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Assessee represented by Shri Mitish S. Modi, CA Department represented by Shri Vinod Kumar, Sr. DR Date of hearing 22/02/2023 Date of pronouncement 28/02/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by the assessee (s) are directed against the common order of learned Commissioner of Income Tax (Appeals)-3, Surat (in short, the ld. CIT(A) dated 20/09/2017 for the Assessment year (AY) 2012-13. In both these appeals, the assessee has raised certain common grounds of appeal
, facts in both these years are common, as both the assessees are brother and earned Capital gain on sale of immovable property held by them, therefore, with the consent of parties, both these and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. appeals were clubbed, heard together and are decided by this consolidated order to avoid the conflicting decisions. For appreciation of facts, the appeal being is treated as a “lead case”. In this appeal, the assessee has raised following grounds of appeal: “1. On the facts and in the circumstances of the case as well in law, the learned CIT(Appeals) erred in upholding the order of the ITO, Ward 3(3)(2), Surat (for sake of brevity “The AO”) invoking the provisions of Section 50C of the Act for the alleged deemed Capital Gain, without appreciating the crucial and relevant evidences furnished to establish the maximum possible fair market value prevailing on the date of transfer of the land in question and hence, not justified.
2. On the facts and in the circumstances of the case as well in law, the learned CIT(Appeals) erred in holding that the value estimated by the DVO at Rs. 3,54,72,000/- as the fair market value on the date of transfer of the land in question and hence, not justified.
3. On the facts and in the circumstances of the case and in law, both the lower authorities have grievously failed to consider in the right, lawful and proper perspectives, the detailed submissions, with the explanations duly substantiated by the authentic, credible and cogent evidences for the claim of the maximum possible fair market value on the date of transfer of the land in question and therefore, the order of the CIT(Appeals) confirming the action of the AO u/s 50C of the Act to the extent of substituting the value estimated by the DVO at Rs. 3,54,72,000/- against the actual sale consideration of Rs. 1,80,00,000/- , is liable to be struck down.
4. Your appellant further reserves his right to add, alter, modify or to amend any of the aforesaid grounds before or at the time of hearing of an appeal. It is therefore, respectfully submitted that taking into account various submissions written as well as oral made in the course of assessment proceedings and/or appeal proceedings before the CIT(Appeals) through the written submissions, the entire addition of Rs. 96,81,664/- ought to have been deleted in toto especially in view of the appellant’s various submissions with AO/CIT(Appeals), which form part of statement of facts alongwith various submissions to be filed before Hon’ble ITAT, Surat and the appeal of the appellant be allowed in full as prayed for.” and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr.
2. Perusal of record shows that the ld. CIT(A) passed the impugned order on 20/09/2017. However, the present appeal was filed on 30/04/2018, thus there is delay of 91 days in filing the present appeal before the Tribunal. The assessee has filed application for condonation of delay. In the application, the assessee/applicant contended that the impugned order passed by the ld. CIT(A) dated 20/09/2017 was served upon the assessee on 27/10/2017 and as such, the time limit for filing appeal was up to 25/12/2017. After the order of ld. CIT(A), the order giving effect and demand notice under Section 156 of the Income Tax Act, 1961 (in short, the Act) was received by the assessee on 03/11/2017. The assessee filed application under Section 154 of the Act on 28/11/2017 demonstrating that there was mistake in the order giving effect by the Assessing Officer. The assessee was under bonafide belief that the Assessing Officer would certainly appreciate the fact and in considering the decision of ld. CIT(A), the issue under litigation after rectification of the order would be came to an end. The Assessing Officer has not appreciated the facts thus, the assessee has to file appeal before the ld. CIT(A) against the order under Section 154 of the Act and simultaneously, the assesse also filed appeal before the Tribunal in challenging the order of ld. CIT(A). The assessee further stated that he is a senior citizen and having no business activity and no substantial source of income except interest income from savings bank account, and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. agricultural income, for the year under appeal, the assessee earned capital gain on sale of immovable property. The assessee is native of Saurashtra, North Gujarat and has to frequently visit at native place for settlement of ancestral agricultural land. Further, due to dispute on the division of ancestral property amongst the family members, the assessee was under mental pressure and facing ill health. Certificate of Doctor, who treated the assessee during the relevant period, is also filed. The assessee deposited appeal fees on 23/03/2018 and handed over the necessary paper for filing appeal before the Tribunal on 23/04/2018.
