Shri Hashmukh Dahyabhai Reshamwala,HUF, Surat v. The Income tax Officer,Ward-7(2),, Surat

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.3374-3380/AHD/2009 ASSESSMENT YEAR: 2006-07 DATE OF HEARING:8.4.10 DRAFTED:9.4.10 KAUSHIK SURESHBHAI RESHAMWLAL RAMPURA MAIN ROAD SURAT 395003 PAN NO.ABNPR3554J ASHWIN MANCHHARAM RESHAMWALA (HUF) 7/2322 RAMPURA MAIN ROAD PAN NO.AABHA9339R HASMUKH DAHYABHAI RESHAMWALA (HUF) 7/3721 RAMPURA MAIN ROAD PAN NO.AAAHH8342A JASHWANTBHAI DAHYABHAI RESHAMWALA (HUF) 7/3721-22 RAMPURA MAIN ROAD PAN NO.AABHJ2882G MOHANLAL JETHABHAI RESHAMWALA 7/319 RAMPURA DUDHARA SHERI PAN NO.ABNPR3567K ARVIND CHUNILAL RESHAMWALA (HUF) 7/2371 RAMPURA MAIN ROAD PAN NO.AABHA9340JB RAMESHCHNDRA J RESHAMWALA (HUF) 7/2319 RAMPURA V/S . V/S . V/S . V/S . V/S . V/S . V/S . INCOME TAX OFFICER WARD-7(2) SURAT INCOME TAX OFFICER WARD-7(2) SURAT INCOME TAX OFFICER WARD-7(2) SURAT INCOME TAX OFFICER WARD-7(2) SURAT ACIT CIRCLE-7 SURAT INCOME TAX OFFICER WARD-7(2) SURAT ASSTT. COMMISSIONER OF INCOME-TAX SURAT ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 2 DUDHARA SHERI PAN NO.AACHR5758Q (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI DENNIS CHOKSHI AR REVENUE BY:- SHRI B.C.GEAHLOT CIT-DR O R D E R PER BENCH:- THESE SEVEN APPEALS BY DIFFERENT ASSESSEE ARE ARIS ING OUT OF ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-IV SURAT IN A PPEAL NOS. CAS-IV/100- 106/2008-09 DATED 12-10-2009. THE ASSESSMENTS WERE FRAMED BY ACIT CIRCLE-7 AND ITO WARD-7(2) SURAT VIDE THEIR DIFFERENT ORDERS DATED 18-12-2008 16-12-2008 & 26-12-2008 RESPECTIVELY FOR THE ASSESSMENT YEAR 200 6-07. 2. SINCE ALL THESE APPEALS CARRY ONLY ONE COMMON IS SUE REGARDING THE COMPUTATION OF CAPITAL GAINS THESE APPEALS ARE CLU BBED AND HEARD TOGETHER AND NOW ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. THE GROUNDS ARE COMMON IN ALL THE SEVEN APPEALS AND FOR THE SAKE OF CONVENIENCE AND B REVITY WE WILL DISCUSS ITA NO.3374/AHD/2009 IN THE CASE OF KAUSHIK SURESHBHAI RESHAMWLAL. THE GROUNDS RAISED BY THE ASSESSEE WHICH READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) HAS ERRED IN EN HANCING THE VALUE OF LAND FROM RS.400/- SQ. MTR. TO RS.5000/- SQ. MTR. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED COMMISSIONER OF INCOME TAX OUGHT TO HAVE TAKEN VIEW TO ACCEPT THE S ALES PRICE AT RS.400/- PER SQ. MTR. SHOWN BY YOUR APPELLANT AND DELETED THE AD DITION OF RS.21 24 472/- BEING AMOUNT ESTIMATED AT RS.700/- PER SQ. MTR. BY THE ASSESSING OFFICER. 3. IT IS THEREFORE PRAYED THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND THERE AFTER ENHANCEMENT MADE OF RS.1 23 08 119/- BY THE LEARNED COMMISSIONER OF INCOME TAX APPEAL-IV MAY PLEASE BE DELETED. ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 3 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSEE ALONG WITH OTHER SIX FAMILY MEMBERS OWNED AN ANCESTRAL AGRICUL TURAL LAND AT SURVEY NO.227 BHESTAN SURAT AD MEASURING 88700 SQ. MT. AGRICULTU RAL LAND FALLING UNDER SURAT URBAN DEVELOPMENT AUTHORITY (SUDA IN SHORT) WHEREB Y THE LAND AD MEASURING 6610 SQ. MT. WAS ACQUIRED AND THE BALANCE LAND OF 62090 SQ. MT. WAS LEFT WITH 14 CO- OWNERS OF RASHAMWALA FAMILY AND THE ABOVE SAID CO-O WNERS AGREED TO SELL THE SAID AGRICULTURAL LAND AD MEASURING 62090 SQ. MT. TO SHR I HITENDRA D PATEL IN APRIL 05. DURING THE YEAR UNDER CONSIDERATION SURVEY WAS COND UCTED ON 08-03-2006 ON THE BUSINESS PREMISES OF M/S. NAVJIVAN SYNTHETICS U/S.1 33A OF THE ACT WHEREIN A WRITING PAD CONTAINING 8 PAGES WAS FOUND AND IMPOUNDED BY T HE DEPARTMENT AS ANNEXURE- BF/9. ON THIS WRITING PAD THE FOLLOWING JOTTINGS W ERE MADE:- 14-04-2005 RS. 11 111 20-05-2005 RS.30 00 000 10-06-2005 RS.50 00 000 27-07-2005 RS.60 00 000 05-09-2005 RS.50 00 000 10-10-005 RS. 7 00 000 30-11-2005 RS.55 00 000 14-1-2005 RS.40 00 000 DURING THE COURSE OF SURVEY STATEMENTS OF SHRI BIMA L V RESHAMWALA VINESH R RESHAMWALA ASHUTOSH R RESHAMWALA AND BALKRISHNA R RESHAMWALA I.E. THE KARTA AND MEMBERS OF RESHAMWALA FAMILY WERE RECORDED U/S. 131 OF THE ACT WHEREIN ALL OF THEM STATED THAT THE AMOUNT WRITTEN IN THE IMPOUNDE D WRITING PAD WAS RECEIVED FROM SHRI HITENDRA D PATEL IN RESPECT OF SALE OF THEIR A GRICULTURAL LAND AT BHESTAN AND THE TOTAL