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Vijaysingh Lalusingh Rajput v. ITO2(3)(4) Surat /I.T.A. No. 2990/Ahd/2015/A.Y.11-12 Page 1 of 14
आयकर अपीलीय अिधकरण,सुरत �यायपीठ, सुरत INCOM TAX APPELLATE TRIBUNAL-SURAT-BENCH-SURAT �ी सी.एम.गग�, �याियक सद�य तथा �ी ओ.पी.मीना, लेखा सद�य के सम� BEFORE C .M. GARG, JM & O. P. MEENA, AM आ.अ.सं./I.T.A No. 2990/Ahd/2015 िनधा�रण वष�/Assessment Year:2011-12 Vijaybhaisingh Lallusingh Rajput V. The Income Tax Officer, Plot No. 258/10-11 Near Shiv Ward-2(3)(4), Surat. Vijay Processors, GIDC, Pandesara, Surat – 394221. [PAN:ABXPR3970L] अपीलाथ� Appellant ��यथ�/Respondent िनधा�रती क� ओर से Assessee by Shri Ramesh Kumar Malapani, CA राज�व क� ओर से Revenue by Shri R. P. Rastogi, Sr. D.R. सुनवाई क� तारीख Date of hearing 31.07.2018 उ�ोषणा क� तारीख Date of 28.09.2018 pronouncement आदेश /ORDER PER O. P. MEENA, AM 1. This appeal at the instance of the Assessee is directed against an order dated 24.08.2015 passed by learned Commissioner of Income tax (Appeals)- 1, Surat (in short “the CIT (A)”) for the Assessment Year 2011-12.
Grounds raised by the assessee read as under :
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“1. States that Ld. CIT (A) erred on facts and in law in sustaining addition of Rs. capital gains to Rs. 46, 76,143 by invoking provisions of section 50C of the Act. “2. Additional ground No.1- states that Ld. CIT (A) erred in upholding the transaction of purchase and resell of the land as assessable under the head “capital gains” as against “business income” claimed by the appellant and transaction being adventure in nature of trade and thereby erred in sustaining the addition of capital gains of Rs. 46,76,143 by invoking provisions of section 50C of the Act. “3 Additional ground No. 2 Without prejudice to above, the ld. CIT (A) erred in sustaining the addition of capital gains of Rs. 46,76,143 by invoking provisions of section 50C of the Act without referring or directing to Ld. AO to refer the matter to DVO for valuation under section 50C (2) of the Act. “4 Additional ground 3- states that CIT (A) erred in not granting deduction of correct amount of cost of acquisition of the land which is Rs. 16,52,000 ( 28% of Rs. 59,00,000) as against the incorrect cost of acquisition of Rs. 85,000 deducted before the AO.” 3. The learned counsel for the assessee submitted though the above grounds are covered by general ground no. 1 of the appeal. However, to make the contentions more specific, the appellant prefers above additional ground of appeal. Further, the above grounds are legal ground and should be admitted in the light of ratio laid down in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) : [1999] 157 CTR 249 (SC) and Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC): [1990] 53 Taxman 85 (SC).
The ld. D.R. did not seriously object to the admission of additional ground.
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We have heard the rival submissions and perused the relevant material on record. We find that the above ground are covered by main ground no.1. Thus, these grounds are mere extension and being legal are allowed to be admitted in the light of ratio laid down by National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383(SC) wherein it was held that the additional ground of appeal can be admitted where the issue involved is pure question of law not involving any investigation of facts. In view of this matter, the additional ground are admitted. However, these grounds are involves the basic issue of taxing business income as long-term capital gain and if capital gains not allowing deduction of cost of acquisition and not making reference to DVO under section 50C (2) of the Act. Hence, being considered together.
