UMA MAHESWARA RAO BODAPATI,HYDERABAD vs. DCIT., CIRCLE 2(1), HYDERABAD

The grounds raised by the assessee read as under:

There is a delay of 16 days in filing the appeal before the Tribunal. The assessee has explained the reasons for such delay. After discussing with the learned DR, the delay of 16 days in filing the appeal before the Tribunal is hereby condoned and the appeal is admitted for adjudication.

Brief facts of the case are that the assessee is a non- resident and filed his return of income for the A.Y 2016-17 on 29.07.2016 declaring total income at Rs.8,29,23,240/-. The assessment has been completed u/s 143(3) of the I.T. Act, 1961 on 24.05.2018 and determined the total income at Rs.8,44,23,240/- by making addition towards disallowance of Rs.15.00 lakhs towards expenses of transfer while computing the Long-Term Capital Gain derived from the sale of property. The assessment has been subsequently reopened on the basis of reasons as per which income chargeable to tax has been escaped on account of under estimation of income derived from sale of property. Therefore, notice u/s 148 of the I.T. Act, 1961 dated 29.03.2021 was issued and served on the assessee. In response to the notice u/s 148 of the Act, the assessee has filed return of income on 2.1.2022 declaring income of Rs.8,54,99,200/-. The case was selected for scrutiny. During the course of assessement proceedings, the Assessing Officer noticed that during the financial year 2015-16 relevant to A.Y 2016-17, the assessee has sold an immovable property vide registered sale deed dated 23.09.2015 for a consideration of Rs.12,78,00,000/- and the market value of the property as per the Stamp Valuation Authority was at Rs.14,78,00,000/-. The Assessing Officer further noted that as per DR order dated 25.01.2016, the assessee has paid additional stamp duty of Rs.96,30,500/- which is 5.65% of the fair market value of the property. Therefore, by taking into account the stamp duty has worked out fair market value as on date of sale at Rs.17,04,51,327/-. Since there is a difference towards the full value of sale consideration as per section 50C and sale consideration declared by the assessee in the return of income, the Assessing Officer after considering the relevant receipts submitted by the assessee has made an addition of Rs.4,26,51,327/- towards Long-Term Capital Gain computed on transfer of property in terms of section 50C of I.T. Act, 1961.

Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT (A). Before the learned CIT (A), the assessee challenged the reopening of the assessment on the ground that the Assessing Officer has reopened the assessment on mere change of opinion which is evident from the original assessment order passed by the Assessing Officer u/s 143(3) of the Act where the Assessing Officer has considered the issue of computation of Long-Term Capital Gain from sale of property. The assessee had also challenged the addition made by the Assessing Officer towards computation of capital gain by adopting provisions of section 50C of the Act on the ground that the assessee had entered into an agreement for sale on 17.10.2014 and as on the date of agreement, the market value of the property is much lesser than the sale consideration received by the assessee as per the registered sale deed. In this regard, the assessee has filed certain additional evidences before the learned CIT (A) including a certificate from the stamp duty authorities evidencing fair market value of the property as on the date of agreement and as on the date of sale deed. The learned CIT (A) after considering the submission of the assessee and also taken note of the Hon'ble Supreme Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd reported in (2007) 210 CTR 0030 observed that the Assessing Officer has reopened the assessment on the basis of reasons to believe which is further supported by fresh tangible material on the basis of Assessing Officer which suggests escapement of income. The learned CIT (A) also rejected the argument of the assessee in light of additional evidences on addition towards differential amount to capital gain as per provisions of section 50C of the Act on the ground that the assessee did not file additional evidences as prescribed under Rule 46A of I.T. Rules, 1961 and further the assessee could not controvert the findings of the Assessing Officer with supporting evidences. Therefore, rejected the argument of the assessee and upheld the addition made by the Assessing Officer towards Long- Term Capital Gain from sale of property in terms of section 50C of the I.T. Act, 1961.

Aggrieved by the order of the learned CIT (A), the assessee is in appeal before the Tribunal.

The learned Counsel for the assessee submitted that the learned CIT (A) erred in not admitting the additional evidences filed by the assessee merely for the reason that the assessee has not filed a formal petition for computation of additional evidences in terms of Rule 46A of the I.T. Rules, 1961. The learned Counsel for the assessee further submitted that the appellant had entered into an agreement on 17/10/2014 and agreed to purchase the property @ Rs.4 crore per acre and also paid a sum of Rs.1.5 crore by cheques. The assessee got registered the property on 23.9.2015 and received sale consideration of Rs.12,78,00,000/- as agreed in the sale deed. Further while computing the Long- Term Capital Gain, the assessee has considered the full value of consideration in terms of section 48 of the I.T. Act, 1961 by taking into account the sale consideration as per the registered sale deed, even though the fair market value of the property as on the date of registration is higher than the fair market value of the property as per registered sale deed in terms of 1st and 2nd proviso to section 50C of the Act where it has been clearly sta5ted that where the date of agreement fixing the amount of consideration and date of registration for the transfer of capital asset are not the same, the value adopted or assessed or assessable by the Stamp Valuation Authorities on the date of agreement may be taken for the purpose of computing the full value of property for such transfer. Therefore, the assessee has rightly taken sale consideration as per registered sale deed and computed the Long- Term Capital Gain. Although the assessee has filed the relevant details including a certificate from the Stamp Valuation Authority evidencing additional amount of fair market value on the date of agreement and date of sale deed but the learned CIT (A) rejected the additional evidences filed by the assessee and sustained the additions made by the Assessing Officer. Therefore, he submitted that the addition made by the Assessing Officer should be deleted.

The learned DR, on the other hand, supporting the orders of the learned CIT (A) submitted that so far as the difference between the fair market value of the property as referred to in registered sale deed dated 23.09.2015 and sale consideration received by the assessee. The assessee had also paid additional stamp duty as per the order of the District Registrar. The Assessing Officer after considering the relevant facts has rightly adopted first proviso of section 50C of the I.T. Act, 1961. The learned DR further submitted that although the assessee has filed certain certificate from the Stamp Valuation Authority and claimed that the fair market value of the property as on the date of agreement is lesser than the sale consideration and first proviso of section 50C of the Act the fair market value as on the date of agreement should be considered. He submitted that in absence of necessary gazette notification and relevant evidence to prove that there is a difference between the fair market value and registered sale deed as on the date of agreement, the argument of the assessee cannot be accepted.

We have heard both parties, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that there is a difference between the sale consideration as per registered sale deed dated 23.09.2015 and the fair market value of the property as on the date of sale deed. As per the registered sale deed, the assessee has received Rs.12.78 crores as full value of the consideration whereas the fair market value of the property as on the date of the sale declared by the Stamp Valuation Authority was Rs.14.70 crore. The Assessing Officer on the basis of Stamp Duty paid by the assessee has computed the fair market value at Rs.17.05 crore even though the fair market value as per registered sale deed was Rs.14.78 crore. The Assessing Officer has worked out the fair market value at Rs.17.05 crore on the basis of Stamp Duty payment of Rs.96,30,500/- which is at 5.65% of the fair market value of the property. From the above, there is no clarity as to what is the fair market value as on the date of sale where it is Rs.14.78 crore or Rs.17.05 crore as computed by the Assessing Officer. Further, the assessee claimed that he had entered into an agreement of sale dated 17.10.2014 and paid part of the consideration by cheque. The assessee further claimed that the fair market value of the property as on the date of agreement was much lesser than or equal to sale consideration received as per the registered sale deed and in view of the 1st and 2nd proviso of section 50C, if the full value of consideration as per the registered sale deed is equal or higher than the fair market value as on the date of agreement, then full value of consideration as per the sale deed should be adopted. We find that as per the first proviso to section 50C talks about the full value of consideration to be adopted in a case where the date of agreement fixing the amount of consideration and the date of registration for the transfer of capital asset are not the same and in such case, the value adopted or assessed or assessable by the Stamp Valuation Authority on the date of agreement may be taken for the purpose of computing the full value of consideration. The 2nd proviso further states that the 1st proviso shall apply only in a case where the amount of consideration or a part thereof has been received by an account payee cheque or bank transfer. In the present case, there is no dispute with regard to the fact that the assessee had entered into an agreement of sale on 17.10.2014 and also paid part of consideration through bank transfer. Thus, in our considered opinion, for the purpose of determination of full value of consideration as per the 1st and 2nd proviso should be considered. Although the 1st and 2nd proviso came into the statute w.e.f. 1.4.2017 and 1.4.2017 by the Finance Act, 2017, the fact remains that the same to be held to be retrospective in nature by various Courts including the Hon'ble Madras High Court in the case of CIT vs. Vummudi Amarendran reported in 429 ITR 97 and this has been further followed by the Coordinate Bench of the ITAT in the case of Smt. Neela Reddy Moramreddy in Hyd/2020 dated 19.10.2023. Therefore, we are of the considered opinion that the full value of consideration should be determined in accordance with the provisions of section 50C and 1st and 2nd proviso therein.

Having said so, let’s come back what is the full value of consideration of the property for the purpose of section 48 of the I.T. Act, 1961. Admittedly, the assessee has entered into an agreement of sale on 17.10.2014 with the buyer and agreed to sell the property for a consideration of Rs.4.00 crores per acre and also paid part of consideration by cheque. The fair market value of the property as per the Stamp Duty Valuation Authorities as on the date of agreement was Rs.2,25,00,000/- per acre and this is further supported by certificate issued by the concerned Sub Registrar coupled with gazette notification issued by the Govt. of Karnataka, dated 27.10.2014. The guideline value of the property has been subsequently revised w.e.f. 27.10.2014 at Rs.4.00 crores per acre and once again which is supported by the certificate issued by the Sub Registrar coupled with gazette notification of the State Government. Since the appellant has entered into agreement on 17.10.2014 and paid part of the consideration through cheque, in our considered view, as per 2nd proviso of section 50C of the I.T. Act, 1961, the fair market value of the property as on the date of agreement should be considered but not the fair market value as on the date of registration for the purpose of section 48 of the I.T. Act, 1961. If we consider the fair market value of the property as on the date of agreement, in our considered view, the consideration received by the assessee for transfer of the property is in accordance with the value stated in the Registered Sale Deed dated 23.09.2015 and thus, the Assessing Officer cannot adopt the value as on the date of registration of the property for the purpose of section 48 of the I.T. Act, 1961. The learned CIT (A) without considering the relevant facts simply sustained the addition made by the Assessing Officer. Thus, we set aside the order of the learned CIT (A) and direct the Assessing Officer to delete the addition made towards the capital gain in terms of section 50C of the I.T. Act, 1961.