Income Tax Appellate Tribunal - Delhi
Girish Mohan Gupta, New Delhi vs Department Of Income Tax on 16 December, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `C': NEW DELHI
BEFORE SHRI G.D. AGARWAL, VICE PRESIDENT
AND SHRI C.L. SETHI, JUDICIAL MEMBER
I.T. A. No.1544/Del/2011
Assessment Year: 2006-07
Asstt. Commissioner of Income-tax, Shri Girish Mohan Gupta,
Circle 33(1), New Delhi. Vs. 102, Padma Tower,
11, Rajendra Place, New Delhi.
PAN: AAOPG4049D
(Appellant) (Respondent)
Appellant by : Shri Salil Mishra, Sr. DR.
Respondent by : None.
ORDER
PER C.L. SETHI, JUDICIAL MEMBER
The revenue is in appeal against the order dated 16.12.2010 passed by the learned Commissioner of Income-tax (Appeals) in the matter of an assessment made under sec. 147/143(3) of the Income-tax Act, 1961 (the Act) for the Assessment Year 2006-07.
2. The only ground raised by the revenue is as under:-
"On the facts and in the circumstances of the case the Ld. CIT(A) had erred in deleting the addition of rs.11,96,000/- being Suppressed Capital Gains holding that the reference to the DVO has been made u/s 55A and not u/s 50C(2) of the Act."2
3. In this case, the original assessment was completed u/s 143(3) on 30.12.2008 accepting the returned income of Rs.29,36,647/- shown by the assessee in the return of income filed on 19.10.2007. In the course of regular assessment proceedings, the Assessing Officer had referred the case to the Valuation Cell under sec. 55A of the Act to determine the fair market value of the property sold by the assessee during the relevant year under consideration. The valuation report was not received by the AO by the time he made the assessment under sec. 143(3) of the Act on 30.12.2008. Subsequently, the valuation report dated 27.02.2009 was received by the AO on 5.03.2009, where the Valuation Officer determined fair market value of the property sold by the assessee at Rs.28,60,000/- as against sale consideration of Rs.16,64,000/- shown by the assessee. In view of the above difference, the AO reopened the assessment by issuing notice under sec. 148 on 6.03.2009 and thereafter, statutory notices under sec. 143(2) and 142(1) were also issued. The AO then proceeded to make the re-assessment under sec. 147/143(3) of the Act and where the full value of consideration in respect of the property sold by the assessee was taken at Rs.28,60,000/- as against Rs.16,64,000/- shown by the assessee. The AO accordingly determined the income from capital gain at Rs.22,30,011/- against which the assessee preferred an appeal before the learned CIT(A). 3
4. Before the learned CIT(A), it was contended by the assessee that the document of sale relating to the property sold by the assessee was actually not registered with the Registrar and as such, the value assessed for the purpose of stamp duty cannot be substituted by applying the provision of sec.50C of the Act as they stood at the relevant time. It was further contended that the Departmental Valuation Officer (DVO) has determined the fair market value on the basis of value adopted by the State Government for the purpose of payment of stamp duty, which cannot be made a basis to determine the full consideration received by the assessee for the purpose of determining capital gain in the hands of the assessee. In this connection, the assessee relied upon the decision of ITAT, Jodhpur Bench (SMC) in the case of Navneet Kumar Thakkar vs. ITO (2008) 110 ITD 525(Jodh)(SMC).
5. After considering the AO's order and submissions of the assessee, the learned CIT(A) held that the substitution of the sale consideration shown by the assessee at Rs.16,64,000/- by the sum of Rs.28,60,000/- on the basis of the DVO's report, was unjustified and not in accordance with law. Since the relevant document of sale of property was not registered with the stamp duty valuation authority, the learned CIT(A) held that sec. 50C as it then stood, would not apply because as per provisions of sec. 50C, as it then stood, it was necessary that the sale document for transfer of property should have 4 been registered before the competent authority and then the value for the purpose of payment of stamp duty could have been adopted as a full value of consideration of transfer of property. The learned CIT(A) further held that the amendment made in sec. 50C by the Finance (No.2) Act, 2009 w.e.f. 1.04.2009 whereby the word "assessable" was inserted, would be applicable only in cases where the transactions of sale of property is made on or after 1.10.2009. The learned CIT(A), therefore, directed the AO to accept the sale consideration of the property shown by the assessee at Rs.16,64,000/-.