Brief facts are that the assessee has along with two co-owners have sold a land on 03.03.2011 for sale consideration of Rs. 56 lakhs of which stamp duty valuation was at Rs. 1,70,04,082. The assessee`s share in immovable property was 28% which worked out to Rs. 47,61,143 as against disclosed sale consideration of Rs. 9,43,500. Therefore, under stated sale consideration workouts to Rs. 38,17,643 under section 50C of the Act. The assessee has claimed that he has done business and therefore, provisions of section 50C is not applicable. However, the AO observed that the assessee has treated the
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property under question as capital asset by showing the capital gains in his return of income filed for the year under consideration. Further, from the facts and the frequency of transaction, it is clear that same is not business transactions and is only afterthought of the assessee with a view to avoid the incidence of taxation on the amount of transfer of capital asset in the hands of the assessee. The assessee has not brought on record any single instance of land or property transacted. Therefore, the AO has taxed the capital gains of Rs. 46,76,143 as per provisions of section 50C of the Act for the year under consideration.
Being dissatisfied, the assessee preferred an appeal before the CIT (A). Wherein it was submitted that the assessee has along with two co-owners have purchased land on 20.07.2010 at Bharthana, Vesu for Rs. 50 Lakh of which cost with stamp duty, R.R. receipt and legal fees comes to Rs. 59 lakhs [stamp duty valuation at Rs. 1,70,04,082/-] with a intention to earn business profit from trading of land. The said land was sold on 04.03.2011 to M/s. Expressions within 7 months for Rs. 56 lakhs, (excluding stamp duty) in which net business loss of Rs. 84,000 being 28% share of the assessee including cost with stamp duty and other charges have been claimed. It was submitted that the stamp duty charged at Rs. 8,33,200 on purchase value of land as on 20.07.2011 and of Fair market value at Rs. 50 Lakh. The said land was sold
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within 7 months on 03.03.2011 for Rs. 56 lakhs on which also stamp duty was charged at Rs. 8,33,200. Hence, fair market value of the property purchased was at Rs. 50 Lakh which was accepted by the AO. The stamp duty of Rs. 8,33,200 same was charged on sale price of Rs. 56 lakhs which means that the price of Rs. 56 Lakh is fair market value of property. Therefore, there is no sale of land on account of business assets. However, the AO has considered the stamp duty valuation at Rs. 1,70,04,082 for sale of property whereas the AO has taken sale consideration for purchase at Rs. 50 lakhs only. Therefore, if the AO was not satisfied with the valuation, he should have referred the property for valuation. However, the CIT (A) was of the view that provision of section 50C are duly applicable as the assessee did not prove that the assessee was dealing in land and impugned land was actually business assets on which provisions of section 50C are not applicable. Merely because the land was sold within 7 months the same cannot ipso facto becomes business assets. Further, in computation of income and in books of accounts, the assessee has treated this land as capital asset and not as business assets. Thus, the claim of the assessee is contrary to its own stand and treatment meted out in books of accounts. It is also seen that he has made claim for exemption under section 54F of Rs. 8,58,500, which is allowable only against the income chargeable as capital gains and not as business profit. The assessee also did not produce any evidence
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that he wanted to start a new business activity involving the impugned land as business assets. The CIT (A) observed that another argument of the assessee that both the purchase and sale have happened in same financial year hence, Jantri value should be applied to purchase and sale value. Further, it was argued that matter be referred to DVO for determination of fair market value. However, the CIT (A) was of the view that provision of section 50C comes into operation only on sale value and not on purchase transaction. Therefore, the request of the assessee that purchase transaction should be referred to DVO is not acceptable. Nor the assessee has furnished any evidence that purchase value shown at Rs. 50 Lakh is not fair market value of transaction. Evidently, provision of section 50C are applicable to consideration received or accrued as a result of transfer of capital asset and not when consideration paid. The CIT (A) further, observed that the amendment by Finance Act, 2013 provides that if buyer purchases a property for a price below the Circle rate and the difference between then declared purchase price is more than Rs. 50,000 then such difference would be assumed to be the income of the purchaser and would be chargeable to tax under the head income from other source. This amendment coming in to effect with 01.04.2014. By this amendment, the purchaser has been also brought in the purview of section 50C of the Act, which was not earlier. This amendment has clarified that before 01.04.2014, the buyers of
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property were out of purview of section 50C of the Act. The CIT (A) further observed that the assessee has all along challenged applicability of provision of section 50C and never challenged that value adopted by Stamp Duty Authorities was more than the fair market value. The sub-section 50C (2) requires that the assessee should claim before the AO that value adopted or assessed by the stamp duty valuation authority under section 50C(1) exceeds fair market value of the property then only the AO may refer the valuation of capital asset to DVO. In the present case, the assessee has never made such claim before the AO Therefore; the AO was not required to refer to valuation. In view of this the CIT (A) held that the of capital gains at Rs. 46,76,143 taxed by the AO was justified.
