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2016 (8) TMI 55 - ITAT MUMBAI

2016 (8) TMI 55 - ITAT MUMBAI - TMI - Capital gain computation - determination by the stamp duty valuation authorities for stamp duty purpose - reference matter to DVO - Held that:- In case the assessee disputes the value as adopted by the stamp duty valuation authorities for stamp duty purposes, the AO is bound to refer the matter to DVO for determining the fair market value of the property and in case DVO valued the fair market value of the property at a value higher than stamp duty value adop .....

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eming fiction of Section 50C of the Act, instead of the value of the land of ₹ 2,09,28,000/- as determined by the DVO, while on the other hand the actual sale consideration is ₹ 72,00,000/- . The assessee’s share in the land is 13.5417% and hence full value of consideration will work out to ₹ 23,98,500/- which for the purposes of Section 48 of the Act shall be adopted as full value of consideration of sale of land as per provisions of Section 50C of the Act for computing long t .....

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T(A) ), for the assessment year 2009-10, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 23rd December, 2011 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961 (Hereinafter called the Act ). 2. The revised and consolidated grounds of appeal raised by the assessee filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- 1. The Learned CIT (A) erred in .....

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nd further erred applying section 50C of the Income Tax Act, 1961 under the pretext of enhancement u/s 251(1)(a) r.w.s. 251(2) of the Income Tax Act, 1961 where in fact there was a reduction in tax liability rendering such enhancement notice and the direction bad in law. Without prejudice to Ground no. 1 & 2: 3. The Learned CIT (Appeals) has erred in law, facts and in circumstances of the case by treating the sale of Agricultural land at village Kunenama, Pune as sale of Capital Asset [non- .....

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pable to being used for commercial and non- agricultural purposes and also ignoring the various defects in the land. 5. The Learned CIT (Appeals) has erred in law, facts and circumstances of the case by adopting the enhanced value of ₹ 2,09,28,000 instead of the value adopted by stamp duty authority of ₹ 1,77,12,000 in violation of subsection 3 of section 50C of the Income Tax Act 1961. 6. The Learned CIT (Appeals) has erred in law, facts and circumstances of the case by confirming t .....

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he assessee has claimed exemption of claim of profit on sale of agricultural land. The assessee was asked to produce the documents to explain exemption of claim of profit on sale of agricultural land. A letter to DVO was sent by the A.O. on 17th November, 2011 to determine the fair market value of the property located at Village Kunenama, Pune , as the fair market value as revealed as per stamp duty valuation authority was ₹ 1,77,12,000/- for the total part of the asset. The assessee has c .....

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7; 50 lacs for the said land and the letter from Talathi, Pune. On verification of the sale agreement of the said land, it was observed by the AO that the agricultural land situated at Pune was not in the assessee s name but it was his mother s name and hence the assessee was asked to explain as to why the income claimed exempt as profit on sale of agricultural land should not be taxed u/s 68 of the Act. The assessee submitted that the assessee had purchase the said land along with three others .....

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of the Act in the case of the assessee for the assessment years 2006-07, 2007-08, and 2008-09 , and in the case of assessee s mother for the assessment years 2006-07, 2007-08 and 2009-10. The assessee submitted that the sale of agricultural land and the exempt capital gain was correctly reflected in the tax return of the assessee. The A.O., however, rejected the contentions of the assessee as the property indicated the name of mother of the assessee and other persons both in the purchase and sal .....

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. ₹ 23,98,500/- which was added to the total income of the assessee as undisclosed income u/s 68 of the Act vide assessment order dated 23rd December, 2011 passed by the AO u/s 143(3) of the Act for which no satisfactory explanation has been given by the assessee with respect to nature and source of the income. 4. Aggrieved by the assessment order dated 23-12-2011 passed by the A.O. u/s 143(3) of the Act , the assessee filed first appeal before the learned CIT(A). 5. Before the learned CIT .....

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₹ 9,75,000/- ( held in the name of mother Mrs. Annette Bulchandani). The assessee submitted that he was minor when the said land was acquired in 1987 and the mother acted on his behalf as a natural guardian for the purchase of the said agricultural land. The payment was made by the assessee in 1987 and possession was held by the assessee. The said agricultural land was declared as a private forest land in 2008 as is evidenced by 7/12 extract attached to the sale deed. Since the agricultura .....

