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Facts
The assessee, a real estate company, claimed a business loss of Rs. 12.25 Crs from a failed hotel property purchase deal, where Rs. 14.50 Crs advance was forfeited, with Rs. 2.25 Crs refunded after arbitration. Separately, the Assessing Officer made an addition of Rs. 1.8 Crs under Section 43CA for the difference between the actual sale consideration (Rs. 17.93 Crs) of a land plot and its stamp duty valuation (Rs. 19.73 Crs), which the assessee disputed.
Held
For the business loss, the tribunal upheld the CIT(A)'s decision, confirming it as an allowable business loss under Section 37(1) of the Act. For the Section 43CA addition, the tribunal upheld the CIT(A)'s deletion of the addition, stating that the Assessing Officer was duty-bound to refer the matter to the Departmental Valuation Officer (DVO) under Section 50C(2) given the assessee's specific objection, and failure to do so rendered the addition unsustainable.
Key Issues
1. Whether a loss arising from the forfeiture of advance payment in a failed property acquisition by a real estate developer is an allowable business loss. 2. Whether an addition under Section 43CA/50C is valid if the Assessing Officer fails to refer the property valuation to the DVO despite the assessee's specific objection.
Sections Cited
37(1), 43CA, 50C, 50C(2)
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Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
ORDER PER S.RIFAUR RAHMAN, AM: 1. This appeal has been filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)-29, New Delhi [“Ld.
CIT(A)”, for short], dated 18/10/2017 for Assessment Year 2014-15.
ACIT vs. Ridgeview Developers Pvt. Ltd 2. Aggrieved with the above order, Revenue is in appeal raising following grounds of appeal:-
“1. The Ld. CIT(A) has erred in law and on facts by deleting the addition made by the AO u/s 37(1) of the Act without considering the fact that assessee failed to submit the details of broker on assurance of whom the assessee has entered into the deal.
The Ld. CIT(A) has erred by not appreciating the fact that the State Registration Authorities recognize this plot as having preferential location owing to being located in the corner having two approach roads. The Assessing Officer is not bound to refer the matter to the DVO for valuation.
That the grounds of appeal
are without prejudice to each other.
4. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time hearing of the appeal.”
3. We shall proceed to dispose of this appeal ground wise.
4. The relevant facts relating to ground No.1 are, during the assessment proceedings, the Assessing Officer observed that the assessee had claimed an expense on account of business loss of Rs.12.25 Crs. in respect of non execution of sale deed during the year. The company has claimed expenses of Rs.3,27,77,388/- during this year as against the expenses of Rs.1,58,28,330/- in the previous year. The assessee was asked to explain the claim of large expenses in the profit and loss account by issue of questionnaire dated 10/10/2016. In response, the assessee has submitted as under:-
“The assessee company has entered into agreement with M/s R.K. Associates and Hoteliers Pvt. Ltd., A-25, Hospital Road, Near Rama Tent House, Bhogal, New Delhi for the purchase of a Hotel Fortune in Grazia, Sanjay Nagar, District Centre, Sec-23, Ghaziabad, Uttar Pradesh for the purchase consideration of Rs.95 crores as per the terms of agreement to sell dated 09.12.2013 an amount of Rs. 50 Lacs was paid to the vendors and amount of Rs. 16 crores was paid by the Assessee Company to the vendors on 08.01.2014 and the balance consideration of Rs. 7850 Lacs was to be paid by 08.02.2014. As per the terms of agreement, the assessee company has paid total amount of Rs. 1450 Lacs by payee account cheques as per detail enclosed herewith. The assessee company has deducted TDS amounting to Rs.1450 Lacs on such advance payment and same was deposited with the Income tax Department. The copy of the TDS Returns showing the deduction on such TDS is enclosed. It may be mentioned here that due to the depressive conditions in the real estate market, the assessee could not raise the funds for payment of the balance purchase consideration in respect of the above mentioned hotel building. The assessee company has sought time for further balance of payment. The vendor has allowed desired time keeping in view the financial position of the assessee but in the extended period, the assessee company, but in the extended period, the assessee company could not manage the funds as there was lean condition in the Real Estate Market for selling of existing inventory. The Vendor has not allowed further period and inspite of that it has issued a legal notice for failure to payment of advance money of Rs.1450 Lacs as per the terms of agreement as the assessee company has defaulted in making the balance payment of Rs.8050 Lacs. Inspite of its best effects, the assessee has started taking additional time for arrange the balance payment. After recovering the financial positions, the assessee company has agreed with the vendor to appoint an arbitrator to resolve the issue arises on the non payment of balance amount of