SALE CONSIDERATION OF WHICH WAS RS.3 00 11 11 1/-. DURING THE COURSE OF STATEMENT THEY ADMITTED THAT THE SAID TRANSACTION I S NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND ADMITTED THE SALE RECEIPT OF RS.3 00 11 111/- IN RESPECT OF ABOVE AGRICULTURAL LAND. THE ASSESSING OFFICER IN VIEW OF THE ABOVE FACTS BIFURCATED THE TOTAL SALE PROCEEDS AMONG 14 CO-OWNERS OF THE LAND AND CO LLECTED CHEQUES FOR ADVANCE TAX FROM THEM AS UNDER:- ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 4 SR NO. NAME SALES PROCEEDS OF LAND CHEQUE OF ADVANCE TAX 1. SHRI SAKERIAL C RESHAMWALA (HUF) 37 50 000 6 2 5 000 2. MADHUSUDAN C RESHAMWALA (HUF) 37 50 000 6 25 00 0 3. MOHANLAL J RESHAMWALA 37 50 000 6 25 000 4. RAMESHCHANDRA J RESHAMWALA 37 50 000 6 25 000 5. ARVIND C RESHAMWALA (HUF) 25 00 000 4 16 670 6. INDRAVADAN M RESHAMWALA (HUF) 12 50 000 2 08 33 0 7. BHUPENDRA M RESHAMWALA (HUF) 12 50 000 2 08 330 8. KAUSHIK S RESHAMWALA 12 50 000 2 08 330 9. ASHWIN M RESHAMWALA (HUF) 12 50 000 2 08 330 10. NARESH N RESHAMWALA 15 00 000 2 50 000 11. HASMUKHLAL D RESHAMWALA (HUF) 15 00 000 2 50 0 00 12. RASIKLAL D RESHAMWALA (HUF) 15 00 000 2 50 000 13. GOVARDHAN D RESHWAMWALA (HUF) 15 00 000 2 50 0 00 14. JASWANTLAL D RESHAMWALA (HUF) 15 00 000 2 50 0 00 TOTAL 3 00 00 000 49 99 990 4. POST SURVEY PROCEEDINGS THE REVENUE SUMMONED TH E PURCHASER SHRI HITENDRA D PATEL AND RECORDED HIS STATEMENT U/S.131 OF THE ACT WHEREIN HE ADMITTED TO HAVE PURCHASED THE AGRICULTURAL LAND FOR TOTAL C ONSIDERATION OF RS.3 CRORE FROM RESHAMWALA FAMILY AND THEY OFFERED THE ABOVE SALE CONSIDERATION IN THEIR RESPECTIVE RETURN OF INCOME QUA THEIR INDIVIDUAL SH ARES. WHILE FRAMING THE ASSESSMENT THE ASSESSING OFFICER ESTIMATED THE VALU E OF LAND @ 700 PER SQ.MT AND WORKED OUT CAPITAL GAINS ACCORDINGLY AT RS.21 24 4 72/- AS AGAINST THE CAPITAL GAIN DECLARED BY THE ASSESSEE AT RS.7 48 128/- AND THERE BY MADE ADDITION OF RS.19 76 374/-. THE AO WHILE COMPUTING THIS CAPITAL GAIN ADOPTED THE FAIR MARKET VALUE OF THE LAND AT RS.700/- PER SQ.MT. AS AGAINST THE STAMP VALUATION FIXED BY THE REGISTRATION AUTHORITY AT RS.400/- PER SQ.MT. THE ASSESSEE DISCLOSED THE VALUE IN TERMS OF PER SQ.MT. AT RS.483/- PER SQ.MT. THE ASSE SSING OFFICER ALSO ADOPTED THE COST OF ACQUISITION OF THE ABOVE SAID AGRICULTURAL LAND AT RS.25 PER SQ.MT. AS ON 01- 04-1981 FOR COMPUTING CAPITAL GAINS AS AGAINST THE VALUE ADOPTED BY THE ASSESSEE AT RS.60/- PER SQ.MT. AS CERTIFIED BY REGISTER APPR OVED VALUER OF THE DEPARTMENT. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 5 5. THE CIT(A) ENHANCED THE SALE CONSIDERATION BY AD OPTING FAIR MARKET VALUE AT RS.5 000/- SQ.MT. FOR THIS CIT(A) HAS RECORDED THE FOLLOWING FINDINGS IN PAGES 8 9 AND 10 :- IN THE PRESENT CASE SINCE THE CASH RECEIPTS AS NO TED IN THE LOOSE PAPER WERE FOUND AND IMPOUNDED IN SURVEY THE APPELLANT CLAIME D TO HAVE NOT RECEIVED ANY FURTHER PAYMENT EITHER IN CASH OR IN CHEQUES AN D OFFERED THE CAPITAL GAIN ONLY ON THE AMOUNT NOTED IN THE LOOSE PAPER. THIS I S NOT ACCEPTABLE SINCE THE APPELLANT HAS NOT EXECUTED THE SALES AGREEMENT IMME DIATELY THEREAFTER BUT HAS ENTERED INTO A REGISTERED SALES DOCUMENT MUCH L ATER ON 2-2-2007 I.E. AFTER A PERIOD OF MORE THAN 1 YEAR WHICH CLEARLY SIGNIFIE S THAT THE APPELLANT MUST HAVE RECEIVED THE PAYMENT EVEN AFTER DECEMBER 2005 TILL FEBRUARY 2007 BECAUSE IF THE PURCHASER HAD MADE THE ENTIRE PAYMEN T IN DECEMBER 2005 HE WOULD NOT HAVE WAITED TO ENTER INTO A REGISTERED SA LES DEED FOR A PERIOD OF MORE THAN 1 YEAR. THIS FACT CLEARLY SIGNIFIES THAT THE SALES CONSIDERATION AS SHOWN BY THE APPELLANT IS NOT CORRECT AND JUST BECA USE THE UNACCOUNTED CASH PORTION OF THE SALES CONSIDERATION WAS FOUND AND IM POUNDED DURING SURVEY THE APPELLANT HAS THEREAFTER NOT SHOWN ANY FURTHER RECEIPT AND THEREBY EVADED THE BALANCE PORTION WHICH IS OUGHT TO HAVE B EEN RECEIVED DURING THE PERIOD BETWEEN DECEMBER 2005 TO FEBRUARY 2007 WHEN THE SALES DEED WAS REGISTERED. HENCE THE SALES CONSIDERATION HAS TO BE ESTIMATED IN THE PRESENT CASE AS PER SECTION 45. IT IS PERTINENT TO NOTE THAT AS ALREADY DISCUSSED ABOVE THE NEW JANTRY AS MADE APPLICABLE FROM APRIL 2008 WAS WORKE D OUT BY THE STATE GOVERNMENT ON THE BASIS OF THE MARKET RATES PREVAIL