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Facts
The assessee claimed a capital loss of Rs. 25,75,000 on the sale of plot no. 152 for Rs. 35,00,000, having purchased it for Rs. 60,75,000. The Assessing Officer disallowed this loss, observing that an identical, adjacent plot (no. 150) was sold by the assessee for Rs. 60,75,000 (its purchase price) shortly after, and the assessee failed to provide a plausible explanation for the significant price discrepancy. The CIT(A) upheld the disallowance.
Held
The Tribunal upheld the disallowance, stating that the AO was justified in drawing an adverse inference of suppressed sale consideration based on the comparative sale transaction of an identical plot by the assessee itself, especially when no plausible explanation was offered for the vast difference in sale prices. It confirmed that the full value of consideration for plot 152 was rightly taken as Rs. 60,75,000, and the claimed capital loss was correctly denied.
Key Issues
Whether the Assessing Officer can substitute the declared sale consideration for computing capital gains/loss by drawing an adverse inference from comparative sales of identical properties by the assessee when no plausible explanation is provided, even without invoking Section 50C or referring to a Valuation Officer under Section 55A?
Sections Cited
250(6), 50C, 48, 55A, 142(1)
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आदेश/Order
PER VIKRAM SINGH YADAV, AM
This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-3, Gurgaon dt. 30/04/2024 pertaining to Assessment Year 2019-20.
In the present appeal, the Assessee has raised the following grounds of appeal:
1) That the order of the Id. CIT(Appeals)-3, Gurgaon passed u/s 250(6) dated 30.04.2024 is erroneous, contrary to the facts of the case and is bad in Law. 2) That the Id. CIT(Appeals) has erred in confirming the action of the Assessing Officer in disallowing the capital loss of Rs. 25,75,000/- claimed by the Appellant and by adding this amount in the sale consideration already declared by the Appellant on presumption basis without assigning any cogent reasons and adverse material on record.
3) That the Id. CIT (Appeals) has gravely erred in upholding the disallowance of capital loss in spite of the fact that no incriminating material was found during the course of search at the Appellant's premises 4) That the Id. CIT(Appeals) has erred in confirming the action of the AO in disallowing the capital loss and making addition as above by treating it as sale consideration arbitrarily in spite of the fact that sale consideration was above the FMV as contemplated u/s 50C without referring the matter to Valuation Officer. 5) That the Id. CIT(Appeals) has failed to appreciate that the sale consideration complied with provisions of section 50C which had been accepted by the Id. Assessing Officer, and thus no addition could be made to sale consideration. 6) That the Id. CIT(Appeals) has erred in confirming the disallowance of expenses of Rs. 15,411/-out of Rs. 3,25,881/- claimed by the Appellant.”
Briefly the facts of the case are that during the course of assessment proceedings, it was observed by the AO that the assessee had sold plot no. 152, JLPL, Sector-94, Mohali for Rs. 35,00,000/- vide unregistered agreement dated 11.05.2018 which was purchased for Rs. 60,75,000/. The assessee had claimed capital loss of Rs. 25,75,000/- in its Profit & Loss account. Upon perusal of the books of accounts of the assessee for the year under consideration, it was observed by the AO that the assessee had sold another plot of same size bearing no. 150, JLPL, sector-94, Mohali for Rs.60,75,000/- vide registered sale deed dated 15.11.2018 which was purchased for Rs. 60,75,000/- resulting into no gain/ no loss. The assessee was asked to explain as to how it was reasonable that two plots of same size adjacent to each other purchased for the same price were sold for selling prices almost half of each other and in reply, the assessee filed its submissions, however, the reply of the assessee was not found tenable by the AO and an addition of Rs.25,75,000/- was made by the AO by disallowing the capital loss claimed in the return of income.
Being aggrieved, the assessee carried the matter in appeal and it was submitted during the appellate proceedings that the AO had disallowed capital loss of Rs. 25,75,000/- merely on the basis of the comparison of the sale consideration of one plot vis-a-vis another plot and disallowed the said loss only on the basis that the agreement to sell was unregistered. It was contended that the sale consideration had been transferred through banking channels and then the said plot had been transferred by the builder to the purchaser with whom the agreement to sell had been executed. Further, it was submitted that the transfer/sale of the immovable property is in compliance with the provisions of section 50C of the Act and the same has been duly mentioned and accepted by the Id. Assessing Officer in para no. 6.1 of the assessment order dated 19.06.2021. However, the addition was made arbitrarily without referring to the DVO and on the basis of presumption that the two properties must have been sold at the same price without taking into consideration that both the plots were sold after a gap of nearly 6 months as evident from the copies of sale deed / agreement to sell furnished during the assessment proceedings. Further, the variations in sale consideration may be attributed to the unavailability of the basic amenities like roads and market at Sector-94 Mohali at the time of sale of the first plot on 11.05.2018.