Rs.8050 Lacs to the vendors. The sole arbitrator after hearing both the parties and examine the witnesses has given the final award on 04.03.2014. The copy of the award is enclosed for your perusal and ready reference. It is submitted that the arbitrator after perusing the evidences and documents produced by both the parties and as per terms of agreement has found that the assessee company has failed to obligation to make timely payment to the vendor within the stipulated time as the time was the essence of the contract. Thus the arbitration has given the award to the fact that the vendor would be paid a sum of Rs. 225 Lacs to the assessee company after forfeiting the amount of Rs.1225 Lacs as the assessee company has failed to fulfill its obligation in making the payment to the vendor in time. Since no other option is left with the assessee to accept the award of the arbitrator, therefore the assessee company has accepted the loss of Rs. 1225 Lacs (Rs. 1450 lacs - Rs. 225 Lcas). Since the assessee company has made the advance payment for the purchase property in its normal course ACIT vs. Ridgeview Developers Pvt. Ltd of business as the assessee company has engaged in the construction of integrated Township, Selling of Flats, Hotels etc., therefore, the loss of Rs.1225 Lacs was a business and allowable u/s 37 of the Income Tax Act. Accordingly the assessee has claimed business loss of Rs.1225 Lacs in the profit and Loss account. The copy of the agreement, award, legal notice and copy of resolution and other relevant documents are enclosed for your perusal and reference."
After considering the above submissions, the Assessing Officer further asked to explain and submit the details of loss of Rs.12.25 Crs. due to default in payment to M/s R.K. Associates and Hoteliers Pvt. Ltd. Further, the assessee was asked to explain specific efforts to raise advances for the payment to above said party and he observed that the assessee had reserves and surpluses at the day of default with cash and bank balances, then why the payment due was not made. In this regard, the assessee has submitted as under:-
"In the course of last hearing, the assessee was required to show cause as to why the business loss of Rs.1225 Lacs should not be allowed in this year. In this connection, it is submitted that the assessee has entered into agreement for the purchase of Hotel Building Property situated at Sanjay Nagar, Ghaziabad for the value of Rs. 9500 Lacs. The assessee has paid Rs. 1650 Lacs as advance and the balance payment was required to be paid on or before 08.02.2014. It may be mentioned here that the assessee had agreed to buy the sand Hotel Property after taking into consideration the funds available with it for such purchases. In respect of funds availability it is stated that the assessee has entered this deal after considering the assurance given by one of the broker that he has a good customer who is interested for buying the Hotel in NCR of Delhi. Further after discussion with the broker and perusing the Authority Letter in favor of such broker for purchase of Hotel at Rs. 100 crores, the assessee has started working to buy this hotel at lesser amount. Further the assessee has also worked out that it will get the profit about Rs. 5 crores after execution of Sale Deed directly in favor of potential customer who has agreed to buy it for Rs.100 crores.
Secondly, the assessee was also negotiating for the sale of commercial plot at its own project TDI City Agra for the consideration about of Rs. 20 crore. Infact, the assessee has sold the said plot for Rs. 19.31 crores and received the amount. Thirdly, the assessee has got approved the Housing Project from DTCP, Haryana at Dharuhera in its group company and has negotiated the sale of FSI 500000 sq. ft. 800/- sq. ft. in its associates company M/s Dream Merchant Promoters P. Ltd. This after considering the expected sale proceeds from all sources and fund available with the assessee, it has finally entered into agreement for the purchase of Hotel at Rs. 9500 Lacs and started making the advance payments. However, the said deal could not materialized on time due to the backing out of the potential customer who have agreed to buy this hotel at Rs. 100 crores. Further due to the recession in the real estate business, the commercial plot proposed to be sold at Rs. 20 crore could not materialized on time, therefore, the assessee company has realized that there would be apparent loss in completion the transaction and the project would not profitable to buy at Rs.95 crores as the potential buyer of Rs. 100 crores has backed out. In view of this fact the assessee company has agreed for the surrender of Rs. 1225 Lacs out of Rs. 1650 Lacs as per award given by Arbitrator as damaged against the apparent loss which would much higher for execution of the Sale Deed after the payment of the sale amount on very higher rate of interest on borrowings. Since the payment for damages for cancellation of the deal is a business loss in the real estate business line, therefore, the same is allowable u/s 37 of the Income Tax Act. In view of this fact it is requested that the proposed disallowance of the business loss of Rs. 12.5 crores is not tenable in law."
