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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-11, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 28.11.2023 passed for Assessment Year 2012-13.
The Assessee has taken the following grounds of appeal:-
“1. The Ld. CIT(A) has erred in law and on facts in partly allowing the appeal. He ought to have allowed the appeal fully in accordance with the grounds of appeal raised by the appellant company before him.
1. Challenging the validity of notice issued u/s. 148 of the Act for reopening the assessment u/s. 147 of the Act as well as passing the order u/s. 144 r.w.s.147 of the Act.
1. The Ld. CIT (A) has erred in law and on facts in confirming the action of the Ld. AO in issuing the notice u/s. 148 of the Act for reopening the assessment u/s. 147 of the Act as well as passing the order u/s. 144 r.w.s.147 of the Act.
Maunang Farms Pvt. Ltd. vs. ITO (Now ACIT) Asst.Year –2012-13 - 2–
2. The Ld. CIT(A) has erred in law and on facts in not considering the fact that reopening of the case of the appellant company under section 147 of the Act by the Ld.AO merely on the basis of borrowed satisfaction without application of mind in absence of any tangible material and /or independent clinching evidence as well as cogent material evidence on record for reopening of the case of the appellant company and therefore, in view of various judicial pronouncements of the Hon'ble Jurisdictional Gujarat High Court and various other High Courts, the reopening of the case of the appellant company is merely on borrowed satisfaction.
3. The Ld. CIT(A) has not properly considered various judicial pronouncements relied upon by the appellant company. II. Addition on account of Long Term Capital Gain Rs. 85,860/-
1. 1. The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs.85,860/- out of total addition of Rs.3,43,960/- on account of Long Term Capital Gain u/s.50C as made by the Ld. AO.
2. The Ld.CIT(A) has erred in law and on facts in not properly considering the submission made by the appellant company wherein, it was contended that the property sold by the appellant company was litigated property and there were various litigations in the said property and it was not possible to sale the property at market rate and the necessary evidence in respect of the litigation are mentioned in the sale deed and hence, provisions of section 50C does not apply in the case of appellant company.
3. The appellant humbly submits that if the difference between the valuation adopted by the Stamp Valuation Authority or that declared by the appellant is less than 10 per cent, the AO should adopt the value as declared by the appellant in view of various judicial pronouncements of various Courts. In the case of appellant, the sale value declared in the return of income by the appellant company of Land at Rundh is Rs. 9,49,89,978/- and the value as determined by the District Valuation Officer (DVO) is Rs. 10,34,91,000/- which is approximately 8.95% higher but less than 10% and hence the value adopted by the appellant company is to be accepted by the Ld.AO.
5. The appellant company humbly submits that similar addition restricted by the Ld. CIT(A) to the extent of Rs.86,451/- on account of Section 50C the Act in the case of one of the co-owner of the land Bhojison Infrastructure Pvt. Ltd and the Hon'ble ITAT "SMC" Bench vide appellate order dated 01.03.2023 in for A.Y. 2012-13 allowed the appeal. Hence, the issue is duly covered by the order of the Hon'ble ITAT "SMC" Bench dated 01.03.2023.
4. The Ld. CIT(A) has erred in law and on facts in not properly considering various judicial pronouncements relied upon by the appellant company. The appellant company reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing.”
Maunang Farms Pvt. Ltd. vs. ITO (Now ACIT) Asst.Year –2012-13 - 3–
The brief facts of the case are that the assessment of the assessee was reopened on the basis of information received by the Assessing Officer that the assessee had sold certain land (alongwith other co-owners of the said property) and it was found that the assessee company had shown the sale consideration of the land as per the registered sale deed, instead of market value of the said property as per stamp valuation. Accordingly, the Assessing Officer invoked the provisions of Section 50C of the Act and made addition of Rs. 3,43,960/- to the income of the assessee.
