POONAM HARESH BUDHRANI,MUMBAI vs. CIT(A) 39, MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M):

3.1. During the course of first appellate proceedings, the assessee pointed out that the difference between the value adopted by the stamp duty authority and the sale consideration declared by her was only Rs.2,66,000/- (Rs.61,16,000 – Rs. 58,50,000) which works out to 4.55% of sale consideration declared by her. It was pointed out that the consideration fixed by the stamp valuation authority is only indicative and cannot be construed as the full value of consideration as the consideration is driven by market forces. The assessee also placed reliance on the decision of Co-ordinate Bench of Jaipur Tribunal wherein it was held that if the difference between consideration fixed by the stamp valuation authority and the actual consideration is less than 10%, then the actual consideration adopted by the assessee should be accepted. The ld. CIT(A) did not heed to the contentions of the assessee and proceeded to upheld the addition in the sum of Rs.2,66,000 made by the ld. AO.

3.2. With regard to claim of exemption u/s.54EC of the Act in respect of investment made by the assessee in NHAI capital gain bonds for Rs.50,00,000/-, both the lower authorities held that assessee had invested the same beyond a period of six months from the date of sale and hence, not eligible for exemption thereon.

“7. These submissions, however, do not impress us. As noted by the Central Board of Direct Taxes circular 8 of 2018, explaining the reason for the insertion of the third proviso to Section 50C(1), has observed that "It has been pointed out that the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location". Once the CBDT itself accepts that these variations could be on account of a variety of factors, essentially bonafide factors, and, for this reason, Section 50C(1) should not come into play, it was an "unintended consequence" of Section 50(1) that even in such bonafide situations, this provision, which is inherently in the nature of an anti-avoidance provision, is invoked. Once this situation is sought to be addressed, as is the settled legal position- as we will see a little later in our analysis, this situation needs to be addressed in entirety for the entire period in which such legal provisions had effect, and not for a specific time period only. There is no good reason for holding the curative amendment to be only as prospective in effect. Dealing with a somewhat materially identical situation in the case of Rajeev Kumar Agarwal v. Addl. CIT [2014] 45 taxmann.com 555/149 ITD 363 (Agra) wherein a coordinate bench was dealing with the question whether insertion of a proviso to Section 40(a)(i) to cure intended consequence could have retrospective effect, even though not specifically provided for, and speaking through one of us (i.e. the Vice President), the coordinate bench had, after a detailed analysis of the legal position, observed that, "Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced". Referring to this decision, and extensively reproducing from the same, including the portion extracted above, Hon'ble Delhi High Court, in the case of CIT v. Ansal Landmark Township (P.) Ltd. [2015] 61 taxmann.com 45/234 Taxman 825/377 ITR 635 (Delhi), has approved this approach and observed that "the Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to section 40(a)(ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance". The same was the path followed by another bench of this Tribunal in the case of Dharamashibhai Sonani v. Asstt. CIT [2016] 75 taxmann.com 141/161 ITD 627 which has been approved by Hon'ble Madras High Court in the judgment reported as CIT v. Vummudi Amarendran [2020] 120 taxmann.com 171/429 ITR 97]. The question that we must take a call on, therefore, is as to what is the rationale behind the insertion of the third proviso to section 50C(1), and if that rationale is to provide a remedy for unintended consequences of the main provision, we must hold that the third proviso to section 50C(1) comes into force with effect from the same date on which the main provision, unintended provisions of which are sought to be nullified, itself was brought into effect. Let us understand what the nature of the provisions of section 50C is. In terms of this provision, if the property is sold below the stamp duty valuation rate, which is often called circle rate, this stamp duty valuation report is assumed as sale consideration for the property in question, and, accordingly, capital gains tax is levied. This deeming fiction to substitute apparent sale considerations by notional consideration computed on the basis of a stamp duty valuation rate, was thus to address the issue with respect to potential evasion of taxes by understating the sale consideration amount in a sale deed. As noted by the CBDT, while explaining the justification for insertion of section 50C, "(t)he Finance Act, 2002, has inserted a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property". Section 50C, thus, on a conceptual note, is a provision to address capital gains tax evasion on account of understatement of the consideration. Of course, the law provides, under section 50C(2), that wherever an