Being, aggrieved the assessee filed this appeal before the Tribunal. The learned counsel for the assessee submitted that impugned land was transferred within just 7 months from date of purchase and was therefore, adventure in nature of trade. This view was supported by decision of Hon`ble Supreme Court in the case of G. Venkatswami Naidu & Co. v. CIT [1959] 35 ITR 594 (SC) in which it was held that even an isolated and single transaction may be adventure in nature of trade , if some essential features of trade are present is such a transaction. Therefore, the CIT (A) should have treated the transaction
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as adventure in nature of trade and income arising should have been assessed as business income and not as capital gains. The assessee has purchased the property for Rs. 50 Lakh and sold for Rs. 56 Lakh hence, the land value given in sale deed is fair market value. Further, the provisions of section 50C provides that where there is difference in value assessed by Stamp Duty Authorities then the matter may be referred to DVO for determining fair market value. This means that the AO has relied on the value determined by Stamp Duty Authorities at the time of sale where stamp authorities have determined the same value at the time of purchase by the assessee, which is just six month before the sale. Therefore, CIT (A) was requested to refer the property for valuation to DVO, but Ld. CIT (A) denied the demand made by the assessee. The learned counsel for the assessee placing reliance in the case of Nandita Khosla 11 taxmann.com 344 (Mum-Trib) laid down that where the assessee has pointed out strong reason that sale consideration was less than the value determined for stamp duty purposes, then such case have to be referred to DVO. The Chennai tribunal has also examined the issue in the case of Shaik Mohideen v. ITO [2009] 123 TTJ (Chennai) 411 and also held that It has been appreciated as to what is it that the assessee is asking for-merely a chance to be able to say that the value adopted by Stamp Valuation Authority, exceeds the fair market value of the property. Giving chance to the assessee to make
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such a plea, as per law, is not the same thing as accepting the claim itself. The learned counsel for the assessee further, placed reliance in the case of Raj Kumar Agarwal v. DCIT [2014] 47 taxmann.com 88 (Agra-Trib) wherein it was held that where the assessee claimed that actual market value of her land was less than stamp duty valuation, it was incumbent upon Assessing Officer to refer valuation of said land to Departmental Valuation Officer. The learned counsel for the assessee further, relied on the decision of Hon`ble Calcutta High Court in the case of Sunil Kumar Agarwal v. CIT [2014] 47 taxmann.com 158 (Calcutta) wherein it was held that the assessee contended that its case had always been that the price offered by the purchaser was the highest prevailing market price and, thus, valuation made by District Sub-Registrar was, in fact, challenged, and the Assessing Officer, in fairness, should have referred the matter to a valuation officer contemplated under section 50C, rather than proceeding to assess the capital gain on the basis of the valuation made by the District Sub-Registrar. The learned counsel for the assessee further relied in the case of Hi-Technical Auto v. ACIT I.T.A.No. 2703/Ahd/2015 dtd. 22.11.2017 of Ahmedabad Tribunal and Narendra Dahyabhai Patel v. ITO I.T.A.No. 2087/Ahd/2013 dtd. 31.08.2016. The learned counsel for the assessee also contended that the assessee be allowed deduction on account of cost of acquisition and cost of indexation in accordance with law while computing short-
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term capital gains on sale of land and deduction claimed under section 54F of the Act.
On the other hand, the ld. Sr. DR supported the orders of lower authorities.
