TaxTMI 
TaxTMI 
2022 (4) TMI 672
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....6 which is directed against the order of learned Commissioner of Income-Tax (Appeals)-7, Ahmedabad dated 28.09.2016. 3. The relevant facts of the case giving rise to this appeal are that the assessee, who is an individual, filed his return of income for the year under consideration on 21.07.2012 declaring total income of Rs. 3,74,560/-. During the year under consideration, the assessee along with his two brothers namely Shri Yogeshbhai Laxmanbhai Makwana and Shri Subodhbhai Laxmanbhai Makwana had sold an immovable property situated at Saijpura, Naroda, Ahmedabad jointly owned by them to M/s. Shanti Infra Developers, a partnership firm, for a total consideration of Rs. 5,04,43,000/-. The said property comprising of 5327 sq. yards of non-agricultural land bearing final plot No.44 and Krishna Colony plot of 627 sq. yards along with the construction was acquired by the assessee and his brothers by way of inheritance after the death of their father late Shri Laxmanbhai Panchabhai Makwana on 21.06.1986. In the return of income filed for the year under consideration, his 1/3rd share in the Long Term Capital Gain arising from the sale of the said property was declared by the assessee at....
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.....03.2015 requiring the assessee to show-cause as to why the transaction should not be treated as transfer of land only and deduction on account of cost of acquisition being fair market value of the land sold should not be restricted to Rs. 80/- per sq. yard rejecting the index cost of construction claimed by the assessee. The contents of the said letter issued by the Assessing Officer to the assessee were as under:- "Please refer to the assessment proceedings pending in your case and hearing took place on various dates and furnished certain details by you 2. On verification of the details furnished, it is noticed that you have shown Long Term Capital gain of Rs. 1,70,304/- after claiming exemption U/s 54B/54D/54G etc. of Rs. 40,84,8698/- on sale of final plat No.44 of TP scheme No.47, Saijpur, Naroda, Ahmedobod admeasuring 5954 sq. yard for a consideration of Rs. 5,04,43,000/- by you and 3 others. On verifying the Long term Capital Gain working it is noticed that you have worked out capital gain on the Long Term Capital Gain dividing the property in three parts as under Area of land Area of land after allotment of Final TP No.47 Value of Land (R....
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.... with 3 other for consideration of Rs. 5,04,43,000/- vide document No.9822 dated 09/09/2011 and capital Gain exemption claimed will be treated U/s 54F and the calculation will be made accordingly. As the capital gain exemption U/s 54 will be available only if there is transfer of long term capital asset being building or land appurtenant thereto and being a residential house. But in your case the residential house were not transferred only the land have been transferred as evidence from the condition No.6 of your Banakhat and as per (parishist in Gujarati) of sale specified in the sale deed dated 09/09/2011 as such capital gain exemption will be available U/s 54F. 3. In the Long Term Capital Gain working you have shown the value of construction as under:- Description Residential Commercial Total Value Residential Bungalow 427000 427000 Shops, Hall & Worker Room 760500 760500 Worker Room (Krishna Colony) 339200 339200 Open Marginal Shed 277200 277200 Ceramic Factory Shed 96000 96000 Ceramic Furnace #01 300000 300000 Ceramic Furnace #02 ....
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....om the registered office for the year 1980-81 in respect of R. Survey No.977, Moje Saijpur Bogha were considered and the tabulation of the same is produced as under. "Sale Instances from register office for year 1980/81.(R. Sur. No:- 977, Moja; Saijpur Bogha) SR.NO 1 2 AMOUNT Rs. 20000 Rs. 90000 LOCATION F.P. NO. /SUR. NO. SP.NO:-21/P.R.SUR. NO:- 16. S.P.NO.--35/1, R. SUR. NO:- 16. AREA SQ. Ml. /SQ.YDS 100.00 SQ.YDS. 412.00 SQ. YDS NAME OF SELLER - - NAME OF PURCHASER - - DATE OF REGISTRATION 15/07/1981. 05/12/1961. REGISTRATION NO. 8792 2036 RATE PER SQ.MT/SQ. DS. Rs. 200/- PER SQ.YDS. Rs. 218/- PER SQ.YDS. 5. This office has called for the copy of Sale Deed bearing No.8792 dated 15/07/1981 and Registration No.2036 doted 05/12/1981 from the Sub Registrar Office, City Zone. Ahmedabad vide letter dated 05/03/2015. The Sub Registrar vide fetter dated 12/03/2015 submitted the copy of the above documents which is enclosed herewith. On verification of Copy of Document 8792 dated 15/07/1981 it is noticed that the said document was executed between Okhabhai Jorabhai Rabari (Seller) ....