After considering the above submissions, the Assessing Officer dismissed the contention of the assessee and proceeded to make the addition of Rs.12.25 Crores by observing as under:-
“1) The assessee company has not submitted the details of the broker on assurance of whom the assessee has entered into the deal. Any prudent businessman will not enter into an agreement merely on the basis of verbal assurance by some broker and will enter into a business deal which can result in such a huge loss to him. 2) The assessee speaks of Authority letter in favour of this broker which does not hold any force as the same cannot be accepted as a proof of the deal with any potential customer.
3) The assessee company is claiming that the potential customer backed out which is without any basis and unfounded. These kind of replies are vague and general and not sustainable. 4) The assessee company has not submitted any details w.r.t the efforts made to raise advances from the market.It was abundantly clear to the assessee company that there would be huge loss to the company in case of default in making payments to the M/s R.K. Associates and Hoteliers Pvt. Ltd despite that there has been no efforts from the management of the company to raise funds from the market. 5) As per the submission of the assessee, the assessee was also negotiating for the sale of commercial plot at its own project TDI City Agra for the consideration about of Rs. 20 crore. Infact, the assessee has sold the said plot for Rs. 19.31 crores and received the amount and he assessee has got approved the Housing Project from DTCP, Haryana at Dharuhera in its group company and has negotiated the sale of FSI 500000 sq. ft. @ 800/-sq. ft. in its associates company M/s Dream Merchant Promoters P. Ltd. Therefore, it is quite contradictory that assessee had funds as per it's own submission but still defaulted in payment due to backing of potential customer knowing fully well the consequences of the same. In view of the above observations, the business loss amounting to Rs.12,25,00,000 as claimed in P & L account of the assessee company is disallowed u/s 37 of the IT Act 1961.”
Aggrieved with the above addition, the assessee preferred an appeal before the Ld. CIT(A) and filed the detailed submissions before him.
After considering the submissions of the assessee, the Ld. CIT(A) decided the issue in favour of the assessee by observing as under:-
“5.2 I have considered the facts and circumstances of the case, submission of the appellant and perused the assessment order. I find that the appellant is a real estate company engaged in the business of development of integrated residential township and other real estate business. During the year under consideration, they entered into an agreement with M/s RK Associated and Hoteliers P. Ltd. for purchase of hotel Fortune in Grazia, Sanjay Nagar, Distt. Centre, Sector-23, Ghaziabad, UP. The sale consideration of the impugned property was agreed at Rs.95 crores which was to be paid as per the agreed dates as mentioned at clause 2 of the agreement, i.e. ".... The BUYER shall purchase the property from the SELLER and the SELLER shall sell the property to the BUYER from the purchase price and conditions set out in this Agreement. The BUYER shall pay the purchase price in the following manner: a) An amount of Rs.50,00,000/-(Rupees Fifty Lacs only) must be paid by the BUYER to the SELLER upon execution of this Agreement by the BUYER to the SELLER, accordingly BUYER has paid a sum of Rs.50 lacs after deduction of Tax @1% vide cheque no.849983 dated 09.12.2013 drawn on IDBI Bank KG Marg, New Delhi for Rs.49,50,000/- the receipt of sum, the SELLER does hereby acknowledge. b) An amount of Rs. 16,00,00,000/- shall be paid by the BUYER to the SELLER within one month of this Agreement i.e. by 08.01.2014. c) An amount of Rs.78,50,00,000/- shall be paid by the BUYER to the SELLER within two months of this agreement i.e. by 08.02.2014. d) If the BUYER fails to pay the balance of the purchase price on or before the scheduled dates set out in sub clause b and c of clause 2, the amount paid by the BUYER shall be forfeited by the SELLER, and the interest of the BUYER in the property as created by this agreement shall terminate without any legal proceedings being taken or any other act being performed and the property shall revert to and re-vest in the SELLER. The BUYER shall promptly discharge any caveat, encumbrance, lien, charge or other instrument which the BUYER may have registered or caused to be registered against the title to the property. e) Condition precedent:
