SHRI DR. LIYAKAT ALI KAPADIYA,UJJAIN vs. ASSISTANT COMMISSIONER OF INCOME TAX 2 (1), UJJAIN

1 Dr. Liyakat Ali Kapadia ITA 668 of 2017

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE

BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER And SHRI MANISH BORAD, ACCOUNTANT MEMBER

ITA No. 668/Ind/2017 A.Y. 2013-14

Dr. Liyakat Ali Kapadiya, Barnagar PAN – ADUPK 5682 K :: Appellant

Vs

ACIT-2(1), Ujjain :: Respondent

Assessee by Shri Manoj Fadnis, CA Respondent by Shri K.C. Selvamani, Sr. DR Date of hearing 18.3.2019 Date of pronouncement 25.3.2019

O R D E R PER SHRI KUL BHARAT, JM This appeal is filed by the assessee against the order of ld. CIT(A)-

Ujjain, dated 05.7.2017.

sustaining the addition made at Rs.11,76,480/- under the head ‘capital gain’

without appreciating correct facts of the case. Facts, in brief, are that the

assessee is an individual and deriving income from salary and profession,

capital gain and income from other sources. The Assessing Officer made the

addition of Rs.11,76,480/- on account of short term capital gain. The assessee

2 Dr. Liyakat Ali Kapadia ITA 668 of 2017

sold a piece of land for a total consideration of Rs.15 lacs. The assessee

furnished the sale deed of the land. As per registry, the sale value of the land

was at Rs.15 lacs. The stamp valuation authorities assessed the value of land

at Rs.26,76,480/-. As per the provisions of Section 50C(3), the sale value for

computing the capital gain is to be adopted as per the value assessed by the

stamp valuation authority. Therefore, the Assessing Officer made the addition

of difference value i.e. Rs.11.76,480/-. The assessee challenged the same

before the ld. CIT(A). The ld. CIT(A) noted that the assessee was asked to

produce the register deed of sale agreement but the same has not been filed.

The plot was sold on power of attorney, therefore, there was sufficient cause

for not producing the evidences which had been called by the Assessing

Officer. Therefore, addl. evidences producing during appellate proceedings

were admitted by the ld. CIT(A) and the same were forwarded to the

Assessing Officer for comments. The Assessing Officer submitted the remand

report. Considering the facts, submissions, remand report and certain judicial

pronouncements, the ld. CIT(A) held as under:

“5.1.3 Therefore, the Assessing Officer is duty bound to adopt the sale consideration at Rs.26,76,480/- as adopted by the stamp valuation authorities for the purpose of capital gain. Similar view is also been upheld by Hon’ble ITAT, Indore in the case of Krishnakant Shukla vs. ACIT (2011) 18 ITJ 500 (Tribunal. – Indore). Therefore, the addition made by the Assessing Officer amounting to Rs.11,76,480/- is confirmed. Therefore, the appeal on this ground is dismissed.” 3. At the outset of the hearing, ld. counsel for the assessee contended that

the identical issue on similar set of facts and circumstances has been dealt

3 Dr. Liyakat Ali Kapadia ITA 668 of 2017

with by this very Bench and this Bench had remanded the matter back to the

file of the ld. CIT(A) to adjudicate the issue afresh after procuring the valuation

report from the Departmental Valuation Officer. On the other hand, the ld. Sr.