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....ces of document No.8792 dated 15/07/1981 in place of Rs. 250/- claimed by you as per the valuation Report. 6. From the above it is clear, the valuation Report done and prepared by Shri Kanu P Gajjar of Amee Engineer is made based on incorrect facts, which can be evidenced from the details of safe instances quoted and interpreted by the valuer for determining the valuation of the land and construction. 7. In view of the above, you are required to furnish evidence details as called for above to establish your claim that you have sold residential land and construction, commercial land and construction and open land as claimed in your calculation of Capital Gain and the valuation adopted in respect of the same. In the absence of the above details your transaction will be treated as in respect of Open Land and the valuation of Rs. 80/- sq. yard as per the sale instances document No.8792 doted 15/07/1981 will be taken into the calculation of value of land as on 1/4/1981 and the cost of construction on the land claimed by you will be rejected." 5. In reply to the show-cause notice issued by the Assessing Officer, the following explanation, in detail, was offered by th....
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....0/Sq. Yard (Rupees Nine Thousand per Sq. Yard). 2. Page No 5 of "Banakhat" confirms that there was a construction of Krishna Colony along with other construction which was used for our commercial & residential purpose. The land along with construction to be called as "Majkur Jamin". 3. Para 6 at Page No. 8 of "Banakhat" confirms that there was a construction of Krishna Colony, construction of shops, construction of Krishna Pottery Works which was used for commercial purpose and the construction of Bungalow which was used for residential purpose by us. 4. The construction is an immovable property and cannot be moved away from one land to another land. Sir, it is not possible to sale the land without passing the possession of construction on the land to the Buyer. The Seller has to either demolish the total construction on the land to make the land "Open to Sky " and then sell the land "Open to Sky" to the Buyer OR pass the possession of the construction (Pratyahsh or Paroksh Kabja) to the "Buyer" along with the possession of the land. Sir, in the registered "Banakhat" or registered "Sales Deed" we as a Seller of said property have never declared that we ha....
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....valuation of any land, the sale value of other property for the same period are taken as a indicative value and then final market value of land is determined considering many other factors affecting the cost. The indicative value can never be considered as FMV in any case without considering the additional factors affecting the cost. The sale value of one land can never be the same to the sale value of other land 10. Sir, the value of land at all location in a particular ward (say, entire Saijpur Bogha Ward) is never the same as lots of factors are affects the value of land. Few factors as per my knowledge and information are listed below: i. Total plot area of land to be sold or purchased ii. Type of land. A Commercial Land is more costly than a Residential Land and a Residential Land is more costly than an Agriculture Land. iii. Locality where the subject land is situated. Whether the land is located in an undeveloped area, developing area or a developed area. Whether the land is located in a slum area, middle class area, upper middle class area or upper class area. iv. Type of existing constructions nearby the subject land. v....
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....ng the problem of Rain Water Deposition during the rainy season but as our land was located at the height more than that of Main Road, we never faced the problem of Rain Water Deposition till the date nor we have suffered any loss due to the same. 12. Sir, Kindly find attached copy of Original Lease Deed executed between Kuberdas Hargovendas Modi and Samuben on 03/05/1947 (copy of Original Lease Deed attached herewith). As per the Original Lease Deed Samuben purchased Lease Rights from Kuberdas Hargovandas Modi which was later sold to our Parents on 27/10/1975 and further we have recently sold this lease rights on 09/09/2011 vide registered Sales Deed. Sir, as per the original Lease Deed executed on 03/05/1947, the value for 8470 Sq. Yard Land was decided to be Rs. 42,350/= as agreed on 03/05/1947. If the amount of Rs. 42,350/= was kept in a Saving Bank Account on 03/05/1947 then what would be the accumulated value with interest (considering Rate of Interest @ 4%, as applied for Saving Bank Account, which is exempted from Income Tax) for the period from 03/05/1947 up to 01/04/1981 (for 137 Quarters)..?. If same is calculated by the formula A=P (I+R/100)^n,, then t....
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....d at Rs. 20,000.00 (@ 80.00 per Sq. Yard). If a very small residential plot with a very narrow entrance and without any facility in the slum area of "Rabari Vas ' is sold @ 80.00 per Sq. Yard than the value of our commercial cum residential plot located on 40' Main Road with all facility as described above is justified. A multistory building can be constructed on our plot for the purpose of Commercial or Residential purpose but in no circumstance a multistory building for commercial purpose or residential purpose can be constructed in such a small residential plot located in a slum area of "Rabari Vas " with such narrow entrance. As per Government Norms for the construction of any multistory building the plot area should have good approach road with sufficient "Open to Sky" land (for the reason of fire safety purpose and Transportation of Goods & Public Services). The rate of such a mall residential plot in slum area can't be considered for the valuation of our plo5 bid is good indication that if a small residential plot in a slum area with very narrow entrance and without any facility is sold at the rate of 80.00 per Sq. Yard then the value of our commercial cum reside....
