Smt. Mizar Anita Pal, Mangalore V. ADIT, Mangalore

ITA 198/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63675 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE J
• Assessee Lawyers: S VENKATESAN
• Keywords: Capital asset; Depreciation; Cost of acquisition; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI N.BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V.VASUDEVAN, JUDICIAL MEMBER ITA NOS.198 & 199(B)/2011 (ASSESSMENT YEARS: 2007-08) SMT. MIZAR ANITA PAI & THE ASST.DIT, SMT. MIZAR ASHALATHA PAI (INTL. TAXATION) D.NO.P-II-44,C/O MIZAR GOVINDA, MANGALORE PAI & SONS, PORT ROAD, BUNDER, MANGALORE-575 011. PAN NO.AJMPP 0282C PAN NO.AJMPP 0339G VS APPELLANT RESPONDENT ASSESSEE BY : S. VENKATESAN, CA REVENUE BY : SMT. SUSAN THOMAS JOSE, JCIT(DR) DATE OF HEARING : 08-08-2012 DATE OF PRONOUNCEMENT : 31-08-2012 ITA NOS.198 & 199(B)/2011 2 O R D E R PER SHRI N.V.VASUDEVAN, JM: THESE ARE APPEALS BY THE TWO ASSESSEES NAMELY SMT. MIZAR ANITHA PAI & SMT MIZAR ASHALATHA PAI, AGAINST TWO O RDERS BOTH DATED 29-11-2010 OF CIT(A)-IV, BANGALORE, RELATING TO ASS ESSMENT YEARS: 2007-08. 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH BOTH THE SE APPEALS HAVE BEEN FILED AND THE ISSUE INVOLVED IN BOTH THE APPEA LS ARE IDENTICAL. THEREFORE, WE DEEM IT CONVENIENT TO PASS A COMMON O RDER. 3. THERE WAS A PARTITION OF THE HUF OF MIZAR ANNAPP A PAI, AS PER COURT DECREE O.S.NO.92/98 DATED 22-03-2003, BEFORE THE SECOND ADDL. CIVIL JUDGE (SR. DIVISION) MANGALORE. AS PER THE COURT DECREE THE HUF STATUS WAS SEVERED WITH EFFECT FROM 22-03-2003 AND THE PROPERTY OWNED BY THE HUF WAS DIVIDED IN EQUAL SHARES AMONG THE FOLLOWING 4 MEMBERS TO BE HELD AS CO-OWNERS NAMELY;- A) MIZAR ANNAPPA PAI- KARTA B) MRS MIZAR ASHALATHA PAI (WIFE) C) MRS MIZAR ANITA PAI (DAUGHTER) D) MR. MIZAR AJITH PAI (SON) DURING THE PREVIOUS YEAR THE AFORESAID CO-OWNERS SO LD THE FOLLOWING PROPERTIES; I) PROPERTY AT KANKANADY B VILLAGE BEARING SURVEY NO.6/5A1P1, 26/5A1P2, 25/5A3, 70/1B MEASURING 2.90 ITA NOS.198 & 199(B)/2011 3 ACRES. THIS WILL BE HEREIN AFTER REFERRED TO AS TH E FIRST PROPERTY. II) PROPERTY AT KANKANADY B VILLAGE IN SURVEY NO.27/3 MEASURING 0.46 ACRE. THIS WILL BE HEREIN AFTER REFE RRED TO AS THE SECOND PROPERTY. III) PROPERTY AT FORMER CASBA BAZAR VILLAGE, CENTRAL WAR D, BEARING SURVEY NO.797/1 MEASURING 3.85 CENTS. THIS WILL HEREINAFTER BE REFERRED TO AS THE THIRD PROPERTY. 4. THE FIRST PROPERTY WAS SOLD FOR A SALE CONSIDER ATION OF RS.1,71,12,500/-. THE FIRST PROPERTY APART FROM LA ND AREA ALSO HAD A BUILDING WITH A PLINTH AREA OF 11,925 SQ.FT WHICH H AD BEEN BUILT IN THE YEAR 1956. THE ASSESSEE SMT. MIZAR ANITA PAI, COMP UTED CAPITAL GAINS ON SALE OF HER 1/4 TH SHARE OF RIGHT, TITLE AND INTEREST OVER THE FIRST PROPERTY AS FOLLOWS; DATE OF TRANSFER: 20 TH OCT. 06 SALE CONSIDERATION (1,71,12,500/4) RS.42,78,1 22 LESS: INDEXED COST OF FAIR MARKET VALUE AS ON 01-04 -1981: RS.46,09,691 CAPITAL GAINS (-) RS. 3,31,569 THE FAIR MARKET VALUE AS ON 01-04-1981 WAS ADOPTED AT RS.11,000/- PER CENT IN RESPECT OF THE LAND AND RS.3,57,750/- IN RESPECT OF THE BUILDING BUILT ON THE LAND IN 