TMI Blog2012 (3) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... Accountant Member) For the Petitioner : Dr. Sunil Pathak, Nikhil Pathak For the Respondent : S. K. Singh ORDER Shailendra Kumar Yadav (Judicial Member) This appeal by the assessee is directed against the order of CIT(A)-III Pune dated 17-12-2009 for A.Y. 2005-06 on the point of penalty of ₹ 9,59,31,626/- levied by the Assessing Officer u/s 271(1)(c) of the Act. 2. The assessee is engaged in the business of manufacturing of biscuits and chocolates and stated to have closed its business activities from 1996. No returns of income were filed by the assessee from A.Y. 2000-01 onwards. However, the assessee has sold two properties mentioned below during the year under consideration. Sr. No. Particulars of the property Area in sq. mtrs. Date of sale Consideration (Rs.) 1. Survey No. 44, Hissa No. 1/A 19,324 1-4-2004 7,28,00,000 2. Survey No. 44, Hisa No. 1/A 27,298 28-3-2005 16,00,00,000 3. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances, the registered valuer in his report dated 18-12-2003 adopted land rate for cost of acquisition as on 1-4-1981 @ ₹ 1,230/- per sq, mtrs, During the course of assessment proceedings, the copy of ready reckoner and the circular dated 3-10-1989 was obtained from the Jt. Sub-Registrar, Pune. As per the said circular, the value of the land in the year 1981 was 40% of the value in 1989, i.e. 40% of ₹ 1,000/- per sq. mtr. In other words, as per the said circular, the fair market value comes to ₹ 400 per sq. mt. only. Market information was also gathered and it was revealed that in the year 1981, the rate of land at Dhabnori village, which was outside the municipal corporation area were not so high and the land in question was not even in the residential zone in the year 1981. In this background, Dy. Director of Income-tax (Investigation) Unit 1, Pune also conducted enquiries and also summoned u/s 131 of the Act, shri Yashwant Sadashiv Pathak, registered valuer, and his statement was also recorded on 10-12-2007 for his explanation and comments on the valuation adopted by him. It was seen from the following facts, that the valuation adopted by the said registered val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valued at much higher rate as on 1-4-1981 being in PMC limits and having benefits of all infrastructures and all civil amenities. 21. Coming to three sale instances relied upon by the A.O., the stand of the assessee was that the lands relied by A.O were not comparable to the land owned by the assessee, hence there was no question of determining the FMV on the basis of those lands. The assessee has raised various contentions to bring out distinction between the three instances and the assessee s case in its reply placed at pages 146 to 150 as discussed above which was not duly considered by the A.O. The A.O has not disputed the fact that the comparable cases relied upon by the A.O were outside the PMC limit. Unequal should not be treated equally. The value of land situated in PMC limit is certainly higher than one outside municipal limits in Dhanori area. The land in municipal limit has benefit of infrastructure such as sewerage, water, electricity road security etc. so its value has to be higher. A.O has discussed the sale instances of ₹ 247/- but ignored the same while reached to conclusion whereby value of land @ 15.23 per sq. mtr as on 1-4-1981. This reflects the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion certificates to the parties in all the cases, as requested by them in the application in form no. 37-I. This strengthens our view that the three sale instances relied by the A.O were not comparable with the assessee's land and hence the adopting the rates as per these instances for determining fair market value of property is not justified and contrary to the facts on record. 24. Without prejudice to the above, we find that there was not much of a development outside the Pune Corporation limits and the basic facilities infrastructure like roads, drainage, drinking water supply, etc. were absent outside PMC limit though falling in same revenue estate i.e. Dhanori. So same could not be compared with the assessee s land for the purpose of adopting fair market value as on 1-4- 1981 so as to compute capital gain with regards to property in question. We also find that on page 17 of the assessment vide para 8.2 the A.O observed as under: Further; in view of the claim of the assessee that the land in question is 26 acres fully developed and sanctioned etc. this office has made an attempt to obtain sale instances of bigger properties from the SRO of the area concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from the fact that within 1.5 kms from the earlier three sale instances, the land rates could increase from ₹ 