TaxTMI 
TaxTMI 
2012 (3) TMI 468
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....ove sale transactions were reflected in the Annual Information Returns filed u/s 285BA of the Act. Therefore, a notice u/s 142(1) of the Act was issued on 30- 8-2007 calling for the return of income for A.Y. 2005-06. In response to the same, the assessee instead of filing return of income submitted a letter dated 20-9-2007 wherein it was stated as to how the assessee suffered losses and required to close its business activities and further elaborated the financial difficulties. It was also mentioned that on account of estimated tax liability, the assessee has paid long term capital gain of Rs. 4.50 crores and proposed to discharge the remaining liability in due course. When questioned about the capital gains on sale of land, the assessee vide letter dated 26-9-2007 furnished the working of estimated loss amounting to Rs. 17,93,93,090/- which included loss on sale of capital asset of Rs. 5,39,25,300/-. Further notice u/s 142(1) of the Act dated 12-10-2007 was issued for calling the necessary documentary evidence in support of the value of the property adopted as on 1-4-1981 @ 1,230 per sq. mtr. In response to the said notice the assessee filed letter dated 29-10-2007 enclosing there....
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....valuer could not explain as to why the rate of building has been adopted at reckoner rates, which are applicable for the new buildings, whereas the building in question was dilapidated and constructed in the year 1959-60, which had hardly any value. (b) The constructed area was hardly 5.87% of the total area of lad; (c) Even in the sale agreement, there was no assignment of any sale consideration to these structures; (d) The purchaser had demolished the said building to develop the land, which further suggests that the structure was of no value; (e) Even though the valuer had adopted reckoner rates for land and building of ground floor, upper floor, commercial and residential quarters for taking average rate, but it was admitted by him in the statement that there was no upper floor. (f) The reckoner rates for 1989 were for new buildings and not for the old constructions; (g) the buildings constructed were in village Dhanori (which was outside PMC limit in 1981), whereas the rates adopted by valuer were for land and building constructed within the municipal limits; (h) The valuer adopted the rate of the new commercial RCC building whereas in the case of assessee, it wa....
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...., zoning was not available and were around 3 to 4 kms away from the assessee's land. The said plots were in interior part of dhanori village and not having benefit of development in terms of water, drainage, electricity and other infrastructure facilities being outside PMC limits. The A.O has not justified its stand as to how the said three lands were comparable with the assessee's land. Copies of the sale deeds of the said three comparable instances were placed in the paper book. According to the said sale deeds, it is clear that the said lands were within the Gram Panchayat of Dhanori village only while the assessee's land in question was already in concern municipal limits at relevant point of time. In view of above comparison between both was not justified for purpose of valuation at relevant point of time. Equal should be treated equally and unequal should not be treated equally. 23. Further, the sale instances of the properties in all four directions should be taken into consideration to arrive at conclusion of the average value of the property. However, in this case the comparable cases have been taken which are situated in only one side of assessee's property and that too....
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....his instance was obtained as it was developed by a society on bigger land. This agreement is executed on 20-10-1990 between Shri Rajkumar Jitram Agarwal (purchaser through partner of M/s. Shree Gurukripa Developers) and Smt. Sheela Sham Paranjape (seller) for one plot of land (in a big layout) admeasuring 469 sq. mtrs for a consideration of Rs. 2,90,000/- at Rs. 618 per sq. mt. The agreement is referred in the final registered document dated 19-3-1999 Going by the guidelines in ready reckonor and circular dated 3-10-1989 the rate per sq. mt will work out to Rs. 247/- for the year 1981. Thus the rates shown in ready reckoner and circular dated 3-10- 1989 at Rs. 1000/- in the year 1989 are also on the higher side. A copy of the sale instance was also made available to the assessed company on 24-12-2007 for its comments/explanation thereon." As discussed earlier this is one of the instances discussed by the A.O but not taken into consideration by him. It shows that three instances referred to above did not constitute proper comparables. From the above we find that the A.O obtained an agreement for sale of building which was dated 20-10-1990 and the same was registered on 19-31999. A....