The ld CIT(A) however did find the explanation so submitted by the assessee acceptable. As per ld CIT(A), looking into the facts and circumstances of the case, it is observed that the appellant was in possession of two plots bearing nos. 150 and 152 at JLPL, sector-94, Mohali which were purchased for Rs. 60,75,000/- each and sold for Rs. 60,75,000/- and Rs. 35,00,000/- on 11.05.2018 and 15.11.2018 respectively. The capital loss claimed by the appellant in its ITR on account of sale of plot no. 150 was disallowed by the AO. Upon perusal of findings of the AO and submission of the appellant, it is noted that there is no basis in the submission of the appellant that the variation in sale consideration may be attributed to the unavailability of the basic amenities like roads and market at Sector-94 Mohali at the time of sale of the first plot on 11.05.2018. The above submission of the appellant is devoid of any merit since both the plots were purchased for the same price and it is beyond logic as to how unavailability of infrastructure could cause such huge difference in sale consideration when the purchase price was not affected by the same. It is also pertinent to mention that these two plots were in close vicinity of each other( plot no. 150 and plot no. 152) thus, how come it is possible that basic amenities like roads and market were available for one plot and not available for another plot. Further the appellant has contended that the AO should have referred the matter to the DVO during the course of assessment proceedings. This contention of the appellant has been found baseless since the appellant did not raise any such concern before the AO during the assessment proceedings. After taking into consideration facts of the case, it is noted that the appellant had willfully shown capital loss of Rs. 25,75,000/- with the intention of setting off the same with future capital gains. In view of the above facts and discussion, it was held by the ld CIT(A) that disallowance of capital loss of Rs. 25,75,000/- made by the AO was justified and the appeal of the assessee was dismissed.
6. Against the said findings and directions of the ld CIT(A), the assessee is in appeal before this Tribunal.
7. During the course of hearing, the Ld. AR submitted that the Id. CIT(Appeals) has erred in confirming the action of the Id. Assessing Officer i.e. ACIT, Central Circle-2, Chandigarh, who had while framing assessment, had arbitrary disallowed loss on sale of capital asset amounting to Rs. 25,75,000/- without bringing on record any material to prove that the Appellant had violated the provisions of section 50C of the Income Tax Act, which provides for the fair market value to be adopted in case of transfer(sale) of immovable property, being land or building or both whereas, in the case of the Appellant, the transfer/sale of the immovable property complies with the provisions of section 50C of the Income Tax Act and the same has been duly mentioned and accepted by the Id. Assessing Officer at para no. 6.1 of the impugned assessment order dated 19.06.2021.
It was submitted that in spite of the transaction being compliant with the provisions of section 50C of the Act, the additions/disallowance had been made arbitrarily on the basis of presumption that the two properties must have been sold at the same price, in utter disregard to the fact that the plots were sold after a gap of nearly 6 months as is evident from the copies of sale deed/agreement to sell filed during the assessment proceedings and this fact was apprised to the ld CIT(A) during the hearing of the appeal.
9. It was submitted that there is no other provision(s) in the statute which allows the Assessing Officer to adopt a different sale consideration or at the same allows him to reject the sale consideration for the purpose of computation of capital gains/loss as per the provisions of section 48 of the Act. However, the AO arbitrarily took the view that the capital loss was not to be allowed without pointing out any relevant section of the statute which empowered him to do so. That the CIT(A) has affirmed the additions made by the AO without considering the reply of the Appellant and in utter disregard to the provisions of section 48 r.w.s 50C of the Act wherein the AO could not have replaced the sale consideration with a hypothetical amount in absence of any corresponding provisions in the Statute which permitted him to do so.
10. It was submitted that the actual sale consideration of first property was Rs. 35,00,000 (plot no. 152 had been sold on 11.05.2018) and subsequently the transaction of sale of another property (plot no. 150 had been sold on 15.11.2018) had been made after nearly a gap of 6 months which is evident from the page no. 2 of the sale deed. However, it is essential to bring on record again that the collector rate for the same sized plot in the same locality which is duly mentioned as per the subsequent sale deed is Rs. 28,50,000 and that the earlier property had been sold for Rs. 35,00,000 which is already stated above the collector rate. Therefore, in spite of the fact that the Assessing Officer did not bring any material on record to prove that the Appellant had received sale consideration in excess of the amount recorded in its books of accounts, the addition has been made on the mere assumptions, surmises and suspicion that the first sale was made on unregistered agreement and the subsequent sale had been made for a higher amount.
11. It was submitted that once the AO has accepted the sale consideration mentioned in the agreement to sell dated 11.05.2018 and also accepted the cost of acquisition claimed by the Appellant company in its return of income, then he could not deny the capital loss claimed by the Appellant. Further, no reference was made to the Valuation Officer during the assessment proceedings to ascertain the value of the immovable property sold during the year and in absence of the same, the Id. AO could not adopt any other value on arbitrary basis and was not justified in disallowing the capital loss claimed by the Appellant. Reliance was placed on the decision of the Hon’ble Gujarat High Court in the case of Commissioner of Income Tax - 6 vs. Akash Association T20171 87 taxmann.com 84 (Gujarat) wherein it was held as under: “4. Section 50C of the Act provides for special provision for full value of consideration in certain cases. Sub-section (1) of section 50C provides for the adoption of the value taken by the Stamp Valuation Authority for the purpose of stamp duty as the full value of consideration of the transferred asset for the purpose of section 48 of the Act. Learned counsel for the Revenue however contended that in the present case the transfer of the land took place under a Banakhat which was not registered and that therefore there was no occasion for the Stamp Valuation Authority to assess the value of the land for the purpose of payment of stamp duty upon its transfer. This contention however, ignores the plain language used in sub-section (1) of section 50C which provides for the adoption of the valuation of the Stamp Valuation Authority for the purpose of payment of stamp duty not only when it is adopted or assessed but where it is assessable by such authority. The expressions 'adopted' or 'assessed' or 'assessable' would include even a case where the document evidencing transfer of the capital asset has not been presented for registration. The expression 'assessable' would permit the Revenue authorities to apply what is popularly referred to as Jantri rates with respect to the land in question for the purpose of section 48 of the Act with aid of deeming fiction contained in sub-section (1) of section 50C of the Act…”
It was submitted that in view of the aforesaid decision, it is apparent and crystal clear that if the consideration adopted for the purposes of section 48 of the Act is in compliance and harmony with the provisions of section 50C, then the consideration to be adopted for the purposes of computation under section 48 cannot be modified or replaced by the Assessing Officer.