assessee claims that the actual market rate is less than the stamp duty valuation, he can have the matter referred to a Departmental Valuation Officer for the ascertainment of the market value, but then it is a cumbersome procedure and, at the end of the day, every valuation, whether by the departmental valuation officer or under the stamp duty valuation notification, is an estimate, and there can always be bonafide variations, though to a certain limited extent, in these estimations. Unless, therefore, some kind of a tolerance band or a safe harbour provision, in respect of such bonafide variations, is implicit in the scheme of law, the assessees are bound to face undue hardships. The mechanism under section 50C proceeds on the assumption that when the sale consideration is less than the stamp duty valuation, the sale consideration is to be treated as understated. This assumption is, however, laid to rest when the variations between the stated consideration and the stamp duty valuation figure are treated as explained. The insertion of the third proviso to Section 50C(1) provides for this tolerance band with respect to a certain degree of variations between the stamp duty valuation and the stated consideration of an immovable property. In other words, as long as the variations are within the permissible limits, the anti-avoidance provisions of Section 50C do not come into play. As we have noted earlier, the CBDT itself accepts that there could be various bonafide reasons explaining the small variations between the sale consideration of immovable property as disclosed by the assessee vis-à-vis the stamp duty valuation for the said immovable property. Obviously, therefore, disturbing the actual sale consideration, for the purpose of computing capital gains, and adopting a notional figure, for that purpose, will not be justified in such cases. On a conceptual note, an estimation of market price is an estimation nevertheless, even if by a statutory authority like the stamp duty valuation authority, and such a valuation can never be elevated to the status of such a precise computation which admits no variations. The rigour of Section 50C(1) was thus relaxed, and very thoughtfully so, to take these bonafide cases of small variations between the stated sale consideration vis-à-vis stamp duty valuation, out of the scope of adjustments contemplated in the computation of capital gains under this anti-avoidance provision. In our humble understanding, it is a case of a curative amendment to take care of unintended consequences of the scheme of Section 50C. It makes perfect sense, and truly reflects a very pragmatic approach full of compassion and fairness, that just because there is a small variation between the stated sale consideration of a property and stamp duty valuation of the same property, one cannot proceed to draw an inference against the assessee, and subject the assessee to practically prove his being truthful in stating the sale consideration. Clearly, therefore, this insertion of the third proviso to Section 50C(1) is in the nature of a remedial measure to address a bonafide situation where there is little justification for invoking an anti-avoidance provision. Similarly, so far as enhancement of tolerance band to 10% by the Finance Act 2020, is concerned, as noted in the CBDT circular itself, it was done in response to the representations of the stakeholders for enhancement in the tolerance band. Once the Government acknowledged this genuine hardship to the taxpayer and addressed the issue by a suitable amendment in law, the next question was what should be a fair tolerance band for variations in these values. As a responsive Government, which is truly the hallmark of the present Government, even though the initial tolerance band level was taken at 5%, in response to the representations by the stakeholders, this tolerance band, or safe harbour provision, was increased to 10%. There is no particular reason to justify any particular time frame for implementing this enhancement of tolerance band or safe harbour provision. The reasons assigned by the CBDT, i.e., "the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location," was as much valid in 2003 as it is in 2021. There is no variation in the material facts in this respect in 2021 vis-à- vis the material facts in 2003. What holds good in 2021 was also good in 2003. If variations up to 10% need to be tolerated and need not be probed further, under section 50C, in 2021, there were no good reasons to probe such variations, under section 50C, in the earlier periods as well. We are, therefore, satisfied that the amendment in the scheme of Section 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à-vis stamp duty valuation to 10%, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related statutory provision of Section 50C, i.e. 1st April 2003. In plain words, what is means is that even if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face value and the anti-avoidance provisions under section 50C will not be invoked.

will have no application in the matter. The enhancement in capital gain computation, as made by the Assessing Officer, thus stands disapproved. The assessee gets the relief accordingly.

