AMIT GIRDHARBHAI PATEL,VADODARA vs. THE ACIT, CIRCLE-1(1)(1), VADODARA

A.Y. 2012-13 Page No 3 Amit Girdharbhai Patel vs. ACIT 3.1. Further it was noted by the A.O. that the assessee did not give possession of the impugned land to Shri. Nilesh V Shah at the time of Banakhat. So there was no transfer in view of the provisions of section 2(47) of the Act. However, in the final sale deed dated 13/03/2012, the assessee appeared as the seller and the property was sold at the consideration less than the stamp duty value thereby attracting the provisions of section 50C of the Act.

3.2. In the appellate order No.CAB/5-933/2014-15 dated 26/11/2015 in the case of Shri. Nilesh V Shah for the AY 2012-13, the Ld. CIT(Appeals) remarked that in this case the transfer did not take place as per section 2(47) of the Act and hence the provisions of Section 50C would not be applicable in the hands of Shri. Nilesh V Shah but would be applicable in the case of Shri. Amit G Patel i.e. the assessee herein. The relevant portion of the appellate order is reproduced here as follows:-

"Therefore, the provisions of section 50C of the Act may be applicable in the cases of Srhi Amit G. Patel, Shri Kirit D. Patel and Shri Arvind G. Patel, but not in the case of the assesse, as no "transfer." of property took place in his case, in terms of section 2(47) of the Act. In view of the fact that the assessee is not a seller of the property, the provisions of section 50C of the Act cannot be invoked in his case. However, the Assessing Officer is directed to examine the applicability of the provisions of section 147 and 50C in the cases of Shri Amit. G. Patel, Shri Kirit D. Patel and Shri Arvind G. Patel."

3.3. Since there was a difference between the Stamp Duty Value and Sale Consideration, the provisions of Section 50C of the Act A.Y. 2012-13 Page No 4 Amit Girdharbhai Patel vs. ACIT were applied in this case and the AO made addition of Rs.1,37,32,400/- [Rs.2,39,32,400 Rs.1,02,00,000] to the total income of the assessee for the Asst. Year 2012-13.

1. The Ld. AO has erred in law and on facts of the case in reopening the assessment u/s. 147 of the Act. Under the facts and circumstances of the case, the action of reopening is without jurisdiction and is not permissible either in law or on facts.

2. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in making addition of Rs. 1,37.32,400/- u/s. 50C of the Act.

3. Both the lower authorities failed to appreciate the commercial arrangement of the transaction. The impugned land has been sold during the year under consideration by the confirming parties (Mr. Nilesh V. Shah & Others) and not the appellant. It is the substance of the transaction and not the form which needs to be considered.

4. Both the lower authorities failed to appreciate that the impugned land has been transferred by the appellant in the preceding year (A.Y. 2011-12) by virtue of Section 2(47) of the Act and capital gain on such transfer has been duly offered to tax in the preceding year.

5. Alternatively and without prejudice, the stamp duty valuation as on the date of agreement to sale shall be adopted as per the first proviso to Section 50C of the Act introduced by Finance Act, 2016. It is well settled that the first proviso to Section 50C of the Act is curative in nature, thus applicable retrospectively.

6. Alternatively and without prejudice, the addition u/s. 50C of the Act shall be restricted to the share of the appellant (1/3rd share) in the impugned land.

7. Alternatively and without prejudice, reference ought to have been made to DVO.

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8. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.

5. Ld. Sr. Counsel Shri Tushar Hemani appearing for the Assessee submitted that his arguments of three-fold namely the full payment was received by the assessee on 16-02-2011 itself i.e. Asst. Year 2011-12 and possession was also handed over in A.Y. 2011-12. In view of Section 2(47)(v) of the Act transfer took place in the Asst. Year 2011-12 which has been accepted by the Revenue. Thus there is no taxable event occurred in Asst. Year 2012-13. Therefore the question of addition u/s 50C in the Asst. Year 2012-13 does not arise.

