Tribunal directs AO to use declared sale consideration & fair market value for cost of acquisition. No indexation on land.

The tribunal partly allowed the assessee's appeal, directing the AO to adopt the declared sale consideration and re-compute the cost of acquisition based on fair market value as of April 1, 1981, excluding a strip of land purchased in 2008. The tribunal dismissed the claim for indexation on the strip of land. The decision was rendered on July 27, 2016.

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Issues Involved:
1. Computation of long-term capital gain.
2. Adoption of sale consideration under section 50C of the Income-tax Act, 1961.
3. Indexation on the amount paid for acquiring possession of a strip of land.
4. Fair market value of the asset as on April 1, 1981, as cost of acquisition under section 55(2) of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Computation of Long-Term Capital Gain
The assessee contested the computation of long-term capital gain by the Assessing Officer (AO), which was confirmed by the Commissioner of Income-tax (Appeals) (CIT(A)). The AO computed the long-term capital gain at Rs. 2,43,18,412 against the declared gain of Rs. 1,53,56,462. The assessee argued that the CIT(A)'s action was illegal, unjustified, arbitrary, and against the facts of the case. However, the tribunal did not provide a distinct judgment on this specific issue, implying that the primary focus was on the other grounds of appeal.

Issue 2: Adoption of Sale Consideration under Section 50C
The assessee challenged the AO's adoption of the sale consideration at Rs. 6,12,70,120 against the actual sale consideration of Rs. 6,00,00,000. The assessee argued that the difference of Rs. 12,70,120 (2.11%) was within the tolerable limits of 15% variation recognized by the Supreme Court in C.B. Gautam v. Union of India. The tribunal found merit in this argument, referencing the Pune Bench's decision in Rahul Constructions v. Deputy CIT, where a difference of less than 10% was deemed ignorable. Consequently, the tribunal directed the AO to adopt the sale consideration as declared by the assessee. This ground of the assessee was allowed.

Issue 3: Indexation on Amount Paid for Acquiring Possession of Strip of Land
The assessee claimed indexation on Rs. 13,97,120 paid for acquiring possession of a strip of land, arguing ownership since the purchase of the original plot and citing the Theory of Adverse Possession. The CIT(A) and the AO did not allow this indexation. The tribunal upheld the lower authorities' decision, noting the absence of evidence proving ownership before the land's regularization in 2008. The tribunal dismissed this ground of the assessee's appeal.

Issue 4: Fair Market Value as on April 1, 1981, under Section 55(2)
The assessee contended that the fair market value as on April 1, 1981, should be considered for computing long-term capital gains, submitting a value of Rs. 110 per sq. yard supported by a registered sale deed of a nearby area. The CIT(A) dismissed this claim, stating the assessee could not establish the value as on April 1, 1981. The tribunal found force in the assessee's argument that fair market value should be based on comparable sale instances and directed the AO to re-compute the cost of acquisition after ascertaining the fair market value as on April 1, 1981, excluding the strip of land purchased in 2008. This ground was allowed for statistical purposes.

Conclusion:
The appeal of the assessee was partly allowed, with the tribunal providing specific directions on the adoption of sale consideration and re-computation of the cost of acquisition while dismissing the claim for indexation on the strip of land. The tribunal's order was pronounced in the open court on July 27, 2016.

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