Fair market value remand and section 54B relief denied where new agricultural land was bought before sale proceeds were received.

ITAT Delhi examined two issues in an income-tax article note: first, additional evidence on the fair market value of agricultural land as on 01.04.1981 could be admitted because the assessee had not had adequate opportunity before the Assessing Officer, but the valuation certificate lacked a reliable evidentiary basis, so the adopted value was set aside and the matter remitted for reference under section 55A and fresh computation; second, exemption under section 54B was not available where the new agricultural land was purchased before receipt of the sale consideration from the original transfer, as the statutory investment condition was not satisfied.

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Issues: (i) Whether the assessee's additional evidence on the fair market value of the agricultural land as on 01.04.1981 could be admitted and relied upon, and whether the adopted valuation was sustainable; (ii) Whether exemption under section 54B was available where the new agricultural land was purchased before receipt of the sale consideration from the transfer of the original agricultural land.

Issue (i): Whether the assessee's additional evidence on the fair market value of the agricultural land as on 01.04.1981 could be admitted and relied upon, and whether the adopted valuation was sustainable.

Analysis: The assessee had not been afforded sufficient opportunity before the Assessing Officer to produce material on fair market value, so admission of the additional evidence was justified. However, the valuation certificate relied upon before the appellate authority was based on an ary method, including a broad multiplier applied to stamp-duty value, without a sound evidentiary foundation. In these circumstances, the direction to adopt the stated fair market value could not be sustained, and a reference to the valuation officer was necessary for proper determination.

Conclusion: The valuation adopted by the appellate authority was set aside and the matter was restored to the Assessing Officer for reference under section 55A and fresh computation.

Issue (ii): Whether exemption under section 54B was available where the new agricultural land was purchased before receipt of the sale consideration from the transfer of the original agricultural land.

Analysis: The statutory benefit under section 54B depends on investment of the capital gain arising from transfer of agricultural land in purchase of new agricultural land within the prescribed period. On the facts, the new agricultural land was purchased before the assessee received the sale consideration linked to the transfer, so the investment could not be regarded as utilisation of the capital gain for the new asset. The conditions for exemption were therefore not satisfied.

Conclusion: The claim for exemption under section 54B was not allowable.

Final Conclusion: The Revenue succeeded on the valuation issue by way of remand for fresh determination, while the assessee failed on the exemption claim; the overall disposal was partly in favour of the Revenue.

Ratio Decidendi: Where the material for determining fair market value lacks a reliable foundation, the valuation must be referred for proper determination; and exemption under section 54B is unavailable unless the capital gain arising from the transfer is actually invested in the purchase of new agricultural land within the statutory framework.

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