1956 AND RS.5,000/- FOR THE COMMON WELL IN THE PROP ERTY. THESE VALUES ADOPTED BY THE ASSESSEE ARE BASED ON THE VALUATION REPORT OF A REGISTERED VALUER, MR. SATISH RAO IDDYA. THEREFORE, THE TOTAL VALUE OF THE PROP ERTY WAS COMPUTED AS UNDER; ITA NOS.198 & 199(B)/2011 4 VALUE OF LAND AS ON 01-04-1981 290 CENTS X 11,000 RS.31,90,000 VALUE OF BUILDING AS ON 01-04-1981 RS. 3,57,750 VALUE OF THE COMMON WELL AS N 01-04-1981 RS. 5,000 TOTAL VALUE OF THE PROPERTY AS ON 01-04-1981 RS.35,52,750 1/4 TH SHARE OF THE ASSESSEE RS. 8,88,187 THE DISPUTE IN THESE TWO APPEALS IS WITH REGARD TO THE ADOPTION OF FAIR MARKET VALUE OF THE THREE PROPERTIES AS ON 01-04-19 91. AS FAR AS THE FIRST PROPERTY IS CONCERNED, THE FMV AS ON 1.4.1991 WAS ADOPTED BY THE ASSESSEE AT RS.11,000/- PER CENT BY THE ASSESS EE IN HER COMPUTATION OF CAPITAL GAINS. 5. UNDER THE PROVISIONS OF SEC.55(2)(B)(I) OF THE IT ACT, WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE B EFORE 01-04-1981. THE ASSESSEE HAS AN OPTION TO ADOPT THE FMV OF THE CAPITAL ASSET AS ON 01-04-1981 AS COST OF ACQUISITION OF THE CAPITAL AS SET. SIMILAR DISPUTE EXISTS IN THE CASE OF OTHER CO-OWNERS ALSO AND ALSO IN THE CASE OF SMT. MIZAR ASHALATHA PAI. ACCORDING TO THE AO, THE VALU E OF THE LAND AS ON 01-04-19881 ADOPTED AT RS.11,000/- PER CENT BY THE REGISTERED VALUER WAS NOT DONE ON THE BASIS OF COMPARABLE SALE INSTAN CES AND HAD BEEN DONE ONLY ON THE BASIS OF LOCAL ENQUIRIES. ACCORD ING TO THE AO, THE BETTER WAY OF DETERMINING THE FMV OF THE PROPERTY A S ON 01-04-1081 WAS TO REFER TO COMPARABLE SALE INSTANCES IN THE SA ME AREA. THE AO ACCORDINGLY, PROCURED COMPARABLE SALE INSTANCES FRO M THE SUB- REGISTRARS OFFICE. THE FOLLOWING WERE THE COMPARAB LE SALE INSTANCES OBTAINED BY THE AO. ITA NOS.198 & 199(B)/2011 5 SURVEY NO. LAND EXTENT BUILDING ON THE LAND, ANY TOTAL VALUE OF TRANSACTION DATE OF TRANSACTION 26/13 5 CENTS RS.6,000 05-01-1981 33/2B & 2A2B & D.NO.7-27 5 CENTS (FIVE& ONE HALF CENTS) 398.12 SQ.FT RS.8,000 06-01-1981 76/6B1B & D.NO.6-8-3 12 CENTS 42 SQ.FT RS.25,000 02-03-1981 THE AO FOUND THAT THE DIFFERENCE IN THE FMV AS ON 0 1-04-1981 IN THE COMPARABLE INSTANCES OBTAINED BY HIM AND THE VALUE ADOPTED BY THE ASSESSEE SHOWED SUBSTANTIAL VARIATION. THE AO THERE FORE, SUMMONED SHRI. SATISH RAO IDDYA, THE REGISTERED VALUER, BASE D ON WHOSE REPORT THE ASSESSEE HAD ADOPTED THE FMV AS ON 01-04-1981 O F THE LAND AT RS.11,000/-PER CENT. SHRI IDDYA, WAS QUESTIONED WIT H REGARD TO THE LOCAL ENQUIRIES THAT HE CLAIMED TO HAVE MADE IN ARR IVING AT THE FMV AS ON 01-04-1981. HE COULD NOT GIVE THE NAMES AND ADDRESS OF THE PERSONS WHOM HE CONTACTED IN THIS REGARD. THE AO T HEREFORE, CONCLUDED THAT THERE IS NO CREDIBILITY IN THE CLAIM OF SHRI IDDYA, THAT HE HAS ESTIMATED THE FMV ON THE BASIS OF LOCAL ENQU IRIES. HE COULD NOT ALSO EXPLAIN AS TO WHY HE DID NOT TRY TO GET CO MPARABLE SALE INSTANCES FOR ARRIVING AT THE FMV. SHRI IDDYA, WAS ALSO SHOWN THE COMPARABLE SALE INSTANCES WHICH WERE OBTAINED BY TH E AO FROM THE SUB-REGISTRARS OFFICE. AS FAR AS THE PROPERTY LOCA TED AT SURVEY NO.26/13, IS CONCERNED, HE ACCEPTED THAT IT WAS IN THE SAME