In appeal, the Ld. CIT(A) while passing the order in the case of the assessee relied upon the order passed in the case of Bhojison Infrastructure Pvt. Ltd. vide order dated 09.09.2022 and confirmed the addition in the hands of the assessee with the following observations:-
5. The grounds of appeal no. 8 to 10 are interconnected with each other, are against the addition of Rs.3,43,960/- on account of 50C of the Act. 5.1 Similarly for these grounds also, the undersigned has passed the appellate order in the case of its co-owner M/s. Bhojison infrastructure Pvt. Ltd. for the same A.Y.2012-13 on the same issue i.e. against the reopening of the assessment and passing of assessment order vide appeal order no. CIT(A), Ahmedabad- 1/10742/2019-20 dated 09.09.2022, wherein after considering the reply of the and merit of the case, the action of the AO in making addition on account of section 50C is upheld and hence confirmed. The observation of the undersigned in the said appellate order in the case of M/s. Bhojison infrastructure Pvt. Ltd. is reproduced as under:-
6.1 I have carefully considered the facts of the case, the submission filed by the appellant and re-assessment order passed by the AO. On perusal of the reassessment order, it is seen that the AO had made addition u/s.50C of the Act amounting to Rs.3,43,830/- [Value as per Jantri rate of Rs. 13,09,830/- less value as declared by the appellant of Rs. 9,68.000/-] while passed order u/s. 143(3) r.w.s. 147 of the Act dated 23.12.2019. 6.2 On perusal of the appellant's submission, it is seen that the appellant has taken main contentions, which are as under:-
Maunang Farms Pvt. Ltd. vs. ITO (Now ACIT) Asst.Year –2012-13 - 4– (i) The appellant company and 32 other persons had sold immovable property for sale consideration amounting to Rs.9,49,89,978/- on 09.08.2011. The appellant had received share of Rs.9,66,000/- as sale consideration. During the course of re-assessment proceedings, the appellant had objected the proposal of the AO to adopt Stamp Valuation Authority and proposed to AO to refer the matter to DVO for determination of cost of immovable property sold by the appellant company. (ii) The AO had referred the matter to DVO but before receipt of valuation report, the AO had passed the re-assessment order on 23.12.2019. (iii) Thereafter, the appellant had received DVO's report dated 27.12.2019 determining the valuation of property amounting to Rs. 10,34,91,000/- as against sale consideration received by the appellant company & others of Rs.9,49,89,978/-. The appellant had submitted DVO's report dated 27.12.2019. (iv) The appellant company had made an application u/s. 154 of the Act vide letter dated 09.01.2020 before the AO, however, the appellant company had not received any rectification order till date. (v) In the rectification application u/s.154 of the Act dated 09.01.2020, the appellant had contended that according to various judicial pronouncements by various courts if the difference between valuation adopted by the Stamp Valuation Authority or and that declared by appellant is less than 10%, the AO should adopt value as declared by the assessee. In the case of appellant, the value as declared by the appellant company & others is Rs.9,49,89,978/- and the value as determined by the DVO is Rs. 10,34,91,000/-, which is approximately 8.95% higher but less than 10%. Hence, the appellant company has requested that value adopted by the appellant company is to be accepted. The appellant had relied on the judicial pronouncements also. 6.3 I find that the appellant has taken a plea that the Jantri (Circle rate) of the agricultural property under consideration was Rs.800 per sq. meter, however, they had sold the alleged property under consideration at Rs.5,900/- per sq. meter, which is much higher than the Circle Rate. Therefore, provision of section 50C is not applicable in the case of appellant. In this regard, I find that the claim of the appellant is not correct because the Stamp Valuation Authority had determined the full value of consideration of the alleged property as per the Jantry rate, which was not objected by the appellant. Further, the contention fot he appellant regarding Circle rate of Rs.800 Sq. meter was for agricultural land. However, as per the DVO report and Stamp Valuation Authority, the land appears to be urban land because of its location & lack of agricultural activity. Hence, the claim of the appellant is not correct Further, it is important to mention here that the District Valuation Officer in column 12 of the valuation report, had reported that the appellant had not submitted Maunang Farms Pvt. Ltd. vs. ITO (Now ACIT) Asst.Year –2012-13 - 5– any objection to proposed estimation of the alleged land till the issuance of the report. It is also noticed that after considering the sale instances and taking into account of all the factors which affect the land rates such as size, shape, situation, location, utility, future potentiality, time lag, etc. of the sale instance properties with respect to PUC and make it comparable by adjusting all advantages and disadvantages of the sale instances, the DVO had determined the land rate at Rs.6,428/- per square meter as on date 09.08.2011, which was considered fair and reasonable. I further find that the DVO had considered the plea of the appellant regarding the alleged property was litigated with several title disputes during the course of valuation proceedings. Therefore, the value of alleged property determined by the DVO is justified, logical and as per law. 6.4 In this case, it is necessary to discuss the section 50C of the I. T. Act, which is reproduced as under:- [Special provision for full value of consideration in certain cases. 19 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 20[or 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 20[or 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: ……………………………... ……………………………… ………………………………. (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed 28[or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed 28[or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.] 6.4.1 On plain reading of section 50C of the Act, it is seen that 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 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 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.
