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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM vk;dj vihy la-@ITA No. 507/JP/2015
PER SHRI KUL BHARAT, J.M. This is an appeal filed by the assessee against the order of ld. CIT (A)- 4, Jaipur dated 27.03.2015 pertaining to A.Y. 2010-11. The assessee has raised the following grounds of appeal :-
In the facts and circumstances of the case the order passed by the ld. CIT (A) is bad in law and void ab-initio. 2. In the facts and circumstances of the case the ld. CIT (A) has erred in making the addition of Rs. 4,82,444/- u/s 50C of the Income Tax Act, 1961.
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In the facts and circumstances of the case the ld. CIST (A) has erred in making the addition of Rs. 35,00,000/- u/s 40A(3) of the Income Tax Act, 1961.
The appellant craves to add, amend or alter any grounds of appeal at any time of or on before the hearing of appeal.
At the time of hearing, ld. Counsel for the assessee submitted that he
does not wish to press ground no. 1. Therefore, ground no. 1 is dismissed as
not pressed.
Ground no. 4 is general in nature, needs no separate adjudication.
Briefly stated the facts of the case are that the case of the assessee
was picked up for scrutiny assessment and the assessment was framed under
section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the
Act) vide order dated 31.03.2013. While framing the assessment, the
Assessing Officer made addition by invoking the provisions of section 50C of
the Act of Rs. 4,82,444/- and made addition of Rs. 35,00,000/- by invoking
the provisions of section 40A(3) of the Act. Being aggrieved, on further
appeal to the ld. CIT (A), the appeal of the assessee was dismissed.
Aggrieved by this, the assessee has filed the present appeal before this
Tribunal.
Apropos ground no. 2, the ld. Counsel for the assessee submitted that
the Assessing Officer adopted the value as adopted by the Stamp Authority
without referring it to the Valuation Officer. The assessee has claimed before
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the AO that the value adopted by the AO is not the market value. The ld.
Counsel submitted that despite the assessee making objection to the valuation
made by the Assessing Officer, he adopted the value as adopted by the Stamp
Valuation Authority. He submitted that the Assessing Officer ought to have
referred this matter to the Valuation Officer as per provisions of section
50C(2) thus violated the provisions of the Income-tax Act. In support of his
contention, the ld. Counsel for the assessee placed reliance on the decision of
Hon’ble Hon’ble Allahabad High Court rendered in the case of CIT vs. Shri
Chandra Narain Chaudhri in Income Tax Appeal No. 287 of 2011. The ld.
Counsel, therefore, prayed that the addition made on account of short term
capital be deleted.
5.1. On the contrary, ld. Departmental Representative opposed the
submissions of the ld. Counsel for the assessee. He submitted that law is well
settled that the assessee is required to object before the Assessing Officer
qua the value adopted as per Stamp Valuation Authority. He submitted that in
present case, the assessee has not made any objection. Therefore, he
submitted that the case laws as relied by the ld. Counsel would not help.
5.2. We have heard the rival contentions and perused the material available
on record. The assessee is aggrieved by the action of the AO against adopting
the value of the property as per the Stamp Valuation Authority. Admittedly,
the assessee has not made objection or representation before the AO against
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invocation of provisions of section 50C of the Act. For the sake of clarity, the
provisions of section 50C of the Act is reproduced herein below :-
“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 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 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.
(2) Without prejudice to the provisions of sub-section (1), where— (a) the assessee claims before any Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub- section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub- section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub- section (1) of section 16A of that Act. Explanation.—For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-section
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(1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.]”
A bare reading of the above provision makes it clear that as per Section
50C(2)(a) of the Act, the assessee has to make a claim before the Assessing
Officer that the value adopted or assessed (or assessable) by the Stamp
Valuation Authority exceeds the fair market value of the property in that event
the Assessing Officer may refer the valuation of the capital asset to a
Valuation Officer. Ld. Counsel for the assessee could not point out as to when
such claim was made before the Assessing Officer. Even the assessee has not
placed any Valuation Report by an approved valuer to buttress the contention
that the value so adopted by the AO exceeds the fair market value as on the
date of transfer. Under these facts, the submissions of the assessee are
devoid of any merit, hence, the ground raised in this appeal is rejected.
Apropos ground no. 3, in respect of addition of Rs. 35,00,000/-, the ld.
Counsel for the assessee submitted that the property in question was
purchased on 08.01.2010 for setting up of an industry which is evident from
the title deed and the property is still lying with the assessee. He, however,
submitted that due to certain reasons the setting up of an industry could not
take place and is hopeful that the industry will be established. The ld. Counsel
submitted that the investment made in the purchase of the property is a
capital investment and not for trading asset and urged that the provisions of
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section 40A(3) are not applicable. The ld. Counsel submitted that provisions
of section 40A(3) were brought on statute for stopping bogus expenditure. He
submitted that in the case of assessee the genuineness of the payment is not
doubted and the payments made to the persons are identifiable. He, placed reliance on the CBDT Circular No. 6P dated 6th July, 1968, submitted that
provisions of section 40A(3) of the Act is not applicable in the case of the
assessee. The ld. Counsel further relied on the decision of Hon’ble Gauhati
High Court rendered in the case of Walford Transport (Eastern India) Ltd. vs.
CIT (1991) 240 ITR 902 (Gau.). He, therefore, prayed that the addition made
deserves deletion.
6.1. On the contrary the ld. D/R supported the orders of the authorities
below.
6.2. We have heard rival contentions, perused the material available on
record and gone through the orders of the authorities below. We have given
our thoughtful consideration to the rival contentions of the parties. Admittedly,
claim of the assessee is that the assessee had made investment into a capital
asset. It is also noted by the Assessing Officer that during the year under
consideration, the assessee has purchased four industrial plots for a total
consideration of Rs. 35,00,000/-. The Assessing Officer invoked provisions of
Section 40A(3) of the Act on the ground that the investment is made in cash.
However, the case of the assessee is that provisions of section 40A(3) would
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not be applicable as the assessee had made capital investment. However,
The Ld. Departmental Representative conceded that the investment made is
in the nature of capital expenditure. Therefore, in our considered view,
provisions of section 40A(3) would not be applicable. Accordingly, we hereby
direct the assessing officer to delete the addition. This ground of the
assessee’s appeal is allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 28/02/2017.
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सहायक पंजीकार@Aेेज. त्महपेजतंत
8 ITA No. 507/JP/2016 Shri Sunil Kumar Tiwari.