15/-per sq. mtr. to ₹ 247/- per sq. mtr. i.e. about 16 times and if that be so, the assessee's land was further 1.5 kms from this land having the market rate of ₹ 247/- per sq. mtr. In this way, the FMV of the assessee's land could be about at least 15 times of ₹ 247/-. In view of the above, the rate adopted by the A. O. cannot be accepted because it is devoid of concept of equally which is basis f principles of natural justice. Principle of natural justice is strength of progressive society. Without prejudice to above, even the fourth sale instance of ₹ 247/ - per sq. mtr. was for land outside PMC limit in 1981 in Dhanori village and it cannot be considered to be comparable with the assessee's land. At the same time we find that the estimate of FMV as made by the registered valuer on behalf of assessee at ₹ 1230/- per sq. mtr. is also on higher side. 25. Regarding built up structure, we find it undisputed that land in question had old built up area as well. We find that in case of G.R. Radhakrishnan Vs. Appropriate A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,230/- per sq.mtr. We also find that under the Stamp Duty Act in view of section 2(na) the stamp duty valuation as adopted had to be considered as minimum FMV because consideration as per the agreement is higher than the stamp duty valuation, the same is the market value as per section 2(na). In the present cases, the land being in PMC limit although in revenue estate of Dhonori village had to be considered as much better located land than the other lands in Dhanori village which are outside PMC limit as they were away from the main road i.e. Pune Alandi Road. Accordingly, if the stamp duty authorities had fixed ₹ 400/- per sq. mtr. As minimum FMV in 1981 for land in general in revenue estate of Dhanori village, the assessee s land had to be valued at much higher a price. This view is supported by the fact that in 2004-05 when the assessee sold its pieces of land, the market value was almost double the stamp duty valuation at the relevant time which is evident from fact that the CIT(A) on page 12 of his order noted that the assessee received ₹ 7.28 crores as against ₹ 3.09 crores stamp valuation in sale deed dated 1-4-2004 and ₹ 16 crores as against ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue regarding the FMV of the land was a debatable one and it was a matter of estimate. The Tribunal has noted that the assessee sold the land for a consideration which was more than double the stamp duty valuation. Hence, one can argue that even ₹ 800/- per sq. mtr could be allowed as a FMV. The learned AR submitted that the issue involved is a matter of estimate and on such estimated addition, no penalty is leviable. The learned AR further submitted that the assessee had adopted the rate on the basis of report of government Approved valuer. It was further submitted that when an expert in the field had certified the FMV at a particular rate, the authorities below were not justified in holding that the assessee has mala fidely adopted higher rate for reducing its tax and hence there is no reason to levy penalty u/s 271(1)(c) of the Act. Undisputedly the assessee had not filed the return for the year under consideration for various reasons discussed above. It is pertinent to note that the land was sold by the assessee subsequently. The assessee offered the capital gain on the balance part of the land in A.Y. 2008-09. Further, before receipt of any notice for A.Y. 2005-06, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has inflated the market value of the property sold as on 1-4-1981 and thereby reduced the capital gain on the same. In this background, the learned DR supported the order of the CIT(A). 6. After going through the rival submissions and perusing the material on record, we find that the assessee has sold its land at dhanori, Pune. The assessee was engaged in the business of manufacturing biscuits and chocholates and stated to have closed its business activities from 1996 onwards due to various problems, manufacturing loss, control over administration and it was not running the administration properly and was not having all records so as to file the returns for A.Y. 2005-06 at relevant part of time. However various queries were raised by the Assessing Officer with regards to capital gain and after rejecting the contention raised on behalf of the assessee, the Assessing Officer considered the capital gain of ₹ 22,93,91,745/- which was confirmed by the CIT(A). In second appeal and the Tribunal vide its order dated 6th September 2010 in ITA No. 1568/PN/2008 directed the Assessing Officer to compute the capital gain by taking FMV of the land at ₹ 665/- per sq. mtr as on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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