Income Tax Appellate Tribunal - Panji
Dominic Dias Margaao vs Assistant Commissioner Of Income Tax on 21 February, 2002
Equivalent citations: [2003]87ITD1(PANJI), (2004)82TTJ(PANJI)22
ORDER
B.L. Chhibber, A.M.
1. Since common issues are involved in all these appeals, the same are consolidated and disposed of by a single order for the sake of convenience. The assessees at Sr. Nos. 3 and 4 are the spouses of Mr. Dominic Dias and Mr. Richard Dias respectively and all the assessees are governed by the Portuguese Civil Code.
2. The first common grievance of the assessee is that the learned CIT(A) is not justified in holding that the proceedings under Section 147 of the Act were properly initiated with sufficient ground for issue of notice under Section 148. All the four assessees are co-owners of agricultural land measuring 1,08,000 sq. mtrs. situated at Canacona. The said land was sold to M/s Deeksha Holding Co. (P) Ltd. who purchased the same on 27th Oct., 1994, for a consideration of Rs. 1,69,56,000 for construction of a beach resort. The share of each assessee being Rs. 42,39,000.
3. The assessees had filed returns of income for asst, yr. 1995-96 on 31st Oct., 1995, which were processed under Section 143(1)(a) on 30th Sept., 1996. In these returns, the assessees had not disclosed the income from capital gains from the sale of said land. Accordingly, proceedings under Section 147 were initiated by issue of notice under Section 148 on 30th Sept., 1996, to bring their respective incomes from capital gains to tax. The assessees challenged the action of the AO before the CIT(A) who upheld the action of the AO.
4. Shri D.E. Robinson, the learned counsel for the assessee submitted that the assessees bona fide believed that the population of Canacona was less than 10,000 and the sale made on 27th Oct., 1994 was not liable to capital gains tax for such reason. Therefore, the transaction was not part of the returns of income filed by the assessees for the asst. yr. 1995-96. He submitted that the information on record of the AO or in possession did not indicate that income had escaped the assessment. The learned Departmental Representative relied upon the orders of the authorities below.
5. We have considered the rival submissions and perused the facts on record. From the perusal of the assessment order, it is noted that the AO had made enquiries from the Chief Officer, Canacona Municipal Council, who had confirmed vide his letter No. CMC/Admn/Sec/Gen/39/97-98/863 dt. 7th Oct., 1997, that the property known as Quandeli Baga situated in Nagorcem, Pallolem Revenue Village falls within the jurisdiction of Canacona Municipal limits w.e.f. 5th March, 1985, i.e., from the date of existence of Canacona Municipal Council. The Chief Officer had also informed that the population of the Canacona Municipal area as per the 1991 census was 10,446. So it is wrong to say that the AO had no information in his possession to reopen the assessment as per Section 147 of the Act where the returns of income had been furnished by the assessees but no assessments had been made and the AO had noticed that the assessees had understated their income; it will be deemed to be a case where income chargeable to tax had escaped assessment. Accordingly, we do not find any infirmity in the action of the AO and the observations of the CIT(A). This ground accordingly fails.
6. The next and most vital issue in the appeals filed by the assessees involves determination of fair market value of the aforesaid property as on 1st April, 1981, in terms of Section 55(2)(b)(ii) of the IT Act. The relevant facts briefly stated are like these : The land was purchased by Shri Dominic Dias, the first assessee, in the year 1969 for a consideration of Rs. 35,000. He later on sold the land to his father late Shri Ubaldino Dias in June, 1979 for a consideration of Rs. 40,000. On 11th Sept., 1981, the property was transferred by the late Shri Ubaldino Dias by way of gift to his two sons, Shri Dominic Dias and Shri Richard Dias, taking the value at Rs. 48,000 in the registered gift deed. These two persons along with their respective spouses are the assessees and it is the quantification of capital gains arising from the sale of this property in 1994 by them to Deeksha Holding Co. (P) Ltd. In the return filed in response to notice under Section 148 the assessees declared capital gains on the basis of computation made by taking the market value as on 1st April, 1981, as determined by an approved valuer Shri Vikas Desai, through two separate Valuation reports, one in respect of the value of trees and the other in respect of the value of land. As per the valuation report in respect of the land, the same was valued at Rs. 50 per sq. mtr. which was worked out to Rs. 54,00,000 as on 1st April, 1981, as against the total sale consideration of Rs. 1,69,56,000 received by all the co-owners on the sale made in October, 1994. The AO summoned the approved valuer and examined him on oath. It came out that Shri Vikas Desai had not visited the Sub-Registrar's office to collect information of sale deeds for comparison nor had he visited any Government office for getting information on specific amenities available as on 1st April, 1981, in and around the area where the said land was situated. He also confirmed that the land was considered as agricultural land in 1981 and the area was not yet notified as settlement zone although it had the potentialities of a settlement zone as there were cluster of houses around this land. On the request of the assessee Mr. Vikas Desai was allowed to be examined by the assessee's counsel. It appears that during this cross-examination, it transpired that since Shri Vikas Desai was not a valuer of agricultural property, the market value as on 1st April, 1981 may be got determined by some other valuer dealing with agricultural property. Accordingly at the instance of the AO another valuer Shri Ghanshyam A. Nagarsekar who was the valuer for valuing the agricultural land was engaged, who valued the land at Rs. 60 per sq. mtrs. calculating the market value as on 1st April, 1981 at Rs. 64,80,000. The AO was not satisfied by this valuation report and rejected it as 'mere opinion'. After rejecting the reports of both the valuers, the AO proceeded to determine the value of land as on 1st April, 1981. Noting that the said land had been gifted by a registered gift deed by the father of the first two assessees at Rs. 48,000 in 1981, he held that as on 1st April, 1981 that was the correct value for determining the capital gain under Section 55(2)(b)(ii) of the Act. He accordingly worked out capital gains by adopting the value of the land at Rs. 48,000 as on 1st April, 1981. Aggrieved by the order of the AO, the assessee appealed to the CIT(A).
7. The CIT(A) noticed that the sale by Shri Kunde to Shri Dominic Dias (or substantively to his father) was a valid sale to an unrelated person without any evident consideration over and above what was stated in the registered sale deed and this consideration was considered as adequate with reference to fair market value by the stamp duty authorities. Having considered the entire circumstance's of the case and given careful thought to the matter, the CIT(A) held as under :
"I find it most appropriate to adopt this sale consideration of Rs. 35,000 in 1969 in respect of the same land as the basis and work out the value as on 1st April, 1981 with the help of cost inflation index. This will obviate the influence of restrictions imposed, if any, on the construction of beach properties as that process admittedly started only in 1985. The question of taking cost of trees separately will also not arise as there is admittedly no evidence that any fresh plantation took place during the period from 1969 to 1981. The sale consideration in 1969 naturally included the price of standing trees as well. The AO is accordingly directed to do this exercise. In case of any difficulty (which would normally not arise), he may obtain the help of the valuation cell of the Department. The appellant shall also be given an opportunity in regard to the actual working of the value as on 1st April, 1981 by extrapolating the value of Rs. 35,000 as on 17th Nov., 1969, as per sale deed with Shri Kunde. But the principle is hereby decided and the opportunity will not be extended to refute this principle. This ground of appeal is disposed of accordingly."
Aggrieved by the order of the CIT(A) both the assessees and the Revenue are in appeals before us.
8. The grievance of the assessees is that the learned CIT(A) erred in rejecting the valuation reports of the registered valuers for the purpose of determination of market value of the, land sold during the year of account as on 1st April, 1981, for purposes of Section 55(2)(b)(ii) of the Act, while the grievance of the Revenue is that the learned CIT(A) has erred in holding that the gift deed referred to by the AO for working out the fair market value as on 1st April, 1981 does not reflect the fair market value being evident family arrangements. We will first take up the grievance of the assessees.
9. Shri D.L. Robinson, the learned counsel for the assessee submitted that the assessees secured a valuation report initially from a registered valuer for immovable properties in which the value as on 1st April, 1981, was stated at Rs. 54,00,000. This report was. rejected by the AO who required specifically a valuation report from a registered valuer for agricultural land as in his opinion, the land was agricultural land. The assessee therefore, obtained the valuation report from a valuer registered for valuation of agricultural land who valued the land and trees as on 1st April, 1981, at Rs. 66,41,000. The AO wrongly refused to accept this valuation report and has held that Rs. 48,000 stated in the gift deed in 1981 is the market value as on 1st April, 1981. The learned counsel submitted that Section 55(2) clearly gives the assessee option to substitute the market value as on 1st April, 1981, as cost for the purpose of computing capital gains. The assessees had substantiated their claim of the market value as on 1st April, 1981, with two valuation reports, documents, comparable cases with details of parties, location, registration, details of area and price recorded. The reasons given by the AO for rejecting the reports and comparable cases are absolutely baseless. The property was purchased in 1969 for a price of Rs. 35,000 by the father of the first two assessees, viz., Mr. Dominic Dias and Mr. Richard Dias. The first assessee Mr. Dominic Dias was 22 years of age at that time and had no source of income worth the name, At the material time Mr. Dominic Dias was a partner of Mr. Kunde from whom the property was purchased having been admitted to the benefits of the said firm in 1960 (M/s Goa Chitrapur Bus Service) when he was a minor on the basis of capital provided by his father and on account of friendship between his father and Mr. Kunde. The share income was negligible. (Average of less than Rs. 4,000 p.a. and losses in many years). Mr. Dominic Dias had no other source of income at that point of time. According to the learned counsel, there were extraneous considerations that governed the transaction on account of long-standing friendship between the assessee's father and Mr. Kunde and the value stated in 1969 in the purchase document itself cannot be considered as market value. He drew our attention to the copies of sale deeds in compilation p. 165 and submitted that there are registered sale transactions in the vicinity in Canacona in 1969 at Rs. 4.38 per sq. mtrs. whereas the sale deed of Mr. Kunde record a rate of 32 paise per sq. mtr. The learned counsel further submitted that it is significant that the partnership between the first assessee and Mr. Kunde was dissolved in 1983 soon after the demise of the assessee's father in February, 1982, though the father of Mr. Dominic Dias was not a partner in the said firm. The firm M/s Goa Chitrapur Bus Service was assessed to tax (p. 27 of the paper book). The records are available with the Department. He also drew our attention to the affidavit of Mr. Dominic Dias (p. 89 of the compilation),
10. The learned counsel further submitted that it is on record that Mr. Dominic Dias transferred this land back to his father and he was required to do so because on his marriage in 1979 to ensure that both Mr. Dominic Dias and his brother Mr. Richard Dias had the benefit of this land and the first purchase in Shri Dominic Dias name is not questioned as violating provisions of Portuguese Civil Code as being in excess of the father's disposable quota by the other son and to prevent the assessee's wife from acquiring interest in the property on the marriage of Mr. Dominic Dias. The transfer was done on 2nd June, 1979, and Mr. Dominic Dias was married on 5th June, 1979. Considering the fact that the property was purchased by Mr. Dominic Dias's father from out of his own funds this transaction between the father and son cannot be considered as a regular commercial transaction. Coming to the gift deed of which the vacant land is the subject-matter transferred the property to the first two assessees jointly, the learned counsel submitted that it is clearly a family arrangement considering the antecedents. The father of the first two assessees had intended the land to be inherited only by his sons excluding the daughters who were all married and made the gift deed in September, 1981 and when his health deteriorated, He expired on 20th Feb., 1982. According to the learned counsel, it was the intention that the benefit of land should devolve on both his sons and there should be no claim from the daughters for whose benefit he had incurred substantial marriage expenses. The learned counsel therefore, concluded that none of the three transactions which ultimately vested the property in the hands of the first two assessees could be considered as a regular commercial transaction. The learned counsel further submitted that the CIT(A) has rightly accepted the plea that the later two of the three transactions are family arrangements and do not provide the basis for determination of the market value as on 1st April, 1981. The learned counsel further submitted that AO had ignored some of the evidence filed and had not evaluated the others judiciously, and briefly the evidence filed are the following :
"1. Valuation report of registered valuers for urban property and agricultural property--pp. 31 and 37.
2. The plan of the land indicating the salient features and its relevance to town Planning regulations annexed from time to time.