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limits of any municipal town. The A.O. sent the DVO report dated 27th September, 2012 to the ld. CIT(A) , wherein the ld. CIT(A) observed that the alleged land was within a radius of 2 kms of Lonavala Municipality , the DVO had reported that it is not an agricultural land and the DVO valued the said land at ₹ 2,09,28,000/-. Thus, the ld. CIT(A) observed that the long term capital gain of ₹ 28,26,651/- is to be brought to tax as income under the head capital gains as against the addi .....

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ted before the ld. CIT(A) that vide notice of enhancement it is proposed to value the property at ₹ 20,928,000/- and the assessee s share is proposed at ₹ 28,33,651/-. The assessee submitted that as per provisions of Section 50C(3) of the Act , if the value as adopted by DVO exceed stamp duty value as adopted by stamp duty valuation authorities, the value as determined by stamp duty authorities shall be adopted. The assessee also submitted that the indexed cost should be taken while .....

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marked as forest land under the Maharashtra Private Forests(Acquisition) Act, 1975. The sales instances relied upon by the valuation officer were not marked as forest land with low commercial value, therefore, are not comparable. The assessee also submitted that sales instances relied upon by the DVO was never submitted to the assessee despite request made by the assessee. The assessee submitted that the DVO did not visited the site before giving valuation report. The assessee also submitted th .....

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assets in the income tax records, hence, the learned CIT(A) held that the land belongs to the assessee and not to assessee s mother. The ld. CIT(A) observed from the DVO report that the land is within the radius of 2 kms from the Lonavala Municipality and hence it is a capital asset in view of section 2(14) of the Act. Further, there was no evidence brought on record by the assessee to show that any agricultural operations were actually carried out in the land. The ld. CIT(A) accordingly held t .....

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uisition and compute the capital gain accordingly as per provisions of section 48 of the Act to compute capital gains under the head income from capital gains and the addition made u/s 68 of the Act was directed by the learned CIT(A) to be deleted vide appellate orders dated 03-12-2012 passed by the learned CIT(A). 6. Aggrieved by the appellate order dated 03-12-2012 by the learned CIT(A), the assessee is in second appeal before the Tribunal. 7. The ld. Counsel for the assessee reiterated its su .....

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77; 28,33651/- as full value of consideration based on DVO report. The ld. Counsel drew our attention to the order of the authorities below and submitted that the A.O. has made reference to the DVO for valuing the property. The stamp duty value as determined by stamp duty valuation authorities of the property was ₹ 1,77,12,000/-. The assessee s share is 13.5417% in the said property. The DVO has valued the property at ₹ 2,09,28,000/- while the actual sale consideration received for t .....

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issued by Village Kamgar Talathi of village Kunenama, Taluka Mawal, Dist Pune whereby it is certified that the assessee s land is situated out of the limits of the Municipality of the town Lonavala and is at distance of 8 Kms from town Lonavala. He further drew our attention to paper book page 13 which is deed of conveyance executed by the assessee for sale of the afore-stated land whereby he submitted that the land is referred to as an agricultural land in said deed of conveyance. He also drew .....

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htra was placed for reference. He also referred to the Balance Sheet as at 31st March, 2006 and 31st March 2008 of the assessee whereby the said land was duly reflected which is placed at page 50 and 51 of paper book. He also drew our attention to the Balance Sheet of the mother of the assessee as at 31st March 2005, which is placed at paper book page 49 whereby the said land is not being reflected as an asset in her Balance Sheet. The learned counsel for the assessee drew our attention to the a .....

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pplied section 68 of the Act by holding the same as cash credit not being satisfactorily explained by the assessee , while the ld. CIT(A) applied section 45 of the Act to bring to tax long term capital gain on sale of the said land. It was submitted that the learned CIT(A) cannot bring new source of income to taxation as the AO made additions u/s 68 of the Act by treating the same as cash credit for which no satisfactory explanation was given by the assessee about the nature and source of the in .....

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come filed with the Revenue. The valuation made by the DVO cannot be accepted as it is on higher side and the land was forest land having low commercial value and the DVO did not considered these factors affecting valuation of land. The learned counsel submitted that the valuation of stamp duty authority should be accepted. The ld counsel submitted that in any case as per provisions of Section 50C(3) of the Act, valuation as adopted by stamp duty valuation authorities for stamp duty purposes be .....

