Income Tax Appellate Tribunal - Ahmedabad
Income Tax Officer, Ward-9(4), , Surat vs Sureshchandra Parekh ,, Surat on 9 February, 2017
I T A N os . 8 4 1 & 1 03 0/ A h d/ 2 0 1 5
Ass ess me nt Yea r: 2010 -11
Page 1 of 6
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD 'B' BENCH, AHMEDABAD
[Coram: Pramod Kumar AM and S S Godara JM]
ITA No.841/Ahd/2015
Assessment Year: 2010-11
Sureshchandra Parekh, ................Appellant
B/44, Shradha Society,
Sumul Dairy Road,
Surat - 395 001.
[PAN: ADLPP 8524 C]
Vs.
Income Tax Officer - 3(3)(4),
Surat. ...............Respondent
ITA No.1030/Ahd/2015
Assessment Year: 2010-11
Income Tax Officer,
Ward - 3(2)(5), Surat. ...............Appellant
Vs.
Sureshchandra Shantilal Parekh, ................Respondent
B/44, Shradha Society,
Sumul Dairy Road,
Surat - 395 001.
[PAN: ADLPP 8524 C]
Appearances by
Mehul Shah for the assessee
James Kurian for the Revenue
Hearing concluded on: 07/12/2016
Order pronounced on : 09/02/2017
O R D E R
Per Pramod Kumar, AM:
1. These cross appeals are directed against the order dated 04.02.2015 passed by the learned CIT(A), in the matter of assessment under section 143(3) r.w.s. 147 of the Income Tax Act, 1961, for the assessment year 2010-11.
I T A N os . 8 4 1 & 1 03 0/ A h d/ 2 0 1 5 Ass ess me nt Yea r: 2010 -11 Page 2 of 6
2. Grievances raised by the parties are as follows:-
a) Grievances of the assessee:-
"1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in partly confirming the addition of Rs.11,91,000/- under the deeming provisions of Section 50C of the I.T. Act, 1961 out of the total addition of Rs.86,70,607/- made by the Assessing Officer when the provisions of section 50C do not apply in case of transfer of leasehold rights in land or building.
2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in giving direction to adopt indexed cost of acquisition between Rs.14,91,000/- and Rs.51,59,487/- when the issue was not part of grounds of appeal raised by the assessee.
3. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-tax (Appeals) has erred in giving the above direction without confronting the issue to the assessee thereby exceeding his jurisdiction where the IT Act, 1961 does not provide the power to CIT(A) to set aside the issue.
4. It is therefore prayed that above addition made by Assessing Officer and confirmed by CIT(A) may please be deleted."
b) Grievances of the Revenue :-
"i) On the facts and circumstance of the case and in law, the Ld. CIT(A)
has erred in law in accepting the report of the DVO and reducing the addition of long term capital gain from Rs.86,70,607/- to Rs.14,91,000/-, when such claim of reference to the DVO was never made by the assessee before the assessing officer. Thus the decision of CIT(A) is in contravention to the provision u/s 50C(2) of the IT Act.( Reliance is placed on the case laws reported in (2011) 15 taxman.com 103 (Ahd.) ITAT in the case of Sanjaybhai Z. Patel vs. ACIT, Cir-2, 43 SOT 452 (Mumbai) in the case of Shri Sharad Dinesh Photographer v/s ITO, Ward 25(3)(4),Mumbai and 221 CTR 196 (Madras) (HC).
(ii) On the facts and circumstance of the case and in law, the Ld. CIT(A) has erred in law in setting-a-side the matter regarding cost of acquisition to the AO, which requires subjective appraisal of evidence to be placed by the assessee, when as per finance Act. 2001 the power of the CIT(A) relating to set-aside has been omitted.
iii) Therefore, It is prayed that the order of the Ld. CIT(A) be set-aside and that of the Assessing Officer be restored."
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3. To adjudicate on this appeal, only a few material facts are required to be taken note of. During the relevant previous year the assessee sold a lease hold property for a sale consideration of Rs.49,70,000/- but according to the Assessing Officer, the value of this property for the purpose of stamp duty valuation by the sub-registrar was Rs.1,36,40,607/-. It was in this backdrop the Assessing Officer required the assessee to show cause as to why an addition of Rs.86,70,607/-, being difference between the stamp duty value and the sale consideration not be brought to tax in terms of section 50C of the Act. The assessee inter alia submitted that as held by the Tribunal in the case of DCIT vs. Tejinder Singh [16 ITR (Tribunal) 45], the lease hold property held by the assessee does not attract provisions of section 50C of the Act. There were of course other arguments advanced in support of the assessee's stand but for the reason we will set out in a short while, it is not necessary to go into this aspect. The Assessing Officer rejected this explanation and proceeded to treat Rs.1,36,40,607/- as sale consideration for the purpose of computing capital gain. Aggrieved, assessee carried the matter in appeal before the learned CIT(A) but without success.
4. Learned CIT(A) not only confirmed action of the Assessing Officer but also directed the Assessing Officer to make an addition in respect of cost of acquisition as there was variation in the figures of cost of acquisition as per record vis-a-vis the lease deed. The learned CIT(A) gave partial relief in quantum of addition but that is not material in the present context. None of the parties satisfied by the stand so taken by the learned CIT(A). While the assessee is aggrieved of the action of the Assessing Officer being confirmed and the enhancement being made, Assessing Officer is aggrieved of the matter being remitted to his file, even though under section 250 the CIT(A) does not have any power to do so. Both the parties are in appeal before us.