It was submitted that there was not even an iota of evidence with the Assessing Officer to make the addition/disallowance of Rs. 25,75,000/- (difference of 60,75,000 being the consideration of another property and 35,00,000 being the actual consideration of property) as no such incriminating or adverse material was found from the possession of the Appellant. Further, the name and address of the buyer of the said property in question were available with the Assessing Officer but he did not confirm from the said buyer before making any addition in the case of the appellant.
14. The ld DR is heard who has relied on the order of the lower authorities and it was submitted that it is a clear case of suppression of sale consideration as the assessee has sold a similar plot of land of same size and location for sale consideration of Rs 60,75,000/- whereas the subject plot of land was sold for Rs 35,00,000/-. It was further submitted that even the purchase cost of the plot of the land is Rs 60,75,000/- and it is therefore a case where the assessee has sold the plot of land lower than the purchase cost and therefore, in such circumstances, the AO has rightly disallowed the capital loss so claimed by the assessee.
Heard the rival contentions and purused the material available on record. The issue under consideration relates to determination of full value of consideration by the Assessing officer in respect of plot of land sold by the assessee (plot no. 152, JLPL, Sector-94, Mohali) vide unregistered agreement dated 11.05.2018 for a stated consideration of Rs. 35,00,000/-. Admittedly, the collector rate was Rs 28,50,000/- of the said property at the relevant point in time and the transaction has been executed at the stated consideration of Rs 35,00,000/- which is higher than the collector rate and in such a scenario, the AO has not invoked the provisions of Section 50C of the Act and therefore, the contentions advanced by the ld AR that the impugned transaction is in compliance with the provisions of section 50C doesn’t help the case of the assessee. At the same time, it is noted that the AO has referred to another comparative sale transaction executed by the assessee (plot of same size bearing no. 150, JLPL, Sector-94, Mohali) vide registered sale deed dated 15.11.2018 for stated consideration of Rs. 60,75,000/- and held that the full value of consideration for the first plot of land should be Rs 60,75,000/- and not Rs 35,00,000/- and there is suppression of sale price of subject plot of land and therefore, the resultant capital loss of Rs 25,75,000/- (purchase cost being Rs 60,75,000/-) claimed by the assessee was disallowed by the AO.
16. The question that arises for consideration is whether the AO can substitute the stated sale consideration with another amount and held the latter figure, being a comparative sale figure as full value of consideration for the purposes of computation of capital gains. In this regard, it has been contended by the ld AR that the AO doesn’t have any such powers under the statue for substitution of actual sale consideration with another sale figure especially in absence of any material on record that the assessee has received any amount over and above the stated sale consideration.
17. In this regard, useful reference can be drawn to the decision of the Hon’ble Punjab and Haryana High Court in case of Pr. CIT vs Quark Media House India Private Limited (Income Tax Appeal No. 110 of 2016 (O& M) dated 24/01/2017) brought to notice of both the parties during the course of hearing and both the parties were heard. The question for consideration before the Hon’ble High Court was whether for the purposes of computing the capital gains on sale of land and building, the sale price ought to be taken as mentioned in the sale deed or the value of the property arrived at by the AO by reference to the DVO and as to whether the AO rightly made a reference to the DVO and the relevant discussions and findings of the Hon’ble High Court read as under: 12. The first and the main question concerns the ambit and the meaning of the words “full value of the consideration received or accruing as a result of the transfer of the capital asset”. On behalf of the assessee it is contended that these words and especially the words “full value of the consideration received or accruing” refer to the consideration arrived at between the parties and not the fair market value thereof. On behalf of the revenue it was contended otherwise. 13. Mrs. Suri, firstly relied upon the judgment of the Supreme Court in Commissioner of Income Tax, West v. George Henderson and Co. Ltd. (1967) 66 ITR 622 where section 12B of the 1922 Act fell for consideration. Section 12B of the 1922 Act as it was in force on April, 1, 1947 read as under:- "Section 12-B of the Income Tax Act as it was in force on April 1, 1947 provided as follows: "12-B. (1) Capital Gains.— The tax shall be payable by an assessee under the head 'Capital gains' in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after the 31 st day of March, 1946 and before the first day of April, 1948, and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place: * * * (2) The amount of a capital gain shall be computed after making the following deductions from the full value of the consideration for which the sale exchange or transfer of the capital asset is made, namely: (i) expenditure incurred solely in connection with such sale, exchange or transfer;
(ii) the actual cost to the assessee of the capital asset, including any expenditure of a capital nature incurred and borne by him in making any additions or alterations thereto, but excluding any expenditure in respect of which any allowance is admissible under any provisions of Section 8, 9, 10 and 12. Provided that where a person who acquires a capital asset from the assessee, whether by sale, exchange or transfer, is a person with whom the assessee is directly or indirectly connected, and the Income Tax Officer has reason to believe that the sale exchange or transfer was effected with the object of avoidance or reduction of the liability of the assessee under this section, the full value of the consideration for which the sale, exchange or transfer is made shall with the prior approval of the Inspecting Assistant Commissioner of Income Tax, be taken to be the fair market value of the capital asset on the date on which the sale, exchange or transfer took place: ** * Provided further that where the capital asset became the property of the assessee or of the previous owner where the cost of the capital asset to the previous owner is to be taken in accordance with sub-section (3) before the 1st day of January, 1939, he may, on proof of the fair market value thereof on the said date to the satisfaction of the Income Tax Officer, substitute for the actual cost such fair market value which shall be deemed to be the actual cost to him of the asset, and which shall be reduced by the amount of depreciation, if any allowed to the assessee after the said date and increased or diminished as the case may be by any adjustment made under clause (fit) of sub-section (2) of Section 10: * * * This section was inserted in the Income Tax Act, 1922 by the Income Tax and Excess Profits