SH. SHIROM LAMBA,CHANDIGARH vs. ITO, WARD- 2(3), CHANDIGARH

The only issue in this appeal of the assessee is as regards to the order of CIT(A) sustaining the addition of long-term capital gain by computing U/s 50C of the Act. For this, the assessee has raised the relevant ground no. 3, which is as under:

Brief facts are that, the assessee, Sh. Shirom Lamba, is a co- owner of the property in SCF 10, Sector 22D, Chandigarh to the extent of 8.33% shares. He sold his 8.33% shares by entering into an agreement to sale with the purchasers, namely Smt. Tirlochankaur, Gurpreet Singh and Shri. Kuldeep Singh, vide an agreement dated 31.08.2012, which was subsequently signed again with the same purchaser in 2013 due to death of one of the purchaser, Shri. Iqbal Singh. The total consideration of 25% shares being co-owners namely, Shirom Lamba, Sh. Sameer Lamba Page 2 of 11 ITA No.- 702/Chandi/2022 Shirom Lamba and Sh. Anil Kumar Lamba, to the extent of 8.33% each is Rs 1.40 crores. Thereby, all three co-owners of 25% shares in SCF No. 10, Sector-22D, Chandigarh, sold this property for a total consideration of Rs. 1.40 crores. The AO during the course of assessment proceedings noted that as per return filed by assessee, has shown sale consideration at Rs. 46, 66,667/- to the extent of his shares of 8.33%. The AO noted that the fair market value, in term of provision of section 50C of the Act is to be taken as per Circle Rate fixed by Sub-registrar of the concerned area and therefore he noted that the circle rate of this property to the extent of 25% is at Rs. 3,91,88,985/-. Accordingly, taking this value of sale consideration as per circle rate at Rs. 3,91,88,985/- to the extent of 25% shares of three co-owners, he computed assessee’s shares of 8.33% at 1,30,62,998/-. Therefore, the AO adopted the fair market value in terms of section 50C of the Act at Rs. 1,30,62,998/- and thereby computed long-term capital gain at Rs. 83,96,328/-. Aggrieved, against the action of the AO, the assessee preferred an appeal before the CIT(A).

We have heard the rival contentions and gone through the facts and circumstances of the case. The facts are admitted that the assessee being co-owner to the extent of 8.33% in the property sold i.e. SCF10 Section 22D, Chandigarh. The assessee disclosed the consideration of his shares at Rs. 46,66,667/-. The AO noted the circle rate and as per circle rates the assessee‘s shares worked out at Rs. 1,30,62,998/-, therefore, the AO computed long-term capital gain on account of sale at this property at Rs. 83,96,328/-. However, as against the fair market value adopted by AO at Rs. 1,30,62,998/-, the CIT(A) restricted the fair market value in view of estimate made by DVO at Rs. 74,55,700/-. Therefore, addition to the extent of 27,89,033/- was sustained. Now, only argument of Ld. Counsel for assessee was that, in view of the amendment brought by legislature in section 50C introduced by the Finance Page 4 of 11 ITA No.- 702/Chandi/2022 Shirom Lamba Act, 2016 w.e.f. 01-04-2017, the date of agreement is crucial for determining the fair market value for the purpose of computation of capital gains u/s 50C of the Act. He stated that this amendment by the Finance Act, 2016 w.e.f., 01.04.2017, introducing the proviso is retrospective and he drew our attention to the relevant provision of Section 50C of the Act, which reads as under:

