THE JOINT COMMISSIONER OF INCOME TAX (OSD), CIRCLE-8(1), HYDERABAD, HYDERABAD vs. NEELA REDDY MORAMREDDYGARU, HYDERABAD

There is a delay of 22 days in filing of the appeal by the Revenue for which the Revenue has filed a condonation application along with an affidavit explaining the reasons for such delay. After considering the contents of the condonation application filed along with the affidavit and after hearing both the sides, the delay in filing of the appeal by the Revenue is condoned and the appeal filed by the Revenue is admitted for adjudication.

Facts of the case, in brief, are that the assessee is an individual and engaged in the business of trading of shares. She filed her return of income electronically for the A.Y 2014-15 on 28.9.2014 declaring total income of Rs.2,21,25,630/- and agricultural income of Rs.50,000/-. The said return was processed under section 143 (1) of the I.T. Act, 1961 and subsequently, the case was selected for scrutiny under CASS. The Assessing Officer thereafter vide order dated 28.9.2016 passed the order u/s 143(3) of the Act accepting the returned income.

Subsequently, it was noticed that the assessee offered Long Term Capital Gain (LTCG) from the sale proceeds of 2.92 acres of land in Sy. No.83/1B to 83/3H in Varadarajapuram, Kanchipuram Distt Chennai which was sold on 28.03.2014 and the same was accepted during the scrutiny assessment. It was noticed from the sale deed that an amount of Rs.3.10 crore was received towards sale proceeds of the said land and the SRO value of the said land was not placed on record. However, the SRO value of the said Survey Numbers was viewed from the Website of the Registration Department of Chennai and it was noticed that the SRO value of the said land was Rs.1005/- per sq.ft. Hence the SRO value of 2.092 acres worked out to Rs.12,78,31,176/-. The Assessing Officer, therefore, issued a letter u/s 133(6) of the Act Page 2 of 27 of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy to the SRO, Padappal, Tamil Nadu requesting for the guideline value for the Varadharajapuram Village Survey No.83/1A to 83/3H per acre as on 28.03.2014. The SRO vide letter dated 19.7.2018 informed that guideline value for Survey Nos.83/1A & 83/2 is Rs.90,00,000 per acre and that for Sy. Nos. 83/1B, 1C, 1D, 3A, 3B, 3C, 3D, 3E, 3F, 3G & 3H is Rs.1200 per sq. ft. Since there was under assessment for not considering the SRO value on such transfer of land, the Assessing Officer reopened the assessment u/s 147 of the Act after taking due approval from the competent authority as the difference of sale consideration as per the provisions of section 50C of the Act and the sale consideration offered by the assessee was to the tune of Rs.12,16,34,240/-. The Assessing Officer issued a notice u/s 148 of the Act on 2.8.2018. However, the assessee did not respond to the notice issued u/s 148 for which the notice u/s 142(1) of the Act was issued to the assessee. In response to the same, the assessee requested the Assessing Officer to treat the return of income filed u/s 139(1) on 28.09.2014 as return filed in response to notice u/s 148 of the Act. Subsequently, the Assessing Officer issued notice u/s 143(2) of the Act and also a show-cause notice to the assessee asking him to furnish certain details.

During the course of assessment proceedings, the Assessing Officer noted that the agricultural land of 8.66 Acres in Varadharajapuramn village, Kancheepuram district at Survey No. 72, 73/1A1, 73/2, 74/1, 75, 76, 77/1 to 77/3, 78/1 (part), 83/1B to 83/3H and 84 was agreed to be sold as per MoU entered into with Sri Ramji on 28.05.2010. As per the MoU, the total land agreed to be sold was to an extent of about 8.66 acres and the sale consideration was Rs.9,14,00,000/- which works out to of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy about Rs.1,05,00,000/- per acre. An advance of Rs.1,00,00,000/- was received.

Subsequently, as Sri G. Ramji was unable to fulfill the terms and conditions of the MoU, another MoU dated 16.12.2011 was executed between the assessee, Sri G. Ramji and M/s Tatia Developer Pvt. Ltd. for sale of the properties of 8.66 acres.

