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Income Tax Appellate Tribunal, “SMC” – ‘C’ BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI
आदेश /O R D E R
This appeal by the assessee is directed against the order of the Commissioner of Income-tax(Appeals)-1,Chennai dated 17.10.2016 for assessment year 2010-11.
- - 2 ITA 97/Mds/11
The Revenue has raised the following grounds :
“2. The learned CIT(A) has erred in holding that the assessment of capital gains made invoking provisions of sec.50C as not correct.
2.1 The learned CIT(A) failed to appreciate that the A.O. was bound by the provisions of Sec.50C of the I.T. Act to adopt the value fixed by the Stamp Authorities as the sale consideration.
2.2 The learned CIT(A) factually erred in holding that the value adopted as per Sec.50C by the AO was a notional value and that the consideration as admitted by the assessee was above the FMV for stamp duty purposes.
2.3 The learned CIT(A) failed to note that the stamp duty fees has been calculated and paid by the assessee on the FMV fixed by the stamp authorities and hence value on which stamp duty was paid was to be taken as the sale consideration.
3. The learned CIT(A) erred in holding that the asset transferred by the assessee was a long term capital asset.
3.1 The learned CIT(A) failed to appreciate the fact that the capital asset devolved on the assessee only on the execution of the GPA on 28.5.2008 and therefore the period of holding in the assessee’s hand did not exceed 36 months and hence the impugned asset was not a long term capital asset.
3.2 The learned CIT(A) failed to appreciate that deeming provision in respect of the cost of acquisition as per Sec.49 of the I.T. Act is applicable only in cases where the capital asset became the property of an assessee through (i) partition of HUF (ii) gift or will (iii) succession, inheritance or devolution etc. and not in a case transfer is by way of execution of GPA.”
- - 3 ITA 97/Mds/11
The facts of the case are that this case was reopened u/s.148 of the Act to assess the income that has escaped under capital gains. The AO observed that the assessee is the power agent of one Shri Palsarak Mohamed Shauaib residing at Saudi Arabia. The power of Attorney was given to M/s. Cholan Property Developers Pvt. Ltd. represented by its Managing Director Mr. D. Solairaj to sell 66.95 cents of the property situated at No.32, Karanai Village, Chengalpattu Taluk in survey Nos. 103/5, 103/6, 97/1, 97/2, 95/1, 95/2, 95/10, 95/3 & 94. The power of Attorney was registered on 26.5.2008. According to the AO, the assessee sold 61 cents of the above mentioned property on 11.11.2009 registered as two documents vide Nos. 4086/2009 and 4087/2009 for 49 cents and 12 cents respectively. The assessee sold 49 cents of the above mentioned property vide document No.4086/2009 for a sale consideration of ₹30,55,000/- and balance 12 cents were sold vide document No. 4087/2009 for a sale consideration of ₹7,80,000/- and the market value of the property was ₹13,20,000/-.
- - 4 ITA 97/Mds/11 3.1 The AO found that in the return filed on 1.10.2014, the assessee did not admit the sale consideration received for the sale of 49 cents. When this was pointed out, the assessee filed a revised return on 7.3.2015 admitting total income of ₹11,39,819/-. Assessee is in the business of civil construction and has admitted business income of ₹ 26,145/-. In the profit and loss account, it was seen by the AO that the assessee has claimed a sum of ₹ 13,68,362/- as materials purchased and a sum of ₹ 5,58,420/- as labour charges. As the assessee could not produce proper vouchers, a sum of ₹ 1,36,836/- under the head materials purchased and for a sum of ₹ 55,842/- under the head labour charges both the expenses are disallowed. The AO observed that the assessee has received a sum of ₹ 83,500/- as professional receipts in 26AS, but the same was omitted to be included in the total income and therefore, the same is added to the business income.
3.2 Further, the AO observed that the ownership of the property sold at No.32, Karanai Village, Chengalpattu Taluk, vested with the assessee only from 26.5.2008 i.e. the date of registration of Power of Attorney. The property was sold on - - 5 ITA 97/Mds/11 11.11.2009 and the guideline value as on 1.8.2007 to 31.3.2012 is ₹ 40,00,000/- per acre. The cost price is taken as ₹24,40,000/- for 61 cents and therefore, the gain on sale of property applying sec.50C of the Act is assessed as short term capital gain by the AO. Aggrieved, the assessee went in appeal before the CIT(Appeals).
Before the CIT(Appeals), it is submitted that the assessee sold 61 cents of two property on 11.11.2009 as two documents vide Nos.4086/2009 and 4097/2009 for 49 cents respectively. The assessee sold 49 cents vide document Nos.4086/2009 for a sale consideration of ₹ 30,55,000/- and balance 12 cents were sold vide document No.4087/2009 for a sale consideration of ₹7,80,000/- totally coming to a consideration of ₹ 38,35,000/-. But the AO has assessed to a value of ₹ 53,90,000/- for 49 cents and ₹ 13,20,000/- for 12 cents which comes to ₹ 67,10,000/-.
4.1 The assessee relied on the judgment of the Supreme Court in the case of Gautham vs. Union of India (199 ITR 530), wherein it had recognized a tolerance limit for preemptive purchase of property under Chapter XXC at 15% of variation. If - - 6 ITA 97/Mds/11 the deviation is below 15%. No addition should be made. The assessee further submitted that the AO, in this case, assessed the income of ₹ 67,10,000/- instead of ₹ 38,35,000/-, the difference is ₹ 28,75,000/-, which come to 75%. According to the assessee, the valuation has not referred to Department Valuation Officer and the AO has taken the maximum market value for assessment to the tune of ₹ 67,10,000/- instead of guideline value of ₹ 38.35.000/-. Before the CIT(Appeals), the assessee also relied on the following judgments : a) Ritz Enterprises Pvt. Ltd. vs. ACIT, Lucknow (ITAT) b) Khoobsurat Resorts Pvt. Ltd. vs. CIT (Delhi-HC) c) C.B.Gautam vs. Union of India (SC).
According to the CIT(Appeals), there are two issues for determination, viz., whether in the absence of any material the AO could have adopted Fari Market Value on notional basis and substituted the same for the sale consideration as reported by the assessee, especially when the impugned property was sold at a price which was more than the guideline value and whether the AO was correct in adopting the date of assignment of the power of attorney to the agent to transact the property and - - 7 ITA 97/Mds/11 substitute the same for the date of ownership ignoring the actual period of holding by the assessee.
5.1 The CIT(Appeals) observed that on the first issue, there is no material on record to suggest that the fair market value adopted had any basis. Further, the AO has not rejected the sale consideration reported by the assessee nor confronted the proposed fair market value proposed to the substituted. On the contrary, the property transacted by the assessee was above the fair market value for stamp duty purposes and this has not been disputed by the AO. Therefore, the CIT(Appeals) observed that the AO was not correct in substituting a notional figure with the sale consideration reported by the assessee.
5.2 On the second issue, the CIT(Appeals) observed that the assessee had acquired the impugned property by way of a sale deed (purchase deed by the assessee) executed on 14.6.1994, which is evident from the copy of sale deed dated 16.6.1994 registered before the Sub-Registrar, District of Thiruporur.
According to the CIT(Appeals), the sale deed similarly of the impugned property in favour of the purchase is dated 11.11.2009
- - 8 ITA 97/Mds/11 as evident from the deed registered. Therefore, according to the CIT(Appeals), the period of holding clearly exceeds 36 months as prescribed in sec.2(42A) and both the parcels of land of 49 cents and 12 cents were acquired by this deed. Hence, the CIT(Appeals) observed that they were long-term assets.
According to the CIT(Appeals), the AO did not appreciate the facts properly in rejecting the plea of the assessee that the land sold was on a guideline value as also that the said land was held as a long-term capital asset thereby giving rise to long-term capital gains on its sale and directed the AO to recompute the long-term capital gains, accordingly. Against this, the Revenue is in appeal before us.
I have heard both the parties and perused the material on record. The first issue for consideration is applicability of Sec.50C of the Act. The AO mentioned in his assessment order that guideline value of the property as on 01.08.2007 to 31.03.2012 is `40 lakhs per acre. Contrary to this, Ld.CIT(A) observed that the impugned property transacted by the assessee was above the guideline value for Stamp duty purpose. There is - - 9 ITA 97/Mds/11 no discussion for such conclusion arrived at by the Ld.CIT(A).
Hence, this issue is to be looked into with reference to the specific State Government notification and for this purpose, this issue is remitted to the file of ld. Assessing Officer for fresh consideration. Hence, this ground of appeal is partly allowed for statistical purposes.
The next issue is with regard to capital gains whether the ld. Assessing Officer was correct in adopting the date of registration of power of attorney to the agent to transact the property and substitute the same for the date of ownership.
I have heard both the parties and perused the material on record. As per the findings of the AO, the power of attorney was registered on 26.05.2008 and the assessee sold the property on 11.11.2009. However, the Ld.CIT(A) mentioned that the assessee had acquired the impugned property by way of sale deed executed on 14.06.1994, registered on 16.06.1994. There is no whisper about this document in the assessment order.
Being so, Ld.CIT(A) came to a conclusion that the assessee had become the ownership of the impugned property from this date
10 - - ITA 97/Mds/11 of sale deed dated 16.06.1994 without furnishing the same to the ld. Assessing Officer. Hence, in the interest of justice, I remit the issue in dispute to the file of ld. Assessing Officer to examine the same afresh and decide in accordance with law. Hence, this ground of appeal is partly allowed for statistical purposes.
9. In the result, the appeal of Revenue is partly allowed for statistical purposes. Order pronounced on 21st August, 2017 at Chennai.