DR relied on the orders of the Revenue Authorities. However, he did not

object to the submission of the learned Counsel for the assessee if the matter

is reconsidered by the ld. CIT(A).

authorities. We find that the identical issue on similar set of facts and

circumstances has been dealt with by us vide order dated 19.9.2018 wherein

we remanded the matter back to the file of the ld. CIT(A). The relevant portion

of the order dated 19.9.2018 (supra) is reproduced hereunder for ready

reference:

“8. The sole issue raised by the assessee relates to the Short Term Capital Gain addition at Rs.78,04,301/- made by the Ld.A.O by applying provisions of Section 50C of the Act thereby calculating the sale consideration of the industrial land sold by the assessee on the basis of the value adopted by the stamp valuation authorities. It is not disputed that sale deed have been registered and have been signed by the assessee. The only grievance of the assessee is that even when the objection was raised before both the lower authorities still the addition have been made u/s 50C of the Act even when as per the provisions of the Act the Assessing Officer should have referred the matter to the Departmental Valuation Officer to value the alleged property. We find that the Ld.CIT(A) confirmed the addition observing as under; “8. Ground Nos. 4 & 5:- By these grounds the appellant has challenged the addition of Rs. 7804301/ - being STCG added by invoking section 50C of the Income Tax Act, 1961. The detailed facts of the case as per the assessment order are reproduced at Para No.2 above and the detailed written submissions of the appellant are reproduced at Para No.3 above. 8.1 Briefly stated the facts are that for the year under consideration the AO noted that the appellant has sold immovable properties on 24/10/2008 and 23/01/2009 for Rs.987000/- & Rs.658000/-. As per the sale deed the value adopted by the Stamp Valuation Authority in

4 Dr. Liyakat Ali Kapadia ITA 668 of 2017

respect of the above properties was Rs.5596000 / - and Rs.3776000 / - respectively. Appellant had not shown any capital gain on the above transaction. The AO therefore asked the appellant to show cause as to why the STCG as per provision of section 50C of the Income Tax Act, 1961 of Rs. 7804301/ - not be assessed for the year under consideration. Appellant contended that provision of section 50C were not applicable as the asset was a business asset being industrial land. Appellant also contended that the transaction was not entered in the books of accounts as representative of the company who participated in the auction of the said land did not inform the company and made the payment out of funds of Speed Automobile. Further after purchase it was noticed by him that the land was disputed and so the said land was sold to two different purchasers. As a result of this both the purchase and sale of the land was not communicated to the appellant company and hence necessary accounting effects was not made in the books of accounts. Appellant also filed various papers in support of the contention that the land in question was diverted for industrial use and was thus used for business purposes and hence was not covered by provisions of section 5OC of the Income Tax Act, 1961. It was also argued that as the title was disputed the land was sold immediately at almost cost price. AO however, stated that the above arguments were not tenable as the registry/deed were under the' name and seal of the company and part of the land still continued in the name of the company. AO also noted that the appellant did not carry out any business activity on the said land, and sold the land very quickly and therefore it cannot be said that it was a business asset of the appellant or that there was distress sale. 8.2 From the material on record it is thus evident that the appellant has not shown any capital gains on the sale of the above two immovable properties. The contention of the appellant is that because of the non communication of the purchase and sale transaction by the representative accounting effect in the books of accounts were not made. This can hardly be considered as a valid reason for not showing the capital gains. It is an admitted position that the registered documents were in the name of the company and also part of the land still continued in the name of the company. Thus as per the legal provisions the ownership was of the appellant company. The contention that the land was business asset and hence provisions of section 5OC are not attracted is also not established. It is an admitted fact that the land in question is a capital asset and is not a part of the stock in trade of the appellant company and hence is covered by the provisions of section SOC. In the case of Inderlok Hotels(P) Ltd. Vs. ITO the ITAT Mumbai Bench I 32 SOT 419 (Mumbai) has held as under:- “As per the legislative history, section 5OC was inserted in the Act by the Finance Act, 2002 with effect from 1-4-2003 and it is in the nature of special provision which is introduced in determining the full value of the consideration in case of transfer of land or building or both. The value determined or assessed by any authority of the State Government for purpose of payment of stamp duty in respect, of such registration of