3. The learned Authorised Representative (ld. AR) of the assessee submits that the ld. CIT(A) while adjudicating the appeal of assessee, granted partial relief to assessee and directed the Assessing Officer to recompute the capital gain by substituting the value estimated by Departmental Valuation Officer (DVO) in place of Jantri value as per Section 50C(2). The Assessing Officer failed to follow the direction of ld. CIT(A) and erroneously computed long term capital gain at Rs. 1.15 crore. The fact is that the Assessing Officer while passing the assessment order under Section 143(3) made addition of capital gain of Rs. 96.81 lacs by invoking provisions of Section 50C of the Act. The assessee in the return of income has disclosed the capital gain and computed the income as per provisions of Section 48. This fact was not disputed by the Assessing Officer as well as by the ld. CIT(A). However, the Assessing Officer draw inference that and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. full value of consideration shown by assessee under Section 48 is much less the valuation made by Stamp Valuation Authority. The matter was referred to the DVO under Section 50C(2) of the Act. The ld. AR further submits that the Assessing Officer while passing the assessment order under Section 143(3), allowed the expenditure including the land premium paid by assessee at the time of sale/transfer from full value of consideration shown by assessee in the return of income which can be verified from the assessment order. However, while passing the order giving effect, the Assessing Officer has not allowed the deduction for expenditure in incurred wholly and exclusively in connection with the transfer of land i.e. levy of tax/premium by State Government authorities for an amount of Rs. 1.61 crore. The ld. AR submits that the land premium receipt is filed on record. The ld. AR submits that since the assessee was pursuing remedy before the Assessing Officer with bonafide and time taken in such proceedings is to be excluded in computing the period of delay and for one more reasons that the assessee was not well coupled with the facts that he is senior citizen, thus there is sufficient reasonable and bonafide cause for condonation of delay. The assessee has no malafide intention in filing appeal belatedly, rather there is likelihood that the assessee may suffer prejudice in the event, the delay is not condoned. The ld. AR for the assessee submits that the delay is not inordinate and the assessee has good case on merit and would suffer and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. prejudice, if delay is not condoned. The ld. AR further submits that it is settled law that when technicalities are fitted against cause of substantial justice, cause of substantial justice must be prevail as has been held by various superior courts.
4. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue has not seriously opposed the contention of ld. AR of the assessee.
5. We have considered the submissions of both the parties and perused the contents of application for condonation of delay. We find that the assessee has sought condonation of delay basically on two counts i.e. (i) the assessee was pursuing his remedy bonafidely before the Assessing Officer by filing rectification order, against the order giving effect in pursuance of order of ld. CIT(A) and (ii) the assessee is a senior citizen and was under mental tension due to division of ancestral property amongst family members and due to such mental tension, the assessee was suffering ill health. To support second contention, the assessee has furnished medical certificate of Doctor Binodbhai Patel. We find that after passing the impugned order by ld. CIT(A), the Assessing Officer passed the order giving effect along with demand notice under Section 156 of the Act. The assessee filed application for rectification of such demand notice and was seeking rectification in the order giving effect dated 25/10/2017. We further find that in application for rectification, the and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. assessee claimed allowance of expenditure incurred on improvement /payment of land premium paid at the time of conversion of land use for transfer of land. All these facts are not disputed by ld SR DR for the revenue. The ld. AR of the assessee while making his submission, submitted that in case, the application of assessee under Section 154 had been appreciated the issue under litigation would have come to an end. We further find that initially while passing the assessment order the assessing officer made addition of Rs.96,81,667/-, by invoking section 50C. However, while giving effect of the order of ld. CIT(A), wherein the assessee was allowed relief on the basis of report of DVO, the assessing officer made addition of Rs. 1,15,12,412/-. Here we may also mention that the assessing officer initially considered the value of asset at Rs. 4.70 Crore on the basis of valuation made by stamp valuation authority for the purpose of registration of sale deed. However, on making reference to DVO, the DVO estimated total value of asset at Rs. 3.54 Crore. Thus, we find merit on the submission of ld. AR of the assessee that the assessee was bonafidely pursuing remedy before the Assessing Officer and had it been allowed, the issue would have been settled. Thus, we find merit in the submissions of ld AR for the assessee that the assessee was bonafidely pursuing remedy and time period spent in such proceedings is liable to be excluded for the total period of limitation of filing appeal. In our view, ordinarily, a litigant does not get benefit by filing appeal and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. belatedly. Further, there is no presumption under the law that delay in filing appeal was deliberately, unless it is shown that it is a sheer negligence or with malafide intention. The Hon’ble Apex Court in Collector, Land Acquisition Vs Mst. Katiji & ors. AIR 1987 (SC) 1353/167 ITR 471(SC) held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim who have vested right in injustice being done because of a non-deliberate delay. We do not find any fact or circumstance on the record, which may suggest that the delay in filing appeal was deliberate, therefore, we condone the delay in filing appeal and admit the same for adjudication. Now adverting to the facts of the case, leading to filing the present appeal.