Tax (Amendment) Act, 1947 (22 of 1947) which received the assent of the Governor-General on April 18, 1947, but the amending Act was deemed to have come into force on March 31, 1947. Sub section (2) provided that the amount of the capital gain shall be computed after making deductions mentioned therein from the full value of the consideration for which the sale, exchange or transfer of the capital asset is made. The words though not identical to those in Section 48 of the Act are similar. In that case prior to 01.01.1939, the respondent purchased 1500 shares of a company during the accounting year ending 31.03.1937. On 01.04.1946, the respondent transferred these shares to one Girdhari Lai Mehta at the rate of Rs. 136/-per share although the market value on that date was Rs. 620/-per share. On the same day, Girdhari Lai Mehta in turn sold the shares to Jardine Skinner & Co. at the rate of Rs. 100/-per share but retained the share scrips with blank transfer forms until May, 1946 when the shares were registered in the name of Jardine Skinner & Co. In March, 1947, Jardine Skinner & Company transferred the shares to Jardine Henderson & Co. at the rate of Rs. 493-10-0 per share. The Assessing Officer while assessing the respondent to tax for the assessment year 1947-48 held the capital gain to be Rs. 484/- per share being the difference between the market price of Rs.620/- per share and the sale price of Rs.136/- per share. The Appellate Assistant Commissioner affirmed the order but varied the quantum of capital gain holding that on the date of acquisition of the shares by the respondent i.e. 1.1.1939 the market value of the share was Rs. 153/- per share and that this figure should be taken as the actual cost in view of the third proviso to Section 12B(2). The Appellate Assistant Commissioner also held that the sale was effected with the object of avoidance of tax. The Tribunal dismissed the appeal but on the ground adopted by the Appellate Assistant Commissioner, a reference was made to the High Court. A majority of the Judges of the High Court answered in favour of the assessee- respondent. The Supreme Court held as under:- "5. The question therefore arises in the present case as to what is precisely the finding of fact arrived at by the Tribunal as regards the full value of the consideration. It is necessary to state at the outset that the Income Tax Officer and the Appellate Assistant Commissioner assessed the tax on the footing that the first proviso to Section 12-B(2) applied and therefore the market value of the shares must be taken to be the full value of the consideration for the transfer. The Appellate Tribunal, however, rejected the contention of the appellants that the first proviso to Section 12-B(2) applied to the case, but nevertheless proceeded to affirm the order of the Appellate Assistant Commissioner. In para 7 of the order dated August 23, 1951 the Appellate Tribunal stated that "these shares were transferred by the assessee company to one Giridharilal Mehta on 1st April, 1946 at the book value of Rs 136 per share, though the market value of those shares on that date was admittedly Rs 620 per share". In para 8 of the order the Appellate Tribunal has remarked that the assessee refused to give any further facts to explain why it sold shares to Giridharilal Mehta at Rs 136 per share when the market price of the shares stood at Rs 620 per share and also why Giridharilal Mehta again sold the shares on the same date at Rs 100 per share at a, loss of Rs 54,000, and then again within a few months thereafter why Jardine Skinner & Co. sold the shares at Rs 493/10 per share. In para 9 the Appellate Tribunal recorded the finding that prima facie the transaction was not a bona fide one, and proceeded to say that "if the assessee refuses to disclose all the facts leading to the transaction, and the facts immediately after the transaction, we must hold that it will react to the prejudice of the assessee". In para 10 the Appellate Tribunal has observed that under Section 12-B(2) of the Income Tax Act, the Income Tax Officer has to compute the capital gains after making certain deductions from the full value of the consideration for the sale and he therefore has a right to know the full value. The Appellate Tribunal added: "The assesses cannot shut out the Income Tax Officer from finding out what is the full value of the asset transferred by merely putting a figure on the document of transfer. The Income Tax Officer in this case took the value to be the market price of the shares. There is no dispute that the market price of the shares was Rs 620 per share. We cannot say therefore that in the circumstances the Income Tax Officer was in any way wrong in determining the full value of the shares." In para 11 the Appellate Tribunal held that the first proviso to Section 12-B (2) did not apply to the case and the sale was not effected with the object of avoidance or reduction of the liability of the assessee under that section, and then observed as follows: "But the right of the Income Tax Officer to determine the full value of the assets is always there specially in a case where the assessee refuses to give all the information to the Income Tax Officer and the value of the assets given by him is so suspiciously low. We therefore think there is no substance, in the points raised by Mr Issac". It was contended by Mr Asoke Sen on behalf of the respondent that there was no express finding of the Appellate Tribunal that the respondent actually sold the shares at the market price of Rs 620 per share and that the respondent received that market price of the shares as consideration for the transfer. Reference was made to para 7 of the order of the Appellate Tribunal wherein there is an express finding that the shares were transferred by the respondent to Giridharilal Mehta on April 1, 1946 at the book value of Rs 136 per share, though the market value on that date was Rs 620 per share. Mr Asoke Sen further submitted that it could not be argued from paras 8 to 11 of the order of the Appellate Tribunal that there was an inferential finding that the shares were actually sold at Rs 620 per share by the respondent. On behalf of the appellants Mr Narsaraju pointed out that in the statement of the case dated July 29, 1952 the Appellate Tribunal has said that by the previous order dated August 23, 1951 the Appellate Tribunal had come to the conclusion that the sale had been effected at Rs 620 per share and that the market price of the shares must have been paid. It was, however, pointed out on behalf of the respondent that the statement of the case was not an agreed statement and that it was drawn up by the Appellate Tribunal whose constitution was different from that of the Appellate Tribunal which made the order dated August 23, 1951. It is true that the Court is bound to proceed normally on the findings of fact which are mentioned in the statement of the case. But if the statement of the case does not correctly summarize or interpret the finding recorded in the order of the Appellate Tribunal which has been made part of the case, the Court is entitled to look at the order itself in order to satisfy itself what was actually the finding of the Appellate Tribunal.