ING DURING THE PERIOD 2005 AND 2006. ANOTHER IMPORTANT FACT TO BE NOTED I S THAT THE OLD JANTRY WAS PREVAILING SINCE 1999 AND WAS NOT REVISED SINCE LON G AND HENCE IT WAS VERY MUCH NECESSARY TO BRING THE JANTRY AT PAR WITH THE PREVAILING MARKET RATES IN ORDER TO ELIMINATE LEAKAGES OF REVENUE. THE OLD JAN TRY RATE OF THE LAND UNDER CONSIDERATION WAS RS.400/- WHEREAS THE NEW JANTRY R ATE IS RS.5 000/-. THUS THERE IS A HUGE DIFFERENCE BETWEEN THE OLD AND NEW JANTRY RATES WHICH AMPLY EVIDENCES THAT THE PREVAILING MARKET RATES WERE VER Y MUCH HIGHER AS COMPARED TO THE OLD JANTRY RATES. THEREFORE THE SA LES CONSIDERATION AS SHOWN BY THE APPELLANT AS PER THE OLD JANTRY RATES IS NO T AT ALL ACCEPTABLE. FURTHER IT IS A MATTER OF COMMON SENSE THAT PROPERTY PRICES WO ULD NOT INCREASE ABNORMALLY FROM RS.400/- PER SQ. MT. TO RS.5 000/- PER SQ. MT. IN JUST A FEW MONTHS BUT IN FACT THIS SUGGESTS THAT THE ACTUAL M ARKET RATES WERE MUCH HIGHER THAN THE OLD JANTRY PREVAILING DURING 2006 I .E. DURING THE PERIOD WHEN THE DEAL UNDER CONSIDERATION WAS FINALIZED. IN THE STATE OF GUJARAT STAMP DUTY IS RECOVERED AS PER THE PROVISIONS OF SECTION 32(A) OF THE BOMBAY STAMP ACT 1958. THE FIRST JANTRY WAS PREPARE IN 1984 AND THEREAFTER IN 1999. THE JANTRY MADE APPLICABLE IN 2008 WAS BASED ON THE MARKET SITUATIO N DURING THE PERIOD 2005- 2006 I.E. DURING THE PERIOD WHEN THE SUBJECT DEAL H AD TAKEN PLACE. THEREFORE THE REVISED JANTRY RATE OF RS.5 000/- PER SQ. MTR. IS THE PERFECT BASIS FOR DETERMINING THE MARKET VALUE OF THE SUBJECT LAND IN THE YEAR 2006 AND THE RATE OF RS.700/- PER SQ. MTR. AS ADOPTED BY THE AO IS RE JECTED AS BEING WITHOUT ANY BASIS. ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 6 MOREOVER IT IS SEEN THAT IN THE VALUATION REPORT I NSTANCES OF SALE OF AGRICULTURAL LAND HAS BEEN GIVEN BY THE REGISTERED VALUER BETWEE N RS.15 TO 32 AND THE OTHER RATES AS GIVEN BY THE VALUER ARE NOT COMPARAB LE WITH THE ASSESSEES CASE SINCE THEY ARE FOR NA LAND AND NOT AGRICULTUR AL LAND. THUS WHEN THE COMPARABLE INSTANCES ARE BETWEEN RS.15 TO RS.32 PER SQ. MTR. THE RATE OF RS.60 PER SQR. MTR. AS ADOPTED BY THE VALUER IS INC ORRECT AND WITHOUT ANY BASIS AND THEREFORE THE SAME CANNOT BE ACCEPTED. A CCORDINGLY THE COST OF ACQUISITION OF THE LAND AS ON 1-4-1981 IS TAKEN AT RS.25 PER SQ. MTR. AS DETERMINED BY THE A.O. AS REGARDS THE AREA OF THE LAND SOLD I AGREE WITH T HE APPELLANT THAT WHEN SUDA HAS ACQUIRED 26610 SQ. MTS. OF LAND OUT OF THE TOTAL 88 700 SQ. MTRS. THE SALES CONSIDERATION CAN BE COMPUTED ONLY FOR TH E BALANCE LAND OF ONLY 62090 SQ. MTRS. FURTHER SINCE THE APPELLANT HAD A CQUIRED 88700 SQ. MTRS. ORIGINALLY OUT OF WHICH 26 610 SQ. MTRS. HAS BEEN LOST WITHOUT ANY CONSIDERATION HE IS ENTITLED TO CLAIM THE COST OF ACQUISITION FOR THE ENTIRE 88700 SQ. MTRS. OF LAND. HENCE THE CAPITAL GAIN IN THE CASE OF THE APPELLAN T CONSIDERING THE SALES AREA AT 62090 SQ. MTRS. SALES PRICE AT RS.5 000/- PER S Q. MTR. AND FMV AS ON 1-4- 1981 AT RS.25 PER SQ. MT. FOR 88 700 SQ. MTRS. WOUL D WORK OUT AS FOLLOWS. PARTICULARS AMOUNT (RS) SALES PRICE (62 090 SQ. MTRS. X RS.5 000) LESS: INDEXED COST OF ACQUISITION (88 700 SQ. MTRS. X 25 X 497 / 100) TOTAL CAPITAL GAINS OF THE CO-OWNERS APPELLANTS SHARE AT 4.16% OF RS.29 94 29 025/- LESS: SHOWN IN THE RETURN OF INCOME ADDITIONS 31 04 50 000 1 10 20 975 29.94.29 025 1 24 56 247/- 1 48 128/- 1 23 08 119/- IN THE RESULT THE APPEAL IS PARTLY ALLOWED AND INCO ME ENHANCED AS ABOVE. AGGRIEVED THE ASSESSEE CAME IN SECOND APPEAL BEFOR E US IN ALL 7 APPEALS. 6. THE FIRST GRIEVANCE OF THE ASSESSEE IS AGAINST T HE ENHANCEMENT OF VALUE OF LAND FROM RS.700/- PER SQ. MT. TO RS.5 000/- SQ. MT . BY THE CIT(A) AS AGAINST THE FAIR MARKET VALUE ADOPTED BY THE ASSESSEE AT RS.483/- PE R SQ. MT. (THE CIRCLE RATES FIXED BY STAMP DUTY REGISTRATION AUTHORITY ARE AT RS.400/ - PER SQ.MT.) SECOND GRIEVANCE OF THE ASSESSEE IS THAT THE AGRICULTURAL LAND WAS A NCESTRAL AGRICULTURAL LAND AND ACCORDINGLY FAIR MARKET VALUE AS ON 01-04-1981 FOR COMPUTATION OF CAPITAL GAIN I.E. THE COST OF ACQUISITION IS TO BE DETERMINED ACCORD ING TO THE ASSESSEE AS PER ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 7 VALUATION REPORT OBTAINED FROM APPROVED VALUER SHR I P. K. DESAI WHO VALUED THE LAND AS ON 01-04-1981 AT RS.60 PER SQ. MT. AS AGAIN ST THIS THE ASSESSING OFFICER DETERMINED THE FAIR MARKET VALUE AT RS.25/- PER SQ. MT. ON THE GROUND THAT THE COMPARABLE SALE INSTANCE GIVEN BY THE REGISTERED VA LUER RANGES FROM RS.15/- TO RS.32 PER SQ. MT. 7. WE FIND ONE MORE INTERESTING FACT FROM THE ORDER S OF THE LOWER AUTHORITIES AS WELL AS FROM THE SUBMISSIONS OF THE ASSESSEES COUN SEL AND LD. CIT-DR THAT THE TOTAL CONSIDERATION OF RS.3 CRORES WAS RECEIVED BY THE CO -OWNERS UP TO DEC.05 BUT THE SALE DEEDS WERE REGISTERED IN FEB07 AND THE ASSESS EE HAD TO RECEIVED FURTHER AMOUNT FROM THE BUYERS AMOUNTING TO RS.8 LAKH WHIC H WAS BALANCE TO BE RECEIVED AT THE TIME OF REGISTRATION OF SALE DEED. THE LD. C OUNSEL FOR THE ASSESSEE BEFORE US STATED THAT THE LOWER AUTHORITIES HAVE FAILED TO AP PRECIATE THE FACT THAT THE DEAL WAS ENTERED INTO IN APRIL05 FROM WHERE THE PAYMENT STA RTED RECEIVED FROM THE BUYER BY THE CO-OWNERS. OUT OF 14 CO-OWNERS 3 CO-OWNERS N AMELY RAMKRISHNA HASMUKHBHAI RESHAMWALA SAKERLAL C RESHAMWALA AND A SHWINBHAI M RESHAMWALA EXPIRED IN THE INTERVENING PERIOD ON 15- 02-2006 11-03-2006 AND 16- 08-2006 RESPECTIVELY. ACCORDINGLY THE FULL AND FIN AL CONSIDERATION WAS RECEIVED AND REGISTERED SALE DEED WAS EXECUTED IN FEB07. ACCOR DING TO LD. COUNSEL THE PAYMENT SO RECEIVED IS AMOUNTING TO RS.2 92 11 111/ - AS NOTED IN THE IMPOUNDED WRITING PAD UP TO DEC05 AND THE BALANCE RS.8 LAKH WAS YET TO BE RECEIVED AND FINALLY IT WAS RECEIVED AT THE TIME OF REGISTRATION OF SALE AGREEMENT IN MAR06. THE LD. CIT- DR STATED THAT THE CIT(A) HAS RIGHTLY HELD THAT THE ISSUE UNDER CONSIDERATION IS NOT DETERMINATION OF SALES CONSIDERATION U/S.50C OF THE ACT BUT THE SALE VALUE IS BEING DETERMINED U/S.45 OF THE ACT SINCE IN THE YEAR UND ER CONSIDERATION THE ASSESSEE HAVE NOT ENTERED INTO ANY REGISTERED SALE DEED AND THEREFORE THE PROVISIONS OF SECTION 50C ARE NOT APPLICABLE. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSEE HAD RECEIVED THE FULL SALE S CONSIDERATION OF RS.3 00 11 111/- FOR THE SAID AGRICULTURAL LAND UP TO MARCH06 AND HAD ALSO GIVEN THE POSSESSION OF THE SAID AGRICULTURAL LAND IN THE YEA R UNDER CONSIDERATION ITSELF BUT THE REGISTRATION OF THE SALE DEED WAS DONE LATER ON 02- 02-2007 ON ACCOUNT OF DEATH OF 3 CO-OWNERS. THIS IS NOT A CASE WHERE NO SALE DEED HA S BEEN REGISTERED BUT IN THIS CASE THE REGISTRATION OF THE SALE DEED GOT DELAYED ON ACCOUNT OF DEATH OF CO-OWNERS AND THEREFORE THE PROVISIONS OF SECTION 50C ARE CL EARLY APPLICABLE. ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 8 8. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES WE FIND THAT THE CIRCLE RATES FIXED BY STAMP DUTY AUTHORITIES OF LAND AT BHESTAN FOR FINANCIAL YEAR 2005-06 RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION WAS FIXED AT RS.400/- PER SQ.MT AND THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE IS @ RS.483/- PER SQ.MT. WE FIND THAT THESE CO-OWNERS HAVE SOLD THE LAND AND RECEIVE D PAYMENT OF RS.2 92 11 111/- UP TO 14-12-2005 AND DUE TO DEATH OF CO-OWNERS IN T HE INTERVENING PERIOD THE SALE DEED COULD NOT BE REGISTERED BUT THE CLAIM OF THE A SSESSEE IS THAT THE BALANCE RS.8 LAKH WAS RECEIVED AS ON 31 ST MARCH 2006. FINALLY THE SALE DEED WAS REGISTERE D IN JAN. & FEB07 THROUGH TWO SALE DEEDS REGISTERED AND THE CONSIDERATION OF THE SALE DEEDS WAS AMOUNTING TO RS.3 00 11 111/-. WE FIND T HAT THE REVENUE COULD NOT BRING ANY EVIDENCE THAT THE ENTIRE CONSIDERATION WAS NOT PAID ON OR BEFORE 31-03-2006 AND POSSESSION OF LAND WAS NOT HANDED OVER BY THESE CO- OWNERS TO THE SELLER. EVEN OTHERWISE WE ACCEPT THE CLAIM OF THE REVENUE THAT THE POSSESSION OF THIS LAND AND THE BALANCE PAYMENT OF RS.8 LAKH WAS DELIVERED AT T HE TIME OF REGISTRATION OF SALE DEED IN JAN. & FEB07 WHEN THE SALE DEEDS WERE REG ISTERED THE REVENUE CANNOT ASSESS THE CAPITAL GAIN IN THE ASSESSMENT YEAR UNDE R CONSIDERATION I.E. ASSESSMENT YEAR 2006-07. HOWEVER THE VITAL ISSUE BEFORE US I S WHETHER IN THE CASE OF SALE THROUGH REGISTERED SALE AGREEMENT THE CAPITAL GAIN IS TO BE COMPUTED IN TERMS OF SEC.50C OF THE ACT OR NOT. WE ARE OF THE VIEW THAT WHEN THE ASSET IS TRANSFERRED IN TERMS OF SEC.53A OF THE TRANSFER OF PROPERTY ACT 