Smt.B.Ratna , Hyderabad V. Asst. Commissioner of Income Tax, Circle-4(1), Hyderabad

ITA 1681/Hyd/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8710 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 02-03-2020
• Assessment Year: 2007-2008
• Appeal Filed On: 10-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; TDS; Set aside; Capital Gains
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES SMC, HYDERABAD BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 1680/HYD/2018 2007-08 SRI JUSTICE B.SUBHASHAN REDDY (HUF) HYDERABAD [PAN: AADHB3602G] ASST.COMMISSIONER OF INCOME TAX, CIRCLE-4(1), HYDERABAD 1681/HYD/2018 2007-08 SMT. B. RATNA, HYDERABAD [PAN: AFUPB6994H] FOR ASSESSEE : SHRI A.SRINIVAS, AR FOR REVENUE : SHRI M.N.MURTHY NAIK, DR DATE OF HEARING : 02-03-2020 DATE OF PRONOUNCEMENT : 22-07-2020 O R D E R THESE APPEALS ARE FILED BY SHRI B. SUBHASHAN REDDY (HUF) AND SMT. B. RATNA AGAINST THE ORDER OF THE LD CIT ( A) IN APPEAL NOS.0072 & 0073/CIT(A)-1/HYD/2015-16/2018-19, DATED 01/05/2018 RESPECTIVELY FOR THE AY 2007-08. SINCE BOTH THE APPEALS ARE WITH RESPECT TO RELATED PARTIES AND ON IDENTICAL ISSUES AND GROUNDS, FOR THE SAKE OF CONVENIENCE THEY ARE T AKEN UP TOGETHER FOR ADJUDICATION AND DISPOSED OF BY THIS C OMMON ORDER. 2 ITA NOS.1680 & 1681/HYD/2018 2. BOTH THE ASSESSEES HAVE RAISED SEVERAL IDENTICAL GROUNDS IN THEIR RESPECTIVE APPEALS HOWEVER, THE CRUX OF THE I SSUE IS THAT THE LD CIT (A) HAS ERRED IN CONFIRMING THE ORDER OF THE LD. AO WHO HAD UNDULY INVOKED THE PROVISIONS OF SECTION 50C OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE HUF OF JUSTICE B. SUBHASHAN REDDY, AND SMT. B. RATNA (INDIVIDUAL) FIL ED THEIR RESPECTIVE RETURN OF INCOME ON 31/7/2007 DISCLOSING TAXABLE INCOME OF RS. 30,68,930/- AND RS. 29,72,240/- RESPE CTIVELY. BOTH THE CASES OF THE ASSESSEES WERE REOPENED AS IT WAS OBSERVED THAT THERE IS ESCAPEMENT OF INCOME SINCE THE SRO VALUE O F THE PROPERTY SOLD JOINTLY BY THEM WAS HIGHER THAN THE ACTUAL SAL E CONSIDERATION RECEIVED BY BOTH THE ASSESSEES. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS IN THE CASE OF BOTH THE ASSESSEES IT WAS OBSERVED THAT THE ASSESSEES HAD SOLD THEIR PROPERTY BY EXECUTING A SALE DEED ON 31/07/2006 WHEREIN THE SALE CONSIDERATION WAS DISCLOSED AS RS.1,05,00,000/-. HOWEVER, IT WAS REVEALED THAT TH E SRO VALUE OF THE PROPERTY FOR THE PURPOSE OF STAMP DUTY WAS RS.1 ,20,71,314/-. IT WAS ALSO OBSERVED THAT THE PURCHASER OF THE PROP ERTY HAD PAID THE DEFICIT STAMP DUTY OF RS 8,44,510/- AND THE SAL E DEED WAS REGISTERED. THEREFORE, IT WAS OPINED BY THE LD.AO T HAT THE PROVISIONS OF SECTION 50C OF THE ACT SHALL COME INT O OPERATION AND ACCORDINGLY THE SALE CONSIDERATION HAS TO BE ENHANC ED BY RS. 7,85,657/- [(RS. 1,20,71,314 - RS. 1,05,00,000) / 2 ] BY ADOPTING 3 ITA NOS.1680 & 1681/HYD/2018 THE SRO VALUE WHILE COMPUTING THE CAPITAL GAINS IN THE HANDS OF BOTH THE ASSESSEES. 