Maunang Farms Pvt. Ltd. vs. ITO (Now ACIT) Asst.Year –2012-13 - 6– In this case, I find that the appellant and other persons had sold an immovable property bearing survey no. 39 (old survey no. 8) of Rundh Village of taluka city, Surat for sale consideration of Rs.9,49,89,978/- on 09.08.2011. However, as per the Jantri rate adopted by the Stamp Valuation Authority (fair market value as decided by the authority), total consideration of the said land was Rs.12,88,00,000/-. Since, the share of the appellant was 1.01% of the total sale consideration and accordingly, the appellant had shown Rs.9,66,000/- as safe consideration. However, as per the Jantri rate, full value of consideration in the hand of the appellant should have been Rs.13,09,830/-. Since, the sale consideration as per Jantri rate (assessed by the Stamp Authority) was more than the sale consideration disclosed by the appellant, therefore, the AO had made addition of Rs.3,43,830/- (Rs.13,09,830 - Rs.9,66,000) on account of section 50C of the I.T. Act. 6.4.2 I further find that the AO had referred the matter to DVO at the request/instance of the appellant during the course of re-assessment proceedings. But before receipt of valuation report, the AO had passed the reassessment order on 23.12.2019. Thereafter, the appellant had received DVO's report dated 27.12.2019 determining the valuation of property amounting to Rs.10,34,91,000/- as against sale consideration received by the appellant company & others of Rs.9,49,89,978/-. The appellant had submitted DVO's report dated 27.12.2019. In the said report, the DVO had determined the value of the alleged land at Rs. 10,34,91,000/-. 6.4.3 It is important to note that the DVO who is a subject expert in valuation of immovable properties had valued the properties as per the standard operative procedures. It is also important to reproduce the section 16(A)(6) of the W.T. Act, 1957, which is as under:-
"On receipt of the order under sub-section (3) or sub-section (5) from the Valuation Officer, the 1 [Assessing Officer] shall, so far as the valuation of the asset in question is concerned, proceed to complete the assessment in conformity with the estimate of the Valuation Officer.]" It is seen from the above provision that the AO does not have any discretion but he/she “shall” proceed to complete the assessment in "conformity" with the estimate of the Valuation Officer. In this regard, reliance is placed on the decision of the Hon'ble Pune Tribunal in the case of Anil Murlidhar Deshmukrt vs. Income Tax Officer, Ward-3(2), Nashik [2019] 101 taxmann.com 93 (Pune - Trib.) [13-12-2018], had passed the judgement in favour of Revenue. The head note of the judgement is as under:- "Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value of consideration - Assessment year 2013-14 - Assesses sold a property for consideration of Rs. 42 lakhs - Assessing Officer noted that stamp value of said property was Maunang Farms Pvt. Ltd. vs. ITO (Now ACIT) Asst.Year –2012-13 - 7– Rs. 56.19 lakhs and, accordingly, treated stamp duty value as full value of consideration under section 50C - However assessee objected to stamp valuation and requested Assessing Officer to make a reference to District Valuation Officer (DVO) - DVO determined fair market value (FMV) of property at Rs. 46.96 lakhs - Assessing Officer computed capital gain by adopting full value of consideration on basis of DVO's report instead of actual sale consideration of Rs. 42 lakhs shown by assessee which resulted into addition of Rs. 4.96 lakhs - Whether when Assessing Officer had obtained DVO's report, same was binding on him - Held, yes- Whether, therefore, valuation done by DVO was correctly adopted as full value of safe consideration - Held, yes [Paras 5 and 17] [In favour of revenue] IT: Where assessee had sold a property and Assessing Officer after rejecting valuation of property submitted by assessee referred matter to DVO to obtain fair market value, valuation done by DVO was binding on Assessing Officer." 