Income Tax Appellate Tribunal - Pune
Madhukar Moreshwar Khare,, Nashik vs Assessee on 6 September, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES "A", PUNE
BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER
AND SHRI G.S. PANNU, ACCOUNTANT MEMBER
ITA No.238/PN/2011
(Assessment Year: 2006-07)
Madhukar Moreshwar Khare,
Hansadhwani, Vise Mala,
College Road, Nashik - 422 005.
PAN : ACLPK3305P .... Appellant
Vs.
Asstt. Commissioner of Income Tax,
Circle - 1, Nashik. .... Respondent
Appellant by : Mr. M. K. Kulkarni
Respondent by : Mr. Y. K. Bhaskar
Date of hearing : 06-09-2013
Date of pronouncement : 29-10-2013
ORDER
PER G. S. PANNU, AM
This appeal by the assessee is directed against an order of the Commissioner of Income Tax (Appeals) - II, Nashik dated 29.12.2010 which, in turn, has arisen from an order dated 22.12.2008 passed by the Assessing Officer, under Section 143(3) of the Income-tax Act, 1961 (in short "the Act"), pertaining to the assessment year 2006-07.
2. In this appeal, the assessee has raised the following two Grounds of Appeal :-
"1. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax, (Appeals)-II, Nashik is not justified in confirming addition of Rs.36,73,000/- by the AO in respect of the substituted deemed sale consideration at the rates adopted for the purpose of stamp duty valuation in place of actual sales consideration received by the appellant, thus invoking Sec. 50C of the Act, particularly when an opportunity to cross the DVO is now allowed to appellant in spite of his specific request in this respect.2 ITA No.238/PN/2011
A.Y. 2006-07
2. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income Tax, (Appeals)-II, Nashik is not justified in confirming the AO's action in calculation of deduction claimed U/s.54F of the Act."
3. The dispute in this appeal relates to the income by way of capital gains from sale of land declared by the assessee in the return of income, which is as under :-
"INCOME FROM CAPITAL GAIN INCOME RS.
Long Term Capital Gain on Sale of land
Sale Proceeds of Survey No. 14/1+2, 5,200,000
Less : Transfer Expenses 1,56,000 5,044,000
-------------
Less : Indexed Cost of Acquisition
Purchased in F.Y. 97-98
860000 X 497 1,291,299
331 ---------------
3,752,701
Less : Exempt U/s.54EC
(Invested in Rural Elec. Bond Rs.10,00,000/-
& National Housing Bank Rs. 10,00,000/- 2,000,000 1,752,701
--------------
Less : Exempt U/s.54F
Investment in New House Rs.1,392,251/-
Capital Gain X Cost of New Asset
Net Sale Consideration 1,035,825 716,876"
4. In the assessment proceedings, Assessing Officer noticed that the value adopted by the stamp valuation authority for the purposes of payment of stamp duty in respect of the impugned transfer of land was Rs.88,73,000/-. The assessee had declared the consideration on sale of land as per the sale- deed, which was Rs.52,00,000/-. The assessee adopted the stated amount of sale consideration as the "full value of the consideration" received for the purposes of computing capital gain in terms of Section 48 of the Act. The Assessing Officer, however, noted that since the value adopted by the stamp valuation authority for the purpose of payment of stamp duty was higher than the full value of the consideration received as per the sale-deed, the value adopted by the stamp valuation authority was to be taken as the full value of the consideration for the purposes of computing capital gain under Section 48 of the Act because of the explicit provisions of Section 50C of the Act. On 3 ITA No.238/PN/2011 A.Y. 2006-07 being show-caused, assessee contested the valuation made by the stamp valuation authority for the purposes of payment of stamp duty and accordingly, the Assessing Officer made a reference to the Departmental Valuation Officer (in short 'DVO') as per Section 50C(2) of the Act. The report of the DVO was however not received till the finalization of assessment. The Assessing Officer finalized the assessment by applying Section 50C of the Act and he considered the value adopted by the stamp valuation authority as the full value of consideration received or accruing as a result of transfer for the purposes of computing capital gain under Section 48 of the Act. Accordingly, the Assessing Officer adopted the full value of the consideration of Rs.88,73,000/- as against Rs.52,00,000/- taken by the assessee, and accordingly, the long term capital gain was assessed at Rs.43,89,876/- as against Rs.7,16,876/- declared by the assessee, thereby resulting in an addition of Rs.36,73,000/- to the total income.
5. Aggrieved with the assessment, assessee carried the matter in appeal before the CIT(A). Before the CIT(A), assessee not only contested the application of Section 50C of the Act to substitute the full value of consideration but also assailed the calculation of the amount of deduction under Section 54F of the Act pertaining to investment in a new house property. The CIT(A) upheld the action of the Assessing Officer in applying the provisions of Section 50C of the Act and also calculation of taxable capital gain including the amount of deduction allowable to the assessee under Section 54F of the Act as done by the Assessing Officer. In doing so, the CIT(A) also took into consideration the subsequent report of the DVO wherein the 'Fair Market Value' (in short FMV) of the property was ascertained at Rs.93.88 lacs. The CIT(A) noticed that since the FMV determined by the DVO was higher than the value adopted by the stamp valuation authority, the Assessing Officer made no mistake in considering the value adopted by the stamp valuation authority as the full value of consideration to compute the capital gain, having regard to Section 50C of the Act. Not being satisfied with 4 ITA No.238/PN/2011 A.Y. 2006-07 the order of the CIT(A), assessee is in further appeal before us on the stated Grounds of Appeal.