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....stated in the property schedule of Banakhat and sale deed. 7. As regards the rate of Rs. 250/- per sq. yard adopted by the assessee as fair market value of the land as on 01.04.1981 on the basis of the valuation report of the Registered Valuer, the Assessing Officer found that there were mistakes in the calculation made by the Registered Valuer while working out the rate of Rs. 250/- per sq. yard on the basis of comparable instances of sales. Since the said mistakes were glaring and accepted even by the Registered Valuer in his statement recorded on oath, the Assessing Officer adopted the fair market value of the land of the assessee as on 01.04.1981 at Rs. 80/- per sq. yard rejecting the contention of the assessee that the rate of Rs. 250/- per sq. yard was determined by the Registered Valuer on the basis of other factors also. The Assessing Officer thus held that what was sold by the assessee was only the non-agricultural open land of 5954 sq. yards without there being any residential bungalow or commercial property as claimed by the assessee. He accordingly adopted the cost of acquisition of the land so sold by the assessee being the fair market value of the land as on 01.04.....
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....rdingly, your appellant humbly prays to your honour for allowing the cost of construction and indexation thereon from the period 01/04/1981 since, it was constructed before 01/04/1981 considering the valuation made by the registered valuer for computing the long term capital gain accordingly." Kindly refer to Para-6 of my factual submissions on page no.4 wherein, your appellant has pin-pointed that the learned assessing officer has ignored major contents of the valuation report of M/s. Amee Engineers. He has not considered the contents on page no.8 to 11 of the valuation report wherein, the values of other assets as noted hereunder are mentioned: NO. DESCRIPTION VALUE AS ON 01/04/1981 A. Residential Bungalow 4,27,000 B. Shops, Hall and Worker Room 7,60,500 C. Worker Room 3,39,200 D. Ceramic Factory Shed 2,77,200 E. Open Marginal Shed 96,000 F. Ceramic Furnaces 3,00,000 G. Ceramic Furnaces 1,00,000 H. Chimney of Furnaces 50,000 I. Compound Wall 1,09,200 J. Brick Flooring 33,300 TOTAL Rs. 24,92,400 Most of the construction work was made in the F.Y.1979-....
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....land of 8,470 square yards, your appellant humbly prays for your honour to consider the total area of land and cost of construction for 8,470 square yards as claimed by your appellant as final and long term capital gain be computed accordingly." Kindly refer to para-4 of your appellant's factual submission on page no.2 wherein, it was very clearly informed to the learned assessing officer that the total area of land was 8470 Sq.Yds. and as per the proposed town planning scheme no.47 as announced by the government in C.Y. 2009, the clear available area of plot was 5954 Sq.Yds. The said scheme was not finalized till the execution of the sale deed but since, the said proposed town planning scheme was announced, one has to consider the same while, planning for future development of the property. Factually, the said proposed town planning scheme is finalized only 2-3 months back and yet, the excess land to be acquired by government out of 8470 Sq.Yds. is so far not acquired and the same is in full possession of the buyers only. Your appellant just want to convey that your appellant had invested for 8470 Sq.Yds only and on sale of the said property considering the sale value....
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.... it would be very much evident from the list of properties mentioned above that major portion of the property contained only residential premises (self and rented), To evidence this statement, we have enclosed the copies of municipal bills wherein, the names of tenants are mentioned in the bills alongwith the nature of property are very clearly mentioned. Further, a copy of letter for allotment of PAN and PAN Card of your appellant is also enclosed to evidence that your appellant was also residing in the same property till the finalization of the deal of the captioned property. A rough copy of sketch of the captioned property is also enclosed herewith for your ready reference. It may further be noted that the factory premises of Krishna Pottery Works was not in use since 1994-95 and since, the said firm had closed its business activities from 1994-95 itself, it ceased to be a commercial premises from that year only. We have also enclosed a copy of application for surrender of the respective licence in the name of Krishna Pottery Works. In view of the abovenoted evidences and explanation, we humbly submit that the captioned property was mainly occupied and used as residenti....
