Notice u/sec 142(1)from ito
This query is : Resolved
24 August 2013
Dear Experts,
My client had purchased a 10 acre agricultural property in 2004 for Rs.25 lacs and spent on leveling,development, and construction of wall through out etc etc and the total cost of the land came around 47 lacs, and in the year 2007 she sold the property due to some dispute from the villagers to a prospective buyer for an amount of Rs.85 lacs as in where is basis. whereas the registration value as per sub registrar was 1.84 crs. for which the buyer after having negotiated paid 85 lacs in full and got the property registered for the sub-registrar value and paid the stamp duty accordingly.
Now my client has been served on a notice u/s 142(1)to produce relevant return of income from 2007-08 onward and pay the capital gains on 1,84 lacs- 25 lacs. The ITo is not ready to accept the sale consideration of Rs.85 lacs at any cost. he says it is done purposely to avoid capital gains.
Dear experts kindly advice on the same.
My client had purchased a 10 acre agricultural property in 2004 for Rs.25 lacs and spent on leveling,development, and construction of wall through out etc etc and the total cost of the land came around 47 lacs, and in the year 2007 she sold the property due to some dispute from the villagers to a prospective buyer for an amount of Rs.85 lacs as in where is basis. whereas the registration value as per sub registrar was 1.84 crs. for which the buyer after having negotiated paid 85 lacs in full and got the property registered for the sub-registrar value and paid the stamp duty accordingly.
Now my client has been served on a notice u/s 142(1)to produce relevant return of income from 2007-08 onward and pay the capital gains on 1,84 lacs- 25 lacs. The ITo is not ready to accept the sale consideration of Rs.85 lacs at any cost. he says it is done purposely to avoid capital gains.
Dear experts kindly advice on the same.
24 August 2013
Mr. Hussain,
If it is a agriculture land, then how come Capital gain arrises on it???
Provide All relevant Sections of IT Act to ITO and ask him to get training first and then send notices to assessee..
If it is a agriculture land, then how come Capital gain arrises on it???
Provide All relevant Sections of IT Act to ITO and ask him to get training first and then send notices to assessee..
24 August 2013
If it is not rural agriculture land, then the contention of AO is right as the full value of consideration is your case is stamp duty value is full value of consideration not the sale proceed
24 August 2013
if the agriculture land is capital assets (not the rural land) you may ask ITO to refer the case to valuation officer.
Valuation officer may take the dispute related to land while determining the FMV
Valuation officer may take the dispute related to land while determining the FMV
24 August 2013
DEAR Experts thanks for ur response. actually i want to know if the AO can proceed with the calculation as per the subregistrar guideline value or as per the actual sale consideration recieved by the seller ? and also is an agriculture land subject to capital gains or not ?
04 August 2024
### Key Points on Capital Gains and Agricultural Land
**1. **Sale Consideration vs. Guideline Value:**
- **Section 50C**: According to Section 50C of the Income Tax Act, if the sale consideration declared by the seller is less than the stamp duty value (guideline value) of the property, then the stamp duty value is deemed to be the sale consideration for computing capital gains. This provision applies to **immovable property**.
- **Section 43CA**: For the sale of immovable property (other than capital assets), the same principle as Section 50C applies, where the value declared by the seller in the sale agreement is considered for calculating capital gains if it is less than the stamp duty value.
**2. Agricultural Land and Capital Gains:**
- **Section 2(14)**: Under Section 2(14) of the Income Tax Act, agricultural land is not considered a capital asset if it is situated in a rural area as defined by the Act. In such cases, capital gains tax does not apply. For urban land, capital gains are taxable.
- **Definition of Rural Area**: The definition of rural and urban areas depends on the local regulations and the size of the land. For example, land in cities or towns with a population of over 10,000 is often considered urban.
**3. Application to Your Case:**
- **Sale Consideration**: If the actual sale consideration is Rs. 85 lakhs, this amount should be considered for calculating capital gains unless the sale price is below the guideline value and the guideline value is considered as per Section 50C.
- **Agricultural Land**: Determine whether the land is classified as agricultural land under the Income Tax Act and the local jurisdiction. If it qualifies as agricultural land in a rural area, it may be exempt from capital gains tax.
