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Facts
The assessee purchased an immovable property, and the stamp duty valuation was higher than the purchase price. The PCIT initiated revision proceedings under Section 263, considering the assessment order erroneous and prejudicial to revenue due to the discrepancy. The assessee contested this, arguing the difference was within permissible limits and the AO's order was not erroneous.
Held
The Tribunal held that the variance between the purchase price and the stamp duty valuation (6.06%) was within the 10% tolerance limit, which was applicable retrospectively. The revenue failed to discharge its burden of proof that a higher sale consideration was paid. Therefore, the PCIT's order under Section 263 was set aside.
Key Issues
Whether the PCIT's order under Section 263, holding the assessment order erroneous due to the difference between purchase price and stamp duty valuation of a property, is justified when the difference is within the tolerance limit?
Sections Cited
263, 143(3), 56(2)(x), 50C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GAGAN GOYAL
PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of Ld. PCIT, Mumbai dated 01.03.2024 passed u/s. 263 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2018-19. The assessee has raised the following grounds of appeal:-
1. GROUND 1: ORDER PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 Kiran Ashok Desai 1.1 On the facts and in the circumstances of the case and in law, the order passed by the Ld. Principal Commissioner Of Income Tax PCIT. Mumbai-19 ("the Ld. PCIT) under section 263 of the Income-tax Act, 1961 ("the Act") is invalid and bad in law.
1.2 The Ld. PCIT failed to appreciate and ought to have held that:
1.2.1 order passed by the Ld. AO after due inquiry/ investigation on question/issue could not per se be treated as erroneous in nature; 1.2.2 Order could not be held as erroneous under section 263 of the Act simply because according to the Ld. PCIT, the Ld. AO should have made a certain addition; 1.2.3 Once the Ld. AO has taken one of the permissible views on the basis of the enquiry, order cannot be said to be erroneous merely because the Ld. PCIT entertains a different opinion in the matter; 1.2.4 order passed by the Ld. AO ought not have been held as 'erroneous' and 'prejudicial to the interest of the revenue as the twin conditions stated under section 263 of the Act are not fulfilled; and 1.2.5 the subject matter of revisionary proceedings did not form part of limited scrutiny proceedings and the assessment order could not have been held to be 'erroneous and prejudicial to the interest of Revenue when the Ld. AO could not have travelled beyond the issues forming subject matter of the 'limited scrutiny.
1.3 The Appellant prays that order passed under section 263 of the Act to be struck down as null and void ab initio.
WITHOUT PREJUDICE TO GROUND 1:
GROUND 2: THE ASSESSMENT ORDER PASSED BY THE LD. AO UNDER SECTION 143(3) R.W.S 143(3A) AND 143(3B) OF THE ACT FOR AY 2018-19 IS NEITHER ERRONEQUS' NOR 'PREJUDICIAL TO THE INTEREST OF THE REVENUE' 2.1 On the facts and circumstances of the case and in law, the Ld. PCIT erred in concluding that addition of INR 53,87,693 (50% of difference of purchase value and stamp duty value i.e.Rs.1,07,75,385) under section 56(2)(x) of the Act ought be made.
2.2 The Ld. PCIT failed to appreciate and ought to have held that:
2.2.2 Section 56(2) (x) of the Act is curative in nature and hence, the stamp duty value ought to be substituted by the Ld. DVO valuation in bonafide/genuine cases:
2.2.3 3.2.3 The variance limit/tolerance limit as introduced under Section 56(2)(x) of the Act of 5% (vide Finance Act, 2018) which was further increased to 10% vide Finance Act, 2020, is curative in nature and hence should be applied retrospectively; 2.2.4 The variation between the actual purchase value and the value derived by the Ld. DVO is only 6.06% and accordingly, falls within the variance limit/tolerance limit and hence, no adjustment ought to be made for the variance; 2.2.5 The purchase consideration paid by the Appellant is an arm's length price negotiated between two independent parties i.e. willing buyer and willing seller.
2.3 The Appellant prays that order passed under section 263 of the Act to be struck down as null and void ab initio.
GROUND 3: GENERAL The Appellant craves leave to add to, alter and/or amend all or any of the foregoing grounds of appeal which are without prejudice to each other.