6.4.4 Reliance is also made on the decision of the Hon'ble Mumbai Tribunal in the case of Seksaria Industries (P.) Ltd. vs. Income-tax Officer, Ward- 2(3)(2), Mumbai [2016] 69 taxmann.com 342 (Mumbai) [31-10- 2014], had passed the judgement in favour of Revenue. The head note of the judgement is as under- "Section 50C of the Income-tax Act, 1961 - Capital gain - Special Provision for computing full value consideration in certain cases - Assessment year 2009-10 -For application of section 50C, there is no requirement according to which department has to submit some proof that something more is paid over and above agreement price [In favour of revenue] Section 50C of the Income-tax Act, 1961 - Capital gain - Special Provision for computing full value consideration in certain cases - Assessment year 2009-10 -Where value adopted and assessed by Stamp Valuation Authority under subsection (1) of section 50C was disputed by assessee in appeal, revision and even before High Court, assessee could not avail benefit under _section 50C(2) [in favour of revenue]"
6.4.5 Reliance is also made on the decision of the Hon'ble Vishakhapatnam Tribunal in the case of Sri Pattabhiram vs. Income-tax Officer, Ward-2, Kakinada [2014] 45 taxmann.com 141 (Visakhapatnam – Trib.)[13-12-2013], had passed the judgement in favour of Revenue. The head note of the judgement is as under:- "Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases (Valuation made by DVO) - Assessment year 2006-07 - Whether where fair market value determined by DVO on a reference made by Assessing Maunang Farms Pvt. Ltd. vs. ITO (Now ACIT) Asst.Year –2012-13 - 8– Officer in terms of sub-section (2) of section 50C is less than value adopted or assessed by Stamp Valuation Authority then such fair market value determined by DVO has to be treated as full value of consideration received by assessee for purpose of computing capital gain - Held, yes [Para 10] [In favour of revenue] IT: Where fair market value determined by DVO on a reference made by Assessing Officer in terms of sub-section (2) of section 50C is less than value adopted or assessed by_ Stamp Valuation Authority then such fair market value_ determined by DVO has to be treated as full value of consideration received by assessee for purpose of computing capital gain.
Circulars and Notifications: Circular No. 8/2002, dated 27-8- 2002" 6.5 In view of the above discussions and factual matrix of the case, valuation report of DVO and above referred judicial pronouncement of the Hon'ble Tribunals, the sale consideration determined by the DVO vide report dated 27,12.2019 is full and final for the AO while computing the capital gain in the case of appellant. Since, as per the DVO's report dated 27.12.2019, Full Value of Consideration in the case of appellant comes to Rs.10,52,451/- (1.01% of Rs. 10,34,91,000/-). Thus, the difference in sale consideration as per DVO's report and sale consideration shown by the appellant comes to Rs. 86,4517-(Rs. 10,52,451 - Rs.9,66,000/-). Therefore, additions of Rs.86,451/- on account of section 50C is justified out of total addition of Rs,3,43,830/- and therefore, stand confirmed. Further, the AO is directed to delete the remaining addition of Rs.2,57,379/- (Rs.3,43.830 - Rs.86.451). Thus, ground no. 5, 6, 7, 8 & 9 are partly allowed." 5.2 Since, the addition on account of section 50C was upheld by the undersigned by giving detailed observation (reproduced supra), therefore, keeping in view of the decision taken in the case of M/s. Bhojison infrastructure Pvt. Ltd. (a co-owner of the same land) vide appeal no. CIT(A), Ahmedabad-1/10742/2019-20 dated 09.09.2022, the addition on account of section 50C in the case of the appellant is also upheld and hence confirmed. Further, the AO is also directed to consider the confirmed addition of Rs.85,860/- [1.01% of (Rs. 10,34,91,000 - Rs.9,49,89,978). Remaining addition of Rs.2,58,100/- is deleted. Thus, the grounds of appeal no. 8 to 10 are also partly allowed.
