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Facts
The assessee, an individual, did not file an income tax return for AY 2010-11. The Assessing Officer reopened the assessment under Section 147 after a land transfer, making an ex-parte addition of Rs. 1,11,47,000/- as short-term capital gain, representing the assessee's 50% share in the property, based on Section 50C. The Ld. CIT(A) directed the AO to re-compute capital gains by using the Fair Market Value at the time of allotment as the cost of acquisition, against which the Revenue appealed.
Held
The Tribunal acknowledged the Revenue's argument that Fair Market Value should not be applied when the actual cost of acquisition is available. However, considering the ex-parte nature of the Assessing Officer's order and the lack of information regarding other co-owners, the Tribunal deemed it proper to restore the issue to the Assessing Officer for fresh adjudication, allowing the assessee an opportunity to be heard and considering the fate of other co-partners. The Revenue's appeal was allowed for statistical purposes.
Key Issues
Whether the cost of acquisition for calculating capital gains should be the actual payment made or the Fair Market Value at the time of allotment, and whether the CIT(A) was justified in directing the use of FMV as the cost of acquisition.
Sections Cited
50C, 147, 148, 144, 2(47), 45(1), 139(1), 271(1)(C), 48
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
This appeal filed by the Revenue is directed against the order dated 29.05.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2010-11.
None appeared on behalf of the assessee at the time of hearing despite service of notice through the Ld. DR. Since this case was getting adjourned from time to time and notice was duly served through the Ld. DR, therefore, this appeal is being decided on the basis of material available on record and after hearing the Ld. DR.
Facts of the case, in brief, are that the assessee is an individual and has not filed his return of income for the impugned assessment year. Since the assessee along with others has entered into a tripartite agreement with Shri Jaykishan M. Nogja for transfer of his rights in respect of land situated at Plot NO.06A, Sector- 10E, Village-Kalamboli, which was transferred vide agreement dated 20.11.2009 registered with Sub-Registrar, Panvel and the consideration as per the provisions of section 50C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was Rs.2,23,09,000/-, therefore, the Assessing Officer, after recording the reasons and obtaining due approval from the competent authority, reopened the assessment as per the provisions of section 147 of the Act. Accordingly notice u/s 148 of the Act was issued on 31.03.2017. Since the assessee did not comply to the statutory notices issued, the Assessing Officer proceeded to complete the assessment u/s 144 of the Act. Considering the sale consideration as per the registered sale deed at Rs.2,23,09,000/- and that the assessee is having 50% share in the said property, the Assessing Officer made addition of Rs.1,11,47,000/- treating the same as short term capital gain by recording as under : “4.3 In view of the facts and circumstances of the instant case, the above issues have been examined carefully. As a result it has been concluded as under: Though the land acquired by the CIDCO was agricultural land but the land allotted by CIDCO under 12.5% scheme was not an agricultural land. The subsequent sale of land allotted by CIDCO under 12.5% scheme to a purchaser/developer is clearly an exploitation of land for commercial purposes. There are two situations of transactions in this case. First the transaction by which CIDCO has acquired the land of the assessee & others and secondly the transaction by which the assessee & others has given the land for development for a consideration. At the time of first transaction, it can be said that the assessee has received the consideration as a result of compulsory acquisition of agricultural land and hence the same would not attract capital gains. The mode of consideration is not important as this may be in cash or in kind.
But the second transaction clearly mounts to 'transfer' as defined under section 2(47) of the Income-tax Act, 1961. Therefore the provisions of section 45(1) of the Income-tax Act, 1961 attracted in this case accordingly. Now the only question remains is to what should be the cost of acquisition of land awarded by CIDCO under 12.5% scheme. In this regard, it can clearly be concluded that as on date of transfer, the market value represents the value on which the stamp duty is payable. It doesn't speak about the cost of land. The market value of the property cannot be considered as cost of the property. The cost of property is necessarily be, the amount at which the same was acquired initially. In the instant case, the land was acquired by the assessee & other from CIDCO under 12.5% scheme vide lease agreement dated 24/04/2007 on a payment of Rs.14,993/-. Thus, the cost of the plot transferred vide agreement is clearly Rs.14,993/- in the hands of the assessee and others. 5.1 In view of the above discussion and having regard to the terms of agreements, it is established beyond doubt that the transfer within the meaning of section 2(47)(v) has taken place on the date of execution of agreement on 20/11/2009 and therefore, the capital gains has arisen during the year under consideration i.e. A.Y.2010-11. However, the assessee has not offered capital gains for taxation as the assessee has neither filed return of income U/s 139(1) or U/s 148 of the Income-tax Act, 1961. Since the assessee has failed to comply during the course of reassessment proceedings, the capital gains liability as a result of transfer of the said property is required to be worked out. After considering the date of allotment (which is 24/04/2007), payment to CIDCO of Rs.14,993/- as cost of acquisition and sale consideration of Rs.2,23,09,000/- [as per section 50C of the Act), the resultant capital gain is short term capital gains which works out to Rs.2,22,94,007/- out of the above transfer. 5.2 However, after considering the fact that the assessee has 50% share in the said property as evident from the agreement, the resultant short term capital gains in the hands of the assessee comes to Rs.1,11,47,004/-. Accordingly, short term capital gain of Rs.1,11,47,004/- is hereby added to the total income of the assessee.”