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....he outskirts of Moje. Village Saijpur Boga in the Registration Dist. Ahmedabad, Sub-Dist. Of City Taluka Ahmedabad - 6 (Naroda), -submitted in paper book at Sr.No.3 - page no.26 to 55. c) A copy of affidavit dtd.28/07/2016 of Makwana Rajendrabhai Laxmanbhai - duly translated in English (Original being in Gujarati).Submitted in paper book atSr.No.10 - page no.99 to 103. d) A copy of Sale Deed dtd. 13/10/1975 in respect of sale of leasehold rights of 999 years of the property situated in the outskirts of Moje. Village SaijpurBoga in the Registration Dist. Ahmedabad, Sub-Dist, Of City Taluka Ahmedabad - 6 (Naroda), - duly translated in English (Original being in Gujarati). e) A copy of Sale Deed dtd. 13/10/1975 in respect of sale of leasehold rights of 999 years of the property - known as Krishna Pottery Works situated in the outskirts of Moje. Village Saijpur Boga in the Registration Dist. Ahmedabad, Sub-Dist. Of City Taluka Ahmedabad-6 (Naroda) - duly translated in English (Original being in Gujarati). f) A copy of letter dtd.12/06/2000 of Sr. Supervisor of workshops, Shram Bhavan, Khanpur, Ahmedabad. In respect of closure of manufacturing process....
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....ent order and the submissions made by the appellant. The AO made the impugned the addition holding that the subject matter of transfer was open land and not land with construction. He also did not accept the valuation report furnished by the appellant during the assessment proceedings because the said contained factual errors in respect of the area of the land and the comparison with other sale instances. The appellant on the other hand contended that the land had been sold with construction and that the rate of valuation taken by the registered valuer was also correct and that the AO had no authority to reject the valuation report submitted by him. 4.2.1 I have perused the various documents that have been submitted by the appellant which include copy of banakhat dated 15.10.2010, copy of sale deed dated 08.09.2010, copy of valuation report or Amee Engineers dated 06.04.2011, copy of old bills and letters, etc. It is seen from the same that the property under consideration i.e. non agricultural land at No. 44 of T.P. Scheme No. 47, Saijpura, Naroda, Ahmedabad measuring 5954 sq. yards was sold by the appellant along with his mother and two brothers to M/s. Shanti Infra Deve....
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....med by him and also does not have any evidences regarding the construction of the said shops/commercial properties, etc. (vii) A perusal of the valuation of the report calculated by the. Registered Valuer is also seen as being incorrect since the area measured is wrong. Further, the valuer has also made a mistake by taking the sale instances as "land with construction" whereas the transfer was only in respect of land. Thus, the valuation of land is to be taken as Rs. 80/- per sq. yard and not Rs. 250/-claimed by the valuation report. (ix) A statement u/s. 131 was recorded by the AO from Shri Kanu P. Gujjar, approved valuer whose report had been relied on by the appellant. In response to question Nos. 7&8, the valuer admitted that he had made an error in specifying the area of land as well as giving his valuation for "land with construction" instead of "land". 4.2.2 Considering all the above facts, it is clear that the sale transaction was in respect of land only and not land with construction. The claim of the appellant in the submission made during appellate proceedings that the said land was sold with construction is negated by the sale deed itself whic....
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..... 6. The Ld. CIT(A) erred on facts and in law in not adjudicating ground in relation to non invoking of provisions of section 55A of the Act by the Assessing Officer while substituting value of property as on 01 /04/ 1981 of his own against value determined and certified Registered Valuer for the purpose of computing long term capital gain by appellant. 12. We have heard arguments of both the sides and also perused the relevant material available on record. Ground No.1 raised by the assessee in this appeal is general in nature while Ground No.6 raised by the assessee is not pressed and argued by the learned Counsel for the assessee at the time of hearing. 13. As regards the issue raised in Ground No.2 relating to the cost of acquisition of the immovable property sold as claimed by the assessee at Rs. 250/- per sq. yard being the fair market value as on 01.04.1981, it is observed that the same was claimed by the assessee on the basis of valuation report of the Registered Valuer. In the said valuation report, the Registered Valuer had relied on two comparable instances of sale during the relevant period to arrive at the fair market value of the immovable property at Rs....
