COMMISSIONER OF INCOME TAX JALANDHAR vs. GURDIP SINGH SIDHU

ITA No.11 of 2013 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 11 of 2013(O&M) Date of decision: 02.09.2014 The Commissioner of Income Tax, Jalandhar II, Jalandhar ……Appellant Vs. Shri Gurdip Singh Sidhu …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE FATEH DEEP SINGH Present: Mr. Vivek Sethi, Advocate for the appellant. Mr.Ravish Sood, Advocate for the respondent.

Ajay Kumar Mittal,J. 1. This appeal has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 3.9.2012, Annexure A.3 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in ITA No.464/(ASR)/ 2010 for the assessment year 2006-07, claiming following substantial substantial questions of law:- “i) Whether on the facts and in the circumstances of the case, the the Hon'ble ITAT was right in law in interpreting section 50C of the Income Tax Act, 1961 by holding that prior to 1.10.2009 cases of transfer of land or buildings where the transaction was not registered with the stamp duty valuation authority, were out of the ambit of section 50C? GURBAX SINGH 2014.10.13 11:09 I attest to the accuracy and integrity of this document High Court Chandigarh

ITA No.11 of 2013 (O&M) 2 ii) Whether on the facts and in the circumstances of the case, the ITAT was right in holding the issue in favour of the assessee for computation of segment rate at lower than the rate assessed by the Sub Registrar for registration of agricultural land in the particular village by State Valuation Authority? Iii) Whether on the facts and in the circumstances of the case, Hon'ble ITAT was right in holding the issue in favour of the assessee by holding that the order of the AO is based on whims and fancies whereas the AO has specifically pointed out in the assessment order that the assessee has taken the valuation of agricultural land on 1.1.1981, on the basis of small piece of land having commercial value and the AO has taken the base of valuation by considering large size piece of land?” 2. Briefly, the facts necessary for adjudication of the controversy involved as narrated in the appeal may be noticed. The return of income was filed by the assessee on 7.11.2006 declaring total income of ` 14,75,180/- which comprised of salary, income from other sources and long term capital gains on sale of agricultural land. The return was processed under section 143(1) of the Act on 24.5.2007 on the declared income. The assessee entered into an agreement on 19.4.2005 for sale of agricultural land measuring 37 kanals 5 marlas for a consideration at the rate of ` 6,75,000/- per acre. Another agreement of sale of agricultural land was made by the assessee on 2.12.2005 for sale of 36 kanals 8 marlas of land for ` 36,40,000/-. Both pieces of land were situated in Village Chak Hussaina Lama Pind, Tehsil and District Jalandhar. Consideration of agreement was received from the buyer vide three pay orders on 1.12.2005. The assessee in his return had calculated long term capital gains by declaring sale proceeds of agricultural land at ` 83,07,949/-, cost of acquisition by adopting fair GURBAX SINGH 2014.10.13 11:09 I attest to the accuracy and integrity of this document High Court Chandigarh

ITA No.11 of 2013 (O&M) 3 market value of the land at ` 13,89,720/- (i.e. at the rate of ` 1,50,954/- per acre) as on 1.4.1981 and indexed cost of acquisition computed at ` 69,06,908/-. The Collector, Jalandhar fixed the segment rates for sale of property in the Village where the sold land was situated at the rate of ` 25 lacs per acre for the purpose of payment of stamp duty. The sale consideration of the land i.e.9 acres 1 kanal 13 marlas sold by the assessee as per Collector's rate at the rate of ` 25 lacs per acre worked out at ` 2,30,15,625/-. Besides, this, the assessee had received another amount of ` 15,25,000/- on account of sale of mitti. Since the assessee had not declared long term capital gains, as per provisions of the Act, notice under section 148 of the Act was issued to him on 18.11.2008 to assess the escaped capital gains income. Vide notices under sections 142(1) and 143(2) of the Act dated 4.12.2009, the assessee was required to explain as to why the sale value of the land may not be adopted at the rate of ` 25 lacs per acre as fixed by the State Government for the purpose of payment of stamp duty; as to why provisions of Section 50C of the Act may not be invoked for calculating the long term capital gains and fixation of cost of acquisition as on 1.1.1981. The assessee submitted that Section 50C of the Act was not applicable to his case because land in question had been sold by way of modes other than those specified in the said section. After considering the matter, the Assessing officer adopted average cost rate for acquisition at ` 1 lac per acre. Total cost of acquisition was computed at ` 9,01,875/- and indexed cost of acquisition of the transferred asset was computed at ` 44,82,318/-. Finally, the Assessing officer worked out the capital gains at ` 2,00,58,307/- vide order dated 30.12.2009, Annexure A.1. Aggrieved by the GURBAX SINGH 2014.10.13 11:09 I attest to the accuracy and integrity of this document High Court Chandigarh

