Excess land exchanged for locational advantage and dispersed nature of holding, does not require specific disclosure in books, failure to which will attract Section 69B: HC

THE ISSUE BEFORE THE COURT IS - Whether value of excess land acquired under an exchange, if not recorded in books, would result in additions u/s 28(iv) or 69B, without factoring in adjustment for locational advantage and dispersed nature of holding. NO is the verdict.

FACTS of the case: The assessment in the case of Assessee for AY 2006-07 was completed u/s 143(3) on total income of Rs. 15,87,03,349/- against return income of Rs. 6,55,453/-. The reasons for such addition was that the Assessee had shown purchase of land of Rs. 40,36,91,100/-. The documents filed by Assessee showed that it had acquired 17.81 acres of land at Ullawas and Behrampur villages in exchange for 16.16 acres of land at Badshahpur village. According to AO, the Assessee thus acquired 1.65 acre of land in excess for which no value was shown in the books of account. The AO sought explanation from Assessee, and in its reply the Assessee stated that it had not made any sale/purchase of the land but had merely exchanged the land as a result of which no profit or gain had arisen. However, the differential amount, according to the AO, had been withheld by Assessee and accordingly additions were made by invoking Section 69B. On appeal, the CIT(A) deleted the addition. Thereafter, in an alternative submission before the CIT(A), the Revenue urged that even if Section 69B could not have been invoked, the differential amount could be brought to tax u/s 28(iv) of the Act. Repelling this contention, the CIT(A) held that since the stamp valuation authorities would not have determined the value of any land without factoring in demand and supply, locational advantage, proximity to public facilities, infrastructure, the determination of fair value by Assessee of land at Behrampur and Ullawas at the same rate after adjustment for locational advantage and dispersed nature of holding, could not have been faulted. Parity in the market rates and the rate determined by the stamp valuation authorities at the two locations was given more so when evidences were not on record to indicate that Assessee paid more as against the documented price as part of the exchange.

HIGH COURT held that,

++ it is seen that when the Revenue went before the ITAT pleading its contentions, the ITAT concurred with the findings of CIT(A) and held that there was exchanges of Land in the same locality and the duration of purchase of land and its exchange i.e. four-five months was very short. Furthermore, land rates are never uniform as in the share market and the A0 has not brought on record any allegation, material, evidence or document on record supported by proof of any rate variation resulting in a profit and addition has been made purely on the estimate basis and the stand of the A0 taken in the case of Golden View Builders Pvt. Ltd, which has dismissed by the Tribunal's order. In absence of any material or evidence or documents to establish that the assessee has made investment and amount expended on making such investments or acquiring land exceeds the amount recorded in this behalf in the books of accounts, which has been properly audited and accepted by the department. Having heard counsel for the parties, the Court is of the view that no substantial question of law arises inasmuch as the revenue has been unable to persuade the Court that the aforementioned factual finding of the CIT (A), concurred with by the ITAT, suffers from perversity.