5 Dr. Liyakat Ali Kapadia ITA 668 of 2017

conveyance deed would be deemed to be full value of the consideration received or accruing as a result of such transfer. It becomes apparent that the said section specifically deals with the transfer of the 'capital asset', being land or building or both and it provides for replacing the value adopted or assessed for the purpose of stamp duty, under section 48 in place of value or sale consideration shown by the assessee. So far as section 5OC is concerned the language of the said section is so clear in respect of its intention that it is brought on the statute book by way of deeming provision in the nature of the Explanation to section 48. Moreover, it is abundantly clear from the explanation given in the CBDT Circular No. 8 of 2002, dated 27-8-2002 that the basic intention to insert section 5OC was for the purpose of determining full value of sale consideration for the purpose of computation of capital gains under section 48. There should not be any cloud of doubt that section 5OC has application only to the extent of determining sale consideration for computation. of capital gain under Chapter JV-E of the Act and it cannot be applied for determining the income under other heads. Therefore, when, admittedly, in the instant case the sale of the flats was treated as the business income and not as a capital gain, the provision of section 5OC was not applicable." Same view has been taken by the High Court of Madras in the case of CIT vs. Thiruvengadam Investment (P.) Ltd. 320 ITR 345. In the case of ITO vs. United Marine Academy following observation have been made. "The main issue for consideration in the instant case was as to whether in a case where capital gain arising from the transfer of depreciable asset is computed as per the special provisions contained in section 50, the provisions of section 50C can be applied so as to adopt the value assessed for the purpose of payment of stamp duty to be the full value of the consideration received or accruing as a result of such transfer. [Para 11] There are two deeming fictions created in section 5O and section 5OC. The first deeming fiction modifies the term 'cost of acquisition' used in section 48 for the purpose of computing the capital gains arising from transfer of depreciable assets where as the deeminq fiction created In section 5OC modifies the term 'full value of the consideration received or accruing as a result of transfer of the capital asset used in section 48 for the purpose of computing the capital gains arising from the transfer of capital asset being land or building or both. The deeming fiction created in section 5OC thus operates in a specific field which is different from the field which section 50 is applicable. It was thus not a case where any supposition had been sought to be imposed on other supposition of law. There are two different fictions created into two different provisions and going by the legislative intentions to create the said fictions, the same operate in different fields. The harmonious interpretation. of the relevant provisions makes it clear that there is no exclusion of applicability of one fiction in a case where other fiction is applicable. As a matter of fact, there is no conflict between these two legal fictions which operate in different fields and their application in a given case simultaneously does not result in imposition of supposition on other supposition of law. The Assessing Officer thus was right in applying

6 Dr. Liyakat Ali Kapadia ITA 668 of 2017

the provision of section 5OC to the transfer of depreciable capital assets covered by section 50 and in computing the capital gain arising from the said transfer by adopting the stamp duty valuation. [Para 20]" In the case of Assistant Commissioner of Income-tax, Co. Circle IV(3), Chennai vs. MIL Industries Ltd. 142 ITD 428 it has been held as under:- "Whether whatever may be problems suffered by an assessee, in reality those reasons cannot be permitted to go beyond scope of section 5OC _ Held, yes _ Whether, therefore, misfortunes happened to assessee or difficulties faced by assessee or matter of distress sales, etc., cannot be a ground to modify valuation - Held, yes" Considering the above facts and the legal position it is seen that the appellant company has admitted that the land in question was not stock in trade and was a capital asset hence it was well covered by the provisions of section 5OC of the Income Tax Act, 1961. The appellant company has not disputed the value adopted by the Stamp Valuation Authority and has also not objected to the adoption of the same by the AO. In view of the above the computation of STCG at Rs.7804301/- made by the AO is upheld in appeal. These grounds of the appellant are therefore dismissed”.