In appeal, the Ld. CIT(A) / NFAC directed the Assessing Officer to re- compute the capital gain by deducting the fair market value from the sale consideration by observing as under: 4.5. I have considered the findings of the AO, submissions/grounds of the appellant and the facts of the case as placed before me. The submissions filed by the appellant clearly points out to the fact that the payment made by the appellant and his brother to CIDCO of Rs 14,999/- at the time of lease agreement dated 24/04/2007 of the said plot under the 12.5% scheme can never be equated to the cost of acquisition of the said plot. It is quite
illogical that the value of said plot has increased to Rs 2,23,09,000/- (1487 times) when the same plot lease right is transferred to one Shn. Jayakrishnan on 20/11/2009 i.e., within 31 months. The AO would have ideally adopted the Fair market value of the said plot as on 21/04/2007 and used it as cost of acquisition to calculate the value of capital gain. The AO is not justified in treating the entire 50C value as capital gains by adopting a meagre payment cost as cost of acquisition, without any concrete evidences or proof to the contrary. 4.6. However, though the appellant had taxable income, he had grossly failed to file the return of income. The detailed submissions are submitted only during the appellate stage though adequate opportunity of being heard is given by AO. In view of the above, and to make both the ends of justice to meet, the AO is directed to re-calculate the capital gains based on the FMV of the said plot at the time of allotment by CIDCO to the appellant. The AO may accordingly calculate the same while giving effect to this order. The penalty provisions u/s 271(1)(C) in the original assessment order remains intact. Accordingly the addition made by the AO is modified.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal before the Tribunal by raising the following grounds:
1. On the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in modifying the addition made by the AO by directing the AO to ascertain the Fair Market Value of the said land at the time of acquisition, when there is no such provision in Section 48 of the I.T.Act.
2. On the facts and in circumstances of the case, the case falls under the exceptions clause as per Para 3.1.(f) of CBDT's Circular No.5/2024 wherein the tax effect is not quantifiable as on date.
3. The order of the Ld.CIT(A) may be vacated and that of the Assessing Officer may be restored.
4. The appellant craves leave to add, amend or alter any ground/grounds, which may be necessary.
The Ld. DR at the outset submitted that when the cost of acquisition of the asset is available, the Ld. CIT(A) / NFAC was not justified in directing the Assessing Officer to deduct the fair market value of the property for computation of the capital gain. He accordingly submitted that the order of the Ld. CIT(A) / NFAC being very cryptic and not in accordance with law, therefore, the same should be reversed and that of the order of the Assessing Officer be restored.
We have heard the Ld. DR and perused the orders of the Assessing Officer and Ld. CIT(A)/ NFAC. It is an admitted fact that due to non submission of any details before the Assessing Officer, the Assessing Officer determined the share of short term capital gain in the case of the assessee at Rs.1,11,47,000/-, the details of which have already been reproduced in the preceding paragraphs. We find the Ld. CIT(A) / NFAC directed the Assessing Officer to determine the capital gain in the case of the assessee by deducting the fair market value of the land from the sale consideration, the reasons of which have already been reproduced in the preceding paragraphs. We find merit in the arguments of the Ld. DR that when the cost of the asset is available there is no question of deducting the fair market value from the sale consideration so as to determine the capital gain either long term or short term. However, on a pointed query by the Bench as to what has happened in the case of the other co-owners, the Ld. DR submitted that he is not having any details. Since the order of the Assessing Officer is ex-parte order and since the fate of the other co-owners is not available before us therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. While doing so, he shall take into account the fate of the other co-partners and decide the issue as per fact and law. The assessee if he so desires, shall substantiate his case by filing the requisite details. We hold and direct accordingly. The grounds raised by the Revenue are accordingly allowed for statistical purposes.
In the result, the appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced in the open Court on 30th April, 2025.