6. Hence, the department is in appeal before us.
7. The learned DR has submitted that the object and purpose of inserting sec. 50C of the Act was to adopt the value adopted or assessed or assessable by any authority of State Government for the purpose of payment of stamp duty in respect of transfer of any land or building or both as the full value of consideration received or accruing as a result of transfer of land or building or both if the consideration shown by the assessee is lower than the value adopted or assessed for the purpose of payment of Stamp Duty. He further stated that the word "or assessable" inserted after the words "adopted or assessed" in sec. 50C of the Act by the Finance (No.2) Act, 2009 with effect from 1.10.2009 should be construed as explanatory and therefore, even if the document of the transfer of property was not registered with the Registrar, 5 the value assessable by any authority of State Government for the purpose of payment of stamp duty in respect of transfer of any land or building or both, is to be adopted as full value of consideration received or accruing as a result of such transfer inasmuch as it was the intention of the legislature that the full value of consideration is to be adopted as equal to the value adopted or assessed or assessable by any authority of State Government for the purpose of payment of stamp duty. He, therefore, submitted that the valuation report of the DVO based upon the valuation determined for the purpose of payment of stamp duty should be adopted as the full value of the consideration received or accruing as a result of the transfer of the property by the assessee.
8. None for the assessee was present.
9. We have considered the submissions of the learned DR and have gone through the orders of the authorities below.
10. In the present case, the AO has adopted the full value of consideration of the property sold by the assessee at Rs.28,60,000/- on the basis of the DVO's report, who in turn determined the fair market value of the property on the basis of valuation adopted for the purpose of payment of stamp duty by the State Government. There is no other material on record to show and establish that the assessee had received any amount over and above the sale 6 consideration of Rs.16,64,000/- shown by the assessee. The sale consideration has been adopted by the AO at Rs.28,60,000/- merely on the basis of DVO's report, which was based upon the provisions contained in sec. 50C of the Act, providing to substitute the value adopted or assessed by any authority of State Government for the purpose of payment of stamp duty as full value of the consideration received or accruing as a result of such transfer of property provided the value declared by the assessee is less than the value so adopted or assessed for the purpose of payment of stamp duty. Sec. 50C was inserted by the Finance Act, 2002 with effect from 1.04.2003 where it was provided 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 for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed for the purpose of payment of stamp duty shall, for the purpose of sec.48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. It is, thus, clear that provisions contained in sec. 50C are deeming provisions providing for substituting the value adopted or assessed for the purpose of payment of stamp duty as a full value of the consideration received or accruing as a result of transfer of a capital asset, being land or building or both, as against 7 the value shown by the assessee, if the value shown by the assessee is less than the value so adopted or assessed for the purpose of payment of stamp duty. It has been further provided in sec. 50C of the Act that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer and he has not disputed the value so adopted or assessed in any appeal etc. before any authority or court. The A.O. may refer the valuation of the relevant asset to a Valuation Officer in accordance with sec. 55A of the Act. If the fair market value determined by the D.V.O. is less than the value adopted or assessed for stamp duty purposes, the A.O. may take such fair market value to be full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the A.O. shall not adopt such fair market value and will take the full value of consideration to be the value adopted or assessed for stamp duty purposes.
11. The impact and scope of sec. 50C of the Act as it was then inserted by the Finance Act, 2002 w.e.f. 1.04.2003 has been considered by the ITAT, Jodhpur Bench (SMC) in the case of Navneet Kumar Thakkar (supra), where the Tribunal has observed and held as under:-
"7. A deeming provision has been enshrined in section 50C by virtue of which a legal fiction has been created for assuming 8 the value adopted or assessed by any authority of State Government as the full value of sale consideration received in respect of such transfer. A legal fiction has been created only in respect of the cases where the consideration received by the assessee is less than the value adopted or assessed by the stamp valuation authority of the State Government for the purpose of payment of stamp duty` in respect of such transfer'. It is a trite law that the legal fiction cannot be extended beyond the purpose for which it is enacted. Section 50C embodies the legal fiction by which the value assessed by the stamp duty authorities is considered as the full value of consideration for the property transferred. It does not go beyond the cases in which the subject transferred property has not become the subject-matter of registration and the question of valuation for stamp duty purposes has not arisen. By no stretch of imagination, the legal fiction confined to restricted operation can be widened to include within its sweep all the cases where `such property' has not been valued by the State authorities for stamp duty purposes. The Hon'ble Supreme Court in the case of CIT