3. A comprehensive list of comparable cases of sale of land, purchases : having been made by and on behalf of a Hotel company the nature and the purpose being the same as that of the appellant.
4. The circular letter of town planning department dt. 15th April, 1983 to Panchayata imposing restrictions in coastal areas.
5. The statement on oath in cross-examination of Mr. Vikas Desai--Registered valuer.
6. Memorandum of sale entered into between assessees and Mr. Luthria in 1987 and the connected correspondence showing the circumstances in which the transaction was aborted."
The learned counsel submitted that the CIT(A) erred in not taking into the absorbed transfer after the sale of land in 1987. According to the learned counsel, the assessee had actually entered into a memorandum of sale with a reputed hotel owner from Bombay Mr. Luthria of Sea Rock Hotels, in which the price offered was Rs. 51 (p. 72 of the compilation). The assessee had not accepted this price at the material time since it was not considered as adequate and thus not acceptable. A copy of the memorandum was filed before the AO. Even on the basis of this memorandum taking into account the published inflation index for the purpose of capital gains, the equated index price per square metre would be Rs. 34 in 1981, and if the reduction in constructable area of 18.7 per cent imposed in 1983 is taken into account the value equated would be Rs. 47.6 (p. 169 of the compilation). The learned counsel submitted that the valuation made by the valuer obviously took into account the restrictions imposed beginning from 1983 on beach properties which as stated above retarded the rate of increase. The offer made by Mr. Luthria and the fact that it was rejected as inadequate are established by documents (pp. 72-79 of the compilation). There was substantial persuasion from Mr. Luthria which was repelled and offer was not accepted. The AO was not justified in totally ignoring this evidence. In the light of established fully substantiated facts, the valuation reports given by two registered valuation officers must have been accepted by any as reasonable, and against such weighy evidence of market value the AO has chosen to rely on documents relating to mere family arrangements.
11. Coming to the order of the CIT(A), the learned counsel submitted that the CIT(A) has further directed that the market value as on 1st April, 1981, be determined by indexing the purchase price in 1969 by application of cost index. According to the learned counsel, this method is falacious, and wholly unwarranted in the face of valuation reports of experts available on record. Further, there was no approved inflation index prescribed earlier to 1981. The only index available during such period was based on cost of essential commodities and would have no relevance to determination of market price of land. The inflation index notified after 1981 also is only for purposes of neutralising the rise in price of land to the extent caused by mere inflation and are only indicative of the extent inflation in money value has influenced the price. According to the learned counsel, the index is not a determinative factor in so far as price of land is concerned. The price of the land would depend on supply of land which is highly limited and demand which is unlimited.
12. Shri Naresh Kumar, the learned Departmental Representative strongly supported the order of the AO. His first submission is that the transaction dated 17th Nov., 1969, by which the subject property was purchased in the name of Mr. Dominic Dias by later's father was not a transaction between closely connected persons and was therefore a regular commercial transaction with all the implications and consequences that should follow such regular commercial transactions. The learned Departmental Representative submitted that if the first assessee was closely connected with the vendor Mr. Kunde as at the time of transaction there would have been no need to have made a dispute over additional area of nearly 8000 sq. mtrs. and received any sum of money against this disputed area from Mr. Kunde. The learned Departmental Representative further submitted that the father of the first two assessees had gifted the subject land for a value of Rs. 48,000 by a registered gift deed and the AO was justified to adopt the same as the base value. He submitted that the principle of estoppel has exceptions and in this particular case the assessee cannot take advantage of the rule of estoppel, having avoided payment of gift-tax in respect of the gift made by the assessee's father in favour of the first two assessees on 11th Sept., 1981, stating the value of the gift at Rs. 48,000 only. This, according to the learned Departmental Representative is a fraud on the Department and the assessee cannot be allowed to take further advantage having thus deprived the Department of legitimate gift tax due. In support of this contention, he placed reliance on the judgment of the Supreme Court in the case of CIT v. B.N. Bhattachargee (1979) 118 ITR 461 (SC) The learned Departmental Representative further relied on the comparable cases of sales which had taken place near about the date relevant for valuation, the sales having been effected by Mr. Kunde, In these transactions, value may be substituted for the value determined by the approved valuer. The learned Departmental Representative submitted that the AO has collected very recently all the materials from the office of the Sub-Registrar.
13. With regard to the appeals filed by the Revenue, the learned Departmental Representative submitted that the learned CIT(A) was not justified in holding that the gift deed referred to by the AO for working out the fair market value as on 1st April, 1991, does not reflect the fair market value being evident family arrangements. He submitted that all the three transactions were commercial transactions and not the family arrangements as held by the CIT(A).
14. As a rejoinder, Shri D.E. Robinson, the learned counsel for the assessee objected to the filing of compilation of cases now collected from the office of the Registrar on the ground that this is a fresh case of evidence. The learned counsel drew our attention to the written submissions made on 6th April, 1999 and submitted that the close connection between the father of the first two assessees who provided the fund for the purchase of the property and Mr. Kunde has been stated elaborately. The learned counsel further relied upon the ruling of the Andhra Pradesh High Court in the case of Addl. CIT v. Smt. Indira Bai (1985)151 ITR 692 (AP) in support of the plea that the assessee cannot be prevented from requiring a fresh valuation of the property as on 1st April, 1981, despite the value of Rs. 48,000 stated in the gift deed dt. 11th Sept., 1981. The learned counsel further submitted that the Departmental Representative's reliance on the Supreme Court judgment in the case of B.N, Bhattachargee (supra) in support of his submission that persons who dodge tax cannot take advantage of the rule of estoppel is misplaced. According to the learned counsel, the matter dealt with by the Supreme Court in the said case relates entirely with procedure and deals with a situation in which the Supreme Court found the conduct of the parties suspect and even passed strictures. It was also held in this case that estoppel cannot be called into aid to stall performance of public duties and that the doctrine of estoppel did not apply to the facts of the case. According to the learned counsel, so far as the assessee's case is concerned it would be clear from the decision in the case of CGT v. S.N. Zaman (1996) 221 ITR 842 (Gau) that a family dispute which is resolved by a family arrangement would not give rise to any gift tax liability. The learned counsel further submitted that insofar as the comparable cases are concerned, prima facie, these are unacceptable as comparable cases.
The copies of sale deeds are superscribed as 'sales effected to Mundkars'. Mundkars are protected tenants, so protected under the various local enactments, the principal of which is the Mundkar Act. Under the provisions of the Mundkar Act landlords are compelled to sell portions of the property in possession of Mundkars at an upset price determined by the Government. According to the learned counsel, by no stretch of imagination sales to Mundkars can be considered as comparable case. The learned counsel concluded that in view of the facts and circumstances of the case, the value determined by the approved valuer for agricultural land as expressly required by the AO be directed to be accepted.
15. We have considered the rival submissions and perused the facts on record. The subject land was purchased by Mr. Dominic Dias, the first assessee in the year 1969 for a consideration of Rs. 35,000 from one Mr. Kunde. At the material time, Mr. Dominic Dias was 22 years of age and had no source of income worth the name. At the material time he was a partner of Mr. Kunde from whom the property was purchased having been admitted to the benefits of the said firm in 1960 (Goa Chitrapur Bus Service) when he was a minor on the basis of capital provided by his father and on account of friendship between his father and Mr. Kunde. Accordingly there were extraneous considerations that governed the transaction on account of longstanding friendship between the assessee's father and Mr. Kunde and the value stated in 1969 in the purchase document itself cannot be considered as market value. This fact is clear from the copies of sale deeds in compilation page at 165 where there are registered sale transactions in the vicinity of Ganacona in 1969 at Rs. 4.38 per sq. mtrs. whereas the sale deed of Mr. Kunde records a rate of 32 paise per sq. mtr. The submission of the learned Departmental Representative that if the first assessee was closely connected with the vendor Mr. Kunde at the time of transaction there would have been no need to have made a dispute over additional area of 8000 sq. mtrs. and received sum of money against that disputed area from Mr. Kunde is untenable because the relation between Mr. Dominic Dias and Mr. Kunde had deteriorated in the year 1994 much after the death of Mr. Dominic Dias's father in February, 1982. Accordingly we hold that the learned CIT(A) is not justified in holding that the sale by Mr. Kunde to Mr. Dominic Dias (or substantively to his father) was a valid sale to an unrelated person without any evident consideration over and above what was stated in the registered sale deed. The CIT(A) was accordingly not justified in working out the value as on 1st April, 1981, by extrapolating the value of Rs. 35,000 as on 17th Nov., 1969, as per sale deed of Mr. Kunde.
16. It is on record that Mr. Dominic Dias sold the subject land back to his father in June, 1979 for a consideration of Rs. 40,000 and the marginal appreciation of Rs. 5,000 over a period of 10 years itself is unreal, as he was required to do so because of his marriage in 1979 to ensure that both Mr. Dominic Dias and his brother Mr. Richard Dias had the benefit of this land and the first purchase in Shri Dominic Dias's name is not questioned as violating provisions of Portugese Civil Code as being in excess of the father's disposable quota by the other son and to prevent the assessee's wife from acquitting interest in the property on the marriage of Mr. Dominic Dias. The transfer was done on 2nd June, 1979 and Mr. Dominic Dias was married on 5th June, 1979, Considering the fact that the property was purchased by Mr. Dominic Dias's father from out of his own funds this transaction between the father and son cannot be considered as a regular commercial transaction. Thereafter on 11th Sept., 1981, the subject property was transferred by the father of first two assessees by way of gift deed to his two sons viz., Mr. Dominic Dias and Mr. Richard Dias by taking the value at Rs. 48,000 in the registered gift deed. This, in our opinion, is clearly a family arrangement considering the antecedents. The father of the first two assessees had intended the land to be inherited only by his sons excluding the daughters who were all married and made the gift deed in September, 1981 when his health deteriorated. He expired on 20th Feb., 1982. We accordingly hold that none of the two transactions which clearly vested the subject land in the hands of the first two assessees is a regular commercial transaction. The learned CIT(A) has rightly accepted the plea that the later two of the three transactions are family arrangement and do not provide the basis for determination of the market value as on 1st April, 1981. We accordingly reject the appeals of the Revenue.
17. After having held that none of the three transactions referred to supra were commercial transactions and hence cannot be the basis for determination of fair market value as on 1st April, 1981, the issue to be resolved is what should be the fair market value of the subject land as on 1st April, 1981 in terms of Section 55(2)(b)(ii) of the Act. It is on record that the assessees secured a valuation report initially from a registered valuer for immovable properties in which the value as on 1st April, 1981 was stated at Rs. 54,00,000. Besides other details, this report was accompanied by a site plan. The AO rejected the report of the registered valuer Mr. Vikas Desai merely on the ground that he is not a registered valuer for agricultural land. The agricultural land is not defined for this purpose. The subject land had never been fully used for agricultural purposes and though treated as agricultural land on account of 200 coconut trees had immense potentiality to be used for purposes of a beach resort as the valuation, report, the plan and an offer to purchase from a reputed Hotel company establish the value of the property as suitable land for a resort. The AO also examined Shri Vikas Desai. The sworn statement in cross-examination of Mr. Vikas Desai has brought on record very substantial fact concerning the value of the property which had been ignored by the AO in toto. Mr. Vikas Desai deposed that apart from being the valuer, he had personal knowledge of the terrain and the land, having lived in Canacona from his childhood (p. 61 of the compilation). He further deposed that the nature of the property since 1981 to date has not changed, that the land is an absolutely a level land requiring no filling and is ideally suited for a construction of a beach resort. He further deposed that the level of urbanisation around this land was much higher than in the principal Municipal limits of Canacona itself. He also deposed that around that region no land so ideally suited for a resort was ever available or is available and that a large tract of land such, as this would definitely fetch a higher price than small pieces of land on the beach. It is noted that none of the statements of Mr. Vikas Desai made in his cross-examination had been controverted by the AO, Since the AO had examined Mr. Vikas Desai and the cross-examination was a consequence of such examination, the evidentiary value of the same cannot be treated lightly as was done by the AO. The AO has not brought anything on record to repel the factual superiority of the land and the high price it did command in 1981 as established by the foregoing facts. In our opinion, the AO was in error in rejecting the said report. Thereafter, the AO retired the assessed to file a report from an agricultural valuer and accordingly a report from Mr. Nagarsenkar who was an agricultural valuer was produced as specifically required by the AO. The report of the agricultural valuer is at p. 37 of the paper book and we find that the agricultural valuer had given a detailed report and had relied on the very same comparable cases already filed before the AO and had made a reasonable valuation of the property which has been rejected by the AO, who is not a qualified valuer, by merely stating that the valuation is a 'mere opinion' and the basis 'hypothetical'. Besides the comparable cases and the potentiality of the land, the agricultural valuer relied on the following factors for the purposes of valuation :
"(1) The excellent location of the land and the near rectangular shape.