5.1. The second fold of the arguments of Ld. Sr. Counsel is that since the consideration as per Agreement to Sale dated 16-02-2010 was Rs. 80,00,000/- higher than the prevailing Jantri rate of Rs. 75,57,600/- no addition can be made u/s 50C of the Act, as per proviso to Section 50C inserted by Finance Act, 2016 wherein the date of agreement fixing the amount of consideration and the date of registration, for transfer of capital asset are not the same value adopted or assessed or assessable by Stamp Valuation Authority A.Y. 2012-13 Page No 6 Amit Girdharbhai Patel vs. ACIT and the date of agreement may be taken for computing full value of consideration. Thus Ld. Counsel relied upon the decision of this Tribunal in the case of D. Soni Vs. ACIT [2016] reported in 161 ITD 627 (Ahmedabad).

5.2. Third fold of argument of Ld. Sr. Counsel is the assessee had 1/3rd share in the land. Hence the A.O. was not justified in making entire addition u/s 50C of the Act in assessee’s hand. Whereas assessee offered Capital Gain in the A.Y. 2011-12 by filing Return of Income paid appropriate tax thereon. Therefore the impugned addition is not justified and the same deserves to be deleted.

7.1. The first fold of argument by Ld. Senior Counsel that the assessee received full consideration on 16-02-2011 and possession was also handed over in A.Y. 2011-12, as per Section 247(v) of the Act, there is no taxable event in the Asst. Year 2012-13. We have considered the materials available on record, though the Sale Deed was registered in A.Y. 2012-13 and therefore the question of addition u/s 50C does not arise in the hands of the assessee. Since, it is undisputed fact that the Agreement of Sale was entered on 16-02-2010 between the assessee and two other co-owners with A.Y. 2012-13 Page No 8 Amit Girdharbhai Patel vs. ACIT Nilesh V. Shah and four others to sell the property for a consideration of Rs. 80,00,000/- and received Rs. 9,00,000/- as advance vide cheque payment dated 16-02-2010. It is further seen from the Notarized “Deed of Undertaking” dated 13-03-2012, the details of payment of full consideration of Rs.80,00,000/- with dates, cheque numbers and Bank details are provided which were between 16-02-2010 to 16-03-2011 by various installments. Thus as per the Banakhat, the full sale consideration was paid by Nilesh V. Shah to the assessee in the A.Y. 2011-12 itself and thereby possession of the land was also handed over to Nilesh V. Shah.

7.2. Pursuant to the above transaction, assessee offered his share of capital gain in the Asst. Year 2011-12 by filing his Return of Income on 23-11-2011 claiming Short Term Capital Gain of Rs.5,32,933/- which is not disputed by the Revenue. However the sale deed is registered for a consideration of Rs.1.02 crores on 13- 03-2012 to one Shri Rameshbhai M. Patel wherein Nilesh V. Shah is held to be a Confirming Party and the assessee and two others as the Sellers. In the appellate proceedings of Nilesh V. Shah, Ld. CIT(A) held that the provisions of Section 50C of the Act will be applicable in the hands of Sellers, thereby the assessments of the assessee and two co-owners were been reopened by the department. The Assessing Officer merely proceeded with making addition of Rs.1,37,32,400/- being difference between market value and registered value u/s 50C in its entirety in the hands of the assessee (leaving behind the two co-owners of share) for the Asst. Year 2012-13 which is legally not justified. Thus the first and third fold of argument of the assessee are in favour of the assessee and A.Y. 2012-13 Page No 9 Amit Girdharbhai Patel vs. ACIT the additions made u/s 50C by the assessing officer is invalid in law and liable to be deleted.

