2015 (6) TMI 426 - HC - Income Tax

Division Bench corrects computation of capital gains for land sale, emphasizes location & price variations

The Division Bench intervened in the case concerning the computation of long term capital gains for the appellant's land sale in the assessment year ... Reopening of assessment - adoption of sale price - whether AO was justified in applying the same sale price to the land sold by the appellant, which was sold in a different year? - Held that:- There does not appear to be even any attempt at arriving at the real/actual rate. There are certain aspects which require consideration. For instance, the rate of ₹ 19,837/- per marla was in respect of the transaction in the year 2006-07 whereas the appellant's transaction was in the previous year. There is a possibility, to say the least, of the prices having increased during the year. There are certain other aspects which require consideration such as the fact that the appellant's lands were not on the main road but behind those which abutted the main road and the lands that abutted the main road fetched the price of ₹ 19,837/- per marla. The questions of law are, therefore, answered in favour of the assessee/appellant, only for this limited reason, namely, the authorities ought to have made an effort to ascertain the price rather than merely relying upon the rate at which the lands were sold in the subsequent year. Matter is remanded to the Assessing Officer, only for the limited purpose of ascertaining the rate at which the appellant could have sold his lands. - Decided in favour of assessee. Issues:1. Appeal against the order of the Income Tax Appellate Tribunal upholding the decision of the Commissioner of Income Tax regarding the computation of long term capital gains for the assessment year 2006-07.2. Application of the same sale price to the land sold by the appellant in a different year compared to other transactions.3. Justification of applying the same sale price to the land sold by the appellant in comparison to land sold by another individual in a different year and location.Analysis:1. The appeal challenged the Tribunal's order upholding the CIT's decision on computing the balance of long term capital gains for the appellant's land sale in the assessment year 2006-07. The appellant's transaction details were linked to documents seized during a search at another individual's premises, indicating a specific sale rate per marla used in the re-assessment proceedings.2. The substantial questions of law admitted for the appeal revolved around the justification of the Assessing Officer (AO) in framing the assessment under Section 147 and applying the same sale price to the appellant's land sold in a different year. The appellant questioned the application of the same rate to their transaction compared to another individual's land sale occurring a year later.3. The Division Bench acknowledged the appellant's argument that the rate applied to a contiguous land sale in a subsequent year should not be automatically used for the appellant's transaction in the previous year. The Court noted discrepancies in the rates mentioned in documents related to the appellant's transaction and highlighted factors like location and potential price variations that were not adequately considered by the authorities.4. The Court intervened in the orders due to the lack of effort in determining the actual selling price, directing the matter to be remanded to the Assessing Officer for ascertaining the rate at which the appellant's lands could have been sold. The decision favored the appellant based on the authorities' failure to properly assess the transaction and instructed the AO to complete the evaluation within a specified timeframe without granting adjournments to the appellant.