6. The ground of appeal no. 11 is general in nature, hence dismissed.”
Maunang Farms Pvt. Ltd. vs. ITO (Now ACIT) Asst.Year –2012-13 - 9–
5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) confirming the addition made by Ld. Assessing Officer by invoking the provisions of Section 50C of the Act. Before us at the outset, the Counsel for the assessee submitted that the case of the assessee is covered by the order of ITAT in the case of Bhojison Infrastructure Pvt. Ltd. in Appeal No. 395/Ahd/2022 (order dated 01.03.2023), which allowed the appeal in favour of Bhojison Infrastructure Pvt. Ltd. The Counsel for the assessee submitted that Bhojison Infrastructure Pvt. Ltd. was one of the co-owners of the aforesaid piece of land and the Ld. CIT(A) had relied upon the order of M/s. Bhojison Infrastructure Pvt. Ltd. for A.Y. 2012-13, while confirming the addition in the hands of the assessee. However, since the ITAT vide order dated 01.03.2023 in in the case of Bhojison Infrastructure Pvt. Ltd. has allowed the appeal of the assessee, accordingly, the addition in the hands of the assessee is also liable to be deleted. It would be useful to reproduce the relevant extracts of the case of Bhojison Infrastructure Pvt. Ltd. for ready reference:-
“3. The assessee filed its return of income on 29.09.2012 declaring total income at Rs.9,34,990/-. The same was processed under Section 143(1) of the Income Tax Act, 1961. Subsequently, information was received by the Assessing Officer that the assessee and other persons sold an immovable property at Surat for sale consideration of Rs.9,49,89,978/- on 09.08.2011. The Assessing Officer further observed that the assessee has shown its share of sale consideration of Rs.9,66,000/- whereas as per provisions of Section 50C of the Act the assessee was required to consider the Market Value (Jantri Value) of Rs.13,09,830/-. From the details filed in Income Tax Return, the Assessing Officer confirmed that the assessee has not considered the Jantri Value in computation of capital gain. The assessment was reopened under Section 147 of the Act. The Assessing Officer observed that as per Rule of Gujarat State regarding levying of stamp duty on transfer of immovable property against sale, 4.9% of Jantri Value (Fair Market Value as decided for stamp duty) of the property is levied. The property was sold for less sale consideration as compared to market value as on doing reverse working for deriving Jantri Value of the property under consideration. After taking cognisance of the assessee’s reply, the Assessing Officer made addition of Rs.3,43,840/- under Section 50C of the Act.
Maunang Farms Pvt. Ltd. vs. ITO (Now ACIT) Asst.Year –2012-13 - 10–
4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The Ld. AR submitted that as regards to ground no.1, challenging the validity of notice issued under Section 148 of the Act, the CIT(A) erred in not considering the fact that reopening of the case of the assessee under Section 147 of the Act merely on the basis of borrowed satisfaction without application of mind in absence of any tangible material and/or independent clinching evidence is not justified. As regards ground no.2, the Ld. AR submitted that addition on account of Long Term Capital Gain (LTCG) to the extent of Rs.86,451/- out of total addition of Rs.3,43,830/- on account of LTCG is not proper. The Ld. AR submitted that the property sold by the assessee company was litigated property and there were various litigations in the said property it was not possible to sell the property at market rate and the necessary evidence in respect of litigation are mentioned in the sale deed and hence, provisions of Section 50C of the Act does not apply in assessee’s case. Ld. AR further submitted that if the difference between valuation adopted by the Stamp Valuation Authority or that declared by the assessee is less than 10%, the Assessing Officer should adopt the value as declared by the assessee as per various decisions pronounced by various Courts. The Ld. AR further submitted that sale value declared by the assessee in the return of income in respect of land at Rundh is Rs.9,49,89,978/- and the value as determined by the District Valuation Officer (DVO) is Rs.10,34,91,000/- which is approximately 8.95% higher but less than 10%. Hence, the value adopted by the assessee should have been accepted by the Assessing Officer. The Ld. AR relied upon the decision of Tribunal in the case of Jayshriben Bharatbhai Patel vs. ITO (ITA No.449/Ahd/2020, order dated 02.12.2022). 6. Ld. DR submitted that the CIT(A) has restricted the addition to the extent of Rs.86,451/- on account of Section 50C of the Act. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 7. Heard both the parties and perused all the relevant material available on record. As regards to ground no.1, the re-opening of the assessment in assessee’s case was justifiable as the independent satisfaction was given. Besides that, the assessee in the details filed in Income Tax Return did not consider the Jantri Value in computation of gain which is the disputed fact by the Revenue. Therefore, ground no.1 is dismissed. 8. As regards to ground no.2, from the perusal of the records it can be seen that in the return of income in respect of land and the value as determined by the DVO is approximately 8.95% higher but less than 10%. This was never disputed or controverted by the Revenue at any point of time. As per third proviso to Section 50C brought on statute w.e.f. 01.04.2019, the Tribunal on various occasions has applied the said proviso retrospectively as the difference is less than 10% in the actual value taken than the DVO’s value. Therefore, ground no.2 is allowed. 9. In the result, appeal filed by the assessee is partly allowed.”
Maunang Farms Pvt. Ltd. vs. ITO (Now ACIT) Asst.Year –2012-13 - 11–
We observe that the case of the assessee is directly covered by the aforesaid decision referred before us. Further, the Ld. D.R. also submitted / admitted before us that the case of the assessee is covered by the decision of Hon’ble ITAT referred to above.
Accordingly, in light of the above observation the appeal of the assessee is allowed.