After having heard Counsel for both the parties and having scrutinized the order of the Appellate Tribunal dated August 23, 1951 and the statement of the case dated July 29, 1952, we have reached the conclusion that the question of law referred to the High Court cannot be answered as the language used by the Appellate Tribunal in recording its finding as to the actual contract price paid to the respondent by Giridharilal Mehta for the sale of 1500 shares is obscure and its import cannot be determined. In these circumstances we consider that the best course is for the Appellate Tribunal to rehear the appeal and record a clear finding after hearing the parties and after giving an opportunity to the respondent to explain the unusual nature of the transaction and the conduct of the parties concerned therein. After recording a clear finding as to what was the actual price received by the respondent for the sale of the shares to Giridharilal Mehta the Appellate Tribunal will finally dispose of the appeal. On behalf of the respondent Mr Asoke Sen said that his client will give a proper explanation of the transactions and of the conduct of the parties involved before the Appellate Tribunal at the time of the further hearing of the appeal. If the assessee gives explanation of the transaction the Tribunal will be entitled to call upon it to produce documentary or other evidence in support of the explanation. The Tribunal will also be entitled to call for elucidation of the explanation or the evidence. The appellant will be entitled to give evidence in rebuttal."
Considering the language of sub section (2) of Section 12B of the 1922 Act, we are of the opinion that the judgment applies to Section 48 of the 1961 Act. The language of sub section (2) in this regard is 'similar to the language of the opening part of Section 48 of the Act.
15. The judgment undoubtedly holds that the expression "full value of the consideration" cannot be construed as the market value but as the price bargained for by the parties to the sale. It is necessary for the Assessing Officer to ascertain as to what was the price bargained for by the parties to the sale.
The judgment, however, does not support Mrs. Suri's further submission that the price stated in the sale-deed must irrespective of anything also be considered to be the sale price for the purpose of computing the capital gain. In our view this absolute proposition is not well founded. The Assessing Officer must determine whether the price stated in the agreement for sale is infact the price bargained for by the parties thereto. In other words, the full value of the consideration is neither the market value nor necessarily the price stated in the document for sale but the price actually arrived at between the parties to the transaction. If therefore it is found that the price actually arrived upon between the parties is not the price reflected in the document, it is the price bargained for by the parties to sale that must be considered for determining the capital gain under section 48. The Supreme Court did not hold that inferences cannot be drawn by the Assessing Officer from the facts established. In fact in paragraph-5 the Supreme Court observed that there was no inferential finding that the shares were sold at the market price of ? 620/- per share. This read with the operative part of the order in paragraph-6 remanding the matter to record a finding as to the actual price received makes it clear that the finding can be based on inferences as well. In paragraph-6 the assessee is given an opportunity to explain the unusual nature of the transaction. It cannot be suggested that even if there was no explanation by the assessee, the Assessing Officer was bound not to draw an adverse inference.
Even on principle we see no reason to denude the Assessing Officer the right to draw an inference especially an irresistible inference. Take for instance a case where the property worth crores of rupees is sold for merely Rs. 1 lakh and there is no explanation for the same despite the parties being at arms length. The Assessing Officer is not bound to accept the statement in the sale deed unless he can prove that additional consideration was paid. The initial burden to prove the same is undoubtedly on the Department. But in such a case the onus clearly shift upon the assessee. If the assessee is unable to offer an explanation, the Department must be taken to have discharged the burden. The judgment certainly does not hold that the price mentioned in the document is sacrosanct and that the same must be considered to be the price bargained between the parties to the transaction. That would indeed result in an absurdity for the parties could then by merely stating an incorrect price in the sale deed avoid the tax on capital gains altogether.