LOCALITY, WHERE THE PROPERTY OF THE ASSESSEE WAS ALSO LOCATED . HE HOWEVER, EXPRESSED HIS OPINION THAT THE VALUE AS REFLECTED I N THE COMPARABLE SALE INSTANCES OBTAINED BY THE AO DID NOT REFLECT T HE ACTUAL MARKET VALUE. ITA NOS.198 & 199(B)/2011 6 6. THE ASSESSEE WAS CONFRONTED WITH ALL THE ABOVE FACTS AND IN THEIR REPLY THE ASSESSEES TOOK A STAND THAT THE REGISTERE D VALUER, IS AN EXPERT AND HIS VALUATION HAS TO BE ACCEPTED. THE A O HOWEVER, HELD THAT THE REGISTERED VALUERS ESTIMATION OF THE FMV AS ON 01-04-1981 CANNOT BE ACCEPTED. THEREAFTER, THE AO HAS DISCUS SED THE COMPARABLE SALE INSTANCES OBTAINED BY HIM FROM THE REGISTRARS OFFICE AND HAS FINALLY COME TO THE CONCLUSION THAT THE COM PARABLE SALE INSTANCES AND THE VALUES REFLECTED THEREIN WERE A TRUE INDICATOR OF THE FMV AS ON 01-04-1981 OF THE ASSESSEES PROPERTY . THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE MANGALORE URBAN DE VELOPMENT AUTHORITY (MUDA) HAD GIVEN A LETTER TO THE ASSESSEE IN THE YEAR 1987 IN WHICH THEY HAVE CHARGED RS.10,000/- PER CENT IN KANKANADY VILLAGE, IN A PLACE NAMED NETHRAVATHI NAGAR. THE AO ON PERUSAL OF THE DOCUMENTS WAS OF THE VIEW THAT THE SALE IN QUES TION WAS IN THE YEAR 1987 SIX YEARS FROM 01-04-1981. APART FROM T HIS, THE AO WAS ALSO OF THE VIEW THAT THE MUDA PROPERTY WERE CLOSER TO THE CITY AND WAS A PLANNED LAYOUT DEVELOPMENT WITH FACILITIES LI KE ROADS, DRAINAGE, ELECTRICITY, PLAY AREA ETC. HE WAS ALSO OF THE VI EW THAT THE COST IN QUESTION ALSO INCLUDES DEVELOPMENT COST AND THEREFO RE, THE LAND COST WOULD AT BEST CAN BE ONLY 60% AND THEREFORE, HE WAS OF THE VIEW THAT RS.6,000/- AS LAND COST IN 1987 COULD BE APPROPRIAT E. THE AO THEREAFTER MADE THE FOLLOWING OBSERVATIONS; A) THE VALUATION REPORT SUBMITTED BY THE ASSESSEE CANNOT BE RELIED UPON IN VIEW OF THE DEFICIENCIES POINTED OUT IN EARLIER PART OF THIS ORDER. B) THE SALE INSTANCES PROCURED FROM THE SUB-REGISTR ARS OFFICE SHOW THAT THE MAXIMUM PRICE FOR A LAND IN THAT AREA IS ITA NOS.198 & 199(B)/2011 7 AROUND AT RS.2,000/- PER CENT. NO OTHER COMPARABL E SALE INSTANCES HAVE BEEN PRODUCED BY THE ASSESSEE TO SHO W A HIGHER VALUE. C) THE ASSESSEES PROPERTY AS ON 01-04-1981 WAS OCC UPIED BY TENANT THEREBY RESULTING IN REDUCTION OF FAIR MA RKET VALUE. D) THE PROPERTY IS A MULGENI PROPERTY AND THE MULGA R RIGHTS ARE VESTED WITH ANOTHER AND THE MULTI RIGHTS ARE RE QUIRED TO BE PURCHASED SEPARATELY FROM THE MULGAR. E) THE PROPERTY AS ON 01-04-1981 WAS UNDER THE KANK ANADY PANCHAYAT. 7. WITH REGARD TO THE VALUATION OF THE BUILDING, T HE AO MADE THE FOLLOWING OBSERVATIONS; IN RESPECT OF THE BUILDING, THE COST OF CONSTRUCTI ON HAS BEEN TAKEN AT RS.60 PER SQ.FT. AS IN 1956 AND FROM THAT DEPREC IATION HAS BEEN WORKED AT 2% PER YEAR. IN THE CASE OF ONE OF THE S ALE INSTANCES (I PROPERTY) PROCURE FROM SUB-REGISTRAR, THERE IS A SA LE OF 398 SQ.FT BUILDING WITH STONE FOUNDATION, MUD WALLS AND TILED ROOF, BY TAKING THE COST OF THE BUILDING AS ON 01-04-1981 AT RS.6,000/-, THUS THE COST AS ON 01-04-1981 COME TO AROUND RS.15 PER SQ.FT. THE YEAR OF CONSTRUCTION IS STATED TO BE 1961 AND T HEREFORE WORKING BACKWARDS WITH APPRECIATION OF 2% PER YEAR, THE COST OF CONSTRUCTION AS ON 1961 COMES TO RS.25 PER SQ.FT AN D AS ON 1956 COME TO RS.28 PER SQ.FT AS AGAINST RS.60 PER SQ.FT CLAIMED BY THE ASSESSEE. THERE ARE SOME MINOR DIFFERENCES IN RESPE CT OF THE STRUCTURE OF THE BUILDING BUT EVEN CONSIDERING THES E IT CAN BE SEEN THAT THE REGD. VALUER HAS ADOPTED A HIGHER VALUE FO R THE COT OF CONSTRUCTION. 