(2) The made-to-order access to the beach and the main road.
(3) The flat topography making the land suitable for any purpose and in particular for construction of beach resorts.
(4) The fertile soil and the higher water table capable of supporting very healthy coconut trees and tax free agricultural income (agricultural income is not taxed in Goa).
(5) The pressure of resort hoteliers arid the scramble to acquire beach land particularly in 1981, when there were no restrictions on constructions on beach properties.
(6) The fact that the land was not marked as agricultural in development plans in 1981 or now.
(7) The open unrestricted conversion and construction permission that was available in 1981 and progressively subjected to restrictions later.
(8) Total absence of tenants and mundarks.
(9) Comparative rates for smaller holdings."
The observations of the AO that agricultural aspects of the land is not considered by valuer, clearly indicates that the AO has not perused the valuation report fully. In fact, the valuer had dealt with same aspects which the AO states in the order had not been dealt with by the valuer. There is absolutely no warrant to bind down a registered valuer to any particular set of considerations. Neither is it the prerogative of the AO to do so. The registered valuer is entitled to consider all such factors that actually influence the market value. Accordingly we hold that the AO ought to have accepted the value determined by the agricultural valuer at Rs. 66,46,000.
18. Coming to the order of the CIT(A) we find that the CIT(A) has rejected the two valuation reports in a very light manner. He has rejected the valuation reports and the submissions made with reference to the transactions with Sea Rock Hotel (Mr. Luthria) for the only reason that the three valuations vary widely. This is not the ground for rejecting the reports given by the experts. If the restrictions imposed on the constructions on the subject plot in particular are taken note of, the equated value from both the transactions with Mr. Luthria in 1987 and the comparable case cited by the AO on p. 12 of his order would be very near Rs. 50 per sq. mtr. as worked out (P. 169 of the compilation). The value made by the agricultural valuer is higher by Rs. 10 per sq. mtr. for the reason the agricultural valuer has taken note of the comparable cases of sales ranging from Rs. 42 to Rs. 277 per sq. mtr., which was not available to the other valuer, has taken into account the rich agricultural potentialities of the land and acceptance of the Department of the value of Rs. 50 per sq. mtrs. of the inferior adjoining land made by him. Valuations being estimates are bound to vary and Rs. 10 variation in the circumstances cannot be described as wide in the circumstances explained.
19. The CIT(A) has further directed that the market value as on 1st April, 1981 be determined by indexing the purchase price in 1969 by application of cost index. We agree with the learned counsel for the assessee that this method is falacious and wholly unwarranted in face of valuation reports of experts available on record. Besides, there was no approved inflation index prescribed earlier to 1981. The only index available during such period was based on cost of essential commodities and would have no relevance to determination of market price of land.
20. Now we come to the contentions of the learned Departmental Representative. His first contention that Mr. Kunde the vendor had no friendly relation with the father of the first two assessees had already been dealt with by us in para 12 supra. The second contention was that the principle of estoppel has exceptions and in this particular case the assessee cannot take advantage of the rule of estoppel, having avoided payment of gift-tax in respect of the gift made by the first assessee's father in favour of first two assessees on 11th Sept., 1981, stating the value of the gift at Rs. 48,000 only. This, according to the learned Departmental Representative is a fraud on the Department and the assessee cannot be allowed to take further advantage having thus deprived the Department of legitimate gift-tax due, and in support of this contention, he placed reliance on the judgment of the Supreme Court in the case of B.N. Bhattachargee (supra). We do not find any merit in this contention of the learned Departmental Representative The matter dealt with by the Supreme Court in the said case relates entirely with procedure and deals with a situation in which the Supreme Court found the conduct of the parties suspect and even passed strictures. It was also held in the said case that estoppel cannot be called into aid to stall performance of public duties and that the doctrine of estoppel did not apply to the facts of the case. In so far as the assessee's case is concerned, it would be clear from the decision of the S.N. Zaman & S.M. Elahi's case (supra) that a family dispute which is resolved by a family arrangement would not give rise to any gift-tax liability. For this purpose, the dispute need not be an existing one nor the claims of the disputants legally valid. A mere possibility of the dispute, if settled, the settlement would amount to a family arrangement, as held by the Supreme Court in the case of Maturi Pullaiah v. Maturi Narasimham AIR 1966 SC 1936. The observations of the Hon'ble Supreme Court in the above case have been reiterated by the Supreme Court in a later decision in Kale v. Dy. Director of Consolidation AIR 1976 SC 807. Since there is no liability to either gift-tax or capital gains tax consequent to family arrangement represented by two transactions of sale on 2nd June, 1979 by the assessee's father to the assessee, the question of defrauding the Revenue by not filing a gift-tax return does not arise, Further, the primary liability to file any return in this regard would be of the assessee's father and the assessee could not be held responsible for any lapse if at all there is any lapse. Moreover, neither the assessee nor the Department is aware of the existence of any return or non-existence thereof. That the principle of estoppel and res judicata do not apply to income-tax proceedings is too well established to be called into question as on this date.
21. In the light of the above discussion, we direct the AO to adopt the fair market value of the subject land as on 1st April, 1981, at Rs. 66,46,000 as determined by the approved valuer for agricultural land Mr. Nagarsenkar as expressly required by the AO after rejecting the report of Mr. Vikas Desai, the approved valuer.
22. The next grievance of the assessee is that the learned CIT(A) erred in not considering the assessee's objection to levy interest under Section 234B in the light of the provisions of the Act and written submissions made before him. It is noted that as held by the CIT(A) this ground is consequential in nature. The AO is directed to levy interest under Section 234B, if any, after taking into consideration the observations made by us.
23. In the result, assessee's appeals are allowed in part while the Departmental appeals are dismissed.
K.C. Singhal, J.M.
24. After going through the order proposed by my learned brother, I have not been able to persuade myself to agree with the findings and conclusions arrived at by him for the reasons given hereafter.
The basic question to be decided in these appeals relates to the determination of the fair market value of the land as on 1st April, 1981, which was sold by the assessee on 27th Oct., 1994. There is no dispute that the assessees before us had an option under Section 55(2)(b)(ii) to substitute the cost of acquisition by the fair market value as on 1st April, 1981. The necessary facts have been mentioned in the proposed order. I would state them briefly for the benefit of my order. The assessees claimed the .fair market value of the land at Rs. 50 per sq. metre amounting to Rs. 54 lakhs on the basis of valuation report prepared by registered valuer Mr. Desai. AO found that Mr. Desai was not registered valuer for agricultural land and, therefore, he asked the assessees to get the valuation report from approved valuer for agricultural land. Assessees got the land valued by another valuer Mr. Nagarsenkar who was approved valuer for agricultural land who determined the fair market value at Rs. 60 per sq. mtr. amounting to Rs. 64.80 lakhs. On the basis of the this report, claim was revised by the assessees. The AO rejected both the reports for the reasons mentioned in his order. However, he determined the fair market value at Rs. 48,000 on the basis of gift deed dt. 11th Sept., 1981, which was more nearer to the valuation date. The CIT(A) upheld the rejection of both the valuation reports for the reasons given by the AO. However, he came to the conclusion that sale deed dated June, 79 and gift deed dt. 11th Sept., 1981, were not commercial transactions and therefore could not represent the fair market value. But it was further held by him that sale deed executed in the year 1969 was a commercial transaction which represented, the correct market price. Accordingly, he directed the AO to determine the fair market value by increasing such value by cost inflation index. Both assessees and Department are in appeal before the Tribunal.
25. The appeals of the Department have been rejected by my learned brother vide paras 15 & 16 of the order by recording the finding that sale deed & gifts deed executed in 1979 & 1981 respectively did not represent the fair market value merely on the ground that these transactions were not commercial transactions but were merely family arrangement. With due respect to him, I am unable to agree with such broad proposition. According to the general law of the land, all transfers of land by way of sale or gift are compulsorily registerable under the provisions of Registration Act, 1908. For the purpose of such registration, adequate stamp duty has to be paid by the parties in accordance, with provisions of Stamp Act, 1899. Such stamp duty is to be paid on the basis, of market value, of the immovable property to be registered. The concerned registrar has to satisfy himself that adequate stamp duty has been paid. If he thinks that market value is more than stated in the deed, then either he can refuse to register the same or ask the parties to pay adequate stamp duty in accordance with the market value. No provision has been brought to our notice to show that transfer of property by way of family arrangement can be registered at the value below the market value. Therefore, even assuming that sale deed and gift deed were by way of family arrangement, it is difficult to hold that such deeds cannot represent the fair market value. Rather a legal presumption arises that value stated in such deeds represent the correct market value. No doubt such legal presumption can be rebutted by placing relevant material or evidence on the record. In such situation, the onus would be on the person who alleges that market price stated in the deeds is not correct. Therefore, in my view, the CIT(A) was not justified in rejecting the sale deed and gift deed executed in 1979 & 1981 in a summary manner. Consequently, his direction to take the 1969 value as base value and determine the market value as on 1st April, 1981, considering the cost inflation index would also be unwarranted because if any value has to be taken into consideration would be the value nearer to the valuation date. In the present cases, the date of gift deed i.e., 11th Sept., 1981, being nearer to the valuation date of 1st April, 1981, should be considered, however, subject to rebuttal, if any, by the assessee.
26. The appeals of the assessees have been allowed by my learned brother by holding that AO & CIT(A) were in error in rejecting the valuation reports of Mr. Vikas Desai and Mr. Nagarsenkar. However, in my view, these two reports do not represent the value of land as on 1st April, 1981, for the reasons mentioned hereafter.
27. Let me now take the first valuation report of Mr. Vikas Desai. The difference of opinion between us and the reasons as to why this report should be rejected are stated as below :
1. According to my brother, the subject land had never been fully used for agricultural purposes and though treated as agricultural land on account of 200 coconut trees had immense potentiality to be used for the purposes of a beach resort as per the valuation report, the plan and an offer to purchase from a reputed Hotel company (p. 15 & para 17 of the order). In my view this finding is not borne out of the facts. The land is registered as agricultural land in the revenue record as also admitted by the approved valuer in his examination. In the year 1981 there was cultivation of coconut trees, mango trees, cashewnut trees and paddy as is apparent from the gift deed 11th Sept., 1981, (p. 15 of paper book) executed by father of two of assessees in favour of Mr. Dominic Dias and Mr. Richard Dias. The relevant valuation date under Section 55(2)(h)(ii) is 1st April, 1981. Therefore it is difficult to hold that as on 1st April, 1981, the land was not agricultural land. Not only this, It appears from the sale deed dt. 27th Oct., 1994, between assessees and. M/s Deeksha Holdings Ltd. that land was, very much agricultural land (p. 20 of paper book). In the preamble at p. 2 it has been clearly stated as under :
"Whereas the vendors herein have been carrying on intensive agricultural operations in the said agricultural operations in the said agricultural properties for the last several years and have grown substantial number of coconut trees, and other fruit bearing trees, besides growing paddy on part of the said agricultural property and,"
2. The observations that the land had immense potentiality to be used for the purpose of beach resort are- not appealable. As on 1st April, 1981, there is no evidence that any resort or hotel or lodge or any other object of tourist attraction was established. As mentioned earlier, the entire land was cultivated land in 1981. Merely the land is situated near the sea or river cannot be a ground for holding that there was immense potentiality for beach resort, Subsequent event as late as in 1987 (offer to purchase by Hotel co.) cannot be considered as material for such finding as against the fact that the land was purely agricultural.
