Nambardar, Patwari, Sarpanches of villages and gave a exhaustive report as per copy placed at pages 12 to 17 of the paper book. The report is very exhaustive." The learned authorised representative pointed out that the Commissioner of Income-tax (Appeals), cannot adopt contradictory approach, in the adoption of the fair market value of the land, as on April 1, 1981, ignoring the sale consideration of Rs. 43.25 lakhs per acre, of the said land, disclosed by the assessee, as recorded in the agreement, seized in the course of search operation, as full value of consideration under section 48 of the Act. It was, further, pointed out by the learned authorised representative that the Department has already accepted Rs. 1,80,000 per acre as the fair market value of the land as on April 1, 1981 located in the same village and at an adverse location for the assessment year 2005-06. The learned authorised representative also analyse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appellate Tribunal. The Commissioner of Income-tax (Appeals) has failed to consider that sale consideration adopted much more than the circle rate. The Commissioner of Income-tax has stated that language of section 5(2)(b)(ii) was not intended to have different meaning for the purposes of calculation of capital gain and, as such, that documentary evidence has to be taken into consideration for determining the fair market value has to be given meaning as per section only. The Commissioner of Income-tax has failed to consider that the enquiries made from the Revenue department under section 133(6) has clearly brought out the rate which is more than the registered sale consideration. Further the language in section 55(2)(b)(ii) has to be given meaning as per section only. The Commissioner of Income-tax has not disputed that the rate of Rs. 1,80,000 had been adopted for the assessment year 2005-06 and according to the Commissioner of Income-tax, the same is not binding upon the Assessing Officer for the assessment year 2008-09. The Commissioner of Income-tax (Appeals) has failed to consider the fact that the facts and circumstances were same and the rate of Rs. 1,80,000 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Rahon Road was approximately Rs. 5 lakhs per acre. The assessee and his brother, sold land measuring 58 karnal 5A marlas, situated at main Rahon Road, Ludhiana, for net consideration of Rs.3,11,88,214. As the land was owned jointly by the assessee and his brother, sale consideration to the share of the assessee is worked out at Rs.1,55,94,107. As the land was acquired prior to April 1, 1981, the long term capital gains were computed by considering the fair market value of the land in terms of the provisions of section 55(2)(b)(ii) of the Act. The learned authorised representative placed reliance, on the decision in CIT v. Ajax Products Ltd. [1965] 55 ITR 741 (SC) ; Smt. Tarulata Shyam v. CIT [1971] 108 ITR 345 (SC) and Keshavji Ravji and Co. v. CIT [1990] 183 ITR 1 (SC) and contended that plain language used in a statute, should be interpreted as it is, without importing anything extraneous, with a view to giving full effect, to the legislative intent. Such judgments were cited by the assessee, before the Assessing Officer, to support his contentions, in respect of the interpretation of the provisions of section 45 read with sections 48, 55 and 55A of the Act. The assessee, furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Tehsildar only in part and, thus, ignored the remaining contents of the same. It is, thus, evident that the Assessing Officer, adopted the average sale rate of the land in that area, on the basis of registered sale deeds as the "fair market value" of the land in question, for the purpose of computation of capital gains. The Commissioner of Income-tax (Appeals), upheld the finding of the Assessing Officer, as is evident from paragraphs 15 and 16 of the order, as reproduced hereunder: "15. I have considered the Assessing Officer's basis for adopting fair market value at Rs. 27,030 as against Rs. 5,00,000 claimed by the assessee and the authorised representative's arguments on the issue. The appellants claim rests on the certificate issued by the patwari, which in turn is based upon verbal enquiries conducted by him to arrive at the fair market value as on April 1, 1981. Secondly, the appellant relies heavily on the acceptance of the fair market value by the Assessing Officer in the case of the assessee for the assessment year 2005-06 at Rs. 1,80,000 per acre. The authorised representative's contention is that once the value claimed on the basis of patwari's certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no search action in his case leading to discovery of actual sale consideration. In the circumstances the assessee cannot turn back and rely on generally prevalent practice in real estate transactions to suppress the actual sale consideration and rubbish the evidentiary value of registered sale price as reported by the Revenue authorities. herefore I do not find any merit in the authorised representative's argument on the issue. 16. The authorised representative has also raised the issue of consistency on the ground that for the assessment year 2005-06 the Assessing Officer had accepted the certificate of the patwari in determining the fair market value of asset sold. The action of the Assessing Officer in accepting patwari's report on the basis of verbal enquiries allegedly conducted by him for the assessment year 2005-06 is erroneous and therefore cannot be accepted to be binding upon the Assessing Officer for the assessment year 2008-09. The detailed reasons for holding the said certificate as erroneous have been detailed in paragraph 5 of this order. As such the addition made by the Assessing Officer by adopting the fair market value of the land sold at Rs. 27,030 is confirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 957), 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 learned Commissioner of Income-tax (Appeals), in his appellate order observed that he had considered the basis for adoption of the "fair market value" at Rs. 27,030, as against Rs. 5 lakhs claimed by the appellant having regard to submission made by the learned authorised representative, on the issue. The claim of the appellant, for adoption of Rs. 5 lakhs as the "fair market value" per acre, as on April 1, 1981, is based on the certificate issued by the Patwari, in the light of enquiries conducted by him. The appellant also placed reliance on the "fair market value" as accepted by the Assessing Officer, in the