Out of above land, an extent of 5.74 acres (Survey No. 72, 73/1A1, 73/2 74/1, 75, 76, 77/1 to 77/3, 78/1 (part) and 84) was finally handed over to M/s Tatia Developer Pvt. Ltd. on 10.11.2012 on receipt of sale consideration of Rs.6,05,00,000. The same was offered for taxation in AY 2013-14 corresponding to FY 2012-13 and was accepted by the department u/s 143(1) of the Act.

For the remaining extent of 2.92 acres (Survey No. 83/1B to 83/3H), a GPA was executed on 10.01.2013 between the assessee and M/s Tatia Developer Pvt. Ltd. and the property was finally handed over to M/s Tatia Developer Pvt. Ltd. on 28.03.2014 on receipt of sale consideration of Rs.3,10,00,000.

During the re-assessment proceedings, the assessee submitted that since the MoU was signed on 16.12.2011 for sale of the property, the said value should be taken as sale consideration. For this purpose, the assessee submitted a letter from the SRO dated 26.03.2018 showing that the guideline value is Rs.3,90,500 per acre for the year 2011. The assessee also submitted a letter from the SRO dated 28.11.2019 showing that the guideline value is Rs.90,000 per cent as on 31.03.2013. of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy

The assessee has also submitted that the sale of the land was completed in all respects including issue of GPA before 31.03.2013 and accordingly, the rate applicable for the transaction is the guideline value issued as on 31.03.2013. It was argued that the guideline value issued by the Registration department as on 28.03.2014 @Rs.1200 per sft is applicable for the developed land which is done by the buyer of her land.

The learned Counsel for the assessee did not press grounds of appeal No. 1 & 2 challenging the validity of reopening for which the learned DR has no objection. Accordingly, grounds of appeal No. 1 & 2 are dismissed as not pressed.

The learned Counsel for the assessee further submitted that it is incorrect to adopt the guideline value for developed land in sq. ft whereas the land sold by the assessee, which is part of the series of transactions starting from 28.05.2010, is undeveloped land. He submitted that once MOUs were entered into on 28.05.2010 and 16.12.2021 and the GPA was registered on 10.01.2013, the assessee ceded her rights in the land as part consideration was received through DD/Cheque/RTGS. He submitted that the final agreement and the receipt dated 28.03.2014 did not alter the nature of land in the hands of the assessee nor did it alter the sale value fixed in the agreements invoking first and second proviso of section 50C to the case. He submitted that on the basis of the MOUs, the buyer proceeded without hindrance to obtain approval of layout and development of the land. It is also not a case where the entire sale consideration of Rs.3.1 crores was received at the time of final agreement and receipt. He submitted that the consideration was received on various dates between 10.01.2013 and 28.03.2014 as mentioned in the agreement and the final receipt dated 28.03.2014 and thus it clearly shows that the assessee sold only undeveloped land and therefore, the sq.ft wise valuation would not apply.

Referring to the order of the Assessing Officer and the CIT (A) he submitted that it is incorrect on their part to hold that the property was transferred and handed over only on 28.03.2014 based on the routine recitals in the agreement and final receipt whereas there is undisputed evidence to the fact that there is Page 11 of 27 of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy development of land subsequent to the MOUs and the registered GPA in favour of Tatia Developer (P) Ltd who claimed the development cost in their books. Referring to the copy of the MOUs/GPA copies of which are placed at Page No.39 to 65 of the paper book, he submitted that the assessee had no role in development and it is the buyer who has obtained approvals of layout from CDMA and taken up for plotting and development. He submitted that it is also incorrect to take Rs.2,89,400/- as development cost of the layout as incurred by the assessee while the amount is petty and spent for fencing etc.,

The learned Counsel for the assessee submitted that it is the guideline value applicable to the GPA (Deed No.167/2013 dated 10.01.2013) that needs to be adopted in the present case as value u/s 50C because the GPA is the basis on which further sales are effected by the buyer on square foot basis as per the guideline valuation. He submitted that even after the guideline valuation as per communication of SRO dated 19.07.2018, the acreage value is Rs.0.9 crore only for the large survey number 83 (of which Survey No.83/1B to 83/H are only parts). He submitted that when the sale of land is part of series of transactions, the total land being 8.66 acres and the present sale is only for balance of 2.92 acres, there is no rationale in adopting valuation in the hands of the assessee in square foot basis when the sale is in acreage and the recitals in agreement and final receipt are routine.

The learned Counsel for the assessee in his another plank of argument submitted that 1st and second proviso to section 50C apply to the present case because the amounts as part of MOUs and registered GPA were received in cheques/DDs/ Page 12 of 27 of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy RTGS which indicate that the value as per the agreements shall be taken as full value of consideration. He submitted that the learned CIT (A) while agreeing that the development of the land was done by Tatia Developers (P) Ltd held incorrectly that guideline value for developed land @ Rs.1200 sft has to be adopted as sale consideration whereas what the assessee sold was undeveloped land in acreage for which the guideline value is Rs.0.9 crore per acre. He submitted that it is incorrect to state that the MOUs or agreements have no legal validity because they are unregistered. He submitted that the final agreement is nothing but culmination of the series of transactions as per the MOUs/GPA and hence the MOUs are undisputed facts on record. He submitted that it is also incorrect on the part of the Assessing Officer and the learned CIT (A) to ignore the registered GPA. He submitted that it is not understood as to how the learned CIT (A) and the Assessing Officer considered all unregistered documents except that dated 28.03.2014 as invalid and ignore registered GPA even when it is the sole basis for further transfers by the buyer.

Referring to the various case decisions, he submitted that the provisions which are curative in nature and are made to remove any undue hardship to the taxpayer or to remove an apparent incongruity will have to be treated as effective from the date on which the amendment containing such incongruity was introduced.

Referring to the decision of the Hon'ble Madras High Court in the case of CIT vs. Vummudi Amarendran, reported in 429 ITR 97, he submitted that the Hon'ble Madras High Court in the said decision has held that the Assessing Officer could not have based his conclusion solely on guideline value which has Page 13 of 27 of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy been held to be only a prima facie rate prevailing in area to ascertain true or correct market value.

Referring to the decision of the Ahmedabad Bench of the Tribunal in the case of Rahul G. Patel vs. Dy.CIT, reported in 67 ITR 280, he submitted that the Tribunal has held that in view of proviso to section 50C, stamp duty valuation of property for purpose of stamp duty payment on date of agreement can be deemed as full consideration of capital asset.

Referring to the decision of the Allahabad Bech of the Tribunal in the case of Hari Mohan Das Tandon (HUF) vs. PCIT, reported in 169 ITD 639, he submitted the Tribunal in the said case has held that for sale of property in September, 1966, agreement to sell of September 1966 though registered on 29.11.2010 would have to be considered.

Referring to the Delhi Bench of the Tribunal in the case of Amit Bansal vs. ACIT, reported in 174 ITD 349, he submitted that the Tribunal has observed that in view of proviso to section 50C, where date of agreement fixing amount of consideration and date of registration regarding transfer of capital asset in question are not same, value adopted or assessed or assessable by stamp valuation authority on date of agreement is to be taken for purpose of full value of consideration.

Referring to the decision of the Ahmedabad Bench of the Tribunal in the case of Ramesh Govindbhai Patel vs. Income Tax Officer, reported in 184 ITD 731, he submitted that the Tribunal has observed that when the date of agreement fixing amount of consideration and date of registration of property is Page 14 of 27 of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy different, value adopted by stamp valuation authority on date of agreement was to be taken for purposes of computing full value of consideration of such transfer.

The learned DR, on the other hand, strongly supported the order of the Assessing Officer. He further submitted that the learned CIT (A) has wrongly drawn the conclusion that only 64.70% of 2.92 acres of land was transferred by the assessee and not the entire land. He submitted that the rate given by the DSR should be applied for the entire 2.92 acres of land. He submitted that the provisions of section 50C introduced by the Finance Act, 2016 are prospective in nature. He accordingly submitted that the order of the Assessing Officer should be upheld and the grounds raised by the assessee should be dismissed and the grounds raised by the Revenue should be allowed.

We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the assessee in the instant case has declared the Long-Term Capital Gain of Rs.2,80,71,529/- on account of sale proceeds of 2.92 acres of land in Survey No.83/1B to 83/3H at Varadharajapuram Village, Kancheepuram District which was sold for a consideration of Rs.3.10 crores. We find the Assessing Officer, on the basis of guideline value at Rs.1200/- per sft provided by the SRO determined such Long-Term Capital Gain at Rs.14,97,05,769/- as per provisions of section 50C. After deducting the capital gain already offered to tax by the assessee at Rs.2,80,71,529/- he made addition of Rs.12,16,34,240/- to the total income of the assessee the details of which are already given Page 15 of 27 of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy at Para 11 of this order. We find the learned CIT (A) while upholding the action of the Assessing Officer in adopting the SRO’s stamp duty value of the property @ 1200 per sft, however, directed the Assessing Officer to exclude the area allotted for roads, parks and open places which could not be plotted as they are pledged to the Govt. He accordingly directed the Assessing Officer to recompute the capital gain.

It is the submission of the learned Counsel for the assessee that the entire property was covered under agreements of various dates and the amounts have been already decided prior to 28.03.2014. It is submitted that the entire land was to be sold for Rs.9,14,00,000/- out of which an amount of Rs.6,05,00,000/- was already received in A.Y 2013-14 and offered to tax and the amount of Rs.3,10,00,000/- was received in A.Y 2014-15. It is also his submission that the return of income for A.Y 2013-14 was accepted wherein the value of the land was shown at Rs.1,05,00,000/- per acre as against the guideline value of Rs.90.00 lakhs per acre and the return was processed u/s 143(1) and no proceedings u/s 147 or 263 have been initiated. It is also his submission that when the assessee has sold the land in acres, the adoption of the sft rate given by the SRO, which is applicable to developed land with lay out etc., cannot be applied to the case of the assessee. It is also his submission that the provisions of section 50C are retrospective in nature and therefore, adoption of value @ Rs.1,05,00,000/- per acre is in accordance with law.

We find some force in the above arguments of the learned Counsel for the assessee. A perusal of the various details furnished by the assessee in the Paper Book shows that the assessee was the owner of 8.66 acres of land which was sold in Page 16 of 27 of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy two financial years i.e. F.Y 2012-13 and F.Y 2013-14. The details of such land sold and capital gain disclosed as per submission of the learned AR are as under: S.No A.Y Extent of land sold Total Capital Remarks consideration gains disclosed 1 2013-14 5 acres 74 cents Rs.6,05,00,000 2013-14 Thus, the total sale (deed of sale proceeds disclosed in the 18.12.12 A.Y 2013-14 was Rs.6,05,00,000 comprising of 5 acres 74 guntas. Copy of the computation of total income for the A.Y 2013-014 finds a place at pages 29-30 of the paper book. 2 2014-15 2.92 Acres of Rs.3,10,00,00 2014-15 The capital gains was land in 0 disclosed in A.Y 2014-15 S.No.83/1/B to and this finds a place at 83/3B in pages 23 & 24 of the Varadarajapuram Paper Book Village Kachipuram 30.1 From the details furnished by the assessee in the paper book, we find the chronology of events are as under: S.No Event Date Stamp Duty/Guideline valuation 1 First MoU with Ramji 25/5/2010 Rs.3,90,000 per acre (page 61-65 of the Paper Book 2 Second MoU with 16/12/2011 Rs.3,90,000 per acre (Pages 56 to 60 of the Ramji and Tatiya paper book) Developers (P) Ltd 3 Payment of Rs.1 cr. To 25/5/2010 Rs.3,90,000 per Acre (pages 63 to 63 of the Ramji paper Book) 4 Payment made by From Rs.90 lakhs per acre (page 53 of the Paper Tatiya Developers Pvt 17.7.2012 to Book) Ltd 2.1.2013 5 First settlement with 10/11/2012 Rs.90 lakhs per acres M/s Tatiya Developers Pvt Ltd 6 Second settlement 28/3/2014 Guideline value was increased to Rs.1200 per with Tatiya Developers sft because of development of layout of the Pvt Ltd land belonging to the Appellant and also lands which were taken from other owners. The property was developed by the Developer in the year 2014. The appellant is not concerned with this development as it had given up all its rights in land on 10.1.2013 itself when the GPA was given to M/s. Tatiya Developers Pvt Ltd and the guideline valuation of Rs.90 lakhs per acre (Page43 of the paper book). of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy

A perusal of the details furnished by the assessee shows that in A.Y 2013-14 the assessee has sold 5.74 acres of land as per sale deed dated 18.12.2012 for a consideration of Rs.6.05 crores and had declared Long-Term Capital Gain of Rs.96,61,387/- after deducting the indexed cost of acquisition etc., which has been accepted by the Revenue and no proceedings u/s 147 or 263 have been initiated. We find for the impugned A.Y also, the assessee sold the remaining portion of 2.92 acres of land for a total consideration of Rs.3.10 crores which comes to Rs.1,05,00,000/- per acre. However, the Assessing Officer in the instant case on the basis of the SRO’s letter dated 17.08.2018, wherein he had given the rate per sft at Rs.1200/-, adopted the sale consideration at Rs.15,26,34,240/- and accordingly brought to tax the differential Long-Term Capital Gain of Rs.12,16,34,240/-. A perusal of the letter of the SRO Padappai which has been reproduced by the learned CIT (A) in Para 6.5 of his order gives the following details.

From a perusal of the above, it is seen that the SRO value of the Survey No.83/1A and 83/2 on 28.03.2014 are Rs.90 lakhs per acre whereas for the other layouts it is Rs.1200 per sft. We further find from page 18 of the Paper Book that the same Sub Registrar, Padappai has certified the guideline value for survey No.83/1C, ID, 3A, 3B, 3C, 3D, 3E, 3F, 3G and 3H at Rs.90,000/- per cent as on 31.03.2013 i.e. Rs.90 lakh per acre the details of which are as under: of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy

Under these circumstances, we agree with the contention of the learned Counsel for the assessee that when a part of the land i.e. 5.74 acres out of the total area of 8.66 acres was sold in A.Y 2013-14 and the remaining part of 2.92 acres of land was sold in A.Y 2014-15, the Assessing Officer instead of taking the value of the land in acres could not have taken the value per sft which is for developed land with internal roads etc. The final agreement and the receipt dated 28.03.2014 did not Page 20 of 27 of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy alter the nature of land in the hands of the assessee nor did it alter the sale value fixed in the agreement. In our opinion, the assessee cannot be fastened with liability by adopting higher rate of valuation of the land which was developed by Tatiya Developers (P) Ltd in the year 2014 since the assessee had given up all her rights in land on 10.01.2013 itself when the Registered GPA was given to M/s. Tatiya Developers (P) Ltd and the guideline value on that date was Rs.90 lakhs per acres. Under these circumstances when the assessee has sold the land at Rs.1.05 crores as against the guideline value of Rs.90 lakhs per acres, therefore, we are of the considered opinion that the Assessing Officer is not justified in applying the rate of Rs.1200 per sft which in our opinion is the rate applicable for developed land.

There is one more angle which merits consideration. A perusal of the sale consideration of Rs.3.10 crores as per the agreement and final receipt dated 28.03.2014 shows that the same was on the basis of earlier agreements which is evident from the agreement and final receipt, copy of which is placed at pages 39 to 44 of the Paper Book. A perusal of the schedule of payment mentioned at Page 40 of the Paper Book shows that the total consideration was paid through Cheque/ RTGS from 10.01.2013 to 28.03.2014 which are as under: of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy

The payment of the above amount was on the basis of the MOU agreed upon on 16.12.2011 copy of which is placed at Page Nos.56 to 59 of the Paper Book. The total extent of the land of 8.66 acres was agreed to be sold for Rs.9,14,00,000/ in two financial years i.e. 2012-13 and 2013-14 respectively. We find the assessee has executed registered GPA on 10th January, 2013 which finds place at Page 43 to 46 of the Paper Book. The consideration of Rs.3,10,00,000/- is paid on various dates starting from 10.01.2013 to 28.03.2014 and the final receipt was given on 28.03.2014 for the sum of Rs.3.10 crores. A perusal of the MOU executed at Chennai on 28.5.2010 copy of which is placed at pages 61 to 64 of the Paper Book shows that the consideration for the entire sale of 8.66 acres was agreed to be sold for a total sum of Rs.9.14 crores and the amount of Rs.6.05 crore was disclosed in A.Y 2013-14 and the balance Rs.3.10 crore was disclosed in A.Y 2014-15. Under these circumstances we are of the considered opinion that in view of the proviso to section 50C where the date of agreement fixing the consideration and date of registration and transfer of capital asset in question are not the same, the value adopted or assessed or assessable by the stamp valuation authority on date of agreement is to be taken for purpose of full value of consideration.

The Hon'ble Supreme Court in Commissioner of Income Tax, Kolkata Vs. Calcutta Export Company [2018 (404) ITR 654(SC)], considered the question as to whether the amendment made by the Finance Act 2010 to Proviso of Section 40(a)(ia) of the Act is curative in nature and it has to be given retrospective operation from the date of insertion of the said proviso i.e., with effect from Assessment Year 2005-06. It was pointed out that the purpose of the amendment made by the Finance Act 2010 is to solve the anomalies with the instrument of Section 40(a)(ia) of the Act, caused to the bona fide tax payer. It was further held that the amendment even if not given any operation retrospectively, may not materially to be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assesses having substantial turnover and equally huge expenses and necessary cushion to absorb the effect; however a marginal and medium tax payer who work at low gross product rate and when expenditure becomes subject matter of an order under Section40(a)(ia) is substantial, can suffer severe adverse consequence if the amendment made in 2010 is not given retrospective operation i.e., from the date of substitution of the provision. Thus, the amendment made by the Finance Act 2010 being curative in nature was held to be retrospective in operation. In the above decision, the Hon'ble Supreme Court took note of the fact that the statutory amendment was being made to remove undue hardship to the assessee or held to be retrospective.

The Hon'ble Supreme Court in Kolkata Export Company took note of the earlier decisions on the same issue in the case of Allied Motors Private Limited Vs. CIT [1997 (224) ITR 677 (SC)], Whirlpool of India Limited Vs. CIT, New Delhi [2000 (245) ITR 3], CIT Vs. Amrid Banaspati Company Limited [2002 (255) ITR 114] and CIT vs. Alom Page 25 of 27 of 2020 and ITA 3 of 2021 Smt. Neela Reddy Moramreddy

The various other decisions relied on by the learned Counsel for the assessee also supports his case to the proposition that where the date of agreement fixing the amount of consideration and the date of registration of property is different, value adopted by stamp valuation authority on the date of agreement has to be taken for purposes of computing full value of consideration of such transfer. Since in the instant case, admittedly, the guideline value on the date of agreement is Rs.90,000/- per cent i.e. Rs.90 lakh per acre and the assessee has sold the land @ Rs.1,05,00,000/- per acre, therefore, the Assessing Officer, in our opinion, is not justified in adopting the guideline value as on 31.3.2014 that to in sq. foot. In view of the above discussion, we set aside the order of the learned CIT (A) and direct the Assessing Officer to accept the sale consideration shown by the assessee at Rs.3,10,00,000/- only. The grounds raised by the assessee are accordingly allowed.

Grounds raised

Since the assessee’s appeal is allowed, the appeal of the Revenue becomes infructuous. Accordingly, the same is dismissed.