7 Dr. Liyakat Ali Kapadia ITA 668 of 2017

authorities reveals that the objection has been raised by the assessee challenging the value adopted by the Assessing Officer to compute the Short Term Capital Gain. It seems that the Ld. Assessing Officer has directly resorted to impose the provisions of Section 50C without even calling for a Departmental Valuation Officer’s report when the value so adopted by the Stamp Valuation authorities has been challenged by the assessee. Even when the matter came up before Ld.CIT(A), he even when having co-terminus power as that of the Assessing Officer did not refer the matter for valuation to DVO. 12. We find that similar set of facts came before us in the case of Sadhana Sharma Vs. ITO-2(4), Indore, I.T.A.No.396/Ind/97(supra) wherein we have directed the Ld.CIT(A) for examining the additional evidences and also directed him to make due reference to the DVO for valuing the impugned land, observing as follows; “8. We have heard rival contentions and perused records placed before us. The assessee, apart from challenging the addition of Short Term Capital Gain confirmed by Ld. CIT(A) has also challenged the action of Ld.CIT(A) of rejecting the assessee’s application for admission of additional evidence. 9. We observe that in the instant appeal the issue relates to the adoption of market valuation as per stamp duty Valuation Authority by the Assessing Officer in view of the provisions of section 50C of the Act whereas the sale consideration shown in registered sale deed was less than the value adopted by the Assessing Officer. Due to this reason the addition of Short Term Capital gain of Rs.25,32,495/- has been confirmed by both the lower authorities. We find that the assessee did not raise any objection against the adoption of market value by Departmental Valuation Officer before the Assessing Officer to make references to Departmental Valuation Officer (In short DVO) nor he filed any valuation report from any other registered valuer. However when the assessee came up in appeal before Ld.CIT(A) the application for admission of additional evidence was filed in order to prove the poor location of the impugned land being near to “Nallah” which affects the market value of the land. The assessee has also submitted sale deeds of the lands in the immediate vicinity of the impugned land where the market price adopted by the stamp value authority are almost at par with the sale consideration shown by the assessee. These additional evidences were rejected by Ld.CIT(A) only for the reasons that the assessee could not give any possible reason for being failed to provide the same during the assessment proceedings. From the perusal of the judgment referred and relied by the Ld. Counsel for the assessee we observe that the Hon’ble High Court of Bombay in the case of Rallies India Ltd v/s CIT (Appeals) adjudicating the issue as to “where the Assessing Officer fails to make enquiry u/s 55A by passing the assessment order, can the Commissioner of Appeals during the appellate proceedings before him can make such an enquiry by making reference to Departmental Valuation Officer either himself or direct the Assessing Officer to do so in terms of Section 250(4) of the Act” and Hon’ble Court holding in favour of the assessee taking support from the view taken by Hon’ble Apex court in the case of CIT Vs Kanpur Coals Syndicate (1964) 53 ITR 225 wherein the Hon’ble Apex Court held that “it is undisputed that the power of CIT (Appeals) is co terminus with that of Assessment Officer, in fact the CIT (Appeals) can do what the Assessing Officer can do”.

8 Dr. Liyakat Ali Kapadia ITA 668 of 2017

also directed to be remanded to the file of the ld. CIT(A). The ld. CIT(A) would

go through the relevant assessee’s paper book/submissions/case-laws and

then decide the matter afresh after procuring the valuation report from the

Departmental Valuation Officer in terms as indicated hereinabove after

affording due opportunity of being heard to the assessee as per law and the

assessee is also directed to cooperate/appear before ld. CIT(A) in this regard.

9 Dr. Liyakat Ali Kapadia ITA 668 of 2017

Therefore, this ground of the appeal of the assessee is allowed for statistical

purposes only.

rejecting the explanation offered and factual position for additions made at

Rs.15,550/- under the head ‘business or profession’. During the course of

hearing, the learned Counsel for the assessee did not argue this ground.

Therefore, this ground being treated as not pressed is dismissed.

purposes only.

Order was pronounced in the open court on 25.3.2019.

Sd/- Sd/- ( MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 25.3.2019 !vyas! Copy to: Appellant/Respondent/Pr.CIT(A)/Pr.CIT/DR, Indore