This agreement is expressly subject to and conditional upon"
On receipt of the balance amount of Rs. 16,00,00,000/- (as mentioned in sub clause b of clause 2) and Rs. 78,50,00,000/- (as mentioned in sub clause c of clause 2) the SELLER shall execute sale deed in favour of the BUYER on or before 08.02.2014...." out of which Rs.50 lacs was paid as an advance. Further, Rs.14 crore was also paid, thereby, the total payment of Rs.14.50 crore was made but due to the depressive conditions in the real estate market, the appellant could not raise further fund for payment. Though the vendor allowed further time keeping in view the financial position of the appellant, however, the appellant could not managed the fund even in the extended period. Therefore, the vendor issued a legal notice for forfeiture of the payment made of Rs. 14.50 crores. The notice was issued as per the terms of agreement mentioned in clause 14, i.e
".... That if the BUYER fails to pay the balance payment to the SELLER on or before the fixed dates as mentioned in sub clause b and c of clause 2 (an amount of Rs. 16,00,00,000/- within one month of this agreement i.e. by 08.01.2014. And an amount of Rs. 78,50,00,000/- within two months of this agreement i.e. by 08.02.2014 this agreement will be treated as "cancelled and Null & Void" and the amount paid by the buyer shall be forfeited by the SELLER and the SELLER will have the right to sell and above SCHEDULE PROPERTY to any person at any cost and the BUYER will not claim and will not file any litigation against the SELLER regarding the SCHEDULE PROPERTY..." as the appellant defaulted in making the balance payment of Rs.80.50 crore. Thereafter, as per the clause 16, i.e.
"...That if any dispute arises out of this agreement to sell then same shall be referred to the ARBITRATOR appointed by both the parties and order of the ARBITRATOR shall be binding on both the parties...." the matter was referred to the arbitrator and the arbitrator vide the award dated 25.03.2014, has ordered M/s RK Associates & Hoteliers P. Ltd. to refund an amount of Rs.2.25 crore to the appellant out of the forfeited amount of Rs.14.50 crores, thereby, there was a loss of Rs.12.25 crore occurred to the appellant out of the impugned deal of the property and the same was claimed by the appellant as business loss. On the perusal of the facts/details filed by the appellant, I find that the appellant was engaged in the real estate business, therefore, the deal entered into by the appellant for purchase of the property was in accordance with their business activity and the loss of Rs.12.25 crore was incurred during the ACIT vs. Ridgeview Developers Pvt. Ltd course of their business activity. In view of the above discussion and the case laws Appeal No. 545/16-17/CIT(A)-29 A.Y.2014-15 relied upon by the appellant in their submission as mentioned on para 6 above, I m of the considered view that since the loss was occurred to the appellant in the normal course of business, therefore, the same is found to be allowable as business loss. Therefore, the AO is directed to allow the same.”
Aggrieved with the above order, the Revenue is in appeal before us.
At the time of hearing, the Ld. DR submitted that assessee has claimed huge loss due to not meeting the commitment in the agreement made with M/s R.K. Associates and Hoteliers Pvt. Ltd. He brought to our notice findings of the Assessing Officer at page 6 of the order and also relief given by the Ld. CIT(A) in his order at page 10, he relied on the detailed findings of the Assessing Officer to submit that the assessee has not submitted the documents as well as proper reasons to write off such huge amount.