3. Mr. Desai, the approved valuer has considered the subject land as urban land falling within the municipal area of Canacona Municipal Council (cols 7 and 11 of the report). Such considerations are not supported by any material or evidence on the record. On the contrary, it is apparent from the letter of the Chief Officer, Canacona Municipal Council dt. 7th October, 1997, that the subject land fell within the municipal area only w.e.f. 5th March, 1985, (See p. 2 of the assessment order). That means, on the valuation date i.e., 1st April, 1981, it was outside the municipal limit. There is also no evidence that in 1981 the land had any characteristics of urban growth. The personal knowledge of the valuer without the support of any material cannot be the basis of valuation in the eyes of the law. As already stated, the land was fully cultivated in 1981. Therefore, it could not be considered as an urban land by the valuer,
4. In Col. 16 of the report, the valuer has quoted only one instance which is not comparable by any standard for the following reasons :
Subject land The instance taken by the Valuer
1. It is a tract of land measuring 1,08,000 sq. mtrs.
It is a small piece of the land measuring Only 600 sq. mtrs.
2. We are concerned with the valuation date as on 1st April, 1981.
It was sold long back in 1974.
3. This land is situated in village Nagorcem, Tal.
: Canacona.
It was situated in a different village Panguinim, Tal.: Canacona.
4. This land is agricultural land as explained earlier.
The valuer has stated in his statement before the AO in answer to question No. 22 that the land was sold for residential purpose.
28. In view of the above discussion, the valuation report of Mr. Desai cannot be accepted. The valuation of land at Rs. 54,00,000 appeals to be arbitrary having no rationale with facts of the case. In short, the reasons for rejection can be summarised as under:
(1) There is a basic fallacy in the valuation report inasmuch as he has valued this land as residential property as can be seen from the answer to question No. 23 of the statement on oath recorded by AO on 5th Dec., 1997, (pp. 48-51 of the paper-book).
(2) The valuer was influenced by the consideration that the land was urban land falling within the municipal limit while in fact it was agricultural land outside the municipal limit as on 1st April, 1981.
(3) There is no evidence or material to show that in 1981, this land was surrounded by urban growth or to show that there was an existence of any hotel or beach resort nearby such land.
(4) The instance of sale taken into consideration by the valuer is not comparable in any manner.
(5) The offer of Mr. Luthria in the year 1987 at the rate of Rs. 51 per sq. mtr. itself shows that valuation of this land in 1981 adopted by the valuer at the rate of Rs. 50 per sq. mtr. is arbitrary.
(6) The report appears to be prepared on assumptions without looking into any material. It is also apparent from his statement that he visited the land in 1995 while the report was prepared in 1997.
29. Now let me consider the second valuation report by Mr. Nagarsenkar, which appears at p. 37 of the paper book, This report is too general in nature without referring to any data or material relevant to the year 1981. No instance of any sale has been cited except the general statement that the rate of small holding varied from Rs. 40 to Rs. 200 per sq. mtr. There is no material to verify the same. Besides this, it is not clear whether such rates were for the current year when he made the enquiries or for earlier years nearer to the year 1981. From the observations of the valuation at p. 5 of the report (p. 41 of the paper book), it appears that rates were current rates of 1997. However, it is clear that the subject land was agricultural land and continued to be so till the date of sale as observed by me in the earlier paragraphs. From p. 5 of the report (p. 41 of the paper book), it is clear that there were not only 200 coconut trees, but also 1 mango tree and 125 cashew trees even on the date of inspection. The valuer has not pointed to any material to show that there was any urban growth in 1981 much less the beach resort. At p. 6 of the report, he has considered the fact that there was pressure of resorts, hoteliers and scramble to acquire beach land in 1981, but there is no material for such conclusion. It is purely an assumption. He has also mentioned in his report that land falls within the municipal limit, but it is to be noted that the land was outside municipal limit in 1981 as already stated by me in the earlier para while discussing the report of Mr. Vikas Desai. No material has been referred to regarding the value of land in or around the year 1981. Therefore, the value of the land adopted by him at the rate of Rs. 60 per sq. mtr. on ad hoc basis is arbitrary and based on surmises and suspicion. Accordingly, in my opinion, this report cannot be accepted.
30. Now the next question is how to deal with the issue of valuation as on 1st April, 1981 in the circumstances of the case. As already observed by me, the burden is on the assessee to prove the valuation as on 1st April, 1981. It has already been held by me that there is legal presumption that the value mentioned in the legal registered document of sale or gift of immovable property is the correct market value, which is no doubt open for rebuttal by the person who alleges that registered document does not represent the correct value. No instances of sale are brought to notice pertaining to the year 1981 or to the period nearer to such year. However, keeping in view the fact that there was offer of Rs. 51 per sq. mtr. by one Shri Shyam Bajanlal Luthria, Managing Director of Searock Resorts (P) Ltd. shows that valuation of the subject land in 1981 could not have been as low as mentioned in the gift deed of the subject land dt. 11th Sept., 1981, executed by the father of the two assessees. To that extent, the assessee has been able to rebutt the legal presusmption.
31. But, that is not the end of the matter. The question still remains what should be the value of the land in 1981 ? In the absence of any factual data, it is not possible for us to determine such valuation. The power of the appellate authorities are co-terminous with that of the AO as held by the Supreme Court in the case of CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC). It is also well known that an appellate authority has the jurisdiction as well as the duty to correct all the errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute [Kapurchand Shrimal v. CIT (2981) 131 ITR 451 (SC)]. The legislature has communicated, the provisions of Section 55A which provide that the AO may refer the valuation of capital asset to the DVO with a view to ascertain the fair market value for the purposes of Chapter-IV which includes Section 55(2)(b)(ii) with which we are concerned. Clause (a) and Clause (b)(i) of Section 55A are not applicable to the facts of the case. However, Clause (b)(ii) empowers the AO to refer the valuation of the capital asset to the valuation officer if having referred to the nature of the asset and other relevant circumstances, it is necessary so to do. In the present case, the valuation as per the gift-deed dt. 11th Sept., 1981, was only Rs, 48 thousand while the valuation adopted by the two approved valuers was Rs. 54 lakhs and Rs. 64.8 lakhs respectively. The difference in the valuation made by the AO and determined by the approved valuers is very huge and therefore, it was necessary for the AO to have referred the matter of valuation to the valuation officer in accordance with the provisions of Section 55A. No doubt, a discretion was vested with the AO, but the discretion has to be exercised judiciously in appropriate cases. This was a case where, in our opinion, he should have exercised the discretion.
32. In view of the above discussions, it is held that:--
(i) Neither of the valuation report can be relied on being arbitrary.
(ii) The assessee has been able to rebutt the legal presumptions that value in the gift-deed is not the correct market value.
(iii) No factual data or material is available before the Bench to determine the value as on 1st April, 1981.
(iv) It is necessary to refer the matter on valuation to the Departmental Valuation Officer under Section 55A.
Accordingly, the orders of CIT(A) are set aside and the matter is restored to the file of the AO, who is directed to refer the matter of valuation to a senior district valuation officer and then adjudicate the matter after taking into consideration such report and all other material which may be brought on record by the assessee or gathered by him. Assessees shall be given a reasonable opportunity of being heard in this regard.
33. In the result, all the appeals are allowed for statistical purposes. ORDER UNDER SECTION 255(4) OF THE IT ACT, 1961 B.L. Chhibber, A.M.
1. As there is a difference of opinion between the AM and the JM, the matter is being referred to the President of the Tribunal with a request that the following questions may be referred to a Third Member or to pass such orders as the President may desire :
"1. Whether, on the facts and in the circumstances of the case and in law, the value of the land mentioned in the gift deed dt. 11th Sept, 1981, could be assumed as fair market value as on 1st April, 1981, subject to rebuttal, if any, as held by the JM, OR the value of the land mentioned in the aforesaid gift deed could not be considered as market value at all for determining the value of land as on 1st April, 1981, merely because the transaction of the gift was a family arrangement as held by the AM?
2. Whether, on the facts and in the circumstances of the case and in law, the value of land as on 1st April, 1981 can be accepted at Rs. 64.80 lakhs as held by the AM, OR the matter of valuation be restored to the file of the AO as held by the JM ?" SATISH CHANDRA, A.M. (AS THIRD MEMBER) :
On a difference of opinion between the Members constituting the Division Bench, following two questions were referred to me for my opinion under Section 255(4) of the IT Act, 1961-
1. "Whether, on the facts and in the circumstances of the case and in law, the value of the land mentioned in the gift deed dt. 11th Sept., 1981, could be assumed as fair market value as on 1st April, 1981, subject to rebuttal, if any, as held by the JM, OR the value of the land mentioned in the aforesaid gift deed could not be considered as market value at all for determining the value of land as on 1st April, 1981, merely because the transaction of the gift was a family arrangement as held by the AM?
2. Whether, on the facts and in the circumstances of the case and in law, the value of land as on 1st April, 1981, can be accepted at Rs. 64.80 lakhs as held by the AM OR the matter of valuation be restored to the file of the AO as held by the JM ?"
2. Mr. Dominic Dias and Mr. Richard Dias along with their respective spouses are the assessees who sold landed property situated at Canacona measuring 1,08,000 sq. mtrs for a consideration of Rs. 1,69,56,000 on 27th Oct., 1994. In their original respective returns for the asst. yr. 1995-96 they had not declared capital gains arising on the aforesaid sale. The AO, therefore, issued notices under Section 148 to them on 26th Sept., 1997. In response thereto they filed return declaring capital gains of Rs. 6,92,500 in their respective returns. In reassessment proceedings, controversy arose as to what should be the fair market value of the property as on 1st April, 1981. The assessees submitted two valuation reports on 2nd Dec., 1997, one for the valuation of trees and the other for valuation of land for determining its fair market value as on 1st April, 1981. The valuation of land was done by Mr. Vikas Desai, Government registered valuer. In his report dt. 10th Nov., 1997, he valued the land at Rs. 50 per sq. mtr. at Rs. 54 lakhs as on 1st April, 1981. The AO summoned Shri Desai under Section 131 and recorded his statement on oath on 5th Dec., 1997. He deposed that he is the valuer of immovable properties other than the agricultural land, forests, plantations, mines and quarries. He further deposed that he had not visited the Sub-Registrar's office to collect the information of sale deed for comparison purpose and that he did not visit any Government office for getting information on civic amenities as on 1st April, 1981, in and around the area being valued. He further deposed that though the land was considered as agricultural land in 1981, according to him, it had the potentiality of settlement zone as there were cluster of houses around this land and, therefore, he considered this as a settlement zone, although there was no notification of the Government to this effect. It was also admitted by him that the land which was shown as a comparable case, was the land of 600 sq. mtrs. which was sold during 1974 for residential purposes, and that it is located about 8 kms. away from the property and it was sold for Rs. 20 per sq. mtr. He confirmed that he had not verified the genuineness of the sale deed from the Sub-Registrar's office. The AO required the assessee vide his letter dt. 5th Dec., 1997, to show-cause why the valuation report submitted by Shri Desai be not disregarded, he being not an agricultural valuer. A copy of the statement recorded by the AO was also given to the assessee for comments. The assessee responded vide letter dt. 8th Dec., 1997. It was submitted, inter alia, that the potentiality of the land for non-agricultural use keeping in view such development and demand for beach properties for the purpose of construction of beach resorts had to be taken into account for valuation, irrespective of the fact that the land for purposes might have been classified as agricultural land or for even purposes of income-tax or wealth tax, such land might be considered as agricultural land. The assessee undertook to file further valuation report by an agricultural valuer. This was done and another valuation report by Shri Ghanashyam A. Nagarsenkar, the agricultural valuer was submitted on 29th Jan., 1998. In his report Shri Nagarsenkar valued the land at Rs. 60.00 per sq. mtr. thereby arriving at the fair market value as on 1st April, 1981 at Rs. 64,80,000. On perusal of this valuation report, the AO found that he had not given any comparable cases for arriving at the said fair market value at Rs. 64,80,000. The AO rejected this report by observing that his valuation report, which is not based on any solid data and is on hypothetical basis could not be relied upon. The agricultural valuer has to value the land based on the potential yield of the land for which he has to consider the fertility of the soil, water sources, price for the agricultural produce and the yield that can be obtained from the soil agricultural products. However, the valuer has based his estimate of fair market value on the likely price to be paid by the beach resort developers. The AO was of the view that none of the two valuation reports submitted by the assessee could be relied upon as they were not based on any hard facts but merely constituted their opinions.