v. Amarchand N. Shroff [1963] 48 ITR 59 has held that `legal fiction are only for a definite purpose and they are limited to the purpose for which they are created and should not be extended beyond the legitimate field'. Similar view has been reiterated by the Hon'ble Supreme Court in the case of CIT v. Mother India Refrigeration Industries (P.) Ltd. [1985] 155 ITR 711. Thus, what is relevant for the attractability of section 50C, is that the property which is under transfer from the assessee to another person should have been assessed at a higher value for stamp valuation purpose than that received or accruing to the assessee. The value adopted or assessed by the stamp valuation authorities has to be of the very same property, which is the subject-matter of transfer. The language of this section provides in unambiguous terms that the value adopted or assessed by the stamp valuation authority has to be substituted with the sale consideration of the `such property'. But for section 50C, there is absolutely no warrant for replacing the value adopted by the stamp valuation authority with the actual sale consideration for the purposes of computing capital gain. Thus it is clear that the property in respect of which valuation is made for purposes of stamp duty 9 must be the very same property, which is the subject-matter of transfer for calculating capital gain by invoking the provisions of this section. It is wholly irrelevant to consider the assessed value of another property for stamp duty purposes as full value of consideration by making reference to the Valuation Officer under section 55A. Unless the property transferred has been registered by sale deed and for that purpose the value has been assessed and stamp duty has been paid by the parties, section 50C cannot come into operation. In such a situation, the position existing prior to section 50C would apply and the onus would be upon the revenue to establish that sale consideration declared by the assessee was understated with some clinching evidence. The relevant judgments discussed above viz, K.P. Varghese (supra) and Shivakami Co.(P) Ltd. (supra) would come into operation and govern the determination of full value of consideration.
8. Adverting to the facts of the case, it is noticed that the assessee transferred the property in question by executing an agreement which was not registered with the registering authority. In such a case, section 50C could not have come into operation and the resultant application of section 55A by which the Assessing Officer got the property valued and adopted the report of the Valuation Officer as the sole basis for making the impugned addition was wholly invalid. As the Assessing Officer has not embarked upon making enquiries from the purchaser about the actual sale consideration, and has not brought on record any other material worth the name to show that the sale consideration declared by the assessee was understated, in my considered opinion the addition was wrongly made and sustained. I, therefore, order for the deletion of the addition."
12. From the aforesaid decision and language used in sec. 50C of the Act as inserted by the Finance Act, 2002 w.e.f. 1.4.2003, it is clear that unless the property has been transferred by registered sale deed and for that purpose, the value, for the purpose of stamp duty, has been assessed and 10 stamp duty has been paid by the parties, sec. 50C cannot come into operation, and in such a situation, the position existing prior to sec.50C would apply, and the onus would be upon the revenue to establish that sale consideration declared by the assessee was understated by bringing on record some clinching or adequate evidences.
13. Subsequently the word "or assessable" has been inserted by the Finance (No.2) Act, 2009 with effect from 1.04.2009 in sec. 50C of the Act with the intention to prevent the leakage of revenue inasmuch as the scope of the provisions of sec. 50C as it existed prior to the insertion of the term "assessable" by the Finance (No.2) Act, 2009 in sec. 50C of the Act did not include transactions which are not registered with the stamp duty valuation authority, and executed through agreement to sell or power of attorney. Therefore, with a view to prevent the leakage of revenue, the legislature in its wisdom had amended sec.50C so as to provide that where the consideration received or accruing as a result of transfer of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the full value of consideration received or accruing as a result of such transfer for computing capital gain. Thus, the 11 expression "assessable" was inserted after the term "adopted or assessed" in sec. 50C of the Act, and a new Explanation was also inserted to clarify the meaning of the term "assessable". In the memorandum issued by the Board, it has been clearly stated that this amendment will take effect from 1st October, 2009 and shall accordingly apply in relation to transactions undertaken on or after such date. The Board has issued a Memorandum explaining the provisions in the Finance (No.2) Bill 2009, where the Board has clarified and explained the position with regard to the amendment brought in section 50C of the Act by the Finance (No.2) Bill 2009 as under:-
"Provisions for deemed valuation in certain cases of Transfer The existing provisions of section 50C provide that where the consideration received or accruing as a result of the transfer of a capital asst, being land or building or both, is less than the value adopted or assessed by an authority of a State Government (stamp valuation authority) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration received or accruing as a result of such transfer for computing capital gain. However, the present scope of the provisions does not include transactions which are not registered with stamp duty valuation authority, and executed through agreement to sell or power of attorney.
With a view to preventing the leakage of revenue, it is proposed to amend section 50C so as to provide that where the consideration received or accruing as a result of transfer of a capital asset, being land or building or both is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of stamp duty in respect of such transfer, the value so adopted or assessed or assessable 12 shall be deemed to be the full value of the consideration received or accruing as a result of such transfer for computing capital gain.
Further, it is proposed to insert a new Explanation so as to clarify the meaning of the term "assessable".
This amendment will take effect from 1st October, 2009 and shall accordingly apply in relation to transaction undertaken on or after such date."
14. From the aforesaid clarification issued by the Board, it is thus clear that the then existing provisions of sec. 50C would not include transactions which were not registered with stamp duty valuation authority, and executed through agreement to sell or power of attorney, and with a view to cover up the transactions, which were not registered with stamp duty valuation authority, the expression "assessable" was inserted in sec. 50C of the Act providing that even the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of transfer of a capital asset, being land or building or both, the value so assessable shall also be deemed to be the full value of the consideration received or accruing as a result of such transfer for computing capital gain. In the aforesaid Memorandum, the Board has further clarified that the amendment by the Finance (No.2) Bill 2009 would take effect from 1st October, 2009 and shall accordingly apply in relation to transactions undertaken on or after such date.
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15. In the present case, it is not in dispute that the transaction of transfer of a house sold by the assessee was made in February, 2006 and the transaction of sale of property was not registered with the stamp duty valuation authority. Thus, in the present case, the provisions of sec. 50C as it then stood, are not applicable inasmuch as the transaction in question was not registered with the stamp duty valuation authority, and therefore, the valuation of the property made by the Valuation Officer by adopting the circle rate fixed for the purpose of payment of stamp duty would not be relevant for the purpose of determining actual consideration received or accruing as a result of transfer of the house sold by the assessee during the year under consideration. It is also not in dispute that the AO has not embarked upon making any other enquiries about the actual sale consideration, and has merely made the assessment on the basis of the DVO's report, which in turn, based upon the valuation fixed for the purpose of payment of stamp duty as circle rate. We, therefore, find no infirmity in the order of the learned CIT(A) in holding that in view of the provisions contained in sec. 50C as it then stood and in view of the fact that the provisions of sec. 50C as amended by the Finance (No.2) Act, 2009 would apply from 1st October, 2009 in relation to transactions undertaken on or after such date, the DVO's report, which has taken the circle rate fixed for 14 the purpose of payment of stamp duty as the basis of determining the fair market value as on 16.02.2006, cannot be used as an evidence for making the addition by way of enhancing the value of the consideration received or accruing to the assessee as a result of such transfer as against the actual consideration received by the assessee. Moreover, sec. 55A is applicable to ascertain the fair market value of the capital asset and not for the purpose of determining value of the consideration received or accruing as a result of the transfer of the capital asset. In this connection, a reliance may be placed upon a decision of the Hon'ble Delhi High Court in the case of CIT vs. Smt. Nilofer I. Singh (2009) 309 ITR 233 (Delhi), where it has been held that the reference to a Valuation Officer under sec. 55A is for the object of ascertaining the fair market value of a capital asset. It is only when the Assessing Officer is required to ascertain the fair market value of a capital asset in such cases as covered by section 45(4) or section 45(1A) that the provisions of section 55A can be invoked. It was further held therein that when a sale of property takes place, the capital gains arising out of such a transfer has to be computed by taking into account the full value of the consideration received or accruing as a result of such transfer. From the full value of the consideration, the amount of expenditure incurred wholly and exclusively in connection with such transfer as also the cost of acquisition of 15 the asset and the cost of any improvement thereto have to be deducted. The expression "full value of consideration" cannot be construed as having reference to the market value of the asset transferred but only means the full value of consideration received by the transferor in exchange of the capital asset transferred by him. In the case of a sale the full value of consideration is the full sale price actually paid. "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 does it have any necessary reference to the market value of the capital asset which is the subject-matter of the transfer. The full value of consideration does not have any reference to the market value but only to the consideration referred to in the sale deeds as the sale price of the assets which have been transferred. For the reasons given above and in the light of the discussion we have made above, the order of the learned CIT(A) is thus upheld.
16. In the result, the appeal of the revenue is dismissed.
17. This decision is pronounced in the Open Court on 25th November, 2011.
Sd/- Sd/-
(G.D. AGARWAL) (C.L. SETHI)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 25th November , 2011
16
ITA No,1544/Del/2011
Copy of the order forwarded to:
1. Appellant.
2. Respondent.
3. CIT
4. CIT(A)
5. DR
By Order
*mg Deputy Registrar, ITAT.