2015 (1) TMI 250

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..... 1994-95. In the returns filed by him under the Income Tax Act, 1961 (for short the Act) for the Assessment Year 1995-96, he has shown the income in the form of sale proceeds as Rs. 6,45,142/-. The capital gain component was shown as Rs. 3,84,567/-. The Assessing Officer processed the return and passed an order dated 15.01.1997 accepting the facts and figures furnished by the respondent. The jurisdictional Commissioner selected the case of the respondent for suo-motu review under Section 263 of the Act. A show cause notice was issued directing the respondent to explain as to why the order of assessment dated 15.01.1997, be not set aside. He opined that the market value of the property was taken as Rs. 600/- per square yard by the Assessing .....

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..... and the cost of any improvement thereto, must be deducted. The further details are furnished in the form of provisos. The Explanation is devoted to define the various expressions, that are used in the Section. The second component, namely, the cost of acquisition of the asset would become important. That would cut into sale consideration and thereby, bring down the amount, which is liable to be taxed as capital gain. The following illustration would make it clear. a. A plot of 500 square yards was sold in the year referable to the Assessment Year 1995-96 at the rate of Rs. 2,000/- per square yard and it fetched Rs. 10,00,000/-. b. The owner of the plot incurred expenditure of Rs. 1,00,000/- towards advertisement, documentation and legal o .....

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..... lanation, the respondent categorically stated that in the letter addressed by the Sub Registrar, the cost was mentioned as Rs. 40/- per square foot, obviously, for the constructed area, and the same was mistaken by the Commissioner to be the cost of land per square yard. A perusal of the order passed by the Commissioner discloses that he got another letter from the Sub Registrar, Banjara Hills, wherein he is said to have informed that the cost of Rs. 40/- mentioned by him in his earlier letter, is per square yard of land and he mistakenly mentioned it as square foot of constructed area. The difference was bound to be phenomenal. If Rs. 40/- is the cost in respect of square feet of constructed area, in terms of square yards, it would not on .....

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