ITA No.11 of 2013 (O&M) 4 order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 30.9.2010, Annexure A.2, the CIT(A) partly allowed the appeal. It was observed that where the assessment by the State Government Valuation authority takes place at the later date, the provisions of Section 50C will not be attracted. The revenue filed appeal before the Tribunal whereas the assessee preferred cross objections. Vide order dated 3.9.2012, Annexure A.3, the Tribunal dismissed the appeal and partly allowed the cross objections. Hence the instant appeal by the revenue. 3. Learned counsel for the assessee respondent placed reliance on the order dated 14.1.2008, Annexure R.1 passed by Collector Jalandhar whereby according to him, the Collector Jalandhar had accepted the value of the registered sale deed assessed by the assessee. It was submitted that the same could not be produced earlier as it was not within the knowledge of the assessee. Learned counsel for the respondent argued that in view of documents Annexures R.1 to R.4 attached with CM No.13550 CII of 2014 whereby the sale consideration received by the assessee on sale of his agricultural land and shown by him as such for computing income under the head 'Capital gains' was accepted by the Stamp Valuation authority and judgment of this Court in Commissioner of Income Tax III, Ludhiana vs. M/s New P.Grand Resorts, GT Road, Jagraon, ITA No.877 of 2010, decided on 5.3.2014, the addition made by the Assessing officer was unjustified. 4. Learned counsel for the revenue submitted that the Tribunal had erred in deleting the addition. 5. We have heard learned counsel for the parties and perused the GURBAX SINGH 2014.10.13 11:09 I attest to the accuracy and integrity of this document High Court Chandigarh

ITA No.11 of 2013 (O&M) 5 record. 6. The issue involved in the present case is applicability of Section 50C of the Act to the facts of the present case. The Assessing Officer held that the provisions of Section 50C of the Act were applicable as the transfer of property had been carried out vide a registered sale deed and not in pursuance of sale agreement. The CIT(A) held that capital gains arise on transfer of a capital asset and the effective date for computing the capital gain is the date of transfer of capital asset. Since the computation of income from capital gain on sale of land was to be made on the amount of full consideration received or accruing on the date of transfer and on the date of transfer of the land, the provision of Section 50C was not attracted, the Assessing officer was not justified in adopting the value assessed by the stamp duty valuation officer on a subsequent year. When the registration of the land sold by the assessee was done after the date of transfer of land, the provisions of Section 50C of the Act were not applicable. The Tribunal concurred with the findings recorded by the CIT(A). 7. CM No.13550 CII of 2014 filed by learned counsel for the respondent assessee for placing on record documents Annexures R.1 to R.4 in order to show that the sale consideration received by the assessee on sale of his agricultural land and shown by him as such for computing his income under the head 'Capital gains' was accepted by the Stamp Valuation authority is allowed. The said documents are allowed to be taken on record. 8. Accordingly, without expressing any opinion on the legal issue involved herein, in view of Annexures R.1 to R.4, we set aside the order dated 3.9.2012, Annexure A.3 passed by the Tribunal and remand the matter GURBAX SINGH 2014.10.13 11:09 I attest to the accuracy and integrity of this document High Court Chandigarh

ITA No.11 of 2013 (O&M) 6 to it to decide the same afresh after affording an opportunity of hearing to the parties and considering the documents as noticed above and judgment of this Court in M/s New P.Grand Resorts's case (supra), expeditiously in accordance with law. The appeal stands disposed of. (Ajay Kumar Mittal) Judge September 02, 2014 (Fateh Deep Singh) 'gs' Judge GURBAX SINGH 2014.10.13 11:09 I attest to the accuracy and integrity of this document High Court Chandigarh