Considered the rival submissions and material placed on record. We observed that the assessee has entered into an agreement of purchase of property for the total value of 95 Crs. and as per the schedule of payment assessee has paid 49.5 lacs at the time of execution of the agreement and further payment of 14 Crs. and balance amount of Rs.78.50 Crs. was remained unpaid. The ACIT vs. Ridgeview Developers Pvt. Ltd seller has given several opportunities to the assessee for making the payment, however, due to financial exigencies assessee could not keep up the payment schedule and defaulted the same. The seller issued legal notice for forfeiture of the payment made by the assessee of Rs.14.5 Crs. and the matter was referred to the arbitrator, based on the award of the arbitrator dated 25/03/2014, the seller was asked to refund Rs.2.25 Crs. to the assessee and balance was treated as forfeited amount. The same was claimed by the assessee as the Revenue loss in the profit and loss account. The loss claimed by the assessee is a business loss incurred by the assessee during execution of a contract, therefore, by considering the above facts on record, the Ld. CIT(A) has allowed the claim made by the assessee as Revenue loss u/s 37 of the Act. After considering the detailed findings of the Ld. CIT(A), we do not see any reason to disturb the same. Accordingly, the grounds raised by the Revenue is dismissed.
The relevant facts relating to ground No.2 are during assessment proceedings, the Assessing Officer observed that the assessee has sold plot of land i.e. K-1-C, Khasra No.630 part, 631 part, 632 and 142 part, TDI City, Agra for a sale consideration of Rs.17.93 Crs. whereas the stamp duty valuation was at Rs.19.73 Crs. The assessee was show caused as to why the difference should not be added to the income of the assessee u/s 43CA of the act. In response the assessee submitted as under:-
"The assessee had sold the plot measuring 10545.46 sq. mtrs. The circle rate for the said land at Agra was Rs. 17,000 per square meters. Thus the circle rate comes at Rs. 17,92,72,820/-. Thus the assessee sold the property at Rs. 17.92 crores as determined by the stamp Authorities. Further the stamping authorities have taken 10% additional value being the preferential location charges and have determined the circle rate at Rs. 19.73 crores (17.92+1.79). The assessee company had admittedly acquired 1002 acres of land alongwith its associate company at Agra for development of Integrated Township and had the licence issued by the Agra Development Authority, Agra. The approval by the Agra Development Authority was for the following projects:- (i) Residential Projects (ii) Hotel Project (iii) School (iv) Commercial Shop (v) Group Housing The assessee had sold the hotel plot for Rs. 17.93 cr. as approved by the Agra Development Authority. Since there was only one hotel plot in the entire Integrated Township, there is no question of having preferential location of plot like corner. The preferential location charges are paid in respect of a plot having preferential location amongst the identical units. There was only one hotel plot, thereis no identical plot or hotel owned by the asessee company in the Project. The assessee has not received any preferential charges of Rs. 1.8 crores from the vendor. Further the AR submitted vide letter dated 21.12.2016 that:- "The assessee has been further required to show cause as to why the stamp duty valuation of Rs. 19.73 crores should not be taken in respect of plot sold for value of Rs. 17.93 crore in this year and the difference should not be treated as other sources of income u/s 43CA of the Income Tax Act. In this connection it is submitted that the assessee had sold the said hotel plot measuring 10545.46 sq. mtr. At the then market price prevailing in the area. The circle rate was much higher as the actual rate prevailing in the market in that time. However, the assessee has persuaded to Vendee to get the Sale Deed at the circle rate of Rs. 17,000/- per sq mtr. For the value of Rs. 17,93,00,000/- on fair market value of the plot at that time. Now the assessee has objection for proposed addition of Rs. 17.93 crores u/s 50C of the Act and request for the same to be referred to DVO for fair valuation."
After considering the submissions of the assessee, the Assessing Officer rejected the same and proceeded to make the addition of Rs.1.8 Crs. u/s 43CA of the Act by observing as under:-
“(i) As per the sale deed, the given plot is a corner plot having two approach roads. In the sale deed at point no. 12, it is clearly mentioned that the circle rates are 17,000/- per sq. mtrs. (10% extra i.e. 18700/-for the plot being coner plot.). This clearly establishes that the state registration authorities recognize this plot as having preferential location owing to being located in the corner. (ii) As per Section 43 CA of the Act, where the consideration received or accruing as a result of the transfer by an assessee of an asset (not being a Capital Asset), being land or building or both, is less than the value adopted or assessed or assesseable by any authority of the state government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall for the purpose of computing profit and gains from transfer of such asset be deemed to be the full value of the consideration received or accruing as a result of such transfer. (iii) The assessee has demanded that the valuation of the property should be referred to the DVO for fair valuation. This is not acceptable as already the Agra Development Authority has determined the value of the property after taking into consideration all the factors i.e. preferential location of the plot and other determining factors. Therefore, the assessee's contention that the hotel plot, not being located prudentially to attract the 10% extra stamp duty to the circle rate is contradictory to the circle rate of Rs.18,700/- applied by the stamp duty authorities of the state government for preferential location, the plot being corner plot.