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5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
6. So far as the question of enhancement by the learned CIT(A) is concerned, we find that it is undisputed position that the assessee was not put to notice with respect to the enhancement. A co-ordinate bench of this Tribunal in the case of M/s. Monga Metal Pvt. Ltd. vs. ACIT - ITA No.326/LKW/2013 - order dated 07.08.2013 - has held that such an action of the Assessing Officer i.e. of proposing enhancement without putting the assessee to specifically notice in this regard is unsustainable in law. While doing so, the co-ordinate bench, inter alia, observe d as follows :-
"4. Having heard the rival submissions and from a careful perusal of record, we find that undisputedly the income assessed by the Assessing Officer was further enhanced by Rs.2,05,987 by the ld. CIT(A) by making disallowance of revenue expenditures claimed by the assessee on the ground that no business activity was undertaken by the assessee during the impugned assessment year. The ld. CIT(A) has not mentioned anywhere in his order with regard to the notice of enhancement ever served upon the assessee. Provisions of section 251(2) of the Act categorically says that the Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Therefore, it is incumbent upon the ld. CIT(A) for affording a reasonable opportunity of showing cause against enhancement to the assessee. If he fails to afford an opportunity to the assessee, enhancement made by him is not sustainable in the eyes of law. In the light of these facts, enhancement made by the ld. CIT(A) is not sustainable as it was done without issuing a show cause against enhancement to the assessee. We, therefore, find no merit in the additions. Accordingly, we delete the same.
7. As regards the question as to whether the provisions of section 50C can be invoked in respect of the lease hold property, this issue is no longer res integra. There are several decisions of this Tribunal including the case of DCIT vs. Tejinder Singh (supra), Atul G. Puranik vs. ITO [132 ITD 499 (Mum Trib)] in support of the proposition. Hon'ble Delhi High Court in the case of CIT vs. Shri Kishan Das - ITA No.64 of 2014, judgement dated 10.02.2014, has approved this school of thought and inter alia observed as follows :-
I T A N os . 8 4 1 & 1 03 0/ A h d/ 2 0 1 5 Ass ess me nt Yea r: 2010 -11 Page 5 of 6 "3. It is contended on behalf of the Revenue that the Tribunal fell into error because Section 50C does not make any distinction between properties of one kind and the other and that so long as the state authorities prescribed a different rate than the one involved in the transaction, such prescribed rate would be deemed the rate for the application for Section 50C. Contending that the distinction made in the present case between the fresh leasehold rights and the consideration payable and the residual rights was unjustified, it was argued that such difference is artificial and unsound. Learned counsel relied upon the decision of the Tribunal in Arif Akhatar Hussain v. ITO ITA/543/Mum/2010 to submit that even leasehold rights such as the present one, which comprehended entitlements in respect of land, building and other interest would fall within Section 50C and the presumption to be drawn as a consequence. The decision in Shavo Norgren (P) Ltd. v. DCIT, Circle 3(3) ITA 8101/Mum//2011 by the Mumbai Bench was also relied upon to say that the development rights would be apprehended within Section 50C. The Tribunal in this case relied upon the decisions of the Lucknow Bench in Carlton Hotel (P) Ltd. v. ACIT 2010 (35) SOT 26 (Luck); Mumbai Bench in Atul. G. Puranik v. ITO, 12(1)(1) and that of the Calcutta Bench in Dy. CIT v. Tejender Singh 19 Taxman.Com 4 In all these, the various Benches of the Tribunal appear to have strictly construed the letter of Section 50C to say that the conveyance has to be complete in respect of all entitlements to the property. In the present case, the Tribunal has upheld the valuation of the assessee. We notice that apart from the three Benches, decisions of which have been relied on, the Tribunal also considered the distinction made between Section 50C and 54D(1) which specifically provides that capital gains from, transfer by way of compulsory acquisition under any law of capital asset being land, building or any right in the land or building...................... ?. Section 50C, on the other hand, talks of, transfer by assessee of a capital asset being land or building or both. The contrast in language, given that Section 50C is a specific provision, which seeks to enact a presumption is significant. The valuation of the concerned State agency or the government that the cost of the land is, in the circumstances, higher, is determinative. We notice that in the present case, there has been no such valuation. That apart, the Tribunal adopted an approach which, with respect, appears to be correct, in that it took note of the proportionate transfer of leasehold rights for 54 years. If the Revenue's contentions were to be conceded, then in the given facts of case, if the leasehold rights for residual period of 3 or 4 years were to be valued at par with the cost of acquisition of the full tenure of the lease of 90 years, absurd and anomalous results would ensue."
8. In view of the above discussion, both the grievances of the assessee indeed deserve to be upheld. Neither the learned CIT(A) was justified in confirming the action of the Assessing Officer in treating the stamp duty valuation as consideration for transfer for the purpose of computing capital gain, nor was he justified in proposing enhancement of income regarding reduction in the cost of acquisition without putting I T A N os . 8 4 1 & 1 03 0/ A h d/ 2 0 1 5 Ass ess me nt Yea r: 2010 -11 Page 6 of 6 assessee to notice in this respect. We, therefore, uphold the plea of the assessee. In this view of the matter and the addition having been deleted on merit, grievance of the Assessing Officer is rendered academic and does not call for any adjudication. The direction with which the matter was set aside to the file of the Assessing Officer anyway stands deleted.
9. The only other point raised in Revenue's appeal is with respect to grant of partial relief on the basis of deeming provision of section 50C of the Act but the entire addition having been deleted, the partial relief is rendered academic. The appeal filed by the Revenue is thus dismissed as infructuous.
10. In the result, while appeal of the assessee is allowed, appeal of the Revenue is dismissed. Pronounced in the open Court on this 9th day of February, 2017.
Sd/- Sd/-
S S Godara Pramod Kumar
(Judicial Member) (Accountant Member)
Dated: 9 th day of February, 2017.
PBN/*
Copies to: (1) The appellant (2) The respondent
(3) CIT (4) CIT(A)
(5) DR (6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad