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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI PRADIP KUMAR KEDIA
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-1, Ahmedabad (‘CIT(A)’ in short), dated 20.09.2017 arising in the assessment order dated 22.12.2016 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2014-15.
[Vishnubhai M. Desai Vs. ITO] A.Y. 2014-15 - 2 -
The grounds of appeal raised by the assessee read as under:
“1) learned Commissioner of Income Tax (Appeals) has erred in confirming addition of Rs.9,50,946 made by A.O. u/s 56(2)(vii)(b)(ii) of Act in as much as, (i) The agri. Lands purchased are rural lands & not capital assets u/s. 2(14) of Act, therefore provision of section 50C are not applicable whereby provision of section 56(2)(vii)(b)(ii) is not attracted. (ii) The provision of section 56(2)(vii)(b)(ii) are introduced w.e.f. 01.04.2014 whereby said section apply to transactions of transfer/purchases w.e.f. 01.04.2014 & not to transaction entered in F.Y. 2013-14 (01.04.2013 To 31.03.2014). 2) Without prejudice to the above learned CIT(A) has erred in not allowing the enhanced cost u/s 50C r.w.s. 56(2)(vii)(b)(ii) which is available for set off u/s 54B r.w.s. 49(4) against sale of agri. Land. 3) The Agri. Land bearing Block No. 143 (Khata No. 138) purchased on 28.07.2014 (A.Y. 2015-16) do not fall in A.Y. 2014-15 whereby A.O. had erred in applying provisions of Sec 56(2)(vii)(b)(ii) r.w.s 50C of the Act.”
Briefly stated, the assessee filed its return of income for AY 2014-15 which was subjected to scrutiny assessment. In the course of scrutiny assessment, the AO noticed that the assessee has purchased certain land parcels below stamp duty valuation rate. The AO accordingly replaced the stamp duty valuation rate for the purposes of determination of purchase consideration by applying provisions of Section 56(vii)(b) of the Act as tabulated in para 3 of the assessment order.
Aggrieved, the assessee preferred appeal before the CIT(A).
The assessee contended before the CIT(A) that in view of provisions of Section 49(4) r.w.s. 54B of the Act, the addition towards understatement of income under s.56(2)(vii)(b) of the Act is not sustainable in law. The CIT(A) however did not see any merit in the plea raised on behalf of the assessee and dismissed the first appeal. The CIT(A) dismissed the appeal of the assessee with the observations that amount of addition of Rs.9,50,946/- under s. 56(2)(vii)(b) may be available in future under [Vishnubhai M. Desai Vs. ITO] A.Y. 2014-15 - 3 - s.49(4) of the Act as and when the capital gain arises on transfer of land under purchase. The relevant operative para of the order of the CIT(A) is reproduced hereunder for ready reference:
“3. Conclusion:-
The submission made by the assessee has been carefully considered. However, the same is not found acceptable. As per provision of section 56(2) of the IT Act, the following income shall be chargeable to income tax under the head income from other course, namely................
(viib) Any immovable property:- (i) Without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property. (ii) For a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees. The stamp duty value of such property as exceeds such consideration.................
4. As mentioned above, the stamp duty value for the properties purchased with other co-owners works out to Rs.9,36,79,593/- whereas, the consideration mentioned in never challenged this addition but the AO had rejected the additional claim of exemption u/s 54B of the Act and therefore me appellant is in appeal before your honor The appellant seeks to make written submission on legal aspects The arguments made under different propositions in this submission are without prejudice to each other. The AO had erred in rejecting difference claim under section 54B of the Income Tax Act, 1961 by virtue of deeming fiction of section-49(4) r.w.s 54B of the Income Tax Act. 1961, being ground no.1. ii. The Appellant had argued in the written submission provided to AO that the addition under section 56(2)(vii) would have direct linkage with cost of asset and therefore, the exemption claimed under section 54B of the Income Tax Act, 1961 against land sold would be increased to that extent as per section 49(4) read with section 54B of the Income Tax Act, 1961. The appellant would like to reproduce the section 49(4) for the ready reference of your honor.
"49(4) Where the capital gain arises from the transfer of a property, the value of which has beer, subject to income-tax under clause (vii) [or clause (viia)] of sub section (2) of section 56, the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purposes of the said clause (vii) [or clause (viia)]" iii. The appellant submits that it is clearly understood from the aforesaid provisions of the Act that it is not required to claim exemption under section 54B in income tax return itself but exemption is direct and having clear linkage with total cost of asset. The AO had never challenged the facts of deeming fiction of 49(4) in its reasoning of rejection of difference claim of section 54B of the Act, being ground no.2; [Vishnubhai M. Desai Vs. ITO] A.Y. 2014-15 - 4 - iv. The assessee submits that it is important to note here that the AO had never challenged above facts and the stand taken by the appellant in its entire body of the assessment order. The assessee further submits that it is clear from the law that by inserting deeming fiction of Section 49(4), the value of addition to be made by assessing officer under section 56(2)(vii) shall be deemed to be the value which needs to be taken into account along with cost of purchase for the purpose of calculation of capital gain and the cost of new asset shall be increased to the extent of addition so made by the assessing officer.
V The appellant submits that there is direct nexus between section 49(4) of the Act cost of asset and cost of asset which is required (o be considered while claiming exemption under section 54B of the Income Tax Act. 1961 and therefore the appellant request that the corresponding amount of addition so made by the assessing officer may please be allowed and cost of capital asset should be increased while computing capital gain, quoting judgment of Hon'ble Supreme Court of India in the case of M/s. Goetz (India) Limited vs. CIT 284 ITR 223 as there is no relation of amendment in Income Tax Return but to give the effect of deeming fiction in claim of exemption while determining computation of capital gain and the judgment relates to only "deduction" and not "exemption", being ground no. 3; vii. The assessing officer had relied upon aforesaid judgment which is clearly not suitable in this case as the appellant is seeking exemption and not deduction, The appellant submits that the deduction may be shown in income tax return when it is to be filed. However, the condition to show exemption is not necessary to be shown in Income Tax Return when it is filed as there is clear difference between deduction and exemption. The appellant further submits that the amount of deduction is first included in the gross total income and then deducted from it to arrive at the net income but it is not so in the case of exemption. The exemption amount is not considered as a part of total income and the same should be specifically excluded directly from the part of gross total income. vii. In view of the above arguments, the appellant categorically stated that the case law mentioned in Para 4 wilt not be applicable to the current case and therefore, the benefit of addition in cost of asset should be excluded for calculation of capital gain and while determining exemption under section 54B of the Income Tax Act, 1961 otherwise it would be double taxation on the part of appellant wherein he had already admitted addition u/s 56 and therefore, the appellant would require to pay tax on additional amount and capital gain tax on the same value again if contention of the appellant is not accepted by your honor. The appellant therefore request your honor that the appeal may please be allowed on the merits of the case.
2.3. The second submission of the appellant dated 08/09/2017 before CIT(A) in this regard is as under:- a. The Appellant is in appeal against the order passed unde, section 143(3) of the Act by income tax Officer. Ward-1 (1)(1). Ahmedabad (the AO), in respect of A.Y. 2014-15 Vide this order, he has made addition of Rs.9,50,946/- to the returned income of Rs.20,29,270/- for the reasons as specified in the body of the order. The Appellant had never challenged [Vishnubhai M. Desai Vs. ITO] A.Y. 2014-15 - 5 - this addition but the AO had rejected the additional claim of exemption u/s 54B of the Act and therefore, the appellant is in appeal before your honor. The appellant herewith make additional written submission on legal aspects as required by your honor. The arguments made under different propositions were already made under previous written submissions. The appellant herewith provide comparative statement of total income and attached original & revised computation of total income for ready reference of your honor. b. Submission of Comparative Statement of Income as required by your honor: The Appellant had argued in their previous written submission that the addition under section 56(2)(vii) would have direct linkage with cost of asset and therefore the exemption claim under section 54B of the Income Tax Act, 1961 against land sold would be increased to that extent as per section 49(4) read with section 54B of the Income Tax Act, 1961. The appellant would like to provide computation of total income after having effect of addition under section 56(2) and enhanced exemption by virtue of section 49(4) for ready reference of your honor. The appellant herewith reproduced comparative statement of computation of total income after incorporating effect as mentioned above.
COMPARATIVE STATEMENT OF INCOME Sr. Heads of Income Original Statement Revised Statement No. (Particulars) of Income of Income (as per stand taken by the appellant) 1 Capital Gain 26750129 26750129 - Less. Exemption U/s (24720859) (25671805) 54B Net Capital Gain 2029270 1078324 2 Income from Other Sources -Interest Income On 32372 32372 SB A/c -Interest On Fixed 6930 6930 Deposit -Addition made u/s - 950945 56(2)(vii)(b) Total IFOS 39302 990248 > Gross total Income 2068572 2068572 Less. Income (2029270) (1078324) Chargeable For Special Rates Income Chargeable 39302 990248 For Normal Rates > Deduction Under Chapter VI-A Less. U/s 80C (LIP) (77486) (77486) Less. U/s 80D (4989) (4989) (Mediclaim) Less. U/s 80TTA (10000) (10000)
[Vishnubhai M. Desai Vs. ITO] A.Y. 2014-15 - 6 -
> Net Taxable Income NIL 897773 Agriculture Income 595760 595760 Add. Income 2029270 1078324 Chargeable For Special Rates Total Income 2625030 2571860 > Computation Of Tax Payable Tax Income Nil 278056 Chargeable For Normal Rates Net Income 365854 215665 Chargeable For Special Rates Less. Relief On Agri. (89152) Income Edu. Cess & Higher 10976 12137 Edu. Cess Gross Tax Payable 376830 416709 > Tax Deducted at Source TDS On Transfer Of (418470) (418470) Immovable Property Tax Refundable (41640) (1761) c. In view of the above arguments, the appellant therefore request your honor that the appeal may please be allowed on the merits of the case".
2.3. I have given careful consideration to the appellant's written submission and also carefully gone through the assessment order. On perusal of the details submitted during the course of the assessment proceedings it is seen that the assesses has purchased immovable property being agriculture land below the Jantri Rate. In view of the above, amount of Rs.9,50.946/-(share of the appellant) was required to be taxed u/s.56(vii)(b) of the Income tax Act, 1961 under the head income from other source. The Appellant had never challenged this addition but the AO had rejected the additional claim of exemption u/s 54B of the Act and therefore, the appellant is in appeal. The Appellant had argued that the addition under section 56(2)(vii) would have direct linkage with cost of asset and therefore the exemption claim under section 54B of the Income Tax Act, against land sold would be increased to that extent as per section 49(4} read with section 54B of the Income Tax Act. 1961
2.4. After going through the relevant provisions of the Act, it is seen that the legislature has provided sub-section (4) to section 49 prescribing cost of acquisition with reference to certain modes of acquisition It states that where the capital gain arises from the transfer of a property, the value of which has been subject to income tax under clause (vii) or clause (vita) of sub section (2) of section 56, the cost of acquisition of such property shall be deemed to be the value which has been taken into [Vishnubhai M. Desai Vs. ITO] A.Y. 2014-15 - 7 - account for the purposes of the said clause (vii) or clause (vita). It means that in case the buyer of the property has acquired the property as capital asset, the legislature has prescribed the provision for cost step-up available to the buyer/transferee for the purpose of calculating capital gain at a later date when such property is sold / transferred by such person. Provision, such as sub-section (4) to section 49 would mean that cost step-up shall be available to the person only for the purpose of calculating capital gain when such property is transferred at a later date as capital asset. In view of the above, deduction on the enhanced value will not be available for the deduction under 54B of the Act in the year under appeal. The ground of the appellant is dismissed.”
Further aggrieved, the assessee preferred appeal before the Tribunal.
Before Tribunal, the assessee also filed a petition under Rule 29 of the ITAT Rules with affidavit for admission of additional evidences. As per the petition, the assessee seeks admission of the additional evidence on an altogether new plea that agricultural land purchased are rural lands and therefore are excluded from the definition of capital asset under s.2(14) r.w.s. 50C of the Act. The assessee has thus called upon the Tribunal to adjudicate the issue in the light of additional evidences so placed. We do not find any compelling reason in the petition for admission of the additional evidence in terms of Rule 29 of ITAT Rules, 1963. Rule 29 of the ITAT Rules provides for stringent stipulations for admission of additional evidences. The assessee has not specified any cogent reason as to why such facts considered relevant by the assessee were not placed before the lower authorities. The assessee himself has admitted that the point was not raised before the lower authorities and the issue involves examination of factual aspect. We are not inclined for admission of the additional evidence requiring factual verifications at this belated stage after lapse of more than 5 years. Therefore, we decline to entertain the additional evidences.
Continuing further, the learned AR for the assessee pointed out that provisions of Section 56(2)(vii)(b)(ii) of the Act has come into play w.e.f. 01.04.2014 and would therefore apply to the transactions which have occurred after that date only as the amendment is prospective in nature. The learned AR also submitted that Section 49(4) of the Act does not [Vishnubhai M. Desai Vs. ITO] A.Y. 2014-15 - 8 - require transfer of the same property for the purpose of claim of deduction under s.54B of the Act. The learned AR next pointed out that a part of the agricultural land was purchased in July 2014 concerning AY 2015-16 and therefore would not be subject matter of assessment for AY 2014-15.
The learned DR for the Revenue relied upon the order of the CIT(A).
We have carefully considered the rival submissions. The taxability of deemed income under s.56(2)(vii)(b)(ii) of the Act is in question. The AO has applied the aforesaid provision after comparing the purchase price of the land vis-à-vis the stamp duty valuation and added the difference in the hands of the assessee in proportion to his share in land holding. The CIT(A) has upheld the aforesaid action of the AO. We do not see any infirmity in the order of the CIT(A) in this regard. Section 49(4) of the Act clearly provides that the benefit of the inflated cost of acquisition in view of the deeming provisions under s. 56(2)(vii)(b)(ii) of the Act would be available at the time of sale of the asset and capital gains will be accordingly reduced to the extent of such increase in deemed consideration. The CIT(A) has given appropriate relief in this regard. We thus see no wrong in action of the CIT(A). The plea of the assessee that the agricultural land is rural land was raised for the first time before us. In the absence of any findings of the lower authorities on factual aspects, we decline to entertain the aforesaid new plea. We also find no merit in the plea of the assessee for its inapplicability of Section 56(2)(vii)(b)(ii) of the Act to the FY 2013-14 concerning AY 2014-15. The aforesaid provision is applicable from AY 2014-15 and would thus apply to transactions concerning FY 2013-14 as intended by the legislature.
As noted earlier, the assessee has taken an altogether new plea that agricultural land bearing Block No. 143 was purchased in the subsequent financial year, which plea was not taken before the lower authorities. We thus see no reason to entertain such plea in the absence of any supporting material placed before the lower authorities. Otherwise also, in view of the provisions of Section 150(1) r.w.s. 153(6) of the Act, the differential [Vishnubhai M. Desai Vs. ITO] A.Y. 2014-15 - 9 - income can be assessed in AY 2014-15 and therefore the whole exercise will be revenue neutral. We, however, do not seek to delineate. We thus find no merit in any of the grounds set up by the assessee.
In the result, the appeal of the assessee is dismissed.
This Order pronounced in Open Court on 11/09/2019
Sd/- Sd/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 11/09/2019 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।