2. The brief facts of the case are that the assessee is individual filed his return of income on 11.12.2018 declaring total income at Rs. 11,59,130/-. The case of the assessee was assessed u/s. 143(3) r.w.s. 143(3A) and 143(3B) of the Act and returned income was accepted. During the year under consideration, the assessee received a gift of Rs. 4.77 crores from his father and the same is claimed to be exempt u/s. 56(2) (vi) of the Act. In addition to this, the assessee earned exempt interest income of Rs. 6,17,351/-, exempt dividend income Rs. 3,89,858/-, exempt LTCG Rs. 9,97,953/-, income from mutual fund Rs. 8,43,314/- during the year. During the year, assessee had purchased an immovable residential property on 30.11.2017 alongwith his wife and son for a consideration of Rs. 4, 75,03,000/-, the stamp duty valuation of the same for the purposes of section 50C was Rs.
Kiran Ashok Desai 5,82,27,385/-. Based on these figures, it can be worked out that there was a gap of 22.58% between the stamp duty valuation and purchase value of the property.
3. In the property mentioned (supra), the share of the assessee was 50% and rest of the share belongs to his wife and son. In the case of the assessee, the Ld. PCIT issued a notice u/s. 263 of the Act on the ground that the order passed by the AO mentioned (supra) is erroneous and prejudicial to the interest of the revenue vide dated 15.02.2024. The copy of notice issued is reproduced herein below for factual reference as under:-
“Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of THE INCOME TAX ACT, 1961-Assessment Year 2018-19, In this regard, a hearing in the matter is fixed on 22/02/2024 at 12:00 PM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in Please refer to the above.
In your case, an assessment order u/s. 143 r.w.s 143(3A) & 143(3B) of the I.T Act, 1961 for A.Y 2018-19 was passed on 08.04.2021accepting the returned income as determined u/s. 143(1) of the Income Tax Act, 1961.
On verification of the assessment records, it is noticed that you have purchased an immovable residential property on 30.11.2017 along with your wife and your son for a consideration of Rs. 4,75,03,000/- the stamp duty valuation of which is Rs. 5,82,27,385/-. Your share of contribution for the purchase of his property is 50% i.e. Rs. 2, 37, 51,500/-.
The Assessing officer has completed the assessment accepting the returned income without making addition of Rs. 53,87,693/-[50% of difference of (5,82,27,385- 4,75,03,000/-)Rs.1,07,75,385/-) u/s 56(2)(x) of the IT Act ignoring the reason for selection
4. In the light of the above, the undersigned proposes to revise the assessment u/s.263 as the said assessment order passed u/s 143 r.w.s 143(3A) &143(3B) of the I.T Act, 1961 for A.Y 2018-19 was passed on 08.04.2021 is 'erroneous' and 'prejudicial to the interest of the revenue' in the light of the facts mentioned above.
5. In this regard, you are hereby given an opportunity to file your written submission in this office latest by 22.02.2024 at 12.00 PM. In case, there is no compliance till the given date, it will be presumed that you did not wish to avail this opportunity and order u/s. 263 of the I.T. Act, 1961 will be passed, as above.”
Finally, order u/s. 263 of the Act was passed vide dated 01.03.2024 with a finding that the Faceless Assessing Officer is erroneous in so far as it is prejudicial to the interests of revenue in accordance with explanation 2(c) below section 263(1) of the Act on the ground of lack of enquiry. Accordingly, the assessment order dated 08.04.2021 passed u/s. 143(3) is set aside de-novo on specific issue as outlined in above para 5.1 with a direction to cause adequate and effective enquiry. The AO is directed to provide reasonable opportunity to the assessee to provide documents and evidences which it may choose to rely upon for substantiating its own claim. The AO is accordingly directed to examine the variation between the stamp duty value and value as per DVO report of the property, considering these documents and any other evidence as required and take necessary action. Thereafter, a fresh order may be passed in accordance with the relevant provisions of law. The assessee being aggrieved with this order of the Ld. PCIT preferred an appeal before us.