18. Mrs. Suri then relied upon the judgment of the Supreme Court in Commissioner of Income Tax, Calcutta v. Gillanders Arbuthnot & Co. (1973)87 ITR 407 where the Supreme Court held:- "Now let us see what is the impact of Section 12-B (2) on that transaction? Under that provision, the amount of capital gains has to be computed after making certain deductions from the full value of the consideration for which the sale is made. What exactly is the meaning of the expression "full value of the consideration for which sale is made?" Is it the consideration agreed to be paid or is it the market value of the consideration? In the case of sale for a price, there is no question of any market value unlike in the case of an exchange. Therefore in cases of sales to which the first proviso to sub-section (2) of Section 12-B is not attracted, all that we have to see is what is the consideration bargained for. As mentioned earlier to the facts of the present case, the first proviso is not attracted. As seen earlier, the price bargained for the sale of the shares and securities was only rupees seventy-five lakhs. The facts of this case squarely fall within the Rule laid down by this Court in C.I.T. v. George Henderson & Co. Ltd It may be noted that in that case the market value of the shares which were allotted at Rs. 136 per share was Rs. 620 per share." Our observations with respect to CIT v. George Henderson & Co. Ltd. (1967)66 ITR 622, apply equally to this judgment.
19. Mrs. Suri relied upon a judgment of the Delhi High Court in Commissioner of Income Tax v. Smt. Nilofer I.Singh 2008 SCC (Delhi) 1522. This was a case under the 1961 Act. In that case the assessee sold two properties, one being a residential flat in Mumbai for Rs. 10 lacs and the other a building in New Delhi for Rs. 23.50 lacs. The Assessing Officer was of the view that the sale consideration did not reflect the fair market value and therefore, referred the matter to the Valuation Officer. The fair market value arrived at by the Valuation Officer was far higher than the prices declared by the assessee. The dispute centred upon the expression "full value of consideration". The revenue contended that the expression refers to the full market value whereas the assessee contended that the expression cannot have any reference to the fair market value. The Division Bench held:-"6. This controversy has already been settled by the Supreme Court in the case of CIT v. George Henderson and Co. Ltd., [1967] 66 ITR 622, the very expression "full value of consideration" was under consideration of the Supreme Court though in the context of the provisions of the Indian Income-tax Act, 1922. The provisions of section 12B of the 1922 Act pertain to capital gains. Sub-section (1) was in pari materia to section 45(1) of the present Act and sub-section (2) of section 12B of the 1922 Act was in pari materia to the provisions of section 48 of the present Act. The Supreme Court was of the view that the expression "full value of consideration" in the main part of section 12B(2) of the Act cannot be construed as having a reference to the market value of the asset transferred but the expression only meant, the full value of a consideration received by the transferor in exchange of the capital asset transferred by him. The Supreme Court also observed that in the case of a sale the full value of consideration is the full sale price actually paid. It was further of the view that the expression "full value" means the whole price without any deduction, whatsoever, and it cannot refer to the adequacy or inadequacy of the price bargained for. Nor did it have any necessary reference to the market value of the capital asset which is the subject-matter of the transfer.
In CTT v. Glanders Arbuthnot and Co., [1973] 87 ITR 407, the Supreme Court while considering the provisions of section 12B of the 1922 Act again observed that in the case of a sale price of an asset, there would be no question of any market value, unlike in the case of an exchange and the Supreme Court also observed that, in the case of a sale, all that one had to see was—What was the consideration bargained for? 8. These decisions make it more than clear that the expression "full value of consideration" that is used in section 48 of the present Act does not have any reference to the market value but only to the consideration referred to in the sale deeds as the sale price of the assets which have been transferred..
With regard to the arguments of the learned counsel for the appellant based on the provision of section 55A of the said Act, it is immediately to be noticed that the said provision begins with the expression "with a view to ascertaining the fair market value of a capital asset". In other words, the reference to a Valuation Officer under section 55A is for the object of ascertaining the fair market value of a capital asset. It is only when the Assessing Officer is required to ascertain the fair market value of a capital asset that the provisions of section 55A can be invoked. There may be certain situations where the Assessing Officer is required to determine the fair market value. One of the situations is indicated in section 45(4) of the said Act where the profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals are to be computed is in question. In such a situation, the provision itself makes it clear that for the purposes of section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer. In a situation, as one obtaining under section 45(4) of the Act, since there is no apparent consideration for the transfer of the asset, the full value of the consideration has to be determined in an indirect manner and that indirect manner has been indicated to be the fair market value of the asset. Thus, when the fair market value of the asset under section 45(4) is to be determined, it is obvious that section 55A of the Act would get triggered and a reference to the Valuation Officer would be necessary.
Another instance where the fair market value would have to be determined is provided in section 45(1A) of the Act. Under this provision, where the assessee receives an amount from the insurer on account of damage or destruction to any capital asset as a result of natural calamities such as floods or fires, explosions, etc., the question of determining the capital gains is also connected with the determination of the fair market value of the asset on the date of receipt of such amounts from the insurer. In section 45( 1A) of the said Act also, it is indicated that for the purposes of section 48 of the said Act, that is for computation of capital gains, the value of any money or the fair market value of the asset on the date of such receipts shall be deemed to be the full value of the consideration received or accruing as a result of such transfer of capital asset. In this situation also the Assessing Officer would be required to compute the fair market value of the asset and, therefore, a reference to the Valuation Officer under section 55A of the said Act would be necessary.
But the facts of the present case are entirely different. The present case involves sales simpliciter where the full value of the considerations are the sale prices of the two properties indicated above. For the purposes of computing capital gains in such a case as the one before us, there is no necessity for computing the fair market value and, therefore, the Assessing Officer could not have referred the matter to the Valuation Officers." We are entirely in agreement with the observations of the Division Bench in so far as they pertain to the issue under consideration. The reliance upon the judgment of the Supreme Court in George Henderson & Co. Ltd. case (supra) is also well founded. The language of Section 12B(2) of the 1922 Act is similar to that of Section 48 of the 1961 Act. The issue is, therefore, covered by the judgment of the Supreme Court.