3. At this stage the AO noted certain facts. These are that this property was originally purchased by Mr. Dominic Dias for a consideration of Rs. 35 000 in the year 1969. It was later on sold to Mr. Ubaldino Dias in June, 1979 for a consideration of Rs. 40,000. On 11th Sept., 1981, the land was transferred by a gift deed by the late Mr. Ubaldino Dias and his spouse to their sons, Mr. Dominic Dias and Mr. Richard Dias. The AO found the recital in the gift deed by which the land was transferred on 11th Sept., 1981, to the assessees that it was specifically mentioned therein that the value of the property gifted is estimated to Rs. 48,000 'at the present market price' and based thereon stamp duty of Rs. 2,880 paid. The same was accepted by the Sub-Registrar as reasonable and the deed was registered. According to the AO the donor and the donees both have signed the document of gift deed in token of the donor having gifted and the donees having accepted the property. This registration resulted in change of the right in the property from Mr. Ubaldino Dias to his sons. It is a legal document in the eyes of law and therefore what is stated therein is binding on the parties. The AO further found from the recital in the sale deed dt. 2nd June, 1979, by virtue of which Mr. Ubaldino Dias had purchased this property from Mr. Dominic Dias for a consideration of Rs. 40,000 which is also a registered document that said Rs. 40,000 represented market price of the property and accordingly a stamp duty of Rs. 2,400 was paid for registration. On a query as to why the value mentioned in the gift deed dt. 11th Sept., 1981, be not taken as a fair market value of the property as on 1st April, 1981, it was submitted before the AO that the sale and gift transactions were made between the family members to have a measure of equitable distribution of the assets. Hence whatever value has been stated in the two transactions is neither dependable nor authentic. It was also stated that the Government had imposed various restrictions on beach properties after 1983 and therefore the rate of increase in price after 1981, is less as compared to the rate of increase prior to 1981. The AO noted that the property was sold during financial year 1994-95 at Rs. 157 per sq. mtr, and if the fair market value as on 1st April, 1981, of the property at Rs. 60 per sq. mtr. is considered, then from the date of purchase i.e., from 1979 the increase would be 162 times for two years whereas the increase from 1981 to 1994-95 would be only 2.62 times (for 13 years). He further observed that if the purchase of land by Mr. Dominic Dias in 1969 is considered, then the increase would be 185 times from 1969 to 1981 (in 13 years). According to the AO from the sale deeds of the property at Cavelossim beach in South Goa which is a well developed beach having number of five star beach resorts, it would appear that there was no such drastic decrease from 1981 to 1994 because of Government restrictions. The AO mentioned two instances viz., the property situated in Cavelossim admeasuring 60,000 sq. meters was sold, vide sale deed dt. 1st Oct., 1985, to Dalmia Resorts at Rs. 41.66 per sq. mtr. for a consideration of Rs. 25,00,000 and another instance of a beach side property measuring 50,068 sq. mtrs. which Was sold in May 1995 to Sunset Resorts (P) Ltd. for a consideration of Rs. 2,47,80,600. This worked out to Rs. 442 per sq. mtr. The AO observed that the price increase was 10.6 times from 1985 to 1995 (in 10 years). He, therefore, held that the assessee's contention regarding drastic decrease in the rate of prices due to Government restrictions between the period from 1981 to 1994 is without any basis.
4. Regarding certain sale deeds of properties located at Agenda, Canacona relied upon by the assessee, the AO found that all these properties were of smaller area and were located about 5 to 7 kms. away from the impugned property of the assessee. He further' observed that copies of such sale deeds or agreements were not furnished for verification. He, therefore, held that these should not be considered as comparable cases. The AO observed that when the price of land sold to Dalmia Resort in Mobor, Cavelossim in 1985 was Rs. 41.66 per sq. mtr., it in nothing but imaginary that the property in question was worth Rs. 60 per sq. mtr. in Canacona in 1981 itself when there were no purchasers for beach resort hotel in Canacona area during that period.
5. The AO was of the view that the property in question had undergone through two transactions viz., in 1979 and 1981. Placing reliance on those transactions the AO observed that Section 33 of the Stamp Act, 1899 provides that the Registrar is vested with the power to impound document presented for registration if in his opinion it was not properly stamped and the sale deed executed in 1979 and the gift deed executed in 1981 both were properly stamped, these were not impounded by the Registrar when these were presented for registration. This shows that the value shown in those documents were reasonable and correct. He referred to the provisions in the Indian Stamp. Act relating to an instrument which is not duly stamped. He then referred to the provisions of Section 49(1) of the IT Act regarding cost of acquisition of capital asset where it becomes the property of the assessee under gift. It contains a deeming provision that in such a case, the cost of acquisition shall be deemed to be the cost for which the previous owner of the property acquired it as increased by the cost of any improvement of the asset incurred or borne by the previous owner or the assessee as the case may be. He then adverted to the provisions of Section 55(2)(b)(ii) and observed that in case of these assessees, the cost to the previous owner was Rs. 40,000. However, the previous owner had acquired this property before 1st April, 1981, therefore, the assessee had no option to choose the market value as on 1st April, 1981. On reading Section 49(1) With Section 56(2)(b)(ii), in the opinion of the AO it was clear that what is the cost to the donor should be considered as cost to the assessee. In the case of the assessee, however, the donor had valued the property at Rs. 48,000 on 11th Sept., 1981, which was shown in the gift deed duly registered. He, therefore, concluded that the value of the property as on 1st April, 1981, could not exceed the price as on 11th Sept., 1981, as mentioned in the gift deed. According to the AO the donor was in a better position to know the market value as on 11th Sept., 1981, as compared to the valuer. On comparison of the sale deed made in 1979 and the gift deed made in the year 1981, he found that the difference of Rs. 8,000 between the value of the property in those two years represent normal increase in the price. He, therefore, held that the registered documents had to be taken as guiding factors for determining the fair market value as on 1st April, 1981. He rejected the assessee's plea to the effect that the said documents were made between the family members and were not for commercial consideration, hence the recital therein about the transactions are not dependable or authentic on the ground that both these are legal documents registered with the Government authorities. These documents have to be registered at the market price which fact had been mentioned in these documents. In the absence of any confirmation whether gift-tax returns had been filed by the donors or their legal representatives despite specific query in this regard, the AO presumed that the gift-tax returns had not been filed. The AO was of the view that the assessee could not have one value for stamp duty and gift-tax and another value for capital gains and he cannot choose the value, which suits him to defraud the Revenue. He, therefore, accepted the value as per the registered gift deed as true market value as on 1st April, 1981. Accordingly, the AO calculated long-term capital gain and brought it to tax. Aggrieved, the assessee appealed.
6. Before the CIT(A) an affidavit of Mr. Dominic Dias appears to have been submitted by Mr. D.E. Robinson, Advocate and counsel for the assessees wherein Mr. Dominic Dias confirmed certain facts mentioned by the CIT(A) in para 2.1 of the appellate order. On the strength of these facts, it was contended that none of the three transactions viz., purchase of the property for Rs. 35,000 in 1969, sale thereof in the year 1979 and gift of the property in the year 1981 could be considered as regular commercial transactions, particularly latter two transactions which were between close relatives and thus represented only a family arrangement. It was submitted that the father having provided the funds for purchase of the land had insisted, when the son was to be married that the land reverts back to him so that the same could be transferred to both the sons and possible disputes be avoided. The very basis adopted by the AO was thus refuted. It was then contended that sea-side periphery of the impugned land being only 200 to 500 mtrs. away from the high tide line, it was ideally situated for a beach resort and the value was quite high in 1981 with no restrictions on the construction of beach resorts. Reliance was also placed on a memorandum of sale signed by the assessees in connection with the proposed sale to one Mr. Luthra of "Sea Rock Hotel, Bombay, who had offered the price of Rs. 51 per sq. mtr. in November, 1987. A copy thereof was filed. It was pointed out that the sale price was not accepted by the assessee as it was not considered adequate and the proposal did not materialise. It was contended that even on the basis of said memorandum, taking into account the published inflation index for the purpose of capital gains, the equalised index price per sq. mtr. as on 1st April, 1981, would be Rs. 34 whereas in the gift deed the value comes to 37 paise per sq. mtr. only. Reliance was also placed on sale of adjoining property by Mr. Kunde to M/s Deeksha Holding Co. wherein the capital gain was computed by taking the value of the land at Rs. 48 per sq. mtr. as on 1st April, 1981 despite there being certain disadvantages attached to the said land in comparison to the impugned land sold by the assessee; it was argued that though the assessment under Section 143(3) in the case of Mr. Kunde was not made, the AO was bound to adopt it as a comparable value.
7. On consideration of the contentions of the assessee and "the evidence adduced in the course of appellate proceedings", the CIT(A) expressed a view that the values estimated by both the valuers have to be rejected outright 'for the infirmities pointed out by the AO as also the wide gap between the valuation made by the two approved valuers. He further observed that the memorandum of sale drawn in 1987 with Shri Luthra of Sea Rock Hotel does not provide any help inasmuch as it was more than six years later and it is not evident why the transaction was aborted. According to the CIT(A), the capital gains offered by Mr. Kunde, if any, in respect of the adjoining property is also an extraneous material inasmuch as the market value taken by him as on 1st April, 1981 has nowhere been examined. The CIT(A) found that the assessee have come forward with at least four values--Rs. 50 per sq. mtr. taken by the approved valuer for immovable properties, Rs. 60 per sq. mtr. taken by the approved valuer for agricultural properties, Rs. 34 per sq. mtr. arrived at by extrapolating the value in the memorandum of aborted sale to Shri Luthra and Rs. 48 per sq. mtr. purportedly taken by Mr. Kunde in respect of the adjacent property. He then recorded a finding that "the range of variation in these values itself is a clear indicator of their falsity". In the opinion of the CIT(A), the sale instances cited by the assessees are in respect of the lands whose nature, locale and potentiality are at considerable variance with that of the assessees' lands, and could not be relied upon. The CIT(A) further observed that the two documents relied upon by the AO i.e., the sale deed executed in the year 1979 and the gift deed executed in the year 1981 do not reflect the fair market value on account of being evident family arrangement. Regarding the sale price of Rs. 35,000 paid by Mr. Ubaldino Dias to Mr. Kunde in 1969 and whether it reflected the real market price in 1969 or not, the CIT(A) rejected the argument of the assessee that there were extraneous considerations governing this transaction. According to him, the price could not be so illusory merely because Mr. Kunde and Mr. Ubaldino Dias were friends presuming that they were, and Mr. Kunde was a partner in the firm in which Mr. Ubaldino Bias's son Mr. Dominic Dias had been admitted to the benefits of partnership. For this, CIT(A) gave following reasons :
(i) In the matter of property such considerations do not play much role;
(ii) There is nothing on record to indicate that the friendship and the partnership influenced the determination of price in any manner according to the CIT(A), the sale by Mr. Kunde to Mr. Dominic Dias (or subsequently to his father) was a valid sale to an unrelated person without any evident consideration over and above what was stated in the registered sale deed and this consideration was considered as adequate with reference to fair market value by the stamp duty authorities.
The CIT(A) finally concluded thus :
"Having considered the entire circumstances of the case and giving careful thought to the matter, I find it most appropriate to adopt this sale consideration, of Rs. 35,000 in. 1969 in respect of the same land as the basis and work out the value as on 1st April, 1981 with the help of cost inflation index. This will obviate the influence of restrictions imposed, if any, on the construction of beach properties as that process admittedly started only in 1983. The question of taking cost of trees separately will also not arise as there is admittedly no evidence that any fresh plantation took place during the period from 1969 to 1981. The sale consideration in 1969 naturally included the price of standing trees as well. The AO is accordingly directed to do this exercise. In case of any difficulty (which would normally not arise), he may obtain the help of the valuation cell of the Department. The appellant shall also be given an opportunity in regard to the actual working of the value as on 1st April, 1981, by extrapolating the value of Rs. 35,000 as on 17th Nov., 1969, as per sale deed with Mr. Kunde. But the principle is hereby decided and that opportunity will not be extended to refute this principle."