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....n plots with buildings thereon are compared, the buildings cannot be treated as scrap, irrespective of their age, the amount invested in putting up the construction, the present depreciated value and the potential for further use of the building. For the purposes of ascertaining the value of the land on which the building had been put up, normally the depreciated value of the building is required to be deducted from the total consideration paid for the property. The exception would be cases where it is clearly established that the price paid for the property is in fact the price paid for the land and scrap value of the building. The appropriate authority acted perversely in treating the value of the building on the auctioned property as scrap for the purchase of valuing the land, even in the absence of any evidence to show that the persons who bought the property bought it with an intention of completely demolishing the building. The order was not valid and was liable to be quashed. " In this background we find that value of property having structure, even though old one should be valued higher than vacant land for the purpose of concluding FMV for computation of capital gains. I....
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....see's land at relevant point of time. Taking of all facts and circumstances FMV of land in question would be reasonable at @ Rs. 665/- per sq. mtr. As on 1-4-1981. A.O is directed to compute the capital gain accordingly." 5. Before the Tribunal passed an order, the Assessing Officer levied penalty u/s 271(1)(c) for the year under consideration. The total penalty levied was Rs. 9,59,31,626/- which was 200% of the tax sought to be evaded, same was confirmed by the CIT(A) which has been opposed on behalf of the assessee. 5. The learned AR submitted that the Assessing Officer has levied the penalty on the ground that the assessee had not filed the return and it was only because of the information received from Annual Information Return that the assessee had sold the land. The Assessing Officer has not accepted the claim of the assessee that there was long term capital loss and sated that the assessee has furnished inaccurate particulars of income. The CIT(A) has also confirmed the stand of the Assessing Officer. According to the CIT(A), the value of the land adopted by the assessee was unrealistic and without any basis and hence he has stated that the assessee has falsely adopted hig....
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....sessing Officer. This shows that the assessee had no intention to conceal its income as otherwise, it would not have paid advance tax on the long term capital gain arising from the sale of the balance portion of the land. Because of bonafide reasons, the assessee could not file the return and secondly, the assessee had computed long term capital loss and hence, by not filing any return, the assessee has lost the chance of carry forward of the losses. The learned AR further submitted that there were various liabilities on the assessee like sales tax, provident fund, bank loan and interest, labour payments etc. which were directly paid by the purchaser to the respective parties and such payments should be allowed as a business loss. I f one considers such payments made totaling to Rs. 7.90 crores there was no positive income at all. In view of this, there was no reason to levy the penalty. Further, the valuation of the land is a matter of estimate and if Rs. 1,050/- per sq. mtr is allowed, there would not have been any capital gain. The learned AR further submitted that the Assessing Officer did not refer the matter to the DVO. Reliance has been placed on the decision of Himachal Pra....
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....er sq. mtrs as claimed by the assessee. The basis of penalty is non-acceptance of the long term capital loss by the Assessing Officer which was confirmed by the CIT(A). According to the Assessing Officer, the value of the land adopted by the assessee was unrealistic and without any basis. He stated that the assessee has adopted the higher value of the land and thereby reduced the income. Accordingly, the above said FMV of the property was adopted at Rs. 15.23 per sq. mtrs as against the claim of the assessee at Rs. 1230/- per sq mtrs for the purpose of computation of capital gain. Now, the FMV as stated above, has been held to be reasonable at Rs. 665/- per sq. mtrs. In fact the FMV of the land has been the subject matter of penalty which was, according to the assessee, is debatable and rightly so, because the Tribunal has also taken the market value with regards to FMV. The adoption of FMV is a matter of estimate. It may vary person to person and adopting the particular FMV at the advice of approved valuer cannot be the sound basis for invoking the provisions of section 271(1)(c) of the Act. As explained above, the assessee could not file the return in time. Same thing was explain....