We noted that this issue is covered by the decision of Hon’ble Madrars High Court in the case of CIT vs. Shri Vummundi Page 5 of 11 ITA No.- 702/Chandi/2022 Shirom Lamba Amarendran vide TCA No. 329 of 2020 order dated 28.09.2020 and the decision of the Delhi Bench of the Tribunal in the case of Amit Bansal vs. ACIT reported in (2019) 174 ITD 349 (Del.). Hon’ble Madras High Court has held that this proviso is curative in nature and will apply retrospectively. Similarly, the Delhi Bench of Tribunal in the case of Amit Bansal (Supra) has decided identical issue and held the same, being in the nature of curative and retrospective. The Tribunal held as under; “8. The above proviso was inserted by the Finance Act, 2016 w.e.f. 01.04.2017. Therefore, the question that has to be decided is as to whether the above amendment is prospective in nature i.e., will be applicable from A.Y. 2017-18 or is retrospective in nature being curative in nature. We find identical issue had come up before the Ahmedabad Bench of the Tribunal in the case of Dharamshibhai Sonani versus ACIT (supra) where it has been held that amendment to section 50C introduced by the Finance Act, 2016 for determining full value of consideration in the case of involved property is curative in nature and will apply retrospectively. We find following the above decision, the Ahmedabad Bench of the Tribunal in the case of Rahul G. Patel vs. DCIT, order dated 26th September, 2018 has held that the proviso to section 50C(1) introduced by the Finance Act, 2016 can be construed as clarificatory in nature and can be applied on pending matters. The various other decisions relied on by the ld. counsel for the assessee also support the case of the assessee that where the date of the agreement fixing the amount of consideration and the date of registration regarding the transfer of the capital asset in question are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of the agreement is to be taken for the purpose of full value of consideration. I, therefore, accept the argument of the ld. counsel for the assessee in principle and restore the issue to the file of the Assessing Officer with a direction to verify necessary facts and decide the issue in the light of my above observation directing to adopt the circle rate on the date of agreement to sell in order to compute the consequential capital gain.”

Reverting back to the decisions relied on by the Revenue, the decision in Bagri Impex (P.) Ltd., supra is distinguishable on facts as the http://www.judis.nic.in assessee therein contended that the date of agreement should be taken as date on which the property was transferred by bringing the same within the ambit of Section 2(47) of the Act, which is not the case before us. In Ambattur Clothing Company Limited, the assessee contended that since the buyer wanted the Sale Deed to be released after registration, they had paid stamp duty as per the guideline value which is higher than the sale consideration agreed to be paid on the instruments. This explanation offered by the assessee was found to be factually incorrect and rejected and in the background of the said facts, the Honble Supreme Court observes that the Assessing Officer was justified in treating the value adopted by the stamp valuation authority as the deemed sale consideration, received/ accruing as a result of transfer.

On going through the facts of the case on hand, we find that no such observation was made by the Assessing Officer. The assessee's consistent case was that the sale consideration agreed to be paid to him by the purchaser was Rs.19 crores and Rs.6 crores was received as advance on the date of entering into the Agreement for Sale. However, the Assessing Officer disbelieved the same and applied the guideline value at Rs.27 crores on the http://www.judis.nic.in date when the Sale Deed was executed and registered. Therefore, in our considered view, the decision in Ambattur Clothing Company Limited cannot be applied with the facts and circumstances of the case on hand.

Mr.T.Ravikumar, learned counsel is right in a submission that the observations made by the Tribunal qua the decision of the Honble Supreme Court in Vatika Township is incorrect. In fact we find that the Tribunal did not assign any reasons as to why the decision in Vatika Township do not apply to the facts of the case. In fact the decision in Vatika Town Ship should be referred for the purpose as to when a Statute can be treated to be clarificatory and when not?. The legal principle laid down therein ought Page 7 of 11 ITA No.- 702/Chandi/2022 Shirom Lamba to have been taken note of by the Tribunal. Therefore, the Tribunal may not be fully right in stating that the judgment in Vatika Township will not be applicable to the facts as the judgment needs to be looked into to consider the legal principle of retrospectively, retro activity or prospectively. In any event, the ultimate conclusion arrived at by the Tribunal confirming the above order passed by the CIT(A) cannot be found faulted with.” In the present case, the assessee now has filed the agreement to sale dated 31.08.2012, which is enclosed in paper book at page 35, and the circle rate as of the date of agreement i.e. 31.08.2012, is Rs. 298.33 per Sq. Yds. Admittedly, the assessee has paid the initial consideration at the time of agreement of Rs.4 lakhs i.e., Rs.2 lakhs vide cheque No.946321 dated 15.09.2012 and Rs.2 lakhs vide cheque No.946303 dated 15.09.2012. The assessee has given calculation of his share of value of 8.33%, as per valuation report comes to Rs. 45,95,650/-, which is less than the amount for which actually sold his shares of 8.33% at Rs. 46,66,667/-. This calculation given by Ld. Counsel for the assessee without supporting evidence of circle rate as on 31.08.2012 is not authentic. This needs verification. Hence, we set aside the order of CIT(A) and that of the AO and remand the matter back to the file of the AO for verification of this issue as under:

In term of the above, the matter is remanded back to the file of the AO for verification purposes.