4.1. Respectfully following the same, we direct the ld. AO to consider only Rs.58,50,000/- as sale consideration while computing the capital gains as against Rs.61,16,000/-.

4.2. We find that assessee has sold a residential property located at Wadala on 25/04/2013 for Rs.58,50,000/-. We find that assessee intended to invest in NHAI capital gain bonds for Rs.50,00,000/- and claim exemption u/s.54EC of the Act thereon. For this purpose, it has issued a cheque bearing cheque No.100021 dated 24/10/2013 for Rs.50,00,000/- drawn on Abhyudaya bank along with application for investment in NHAI bonds to M/s Karvy Stock Broking Ltd., the authorised agent of NHAI, through its agent (sub-broker) Mr. Gobind M Vaswani (sub-broker Code No.231865) for Rs.50,00,000/-. The said application for making investment in NHAI bonds together with the cheque dated 24/10/2013 for Rs.50,00,000/- was handed over by the assessee to sub- broker Shri Gobind M Vaswani on 24/10/2013 who inturn had handed over the documents along with cheque dated 24/10/2013 to M/s. Karvy Stock Broking Ltd., (authorised agent) on 24/10/2013 itself. M/s. Karvy Stock Broking Ltd., had indeed acknowledged the receipt of application together with the cheque dated 24/10/2013 for Rs.50,00,000/- by way of affixing its stamp in the application form for investment in NHAI bonds. Thereafter, M/s. Karvy Stock Broking had retained the cheque with it and had handed over the same to NHAI on 06/11/2013 and the cheque for Rs.50,00,000/- was ultimately encashed on 07/11/2013. This had resulted in creating damage to the assessee in the form of making investment in NHAI bonds beyond the period of six months from the date of transfer. According to revenue, the last date of making investment in NHAI capital gains bonds had expired on 25/11/2013 and since the investment was made on 07/11/2013 (being the date of encashment of cheque) , the asessese is not eligible for exemption u/s 54EC of the Act. It is a fact that the cheque has been handed over to the sub-broker and consequentially by him to M/s Karvy Stock Broking Ltd on 24/10/2013 itself. We hold that the assessee cannot be penalised for the delay caused by M/s Karvy Stock Broking Ltd to hand over the cheque to NHAI, which in any case, is not in the control of the assessee. Hence we hold that the assessee had duly invested in NHAI bonds within a period of six months from the date of sale. Infact from the perusal of the bank statements of the assessee, we find that the assessee had pre-closed his fixed deposits held in Corporation Bank and had transferred the maturity proceeds thereon to Abhyudaya Bank on 11/10/2013 itself. This very clearly proves the intention of the assessee to make the investment in NHAI bonds well before the due date prescribed in the statute. Infact, on the date of issuance of cheque for Rs.50,00,000/- i.e. on 24/10/2013, the assessee had bank balance of Rs.50,08,118.97 which would enable the cheque to get easily encashed for Rs.50,00,000/-. The primary fact of date of handing over of cheque together with the application form is duly supported by an affidavit filed by the sub-broker Shri Gobind M Vaswani who had categorically affirmed that he has collected the application form together with the cheque from the assessee on 24/10/2013 and had indeed handed over the same to authorised agent i.e. M/s. Karvy Stock Broking Ltd., on 24/10/2013 itself. The contents of this affidavit has not been controverted by the revenue by bringing in contrary evidences thereon. The law is very well settled that in the event of an affidavit not tested by the department in the manner known to law, then the contents of the said affidavit is to be construed as true and correct. Reliance in this regard is placed on the celebrated decision of the Hon’ble Supreme Court in the case of Mehta Parikh & Co. vs CIT reported in 30 ITR 181 (SC).

4.3. In view of the aforesaid observations, we have no hesitation in holding that assessee is entitled for claim of exemption u/s.54EC of the Act in respect of investment made by her in NHAI capital gain bonds within a period of six months from the date of transfer. Accordingly, the grounds raised by the assessee are allowed.

Order pronounced on 08/10/2021 by way of proper mentioning in the notice board.