We have heard the rival submissions and perused the relevant material on record. We find that the computation of income and in books of accounts of the assessee revealed that the assessee has treated this land as capital asset and not as business assets. Therefore, this claim of the assessee that he was doing business is contrary to its own stand and treatment meted out in books of accounts. It is also seen that the assessee has made claim for exemption under section 54F of Rs.8,58,500/- which is allowable only against the income chargeable as capital gains and not as business profit. Therefore, the claim that sale of land was adventure in nature of trade is not born out from records and conduct of the assessee. The assessee also did not produce any evidence that he wanted to start a new business activity involving the impugned land as business. Therefore, we are of the considered view that the provision of section 50C are duly applicable as the assessee did not prove that the assessee was dealing in land and impugned land was actually business assets on which provisions of section 50C are not applicable. Merely because the land was sold
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within 7 months the same cannot ipso facto becomes business assets. Therefore, the decision relied in the case of G Venkatswami Naidu & Co. v. CIT [1959] 35 ITR 594 (SC) wherein it was held that even an isolated and single transaction may be adventure in nature of trade, if some essential features of trade are present is such a transaction. We do not find that there are any essential feature are present in this case. Therefore, said case is distinguishable on facts hence, not applicable. Further, with regard the claim of the assessee that the AO should have referred the land for valuation to the DVO, we find that here is a case in which the assessee has specifically objected to the adoption of stamp duty valuation price before the CIT (A). The mere fact that the assessee has not challenged the stamp duty valuation cannot be put against the assessee. The question as to whether the assessee filed any objections before the Stamp Valuation Authority to dispute the valuation, or filed appeal or revision or made reference before any authority, court or the High Court under sub-section (2)(b) of Section 50C of the Act is not of any relevance in this case, as the AO himself observed that the assessee did not dispute the stamp valuation before the Stamp Valuation Authority. There may be several reasons for the purchaser not to file such objection. A purchaser may not go into litigation, and pay stamp duty, as fixed by the Stamp Valuation Authority, which may be over and above the fair market value of the property, as on the date of transfer, though the
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amount so determined has not been actually received by owner of the property. The position as to whether reference should be made to the DVO, even when there is no specific plea to that effect by the assessee, is now well set out in Hon'ble Calcutta High Court's judgment in the case of Sunil Kumar Agarwal v. CIT [2014] 47 taxmann.com 158 (Calcutta) wherein Their Lordships have, inter alia, observed as follows:- “….we are of the opinion that the valuation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub-Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law." 11. In the light of ratio of above decision we are of the considered opinion that the AO should have made reference to DVO the land under consideration and The learned counsel for the assessee relied in the case of Raj Kumar Agarwal v. DCIT [2014] 47 taxmann.com 88 (Agra-Trib) wherein it was held that where the assessee claimed that actual market value of her land was less than stamp duty valuation, it was incumbent upon Assessing Officer to refer valuation of said land to Departmental Valuation Officer. As there is no binding judicial precedent contrary to what has been held by Hon'ble Calcutta High
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Court, as above, the esteemed views of Their Lordships, even though from a non-jurisdictional High Court, bind us as well. Our view are further, supported by the decision in the case of Hi-Technical Auto v. ACIT I.T.A.No. 2703/Ahd/2015 dtd. 22.11.2017 of Ahmedabad Tribunal and Narendra Dahyabhai Patel v. ITO I.T.A.No. 2087/Ahd/2013 dtd. 31.08.2016as relied by the learned counsel for the assessee.
In the light of the above facts and legal position, the plea of the assessee, as set out in the ground of appeal, is indeed well taken. The prevailing legal position is now like this. Once the assessee claims that the actual market value of the land or building is less than stamp duty valuation adopted by the authorities, it is incumbent upon the Assessing Officer to refer to the valuation of said land or building to the departmental valuation officer. In the present case, the Assessing Officer has not done so. In view of this factual position, and in the light of the discussions above, we deem it fit and proper to remit the matter to the file of the Assessing Officer for adjudication de novo after making a reference to the DVO, and completing the assessment on the basis of the valuation so received from the DVO. While so deciding the matter afresh, denova the Assessing Officer will decide the matter in accordance with the law, by considering the claim of deduction of cost of acquisition as claimed,
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improvement cost and other deduction as claimed and also examine the claim under section 54F etc. by the assessee in support of his claim before the AO by way of a speaking order and after giving a reasonable opportunity of hearing to the assessee. We direct so. Accordingly, the aforesaid grounds of appeal are partly allowed.
In the result, the appeal of the assessee is partly allowed.
The order pronounced in the open Court on 28.09.2018. .
Sd/- Sd/- (C.M. GARG) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat: Dated: 28th September, 2018/opm Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/ITAT-File. By order / / TRUE COPY / / Assistant Registrar, Surat