1 882 THE PROVISIONS OF SEC.50C OF THE ACT WILL APPLY TO THE TRANSACTION. THE RELEVAN T PROVISION OF SEC. 2(47) OF THE ACT READS AS UNDER:- 2(47) TRANSFER IN RELATION TO A CAPITAL ASSET INC LUDES - (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANC E OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPE RTY ACT 1882 (4 OF 1882); OR NOW FOR THE SAKE OF CLARITY THE PROVISION OF SEC.5 0C OF THE ACT AS INTRODUCED BY SECTION 24 OF THE FINANCE ACT 2002 WITH EFFECT FRO M 1-4-2003 FOR AND FROM ASSESSMENT YEAR 2003-04 NAMELY:- S.50C. SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES - (1 WHERE THE CONSIDERATION RECEIVED O ACCRUING AS A RE SULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH IS LESS THAN THE ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 9 VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STA TE GOVERNMENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE ST AMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER THE VALUE SO ADOPTED OR ASSESSED SHALL FOR THE PURPOSES OF SECT ION 48 BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACC RUING AS A RESULT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (1) WHERE (A) THE ASSESSEE CLAIMED BEFORE ANY ASSESSING OFFIC ER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DAT E OF TRANSFER; (B) THE VALUE SO ADOPTED OR ASSESSED BY THE STAMP V ALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY COURT OR THE HIGH COURT THE ASSESSING OFFICER MAY REFER THE VALUATION OF TH E CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS M ADE THE PROVISIONS OF SUB-SECTIONS (2) (30 (4) (5) AND (6) OF SECTION 16A CLAUSE (I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION 23A SU B-SECTION (5) OF SECTION 24 SECTION 34AA SECTION 35 AND SECTION 37 OF THE WEAL TH-TAX ACT 1957 (27 OF 1957) SHALL WITH NECESSARY MODIFICATIONS APPLY I N RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY TH E ASSESSING OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THAT ACT. EXPLANATION FOR THE PURPOSES OF THIS SECTION VAL UATION OFFICER SHALL HAVE THE SAME MEANING AS IN CLAUSE OF SECTION 2 OF THE WEALTH-TAX ACT 1957 (27 OF 1957). (3) SUBJECT TO THE PROVISIONS CONTAINED IN SUB-SECT ION (2) WHERE THE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY REFERRED TO IN SUB-SE CTION (1) THE VALUE SO ADOPTED OR ASSESSED BY SUCH AUTHORITY SHALL BE TAKE N AS THE FULL VALUE OF THE CONSIDERATION RECEIVED ON ACCRUING AS A RESULT OF T HE TRANSFER. 9. THE RELEVANT PROVISION OF SECTION 50C OF THE ACT WAS EXPLAINED AND ELABORATED IN THE FOLLOWING PORTION OF THE DEPARTME NTAL CIRCULAR NO.8 OF 2002 DATED 27-08-2002 AS UNDER:- 37 . COMPUTATION OF CAPITAL GAINS IN REAL ESTATE TRANS ACTIONS - 37.1 THE FINANCE ACT 2002 HAS INSERTED A NEW SECTION 50C IN THE INCOME-TAX ACT TO MAKE A SPECIAL PROVISION FOR DETERMINING THE FULL V ALUE OF CONSIDERATION IN CASES OF TRANSFER OF IMMOVABLE PROPERTY. 37.2 IT PROVIDES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUI LDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STA TE GOVERNMENT FOR THE ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 10 PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY UND ER SECTION 48 OF THE INCOME-TAX ACT. 37.3 IT IS FURTHER PROVIDED THAT WHERE THE ASSESSEE CLA IMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER AND HE HAS NOT DISPUTED THE VALUE SO ADOPTED OR ASSESSED IN ANY APPEAL OR REVISION OR REFERENCE BEFORE ANY AUTHORITY OR COURT THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE RELEVANT ASSET TO A VALUATION OFFICER IN ACCORDANCE WITH SECTION 55A OF THE INCOME-TAX ACT. IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS LESS THAN THE VALUE ADOPTED FOR STAMP DUTY PURPOSES THE ASSESSING OFFICER MAY TAKE SUCH FAIR MARKET VALU9E TO BE THE FULL VAL UE OF CONSIDERATION. HOWEVER IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY P URPOSES THE ASSESSING OFFICER SHALL NOT ADOPTED SUCH FAIR MARKET VALUE AN D SHALL TAKE THE FULL VALUE OF CONSIDERATION TO BE THE VALUE ADOPTED OR ASSESSED F OR STAMP DUTY PURPOSES. 37 4 THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL 2003 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YE AR 2003-04 AND SUBSEQUENT YEARS [SECTION 4]. 