8. Aggrieved by the above finding of the CIT(A), the assessee as also the Department came before the Tribunal. The assessee challenged the finding of the CIT(A) on the following grounds :
"2. The learned CIT(A) erred in rejecting the valuation reports of two registered valuers for purpose of determining the market value of land sold during the year of account as on 1st April, 1981, for purposes of Section 55(2)(b)(ii) of the IT Act,
3. The learned CIT(A) erred in rejecting the comparable instances of sale without verification of the facts relating to such comparable cases though the copies of relative sale deeds were filed before him.
4. The learned CIT(A) erred in ignoring all the facts relating to the valuation process as brought out in the cross-examination of the registered valuer on record.
5. The learned CIT(A) erred in not taking into account the aborted transaction of proposed sale of the same land in 1987, though all the facts relating to the said transaction were filed before him in a comprehensive compilation on pp. 64 to 71 of the said compilation and though the said transaction was relevant and indicative of market value of the property as on 1st April, 1981.
6. The learned CIT(A) erred in holding that the initial transaction of the purchase of the land in 1969 was not influenced by personal considerations though the circumstances relating to the said purchase were fully brought on record before him.
7. The learned CIT(A) erred in directing that the valuation as on 1st April 1981should be based on the cost inflation index as applied to the purchase price in 1969."
The Revenue assailed the order of the CIT(A) on the following three substantive grounds :
2. The learned CIT(A) has erred in holding that the gift deed referred to by the AO for working out the fair market value as on 1st Aug., 1981, does not reflect the fair market value being evident family arrangement.
3. The learned CIT(A) has failed to appreciate the fact that the gift deed is a registered deed and for the purpose of paying stamp duty, the fair market value is taken into account and that this transaction is very much nearer to determine the fair market value as on 1st April, 1981.
4. The learned CIT(A) ought to have appreciated the fact that the fair market value adopted by the AO as on 1st April, 1981, itself is more because he has referred to a transaction supported by registered deed which is on 11th Sept., 1981, i e., 5 months later to the date of determination of fair market value.
9. Both the appeals were heard by the Division Bench consisting of Shri B.L. Chhibber (AM) and Shri K.C. Singhal (JM) of Pune Bench of the Tribunal.
10. On consideration of the submissions of the parties, the learned AM in his proposed order held that the CIT(A) was not justified in holding that the sale by Mr. Kunde to Mr. Dominic Dias (or subsequently to his father) was a valid sale to an unrelated person and accordingly not justified in working out the value of Rs. 35,000 as on 17th Nov., 1969, as per sale deed of Mr. Kunde (para 15 refers). He further held that the CIT(A) rightly accepted the plea of the assessee that the latter two of the three transactions are family arrangements and do not provide the basis for determination of the market value as on 1st April, 1981 (para 16 refers). Accordingly, the appeals of the Revenue were rejected.
11. On the appeals of the assessee, the learned AM in his proposed order observed thus :
"17. After having held that none of the three transactions referred to supra were commercial transactions and hence cannot be the basis for determination of fair market value as on 1st April, 1981, the issue to be resolved is what should be the fair market value of the subject land as on 1st April, 1981 in terms of Section 55(2)(b)(ii) of the Act. It is on record that the assessee secured a valuation report initially from a registered valuer for immovable properties in which the value as on 1st April, 1981 was stated at Rs. 54,00,000. Besides other details, this report was accompanied by a site plan. The AO rejected the report of the registered valuer Mr. Vikas Desai merely on the ground that he is not a registered valuer, for agricultural land. The agricultural land is not defined for this purpose. The subject land had never been fully used for agricultural purposes and though treated as agricultural land on account of 200 coconut trees had immense potentiality to be used for purposes of a beach resort as the valuation report, the plan and an offer to purchase from a reputed hotel company establish the value of the property as suitable land for a resort. The AO also examined Shri Vikas Desai. The sworn statement in cross-examination of Mr. Vikas Desai has brought on record very substantial fact concerning the value of the property, which had been ignored by the AO in toto. Mr. Vikas Desai deposed that apart from being the valuer, he had personal knowledge of the terrain and the land having lived in Canacona from his childhood (p. 61 of the compilation). He further deposed that the nature of the property since 1981 to date has not changed, that the land is an absolutely a level land requiring no filling and is ideally suited for a construction of a beach resort. He further deposed that the level of urbanization around this land was much higher than in the principal municipal limits of Canacona itself. He also deposed that around that region no land so ideally suited for a resort was ever available or is available and that a large tract of land such as this would definitely fetch a higher price than small pieces of land on the beach. It is noted that none of the statements of Mr. Vikas Desai made in his cross-examination had been controverted by the AO. Since the AO had examined Mr. Vikas Desai and the cross-examination was a consequence of such examination, the evidentiary value of the same cannot be treated lightly as was done by the AO. The AO has not brought anything on record to repel the factual superiority of the land and the high price it did command in 1981 as established by the foregoing facts. In our opinion, the AO was in error in rejecting the said report. Thereafter, the AO required the assessee to file a report from an agricultural valuer and accordingly a report from Mr. Nagarsenkar who was an agricultural valuer was produced as specifically required by the AO. The report of the agricultural valuer is at p. 37 of the paper book and we find, that the agricultural valuer had given a detailed report and had relied on the very same comparable cases already filed before the AO and had made a reasonable valuation of the property which has been rejected by the AO, who is not a qualified valuer, by merely stating that the valuation is a 'mere opinion' and the basis 'hypothetical'. Besides the comparable cases and the potentiality of the land, the agricultural valuer relied on the following factors for the purposes of valuation:
1. The excellent location of the land and the near rectangular shape;
2. The made-to-order access to the beach and the main road.
3. The flat topography making the land suitable for any purpose and in particular for construction of beach resorts.
4. The fertile soil and the higher water table capable of supporting very healthy coconut trees and tax free agricultural income (agricultural income is not taxed in Goa).
5. The pressure of resort hoteliers and the scramble to acquire beach land particularly in 1981 when there were no restrictions on constructions on beach properties.
6. The fact that the land was not marked as agricultural in development plans in 1981 or now.
7. The open unrestricted conversion and construction permission that was available in 1981 and progressively subjected to restrictions later.
8. Total absence of tenants and mundarks.
9. Comparative rates for smaller holdings.
The observations of the AO that agricultural aspects of the land are not considered by valuer, clearly indicates that the AO has not perused the valuation report fully. In fact the valuer had dealt with same aspects which the AO states in the order had not been dealt with, by the valuer. There is absolutely no warrant to bind down a registered valuer to any particular set of considerations. Neither is it the prerogative of the AO to do so. The registered valuer is entitled to consider all such factors that actually influence the market value. Accordingly we hold that the AO ought to have accepted the value determined by the agricultural valuer at Rs. 66,46,000.
18. Coming to the order of the CIT(A) we find that the CIT(A) has rejected the two valuation reports in a very light manner. He has rejected the valuation reports and the submissions made with reference to the transactions with Sea Rock Hotel (Mr. Luthra) for the only reason that the three valuations vary widely. This is not the ground for rejecting the reports given by the experts. If the restrictions imposed on the constructions on the subject plot in particular are taken note of, the equated value from both the transactions with Mr. Luthra in 1987 and the comparable case cited by the AO on p. 12 of his order would be very near Rs. 50 per sq. meter as worked out (p. 169 of the compilation). The value made by the agricultural valuer is higher by Rs. 10 per sq. mtr. for the reason the agricultural valuer has taken note of the comparable cases of sales ranging from Rs. 42 to Rs. 277 per sq. meter which was not available to the other valuer, has taken into account the rich agricultural potentialities of the land and acceptance of the Department of the value of Rs. 50 per sq. meter of the inferior adjoining land made by him. Valuations being estimates are bound to vary and Rs. 10 variation in the circumstances cannot be described as wide in the circumstances explained.
19. The CIT(A) has further directed that the market value as on 1st April, 1981, be determined by indexing the purchase price in 1969 by application of cost index. We agree with the learned counsel for the assessee that this method is fallacious and wholly unwarranted in face of valuation reports of experts available on record. Besides, there was no approved inflation index prescribed earlier to 1981. The only index available during such period was based on cost of essential commodities and would have no relevance to determination of market price of land.
20. Now we come to the contentions of the learned Departmental Representative. His first contention that Mr. Kunde--vendor had no friendly relation with the father of the first two assessees had already been dealt with in para 12 supra, The second contention was that the principle of estoppel has exceptions and in this particular case the assessee cannot take advantage of the rule of estoppel, having avoided payment of gift-tax in respect of the gift made by the first assessee's father in favour of two assessees on 11th Sept., 1981, stating the value of gift at Rs. 48,000 only. This according to the learned Departmental Representative is a fraud on the Department and the assessee cannot be allowed to take further advantage having thus deprived the Department of legitimate gift-tax due, and in support of this contention, he placed reliance on the judgment of the Supreme Court in the case of CIT v. B.N. Bhattachargee (1979) 118 ITR 461 (SC). We do not find any merit in this contention of the learned Departmental Representative. The matter dealt with by the Supreme Court in the said case relates entirely with procedure and deals with a situation in which the Supreme Court found the strictures. It was also held in the said case that estoppel cannot be called into aid to stall performance of public duties and that the doctrine of estoppel did not apply to the facts of the case, in so far as the assessee's case is concerned, it would be clear from the decision of the C.G.T. v. S.N. Zaman & S.M. Elahi (1996) 221 ITR 842 (Gau) that a family dispute which is resolved by a family arrangement would not give rise to any gift-tax liability. For this purpose, the dispute need not be an existing one nor the claims of disputants legally valid. A mere possibility of the dispute is settled, the settlement would amount to a family arrangement, as held by the Supreme Court in the case of Maturi Pullaiah v. Maturi Narasimham AIR 1966 SC 1936. The observations of the Supreme Court in the above case have been reiterated by the Supreme Court in a later decision in Kale v. Dy. Director of Consolidation (1976) 3 SCC 119; AIR 1976 SC 807. Since there is no liability to either gift-tax or capital gains tax consequent to family arrangement represented by two transactions of sale on 2nd June, 1979, by the assessee's father to the assessee, the question of defrauding the Revenue by not filing a gift-tax return does not arise. Further, the primary liability to file any return in this regard would be of the assessee's father and the assessee could not be held responsible for any lapse if at all there is any lapse. Moreover, neither the assessee nor the Department is aware of the existence of any return or non-existence thereof. That the principle of estoppel and res judicata does not apply to income-tax proceedings is too well-established to be called into question as on this date.
21. In the light of the above discussion, we direct the AO to adopt the fair market value of the subject land as on 1st April, 1981, at Rs. 66,46,000 as determined by the approved valuer for agricultural land Mr. Nagarsenkar as expressly required by the AO after rejecting the report of Mr. Vikas Desai, the approved valuer."
12. The proposed order by the learned AM was not acceptable to the learned JM regarding rejection of the appeals of the Department on the ground that the sale deed and gift deed executed in 1979 and 1981 respectively did not represent the fair market value merely on the ground that these transactions were not commercial transactions but were merely, family arrangement. He has the following reasons therefor:
"According to the general law of land, all transfers of land by way of sale or gift are compulsorily registerable under the provisions of Registration Act, 1908. For the purpose of such registration, adequate stamp duty has to be paid by the parties in accordance with provisions of Stamp Act, 1899. Such stamp duty is to be paid on the basis of market value of the immovable property to be registered. The concerned Registrar has to satisfy himself that adequate stamp duty has been paid. If he thinks that market value is more than stated in the deed, then either he can refuse to register the same or ask the parties to pay adequate stamp duty in accordance with the market value. No provision has been brought to our notice to show that transfer of property by way of family arrangement can be registered at the value below the market value. Therefore, even assuming that sale deed and gift deed hold that such deeds cannot represent the fair market value, rather a legal presumption arises that value stated in such deeds represent the correct market value. No doubt such legal presumption can be rebutted by placing relevant material or evidence on the record. In such situation, the .onus would be on the person who alleges that market price stated in the deeds is not correct. Therefore, in my view, the CIT(A) was not justified in rejecting the sale deed and gift deed executed in 1979 and 1981 in a summary manner. Consequently, his direction to take the 1969 value as base value and determine the market value as on 1st April, 1981 considering the cost inflation index would also be unwarranted because if any value has to be taken into consideration, it would be the value nearer to the valuation date. In the present cases the date of gift deed i.e., 11th Sept., 1981, being nearer to the valuation date of 1st April, 1981 should be considered, however, subject to rebuttal, if any, by the assessee."
