V. Kameswar Rao JUDGMENT
Sanjiv Khanna, J.
1. Prabhu Dayal Rangwala and Indulata Rangwala, husband and wife, individual assessees are appellants in these two sets of appeals, which relate to assessment years 1989-90 and 1990-91. These appeals arise out of a common order passed by the Income Tax Appellate Tribunal ('Tribunal', for short) dated 14th December, 2001. The final outcome of the two sets of appeals will be antithetical/opposite and, therefore, it would be appropriate to deal with the two sets of appeals for assessment years 1989-90 and 1990-91, separately.
I.T.A. No. 224/2002, Prabhu Dayal Rangwala versus CIT & I.T.A. No. 227/2002, Indulata Rangwala versus CIT (Assessment Year 1989-90)
These two appeals stand admitted for adjudication vide order dated 24th April, 2003, on the following substantial questions of law:-
"1. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that proceedings for re-assessment for assessment year 1989-90 were validly initiated?
2. Whether on the facts and in the circumstances of the case, the Tribunal was legally correct in confirming the cost of acquisition as on 1st April, 1974, as adopted by the Assessing Officer?"
2. We will first take up question No. 1 as we perceive that answer to the said question is crucial and would settle the controversy. Answer to question No. 2 would be required only if we hold that the reassessment proceedings were validly initiated.
3. The basic facts as noticed by the Tribunal may be noted:-
(i) The two appellants-assessees, along with other co-owners of property No. 19, Barakhambha Road, New Delhi entered into an agreement dated 7th March, 1973 with M/s. Kailash Nath and Associates ('Builder', for short) for construction of a multi storied building at the cost of the builder.
(ii) Under the agreement, rights in land were to be transferred-ultimately to the nominees of the builder or cooperative society/limited company to be formed by the prospective owners upon completion of the building.
(iii) In consideration, the co-owners were entitled to allotment of 30% of the built-up space/area in the multi storied building, while 70% of the built-up area belonged to the builder.
(iv) The aforesaid share of 30% and 70%, underwent a change and the co-owners' share was enhanced to 37% and the builder's share was reduced to 63% vide agreement dated 19th June, 1981.
(v) The builder and co-owners were free to book flats/commercial space for sale to prospective buyers in the be proposed multi storied building.
(vi) The space/area constituting the co-owners' share was demarcated as consisting 37% of the ground floor, full first floor, full second floor, full third floor and remainder on the fourth floor.
(vii) The building was completed in 1987, when a completion certificate was obtained.
4. During the period relevant to the assessment year 1989-90, the two appellant-assessees sold a part of their built-up multi storied area share to third parties. The sale consideration received was offered for tax under the head, capital gains.
5. The sale consideration received from third parties or the manner and mode of computation of capital gains, is not in question. Determination of the fair market value of the property as on 1st April, 1974, is in issue. Section 55(2)(b)(i) of the Act, as then applicable, postulated that for properties acquired on or before 31st March, 1974, the fair market value as on 1st April, 1974 could, at the option of the assessed, be the cost of acquisition. Father of Prabhu Dayal Rangwala, namely Dwarka Dass, on 2nd December, 1949 had purchased the property. It was a residential house. The property after purchase was used for residential purposes. On 13th November, 1969, the property was converted as belonging to the Hindu Undivided Family. On 27th March, 1971, the property was partitioned in equal shares amongst Dwarka Dass; his wife, ........