Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO
O R D E R Per VIJAY PAL RAO, JM :
This appeal by the assessee is directed against the order dated 23/12/2013 of the CIT(A)-V, Bangalore, for the assessment year 2008-09.
The assessee has raised the following grounds:
Page 2 of 11 1. “The Learned Assessing Officer had erred in passing the order in the manner passed by him and the learned CIT(A) has erred in confirming the same. The orders passed being bad iii law and are liable to be quashed.
2. In any case, the orders passed, being against the principle of natural justice and equity are bad in law and are liable to be quashed. 3.1. In any case and without prejudice the Learned Assessing Officer had erred in making an addition of Rs. 67,37.000/- to the income, by invoking the provisions of sec. 50C of the Act and the learned CIT(A) has erred in confirming the same. On the facts and circumstances of the case and the law applicable, the provisions of sec. 50C are not applicable to the case of the appellant. The action of authorities below being contrary to available facts and law are to be disregarded and addition as made / sustained is to be deleted in entirety. 3.2 In any case, the addition as made / sustained is erroneous and excessive. 3.3. The appellant had correctly computed the Long Term Capital Gain on sale of land and building and same is to be accepted without any variation.
4. The Learned CIT(A) has erred in not admitting the sale agreement executed in the year 2005, filed as additional evidence by the appellant and erred in confirming the stand taken by the Assessing Officer. The various reasons mentioned for rejection of sale agreement being erroneous on facts and law are to be ignored and the additional evidence as filed is to be admitted in the interest of justice.
In any case and without further prejudice, the Learned Assessing Officer had erred in adopting the Fair Market value as on the date of sale deed without referring the matter to the valuation officer, and the learned CIT(A) has erred in confirming the same. The action of authorities below being not in accordance with law is to be rejected in toto.
The appellant denies the liability to pay interest. The interest having been debited erroneously is to be deleted.
Page 3 of 11 7. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that the impugned order be quashed or at least the addition as made/sustained be deleted and interest levied be also deleted. ”
The assessee is an individual and filed his return of income on 6/5/2009 declaring a total income of Rs.11,63,500/- consisting of income from business as well as income under the head ‘capital gains’. During the year under consideration, the assessee had sold a property at Peenya, Bangalore, for a consideration of Rs.30,12,000/- and offered income under the head ‘capital gains’. The AO proposed to invoke the provisions of sec.50C for taking the full value of consideration as assessed by the stamp duty authority. The assessee objected to the action of the AO by explaining that the assessee had entered into an agreement for sale of the property in the year 2005 and also received part consideration on 11/5/2005 onwards up to the date of execution of the sale deed. Since the sale deed was registered on 21/7/2007, therefore, the AO applied the rate prevailing in the year 2007 as assessed by the stamp duty authority.
The assessee challenged the action of the AO before the CIT(A) but could not succeed as the CIT(A) has held that the argument of the assessee that sec.50C shall not be applicable is not acceptable when the AO has adopted the full value of sale consideration as the value assessed by the stamp duty authority.
Page 4 of 11 The CIT(A) has further noted that the assessee has not made any claim for referring to the DVO.
5. Before us, learned AR of the assessee has submitted that there is no dispute that the assessee received payment right from 11/5/2005 till 21/7/2007 when the sale deed was executed. He has further submitted that entire payment has been received by the assessee through cheques and therefore, when the assessee received payment in the year 2005 and also had entered into an agreement for sale, then the rate prevailing in the year 2005 shall be applicable for applying the provisions of 50C and not the rate prevailing in the year 2007 when the sale deed was registered. He has referred to the details of payment as reproduced by the CIT(A) at pages 3 and 4 of the impugned order and submitted that the assessee received part payment in the year 2005, 2006 and finally in 2007. Thus, learned AR of the assessee has submitted that even if the agreement for sale is not registered, sale consideration was agreed upon between the parties in the year 2005 itself and therefore, the rate prevailing in the year 2005 shall be applied for the purpose of sec.50C. In support of his contention, he has relied upon the decision of the Delhi Tribunal in the case of Anil Kumar Jain vs. ITO (143 ITD 659). He has further contended that the assessee filed additional evidence before the CIT(A) but the CIT(A) has declined to admit the additional evidence on the ground that the assessee has not filed a specific application. He has referred to application field on Page 5 of 11 30/8/2003 and submitted that the assessee made a specific application before the CIT(A) for admission of additional evidence in the shape of agreement to sell which was not accepted by the CIT(A). Thus, the learned AR of the assessee has submitted that when the assessee entered into agreement for sale of the property in question on 20/5/2005 and already received part payment w.e.f. 11/5/2005 then the market value of the property has to be adopted as per prevailing rate in the year 2005. He has also relied upon the following decisions: i. ITO vs. Mumtaz Begum (ITA No.877/Hyd/2015 dt.04/11/2015) ii. ITO vs. Modipon Ltd. (ITA No.2049/Del/2009 dt.9/1/2015) iii. M/s.Lahiri Promoters vs. ACIT (ITA No.12/Vizag/2009 dt.22/6/2010 6. On the other hand, learned Departmental Representative has submitted that the assessee never produced the agreement before the AO. The agreement was not registered and therefore, it is an after-thought creation of document. Even the assessee is not having the original agreement. He has further submitted that there is no scope u/s 50C to vary the actual valuation as assessed by the stamp duty valuation authority. Thus, as per provisions of sec.50C, full consideration has to be adopted as the value assessed by the stamp duty authority for the purpose of registration of sale document. He has relied upon the orders of the authorities below.
Page 6 of 11 7. We have considered the rival submissions as well as relevant material on record. The dispute before us is limited only on the point whether the rate prevailing in the year 2005 when the assessee claimed to have entered into agreement for sale or the rate prevailing in the year 2007 when the assessee has finally executed the sale deed and registered are to be adopted as full value consideration u/s 50C of the Act. There is no dispute that the assessee received payment from purchaser of the property since 11/5/2005 onwards. The details of payment are reproduced by the CIT(A) at pages 3 & 4 as under:
Page 7 of 11 8. The assessee sought to produce additional evidence being agreement to sale dated 20/5/2005 which was not admitted by the CIT(A) on the ground that in the absence of any application for filing additional evidence, the same cannot be admitted. We find that the additional evidence sought to be produced by the assessee was duly accompanied by an application dated 30/8/2013. Even though when the assessee has received part payment of sale consideration w.e.f. 11/5/2005 onwards, then there exists an agreement between the parties so far as the sale consideration of the property in question. Once the parties have agreed upon the sale consideration of the property in the year 2005, then it will be immaterial if the final sale deed was executed in the year 2007 when final payment was made to the assessee by the purchaser. It is not the case of the AO that the payment received by the assessee prior to sale deed was not part of the sale consideration. Therefore, when the assessee has received part sale consideration since 11/5/2005, then for the purpose of sec.50C of the Act, the Fair Market Value has to be applied in the year in which the parties have decided and agreed upon the sale consideration and not in the year when the sale deed was executed. The payment in question was not in dispute as the same was received by the assessee through cheques and through banking channels. Therefore, timing of receipt of payment has not been disputed by the AO. In the case of Anil Page 8 of 11 Kumar Jain (supra) Delhi bench of the Tribunal has held in paras.7 to 10 as under:
“7. We have heard both the parties and carefully gone through the orders of the authorities below. The first and foremost point that arises for consideration is as to whether the Assessing Officer should have referred the matter to the Valuation Officer u/s 50C(2) of the Act to determine the fair market value before invoking provisions of section 50C(1) of the Act. From careful perusal of the assessment order, we find that the Assessing Officer has acknowledged the reply of the assessee vide letter dated 12.11.2011, 14.11.2011 and 18.11.2011 (Paper Book page no. 13 to 17) wherein the assessee has emphasized the fact that circle rate i.e. value adopted by stamp valuation authority under sub-section (1) of section 50C in respect to the property sold is much higher than the actual fair market value and the property has been sold on the consideration as stipulated in the sale deed. In the last operative part of the assessment order, the Assessing Officer held that the assessee has not given any explanation in respect of applicability of provisions of section 50C(1) of the Act, therefore, for calculating short term capital gain, the value of half share of the property is taken at Rs.39,05,000 as per value adopted by stamp valuation authority while registering the sale deed.