With the above order, the assessee preferred an appeal before the Ld. CIT(A) and made detailed submissions before him.
ACIT vs. Ridgeview Developers Pvt. Ltd 15. After considering the detailed submissions, the Ld. CIT(A) deleted the additions made by the Assessing Officer for not referring the matter to the DVO even though assessee has made specific objections. The Ld. CIT(A) by relying on the decisions of various Courts/ITAT, he find the merit in the argument of the assessee for not referring the matter to DVO. Accordingly, the ground raised by the assessee is allowed.
Aggrieve with the above order, the Revenue is in appeal before us.
At the time of hearing, the Ld. DR submitted that the addition made by the Assessing Officer is relating to Sec.43CA and submitted that Ld. CIT(A) deleted the addition made by the Assessing Officer for the reason that the AO has not referred the matter to DVO even though assessee has specifically raised the objection before the Ld. Assessing Officer. He submitted that the Ld. CIT(A) having co-terminus power, he could have referred the matter to DVO. In this regard, he relied on the decision of ITAT Mumbai Bench in the case of A.T.E. Enterprises (P.) Ltd vs. DCIT [2012] 28 taxmann.com 289 (Mum).
ACIT vs. Ridgeview Developers Pvt. Ltd 18. On the other hand, the Ld. AR submitted that the issue pertains to deletion of addition of Rs. 1.8cr made u/s 43CA r.w.s 50C on account of difference between the actual sale consideration of Rs. 17.93 Crores received by the assessee company and stamp valuation of Rs. 19.73 Crores as income from other sources u/s 43CA of the Act. The assessee sold the only plot reserved for making the hotel in a township measuring 10545.46 sq. mtrs. to First Choice Hotels (P) Ltd. at the then prevailing market price in the area of Rs. 17.93 cr, which has not been disputed by the ld. AO.
However, the ld. AO mechanically made the addition u/s 43CA considering that circle rate adopted by stamp valuation authority for this plot was 10% more (i.e. 1.8 cr) than the circle rate for other adjoining areas in the township for being a corner plot. The Id. AO has also not found or alleged that the assessee received any excess amount over the sale consideration mentioned in the deeds. The assessee objected to the valuation adopted by the stamp duty authorities before Id. AO (Please see page no.3 of the Assessment Order) and submitted that the preferential location charges (10% enhancement) are paid in respect of a plot having preferential
ACIT vs. Ridgeview Developers Pvt. Ltd location amongst the identical units and since there was only one hotel plot in the entire integrated township, there was no question of having preferential location of plot like corner. The assessee submitted that the actual fair market value of said plot is 1.79 cr and requested for the matter to be referred to DVO vide reply dated 06.12.2016 and 19.12.2016 (Pg. no. 60A to 61A of the paperbook).
The Id. CIT(A) deleted the addition based on the numerous judgements relied upon by the assessee which provide that in cases where the assessee had disputed the value adopted by stamp valuation authorities u/s 43CA r.w.s. 50C, the ld. AO was duty bound to refer the valuation of the asset to valuation officer u/s 50C(2) and in the absence of any such reference being made the addition made on account of higher stamp duty value should be deleted.