5. BOTH THE ASSESSEES HAD EXPLAINED BEFORE THE LD A O AS FOLLOWS:- (I) THE ASSESSEES HAD JOINTLY SOLD THEIR LAND ADMEA SURING 405 SQ. YDS ALONG WITH BUILDING THEREON SITUATED ON THE ROAD SIDE AT PUNJAGUTTA MAIN ROAD. (II) THE AFORESAID PROPERTY WAS NOTIFIED FOR ACQUIS ITION FOR ROAD WIDENING IN THE YEAR 1998. (III) DUE TO THE IMPENDING ACQUISITION BY THE GOVER NMENT THE PROPERTY HAD LOST ITS MARKETABILITY. (IV) THE BUILDING CONSTRUCTED ON THE PROPERTY WAS T O BE DEMOLISHED DUE TO THE ROAD WIDENING. (V) THE AREA NOTIFIED FOR ACQUISITION BY THE GOVERN MENT VIDE LETTER DATED 09/7/2006 WAS 291.83 SQ.YDS (VI) THE COMPENSATION PROPOSED FOR THE ACQUISITION WAS ONLY THE BENEFIT OF RECONSTRUCTION OF COMPOUND WALL, SUMP, B OREWELL OR ANY OTHER STRUCTURES OTHER THAN THE MAIN BUILDING, STRU CTURAL COMPENSATION FOR THE BUILDING AS SPECIFIED AND TDR CERTIFICATE AS PER GOVERNMENT GO SO AS TO ENABLE THE ASSESSEES TO UTILISE FAR OF 4 ITA NOS.1680 & 1681/HYD/2018 AFFECTED AREA ON ANY OTHER SITE WITHIN THE LIMITS O F MUNICIPAL CORPORATION OF HYDERABAD. (VII) OTHER THAN THE AFORESAID COMPENSATION, NO OTH ER BENEFIT WAS AVAILABLE TO THE ASSESSEE ON THE SURRENDER OF 291.8 3 SQ.YDS OF LAND ALONG WITH BUILDING. THUS, NO COMPENSATION WAS PAI D FOR THE ACQUISITION OF THE LAND. (VIII) THE BALANCE LAND AVAILABLE TO THE ASSESSEE W AS 109.17 SQ. YDS WHICH IS WASTE LAND AS IT COULD NOT BE UTILISED FOR ANY PURPOSE. (IX) THUS, THE TOTAL COMPENSATION RECEIVABLE BY THE ASSESSEES IS RS. 46,22,878/- ALONG WITH THE TDR RIGHTS. (X) IN FACT, BOTH THE ASSESSEES HAD TRANSFERRED THE PROPERTY FOR A CONSIDERATION OF RS. 1,05,00,000/- TO THE BUYER OF THE PROPERTY WHO IN TURN IS ONLY ENTITLED TO RECEIVE THE TDS RIG HTS AND THE AMOUNT OF RS. 46,22,878/- BY VIRTUE OF THE TRANSFER OF THE PROPERTY BY BOTH THE ASSESSEES. (XI) THEREFORE IT WAS APPARENT THE MARKET VALUE OF THE PROPERTY TRANSFERRED BY THE ASSESSEES IS ONLY RS 1,05,00,000 /- AND THE PROPERTY TRANSFERRED IS ACTUALLY THE TDS RIGHTS AND THE AMOUNT OF RS. 46,22,878/- RECEIVABLE BY THE ASSESSEES IN FUTU RE FROM THE GOVERNMENT. (XII) FOR THE AFORESAID REASONS, THE PROVISIONS OF THE SECTION 50C OF THE ACT WILL NOT BE APPLICABLE IN THE CASE OF TH E ASSESSEES. 5 ITA NOS.1680 & 1681/HYD/2018 6. HOWEVER, THE LD.AO OPINED THAT THE ASSET TRANSFE RRED BY THE ASSESSEES IS LAND AND BUILDING THEREON AND THEREFOR E, THE PROVISIONS OF SECTION 50C OF THE ACT WILL COME INTO OPERATION, ACCORDINGLY HE INVOKED THE PROVISIONS OF SECTION 50 C OF THE ACT AND ADOPTED THE SALE CONSIDERATION AS RS. 60,35,750/- ( RS. 1,20,71,500 / 2) AND COMPUTED THE TAXABLE LTCG IN T HE HANDS OF EACH OF THE ASSESSEES AT RS. 35,25,683/-. ACCORDING LY, TAXABLE LONG TERM CAPITAL GAIN WAS ENHANCED BY RS. 7,85,657/- IN THE HANDS OF EACH OF THE ASSESSEE. 7. ON APPEAL, THE LD. CIT (A) CONFIRMED THE ORDER O F THE LD. AO BY AGREEING WITH HIS VIEW. 8. AT THE OUTSET, I DO NOT FIND ANY MERIT IN THE OR DERS OF BOTH THE LD. REVENUE AUTHORITIES. IT IS PERTINENT TO MEN TION THAT THE PROVISIONS OF SECTION 50C WAS INTRODUCED TO CURB TH E MENACE OF UNACCOUNTED CASH BEING INFUSED IN THE REAL ESTATE T RANSACTIONS. QUITE OFTEN THE ACTUAL SALE CONSIDERATION PAID FOR ACQUIRING IMMOVABLE PROPERTY IS MORE THAN THE SALE CONSIDERAT ION DISCLOSED IN THE SALE DEED EXECUTED. IN ORDER TO OVERCOME THE ESCAPEMENT OF CAPITAL GAIN TAX ON SUCH