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value and the same was not considered by the DVO in right perspective. .The ld counsel for the assessee relied upon decision of Hon ble Punjab and Haryana High Court in the case of CIT v. Chandni Bhochar reported in (2010) 323 ITR 510(P&H HC) to contend that the value adopted by stamp duty authorities if it is in excess of actual sale consideration also cannot be accepted unless there is positive evidence brought by AO supporting the price adopted by the State Government for the purposes of .....

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the same gains from sale of land which is subjected to tax while in the case of Sardari Lal and Company(supra) relied upon by the assessee, altogether different source of income was brought to tax by learned CIT(A). In the instant case no new source of income has been discovered by learned CIT(A) and it is the same source of gains from sale of land which is subjected to tax by learned CIT(A) as long term capital gains while the AO assessed the same u/s 68 of the Act . The ld DR drew our attentio .....

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) of the Act, the distance is to be measured from road i.e. road distance is to be determined and since the land is approx 8 kms from town Lonavala as certified by Talati, it cannot be brought to tax. 9. We have considered the rival contentions and also perused the material available on record. We have also gone through the case laws relied on by both the parties. We have observed that the assessee is the owner of the land situated at Survey No. 119, Hissa no. 4, Village Kunenama,Taluka Maval, D .....

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tated to be that when the assessee acquired the land in the year 1987, he was minor and the mother acted as natural guardian to execute the purchase deal of the acquisition of the said land and hence the land was stated to be purchased in the name of mother of the assessee despite the payment of ₹ 7000/- being paid by the assessee . The said land was declared and notified in the year 2008 under the category of reserved and private forest under Maharashtra Private Forests (Acquisition) Act .....

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tion is a notified forest land. No evidence is brought on record by the assessee that any permission was sought from the State or Central Government to carry on agricultural activity on the said land. The assessee has submitted that it reflected certain income as agricultural income in the earlier years in the return of income filed with the Revenue which is accepted by the Revenue in scrutiny assessment while what is relevant is that at the time of transfer of the land, the land was agricultura .....

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operations were in-fact actually carried on by the assessee in pursuance of the government approvals on the said land when the land was sold. Merely because in the preceding years, the assessee has declared agricultural income which was accepted by the Revenue is not sufficient to declare the land as agricultural land on the date of its transfer by way of sale executed by the assessee to take out of ambit of being capital asset under Section 2(14) of the Act more-so the land is now a notified fo .....

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lls with in the four corners of exempting provisions of law. Once the assessee establishes its claims for grant of exemption in its favour, then the exemptions provisions are to be liberally construed to give full effect to the exempting provision as mandated by law. The assessee in the instant case failed to bring on record cogent evidences to establish that land under question was an agricultural land at the time of its sale by the assessee on which actual agricultural operations were carried .....

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f the Act on the grounds that the assessee is not able to satisfactorily explain the nature and source of the income , while the ld. CIT(A) brought to tax the gains arising on transfer of land as long term capital gains u/s 45 of the Act. The reliance placed by the assessee in the case of Sardari Lal & Co. (supra) is erroneous as the learned CIT(A) has not brought to tax an altogether different source of income from the source of income considered by the AO , rather the income arising from t .....

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e instant case as facts are clearly different in the instant case under appeal. Further, we have also noted that before enhancing the assessment , the learned CIT(A) duly issued notice of enhancement vide letter dated 23.10.2012 whereby detailed reasons proposing to enhance the assessment was duly given to the assessee and principles of natural justice as enshrined in the doctrine of audi alteram partem was duly complied with by the learned CIT(A) by putting the assessee to notice about proposed .....

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consideration received or receivable in respect of transfer of land or building or both is lower than the value as adopted for stamp duty purposes by the stamp duty valuation authorities , then value as adopted by stamp duty valuation authorities for stamp duty purposes shall be deemed to be full value of consideration for the purposes of computing capital gains chargeable to tax. As per section 50C(3) of the Act, if the fair market value of the land as computed by DVO is higher than the value a .....

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of purchaser of land which was before the Hon ble Court in the case of Chandni Bhochar(Supra) and secondly Section 50C of the Act is deeming provision which for the purposes of computing full value of consideration in the case of transfer of land or building or both has stipulated that full value of consideration shall be deemed to be the value as adopted by the stamp duty valuation authorities for stamp duty purposes in case the actual sale consideration is lower than the value adopted by stam .....

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