We have gone through the order of the AO passed u/s. 143(3) r.w.s. 143(3A) and 143(3B) of the Act, notice issued u/s. 263 of the Act and order passed thereon. It is observed that the stamp duty valuation of the property may be Rs. Kiran Ashok Desai 5,82,27,385/- against the purchased price of Rs. 4,75,03,000/- but fare market value as determined by the District Valuation Officer (DVO) was Rs. 5,03,83,000/-. This valuation by the DVO was carried out in the case of the assessee’s son in his scrutiny assessment proceedings vide DVO’s order dated 21.09.2021. The property under consideration is same as the son is also 50% owner of the same property. For sake of comparison amongst various values a table is being reproduced as under:- iii. The purchase value, stamp duty value and the fair market value determined by the Ld. DVO has been tabulated below for ready reference: Particulars Amount of entire Assessee’s share property (Rs.) (Rs.) Share in the property 50.00% Purchase value 4,75,03,000/- 2,37,51,500/- Fair market value determined by 5,03,83,000/- 2,51,91,500/- the Ld. DVO Stamp Duty Value 5,82,78,500/- 2,91,39,250/- Variance between purchase value 6.06% 6.06% and fair market value determined by the Ld. DVO
Now based on above facts and figures, we deem it fit to examine the issue in the light of provisions of section 50C of the Act which is reproduced herein below as under:-
“Section - 50C, Income-tax Act, 1961 - FA, 2023 Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being and or building or both, is less than the value adopted or assessed or assessable 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 or assessable shall, for the Kiran Ashok Desai purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer: Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, on or before the date of the agreement for transfer:] Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and ten per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration. (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 or assessable 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 or assessable 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 section 16A, 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.
Kiran Ashok Desai Explanation 1].—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). Explanation 2.—for the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty. (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.”
Considering the provisions reproduced (supra) and the facts of the case, it can be comfortably inferred that there was no error in the order of the AO and the same is not prejudicial to the interest of revenue also as the value adopted by the DVO and actual purchase price declared by the assessee falls within the tolerance limit of 10%. Although for the year under consideration, the tolerance limit was 5% and the enhanced limit of 10% is applicable w.e.f. A.Y. 2021-22. On this issue of applicability of enhanced tolerance limit, we would like to rely on [2014] 49 taxmann.com 249 (SC) CIT (Central)-I, New Delhi v. Vatika Township (P.) Ltd. “where a benefit is conferred by legislation, the rule against a retrospective construction is different. If legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect". The net effect of this judgment is that if a fresh benefit is provided by the Parliament in an existing provision, then such an amendment should be given retrospective effect.”
Kiran Ashok Desai 8. Keeping in view the ratio laid down in Vatika Township (P.) Ltd. (supra) the benefit granted by 3rd proviso to section 50C (1) is applicable in the case of assessee also, which is again reproduced herein below as under:
Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and ten per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.
Assessee’s purchase price and market value does not exceed in this case more than 10% hence no addition can be made. Our view is being fortified by following judicial pronouncements of coordinate benches/Hon’ble High Courts:-
[2022] 144 taxmann.com 168 (Pune - Trib.) Sai Bhargavanath Infra v. ACIT [2021] 123 taxmann.com 252 (Mumbai - Trib.) Maria Fernandes Cheryl v. Income Tax Officer, (International Taxation) 10. We further rely upon the ruling of Hon’ble Punjab and Haryana High Court in the case of CIT vs. Chandani Bhuchar [2010] 323 ITR 510/191 Taxman 142 (Punjab & Haryana) for the preposition that “The 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. The Assessing Officer is obliged to bring on record positive evidence supporting the price assessed by the State Government for the purpose of stamp duty. From a plain reading of the provision, it emerges that the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of land or building or both, shall for the purpose of Section 48 of the Act be deemed to be the full value of the consideration received or accruing as a result of transfer. It nowhere provides that the valuation done by the State Government for the purpose of stamp duty etc., would ipso facto take place the actual consideration as being passed on to the seller by the purchaser in the absence of any other evidence. The Assessing Kiran Ashok Desai Officer is required to bring positive evidence on record indicating the fact that assessee has paid anything more than the one disclosed in the purchase deed.”
The view of the High Court of Punjab & Haryana with respect to the deeming provision of section 50C of the Act is that onus of proof lies on the Department/Revenue to bring on record any evidence to the effect that higher amount of sale consideration had passed on to the seller from the buyer in addition to the amount of sale consideration recorded in the deed. The amount at which valuation has been done by the stamp authorities could not be taken as actual sale consideration and the value shown in the sale deed has to be accepted. The circle rates as stipulated under section 50C of the Act cannot be sole concluding reason to hold that there is an understatement of sale consideration and adopt the valuation done for the purpose of stamp duty.
In view of above discussions revenue has failed to discharge its burden of proof that higher amount of sale consideration had passed on to the seller from the buyer in addition to the amount of sale consideration recorded in the deed. In the result, Ground raised by the assessee is allowed and order passed by the Ld. PCIT u/s. 263 of the Act is set aside and original order passed by the AO is sustained. In the result, the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.