PRITAM SINGH CHARAN SINGH GUJJAR,NAGPUR vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4,, NAGPUR

The present appeal has been filed by the assessee challenging the impugned order dated 21/11/2023, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2015–16.

“1. Order passed by Addl/Joint Commissioner of Income Tax (A)-1, Coimbatore U/s. 143(3) is illegal, invalid and bad in law. 2. On the facts and circumstances of the case learned Addl/Joint Commissioner of Income Tax (A)-1, Coimbatore erred in confirming addition made by the assessing officer at Rs.3,22,000/- under section 50C of the Income Tax Act, 1961 is unjustified, unwarranted and excessive.

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160/27, City survey No.586, in the layout of Joras Cooperative Housing Society, Gittikhadan, Nagpur, for a sale consideration of ` 37,00,000. The market value of the property was shown at ` 40,22,000, for stamp duty purposes. The Assessing Officer adopted the stamp duty valuation for computing profit and gains arising on sale of property by the assessee. The Assessing officer has not brought any evidence on record to show that the assessee has received any money other than the sale consideration mentioned in the sale deed. The Assessing officer worked out the difference in sale consideration shown by assessee and market value of the property for stamp duty purposes at ` 3,22,000, and added the same under section 50C of the Act to the total income of the assessee. Being aggrieved the assessee filed appeal on the before the first appellate authority.

“OBSERVATION AND DECISION: Section 50C is as under [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 land or building or both, is less than the value adopted or assessed 16 for 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 16 for assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of sub-section (1), where-

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(a) the assessee claims before any Assessing Officer that the value adopted or assessed 16[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 16 [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. 17 [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 18 [or assessable] by the stamp valuation authority referred to in sub- section (1), the value so adopted or assessed 18 [or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.] 5.2 The assessing officer has assessed the difference between "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"and "consideration received or accruing as a result of the transfer by an assessee of a capital asset" as income taxable u/s 50C. The assessing officer has applied the legal provisions of section 50C and the appellant has not questioned the legal provisions. The arguments raised by the appellant are The Assessing officerhas not brought any evidence on record to show thatthe assessee has received any money other than thesale consideration mentioned in the sale deed. Since the differenceis less than 10% and considering the fact thatvaluation is always a matter of estimation wheresome degree of difference is bound to occur, noaddition can be made DEPARTMILE

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5.3 Section 50C is a deeming provision and does not require any evidence to prove that assessee/appellant has received any money other than the sale consideration. The argument raised is not valid and is dismissed. 5.4 The next argument is that the difference of Rs 3,22,000 is less than 10% and hence no addition must be made. The appellant has quoted various case laws. ITA No. 7545/Mumbai/2014 (ITAT Mumbai)M/s. John Fowler (India) Pvt. Ltd. Vs. Deputy Commissioner of Income Tax has followed the decision in (2010) 38 DTR 0019 (ITAT Pune) Rahul Construction Vs. Deputy Commissioner of Income Tax and ITAT Pune has followed its decision in Harpreeth Hotels (P) Ltd. In all these decisions the Tribunal has not given any legal finding and on the basis of facts has arrived at a finding that this must be ignored as the difference is less. In ITA No. 267 /Kol/2013 (ITAT') Kolkatta ITO VS. M/s. LGW Limited also the Tribunal after discussing various decisions has arrived at the same conclusion. In Appeal No.: CIT(A)-2/637/2008-09/ITBA No. 10118 in the case of Smt. Vinita Khushalani Dated 08/02/2019 the Tribunal has held that as the difference is less the decision of CIT u/s 263 was not called for. (1981) 131 ITR 0597 (Supreme Court) K.P. Varghese Vs. Income Tax Officer & Anr is under section 52(2) and has no relevance to section 50C which is a deeming provision where there is no duty to prove that consideration is passed.. 5.5 In the decisions the Tribunal after analyzing the facts that the difference between the two values is less has directed the assessing authority to ignore the difference. The assessing officer and the appellate authority are bound to follow act and rules and legal interpretation of Courts and jurisdictional Tribunal. The Court/Tribunal has not held that Section 50C is not correct and that the difference of less than a fixed percentage must be ignored. Hence the order of the assessing officer is correct and as per law. 5.6 In the result the appeal is dismissed.”

Sr. Description of Property Sale Value Market Difference No. (`) Value (`) 1. Plot No. 95, admeasuring 157.69 ` 3,22,000 Sq.Mtr. (i.e., 1697.37 Sq.Ft.) out of 37,00,000 40,22,000 i.e., 8% which Kh. No. 30 to 36 & 38 To 39 and is less than 30, 31/1, 33, having P.H. No. 8, market value City Survey No. 586, Sheet No.

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106/27 of Mouza-Borgaon, situated at southern Gorewada Road Friends Colony, Tahsil & District Nagpur

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i) ITO v/s Rustom Fali Mehta, [2023] TaxPub(DT) 2721 (Mum- Trib); ii) Sai Bhargavanath Infra v/s ACIT, [2022] 197 ITD 0496 (Pune- Trib); iii) Stalwart Impex Pvt. Ltd. v/s ITO, ITA No. 5752/Mum/2019, order dated 02/07/2021 (Mum. Trib.); and iv) Maria Fernandes Cheryl v/s ITO (I.T) [2021] 85 ITR 674 (Mum- Trib).

“9. In view of the valuation as per DVO being lower than the stamp duty valuation, the comparison has to be made between actual sale price and the valuation as per DVO. The difference is ` 57,68,020. Such difference is 6.99% of the actual sale price. The difference within tolerance band of 10% and the application of such band will relate from 01/04/2014. The case of the assessee is covered by the order dated 02/07/2021, passed by the Co–ordinate Bench rendered in Stalwart Impex Pvt. Ltd. v/s ITO, ITA no.5752/ Mum./2019, for the assessment year 2016–17. The relevant part of the order is reproduced below:– “Both sides heard, orders of authorities below examined. The solitary issue assailed by the assessee is addition made u/s 43CA of the Act in respect of difference between agreement value of the flats and market value

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determined by the DVO. The value of flats as per assessee, Stamp Duty Value and value as determined by the DVO are tabulated herein under:

Fair Market Value Sr. Agreement Stamp Duty Difference Flat no. as determined by no. value (in `) Value (in `) (in `) DVO (in `) 1. E–1/404 30,92,250 34,04,000 32,27,000 1,34,750 2. D–2/702 32,24,750 40,40,000 37,36,000 5,11,250 3. F–1/502 33,94,500 35,39,000 34,30,000 35,500 Total 97,11,500 1,09,83,000 1,03,93,000 6,81,500

The difference between agreement value and value determined by DVO is Rs.6,81,500/-. In terms of percentage the difference is 7% approximately. The short contention of the assessee is that where the difference between the agreement value and the market value is less than 10% no addition should be made. 5. Similar issue had come up before the Tribunal in the case of Radhika Sales Corporation (supra). The Tribunal deleted the addition by observing as under: “5. We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The solitary issue raised in the appeal by the assessee is against the addition of Rs.10,38,000/- on account of difference in Long Term Capital Gain declared by the assessee and computed by the Assessing Officer after considering the DVO‟s valuation report. It is an undisputed fact that the assessee has disclosed sale consideration of the land as Rs.1,10,00,000/-. During the scrutiny assessment proceedings reference was made to DVO for the valuation of property. The DVO vide report dated 30-12-2013 determined the fair market value of the property as Rs.1,20,38,000/-. The difference between actual sale consideration declared by the assessee and the fair market value determined by the DVO is approximately 9.43%. We find that the Co-ordinate Bench of the Tribunal in the case of Dattatraya Kerba Lonkar Vs. Deputy Commissioner of Income Tax (supra) after considering various decisions including the decision rendered in the case of Rahul Constructions Vs. Deputy Commissioner of Income Tax (supra) and the judgment of Hon‟ble Patna High Court in the case of Bimla Singh Vs. Commissioner of Income Tax (supra) has held as under: “8. We find merit in the submission of Ld. A.R. The difference between the fair market value determined by the DVO and actual sale consideration is Rs.7,14,530/- i.e slightly more than 2 per cent of the sale consideration. The co-ordinate Bench of the Tribunal in the case of Rahul Construction V/s. DCIT (supra) has held that where difference between the sale consideration declared by the assessee and fair market value as determined by the DVO u/s 50C is less than 10 percent, the Assessing Officer was not justified in substituting the value determined for sale consideration disclosed by the assessee. The Co-ordinate Bench after considering the provisions of Section 50C of the Act and the provision of section 23A and 24(5) of the Wealth Tax Act held as under :-

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“13. A combined reading of the above provisions shows that the valuation adopted by the DVO is subject to appeal and the same is not final. In the instant case we find that as Aagainst the value of Rs. 28,73,000/- adopted by the stamp valuation authorities, the DVO has determined the FMV on the date of transfer at Rs. 20,55,000/- . This itself shows that there is wide variation between the two values. Further, the value adopted by the DVO is also based on some estimate. We find that the difference between sale consideration shown by the assessee at Rs.19,00,000/- and the FMV determined by the DVO at Rs.20,55,000/- is only Rs. 1,55,000 which is less than 10 per cent. The Courts and Tribunals are consistently taking a liberal approach in favour of the assessee where the difference between the value adopted by the assessee and the value adopted by the DVO is less than 10 per cent. 14. We find that the Pune Bench of the Tribunal in the case of Asstt. CIT V/s. Harpreet Hotels (p) Ltd. vide ITA Nos. 1156-1160/pn/2000 and relied on by the learned counsel for the assessee had dismissed the appeal filed by the Revenue where the CIT(A) had deleted the unexplained investment in house construction on the ground that the difference between the figure shown by the assessee and the figure of the DVO is hardly 10 percent. 15. Similarly, we find that the Pune Bench of the Tribunal in the case of ITO V/s. Kaaddu Jayghosh Appasaheb, vide ITA No.441/PN/2004 for the asst. yr 1992-1993 and relied on by the learned counsel for the assessee following the decision of the J&K High Court in the case of Honest Group of Hotels (P) Ltd. V/s CIT (2002) 177 CTR (J&K) 232 had held that when the margin between the value as given by the assessee and the Departmental valuer was less than 10 per cent , the different is liable to be ignored and the addition made by the A.O cannot be sustained. 16. Since in the instant case such difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference bound to occur, we are of the considered opinion that the A.O. in the instant case is not justified in substituting the sale consideration at Rs.20,55,000 as Against the actual sale consideration of Rs.19,00,000/- disclosed by the assessee. We, therefore, set aside the order of the CIT(A) and direct the A.O. to take Rs.19,00,000/- only as the sale consideration of the property. The grounds raised by the assessee are accordingly allowed.” 9. The ld. A.R of the assessee has further placed reliance on the decision of Hon‟ble Patna High Court in the case of Bimla