assessee's case for the assessment year 2005-06, at Rs. 1,80,000 while completing assessment under section 143(3) of the Act. The contention of the appellant was rejected by the Commissioner of Income-tax (Appeals), on the ground that the Assessing Officer, while completing the assessment under section 143(3), for the assessment year 2005-06, failed to examine the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket value", within the meaning of the provisions of section 2(22B) of the Act. The contention before the Commissioner of Income-tax (Appeals) that the sale consideration, as specified in the agreement to sell at Rs. 43.25 lakhs per acre, as against circle rate of Rs. 5 lakhs per acre, establishes that "fair market value" of the land is different from its circle rate. However, this contention of the assessee did not find favour with the Commissioner of Income-tax (Appeals), on the ground that the assessee had no option but to declare the said sale consideration of Rs. 43.25 lakhs as mentioned in the sale agreement, in view of the seizure of the said document. Further, the Commissioner of Income-tax (Appeals), is of the opinion that contents of the seized documents cannot be taken as evidence for the purpose of determination of "fair market value", for the purpose of charging capital gains tax. Such rejection of the contentions raised by the appellant is not legally and factually tenable, as the Revenue cannot resort to principle of approbation and reprobation, in respect of the same transaction pertaining to the land in question. The interpretation of the Commissioner of Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estate transactions. In a nut-shell, the Commissioner of Income-tax (Appeals), concluded that "fair market value" is synonymous and equal to the average rate of the sale consideration, as specified in the registered sale deeds, ignoring the definition of "fair market value" as provided under section 2(22B) of the Act, as reproduced above and the impact of actual sale consideration recorded at Rs.43.25 lakhs in the seized "agreement to sell". The learned Commissioner of Income-tax (Appeals), also disregarded the principle of consistency as espoused by the appellant before him, in the context of the assessment year 2005-06. We have perused the impugned assessment order, for the assessment year 2005-06 passed under section 143(3) of the Act, wherein, after detailed discussions and application of mind, the Assessing Officer has adopted "fair market value" of the land, as on April 1, 1981, at Rs. 1,80,000 per acre. Therefore, the logic and rationale, as adopted by the Commissioner of Income-tax (Appeals), in rejecting the contentions and explanation of the appellant, does not stand to legal and factual position and the rule of consistency. In this context, it is pertinent to reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Sarpanch and prominent citizens. It needs to be mentioned here that the sale instances, as recorded in the respective sale deeds, on the basis of which Tehsildar worked out the average price of agricultural land at Rs. 27,030, pertains to the agricultural land situated in the area. However, Tehsildar has specifically mentioned location of the land as situated at the main Rahon Road, whereby market price of agricultural land has been verified at Rs. 5 lakhs per acre. Therefore, there is a marked difference in the location of agricultural land situated in the area and the impugned land situated at main Rahon Road, consequently leading to a different market rates of land at different locations. The document seized in the course of search operation under section 132(1) of the Act, can be used as an evidence, even in a situation where the search has been held as illegal by the competent court. In view of this, the Revenue is competent to use that contents of the seized documents in its favour, on the basis of such documents seized in the course of illegal search. Similarly, the assessee is also competent to use the same, to support his contentions, wherever need it. The assessee-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has preferred the rate collected from the revenue Department-Thus, there was no justification for the Assessing Officer to reject the fair market value of land determined at Rs. 11.50 lakhs per acre-There- fore, capital gain is to be computed by taking the fair market value of land at Rs. 11.50 lakhs per acre as the cost of acquisition." It is pertinent to highlight here that the appellant offered the sale consideration, as recorded in the seized "agreement to sell", for the purpose of section 45 read with section 48 of the Act, which was accepted by the Assessing Officer and the Commissioner of Income-tax (Appeals), for the purpose of computation of capital gains. However, the Assessing Officer as well as the Commissioner of Income-tax (Appeals) turned a volte-face, in considering such sale consideration recorded in seized "agreement to sell" for the purpose of determining "fair market value" of the said land as on April 1, 1981. This approach of the authority is contradictory in nature, as the land and transaction related thereto, are factual in nature. The Revenue is not permitted to adopt different yardsticks, in respect of a single trans- action, under reference, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the registered sale deed and the "fair market value" of the asset sold. Therefore, the Legislature deemed it fit, to introduce the deeming provisions of section 50C, which contemplate a deeming situation in respect of full value of consideration, for the purpose of levy of capital gains. Thus, conceptually and factually, there is wide difference between the sale consideration, as recorded in the registered sale deed and the "fair market value" of the asset. In view of this, consideration as shown in the registered sale deed cannot be equated with "fair market value", as defined in the Act under section 2(22B) of the Act. Therefore, adoption of the average value of land at Rs.27,030 per acre as on April 1, 1981, as the "fair market value" of the land in question, for the purpose of computation of capital gains, is not legally and factually tenable. The "fair market value" represents the price that a seller is willing to accept and a buyer is willing to pay in the open market. The price or sale consideration as specified in the registered sale deed of an asset in India represents the price or sale consideration negotiated or determined not in the open market but in the parallel ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