We do not read the observations in paragraph-7 to mean that the consideration referred to in the sale deed cannot be questioned at all. The judgment if read as a whole does not indicate such an absolute or blanket rule. There is nothing in the judgment to indicate that the revenue had contended that the full value of consideration received or accruing was other than what was mentioned in the sale deed. It is probably in that view of the matter that the Division Bench held that the expression "full value of consideration" refers only to the consideration referred to in the sale deed. If, however, that is what was meant, we respectfully disagree. The full value of consideration referred to in Sections 45 and 48 of the Act refers to the full value actually received or accruing and not what the parties merely state or declare in the sale deed as was paid or payable and received or accruing. Such a view would as we mentioned earlier enable a party to avoid the liability to tax on account of capital gains by merely stating the incorrect price to be the consideration for sale or transfer of the asset. That could not have been the intention of the legislature.
In Dev Kumar Jain v. Income Tax Officer and another (2009) 309 ITR 240 (Delhi), the Assessing Officer considered the sale price disclosed in the agreement to be low and made a reference to the District Valuation Officer for the purpose of determining the fair market value of the property on the date of sale. The District Valuation Officer determined the value to be much higher. It was contended on behalf of the revenue that the assessee was given several opportunities to file objections and to produce evidence. After referring to the judgments, which we have already-referred to, the Division Bench held :- "9. Before us the learned counsel for the Revenue submitted that this was a case where the assessee had not supplied documents, therefore, the ratio of the judgment in the case of the Smt. Nilofer I. Singh, [2009] 309 ITR 233 (Delhi) was not applicable. We are not in agreement with the submission made by the learned counsel for the Revenue for the reasons that there is nothing on record to show that the assessee received a consideration for the sale of the said property in excess of that which was shown in the agreement to sell. That being the case the decision in the case of Smt. Nilofer I. Singh, [2009] 309 ITR 233 (Delhi) would bind the Revenue. The Tribunal, in our view erred in accepting the stand of the Revenue that actual sale consideration recorded in the agreement to sell would be substituted by the value arrived at by the DVO under section 55A of the Act. The question of law as framed is answered in favour of the assessee and against the Revenue." The judgment, therefore, proceeded on the basis that there was nothing on record to show that the assessee received a consideration for the sale of the property in excess of that which was shown in the sale-deed. The Division Bench did not take into consideration the effect of the District Valuation Officer having valued the market price at ten times the amount stated in the document. Inferences on that basis were not even suggested. We do not read the judgment as having held that the amount mentioned in the sale document is sacrosanct and is the only basis on which the capital gain is to be computed.
A Division Bench of this Court by a judgment dated 05.03.2014 in Commissioner of Income Tax-Ill, Ludhiana v. Shri Dharam Pal Aggarwal of 2010 framed the following questions of law:- i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is right in ignoring the provisions contained in Section 55A of the IT Act which specifically empower the Assessing Officer to ascertain the fair market value of capital asset for the purposes of computation of capital gains? ii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT is right in law in ignoring the findings of the Assessing Officer that at the time of sale of capital asset in question there was no notification of circle rates of Delhi Government and hence, reference to the DVO was necessary in the circumstances? The assessee had sold the immovable property by two sale-deeds and invested the sale proceeds in National Housing Bank Bonds which were eligible for deduction under section 54EC of the Act. The Assessing Officer made a reference to the Departmental Valuation Officer under section 55A who determined the fair market value to be much higher than the price shown in the documents. The question before the Court was whether the Assessing Officer was justified in making the reference to the DVO under section 55A for ascertaining the market value of the capital assets which were transferred. The Division Bench referred to the judgments which we already noted and held:- "10. The Hon'ble Supreme Court reiterated the aforesaid view in CIT v. Gillanders Arbuthnot & Co. (1973) 87 ITR 407. Thus, it emerges that the expression "full value of consideration", appearing in section 48 of the Act does not have any reference to the fair market value but to the consideration referred to in the sale deeds as the sale price of the assets which have been transferred." What we observed in respect of paragraph-7 of the judgment of Delhi High Court in Commissioner of Income Tax v. Smt. Nilofer I.Singh (2009) 309 ITR 233 (Delhi) applies equally to paragraph-10 of the judgment in this case. It is obvious that the Division Bench considered the consideration referred to in the sale deeds to be the actual amount received by or accruing to the assessee. The Division Bench did not hold that where it is established that the price mentioned in the sale deed is not the amount actually received by or accruing to the assessee it must nevertheless be the basis of computing the capital gains. Such a contention was neither raised before, nor decided by the Division Bench. This is apparent also from paragraph-8 of the judgment which reads as under:- "These decisions make it more than clear that the expression "full value of consideration" that is used in Section 48 of the present Act does not have any reference to the market value but only to the consideration referred to in the sale deeds as the sale price of the assets which have been transferred". The price to be considered is the consideration received or accruing as a result of the transfer and not necessarily the price that the assessee states that it received or which has accrued to it. At the cost of repetition a view to the contrary would lead to the absurdity of enabling an assessee to avoid capital gains merely by stating that an incorrect price as having been received by it or accruing to it.