8. FINALLY, THE AO COMPUTED THE LTCG ON THE SALE O F THE FIRST PROPERTY AS FOLLOWS; LAND COST : IN VIEW OF THE DETAILED DISCUSSION MADE ABOVE, T HE ASSESSEES ESTIMATION OF COST OF RS.11,000/- PER CE NT CANNOT BE ACCEPTED. THEREFORE, CONSIDERING ALL THE ASPECTS M ENTIONED ABOVE INCLUDING THE COST OF LAND AS PER THE SALE IN STANCES (MAX. RATE RS.2000/- PER CENT) AND THE COT OF LAND SOLD B Y MUDA ITA NOS.198 & 199(B)/2011 8 (ESTIMATED AT RS.4000/- PER CENT), IT IS HEREBY DEC IDED THAT RS.3,500/- PER CENT SHOULD BE THE FAIR MARKET VALUE TO BE ADOPTED AS ON 01-04-1981 IN RESPECT OF THE ASSESSEE S PROPERTY MEASURING 2.90 ACRES. BUILDING COST: IN VIEW OF THE DISCUSSION MADE IN THE PRECEDING PARAGRAPHS, THE COST OF CONSTRUCTION OF THE BUILDIN G IN 1956 IS ADOPTED AT RS.40/- PER SQ.FT AS AGAINST RS.60/- PER SQ.FT AND FROM HERE WORKING AT A DEPRECIATION OF 2% PER YEAR, THE MARKET VALUE OF THE BUILDING COMES TO RS.20 SQ.FT AS ON 01 -04-1981. IN VIEW OF THE SAME, THE FAIR MARKET VALUE OF THE BUIL DING AS ON 01- 04-1981 IS ADOPTED AT RS.20/- PER SQ.FT. IN VIEW OF THE ABOVE CAPITAL GAINS ON THIS TRANSACT ION IS REWORKED OUT AS UNDER; DATE OF TRANSFER: 20 TH OCT.2006 SALE CONSIDERATION (1,71,12,500/4) RS.42 ,78,122 LESS: INDEXED COST OF FMV AS ON 01-04-1981 LAND COST (RS.3,500 X 290 CENT X 519/100)+4 RS.13,1 6,962 BLDG.COST (RS.20X11,925 SQ.FTX519/100)+4 RS. 3,09 ,454 WELL COST: (RS.5000X519/100)+4 RS. 6,487 RS.16,32,903 LONG TERM CAPITAL GAINS RS.26,45,2 19 9. AS FAR AS THE SECOND PROPERTY IS CONCERNED, THE ASSESSEE HAD SOLD IT FOR A CONSIDERATION OF RS.29,87,500/- AND COMPUT ED HER SHARE OF LTCG AS FOLLOWS: DATE OF TRANSFER: 20 TH OCT.2006 SALE CONSIDERATION (29,87,500/4) RS.7,46,875 LESS: ACQUISITION DETAILS: INDEXED COST OF FAIR MARKET VALUE AS ON01-04-1981: 1,15,000X519/100 RS. 5,96,850 LONG TERM CAPITAL GAINS RS.1,50,025 ITA NOS.198 & 199(B)/2011 9 THE AO DID NOT ACCEPT THE FMV OF THE LAND AT RS.10, 000/- AS ON 01- 04-1981 FOR ALMOST IDENTICAL REASONS DISCUSSED WHIL E DEALING WITH THE FIRST PROPERTY, THE AO COMPUTED LTCG ADOPTING RS. 3 000/- PER CENT AS THE FMV OF THE LAND AS N 01-04-1981 AND COMPUTED THE LTCG ON THE SALE OF THE SECOND PROPERTY AS FOLLOWS; DATE OF TRANSFER: 20 TH OCT. 2006 SALE CONSIDERATION (29,87,500/4) RS. 7,46,875 LESS: ACQUISITION DETAILS: INDEXED COST OF FAIR MARKET VALUE AS ON01/04/1981 (RS.3000X46X519/100) RS. 1,79,055 LONG TERM CAPITAL GAINS RS. 5,67,820 10. AS FAR AS THE THIRD PROPERTY IS CONCERNED, THE SAME WAS SOLD FOR A CONSIDERATION OF RS.3,65,750/-. THE ASSESSEE DECLA RED HER SHARE OF LTCG AS FOLLOWS; DATE OF TRANSFER: 14 TH FEB.2007 SALE CONSIDERATION(3,650,750/4) RS.91,438 LES: ACQUISITION DETAILS: INDEXED COST OF FAIR MARKET VALUE AS ON 01/04/1981 (RS.14,000X3.85 