6. Brief facts of the case are that the assessee is an individual, filed his return of income for the A.Y. 2012-13 on 30/03/2013 declaring income of Rs. 6,86,470/-. The assessee also shown agricultural income of Rs. 43,210/- for the rate purposes. The case was selected for scrutiny. During the assessment, the Assessing Officer noted that the assessee has shown long term capital gain and claimed deduction under Section 54B of the Act against such capital gain. On further perusal of record, The Assessing Officer noted that the assessee along with his co-owner had sold immovable property/agricultural land situated at Nana Varachha, Block and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. No. 656, Surat and shown sale consideration of Rs. 1.80 crore. The document of sale was registered with Sub-Registrar, Katargam, vide document No. 2212 of 2012 dated 10.02.2012. The assessee was having 1/3rd share in the property, therefore, the assessee offered capital gain by considering his share at Rs. 60.00 lacs for the purpose of capital gain. The Assessing Officer find that the total stamp duty on such sale transaction was paid at Rs. 23,06,000/-. Such stamp duty was found disproportionate to the sale consideration shown on the sale deed. The Assessing Officer issued notice under Section 133(6) of the Act to Sub- Registrar concerned. In response to notice under Section 133(6), the Sub-Registrar informed that on the basis of Jantri value of total land sold by assessee along with his co-owner was assessed at Rs. 4.70 crores. On the basis of such information, the Assessing Officer was of the view that there is difference of Rs. 2.90 crore in the sale consideration shown on the documents and the value determined by stamp valuation authority on the basis of Jantri value. Since the assessee was having 1/3rd share, hence, the difference was worked out to the share of assessee at Rs. 96.81 lacs.
7. The Assessing Officer on the basis of aforesaid observation, issued show cause notice as to why difference of Rs. 96.81 lacs should not be treated as deemed income of the assessee. The assessee filed his reply on 16/03/2015. The Assessing Officer has scanned certain part of reply in and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. para 5.4 of his order. In the reply, the assessee stated that the land sold by assessee being new Sharat (eligible for premium if converted into non- agricultural land). The market value of this land is too much less than the value of law of old sharat. The reason for difference in market value is because as per State Government Rules, one has to be pay 40% premium of Jantri value as decided by the Government for conversion of nature of land. In this case, the Jantri rate of Rs. 6650/- per square meter. This land falls in the area of Surat Development Authority, so the T.P number is allocated being 25 and final plot No.
92. Further the land under consideration was under dispute between the erstwhile owner from whom the assessees have purchased the said land that is why market value of land was decided on lower side as compared to other land. The assessee also filed copy of Civil Suit being case No. 219/2014. The assessee also contended that the issue of valuation may be referred to DVO. The reply of assessee was not accepted by the Assessing officer. The Assessing Officer by invoking provisions of Section 50C made addition of Rs. 96.81 lacs to the income of assessee in the assessment order dated 19.03.2015. The request of assessee to refer the issue of valuation to DVO was rejected by taking view that it is a time barring matter.
8. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. very detailed written submissions. The submissions of assessee are recorded in para 6 of order of ld. CIT(A). The assessee in its submission, submitted that the assessee along with his co-owner, sold the land at the sale consideration of Rs. 1.80 crore. The assessee was having 1/3rd share and entitled to Rs. 60 lacs. The assessee has shown long term capital gain at Rs. 6,86,465/-. The Assessing Officer made addition by invoking provisions of Section 50C. Similar addition was made in case of co-owner Laljibhai Kalubhai Miyani. In case of co-owner, a remand report was called for from the Assessing Officer with the direction to refer the matter to DVO to estimate fair market value on the date of sale of property. During the remand proceedings, the Assessing Officer referred the matter to the DVO to determine the fair market value in view of objection raised by assessee as per provisions of Section 50C(2)(b) of the Act. The assessee also furnished copy of purchase deed dated 13/09/2004 showing the consideration at Rs. 5,17,500/-. On the basis of such sale deed, the assessee contended that character of agricultural land is “Navi Sharat”. The assessee explained that the agricultural land having character of Navi Sharat can only be used for agricultural purposes by the Ganotiya (occupier) of the land as per the land record of State Government. The assessee further explained that the land of Navi Sharat could not be transferred or sold to any