From this finding recorded by the Assessing Officer, it is clear that the assessee made a claim before the Assessing Officer that the circle rate was much higher than actual market value of the property. In this situation, section 50C(2) provides that without prejudice to the provision of sub-section (1) where the assessee claims before any Assessing Officer or authority that the value adopted or assessed by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer and the value so adopted and assessed by the stamp valuation authority has not been disputed in any appeal or revision or any 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 in that event, relevant and corresponding provisions of the Wealth Tax Act shall, with necessary modifications, will apply.
Page 9 of 11 9. In the present case, it is not in dispute that the assessee has made a claim before the Assessing Officer that the value adopted or assessed by the stamp valuation authority was higher than the fair market value. From the replies filed by the assessee, we also observe that it is also not the case whether the value adopted by the stamp valuation authority has ever been disputed by the assessee in any appeal or revision or otherwise as referred to in section 50C(2) of the Act. In these circumstances, it was incumbent upon the Assessing Officer to refer the matter for valuation to a Valuation Officer has provided in sub-section 50C(2) of the Act.
On the basis of foregoing discussion and factual matrix of the present case, we hold that the view taken by the Assessing Officer as well as confirmed by the Commissioner of Income Tax (A) is not correct. Since the Assessing Officer failed to refer the matter to the valuation officer u/s 50C(2) of the Act, we find it fit and proper to restore the matter back to the file of the Assessing Officer for a fresh adjudication after referring the matter to the Valuation Officer u/s 50C(2) of the Act. The Assessing Officer shall provide reasonable opportunity of being heard to the assessee and then decide the issue accordingly. We also make it clear that the matter with regard to the determination of sale consideration and capital gain shall remain open before the Assessing Officer and both the parties shall be at liberty to raise any other contention submitted by any other document or evidence as they may think fit and proper under the law. The Assessing Officer will consider all the contentions and evidence placed before him and decide the issue de novo by passing a speaking and well-reasoned order.”
Therefore, even if stamp duty valuation of the property at the time of registration of sale deed is adopted as full consideration, the same has to be subject to the verification whether the market value of the property at the time of sale consideration agreed upon by the parties is less than the valuation adopted by the stamp valuation authority then as per provisions of sec.50C(2) market value of the property is required Page 10 of 11 to be taken after consideration of relevant facts including prevailing rate at the time of sale consideration agreed upon between the parties. A similar view has been taken by the co- ordinate bench of the Tribunal in the case of ITO vs. Mumtaz Begum (ITA No.877/Hyd/2015 dated 04/11/2015) in para.7 as under: “7. Having regard to the rival contentions and the material on record, we find that the only issue before us is the value to be adopted u/s 50C whether as on the date of agreement of sale or as on the date of registration. We find that similar issue came up for consideration before the ITAT, Vizag Bench in the case of M/s Lahiri Promoters (supra) and the coordinate bench has extensively dealt with the issue and after considering the ratio laid down by the Hon'ble Supreme Court in the case of K.P.Varghese Vs Income tax Officer and another (131 ITR 597) and also considering the decision of Hon'ble Madras High Court in the case of K.R. Palani Swamy and others Vs. Union of India (2008-TMI-30601 in Appeal No W.P No 4387 of 2003 vide order dated 5-8-08.) has held that since the process of sale has been initiated from the date of sale agreement, the applicability of the provisions of section 50C should be looked at only on the date of sale agreement. The said decision of the Lahiri Promters (supra) has been followed by the subsequent bench of ITAT, Vizag in the case of Koduru Satya Srinivas & Anr. (supra), a copy of which is filed at pages 5 to 15 of the paper book filed by the assessee. The judgment on which the ld. DR has placed reliance only dealt with the issue as to the applicability of provisions of section 50C and not the date on which the provisions of section 50C are to be applied. Therefore, the said decision does not come to the rescue of the revenue. In view of the above, and respectfully following the decisions of the coordinate benches at Vizag (cited supra), we do not see any reason to interfere with the order of ld. CIT(A) and accordingly we uphold the same dismissing the appeal of the revenue.”
As well as in the decisions relied upon by the learned AR of the assessee cited supra.
Page 11 of 11 10. In view of the above facts and circumstances of the case, we are of the considered opinion that the fair market value of the property has to be determined by the AO/DVO after considering all the relevant facts including the prevailing rate in the year 2005. Accordingly, the matter is set aside to the record of the AO for determining the fair market value of the property as per provisions of sec.50C(2) of the Act.
In the result, appeal of the assessee is allowed for statistical purposes.