- **Dispute Resolution**: If the ITO insists on the guideline value despite the actual sale consideration being lower, and you believe the land qualifies as agricultural land exempt from capital gains, provide evidence to substantiate the classification and argue accordingly.
### Action Steps:
1. **Review Documentation**: Ensure all documents related to the purchase, development, and sale of the property are in order, including agreements, receipts, and registration documents.
2. **Prepare a Detailed Response**:
- **Explain the Classification**: Provide evidence that the land is agricultural and thus exempt from capital gains tax, if applicable.
- **Sale Consideration Argument**: Justify why the sale consideration of Rs. 85 lakhs should be considered and not the guideline value.
- **Cite Relevant Sections**: Include references to relevant sections of the Income Tax Act, such as Section 50C, Section 43CA, and Section 2(14).
3. **Submit Evidence**: Attach all relevant documentation, including agreements and proof of actual payment received, and submit a response to the ITO.
4. **Consult a Tax Professional**: Since this is a complex matter involving significant financial implications, consider consulting a tax professional or legal advisor to ensure that your arguments are well-supported and to handle communications with the tax authorities.
### Draft Response Outline:
---
**[Your Client’s Name]**
**[Address]**
**[City, PIN Code]**
**[Date]**
To,
The Assessing Officer,
Income Tax Department,
**[Address of the Assessing Officer]**,
**[City, PIN Code]**
**Subject: Response to Notice under Section 142(1) for AY 2007-08**
**Respected Sir/Madam,**
**1. Introduction**
I am writing in response to the notice issued under Section 142(1) of the Income Tax Act, 1961, regarding the assessment for the Assessment Year 2007-08. The notice pertains to the sale of agricultural land and the computation of capital gains.
**2. Sale of Agricultural Land**
- **Sale Consideration and Cost**: The property was purchased in 2004 for Rs. 25 lakhs and was sold in 2007 for Rs. 85 lakhs. The total cost, including development expenses, amounted to Rs. 47 lakhs. The sale was made at Rs. 85 lakhs as per the agreement, and the registration was done at a higher guideline value of Rs. 1.84 crores.
- **Agricultural Land Classification**: The property is classified as agricultural land as per local regulations and is situated in a rural area. According to Section 2(14) of the Income Tax Act, agricultural land in a rural area is not considered a capital asset, and thus, capital gains tax does not apply.
**3. Relevant Sections**
- **Section 50C**: This section stipulates that if the sale consideration is lower than the stamp duty value, the stamp duty value should be treated as the sale consideration. However, this is applicable only to urban land, not agricultural land.
- **Section 2(14)**: Defines agricultural land and its exemption from capital gains tax if it is situated in a rural area.
**4. Request for Consideration**
Given that the property qualifies as agricultural land and the actual sale consideration is Rs. 85 lakhs, I request that the computation of capital gains be reconsidered based on the actual sale consideration and the classification of the land.
**5. Enclosures**
- Copies of the sale agreement, registration documents, and proof of development expenses.
- Any other relevant documents supporting the classification of the land.
**6. Conclusion**
I respectfully request the Honorable Assessing Officer to take the above explanation into account and adjust the assessment accordingly.
**7. Contact Information**
Should you require any additional details or wish to discuss the matter further, please feel free to contact me at **[Your Contact Information]**.
Thank you for your understanding and cooperation.
**Yours faithfully,**
**[Your Client’s Name]**
**Enclosures:**
1. Copies of relevant documents
2. Proof of sale and development expenses
---
Feel free to adjust the content as per the specific details and consult a tax professional for further guidance.
**1. **Sale Consideration vs. Guideline Value:**
- **Section 50C**: According to Section 50C of the Income Tax Act, if the sale consideration declared by the seller is less than the stamp duty value (guideline value) of the property, then the stamp duty value is deemed to be the sale consideration for computing capital gains. This provision applies to **immovable property**.
- **Section 43CA**: For the sale of immovable property (other than capital assets), the same principle as Section 50C applies, where the value declared by the seller in the sale agreement is considered for calculating capital gains if it is less than the stamp duty value.
**2. Agricultural Land and Capital Gains:**
- **Section 2(14)**: Under Section 2(14) of the Income Tax Act, agricultural land is not considered a capital asset if it is situated in a rural area as defined by the Act. In such cases, capital gains tax does not apply. For urban land, capital gains are taxable.