other person for any other purpose, except for agricultural purposes and if the land owner desires and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. to transfer or sale the agricultural land of Navi Sharat to any person being interested buyer in the open market for the use of said land for the purpose of other than agricultural purposes, can be sold or transferred after getting permission of Deputy Collector having jurisdiction that too on payment of levy of tax/land premium at the rate of 40% of Jantri value declared for residential zone. The assessee and two other co-owners (all three brothers) were not in a position to sell the land in the open market at the desired price or at the Jantri price. Jantri rate for the particular block of land without demarcation as to the character of agricultural of Navi Sharat or Juni Sharat. As a matter of fact, the Jantri declared by the State Government simply exhibits the average rate per square meter of agricultural land or non-agricultural land and there is no demarcated Jantri rate for Navi Sharat or Juni Sharat. The Assessing Officer failed to appreciate this crucial aspect having adverse effect on the market value as per Jantri rate and simply invoke the provisions of Section 50C for making addition at Jantri rate. The assessee also stated that it was explained before the Assessing Officer about the dispute of title/ownership pending in the Civil Court. When there is a dispute in the title of the property, no person is in position to fetch the desired market price at per jantri rate. The assessee furnished copy of challan for the payment of conversion of land in question from Navi Sharat to Juni Sharat, copy of Gaam Namuno No. 6 (Hakk Patrak /ownership and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. document). The assessee also explained the dispute of title between the co-owners and further explained that as the assessee and his co-owners were not having sufficient fund to pay the huge amount of land premium of Rs. 1.61 crores due to paucity of fund of land premium. The assessee agreed with the purchaser that they would directly pay the land premium of Rs. 1.61 crores being forming part of actual sale consideration to the State Government. Thus, the assessee explained that only sale consideration of land in question was Rs. 1.80 crore (sale consideration shown at the sale deed), however, the actual sale consideration was Rs. 3.41 Crore, being Rs.1.80 crore shown on sale deed, which is received by all three owners plus Rs. 1.61 crore, land premium paid to Government. The land premium was paid by purchaser to the State Government for converting the Navi Sharat land into Juni Sharat which was a precondition of the purchaser for purchasing the said land. The assessee further stated that if the land premium is considered as part of sale consideration, the total sale value is Rs. 3.41 crores and the value DVO determined the market value of land at Rs. 3.54 crores, the difference is less than 10% and no addition would survive in view of the third Proviso to section 50C(1).
9. On the basis of such fact, the assessee contended that the difference in fair market value determined by the DVO (after giving effect to the cost of land premium paid for conversion of land from Navi Sharat to Juni and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. Sharat), the difference in sale consideration is below 10% actually 6.66%. It was explained that Jantri rate as notified by the State Government are solely for the purpose of collection of stamp duty and jantri rate are considered in general and never take into consideration various adverse factors effecting the fair market value of land or building. The assessee also stated that Jantri value determined by the Stamp Valuation Authority is Rs. 4.70 crores and market value determined by DVO is Rs. 3.540 crore, thus when the value determined by the DVO is below the valuation of Stamp Valuation Authority, there is no applicability of Section 50C(3) of the Act.
10. The submission of assessee was remanded to the Assessing Officer for his objection/remand report. The assessing Officer filed his reply vide reply dated 29/10/2015 along with report of DVO. The report of DVO was furnished to the assessee for his comment. The assessee filed its comment dated 07/07/2016. In the comment/rejoinder, the assessee in sum and substance repeated the same contention as made in his earlier submission. In addition to the earlier submission, the assessee relied on the case law in C.B. Gautam Vs Union of India (1993) 199 ITR 530/65 Taxman 440 (SC).
11. The ld. CIT(A) after considering the assessment order, submission of assessee and remand report and report of DVO, held that the DVO has considered objection of assessee and estimated the value of land at Rs. and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. 3.54 crores in place of Rs. 4.50 crores as per Section 50C. Thus, the ld CIT(A) directed assessing officer to recompute the capital gain on the basis of report of DVO. Further aggrieved, the assessee has filed the present appeal before this Tribunal.