CENT X 519/100) + 4 RS.69,935 LONG TERM CAPITAL GAINS RS.21,503 THE AO OBTAINED THE COMPARABLE SALE INSTANCES IN KA SBA BAZAAR VILLAGE PERTAINING TO AY: 1981 AND OBTAINED THE FOL LOWING DETAILS FROM THE SUB-REGISTRARS OFFICE. T.S.NO R.S.NO LAND EXTENT BLDG. ON THE LAND, ANY TOTAL VALUE OF TRANSACTION D/O TRANSACTION 153/1 783/1 2 3/4 CENTS 625 SQ.FT BLDG. CONSTRUCTED IN 1965 RS.35,000 10.07.1981 ITA NOS.198 & 199(B)/2011 10 ON THE BASIS OF THE ABOVE, THE AO CAME TO THE CONCL USION THAT THE COST OF THE LAND WOULD BE RS.4,477/- PER CENT . 11. THE ASSESSEE CITED COMPARABLE SALE INSTANCES O F PROPERTY IN KASBA BAZAAR VILLAGE ON 10-07-1981 WHEREBY THE VALU E OF LAND VALUE WAS ADOPTED AT RS.35,000/- PER CENT. WHEN THE SAID DOCUMENTS WAS FILED BEFORE THE AO, THE AO WAS OF THE VIEW THAT T HE SAID PROPERTY WAS A COMMERCIAL PROPERTY IN THE MIDDLE OF THE BUSI NESS CENTRE OF MANGALORE I.E. HAMPANKATTA. HE ALSO EXPRESSED THE VIEW THAT THE ASSESSEES PROPERTY WAS ON THE 16 FT ROAD AND THERE FORE, THE RATE OF RS.14,000/- PER CENT ADOPTED BY THE REGD. VALUER CA NNOT BE ACCEPTED. 12. THEREAFTER, THE AO COMPUTED THE LTCG ON THE TH IRD PROPERTY AS FOLLOWS; LAND COST: IN VIEW OF ABOVE MENTION ED ASPECTS INCLUDING THE COST OF LAND AS PER THE SALE INSTANCE AND TAKIN G INTO ACCOUNT THE COST DIFFERENCE BETWEEN A HIGHLY VALUAB LE COMMERCIAL PROPERTY AND A RESIDENTIAL PROPERTY LOCA TED IN A SLIGHTLY INTERIOR AREA, IT IS HEREBY DECIDED THAT R S.7,000 PER CENT SHOULD BE A FAIR ESTIMATE OF THE FAIR MARKET V ALUE TO BE ADOPTED AS ON 01-04-1981 IN RESPECT OF THE ASSESSEE S PROPERTY MEASURING 3.85 CENTS. IN VIEW OF THE ABOV E, THE CAPITAL GAINS ON THIS PARTICULAR TRANSACTION IS WOR KED OUT AS UNDER; DATE OF TRANSFER: 14 TH FEB.2007 SALE CONSIDERATION (33,65,750/4) RS. 91,438 LESS: ACQUISITION DETAILS; INDEXED COST OF ITA NOS.198 & 199(B)/2011 11 FAIR MARKET VALUE AS ON 01-04-1981 (RS.7,000 X 3.85 CENTS X 519/100) +4 RS. 34,968 LONG TERM CAPITAL GAINS RS.56,470 13. AGGRIEVED BY THE ACTION OF THE AO IN COMPUTING THE CAPITAL GAINS IN THE MANNER AS AFORESAID THE ASSESSEE PREFERRED T HE APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDERING THE AOS ORDER WAS OF THE VIEW THAT THE AO WAS MAGNANIMOUS TO ADOPT TO RS.350 0/- PER CENT FOR THE FIRST PROPERTY WHEREAS IN THE DOCUMENTARY E VIDENCE SUGGESTED THAT THE FMV AS ON 01-04-1981 WAS EVEN LESSER. THE CIT(A) HOWEVER, CONFIRMED THE FINDINGS OF THE AO IN THIS REGARD. A S FAR AS THE SECOND PROPERTY IS CONCERNED, THE CIT(A) UPHELD THE ORDER OF THE AO. AS FAR AS THE THIRD PROPERTY IS CONCERNED, THE CIT(A) UPHE LD THE ORDER OF THE AO. 14. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEES HAVE PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 15. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSE E FILED THE FOLLOWING CHART;- SL.NO . DESCRIPTION OF THE PROPERTY TOTAL SALE PRICE MARKET VALUE ADOPTED AS ON 1/4/1981 BY THE APPELLANT MARKET VALUE ADOPTED BY THE AO AS ON 1/4/1981 MARKET VALUE DERIVED BY COST INDEX 1 PROPERTY NO.26/6A1P1,KANKAN ADY VILL. MANGALORE TQ. 1,71,12,500 35,52,750 12,58,500 32,97,206 (NOTE NO.1) ITA NOS.198 & 199(B)/2011 12 2 PROPERTY IN RS NO.27/3, KANKANADY VILL. MANGALORE TQ. 29,87,500 4,60,000 1,38,000 5,75,626 (NOTE NO.2) 3 PROPERTY IN RS NO.797/1KASBA BAZAAR VILL. MANGALORE Q. 3,65,750 53,900 26,950 70,472 (NOTE NO.3) NOTE NO.1 1,71,12,500 X 100 = 32,97,206 = 8,24,301 519 NOTE NO.2 : 29,87,500 X 100 = 5,75,626 = 1,43,906 519 NOTE NO.3 : 3,65,750 X 100 = 70,472 = 17,618 519 DRAWING OUR ATTENTION TO THE AFORESAID CHART, LEARN ED COUNSEL SUBMITTED THAT THE PRESENT VALUE OF THE PROPERTY AF TER APPLYING THE COST INDEX AND WORKING BACKWARDS WOULD BE THE BEST METHOD OF DETERMINING THE FMV AS ON 01-04-1981 AND THE CALCUL ATION AS MADE BY THE ASSESSEE, AS ABOVE SHOULD BE ACCEPTED AND TH E ADDITION MADE BY AO AND CONFIRMED BY CIT(A) SHOULD BE DELETED. 16. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SMT. S. NEELAVE NI VS CWT, KARNATAKA (125 ITR 665) WHEREIN THE HONBLE KARNATA KA HIGH COURT HAS EXPRESSED THE VIEW, THAT THE BEST EVIDENCE IN R EGARD TO THE MARKET VALUE WOULD BE THE VALUE OF THE PROPERTY ITS ELF IF IT HAS BEEN THE SUBJECT OF PURCHASE NEAR ABOUT THE VALUATION DA TE. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, THE SALE VALU E OF THE PROPERTIES WERE THEREFORE, ADOPTED BY HIM AND BACKWARD WORKING OF THE VALUE DONE. FURTHER, RELIANCE WAS ALSO PLACED ON THE DECI SION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SHANTADEVI GAEKWA D VS DCIT ITA NOS.198 & 199(B)/2011 13 (2012) 72 DTR GUJ. 241, WHEREIN THE HONBLE GUJ. HI GH COURT HELD AS FOLLOWS: CAPITAL GAINS- COST OF ACQUISITION COMPUTATION OF FAIR MARKET VALUE AS ON 1 ST APRIL, 1974 BY REVERSE INDEXATION FROM THE SALE PRICE IN 1991 VIS-A VIS VALUATION FOR WT PURPOSES AS ON 31 ST MARCH, 1989 REVENUE HAVING ACCEPTED THE VALUATION OF THE SELFSAME JEWELLERY GIVE BY THE ASSESSEE AS ON 1 ST MARCH, 1989, AS CORRECT VALUATION FOR THE PURPOSES OF WT ACT, THE SAME VALUATION HAS TO BE TREATED TO BE A RELIABLE BASE FOR ARRIVING AT THE COST OF ACQUISITI ON OF THE JEWELLERY BY THE PROCESS OF REVERSE INDEXATION FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN REVENUE HAV ING ACCEPTED THE SAID VALUATION FOR THE PURPOSE OF WT A CT IS PRECLUDED FROM DISPUTING THE CORRECTNESS THEREOF FO R THE PURPOSE OF ASSESSMENT OF CAPITAL GAINS AS THE FACTO R OF FAIR MARKET VALUE IS DECISIVE FOR THE PURPOSE OF BOTH W T ACT AS WELL AS FOR ASCERTAINING THE COST OF ACQUISITION UN DER THE IT ACT- DATE 31 ST MARCH, 1989 BEING NEARER TO 1 ST APRIL, 1974, THAN DECEMBER, 1991, THERE WAS NO JURISDICTION FOR APPLYING REVERSE INDEXATION FROM A FARTHER DATE- MOREOVER, THE FULL VALUE OF CONSIDERATION RECEIVED ON TRANSFER OF JEWE LLERY BELONGING TO A ROYAL FAMILY AS IN THIS CASE IS GENE RALLY HIGHER THAN THE MARKET VALUE- THUS, IT WOULD BE UNSAFE TO APPLY THE PROCESS OF REVERSE INDEXATION ON THE BASIS OF ACTUA L SALE PRICE IN DECEMBER, 1991 FOR THE PURPOSE OF ASCERTAI NING THE MARKET VALUE OF SAID ITEMS AS ON 1 ST APRIL, 1974. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE THI RD MEMBER BENCH, AGRA ITAT IN THE CASE OF JAHANGANJ COLD STORAGE VS ACIT (2010)133 TTJ 278 WHEREIN IT WAS HELD AS FOLLOWS; CAPITAL GAINS COST OF ACQUISITION FAIR MARKET VALUE AS ON 1 ST APRIL, 1981ASSESSEE SOLD ITS FACTORY WHICH WAS SET UP DURING 1968-69 FOR COMPUTING THE CAPITAL GAINS, I T ESTIMATED THE FAIR MARKET VALUE OF THE LAND AS ON 1 ST APRIL, 1981 @ RS.20 PER SQ. METR. BY APPLYING THE COST INF LATION INDEX TO THE SALE VALUE OF LAND FOR STAMP DUTY PURP OSES IN THE REVERSE ORDER. THE AO REJECTED THE SAME AND E STIMATED ITA NOS.198 & 199(B)/2011 14 THE FAIR MARKET VALUE OF THE LAND @ RS.4 PER SQ.MTR . WHICH WAS THE PREVAILING FAIR MARKET VALUE OF AGRICULTURA L LAND AS ON 1 ST APRIL, 1981. NOT JUSTIFIED LAND IN QUESTION WAS U SED FOR COMMERCIAL PURPOSES AND WAS NOT AN AGRICULTURAL LAND. MARKET RATE OF AGRICULTURAL LAND CANNOT BE MADE THE BASIS FOR ASCERTAINING THE FAIR MARKET VALUE OF ASSESSEES LA ND AS ON 1 ST APRIL, 1981. A COMPARABLE INSTANCE HAS TO BE OF SIMILAR NATURE OF LAND AND SIMILAR TO THE TIME OF THE TRANS ACTION -USE OF THE LAND MAKES A LOT OF DIFFERENCE IN THE VALUE OF LAND RATES OF COMMERCIAL LAND ARE MUCH HIGHER THAN THAT OF AGRICULTURAL LAND. INSTANCES TAKEN BY THE AO CANNOT BE REGARDED T BE THE COMPARABLE INSTANCE FOR THE PURPO SE OF ESTIMATING THE FAIR MARKET VALUE OF THE LAND. THER EFORE, THE FAIR MARKET VALUE OF THE LAND AS ESTIMATED BY THE A SSESSEE @RS.20 PER SQ.METR. AS SUSTAINABLE. 17. THE LEARNED DR ON THE OTHER HAND, PLACED RELIA NCE ON THE ORDER OF THE AO AND THE CIT(A). IN PARTICULAR, THE LEARN ED DR DREW OUR ATTENTION TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SMT. S. NEELAVENI, (SUPRA) WHEREIN THE HON BLE COURT HAS EXPRESSED THE VIEW THAT THE NEXT BEST EVIDENCE WOUL D BE THE VALUE FETCHED FOR A SIMILAR PROPERTY IN THE VICINITY AT A BOUT THE SAME TIME. ACCORDING TO HER, THE AO HAS FOLLOWED THE METHOD AS ADVOCATED IN THE DECISION OF THE HONBLE KARNATAKA HIGH COURT AND TH EREFORE, THE SAME SHOULD E ACCEPTED. 18. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. AS FAR AS THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SMT.S. NEELAVENI, (SUPRA) IS C ONCERNED, IT WAS A CASE OF DETERMINATION VALUE OF SELF ACQUIRED HOUSE PROPERTY. OBSERVATIONS RENDERED THEREIN HAVE TO BE UNDERSTOOD IN THE CONTEXT ITA NOS.198 & 199(B)/2011 15 OF FACTS AND CIRCUMSTANCES IN THAT CASE. THE QUESTI ON WAS WHETHER THE RENTAL METHOD WAS APPLICABLE FOR VALUING RESIDE NTIAL HOUSE. THE HONBLE HIGH COURT HELD THAT RENTAL METHOD WILL BE VALID AND RELEVANT IN DETERMINING THE VALUE OF SELF OCCUPIED RESIDENTI AL HOUSE. THE OBSERVATIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE HAVE BEEN MADE IN THE CONTEXT OF THE ABOVE DECISION OF T HE HONBLE HIGH COURT. IT IS NOT AN AUTHORITY FOR THE PROPOSITION THAT FMV AS ON 01- 04-1981 CAN BE DETERMINED BY ADMITTING THE SALE CON SIDERATION RECEIVED ON TRANSFER AND APPLYING THE COST INDEX AN D WORKING BACKWARDS AND ARRIVING AT THE VALUE. AS FAR AS THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SHANTADEV I GAEKWAD VS DCIT (SUPRA) IS CONCERNED, THE PROCESS OF REVERSE I NDEXATION WAS ACCEPTED BY THE HONBLE GUJARAT HIGH COURT IN THE M ATTER OF VALUATION OF JEWELLERY WHERE THE VALUATION OF THE V ERY SAME JEWELLERY WAS AVAILABLE IN THE WEALTH TAX ASSESSMENT AS ON 31 -03-1989. THE HONBLE COURT HELD THAT THE REVENUE HAD ACCEPTED TH E VALUE OF JEWELLERY GIVEN BY THE ASSESSEE FOR WEALTH TAX PURP OSES AS ON 31-03- 1989. THE AFORESAID DECISION IN OUR VIEW, THEREFO RE, CANNOT BE TAKEN AS LAYING DOWN ANY GENERAL PURPOSE AS CANVASSED BY THE LEARNED COUNSEL FOR THE ASSESSEE. THE DECISION IN THE CASE OF JAHANGANJ COLD STORAGE, SUPRA WAS A CASE WHERE THE ASSESSEE ADMIT TED THE FMV AS ON 01-04-1981 BY APPLYING THE COST INFLATION INDEX TO THE SALE VALUE OF LAND FOR A STAMP DUTY PURPOSE IN THE REVERSE ORD ER. THE AO FURTHER ESTIMATED THE FMV ON THE BASIS OF VALUE OF AGRICULTURAL LAND WHEREAS THE PROPERTY THAT WAS SOLD WAS A COMMERCIAL PROPERTY. IN THESE CIRCUMSTANCES, IT WAS HELD BY THE TRIBUNAL TH AT BASIS ADOPTED ITA NOS.198 & 199(B)/2011 16 BY THE ASSESSEE HAS TO BE ACCEPTED. THIS DECISION ALSO CANNOT BE TAKEN AS LAYING DOWN ANY PROPOSITION THAT FMV AS ON 01-04-1981 CAN BE ADOPTED BY APPLYING THE COST INFLATION INDEX TO THE SALE VALUE OF LAND FOR STAMP DUTY IN THE REVERSE ORDER. 19. WE HAVE DULY CONSIDERED THE SEVERAL ASPECTS OF THE VALUATION AS BROUGHT OUT BY THE AO IN THE ORDER OF ASSESSMENT AN D ARE OF THE VIEW THAT THE PRIMA-FACIE THE CONCLUSION OF THE AO ARE J USTIFIED. WE ARE OF THE VIEW THAT IN THE MATTER OF VALUATION OF FMV AS ON 01-04-1981 THERE IS ALWAYS AN ELEMENT OF ESTIMATION AND GUESS WORK AS THE DATA AVAILABLE CANNOT BE COMPARABLE WITH THE PROPERTY IN QUESTION IN ALL ASPECTS. WE ARE ALSO KEEPING IN MIND THAT EVEN THE AO DOES NOT DISPUTE WITH THE FACT THAT THE MUDA HAS SOLD HOUSE SITES IN THE VICINITY OF THE PROPERTY IN THE YEAR 1987 AT RS.10, 000/- PER CENT. IN THE MATTER OF VALUATION FMV AS ON 01-04-1981, THE R EVENUE ALWAYS TAKES A STAND THAT THE SAME IS LESS THAN WHAT IS AD OPTED BY THE ASSESSEE, BECAUSE DOING SO, WILL INCREASE THE QUANT UM OF CAPITAL GAINS. THE ASSESSEE ON THE OTHER HAND, WILL CONTEN T WITH THE FMV AS ON 01-04-1981 IS HIGHER, BECAUSE THAT WILL RESULT I N CAPITAL GAINS BEING COMPUTED AT A LOWER FIGURE. KEEPING IN MIND THAT VALUATION CAN NEVER BE EXACT, WE WOULD BE MUCH MORE MAGNANIMO US THAN THE AO AND FIX THE VALUE OF FMV OF THE PROPERTY AS ON 0 1-04-1981 AT RS.5,000/- PER CENT FOR THE FIRST AND SECOND PROPER TY. 20. AS FAR AS HE THIRD PROPERTY IS CONCERNED NAMEL Y KASBA BAZAAR PROPERTY. THERE IS EVIDENCE AVAILABLE THAT THE VA LUE OF THE LAND WAS ITA NOS.198 & 199(B)/2011 17 ADOPTED AS ON 10-07-1981 AT RS.14,000/- PER CENT. THE ASSESSEE HAS ALSO ADOPTED THE SAME VALUE WHILE COMPUTING THE CAPITAL GAINS. THE REASONS ASSIGNED BY THE AO FOR REJECTING THE CO MPARABLE SALE INSTANCES ARE NOT JUSTIFIED. THE VALUATION AS DECLA RED BY THE ASSESSEE FOR THIS PROPERTY IS DIRECTED TO BE ACCEPTED. THUS , THE APPEALS ARE PARTLY ALLOWED. 21. IN THE RESULT, THE APPEALS FILED BY THE ASSESS EE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 31-08-20 12. SD/- SD/- (N.BARATHVAJA SANKAR) (N.V.VASUDEV AN) VICE PRESIDENT JUDICIAL MEMBER BANGALORE: D A T E D : 31-08-2012. AM*/DS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-I, BANGALORE. 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE