Case Law Details
Patel Ambalal Haridas – HUF Vs ITO (ITAT Ahmedabad)
In the landmark case of Patel Ambalal Haridas – HUF Vs ITO, the Income Tax Appellate Tribunal (ITAT) Ahmedabad instructed the Commissioner of Income Tax (Appeals) to revisit the calculation of the sale value of a piece of land. The case focused on section 50C of the Income Tax Act, 1961, which deals with the determination of land value for capital gains tax purposes.
Analysis: The case pivoted on the fact that the original valuation didn’t take into account the “Jantri value,” a standard value of land determined by the Government of Gujarat, which was pertinent for assessing the value of the agricultural land in question. Furthermore, the ITAT noted that the CIT(A) failed to consider a Valuation Report in their decision. The valuation set by the CIT(A) thus deviated significantly from the sale price declared by the assessee and was found to be inappropriate. ITAT directed the CIT(A) to re-examine these aspects and adjust the valuation in accordance with the law.
Conclusion: The ruling by ITAT Ahmedabad in the Patel Ambalal Haridas – HUF Vs ITO case provides important clarification on the application of section 50C of the Income Tax Act. It underscores the significance of considering all relevant factors in determining land value for capital gains tax, including the Jantri value and Valuation Reports.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The appeal filed by the assessee is against the order passed by the Ld. CIT(Appeals), National Faceless Appeal Centre (in short “NFAC”), Delhi on 01.02.2023 for A.Y. 2013-14.
2. The grounds of appeal raised by the assessee are as under:
“1. The learned Commissioner of Income Tax (Appeals), NFAC, Delhi has erred in confirming the action of the assessing officer in issuing notice u/s. 148 of the Income Tax Act, 1961 which is illegal and bad in law and hence the assessment so made requires to be quashed.
2. The learned Commissioner of Income Tax (Appeals), NFAC, Delhi has erred in confirming the action of the assessing officer in reopening the assessment and passing an order u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 which is illegal and bad in law hence the same should be cancelled.
3. The learned Commissioner of Income Tax (Appeals), NFAC, Delhi has erred in confirming the action of the Assessing Officer in computing the total income at 40,16,070/- as against that of Rs.6,20,150/- declared by the Appellant in the return of income filed on 2 7/03/2014.
4. The learned Commissioner of Income Tax (Appeals), NFAC, Delhi has erred in confirming the addition of Rs.33,95,918/- made by the Assessing Officer for the alleged long term capital gain considering the sale value of the property as per Stamp Valuation Authority at Rs.87,95,918/- u/s.50C of the I.T. Act, 1961 which as per the Appellant is Rs.54,00,000/-.
5. The Learned Commissioner of Income Tax (Appeals), NFAC, Delhi ought to have considered fact that the provisions of sec.50C is not applicable in the case of the appellant since the sale has been executed at higher rate than the Stamp duty rate.
6. The appellant craves leave to add, alter, amend or modify any of the ground of appeal on or before the date of hearing of appeal.”
3. The assessee filed return of income for A.Y. 2013-14 on 27.03.2014 declaring total income at Rs. 6,20,150/-. The case was reopened under Section 147 of the Act and notice under Section 148 was issued on 29.03.2016 and served upon the assessee. The assessee vide letter dated 18.04.2016 requested to treat the original as return filed in response to notice under Section 148 of the Act and sought copy of reasons recorded. The assessee raised the objection dated 05.05.2016 for the reopening of the assessment for A.Y. 20 13-14. The objection was disposed of on 09.09.2016 by the Assessing Officer. The Assessing Officer observed that the assessee (Individual) sold a land bearing the Survey No. 104/106-1/106-3 situated at Chhatral, Kalol in a consideration of Rs. 54,00,000/- which was registered. The assessee submitted that this land was ancestral property and the capital gain was earned on sale of this land was offered in income tax return of assessee (HUF). The wrong furnishing of the PAN was only on account of the fact that the Karta was carrying a bonafide impression that his personal PAN details have to be furnished. A protective assessment on this issue was made the case of the assessee as the case of the assessee as the case of Ambalal Haridas Patel HUF was not under scrutiny assessment. The Assessing Officer made addition of Rs. 33,95,918/- as Long Term Capital Gain by virtue of provision of Section 50C of the Act.
4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee.
5. The Ld. A.R. submitted that there is some misunderstanding on the issue with regards to the “Jantri Value” adopted by the Assessing Officer. The land in question was agricultural land and the same was converted to Non-Agricultural Land vide order dated 28.05.2012. The Ld. A.R. submitted that this fact was verifiable from the perusal of Clause 5 of the sale deed executed. The Jantri rate for the above referred land bearing Block No. 81 (old Survey No. 104) admeasuring 2529 sq. meters and Block 95/1 (old Survey No. 106/1, 106/2 & 106/3) admeasuring 1821 sq. meters for agricultural land was declared on 18.04.2011 and the details of Survey No. 104 and 106 was submitted before the Assessing Officer. The land in question being non-irrigated land, the Jantri rate applicable would be Rs. 300/- per sq. yard and since the conversion in question is taken place on 28.05.20 12. The Jantri rate applicable would that of agricultural land only as per the contention of the Ld. A.R. The Ld. A.R. further submitted that the Jantri rate for the non-agricultural land was also notified on 18.04.2011. The assessee on sold/transferred such land which was agricultural in nature. The Revenue department of Government of Gujarat vide order dated 03.12.2011 has also proclaimed the conversion of land had taken place subsequently to the proclamation of the Jantri. The Ld. A.R. submitted that the aforesaid order clearly reveals that the land in question has been converted for industrial purpose, the Jantri rate would be three times the rate as applicable to agricultural land but the same was subsequent. The Ld. A.R. further submitted that even under such circumstances the Jantri rate of land would be most 900 per sq. yard and since the assessee sold 4350 sq. yards the Jantri value of the land as per the provision of Section 50C would be Rs. 39,15,000/- (4350 x 900). The aforesaid amount is much lower than the sales declared by the assessee and therefore, the provisions of under Section 50C have been wrongly applied in assessee’s case. The Ld. A.R. further submitted that the Assessing Officer was not taken cognizance of this fact and has not taken the Valuation Report of A-One Valuer of Government who was certified that is Rs. 39,15,000/- and not Rs. 87,65,918/-.
6. The Ld. D.R. submitted that the remand report / observation made by the Assessing Officer has taken all the cognizance of the additional evidence put up by the assessee and thereafter, has confirmed the addition made by the Assessing Officer under Section 50C of the Act. The Ld. D.R. relied upon the order of the CIT(A) and assessment order.
7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the value determine by the Government of Gujarat as per the rate reckoner was Rs. 300 per sq. yards as on the date of 03.12.2011. And the valuer has taken the said Jantri value at the time of calculating the applicability of Section 50C but in assessee’s case when sold was not an industrial land/non-agricultural land but was agricultural land. The fact of Jantri rate and the notification of rate reckoner amount was not properly verified by the CIT(A). Besides this the valuation report submitted by the assessee was also not taken into account by the CIT(A) while confirming the addition. Therefore, it will be appropriate to remand back this matter to the file of the CIT(A) for verifying these aspects and take cognizance of the same. After taking into account all the aspects the CIT(A) should decide it accordingly as per law. Needless to say the assessee be given opportunity of hearing by following principles of natural justice.
8. In result, the appeal of the assessee is partly allowed for statistical purpose.
This Order pronounced in Open Court on 17/05/2023