12. We have heard the submissions of ld. AR of the assessee and the ld. Sr. DR for the Revenue and have gone through the orders of the lower authorities carefully. Both the parties have also filed their written submissions, which we have taken on record. The ld AR for the assessee submits the assessee along with his co-owner, sold the land at the sale consideration of Rs. 1.80 crore. The assessee was having 1/3rd share and entitled to Rs. 60 lacs. The Assessing Officer made addition by invoking provisions of Section 50C. Similar addition was made in case of co-owner Laljibhai Kalubhai Miyani. The co-owner has also filed appeal against similar addition, wherein a remand report was called for from the Assessing Officer with the direction to refer the matter to DVO to estimate fair market value on the date of sale of property. During the remand proceedings, the Assessing Officer referred the matter to the DVO to determine the fair market value in view of objection raised by assessee as per provisions of Section 50C(2)(b) of the Act. The ld AR for the assessee submits that the assessee acquired this asset vide purchase deed dated 13/09/2004 on a sale consideration at Rs. 5,17,500/-. The nature of land is clearly shown as “Navi Sharat”. The land of Navi Sharat and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. can only be used for agricultural purposes by the Ganotiya (occupier) of the land as per the land record of State Government and cannot be transferred or sold to any other person for any other purpose, except for agricultural purposes. And in case the land owner desires to transfer or sale the agricultural land of Navi Sharat to any person being interested buyer in the open market for the use of said land for the purpose of other than agricultural purposes, has to be transferred after getting permission of Deputy Collector on payment of levy of tax/land premium at the rate of 40% of Jantri value declared for residential zone. The ld AR for the assesse submits that assessee and his two brothers were not in a position to sale the land in the open market at the desired price or at the Jantri price in absence of change of land use. The Assessing Officer failed to appreciate this crucial aspect having adverse effect on the market value as per Jantri rate and simply invoke the provisions of Section 50C for making addition at Jantri rate. The ld AR for the assessee submits that it was explained before the Assessing Officer about the dispute of title/ownership pending in the Civil Court and the assessee and his brothers were not in a position to fetch the desired market price at per jantri rate. The assessee and his co-owners agreed that they will apply for conversion of land use and the premium on such land use would be payable by purchaser. Accordingly, the purchaser paid the land premium to the local authorities of Rs. 1.61 Crore being a part of sale and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. consideration. The assessee furnished copy of challan for the payment of conversion of land in question from Navi Sharat to Juni Sharat, copy of Gaam Namuno No. 6 in the form of Hakk Patrak (ownership document). The ld AR for the assessee submits that only sale consideration of land at Rs. 1.80 crore was shown at the sale deed, however, the actual sale consideration was Rs. 3.41 Crore, being Rs.1.80 crore shown on sale deed, which is received by all three owners plus Rs. 1.61 crore, land premium paid to Government. The ld AR for the assessee submits that the buyer of property is always interested to buy property without any encumbrances, charge or lien, so they directly paid the land premium to the state Government in accordance with the provision of section 43 of Ganot Dhara. And if the land premium is considered as part of sale consideration, which is in fact was part of total sale consideration, the total sale value is Rs. 3.41 crores and the value DVO determined the market value of land at Rs. 3.54 crores, the difference is less than 10% and no addition would survive in view of the provisions of third Proviso of section 50C(1). The actual difference in the sale consideration and the value determined by DVO is only 6.66%.
13. The ld AR for the assessee submits that the Hon’ble Apex Court in case of CIT Vs George Henderson and Company Limited (1967) 66 ITR 622- SC, while considering the expression (word) “full value of consideration” held that the expression 'full value of the consideration' cannot be and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. construed as the market value but as the price bargained for by the parties to the sale. The dictionary meaning of the word 'full' is "whole or entire, or complete". The word 'full' has been used in this section in contrast to 'a part of the price'. The words 'full price' means 'the whole price'. Clause (2) of section 12B of 1922 Act itself clearly suggests that if no deductions are made as mentioned in sub-clause (ii) thereof, then that amount represents the full value of the consideration or the full price. When deductions are made as specified in sub-clauses (i) and (ii), then that amount does not represent the full value. The expression 'full value' means the whole price without any deduction whatsoever and it cannot refer to the adequacy or inadequacy of the price bargained for. Nor has it any necessary reference to the market value of the capital asset which is the subject-matter of the transfer.
14. On the basis of afforesaid ratio, the ld AR for the assessee submits that undisputedly the “full value of consideration” in the case in hand bargained by the parties was Rs. 3.41 Crore (1,80 Crore shown on sale deed +1.61 Crore paid as land premium to State Gov.).
15. The ld AR for the assessee submits that Hon’ble Kerala High Court in Mahamood Ibrahim Sait Vs ITO (1994) 210 ITR 700 (Ker), while considering the issue whether consideration for transfer of a property subject to mortgage includes amount paid for discharge of mortgage is deductible in computation of capital gain under section 48. It was held and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. that the amount spent on discharge of mortgage is deductible in computation of capital gain.
16. The ld AR for the assessee submits that various Courts and Tribunal have taken view that the beneficial provisions inserted in the Income Tax Act, particularly third Proviso by Finance Act 2020 shall be treated as retrospective and it is effective from the date on which section 50C itself was inserted w.e.f. 1st April 2003. To support his submissions, the ld AR for assessee relied on the following case laws; Maria Feranandes Cheryl Vs ITO ( 2021) 123 taxmann.com 252 (Mum), CIT Vs Vemmudi Amarendran (2020) 120 taxmann.com 171 (Mad), Joseph Mudaliar Vs DCIT (ITA No. 6912/Mum/2019 dated 14.09.2021), RMG Buildwell (P) Ltd Vs ITO (ITA No. 1311/Del/2018 dated 27.07.2021), Amrapali Cenema Vs ACIT (2021) 127 taxmann.com 376 (Delhi-Trib).
17. In alternative and without prejudice submissions, the ld AR for the assessee submits that in one of the co-owner’s case (Dhirubhai Kalubhai Miyani, the real brother of assessee), the department have accepted the similar sale consideration and also accepted the value of asset as per sale deed and the premium paid by the purchaser, however, the assessee is treated indifferently, which is not permissible in view of the following case laws; Rajeshkumar Shantilal Patel Vs ITO (2021) 127 taxmann.com 342 (Surat– Tribunal), Late Mohanlal Ambelal Desai Vs ITO (ITA 1870/Ahd/2015), Chetanbhai Prahalad Gami Vs ITO (ITA No. 2082/Ahd/2011/SRT dated 18.07.2019), CIT Vs Kumararani Smt Meenakshi Achi (2007) 107 ITR 477 (Madras) and Ramabhai Ukabhai Patel HUF Vs ITO (2018) 102 taxmann.com 109 (Surat- Tribunal) and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr.
18. On the other hand, the ld Sr DR for the revenue submits that the assessee and his co-owners sold immoveable property during the year under consideration. As per the sale deed of the transaction, the assesse has shown sale consideration at Rs. 1.80 Crore. The sub-registrar concerned determined the value of asset as per jantri value at Rs. 4.70 Crore. The assessee was owner of 1/3 share thus as per assessee, he has received Rs. 60.00 lacks. The assessing officer invoked the provisions of section 50C and worked out share of assessee at Rs. 156,81,667/- being 1/3 of Rs. 470,45,000/-. The assessee has already considered Rs. 60.00 lacs for the purpose of calculation of capital gain, therefore, differential amount of Rs. 96,81,667/- (1,56,81,667- 60,00,000) was added by assessing officer to the income of assessee. During the first appellate stage, the matter of valuation was sent to DVO to estimation of value of asset. The DVO estimated the value of asset at Rs. 3,54,72,700/-. The ld CIT(A) directed the assessing officer to consider the value of asset estimated/ determined by DVO for working of capital gain. The assessee claimed that they have sold asset at Rs. 3.41 Crore and explained that Rs. 1.80 Crore was received as shown in sale deed and Rs. 1.61 Crore as a cost of premium paid for conversion of land from Navi Sharat to Juni Sharat. The ld SR DR for the revenue submits that the provisions of section 50C are very clear, which prescribed that where the consideration received or accruing as a result of the transfer by as assessee of a capital asset, being and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. land or building or both, is less than the value adopted or assessed or assessable by any authority of state Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. Thus, this provision is deeming provision. The provisions of Income –tax are very much clear in itself. Nowhere it is mentioned that the expenditure made by the purchaser under any head should include in the full value of consideration. Hence, the plea taken by the assessee on this issue may not be entertained. The expenditure of Rs. 1.81 Crore incurred by the purchaser on account of ‘levy of tax’ was not covered by any agreement. In absence of any agreement between the parties, the additional expenditure may never be treated as part of full value of consideration of immovable property in question. The ld Sr DR for the revenue further submits that the full value of consideration as per registered document is Rs. 1.80 Crore. The stamp valuation authorities determined the value of asset at Rs. 4.70 Crore, thus, the difference between these cost is more than 10%, so the addition made by assessing officer is correct. The ld SR DR for the revenue prayed for dismissal of present appeal.
19. In the rejoinder submissions, the ld AR for the assessee submits that ld Sr DR for the revenue has rightly not raised any dispute about the and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. acceptance of actual consideration. Once in case of third co-owner the department has accepted the transaction of same land and no further addition is made, the assessee cannot be treated indifferently. To support such view, the ld AR for the assessee relied on the Circular of Central Board of Direst Taxes (CBDT) No. 549 dated 31.10.1989.