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Singh V/s. CIT (supra) wherein Hon‟ble High Court has held that difference between the cost of construction shown by the assessee and as determined by the Assessing Officer being less than 15 per cent, the same is to be ignored for the purposes of addition. The Hon‟ble Delhi High Court in the case of CIT V/s. Sadna Gupta 352 ITA 595 held that unless and until there was some other evidence to indicate that extra consideration had flowed in transaction for purchase of property, report of DVO could not form basis of any addition on part of revenue. In absence of any evidence no reliance could be placed on the report of DVO for making addition. 10. Thus, in view of the fact that the difference between sale consideration and the market value determined by the DVO is not substantial and is approximately little over 2 per cent of the actual sale consideration, we find no reason for rejecting actual sale consideration mentioned in the Sale Deed for determining long term capital gain. Accordingly, the ground No.1 raised in appeal by the assessee is allowed. The Assessing Officer is directed to adopt actual sale consideration as mentioned in the Sale Deed as a fair market value for determining the long term capital gain.” 6. In the light of the facts of the case and the decisions discussed above, we find merit in the submissions of assessee. In the present case, since difference between the value declared by the assessee and the value determined by the DVO is less than 10%, no addition in respect of Long Term Capital Gains is warranted. The findings of Commissioner of Income Tax (Appeals) on this issue are accordingly, set aside and the appeal of assessee is allowed.” It would be relevant to mention here that the aforementioned decision was rendered with reference to provisions of Section 50C of the Act. The addition in the instant case is made u/s 43CA of the Act. I find that the provisions of both the sections are pari materia, except that the provisions of section 43CA operate in respect of consideration received on transfer of an asset (other than capital asset) being land or building or both and provisions of section 50C are attracted on transfer of capital assest being land or building or both. Hence, the decision rendered u/s.50C of the Act giving leverage of minor variation, in the value declared by the assessee and the stamp duty value would equally hold good for variation in the value u/s 43CA of the Act. Thus, from the above decision it can be safely deduced that where the difference between sale consideration declared by the assessee and stamp duty value of an asset (other than capital asset) being land or building or both is less than 10%, no addition under section 43CA of the Act is warranted. 6. Here, it would be relevant to mention that the Finance Act 2018 has inserted a proviso to sub-section (1) of section 43CA providing 5% tolerance limit in variation between declared sale consideration vis-a-vis stamp duty value for making no addition. Similar proviso was inserted by the Finance Act 2018 to sub-section (1) to section 50C of the Act. The said tolerance limit band was enhanced from 5% to 10% by the Finance Act 2020 w.e.f. 01/4/2021. The Tribunal in the case of Maria Fernandes Cheryl vs. ITO (International Taxation) reported as 123 taxmann.com 252 (Mumbai) after considering various decision and the CBDT Circular No. 8 of 2018 dated 26-12-2018 held, that the amendment is retrospective in nature and relates back to the date of insertion of statutory section to the

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Act. The relevant extract of the observations made by the Bench reads as under: “ 7. ………………… The insertion of the third proviso to Section 50C(1) provides for this tolerance band with respect to a certain degree of variations between the stamp duty valuation and the stated consideration of an immovable property. In other words, as long as the variations are within the permissible limits, the anti-avoidance provisions of Section 50C do not come into play. As we have noted earlier, the CBDT itself accepts that there could be various bonafide reasons explaining the small variations between the sale consideration of immovable property as disclosed by the assessee vis-à-vis the stamp duty valuation for the said immovable property. Obviously, therefore, disturbing the actual sale consideration, for the purpose of computing capital gains, and adopting a notional figure, for that purpose, will not be justified in such cases. On a conceptual note, an estimation of market price is an estimation nevertheless, even if by a statutory authority like the stamp duty valuation authority, and such a valuation can never be elevated to the status of such a precise computation which admits no variations. The rigour of Section 50C(1) was thus relaxed, and very thoughtfully so, to take these bonafide cases of small variations between the stated sale consideration vis-à-vis stamp duty valuation, out of the scope of adjustments contemplated in the computation of capital gains under this anti-avoidance provision. In our humble understanding, it is a case of a curative amendment to take care of unintended consequences of the scheme of Section 50C. It makes perfect sense, and truly reflects a very pragmatic approach full of compassion and fairness, that just because there is a small variation between the stated sale consideration of a property and stamp duty valuation of the same property, one cannot proceed to draw an inference against the assessee, and subject the assessee to practically prove his being truthful in stating the sale consideration. Clearly, therefore, this insertion of the third proviso to Section 50C(1) is in the nature of a remedial measure to address a bonafide situation where there is little justification for invoking an anti-avoidance provision. Similarly, so far as enhancement of tolerance band to 10% by the Finance Act 2020, is concerned, as noted in the CBDT circular itself, it was done in response to the representations of the stakeholders for enhancement in the tolerance band. Once the Government acknowledged this genuine hardship to the taxpayer and addressed the issue by a suitable amendment in law, the next question was what should be a fair tolerance band for variations in these values. As a responsive Government, which is truly the hallmark of the present Government, even though the initial tolerance band level was taken at 5%, in response to the representations by the stakeholders, this tolerance band, or safe harbour provision, was increased to 10%. There is no particular reason to justify any particular time frame for implementing this enhancement of tolerance band or safe harbour provision. The reasons assigned by the CBDT, i.e., "the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location," was as much valid in 2003 as it is in 2021. There is no variation in the material facts in this respect in 2021 vis-à-vis the material facts in 2003. What holds good in 2021 was also good in 2003. If variations up to 10% need to be tolerated and

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need not be probed further, under section 50C, in 2021, there were no good reasons to probe such variations, under section 50C, in the earlier periods as well. We are, therefore, satisfied that the amendment in the scheme of Section 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à-vis stamp duty valuation to 10%, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related statutory provision of Section 50C, i.e. 1st April 2003. In plain words, what is means is that even if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face value and the anti-avoidance provisions under section 50C will not be invoked. 8. Once legislature very graciously accepts, by introducing the legal amendments in question, that there were lacunas in the provisions of section 50C in the sense that even in the cases of genuine variations between the stated consideration and the stamp duty valuation, anti-avoidance provisions under section 50C could be pressed into service, and thus remedied the law, there is no escape from holding that these amendments are effective with effect from the date on which the related provision, i.e., Section 50C, itself was introduced. These amendments are thus held to be retrospective in effect. In our considered view, therefore, the provisions of the third proviso to Section 50C (1), as they stand now, must be held to be effective with effect from 1st April 2003. We order accordingly. Learned Departmental Representative, however, does not give up. Learned Departmental Representative has suggested that we may mention in our order that "relief is being provided as a special case and this decision may not be considered as a precedent". Nothing can be farther from a judicious approach to the process of dispensation of justice, and such an approach, as is prayed for, is an antithesis of the principle of "equality before the law," which is one of our most cherished constitutional values. Our judicial functioning has to be even-handed, transparent, and predictable, and what we decide for one litigant must hold good for all other similarly placed litigants as well. We, therefore, decline to entertain this plea of the assessee.” [Emphasis added now] As has been aptly explained above, the rational for holding newly inserted proviso to sub-section (1) to section 50C of the Act as curative in nature, hence, having retrospective application, the same analogy would apply to the provisions of Section 43CA of the Act. Both the sections are similarly worded except that both the sections have application on different sets of assessee. As has been pointed earlier, Section 43CA gets attracted where the consideration received or accrues as a result of transfer of an asset (other than a capital asset) being land or building or both. Whereas, provisions of section 50C operates where the consideration received or accrues as a result of transfer of a capital asset being land or building or both. Both the sections induce deeming fiction to substitute actual sale consideration with notional value of asset based on Stamp Duty valuation. Further, a perusal of Circular 8 of 2018 (supra) would show that identical reasons have been given in Para 16 for „Rationalization of Sections 43CA and 50C‟. The proviso has been inserted and subsequently tolerance band limit has been enhanced to mitigate hardship of genuine transactions in the real estate sector. Ergo, in the light of reasoning given for insertion of the proviso and exposition by the Tribunal for retrospective application of

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the said proviso, I have no hesitation in holding that the proviso to sub- section (1) to section 43CA and the subsequent amendment thereto relates back to the date on which the said section was made effective i.e. 01/4/2014. 7. In light of above findings, the Assessing Officer is directed to delete the addition of Rs.6,81,500/- under section 43CA of the Act. The impugned order is quashed and appeal of the assessee is allowed.” 10. The learned Departmental Representative only submitted that during the assessment year 2017–18, the tolerance band was up to 5%, however, we reject his argument in view of the decision of the Co–ordinate Bench cited supra since the difference is below tolerance band, the entire addition of ` 57,68,020, is directed to be deleted. Accordingly, all the ground no.2, raised by the assessee in its appeal for the assessment year 2017–18 is allowed.”

Accordingly, the grounds raised by the assessee are allowed.

Sd/- V. DURGA RAO JUDICIAL MEMBER

NAGPUR, DATED: 18/09/2024 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Sr. Private Secretary ITAT, Nagpur