2002 (2) TMI 347 - AT - Income Tax

Tribunal upholds initiation proceedings for undisclosed capital gains, directs valuation review

Dominic Dias Margaao. Versus Assistant Commissioner Of Income-Tax.

Dominic Dias Margaao. Versus Assistant Commissioner Of Income-Tax. - ITD 087, 001, TTJ 082, 022, Issues Involved:1. Legality of proceedings under Section 147 and issuance of notice under Section 148.2. Determination of fair market value of the property as on 1-4-1981 under Section 55(2)(b)(ii).3. Rejection of valuation reports by registered valuers.4. Treatment of family arrangements for valuation purposes.5. Levy of interest under Section 234B.Detailed Analysis:1. Legality of Proceedings under Section 147 and Issuance of Notice under Section 148:The first common grievance was whether the CIT(A) was justified in holding that the proceedings under Section 147 were properly initiated with sufficient ground for the issuance of notice under Section 148. The assessees had sold agricultural land but did not disclose the income from capital gains in their returns for the assessment year 1995-96. The Assessing Officer initiated proceedings under Section 147 by issuing notices under Section 148. The Assessing Officer had information from the Chief Officer, Canacona Municipal Council, confirming that the property fell within the municipal limits and the population exceeded 10,000 as per the 1991 Census. The Tribunal upheld the action of the Assessing Officer and CIT(A), finding no infirmity in their actions.2. Determination of Fair Market Value of the Property as on 1-4-1981:The primary issue was the determination of the fair market value of the property as on 1-4-1981 under Section 55(2)(b)(ii). The land was purchased in 1969 for Rs. 35,000 and later sold and gifted within the family. The assessees provided valuation reports from registered valuers, which were rejected by the Assessing Officer. The Assessing Officer determined the value based on the gift deed value of Rs. 48,000. The CIT(A) directed the Assessing Officer to determine the value using the cost inflation index based on the 1969 purchase price. The Tribunal, however, found that the family transactions did not reflect the fair market value and rejected the CIT(A)'s method.3. Rejection of Valuation Reports by Registered Valuers:The valuation reports provided by the assessees were from Mr. Vikas Desai and Mr. Ghanshyam A. Nagarsenkar. The Assessing Officer rejected these reports, citing that Mr. Desai was not an agricultural valuer and that both reports lacked solid data and were hypothetical. The Tribunal found that the Assessing Officer was in error in rejecting Mr. Desai's report based on his qualifications alone and noted that the agricultural valuer's report was detailed and reasonable. The Tribunal directed the Assessing Officer to adopt the value determined by Mr. Nagarsenkar at Rs. 66,46,000.4. Treatment of Family Arrangements for Valuation Purposes:The Tribunal considered whether the transactions within the family (sale and gift deeds) could be used to determine the fair market value. It was held that these transactions were family arrangements and did not reflect the fair market value. The Tribunal noted that the value stated in the gift deed was not reliable for determining the market value as on 1-4-1981. The Tribunal rejected the CIT(A)'s direction to use the cost inflation index based on the 1969 purchase price.5. Levy of Interest under Section 234B:The assessees contested the levy of interest under Section 234B. The Tribunal noted that this ground was consequential in nature and directed the Assessing Officer to levy interest, if any, after considering the Tribunal's observations.Separate Judgment by Judicial Member:The Judicial Member disagreed with the Accountant Member on the rejection of the valuation reports and the treatment of family arrangements. He emphasized that the value mentioned in the gift deed should be considered as the fair market value, subject to rebuttal, and directed the matter to be referred to the Departmental Valuation Officer under Section 55A for a fresh determination. The Third Member agreed with the Judicial Member, leading to the restoration of the matter to the Assessing Officer for fresh adjudication based on a valuation report from the Departmental Valuation Officer.