7.3. The second fold of argument namely prevailing Jantri Rate as far the date of agreement and payment of advance by way of cheque payments through banking transactions is to be considered, irrespective of the registration of the land taken place in subsequent year. Undisputedly the Agreement of Sale was entered on 16-02-2010 and registered with the Sub-Registrar, Baroda-3, Akota as Document No. 1997/2010 and also received Rs.9,00,000/- by way of cheque on 16-02-2010 from Nilesh V. Shah. The first and second proviso to Sub-section (1) of Section 50C of the Act reads as follows: Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer : Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, on or before the date of the agreement for transfer:

7.4. The above provisos are clearly applicable to the facts of the present case, the registered Agreement of Sale (Banakhat) entered A.Y. 2012-13 Page No 10 Amit Girdharbhai Patel vs. ACIT on 16-02-2010 and received advance considerations through electronic and cheque modes. However registered of Sale Deed was executed on 13-03-2012 in the subsequent assessment year namely Asst. Year 2012-13. Though the insertions of provisions of section 50C was made by Finance Act, 2016 with effect from 01-04- 2017 has retrospective effect as held by the Tribunal in the case of Dharamshibhai Sonani vs ACIT (cited supra) as follows: “……So far as section 50C is concerned, the Finance Act, 2016, with effect from 1- 4-2017, inserted the provisos to section 50C. [Para 5]

There cannot be any dispute that this amendment in the scheme of section 50C has been made to remove an incongruity, resulting in undue hardship to the assessee.

Once it is not in dispute that a statutory amendment is being made to remove an undue hardship to the assessee or to remove an apparent incongruity, such an amendment has to be treated as effective from the date on which the law, containing such an undue hardship or incongruity, was introduced. [Para 7]

The present amendment, being an amendment to remove an apparent incongruity which resulted in undue hardships to the taxpayers, should be treated as retrospective in effect. Quite clearly therefore, even when the statute does not specifically state so, such amendments, can only be treated as retrospective and effective from the date related statutory provisions was introduced. Viewed thus, the proviso to section 50C should also be treated as curative in nature and with retrospective effect from 1-4- 2003, i.e. the date effective from which section 50C was introduced. [Para 8]

So far as the amendment to section 50C being retrospective in effect is concerned, there is no doubt about the legal position. That the provisos to section 50C being effective from 1-4-2003. This is precisely what the assessee has prayed for. The plea of the assessee is indeed well taken and deserves acceptance. What follows is this. The matter will now go back to the Assessing Officer. In case he finds that a registered agreement to sell, as claimed by the assessee, was actually executed on 29- 6-2005 and the partial sale consideration was received through banking channels, the Assessing Officer, so far as computation of capital gains is concerned, will adopt stamp duty valuation, as on 29-6-2005, of the property sold as it existed at that point of time. In case the assessee is not content with this value being adopted under section 50C, he will be at liberty to seek the matter being referred to the DVO for valuation, again as on 29-6-2005, of the said property. As a corollary thereto, the subsequent developments in respect of the property sold (e.g. the conversion of use of land) are to be ignored. It is on this basis that the capital gains will be recomputed.

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With these directions, the matter stands restored to the file of the Assessing Officer for adjudication de novo. [Para 9]”

7.5. Thus on the above provisos to Section 50C of the Act are applicable in assessee’s case for the Asst. Year 2012-13. Further in this case, the Ld. Sr. Counsel brought to our attention that the prevailing Jantri Rate was Rs.75,57,600/- for A.Y. 2011-12 and produced relevant extract of the Stamp Duty rates which is available at Page No. 58 of the Paper Book. Whereas the assessee’s agreed to sell the property for Rs.80,00,000/- which is much higher than the Jantri value in the Asst. Year 2011-12. Since the assessee received full consideration and handed over possession of the land in the A.Y. 2011-12, thus the question of invoking 50C even for the Asst. Year 2011-12 does not arise. Thus there is no justification for the Revenue to invoke 50C in the present Asst. Year 2012-13 to bring to tax the differential value. Thus the ground raised by the assessee are hereby allowed.