The matter, however, does not end there. In view of the facts of this case the assessee must succeed. Mrs. Suri submitted that there was no finding that the assessee received any consideration other than that shown in the sale agreement. This is correct. The assessment order does not proceed on the basis that the assessee received any amount in addition to what is stated in the sale deed. It proceeds only on the basis that the assessee and the purchaser being related parties, the property was sold at a very low price. The CIT(A) also noted that the Assessing Officer had not shown that the assessee had received any consideration other than the consideration mentioned in the sale agreement. The CIT(A) further noted that the Assessing Officer had unnecessarily emphasized that the assessee and the purchaser were related parties and therefor^, the vendee was in a position to exercise influence in the decision of the assessee and hence the assessee sold the property at the price below the market price. The Tribunal also noted this aspect in paragraph-9. The Tribunal observed that it was not the case of the Assessing Officer that the assessee received a consideration more than what was mentioned in the sale deed and that the Assessing Officer had therefore, erred in considering the fair market value. 24 In the case of related parties, there is yet another aspect. The presumption against the value being understated (not undervalued) is greater where parties are connected or related. Their relationship is a factor which could justify a price lower than the market price. Where parties are strangers there must be some explanation for an undervaluation.
We must, therefore, proceed on the basis that it is not the case of the revenue that the assessee received any amount other than what was mentioned in the sale agreement. In this view of the matter and in view of the judgments referred to earlier especially the judgments of the Supreme Court it must follow that there was no occasion for the Assessing Officer to determine the fair market value. The Assessing Officer was only concerned with the amounts actually received by the assessee. The amount actually received was admittedly the amount mentioned in the sale agreement.
It follows then that the reference to the DVO under section 55A was without jurisdiction. Section 55A opens with the words "with a view to ascertaining- the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer". However, in view of the judgments of the Supreme Court, what falls for determination under section 48 is not the fair market value of the capital asset but the full value of the consideration received or accruing as a result of the transfer of the capital asset.
The Hon’ble High Court has held that the full value of consideration is neither the market value nor necessarily the price stated in the document for sale but the price actually arrived at between the parties to the transactions. It was further held that where it is found by the Assessing officer that the price actually arrived upon between the parties is not the price reflected in the sale document, it is the price bargained for by the parties to sale that must be considered for determining the capital gains under section 48 of the Act. It was further held by the Hon’ble High Court that the Assessing officer can draw the necessary inferences from the established facts and where there is lack of explanation or the explanation so submitted by the assessee was not found acceptable, there is nothing in law which prevents the AO to draw an adverse inference. It was further held by the Hon’ble High Court that to hold that the price mentioned in the sale document is sacrosanct and the same must be considered to be the price bargained between the parties to the transaction would lead to the absurdity of enabling an assessee to avoid capital gains merely by stating an incorrect price as having been received by it or accruing to it and the same could not have been the intention of the legislature. At the same time, there must be a finding that the assessee received any consideration other than that shown in the sale agreement and where the assessment order does not proceed on the basis that the assessee received any amount in addition to what is stated in the sale deed, it must follow that there was no occasion for the Assessing Officer to determine the fair market value and it follows then that the reference to the DVO under section 55A was without jurisdiction.
In light of legal proposition so laid down by the Hon’ble Jurisdictional High Court, I am unable to accept the contention of the ld AR that the AO doesn’t have any such powers under the statue for substitution of actual sale consideration with another sale figure. However, for exercise of such powers, there must be a finding by the AO that there is suppression of sale consideration by the assessee and it is necessary to examine as to how such a finding has been arrived at by the AO.
20. In the instant case, during the course of assessment proceedings, it is noted that the AO has referred to the impugned sale transaction as well as another sale transaction of plot of land by the assessee and the admitted facts are that both these plots of land are identical in terms of size of the plot of land, location that is adjacent to each other and having the same purchase cost of Rs 60,75,000/- as recorded in the books of account. The difference was in terms of sale consideration wherein the subject plot has been stated to be sold for Rs 35,00,000/- and the other plot of land sold for Rs 60,75,000/- within a gap of six months and the explanation of the assessee was sought during the assessment proceedings vide notice u/s 142(1) dated 8/03/2021 to substantiate the same with documentary evidence however, in absence of any plausible explanation furnished by the assessee, the AO based on admitted facts arrived at an inference that there is a suppression of sale price of the plot of land as evidenced by sale of another plot of same size and purchase cost. Admittedly, the AO has drawn his inference of suppressed sale consideration based on comparative sale transaction undertaken by the assessee itself where even the sale consideration is lower than the comparative sale figure and even lower than the purchase cost and therefore, where the assessee failed to offer any plausible explanation, as held by the Hon’ble High Court, the AO has rightly drawn adverse inference against the assessee. Similarly, we find that the ld CIT(A) has rightly held that there is no basis in the submission of the appellant that the variation in sale consideration may be attributed to the unavailability of the basic amenities like roads and market at Sector-94 Mohali at the time of sale of the first plot on 11.05.2018 as both the plots were purchased for the same price and it is beyond logic as to how unavailability of infrastructure could cause such huge difference in sale consideration when the purchase price was not affected by the same and in any case, these two plots were in close vicinity of each other( plot no. 150 and plot no. 152) thus, how come it is possible that basic amenities like roads and market were available for one plot and not available for another plot. The said findings of the ld CIT(A) remain unrebutted before me.
21. In light of the aforesaid discussions and in the entirety of facts and circumstances of the case, I find that the AO has rightly drawn the inference based on admitted facts of comparative sale transaction that there is suppression of the sale consideration in the subject sale of plot of land and full value of sale consideration has been rightly taken at Rs 60,75,000/- and loss so claimed has been rightly denied by the AO and sustained by the ld CIT(A).