In regard thereof, relied on the following case law and submitted that the Hon'ble ITAT deleted the addition u/s 43CA without remand back where the assessee had objected to the valuation adopted by stamp valuation authority even though no valuation report had been submitted by the assessee:
ACIT vs. Ridgeview Developers Pvt. Ltd • ACIT vs. Tarun Agarwal 173 ITD 107 (Agra- Trib.) • 57 ITR (Trib) 449 (Del0 ITO v. Aditya Narain Verma (HUF • ITO-1(3) Mathura Vs. Ramesh Chandra Kulshreshth
Further he submitted that the above may kindly be taken on record and the appeal of the department may kindly be dismissed without allowing the Ld. Assessing Officer a second inning, by sending the matter back to Assessing Officer, enabling it to fill the lacunae and shortcomings and putting the assessee virtually to face a re-trial for no fault of his and to again prove before the Assessing Officer that the sale consideration was the "fair market value" of the property sold by him which has not been disputed by the Id.
Assessing Officer in the first place. This would amount to giving a lease of life to an order which on the basis of facts on records is unsustainable in law.
Considered the rival submissions and material placed on record, we observed that the assessee has sold the property for the sale consideration of Rs.17.93 Crs. whereas the stamp valuation of the property was 19.73 Crs. In issue before us, assessee itself submitted that the assessee sold the only plot reserved for making
ACIT vs. Ridgeview Developers Pvt. Ltd the Hotel in township measuring 10545.46 sq. mtr. to First Choice Hotels (P) Ltd. at the then prevailing market price in the area for Rs.17.93 Crs. The stamp valuation for this plot was enhanced by 10% for preferential location charges. Therefore, the net difference of both are at Rs.1.8 Crs.. The issue before us is, the assessee has made specific objection before the Assessing Officer for adopting the above value, however, it is fact on record that the Assessing Officer failed to refer to the DVO. We observed that the similar issue was considered by the Co-ordinate Bench in the case of Aditya Naraian Verma as under:-
"4.1 On the very perusal of the provisions laid down under section 50C of the Act reproduced hereinabove, we fully concur with the finding of the learned Commissioner of Income-tax (Appeals) that when the assessee in the present case has claimed before 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, the Assessing Officer should have referred the valuation of the capital asset to a valuation officer instead of adopting the value taken by the State authority for the purpose of stamp duty. The very purpose of the Legislature behind the provisions laid down under sub- section (2) of section 50C of the Act is that a valuation officer is an expert of the subject for such valuation and is certainly in a better position than the Assessing Officer to determine the valuation. Thus, non-compliance with the provisions laid down under sub-section (2) by the Assessing Officer cannot be held valid and justified. The hon'ble jurisdictional High Court of Allahabad in the case of Shashi Kant Garg (supra) has been pleased to hold that is well-settled that if under the provisions of the Act an authority is required to exercise powers or to do an act in a particular manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner. Similar view has been expressed by the other decisions cited by the learned authorised representative in this regard hereinabove. The first
ACIT vs. Ridgeview Developers Pvt. Ltd appellate order on the issue is thus upheld. The grounds are accordingly rejected."
Similarly, in the case of ITO vs. Ramesh Chandra Kulshresth in decided as under:-
“28. In the present case, it is noted that the Assessing officer neither discussed the contentions of the assessee for taking actual consideration as fair market value of the property sold nor referred the matter to the DVO as was required U/s 50C(2) of the Act despite specific prayer made by the assessee at the first stage. The AO has also not found or alleged that the assessee received any excess amount over the sale consideration mentioned in the deeds. In the light of these facts and particularly on the failure of the AO to follow the course as prescribed under section 50C(2) and respectfully following various decisions discussed above, we do not find any infirmity in the order of the CIT(A) in quashing the addition made by the AO. We are also of the considered opinion that the department cannot be allowed a second inning, by sending the matter back to AO, enabling it to fill in the lacunae and shortcomings of the assessment order, and putting the assessee virtually to face a re-trial for no fault of his and to again put him to prove before the AO that the sale consideration was the "fair market value" of the property sold by him. This would amount to giving life to an order which on the basis of facts on records is unsustainable in law.”
Respectfully following the above decision, we are inclined to dismiss the grounds raised by the Revenue.
At the time of hearing, the Ld. DR relied on the decision of the A.T.E Enterprises Pvt. Ltd. (supra), which is a case outside our jurisdiction, therefore, we are not inclined to rely on the findings of ACIT vs. Ridgeview Developers Pvt. Ltd the above decision. Accordingly, appeal filed by the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on 26th June, 2024