6. The rival counsels have made their submissions in the above background, which primarily is a reiteration of the respective stands as emerging from the order of the authorities below. Firstly, as per the assessee, Section 50C of the Act is in-applicable in the present case as there was no prima-facie conclusion that assessee had received higher consideration than that stated in the sale-deed. The learned counsel submitted that there was no understatement of consideration in respect of the impugned transaction and therefore Section 50C of the Act has been incorrectly applied. Furthermore, the learned counsel pointed out that during the course of assessment proceedings, assessee had obtained a valuation report from the registered valuer who had valued the said property at Rs.55,63,200/- and therefore, the value adopted by the stamp valuation authority was indeed not the Fair Market Value.
7. On the other hand, the learned Departmental Representative appearing for the Revenue contended that Section 50C of the Act is a deeming provision and wherever the value adopted by the stamp valuation authority was more than the stated consideration, such higher value was deemed to be the full value of consideration in order to compute capital gains. It was contended that there was no requirement for the Assessing Officer to prove any 'understatement' in order to apply the provisions of Section 50C of the Act.
8. We have carefully considered the rival submissions. In our considered opinion, the provisions of Section 50C of the Act are clearly attracted in the present case. The assessee has sold a property, being land, by way of a registered sale-deed for a stated consideration of Rs.52,00,000/-. It is also not disputed that the value adopted by the stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer is Rs.88,73,000/- 5 ITA No.238/PN/2011
A.Y. 2006-07 In such a situation, the provisions of Section 50C of the Act get attracted. Section 50C of the Act is a deeming provision, which prescribes that in case where consideration received or accruing as result of transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by the stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer, then the value so adopted shall for the purposes of Section 48 of the Act be deemed to be the full value of the consideration received or accruing as result of such transfer. The primarily ingredient necessary to invoke Section 50C of the Act is fulfilled in the present case inasmuch as the value adopted by the stamp valuation authority for the purpose of payment of stamp duty in respect of impugned transfer is higher than the consideration received by the assessee for such transfer. In fact, section 50C of the Act does not require the Department to prove that assessee has received anything over and above the stated consideration and accordingly, the plea of the assessee to the said effect is devoid of merit.
9. In-fact, during the assessment proceedings, assessee objected to the value adopted by the stamp valuation authority, as according to him, it was in excess of the fair market value of the property as on the date of transfer. Considering this, in terms of Section 50C(2) of the Act, the Assessing Officer rightly referred the matter for valuation to the DVO. The report of the DVO has since been considered by the CIT(A) whereby the fair market value has been ascertained at Rs.93.88 lacs, which is higher than the value adopted by the stamp valuation authority. Therefore, we find no infirmity in the action of the CIT(A) in upholding the Assessing Officer's action of adopting Rs.88,73,000/- (being the value adopted by the stamp valuation authority) as the full value of the consideration received or accruing or as result of the transfer for the purposes of computing the capital gain under Section 48 of the Act. In view of the aforesaid discussion, the order of the CIT(A) is hereby affirmed. 6 ITA No.238/PN/2011
A.Y. 2006-07
10. Before parting, we may also refer to the decision of the Jaipur Bench of The Tribunal in the case of Prakash Karnawat vs. ITO (2011) 16 taxmann.com 357 (Jp.), which has been relied upon by the assessee to say that where entire land of sale consideration has been invested in specified bonds, then the capital gain would be exempt under Section 54F of the Act and the provisions of Section 50C of the Act would not be applicable. We have carefully perused the said decision and the proposition sought to be canvassed by the assessee before us on the basis of the said decision. Factually speaking, the said decision is not on the same footing as the present case. In the case before the Jaipur Bench of the Tribunal, the entire sale consideration was invested in the purchase of bonds and thus the Jaipur Bench of the Tribunal held that assessee was entitled to deduction under Section 54F of the Act and the provisions of Section 50C of the Act were in- applicable. Without going into the merits of the precedent, it would suffice to observe that in the present case the facts are different in as much as the entire consideration of Rs.52,00,000/-, has not been invested in specified bonds or the new property for the purpose of sections 54EC and 54F respectively, as per details in para (3) of this order. In the case before the Jaipur Bench of the Tribunal, the entire consideration was invested in a new property for the purpose of section 54F of the Act, and thus the decision in the case of Prakash Karnawat (supra) is not applicable in the present case.
11. Therefore, in view of the aforesaid discussion, in so far as the Ground of Appeal No. 1 is concerned the same is hereby dismissed.
12. The second Ground of Appeal is with regard to the computation of deduction allowable under Section 54F of the Act. The assessee invested in a new house of Rs.13,92,251/- and accordingly claimed exemption under Section 54F of the Act of Rs.10,35,825/-, which has since been allowed by the Assessing Officer. On this ground no specific plea has been raised by the assessee except making a reference to the decision of the Bangalore Bench 7 ITA No.238/PN/2011 A.Y. 2006-07 of the Tribunal in the case of Shri Gouli Mahadevappa vs. ITO, (2011) 128 ITD 503 (Bang.). On this aspect, we direct the Assessing Officer to consider the said decision and thereafter re-compute the deduction allowable under Section 54F of the Act if so required, and re-work the amount of taxable long term capital gain accordingly. Needless to say, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard before working out the eligible amount of deduction under Section 54F of the Act as per law. Thus, on this Ground, assessee succeeds for statistical purposes.
13. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open Court on 29 th October, 2013.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (G. S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated : 29 th October, 2013
Sujeet
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT(A)-II, Nashik;
4) The CIT-II, Nashik;
5) The DR, "A" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Sr. Private Secretary
I.T.A.T., Pune