TRANSACTIONS, SECTION 50C WAS INTRODUCED IN THE STATUTE, SO AS TO AT LEAST ADOPT THE MARKET VALUE OF THE STATE REVENUE AUTHORITY AS THE SALE CONSIDER ATION FOR THE PURPOSE OF COMPUTING CAPITAL GAIN UNDER THE PROVISI ONS OF THE ACT. FURTHER, TO AVOID GENUINE HARDSHIPS TO THE ASSESSEE , THE PROVISIONS OF SECTION 50C(2) OF THE ACT PROVIDED FOR REFERRING THE MATTER TO THE VALUATION OFFICER OF THE REVENUE TO DETERMINE THE A CTUAL MARKET 6 ITA NOS.1680 & 1681/HYD/2018 VALUE OF THE IMMOVABLE PROPERTY SOLD BY CONSIDERING ALL THE RELEVANT FACTORS WHICH MAY NOT HAVE BEEN CONSIDERED BY THE STATE VALUATIO AUTHORITY. IN THE CASE OF THE ASSESSEE, TH E VALUE OF THE PROPERTY IS ALREADY DETERMINED BY THE STATE GOVERNM ENT WHICH IS NOTHING BUT THE AMOUNT OF RS. 46,22,878/- COUPLED W ITH CERTAIN TDS RIGHTS. IT IS PERTINENT TO MENTION THAT NO COMP ENSATION IS PAID BY WAY OF CASH FOR ACQUISITION OF THE LAND IN THE C ASE OF BOTH THE ASSESSEES. MOREOVER CONSIDERING THE FACTS AND CIRCU MSTANCES OF THE CASE, IT IS APPARENT THAT THE ASSESSEES HAVE NO T ACTUALLY TRANSFERRED THEIR IMMOVABLE PROPERTY CONSISTING OF LAND AND BUILDING BUT HAVE ONLY TRANSFERRED THEIR RIGHT TO R ECEIVE THE AMOUNT OF THE COMPENSATION OF RS. 46,22,878/- AND THE TDR RIGHTS AND BOTH THESE ASSET DO NOT FALL UNDER THE CATEGORY OF IMMOVABLE PROPERTY. FURTHER THERE IS NO FINDING BY THE LD. RE VENUE AUTHORITIES THAT THE MARKET VALUE OF THE TDR RIGHTS RECEIVED BY THE ASSESSEES COUPLED WITH THE AMOUNT OF RS. 46,22,878/ - IS AT PAR WITH THE SRO VALUE OF THE PROPERTY. IT IS ALSO EVID ENT THAT THE TRANSACTION IS A DISTRESS TRANSACTION CAUSING MENTA L AGONY DUE TO LOSS ARISING OUT OF LAND ACQUISITION AND WASTAGE OF LAND. KEEPING IN VIEW OF ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED VIEW THAT THE PROVISIONS OF SECTION 50C OF THE ACT CANNOT BE INVOKED IN THE HANDS OF BOTH THESE ASSESS EES. HENCE, I HEREBY SET ASIDE THE ORDER OF THE LD. CIT (A) AND D IRECT THE LD. AO TO DELETE THE ADDITION MADE INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT IN THE CASE OF BOTH THE ASSESSEES. 7 ITA NOS.1680 & 1681/HYD/2018 9. BEFORE PARTING, IT IS WORTHWHILE TO MENTION THAT THIS ORDER IS PRONOUNCED AFTER 90 DAYS OF HEARING THE APPEAL, WHI CH IS THOUGH AGAINST THE USUAL NORMS, I FIND IT APPROPRIATE, TAK ING INTO CONSIDERATION OF THE EXTRA-ORDINARY SITUATION IN TH E LIGHT OF THE LOCK-DOWN DUE TO COVID-19 PANDEMIC. WHILE DOING SO , I HAVE RELIED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. JSW LTD., IN ITA NOS.6264/M/2018 AND 6103/M/2018 FOR AY.2013-14, ORDER DATED 14 TH MAY, 2020. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE S ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-07-2020 SD/- ( A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER HYDERABAD, DATED: 22-07-2020 OKK/TNMM 8 ITA NOS.1680 & 1681/HYD/2018 COPY TO : 1.SRI JUSTICE B.SUBHASHAN REDDY (HUF), 3-6-69/B/27, AVANTI NAGAR, HYDERABAD. 2.SMT. B.RATNA, 3-6-69/B/27, AVANTI NAGAR, HYDERABA D. 3.ASST.COMMISSIONER OF INCOME TAX, CIRCLE-4(1 ), HYDERABAD. 4.THE CIT(APPEALS)-1, HYDERABAD. 5.THE PR.CIT-1, HYDERABAD. 6.D.R. ITAT, HYDERABAD. 7.GUARD FILE.