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....that the proceedings under Section 263 initiated in the case of Shri Yogeshbhai Laxmanbhai Makwana, one of the co-owners of the property in question, on the similar issue, were dropped by the concerned learned PCIT after recording his findings/observations as under:- "Facts of the case have been considered alongwith submissions made by the AR. It is observed that the value adopted by shri Kanubai Gajjar was not correct & there were many flaws as discussed above. The report of another Govt. approved Registered valuer Shri Bakul Desai dated 09-03-2016 determining value of plot as on 01-04-1981 appears to be more reasonable & based on geographical, scientific & environmental factors, which may determine the valuation of land to a great extent. The value of land in question as on 1.04.1981 has been taken by the AO at Rs. 250/-Sq. yard. In my considered view the value of land cannot be taken at Rs. 80/-sq. yard. Because it doesn't appear to be proper considering location of land, its distance from Airport, Railway line etc. The valuer though has quoted value such a 350/- sq yard & Rs. 400/- sq yard & Rs. 210 sq yard for the different locations, It is viewed that th....
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....ssee's appeal. 15. The issue involved in Ground No.3 relates to the area of land to be taken into consideration for determining cost of acquisition to be deducted while computing Long Term Capital Gain. 16. As per Banakhat as well as sale deed, 5954 sq. yards of land was sold/transferred by the assessee and other co-owners to the purchaser. While computing the Long Term Capital Gain arising from the said transfer, cost of acquisition being the fair market value as on 01.04.1981 was worked out by the assessee taking into consideration the area of land of 8470 sq. yards. In this regard, it was contended on behalf of the assessee before the Assessing Officer as well as before the learned CIT(A) that the total area of property sold was originally 8470 sq. yards, out of which 908 sq. yards of area was deducted for road while 1608 sq. yards of land was reserved for Corporation as per the Town Planning Scheme. It was claimed by the assessee that the property sold thus was comprising of land of 8470 sq. yards as originally acquired and, therefore, this entire area should be taken into consideration for the purpose of determining the cost of acquisition deductible for the purpose of L....
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....e property as on 01.04.1981, the Assessing Officer and learned CIT(A) have taken a view on the basis of various adverse findings/observations recorded by them that what was sold/transferred by the assessee was only the non-agricultural open land without there being any construction of residential and commercial nature. In this regard, the learned Counsel for the assessee has submitted that there is a clear mention in the agreement to sale/banakhat that the property was being sold/transferred together with construction. The Assessing Officer, however, found that the construction referred to in Banakhat was a road side construction and Krishna Colony construction which was to be demolished by the purchaser. He also referred to the consideration agreed between the parties which comprised of plot of 5327 sq. yards @ Rs. 9000/- per sq. yard, totaling to Rs. 4,79,43,000/- and Krishna Colony construction on plot of 627 sq. yards amounting to Rs. 25,00,000/-. He noted that if at all there was construction of residential and commercial nature on the property sold by the assessee, the consideration for the same should have been specified separately. He also found that in the final sale deed ....
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....ards the issue involved in Ground No.5 relating to the assessee's claim for deduction under Section 54 on account of investment made in residential house, it is observed that deduction of Rs. 40,84,868/- under Section 54 was claimed by the assessee while computing the Long Term Capital Gain arising from the transfer of the property in question by treating the same as a residential property. The Assessing Officer, however, held that it was a case of transfer of non-agricultural open land by the assessee without there being any construction of residential house and the assessee, therefore, was not entitled for deduction under Section 54 for the investment made in the residential house but was entitled for exemption under Section 54F on proportionate basis. He accordingly allowed the claim for such exemption under Section 54F at Rs. 37,72,860/- as against the claim of the assessee for exemption of Rs. 40,84,868/- under Section 54 of the Act. As agreed by the learned representatives of both the sides, this issue is consequential to the issue involved in Ground no.4 of this appeal and since the same has already been decided by us against the assessee by holding that what was transferred....
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....observed that the same is similar to the one involved in Ground No.2 of the appeal of the assessee Shri Rajendrabhai Laxmanbhai Makwana, one of the co-owners of the same property, in ITA No.3270/Ahd/2016, which has already been decided by us in the foregoing portion of this order. Since the material facts relating to this issue as involved in the case of Shri Subodhbhai Laxmanbhai Makwana are similar to the case of Shri Rajendrabhai Laxmanbhai Makwana, we follow our conclusion drawn in the case of Shri Rajendrabhai Laxmanbhai Makwana and direct the Assessing Officer to adopt the rate of Rs. 250/- per sq. yard as the cost of acquisition as on 01.04.1981 being the fair market value of the property in question while computing the Long Term Capital Gain. Ground No. 2 of assessee's appeal is accordingly allowed. 22. So far as the issue raised by the assessee in Ground No.3 as to whether the property sold by the assessee was comprising of any residential or commercial construction as claimed by the assessee is concerned, we find that we have already dealt with the similar issue in Ground No.4 of the appeal of the assessee Shri Rajendrabhai Laxmanbhai Makwana, one of the co-owners of t....