10. WE FURTHER FIND THAT THIS PROVISION WAS ELABORA TED IN THE NOTES ON CLAUSES AND MEMO. EXPLAINING PROVISIONS IN THE FINANCE BILL 20 02 AS UNDER:- NOTES ON CLAUSES:- CLAUSE 24 SEEKS TO INSERT A NEW SECTION 50C IN THE INCOME-TAX ACT TO PROVIDE FOR A SPECIAL PROVISION FOR FULL VALUE OF CONSIDERA TION IN CERTAIN CASES. THE PROPOSED SUB-SECTION (1) OF THE SAID SECTION SE EKS TO PROVIDE THAT WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET BEING LAND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STA TE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. THE PROPOSED SUB-SECTION (2) OF THE SAID SECTION SE EKS TO PROVIDE THAT WHERE THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER TH AT THE VALUE ADOPTED OR ASSESSED BY THE AUTHORITY UNDER SUB-SECTION (1) EXC EEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER AND THE VALUE SO ADOPTED OR ASSESSED BY THE AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BE FORE ANY OTHER AUTHORITY COURT OR A HIGH COURT THE ASSESSING OFFICER MAY RE FER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE THE PROVISIONS OF SUB-SECTIONS (2) (3) (4) (5) A ND (6) OF SECTION 16A CLAUSE (I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION 23A SUB-SECTION ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 11 (5) OF SECTION 24 SECTION 34AA SECTION 35 AND SEC TION 37 OF THE WEALTH-TAX ACT 1957 SHALL WITH THE NECESSARY MODIFICATIONS APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESSING OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THA T ACT. THE VALUATION OFFICER SHALL BE THE VALUATION OFFICER AS DEFINED IN CLAUSE OF SECTION OF THE WEALTH- TAX ACT 1957. THE PROPOSED SUB-SECTION (3) PROVIDES THAT WHERE T HE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE AUTHORITY REFERRED TO IN SUB-SECTION (1) THE VALUE SO ADOPTE D OR ASSESSED BY THE AUTHORITY SHALL BE TAKEN AS THE FULL VALUE OF THE C ONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL 2003 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2003-2004 AND SUBSEQUENT YEARS. MEMORANDUM EXPLAINING PROVISIONS OF SECTION 50C IN THE FINANCE BILL 2002 AS UNDER:- THE BILL PROPOSES TO INSERT A NEW SECTION 50C IN THE INCOME-TAX ACT TO MAKE A SPECIAL PROVISION FOR DETERMINING THE FULL VALUE OF CONSIDERATION IN CASES OF TRANSFER OF IMMOVABLE PROPERTY. IT IS PROPOSED TO PROVIDE THAT WHERE THE CONSIDERAT ION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A SATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY UND ER SECTION 48 OF THE INCOME-TAX ACT. IT IS FURTHER PROPOSED TO PROVIDE THAT WHERE THE AS CLAIMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE ATE OF TRANSFER AND HE H AS NOT DISPUTE THE VALUE SO ADOPTED OR ASSESSED IN ANY APPEAL OR REVISION OR RE FERENCE BEFORE ANY AUTHORITY OR COURT THE ASSESSING OFFICER MA REFER THE VALUATION OF THE RELEVANT ASSET TO A VALUATION OFFICER IN ACCORDANCE WITH SEC TION 55A OF THE INCOME-TAX ACT. IF THE FAIR MARKET VALUE TO BE THE FULL VALUE OF CONSIDERATION. HOWEVER IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION O FFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES THE ASSESSING OFFICER SHALL NOT ADOPT SUCH FAIR MARKET VALUE AND WILL TAK E THE FULL VALUE OF CONSIDERATION TO BE THE VALUE ADOPTED OR ASSESSED F OR STAMP DUTY PURPOSES. IT IS ALSO PROPOSED TO PROVIDE THAT IF THE VALUE AD OPTED OR ASSESSED FOR STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL REVISION OR REFERENCE THE STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL REVISION OR REFE RENCE THE ASSESSMENT MADE SHALL BE AMENDED TO RE-COMPUTE THE CAPITAL GAI NS BY TAKING THE REVISED VALUE AS THE FULL VALUE OF CONSIDERATION. ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 12 THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL 2003 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2003-2004 AND SUBSEQUENT YEARS. [CLAUSES 24 AND 59] 11. IN VIEW OF THE ABOVE PROVISION AND EXPLAINING T HE PROVISION WE ARE OF THE VIEW THAT THE LAW U/S. 50C HAD BEEN PROVIDED ADEQUATE PR OTECTION TO THE TAX-PAYERS AGAINST ADOPTION OF ARBITRARY VALUES FOR THE COMPUT ATION OF CAPITAL GAINS AND THE FOLLOWING PRECAUTIONARY ARE PROVIDED:- (I) THE VALUE WHICH IS CONSIDERED AS THE PROPER VAL UE OF THE PROPERTY AS FIXED BY THE AUTHORITY FOR REGISTRATION FOR STAMP DUTY PU RPOSES IS PRESUMED TO BE THE FAIR MARKET VALUE FOR THE PURPOSES OF COMPUTATION O F CAPITAL GAINS ON THE SALE OF PROPERTY. (II) IT IS OPEN TO THE TAXPAYER TO PLEAD THAT SUCH STAMP VALUE IS ABNORMAL AND CONTEST THE SAME IN APPEAL UNDER THE STAMP LAW REQU IRING ADOPTION OF REDUCED VALUE. IF SUCH VALUE IS REDUCED IN APPEAL UNDER THE PROVISIONS OF THE RELEVANT STAMP LAW SUCH REDUCED VALUE WOULD ALONE BE ADOPTE D. (III) WHERE SUCH STAMP VALUE IS NOT DISPUTED IT IS OPEN TO THE ASSESSEE TO REQUIRE THE ASSESSING OFFICER TO REFER THE VALUATIO N TO THE VALUATION OFFICER WHO SHALL FIX THE VALUATION BY ADOPTION OF THE PROC EDURE PRESCRIBED UNDER SECTION 16A OF THE WEALTH-TAX ACT. IT IS SUCH VALUE WHICH WILL BE ADOPTED BY THE ASSESSING OFFICER. 12. WE FURTHER FIND FROM THE MEMORANDUM EXPLAINING THE PROVISION OF SECTION 50C IN THE FINANCE BILL 2002 WHICH CLEARLY STATES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF LAND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY A UTHORITY OF A SATE GOVT. FOR THE PURPOSES OF PAYMENT OF STAMP DUTY IN RESPECT OF SUC H TRANSFER THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY U/S.48 OF THE A CT. IN CASE THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL REVISION OR REFERENCE THE ASSESSMENT MADE SHALL BE AMENDED TO RE-COMPUTE THE CAPITAL GAINS BY TAKING THE REVISED VALUE AS THE FULL VALUE OF CONSIDERATION. ACCORDINGLY WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 50C ARE APPLICABLE ONLY F OR THE COMPUTATION OF CAPITAL GAINS ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 13 IN REAL ESTATE TRANSACTION. WE FIND FROM SECTION 50 C OF THE ACT THAT IT CREATES A LEGAL FICTION THEREBY APPARENT CONSIDERATION IS SUBSTITUT ED BY VALUATION DONE BY STAMP VALUATION AUTHORITIES AND CAPITAL GAINS ARE CALCULATED ACCORDINGLY. LEGAL FICTION CANNOT BE EXTENDED ANY FURTHER AND HAS TO B E LIMITED TO THE AREA FOR WHICH IT IS CREATED. HON'BLE ANDHRA PRADESH HIGH COURT IN ADDL. CIT V. DURGAMMA P. (1987) 167 1TR 776 (AP) HELD THAT IT IS NOT POSSIBLE TO EX TEND THE FICTION BEYOND THE FIELD LEGITIMATELY INTENDED BY THE STATUTE. THE HON'BLE C OURT WAS DEALING WITH THE PROVISIONS OF SEC. 171(1) OF THE I.T.ACT IN THE CON TEXT OF WHICH IT WAS HELD THAT JOINT FAMILY SHALL BE DEEMED TO CONTINUE FOR THE LIMITED PURPOSE OF ASSESSING CASES OF JOINT FAMILIES WHICH HAVE BEEN HITHERTO ASSESSED AS SUCH. IT IS NOT POSSIBLE TO EXTEND THAT FICTION TO OTHER CASES. SIMILAR VIEW WAS TAKEN BY T HE HON'BLE KERLA HIGH COURT IN CIT V. KAR VALVES LTD. (1987) 168 ITR 416 (KER.) WHER EIN IT IS HELD THAT LEGAL FICTION IS LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED A ND COULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FRAME HON'BLE KERALA HIGH COURT WA S DEALING WITH THE CASE WHERE ASSESSEE SOUGHT TO TAKE ADVANTAGE OF SEC.41(2) BY S UBMITTING THAT IF LIABILITIES ARE NOT LIQUIDATED AND OUTSTANDING ARE NOT COLLECTED THEN BUSINESS COULD BE DEEMED TO CONTINUE. HON'BLE ALLAHABAD HIGH COURT IN CONTROLLER OF ESTATE DUTY V. KRISHNA KUMAR DEVI (1988) 173 ITR 561 (ALL) HELD THAT IN INTERPRETING THE LEGAL FICTION THE COURT SHOULD ASCERTAIN THE PURPOS E FOR WHICH IT WAS CREATED 2ND AFTER DOING SO ASSUME ALL FACTS WHICH ARE LOGICAL TO GIVE EFFECT TO THE FICTION HON'BLE SUPREME COURT IN CIT V. MOTHER INDIA REFRIGERATION PVT. LTD. (1985) 155 ITR 711 (SC) HELD THAT LEGAL FICTIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THEY MUST BE LIMITED TO THAT PURPOSE AND SHOULD NOT BE EXTE NDED BEYOND THAT LEGITIMATE FIELD. IN CIT V BHARANI PICTURES (1981) 129 IT R 244 (MAD ) IT IS HELD THAT LEGAL FICTIONS ARE FOR A DEFINITE PURPOSE AND ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND SHOULD NOT BE EXTENDED BEYOND ITS LEGITIMATE FIELD. THE STATUTORY FICTION INTRODUCED IN ONE ENACTMENT CANNOT BE INCOR PORATED IN ANOTHER ENACTMENT. THE POINT THAT LEGAL FICTION CANNOT BE EXTENDED TO A NEW FIELD WAS HIGHLIGHTED BY HON'BLE MADRAS HIGH COURT IN CIT V. RAJAM T.S (19SS) 125 ITR 207(MAD ) WHEREIN IT IS HELD THAT SECTION 41(2) CREATES A LEG AL FICTION UNDER WHICH THE BALANCING CHARGE IS TREATED AS BUSINESS INCOME CHARGEABLE TO TAX BUT WHEN