13. With regard to the appeals of the assessee, the learned JM expressed a view that, two valuation, reports of Mr. Vikas-Desai and Mr. Nagarsenkar did not represent the value of land as on 1st April, 1981. He recorded reasons as to why the valuation report of Mr. Vikas Desai should be rejected. The summarised reasons therefor are given in para 28 of the dissenting order. The reasons for rejecting the valuation report of Mr. Nagarsenkar have been recorded in para 29 of the dissenting order. On the issue of valuation of the property as on 1st April, 1981, in the circumstances of the case, the learned JM found that no factual data or material is available before the Bench to determine the value as on 1st April, 1981, and, therefore, it is necessary to refer the matter of valuation to the Departmental Valuation Officer under Section 55A. Accordingly, the learned JM set aside the order of the CIT(A) and restored the matter to the file of the AO with a direction to him to refer the matter of valuation to the Departmental Valuation Officer and then adjudicate the matter after taking into consideration such report and all the other material which will be brought on record by the assessee or gathered by him. It is on account of the above decision and difference of opinion between them that the President has been pleased to refer the aforesaid two questions to me for my opinion.
14. The learned representatives of the parties--Mr. Robinson for the assessee and Mr. Bahuguna for the Revenue have been heard. "Mr. Robinson appearing for the assessee submitted that the facts leading to the reference before me have been stated in paras 15 and 16 of the order of the learned AM. As discussed by him at length, the transaction and related antecedents resulting in the gift in favour of the assessee on 11th Sept., 1981, is a family arrangement. He argued that the family arrangement need not necessarily be recorded as such and described as such. The verification of surrounding circumstances can lead to such an inference. In: support of the above proposition, reference was made to the decision in Maturi Pullaiah 's case (supra). He submitted that the gift deed is in effectuation of family-arrangement and therefore, the value stated there is not a negotiated market value. He drew my attention to the definition of "Fair Market Value" in relation to capital asset in Section 2(22B) of the IT Act, according to which the fair market value means (i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date; and (ii) where the price referred to in Sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act. He submitted that the IT Act is a self-contained code and therefore, the value as on 1st April, 1981 should be determined only as per such definition given above. He argued that the value stated in the gift deed as market value is only an estimate and one estimate cannot be based on another estimate. He stated that res judicata does not apply to the tax proceedings. The assessee could not be bound down to value stated in a proceeding which is extraneous to IT Act. In this connection, support was derived from the decision in CIT v. Indira Bai (1985) 151 ITR 692 (AP). According to him the family arrangement has no tax implication and the allegation of evasion of tax is incorrect. He referred to the decision in S.N. Zatnan & S.M. Elahi 's case (supra), wherein their Lordships held that family settlement to avoid possible future dispute is valid. Mr. Robinson argued that determination of fair market value should be independent of value stated in the gift deed, which has no presumptive value.
15. Regarding valuation made by Mr. Nagarsenkar, the agricultural valuer, it was submitted by Mr. Robinson- that the valuation made by him was .supported by the exceptional location of the land being ideally suited for agricultural operations which could yield Rs. 5.00 lakhs of income per annum as well as for construction of beach resorts without much effort to change the topography of the land. He pointed out that the property in question being in Palolem Beach, it could be compared with the only nearest beach being the Agonda Beach which, is situated within 5 kms. from Palolem Beach. In his report, the agricultural valuer relied upon the comparable cases cited by the assessee in Agonda Beach. Drawing attention to the valuation report of Mr. Nagarsenkar dt. 28th Jan., 1998 (pp. 37 to 43 of the compilation) Mr. Robinson submitted that the valuer stated that a single tract of land would actually command a better rate per sq. mtr. than multiple small holdings owned by a large number of owners as the demand is for large area usable for beach resorts. It was submitted that the above fact is evident from the comparable cases of sale of land appearing at p. 57 of the paper book. He submitted that these comparable cases relate to the case of a hotel company, which purchased smaller plots to consolidate and use the same for hotel. He argued that the comparable cases of sales to protected tenants by average rate of Rs. 19 per sq. meter cannot be accepted. He drew my attention to the minutes of the meeting of the Ecological Development Council (copy at pp. 59-60 of the paper book) and submitted that it would be seen therefrom that a very large number of construction applications were pending as far back as 1983 and the policy of the Government was to promote formation of larger plots. In the last para of the minutes, there is an indication that very large number of applications were from hotels and guest houses. Mr. Robinson further submitted that the tourist industry as such being concentrated on the coastal lane, it is only the beaches which are in the settlement zone as is the case of the land in question which was sought after for construction of hotel. He referred to the reply of the valuer in Col. 7 of the report from which he submitted that there was pressure from hotelier for beach land. He also adverted my attention to the special feature of the property in question mentioned by the valuer in Cols. 8 and 9 of the report. It is almost rectangular in shape. The west end of the property with a width of nearly 220 mtrs. ends on the sea beach and the East touches the main road with a width of 150 mtrs. This special feature indicates the potential use of the land, which has been considered by the valuer. Mr. Robinson further submitted that the estimate of agricultural income of Rs. 5,00,000 per annum, if capitalized 12 1/2 times, it would give a figure of Rs. 62.5 lakhs which roughly tallies with his final valuation arrived at Rs. 64.8 lakhs.
16. Mr. Robinson further submitted that the offer of Sea Rock Hotel in 1987 at Rs. 51 per sq. mtr, would work out to Rs. 34 on reverse indexing to 1981. Taking into account the restriction imposed in 1983 and no construction zone upto 90 mtrs from the high tide, the value would be Rs. 47.50 per sq. mtr. Mr. Robinson further submitted that the comparable cases cited by the AO of Rs. 41.66 per sq. mtr. in 1985 in a beach, which is far away from the land in question, by reversing indexing would work out to Rs. 36.80 in 1981. If the restrictions imposed in 1983 are taken into account the value would be Rs. 51.60 per sq. mtr. He pointed out that the working is available at p. 169 of the compilation which indicates that the valuers were nearly correct in their estimate of the market value while giving a weightage for a special feature.
17. According to Mr. Robinson, the valuer has taken into account the fact that there was no agricultural activity on the land, the absence of mundkars and absence of any uprooted trees and the existence of only 200 coconut trees on inspection, cashew trees being of wild growth. This gives an average of one coconut tree for 540 sq. meters. This is by no means an indication of intensive cultivation. Sufficient material has been brought on record by the assessee to show the urbanization in the location of subject property, He submitted that on p. 68 of the compilation is 1964 survey map of Government of India which would show that there was a very high concentration of houses in Paolem (i.e., location of the land in question) as against Chauri which was the only municipal town in the year, 1981. In cross-examination of Mr. Vikas Desai, a question was put to him whether he could identify the square dots shown on the map to which he replied that these represented houses. Another question No. 15 was put to him to the effect that Chauri which is the earliest township in Canacona contains minimum number of houses as compared to Nagorsen indicating a greater urbanisation outside Chouri. What was the explanation for this? Mr. Vikas Desai had replied that settlement is more concentrated in Nagorsen, Paolem towards the coast because of availability of water. My attention was also drawn to census report of 1981 (copy at p. 72 of the paper book) to show that the population of Paolem was 7942 as against the population 1629 of municipal town of Chouri in the year 1981. Mr. Robinson vehemently argued that the valuation made by the valuer is based on the potentiality, possible agricultural yield, the comparable cases and is verifiable more or less correctly with reference to the value offered for the land in. 1987 and the comparable case cited by the AO himself. Further, the opinion of the registered valuer is that of an expert which can be displaced only by evidence. Again the restriction on use imposed in 1983 and inclusion in municipal area in 1985 (involving higher taxes), argued Mr. Robinson, have retarded the rate of increase in prices but not reversed such increase. He also submitted that the details in columns 7, 8 and 9 of the format of valuation report are intended to allow the valuer to state his finding on inspection which unless controverted should be accepted. According to him, these columns indicate such features, which show the importance of potentiality of land under consideration for valuation. He also submitted that perhaps, there is no agricultural valuer in the valuation cell as on date. Moreover, the topography of the land has changed during the last seven years by construction of hotel. Furthermore, under Section 55A(a) reference is restricted only to the valuation which is lower than what the AO estimates and in the case of the assessee reference under Section 55A(b) is inapplicable.
18. Mr. Bahuguna, the learned Departmental Representative placed strong reliance on the findings of the learned JM which is more or less based on the observation and finding recorded by the AO in the assessment order. He submitted that the learned JM has given a finding on the basis of the land revenue records and the recital in the gift dt. 11th Sept., 1981, that it is difficult to hold that as on 1st April, 1981, the relevant valuation date under Section 55(2)(b)(ii) the land in question was not agricultural land. Even the sale deed dt. 27th Oct., 1994, between the assessees and M/s Dikshaw Holding Ltd. in preamble itself clearly brings out that the land was agricultural one. He argued that the entire land was cultivated in 1981, The mere fact that it was situated near the sea, it cannot be said that it had immense potentiality for beach resorts. The subsequent event viz., offer of purchase by a hotel company in the year 1987 cannot be taken to be the material for holding against the fact emanating from records to the effect that the land was purely agricultural. He argued that there is evidence on record that on the valuation date i.e., 1st April, 1981 the property in question was outside the municipal limits. Moreover, the learned JM has rightly stated that there is no evidence that in the year 1981 the land had any characteristic of urban growth. He led me through the summary of the reasons on the basis of which the valuation report of Mr. Vikas Desai can easily be rejected. Even the second valuation report of Mr. Nagarsenkar, argued Mr. Bahuguna cannot be accepted, it being too general in nature. He has not given any instance of sale. He also drew my attention to the significant finding recorded by the, learned JM that Mr. Nagarsenkar has not pointed to any material to show that there was any urban growth in 1981 much less the beach resort. There is no material to support the presumption of Mr. Nagarsenkar that there was pressure of resort, hoteliers and scramble to acquire beach land in 1981 . He was also not correct instating that the land in question falls within the municipal limit. As a matter of fact, in the year 1981, the land under consideration was outside the municipal limits, He, therefore, supported the view of the learned JM that the rate of Rs. 60 per sq. meter adopted by the valuer for valuing the land is on ad hoc basis and based on surmises. He, therefore, supported the view of the learned JM that even the report of Mr. Nagarsenkar could not be accepted. He argued that the gift deed executed on 11th Sept., 1981, is a registered document and for the purpose of paying the stamp duty the fair market value mentioned therein has been taken into account. According to him, for the above reason, the AO was justified to determine the fair market value of the property in question as on 1st April, 1981 at Rs. 48,000 as the transaction of gift deed dt. 11th Sept., 1981, was very much nearer to the relevant valuation date i.e., 1st April, 1981. He, therefore, submitted that if the Tribunal accepts the value of the land mentioned in the gift deed dt. 11th Sept., 1981, as fair market value as on 1st April, 1981, there would be no need to consider the question No. 2.
19. I have gone through the proposed orders of my learned brothers as also carefully considered the arguments advanced by the learned representatives of the parties. It is an admitted position that the subject property sold by the assessee to Dikshaw Holdings (P) Ltd. during the previous year ended on 31st March, 1995, relevant to the asst. yr. 1995-96 is exigible to capital gains tax. It is also not in dispute that for the purpose of computation of capital gains, the fair market value of the subject property has to be ascertained as on 1st April, 1981. The trouble starts now. What looms large is that what is the fair market value of the subject property as on 1st April, 1981? The expression 'fair market value' is defined in Section 2(22B) according to which, the fair market value is the price which the capital asset would ordinarily fetch on sale in the open market on the relevant date which for the purposes of these appeals is 1st April, 1981. With a view to ascertaining the fair market value of the agricultural land which is the subject property measuring 1,08,000 sq. mtrs. known as Quindelibaga Rajabaga situated in Canacona as on 1st April, 1981, the assessee obtained valuation report of a registered valuer Mr. Vikas Desai (copy of which appears in the paper book at pp. 31 to 36) dt. 10th Nov., 1997. As per the declaration in Part III of the report (p. 35 of the paper book), he personally visited .and inspected the property on 16th April, 1995. In column 5 while giving the brief description of the property Mr. Desai stated that the subject property falls within the limits of Canacona Municipal Council, District of South Goa, described in the Land Registration Office of Quepem under No. 4183 bearing Survey No. 29/1. Against column 7 giving classification of land, it is stated that it is an urban land falling within the municipal limits consisting of coconut, cashew plantation, and drinking water well. The area later classified as settlement by town planning department of Goa. In column 13 it stated that the subject land is abetting of Choudi--Kundelebag Road. In column 16, which requires instances of sale of immovable properties in the localities to be 'given, the valuer stated that "in the vicinity and in the immediate neighbourhood no sale deed of similar type of land is available". However, he gave the instance of sale vide deed dt. 27th July, 1974, of 600 sq. mtrs of land for Rs. 12,000 i.e., Rs. 20 per mtr. The said land, according to the valuer falls within the limits of V.P. of Panguinim Tal, Canacona, Goa. The valuer compared the said land in his report (internal p. 4) with that of the subject land and stated that the said land is not accessible whereas the subject land is easily accessible. In the. case of the said land, public transport was not available in 1974 but in case of subject land it was available then. The said land is situated at a distance of 5 kms. From Canacona town with river in between but the subject land is situated at a distance of 1.50 kms. from Canacona town. In the case of the said land, hospital is situated at a distance of 6 kms. (via river) and 8.00 kms. by road, whereas the hospital is at a distance of 2 kms. in the case of subject land. Again in the case of said land all Government offices are situated at a distance of 8 kms. by road, whereas in the case of the subject land these are situated at a distance of 1.50 kms. On the basis of the above comparison, the valuer hazarded a guess that the price of case of subject land could have been Rs. 35 per sq. mtr. or more in 1974 whereas the said land was sold for Rs. 20 per sq.meter in July 1974. In Part II of the report (internal p. 4) the valuer stated that considering the rise in prices of land by 3 to 4 per cent every year in the vicinity considering the value mentioned in the aforesaid sale deed and after comparing it with the subject land, its pros and cons, he was of the view that the rate per square meter of the subject land, in 1981 was Rs. 50 per sq. mtr. He thus arrived at the fair market value of the subject land at Rs. 54,00,000 (1,08,000 sq. meter x Rs. 50). One striking feature which stares at the face of it is a long gap of more than two and a half years between the date of personal inspection of the property by the valuer Mr. Vikas Desai and the date of submission of the report. These dates are 16th April, 1995 and 10th Nov., 1997, respectively. No explanation for inordinate delay has been brought on record by the assessee. This itself puts a question mark on the credibility of the report submitted by the valuer Mr. Desai on 10th Nov., 1997. Moreover, the learned JM has noted certain glaring misstatements in the valuation report of Mr. Vikas Desai. Some of these can be taken note of. No doubt, at the time of submission of the report, the subject land had come within the municipal area of Canacona Municipal Council but Mr. Desai forgot that he was concerned about the value of the subject land as on 1st April, 1981 when it was outside the limits of Canacona Municipal Council (the subject land coming within the municipal area from 5th March 1985, only). There is ample evidence on record to show that the subject land was an agricultural land and continued to be so right upto the date of its sale ultimately to Dikshaw Holdings (P) Ltd, as revealed from the sale deed executed on 17th Oct., 1994. Not only this, the subject land was the agricultural property when it was purchased by Mr. Dominic Dias--one of the assessees before us, on 17th Nov. 1969 and as stated in the sale deed dt. 27th Oct., 1994, for last several years intensive agricultural operations had been carried on, on the subject agricultural land with the result substantial number of coconut trees and other fruit bearing trees had grown; in addition part of the land was used for growing paddy. So neither the subject land was 'urban land' nor it fell within the municipal area of Ganacona Municipal Council as stated by Mr. Desai in his report. This by itself speaks volume about the quality of the valuation report, though conscious effort appears to have been made by Mr. Desai to fill up the gaps as also to support his valuation during the course of cross-examination, It will be revealed from the cross-examination (copy at pp. 61-67 of the paper book) that direct questions were put which yielded favourable response. It was, inter alia, for several such reasons that the valuation report of Mr. Desai and his averments made during the course of cross-examination did not inspire confidence and the AO/CIT(A) as also the learned JM rejected the same altogether and in my considered opinion their view appears to be correct.
20. It is observed from the assessment order that when the fact of Mr. Desai being not an agricultural valuer came to light during his examination on oath on 5th Dec., 1991, and certain startling facts emanating from his report/deposition were revealed (e.g. his non-visiting the Sub-Registrar's office to collect information of sale deed for comparison purposes, no attempt to obtain information from Government offices on civic amenities as on 1st April, 1981, in or around the area of the subject land, absence of notification of the Government to the effect that the subject land was in settlement zone and that he valued the subject land as a residential area) and when the assessees were confronted, the assessee stated in letter dt. 8th Dec., 1997 to the AO that "we would also file a further valuation report by an agricultural valuer". The above request of the assessee in the aforesaid letter was acceded to. It is, therefore, incorrect to have an impression that the report of Mr. Ghanshyam A. Nagarsenkar, the agricultural valuer, was submitted by the assessees "at the instance of the AO". This impression needs to be dispelled.
21. Within a short span of time, the assessee obtained the valuation report dt. 20th Jan., 1998, from Mr. Nagarsenkar. His report finds place at pp. 37 to 44 of the assessee's compilation. On 16th Jan., 1998, Mr. Nagarsenkar as per the request of Mr. Dominic Dias--one of the assessees, carried out site inspection visit of the subject property to determine the market value thereof as on 1st April, 1981. At this stage, it may be noticed that the valuation report of Mr. Nagarsenkar was prepared within three days and was submitted before the AO on 29th .Jan., 1998 (say in a week's time). This is in sharp contrast with time lag between the site inspection and production of report by the first valuer. In column 7 of his report, Mr. Nagarsenkar stated that the subject land falls in the zoning plan of the year 1981. It was not falling in agricultural zone. In column 8 of the report, the special feature of the subject land has been mentioned. He mentioned, inter alia, that the subject land, due to availability of water, fertility of soil etc., could have supported not less than 2000 yielding trees as against Just 200 trees and that "even as far as back 1981 if the land had been fully and effectively used for agricultural purpose, income of more than Rs. 5,00,0,00 per annum could have been derived from this land". Then in column 9 he gave other features which affect the value of the land. In column 10, the valuation officer has to state the comparable cases of sale against which he stated 'refer conclusion-comment in valuation'. At internal p. 5 of the report under the caption 'valuation', he stated that for arriving ,at value as on 1st April, 1981, he had also made inquiries with those who had knowledge of the subject land and lived or reside in the area. He also mentioned that many such agricultural plots and land in South Goa have yielded to non-agricultural use on account of demand for construction of resorts by beach resorts and that the commercial value that such use could command cannot be ignored totally if the land though agricultural in nature is available for such other non-agricultural use in the absence of any prohibition statutory or otherwise. After making the above general remarks, the valuer reverts back to the subject land and observes that the subject land, in particular having been underutilized for agricultural purposes having 200 coconut trees is far too attractive for non-agricultural purposes in view of its topography and location. He then stated that he also made inquiries regarding land transactions. He stated that he ascertained that one hotel project purchased land from a number of owners with a view to consolidate the land so purchased to use for hotel project. He further states that from a few vendors, he learnt that sale rate of individual holding varies from Rs. 40 to Rs. 200 per sq. mtr, then, he again reverts back to the subject land and observes that a single large track of land would command a better rate per sq. mtr. than multiple small holding owned by many. Finally, he summed up certain factors on which he relied for the purpose of valuation and arrived at the value of subject land at Rs. 64,80,000 (land measuring 1,08,000 sq. mtrs. x Rs. 60).
22. As stated earlier, the site inspection of the subject land was carried out by Mr. Nagarsenkar on 16th Jan., 1998 and the report is dt. 20th Jan., 1998. Evidently it appears to have been prepared in haste. Not a single instance of contemporaneous transaction i.e., a sale deed executed on or about valuation date, viz., 1st April, 1981 has been relied upon by him. He solely relied on the "inquiries with those who had Knowledge of this land and had lived or resided in the area". Who were these persons and what knowledge did they possess about the subject land is shrouded in mystery. No attempt has been made at any stage to establish their credentials. Perusal of the report would go to reveal that Mr. Nagarsenkar made numerous assumptions without bringing on record any material to substantiate, them. The learned JM has brought out several infirmities in the valuation, report of Mr. Nagarsenkar and nothing has been shown to me so as to controvert them. For the reasons aforesaid, I agree with the findings of the learned JM that both the valuation reports were rightly rejected by the Departmental authorities.
23. I perused question No. 1 more than once. It puzzled me a lot. My difficulty is this. Question No. 1 has been drafted on the footing that there is difference of opinion between the learned Members as to the acceptability of the value mentioned in the gift deed dt. 11th Sept., 1981, However, on a close reading of the orders of both the learned Members, I find that the difference is superficial and not real. The learned AM has rejected the value mentioned in the said gift deed on the ground, that the question of valuation could not have assumed much importance in a family arrangement. The learned JM has also rejected the value mentioned in the said gift deed but on the ground that the assessee has successfully rebutted the presumption that what is stated in the said registered gift deed is the correct value by pointing out to an offer of Rs. 51 per sq. mtr. in respect of the subject land. In effect, thus, what the learned JM has held is that the value mentioned in the gift deed can no longer be looked into. This finding has been made clear in paras 30 & 32 of the order, though a first reading of para 25, especially the closing sentence, does suggest that the learned JM has held that the assessee is yet to successfully rebut the presumption. If the learned JM is understood as having said that the value mentioned in the gift deed is still subject to rebuttal, then that would mean that the same has not been successfully rebutted before him, in which case his decision to restore the entire matter of valuation to the AO would be inconsistent. If the value mentioned in the gift deed is hot rebutted, then it would be logical to presume that the learned JM would have upheld the said value, especially since he has not been able to agree with the valuation reports of the two valuers. But that is not the case. He has directed the AO to examine the question of valuation and that is only because he is convinced that the value mentioned in the registered, gift, document has been shown to be incorrect by the assessee. That is the only logical manner in which I can understand the orders of the learned Members. In this view of the matter, it becomes unnecessary for me to seek to resolve the first question as if there is a difference of opinion between the learned Members.
24. Now moving to question No. 2 which, in my opinion, brings out the real controversy I am of the view that the course adopted by the learned JM is the appropriate one. The learned AM has fully accepted the valuation reports prepared by the two valuers. The learned JM has, however, rejected them by pointing out various defects in them in paras 27-29 of the order. Before me, Mr. Robinson the learned counsel for the assessee, has not been able to show that there are no such defects in the valuation reports prepared by Mr. Vikas Desai or Mr. Nagarsenkar as have been pointed out by the learned JM. He strongly supported the valuation reports but has not specifically overcome the defects pointed out therein by the learned JM. I, therefore, have a-situation before me where both the learned Members are agreed that the value mentioned in the gift deed dt. 11th Sept., 1981, cannot be sacrosanct, though their reasons are different, as seen earlier. The learned AM has relied fully on the reports of Mr. Vikas Desai and Mr. Nagarsenkar and has held that the fair market value of the subject land as on 1st April, 1981, should be taken at Rs. 64.80 lakhs. But the learned JM has found serious defects in these reports which have not been explained even before me and has discarded the value estimated therein. He has, therefore, restored the question of valuation of the AO. The answer to question No. 2 can, therefore, only be that the learned JM was right.
25. Before me it was contended, as noticed earlier, that the matter should not be restored because the topography of the subject land has now changed considerably and it would be difficult to value the land as it existed at the relevant time. It has also been stated that there are no valuers of agricultural land in the valuation cell. I can only say that these are aspects with which I am not concerned. My jurisdiction as Third Member is limited to resolving the difference of opinion between the learned Members. It was also contended that Section 55A is not applicable. There is, however, no specific reference to Section 55A in question No. 2. So I cannot enter that controversy. Since I am of the opinion that the view taken by the learned JM is correct, I cannot hesitate to agree with him merely because there would be some difficulty in estimating the value of the subject land now.
26. I, therefore, agree with the learned JM that the matter of valuation should be restored to the file of the AO.
27. The appeal will now be placed before the Bench for passing appropriate orders.