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Income Tax Appellate Tribunal, KOLKATA BENCH “SMC” KOLKATA
Before: Shri S.S, Godara
O R D E R This assessee’s appeal for assessment year 2014-15, arises against the Commissioner of Income-tax (Appeals)-6, Kolkata’s order dated 28.02.2018 passed in case No.cita-6, Kolkat-6/10144/16-17 affirming the Assessing Officer’s action making us 50(2)(vii) addition of ₹6,62,962/- in assessment order dated 18.08.2016 involving proceedings u/s. 143(3) of the Income Tax Act, 1961; in short ‘the Act’.
I notice at the outset that the CIT(A)’s detailed discussion qua the above sole issue reads as follows:- “3. The appellant submitted written submission, which is reproduced as under:- ‘only ground of appeal is against addition made by the learned AO of Rs.6,60,962.00 u/s. 56(2)(vii)(b)(ii) of the Act. Registration Set forth Share of Market Share of Difference No. & Date value (value your value your as per assessee assessee conveyance deeds) 00369/2014 5,00,000/- 1,00,00 15,28,586/- 3,05,717/- 2,05,717/- (1/5th) (1/5th) 18.1.2014 00400/2014 5,00,000/- 1,00,000/- 15,28,586/- 3,05,717/- 2,05,717/- (1/5th) (1/5th) 18.1.2014 Gautam Bhakat Vs. ITO Wd-23(2), Hgy. Page 2 00401/2014 7,80,000/- 1,30,000 15,28,586/- 2,54,764/- 1,24,764/- (1/6th) (1/6th) 18.1.2014 00404/2014 7,800,000/- 1,30,000/- 15,28,586/- 2,54,764/- 1,24,764/- 18.1.2014 (1/6th) (1/6th) 4,60,000/- 11,20,962/- 6,60,962/- (the said working as per assessment order needs some clerical correction but total sum of addition is same) Sir, in brief, the provisions of the said section is deeming provision under which in case an individual or Hindu Undivided Family receives any immovable property for a consideration which is less than the stamp duty value over such consideration would be taxable as “income from other sources.” Now, I would like to draw your kind attention towards history of the provisions of sec. 56(2)(v), sec. 56(2)(vi) & Sec. 56(2)(vii) of the Act which basically deal exceeding a specified limit amended from item to time. These provision were brought in to effect to tax gifted sum subject to certain terms and condition after gift tax was dropped with effect from 30th September, 1998. Therefore, whole purpose was to tax the transfer of money under the guise of gift. In support of the above, it may please be noted that the language used in the said section is “where” an individual or HUF receives in any previous year … …” The legislature would have used the term “as a result of transfer” as has been used in the provisions of section 50C and section 43CA of the Act, had there been any intention on their part to tax the excess of stamp duty value over actual consideration in the hand of recipient even in case of sale of Immovable property. Therefore, they have not intended to tax the said difference in the hand of transferee in case of sale by conveyance deed and only purpose was to tax in case of gift. Now, if you kindly view specifically the provisions of section 56(2)(vii) enacted with effect from 1st October 2009 which are read as under. Where an individual or HUF receives in any previous year from any person or persons. a) Any sum of money without consideration the aggregate value of which exceeds Rs.50,00,000.00 the whole of the aggregate value of sum. b) Any immovable property without consideration the stamp duty value of which exceeds Rs.50,000.00 the stamp duty value of such property. Sir, again if you kindly mean the basic object of the legislature, it was to tax in case of gift i.e. without consideration. Further, by the Finance Act 2013 with effect from 01.04,2014 sub-clause (b) to clause (vi) to section 56(2) was broken into two which are read as under: (i) Without consideration the stamp duty value of which exceeds Rs.50,000.00 the stamp duty value of such property. (ii) For a consideration which is less than the stamp duty value of the property by an amount exceeding Rs.50,00,000.00 the stamp duty value of such property as exceeds such consideration.
Gautam Bhakat Vs. ITO Wd-23(2), Hgy. Page 3 Sir obviously the aforesaid amendments is expected to have been brought to plug the gift transactions (transfer of property by gift) being done for a part consideration. Having all the aforesaid provisions and amendments made therein from time to time, it is understood that it was completely intended to tax transfer of money immovable property under the guise of gift and not transfer of immovable property by executing conveyance deed duly registered by a competent authority. It is important to note that provision of section 56(2)(vii) applicable in case of transferee of immovable property covers only Individual or HUF, whereas provisions of section 50C/43CA applicable to the transferor of the property cover all the assessee. It implies that if the transferee of property is a person other than individual or HUF i.e. a Company, Firm, LLP etc., provision of section 56(2)(vii) shall not be applicable. Thus, if an immovable property is purchased by a person other than an individual or HUF for a consideration which is less than Stamp Duty Value / Circle Rate, there will not be any implication or attraction of the provision of this section. There is however nothing explicit as to why only individual and HUF have been brought into the ambit of this section and as to why other persons have been left out. The only broad rationale one can gesticulate & comprehend is that the origin of the provision of section 56(2)(vii) relates to the introduction of the concept of gift/deemed gift into the income Tax Act after the abolition of Gift Tax Act an since the gift tax used to affect largely to individual and HUF, the applicability of this provision has also been restricted to individual and HUF only. Sir, further, the provisions of section 56(2)(vii)(b)(ii) is a deeming provision for the purpose of brining to tax the difference between stamp duty value and actual consideration mentioned in the conveyance deed as income from other source and in absence of any legally acceptable evidence the circle value adopted by the state agency for the purpose of stamp duty would not I cannot substitute the actual sale consideration passed to the seller by the buyer. The assessee has duly disclosed the cost of property purchased as per consideration paid by him to the seller. Therefore, the assessee has discharged is burden of proving purchase consideration a per sale deed. Now the AO was obliged to bring on record the positive evidence supporting the price assessed by the competent authority of state govt for the purpose of stamp duty. In the impugned case the AO has failed to do so and arbitrarily adapted stamp duty value and illegally added of Rs.6,60,692.00 i.e. excess of its over actual consideration to the total income of the appellant. Sir, further, from legality point of view of stamp duty value adapted by the State Agency on which stamp duty is payable, we would like to submit as under:- ‘one of the basic ingredients for making addition U/s 56(2)(vii)(b)(ii) is stamp duty value adapted by the state agency on which stamp duty was paid. At the same time the stamp duty value have been also basis for determining taxable income U/s 50C and U/s 43CA of the Act. therefore, legal validity of adapting stamp duty value in determining Gautam Bhakat Vs. ITO Wd-23(2), Hgy. Page 4 taxable income is of great importance and required to be considered either for section 50C or section 56(2)(vii) of the Act. Here I would like to rely on the following judgments wherein legal validity of stamp duty value has been ruled out and considered to be irrelevant for the purpose of determining taxable income.
CIT v. Chandani Bhochar (2010) 323 ITR 519 (P&H) full value of consideration. Assessee disclosed the purchase price at Rs.17.06 Lacs as stated in the sale deed but the Assessing Officer adopted the value at Rs.30.32 lacs which was assessed for the purpose of paying stamp duty and the difference \vas added to the total income as income from unexplained source. The Commissioner (Appeals) deleted this addition holding that section 50C of the Income Tax Act, 1961 was a deeming provision for the purpose of brining to tax the difference as capital gain and in the absence of any legally acceptable evidence, the valuation done for the purpose of section 50C would not represent the actual consideration passed on to the seller. The Tribunal also held hat valuation done by any state agency for the purpose of stamp duty would not ipso facto substitute the actual sale consideration as being passed on to the seller by the purchaser in the absence of any admissible evidence, and that the Assessing Officer was obliged to brig on record positive evidence supporting the price assessed by the State Government for the purpose of stamp duty. Upholding the decisions of CIT(Appeals) as well as Tribunal in justifying the correctness of recording the fact that the assessee had discharged the burden of proving the sale consideration as projected in the sale deed, the appeal having no question of law, was unadmitted.
2. Sunil Kumar Agarwal v. CIT (Calcutta High Court) (2014) 226 Taxman. Sec. 50C: If the stamp duty valuation is higher than the consideration received, the AO must refer the valuation to the AO even if there is no request by the assessee. The assessee sold a piece of land for Rs.10 Lakhs and offered capital gains. However, the AO, CIT(A) & Tribunal held that as the market value of the land was assessed by the District Sub Registrar at Rs.35 Lakhs for stamp duty purposes, which was duly paid by the buyer, the consideration had to be taken at that figure U/s 50C. On appeal by the assessee to the High Court HELD allowing the appeal: No inference can be made that the assessee has accepted the price fixed by the District Sub Registrar for stamp duty purposes as the fair market value of the property. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Subs Registrar for purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer the AO discharging a quasi judicial function, has the bounden duty to Gautam Bhakat Vs. ITO Wd-23(2), Hgy. Page 5 act fairly and to give a fair treatment by giving him an option to follow the curse provided by law.
CIT v. Sarijan Realties ltd. (2013) 40 Taxman. Commission 398 /(2014) 220 Taxman 112 (Mag)(Guj.) Deeming fiction created by section 50C which substitutes consideration received on sale of a capital asset by stamp duty valuation is applicable only in case of seller and not buyer of the property.
CIT v. Hanuman Prasad Ganeriwala (2014) 43 taxmann.com 133.122 Taxaman 126 (Delhi)(Mag). Circle rate as stipulated under section 50C can become starting point of enquiry but cannot be sole concluding reason to hold that there was under statement of sale consideration.
Mahtab Alam, New Delhi v. I. Tax Department – ITAT No. 3656/Del/2013 It was ruled that on the basis of difference between the market price and apparent sale consideration, no addition can be made without making attempt for verifying the price from the seller of the property. In other words there no positive material evidencing the making actual investment by the assessee over and above disclosed sum. Reliance is also place on Supreme Court decision in the case of K.P.Varghese v. ITO (1981) 131 ITR 597 (SC) ‘in absence of any evidence brought on record to show that the assessee had invested more than the purchase consideration disclose addition made for unexplained investment could not be sustained.’ Considering the above submission, we pray before your honour for natural justice and set right the mistake made by the learned AO while passing the assessment order. For such kind of act, your appellant shall be ever grateful to you.”
4. The only ground raised by the appellant is in respect of addition of Rs.6,60,962.00 u/s 56(2)(vii) being the difference between value mentioned in the Conveyance Deed and the stamp duty value of Immovable properties. The appellant has mainly challenged the validity of the addition on the ground that the provision of sec. 56(2)(vii) does not apply to transactions where consideration is involved and thereby that the said provision was applied for gift transactions only. Having gone through the appellant’s contention as well as the relevant provision of the Act, I do not find any substance in the appellant’s contention. The law in such respect is very clear and applies to both type transactions i.e. whether no consideration involved i.e. gift transactions and also to t ran where consideration is involved but consideration is lesser than the fair market value. Fair market value in such respect has been bench marked to the stamp duty value and in the case of the appellant the F.M.V. of the impugned property is higher than the consideration so mentioned in the Conveyance Deed and hence, the appellant’s contention in such respect stand rejected. Hence, the only ground of the appellant is rejected.”