20. The ld AR for the assessee further submits that once reference is made to DVO, the assessing officer is to compute capital gain taking value by DVO under section 50C, even though it is lesser than value adopted by the stamp valuation authority as has been held by Jurisdictional High Court in PCIT Vs Ravjibhai Nagin Bhai Thesia (2016) 76 taxmann.com 76 (Gujarat). It was argued that Allahabad High Court in CIT Vs Dr Indira Swaroop Bhatnagar (2013) 30 taxmann.com 293 (All), it was held that where the assessing officer after rejecting the valuation of property submitted by assessee referred matter to DVO to obtain fair market value, valuation done by DVO was binding on the assessing officer. The ld AR for the assessee finally submits that if the assessing officer is directed to consider the amount of Rs. 1.61 Crore as a part of sale consideration, as agreed by the parties to the sale transaction, then the sale consideration of Rs. 3.41 Crore (1.80+ 1.61), is within the tolerance range of 10% with the value determined by DVO at Rs. 3.54 Crore, no addition would survive. and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. On the direction of the bench the ld AR for the assessee filed confirmation of purchaser of impugned land namely Batukbhai son of Nanjibhai Dudhat R/o A-2, Shubham Residency, Nana Varachha, Surat in the form of his affidavit. In the affidavit the purchaser confirmed that he had paid land premium of Rs. 1.61 Crore under mutual understanding on behalf of seller of the land, being integral part of sale consideration.
21. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. We have also deliberated on various case laws relied by ld AR for the assessee. We find at the time of passing assessment order, the Assessing Officer made addition of Rs. 96.81 lacs by invoking provisions of Section 50C. The request of assessee to refer the issue of valuation to DVO was rejected by taking view that it is a time barring matter. As noted above that before ld CI(A), the assessee filed detailed written submissions. In the submissions the assessee stressed that the agricultural land/ asset was having character of ‘Navi Sharat’, which can only be used for agricultural purposes by the Ganotiya. The land of Navi Sharat cannot be transferred or sold to any other person for any other purpose, except for agricultural purposes and if the land owner desires to transfer or sale the agricultural land of Navi Sharat to any person being interested buyer in the open market for the use of said land for the purpose of other than agricultural purposes, can be sold or transferred after getting permission of Deputy and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. Collector having jurisdiction that too on payment of levy of tax/land premium at the rate of 40% of Jantri value declared for residential zone. It was also contended that all three brothers were not in a position to sell the land in the open market at the desired price or at the Jantri price. Jantri rate for the particular block of land without demarcation as to the character of agricultural of Navi Sharat or Juni Sharat. As a matter of fact, the Jantri declared by the State Government simply exhibits the average rate per square meter of agricultural land or non-agricultural land and there is no demarcated Jantri rate for Navi Sharat or Juni Sharat. The assessee also disclosed about the dispute of title between the co-owners and further explained that as the assessee and his co-owners were not having sufficient fund to pay the huge amount of land premium of Rs. 1.61 crores due to paucity of fund of land premium. The assessee agreed with the purchaser that they would directly pay the land premium of Rs. 1.61 crores being forming part of actual sale consideration to the State Government. Thus, the assessee explained that only sale consideration of land in question was Rs. 1.80 crore (sale consideration shown at the sale deed), however, the actual sale consideration was Rs. 3.41 Crore, being Rs.1.80 crore shown on sale deed, which is received by all three owners plus Rs. 1.61 crore, land premium paid to Government. The land premium was paid by purchaser to the State Government for converting and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. the Navi Sharat land into ‘Juni Sharat’ which was a precondition of the purchaser for purchasing the said land.
22. The submissions of the assessee was sent to the assessing officer for seeking his remand report. The assessing officer in the remand report furnished the copy of report of DVO, which was obtained in the case of one of the co-owner. We find that neither the ld CIT(A) nor assessing officer investigated about the claim of assessee that purchaser agreed to pay the premium of land conversion charges. The assessee furnished the complete address of the purchaser as contained in the sale deed. No adverse material was brought on record against the claim of assessee. The assessing officer with the remand report furnished report of DVO. The DVO estimated the value of entire asset at Rs. 3.54 Crore. We find that on receipt of report of DVO, the ld CIT(A) directed the assessing officer to re-compute capital gain on the basis of valuation of DVO.
23. Before us, the ld AR for the assessee vehemently submitted that the payment of premium for conversion charges for converting the user/ nature of land from ‘Navi Sharat’ to ‘Juni Sharat’ of Rs. 1.61 Crore was a part of sale consideration, though consideration of land at Rs. 1.80 crore was shown at the sale deed, however, the actual sale consideration was Rs. 3.41 Crore, being Rs.1.80 crore shown on sale deed, which is received by all three owners plus Rs. 1.61 crore, land premium paid to Government. The buyer of property is always interested to buy property and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. without any encumbrances, charge or lien, so they directly paid the land premium to the state Government in accordance with the provision of section 43 of Ganotdhara. And if the land premium is considered as part of sale consideration, which is in fact was part of total sale consideration, the total sale value is Rs. 3.41 crores and the value DVO determined the market value of land at Rs. 3.54 crores, the difference is less than 10% and no addition would survive in view of the provisions of third Proviso of section 50C(1). We find that on the direction of the bench the assessee filed confirmation of purchaser of impugned land namely Batukbhai son of Nanjibhai Dudhat. In the affidavit the purchaser confirmed that he had paid land premium of Rs. 1.61 Crore under mutual understanding on behalf of seller of the land, being integral part of sale consideration.
24. The ld AR for the assessee also relied on the ratio of decision of Hon’ble Apex Court in CIT Vs George Henderson and Company Limited (supra) wherein the Hon’ble Court while considering the phrase “full value of consideration” held that the expression 'full value of the consideration' cannot be construed as the market value but as the price bargained for by the parties to the sale. It was held that dictionary meaning of the word 'full' is "whole or entire, or complete". The word 'full' has been used in this section in contrast to 'a part of the price'. The words 'full price' means 'the whole price'. Clause (2) of section 12B of 1922 Act itself clearly and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. suggests that if no deductions are made as mentioned in sub-clause (ii) thereof, then that amount represents the full value of the consideration or the full price. When deductions are made as specified in sub-clauses (i) and (ii), then that amount does not represent the full value. The expression 'full value' means the whole price without any deduction whatsoever and it cannot refer to the adequacy or inadequacy of the price bargained for. Nor has it any necessary reference to the market value of the capital asset which is the subject-matter of the transfer. On the basis of such submissions, the ld AR for the assessee claimed that actual difference in the sale consideration and the value determined by DVO is only 6.66%. During hearing of the appeal, we raised a question, if there was any written contract about the payment of such premium by the purchaser. The ld. AR fairly submitted that in fact there is no written contract about such payment by the purchaser. However, fact is that the parties orally agreed that the purchaser would initially bear such cost, though such premium is payable by owner. The ld. AR for the assessee, further answered that the oral contract is lawful and there is no bar under law against oral agreement.
25. Before, adverting to the fact of the case in hand, we may refer the validity of the oral contract viz-a viz transfer of immovable property. The Delhi High Court, in the case of Nanak Builders and Investors Pvt. Ltd. vs. Vinod Kumar Alag AIR 1991 Delhi 315 (*), held that even an oral agreement and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. can be a valid and enforceable contract. It was held that in the strict sense, it is not essential that a contract must be in writing, unless specified by law or the parties themselves contemplate the reduction of terms of agreement to writing. (*emphasis added by us).
26. The Hon’ble Apex Court in the case of Alka Bose vs. Parmatma Devi & Ors [CIVIL APPEAL NO(s). 6197 OF 2000] (*), held that even a sale agreement can be oral and have the same binding value and enforceability, as a written agreement. The agreement should be in tandem with the essential conditions in section 10 of the Indian Contract Act, 1872 and thus, will have the equal force of evidentiary value, as a written one. An oral agreement is as equally valid, as a written one. The legality, of an oral agreement, cannot be questioned, if it falls under the ambit of the requirements stated in section 10 of the Indian Contract Act, 1872. (*emphasis added by us).
27. Section 48 of the Registration Act, 1908, which states that all non- testamentary documents require to be registered under this Act, and relating to any property, whether movable or immovable, shall take effect against any order, agreement or declaration relating to such property, unless where the agreement or declaration has been accompanied or followed by delivery of possession.
28. Section 92 of the Indian Evidence Act prescribed that when the terms of any such contract, grant or other disposition of property, or any matter and 245/Srt/2018 Sh. Jivrajbhai Kalubhai Miyani Vs ITO & 1 Anr. required by law to be reduced to the form of a document, have been proved according to the last section, no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest, for the purpose of contradicting, varying, adding to, or subtracting from, its terms. However, its second proviso of section 92 makes an exception to that if there is any separate oral agreement as to any matter where the document is silent and the terms are inconsistent, then the oral agreement may be proved valid. And third proviso to section 92 further makes an exception that if there is any separate oral agreement which constitutes a condition precedent to the attaching of any obligation under any such contract, then also oral agreement may be proved.
29. Hon’ble Karnataka High Court in Smt J Rama Vs CIT (2010) (194 Taxman 37 Karnataka) while considering the issue of TDS also held that the contract may be in writing or may be oral. Thus, in view of the legal position there is no bar under law in making oral agreement/ contract, if it fulfil the condition of section 10 of Indian Contract Act.
30. Now again adverting to the facts of the case in hand, the assessee right from the beginning is claiming that the assessee and his co-owner agreed that the purchaser shall bear the levy of charges for conversion of land use from Navi sharat to Juni sharat and the payment of Rs. 1.61 Crore was paid by the purchaser on behalf of assessee as the assessee and his