- **Definition of Rural Area**: The definition of rural and urban areas depends on the local regulations and the size of the land. For example, land in cities or towns with a population of over 10,000 is often considered urban.
**3. Application to Your Case:**
- **Sale Consideration**: If the actual sale consideration is Rs. 85 lakhs, this amount should be considered for calculating capital gains unless the sale price is below the guideline value and the guideline value is considered as per Section 50C.
- **Agricultural Land**: Determine whether the land is classified as agricultural land under the Income Tax Act and the local jurisdiction. If it qualifies as agricultural land in a rural area, it may be exempt from capital gains tax.
- **Dispute Resolution**: If the ITO insists on the guideline value despite the actual sale consideration being lower, and you believe the land qualifies as agricultural land exempt from capital gains, provide evidence to substantiate the classification and argue accordingly.
### Action Steps:
1. **Review Documentation**: Ensure all documents related to the purchase, development, and sale of the property are in order, including agreements, receipts, and registration documents.
2. **Prepare a Detailed Response**:
- **Explain the Classification**: Provide evidence that the land is agricultural and thus exempt from capital gains tax, if applicable.
- **Sale Consideration Argument**: Justify why the sale consideration of Rs. 85 lakhs should be considered and not the guideline value.
- **Cite Relevant Sections**: Include references to relevant sections of the Income Tax Act, such as Section 50C, Section 43CA, and Section 2(14).
3. **Submit Evidence**: Attach all relevant documentation, including agreements and proof of actual payment received, and submit a response to the ITO.
4. **Consult a Tax Professional**: Since this is a complex matter involving significant financial implications, consider consulting a tax professional or legal advisor to ensure that your arguments are well-supported and to handle communications with the tax authorities.
### Draft Response Outline:
---
**[Your Client’s Name]**
**[Address]**
**[City, PIN Code]**
**[Date]**
To,
The Assessing Officer,
Income Tax Department,
**[Address of the Assessing Officer]**,
**[City, PIN Code]**
**Subject: Response to Notice under Section 142(1) for AY 2007-08**
**Respected Sir/Madam,**
**1. Introduction**
I am writing in response to the notice issued under Section 142(1) of the Income Tax Act, 1961, regarding the assessment for the Assessment Year 2007-08. The notice pertains to the sale of agricultural land and the computation of capital gains.
**2. Sale of Agricultural Land**
- **Sale Consideration and Cost**: The property was purchased in 2004 for Rs. 25 lakhs and was sold in 2007 for Rs. 85 lakhs. The total cost, including development expenses, amounted to Rs. 47 lakhs. The sale was made at Rs. 85 lakhs as per the agreement, and the registration was done at a higher guideline value of Rs. 1.84 crores.
- **Agricultural Land Classification**: The property is classified as agricultural land as per local regulations and is situated in a rural area. According to Section 2(14) of the Income Tax Act, agricultural land in a rural area is not considered a capital asset, and thus, capital gains tax does not apply.
**3. Relevant Sections**
- **Section 50C**: This section stipulates that if the sale consideration is lower than the stamp duty value, the stamp duty value should be treated as the sale consideration. However, this is applicable only to urban land, not agricultural land.
- **Section 2(14)**: Defines agricultural land and its exemption from capital gains tax if it is situated in a rural area.
**4. Request for Consideration**
Given that the property qualifies as agricultural land and the actual sale consideration is Rs. 85 lakhs, I request that the computation of capital gains be reconsidered based on the actual sale consideration and the classification of the land.
**5. Enclosures**
- Copies of the sale agreement, registration documents, and proof of development expenses.
- Any other relevant documents supporting the classification of the land.
**6. Conclusion**
I respectfully request the Honorable Assessing Officer to take the above explanation into account and adjust the assessment accordingly.
**7. Contact Information**
Should you require any additional details or wish to discuss the matter further, please feel free to contact me at **[Your Contact Information]**.
Thank you for your understanding and cooperation.
**Yours faithfully,**
**[Your Client’s Name]**
**Enclosures:**
1. Copies of relevant documents
2. Proof of sale and development expenses
---
Feel free to adjust the content as per the specific details and consult a tax professional for further guidance.
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