THIS AMOUNT IS DISTRIBUTED TO SHAREHOLDERS THEN IT WOULD NOT BECOM E DEEMED DIVIDEND AND IT WOULD BE ONLY A CAPITAL RECEIPT AND NOT DISTRIBUTION OF A CCUMULATED PROFITS. THUS A LEGAL FICTION WAS INVOKED IN THE HANDS OF THE ASSESSEE CO MPANY AND WAS NOT EXTENDED IN ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 14 THE HANDS OF THE SHAREHOLDERS. IN THE PRESENT CASE SECTION 50C CREATES A LEGAL FICTION FOR TAXING CAPITAL GAINS IN THE HANDS OF TH E SELLER AND THE DIFFERENCE BETWEEN APPARENT CONSIDERATION AND VALUATION DONE BY STAMP VALUATION AUTHORITIES TO BE ASSESSED AS CAPITAL GAIN. IT IS FOR THE LEGISLATURE TO INTRODUCE LEGAL FICTION TO OVERCOME DIFFICULTY IN TAXING CERTAIN RECEIPTS OR EXPENDITUR E WHICH OTHERWISE WAS NOT POSSIBLE UNDER NORMAL PROVISIONS OF THE ACT. IT IS WITH THIS PURPOSE THAT WHEN IT WAS FOUND DIFFICULT TO PREVENT TAX EVASION BY UNDERSTATING AP PARENT SALE CONSIDERATION AS COMPARED TO THE VALUATION MADE BY STAMP VALUATION A UTHORITIES FOR THE PURPOSES OF LEVYING STAMP DUTY THEN IT WAS THOUGHT NECESSARY TO INTRODUCE SECTION 50C FOR SUBSTITUTING APPARENT SALE CONSIDERATION BY VALUATI ON DONE BY STAMP VALUATION AUTHORITIES. HON'BLE MADRAS HIGH COURT IN CGT V R. DAMODARAN (2001) 247 ITR 698 HELD THAT STAMP VALUATION AUTHORITIES HAVE THEIR OW N METHOD OF EVALUATING THE PROPERTY. MERELY BECAUSE FOR THE PURPOSE OF STAMP D UTY PROPERTY IS VALUED AT HIGHER COST IT CANNOT BE SAID THAT ASSESSES HAS MADE MORE PAYMENT THAN WHAT IS STATED IN THE SALE DEED. WE ARE IN FULL AGREEMENT WITH THE ARGUMENTS OF THE ASSESSEE THAT SECTION 50C IS APPLICABLE IN THE PRESENT CASE AND T HIS PROVISION BEING A DEEMING PROVISION WILL APPLY FOR DETERMINING THE FULL VALUE OF CONSIDERATION AS A RESULT OF TRANSFER OF CAPITAL ASSETS FOR THE PURPOSES OF COMP UTATION OF CAPITAL GAINS U/S.48 OF THE ACT. WE FURTHER FIND THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE CONSIDERATION OVER AND ABOVE WHAT HAS BEEN RECORDE D IN THE SALE DEED/AGREEMENT HAS BEEN MADE BY THE ASSESSEE AND IN THE ABSENCE OF THE SAME NO ADDITION CAN BE MADE BY ESTIMATING AND SUBSTITUTING THE MARKET VALU E. ACCORDINGLY WE DELETE THE ADDITION MADE BY THE LOWER AUTHORITIES IN THESE APP EALS. 13. AS REGARDS TO THE ISSUE OF COST OF ACQUISITION TO BE ESTIMATED BY ADOPTING FAIR MARKET VALUE AS ON 01-04-1981 FOR THE PURPOSES OF C OMPUTING THE INDEXATION VALUE THE ASSESSING OFFICER HAS ESTIMATED THE COST OF ACQ UISITION AT RS.25/- PER SQ.MT. ON THE BASIS OF REPORT OF ASSESSEES REGISTERED VALUER APPROVED BY THE DEPARTMENT TAKING COMPARABLE SALE INSTANCES GIVEN BY THE VALUE R WHICH RANGED FROM RS.15/- TO RS.32/- PER SQ.MT. THE ASSESSEE HAS ADOPTED THE VAL UE AT RS.60/- PER SQ.MT. ON THE BASIS OF REPORT GIVEN BY REGISTERED VALUER APPROVED BY DEPARTMENT WHO HAS VALUED ON THE BASIS OF MANY FACTORS AS LOCALITY TRAFFIC J AM FERTILITY OF LAND ETC. WE FIND THAT THE REVENUE COULD NOT SUBSTANTIATE THE VALUE ADOPTE D BY THE LOWER AUTHORITIES AT RS.25/- PER SQ.MT WHICH HAS NO BASIS. THE VALUE ADO PTED BY THE ASSESSEE OF LAND AT ITA NO.3374-3380/AHD/2009 A.Y.2006-07 RESHAMWLAL 7 GROUP V. ITO WD-7(2) & ACIT CIR-7 SURAT PAGE 15 RS.60/- PER SQ.MT. IS BASED ON A TECHNICAL REPORT O F REGISTERED VALUER APPROVED BY THE DEPARTMENT. ACCORDINGLY WE ACCEPT THE VALUE ADOPT ED BY THE ASSESSEE FOR COMPUTATION OF CAPITAL GAINS AT RS.60/- PER SQ.MT. AND DIRECTING THE ASSESSING OFFICER TO ADOPT THIS VALUE FOR THE COMPUTATION OF CAPITAL GAINS IN THESE APPEALS. 14. SIMILAR BEING THE ISSUES AND FACTS IN ITA NO.3375 TO 3380/AHD/2009 IN THE CASES OF ASHWIIN M RESHAMWALA (HUF) HASMUKH D RES HAMWALA (HUF) JASWANTIAL D RESHAMWALA (HUF) MOHANLAL J RESHAMWAL A ARVINDLAL C RESHAMWALA (HUF) AND RAMESHCHANDRA J RESHAMWALA (HU F) THESE APPEALS ARE ALSO DECIDED IN TERMS OF THE ABOVE. ACCORDINGLY BOTH THE ISSUES OF THE ASSESSEES APPE ALS ARE ALLOWED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE ORDERS OF THE LOWER AUTHORITIES ARE REVERSED. 15. IN THE RESULT THE APPEALS OF THE ASSESSEES ARE ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON 23/04/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 23/04/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IV SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD