Shri Vinodsingh Natvarsingh Rajput, Vadodara V. The ITO, Ward-1(2)(5), Vadodara

ITA 1853/AHD/2019

AI Insights

This case involves an appeal by Vinodsingh Natvarsingh Rajput against the orders of the Income Tax Officer and the CIT(A), which pertained to the assessment year 2013-14. The primary contention was regarding the valuation of property for computing long-term capital gains, where the stamp duty valuation was significantly higher than the actual sale consideration received. The assessee argued that the valuation should be based on the date of the agreement to sell rather than the date of the sale deed, as the latter involved a higher stamp duty value due to the passage of time and changes in land condition. Additionally, the assessee contested the disallowance of transfer expenses related to the sale of the property. The Tribunal found merit in re-evaluating the issues and remanded the case for further examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129298 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 12-02-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 15-12-2019
• Other Referred Cases: Ramesh Govindbhai Patel V. Income Tax Officer, Dharamshibhai Sonani V. ACIT, CIT V. S Venkat Reddy, ITO V. Modipon Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y.R. RAVAL
• Assessee Lawyers: SURENDRA MUDIANI
• Keywords: Sale consideration of property below Jantri Value; Business income; Principle of natural justice; Capital Gains
• Section: 147; 148; 54B; 50C; 142(1); 143(2); 139(1); 13

Judgement Text

ITA No.1853/Ahd/2019 Assessment Year: 2013-14 Page 1 of 8 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.1853/Ahd/2019 Assessment Year: 2013-14 Vinodsingh Natvarsingh Rajput, vs. Income Tax Officer, Kanchanpura, Ward – 1(2)(5), Vadodara. B/h. Paris Bhista, Vishwamitri, Vadodara. – 390 011. [PAN – AJJPR 3383 H] (Appellant) (Respondent) Assessee by : Shri Surendra Mudiani, AR Revenue by : Shri Y.R. Raval, Sr. DR Date of hearing : 13.02.2023 Date of pronouncement : 24.02.2023 O R D E R This appeal is filed by the Assessee against order dated 13.09.2019 passed by the CIT(A-5), Vadodara for the Assessment Year 2013-14. 2. The Assessee has raised the following grounds of appeal :- “1. The Assessing Officer and Ld. CIT(A), Baroda both erred in law in considering the stamp duty valuation of the property of Rs.5,99,85,800/- for the purpose of computing long term capital gain as against the actual sale consideration of Rs.4,60,94,320/-. Accordingly, they have taken sales consideration belonging to the assessee of Rs.59,98,580/- (being 1/10 th of the total value) as against the actual sales consideration received by the assessee Rs.46,09,432/- (being 1/10 th of the total sales consideration) which is not correct. This has resulted in an addition of Rs.13,89,149/-- being difference between valuation as per the stamp duty authority Rs.59,98,580/- and actual sales consideration Rs.46,09,432/- received by the assessee. 2. The Assessing Officer has also erred in law in considering stamp duty valuation of the property in the year of sale deed (F.Y. 2012-13) instead of stamp duty valuation of the property in the year of “agreement to sell” (F.Y. 2019-10). 3. The Ld. CIT(A), Baroda has erred in law in not allowing transfer expenses of Rs.26,09,432/- (1/10 th Rs.2,60,94,320/-) in relation to sale of property which is evidenced by the sale deed itself and which have ITA No.1853/Ahd/2019 Assessment Year: 2013-14 Page 2 of 8 been completely verified and accepted by the Assessing Officer during the assessment proceedings. 4. The Orders of the Assessing Officer and Ld. CIT(A), Baroda both are illegal against the natural justice and good conscience.” 3. The assessee did not file any return of income under Section 139(1) of the Income Tax Act, 1961. The case of the assessee was reopened under Section 147 of the Act after recording the reasons for doing so. Notice under Section 148 of the Act dated 10.03.2015 was issued and duly served upon the assessee. In response to the said notice, the assessee filed his return of income on 17.07.2015 declaring therein net taxable income at Rs.3,52,570/- and agricultural income of Rs.1,08,250/-. Notice under Section 143(2) and 142(1) of the Act dated 13.08.2015 were issued and duly served upon the assessee alongwith a detailed questionnaire. The Ld. AR of the assessee attended the assessment proceedings and furnished relevant particulars. The Assessing Officer observed that during the previous year relevant to the A.Y. under consideration the assessee has shown Long Term Capital Gain (LTCG) of Rs.3,50,895/- on sale of agricultural land, interest income, commission income and agricultural income. On perusal of the statement of total income filed alongwith return of income, the Assessing Officer observed that the assessee has shown LTCG on sale of agricultural land at Rs.8,92,225/- and after claiming deduction under Section 54B of Rs.5,41,330/-, and taxable LTCG was shown at Rs.3,50,895/-. The assessee sold the land alongwith nine other members and the said sale consideration as per registered sale deed was shown at Rs.4,60,94,320/-. Accordingly, for the purpose of working out the LTCTG the assessee adopted the sale consideration amount at Rs.46,09,432/- being his share at 1/10 th . The assessee has not submitted copy of certificate of Stamp Duty Valuation made by the Stamp Duty Valuation Officer. The Assessing Officer observed that the assessee has claimed the cost of acquisition of land for Financial Year 1981-82 at Rs.8,41,819/-. Thus, the Assessing Officer held that for the purpose of computing LTCG on sale of agricultural land, the sale consideration was taken at Rs.5,99,85,800/- as per the provisions of Section 50C of the Act. Accordingly, the assessee’s share of sale consideration is taken at Rs.59,98,580/- being 1/10 th share as against Rs.46,09,432/- adopted by the assessee in his statement of total income. The Assessing Officer further valued the land for Financial Year 1981-82 at Rs.9,18,000/- as against Rs.9,88,050/- adopted by the Assessing Officer for the purpose of working out the LTCG. ITA No.1853/Ahd/2019 Assessment Year: 2013-14 Page 3 of 8 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The Ld. AR submitted that the assessee alongwith nine other joint holders agreed to sell agricultural land at Village Vadsar by a Registered agreement on 13 th April, 2009 to one Kalpanaben Patel. Part payment of Rs.3,00,000/- was received by cheque. The agreement stipulates that sale price is agreed at Rs.61/- per sq. feet as the sale of the land is prohibited without further approvals. The final sale deed is to be executed and possession was to be given after such approvals permitting use of the land for non-agricultural purpose and sale thereof. Such approvals involve substantial time, efforts, cost and uncertainty and the buyer is expected to make the necessary efforts and also bear the necessary cost. There was litigation relating to the land and orders against the assessee were obtained and it was for the buyer to bear the costs of litigation and compensation to the litigant Ma/s Sukan Developers. The Collector approved sale of the land after payments referred to above vide order dated 16 th August, 2012. Sale Deed was executed on 25 th September, 2012. The Ld. AR submitted that the amount of Rs.59,98,580/- was based on stamp duty value on the date of sale deed which is executed in 2012 while the actual sale consideration was agreed in 2009 which is evidenced by registered document as also receipt of part amount in cheque. Hence, the stamp duty value ought to be considered as on the date of such prior agreement i.e. 13 th April, 2009 and not as on the date of sale deed which is much later on 25 th September, 2012. The assessee cited various judicial decisions supporting his claim and the correct stamp duty value is Rs.97,93,000/- and sale consideration shown in the return of income is much higher and hence no addition is justified. The Assessing Officer did not accept assessee’s submissions as Section 50C of the Income Tax Act, 1961 contemplates adoption of stamp duty value as on the date of the Sale Deed. Ld. AR submitted as under :- “v) Appellant's submissions a) It is submitted that both the Commissioner (Appeals) has applied provisions of Section 50C in an erroneous and illogical manner and without due consideration of decisions of Hon'ble Tribunals. b) It is submitted that the Commissioner (Appeals) has failed to appreciate the fundamental purpose of Section 50C which is to control tax evasion ITA No.1853/Ahd/2019 Assessment Year: 2013-14 Page 4 of 8 by understatement of sale price and the purpose is not to tax income which is neither received nor likely to have been received. c) As regards transactions in immovable properties, there are cases in which the agreement for the transaction is shortly followed by final sale deed. In such a case, the agreed sale consideration and the sale consideration in final sale deed may be expected to be corresponding to the value adopted for the purpose of stamp duty. However, there are many cases in which there is substantial time gap between an agreement to sell the property and execution of final sale deed. In such a case, it is very likely that the consideration in the agreement for sale which thereafter becomes sale consideration as per Sale deed, is substantially lower than the value adopted for the purpose of stamp duty. Section 50C is not intended to levy tax in such cases, on difference between the sale consideration as per Sale deed and value adopted for the purpose of stamp duty as such differential amount cannot be reasonably considered to be understatement of actual sale consideration. d) In case of Ramesh Govindbhai Patel V. Income Tax Officer, reported at 184 ITD 731 decided by Hon'ble Ahmedabad Bench of ITAT, the Assessee had agreed to sell immovable property in 1996 for Rs.2,37,500 but the final sale deed was executed after more than 3 years in 2010 when the value adopted for stamp duty was Rs.51,63,265/-. It was held that the value for the purpose of stamp duty, for application of Section 50C, should be taken as on the date of the prior agreement and not on the date of execution of final sale deed. This was held even for the Assessment Years prior to Assessment Year 2017-18 from which year, the law specifically provided for adoption of the stamp duty value as on the date of the prior agreement. Decision of the Ahmedabad Bench of ITAT in case of Dharamshibhai Sonani V. ACIT reported at 161 ITD 627 is to the same effect. Following other decisions are also to the same effect: CIT V. S Venkat Reddy reported at 57 SOT 117(Hyderabad) ITO V. Modipon Ltd reported at 154 ITD 369 (Delhi) e) The learned Commissioner (Appeals) did not follow the aforesaid decisions by differentiating Appellant's case on erroneous grounds as under: f) The ratio of the aforesaid decisions is that tax should not be charged on amount not likely to have been received by the Assessee. ITA No.1853/Ahd/2019 Assessment Year: 2013-14 Page 5 of 8 All the observations made by the Commissioner (Appeals) lead to clear indications that the actual consideration received is bound to be much lower than the stamp duty value considering the following: - That sale price was agreed about 3 years earlier - When the sale consideration was agreed, the land was in inferior condition and subject to adverse restrictions that did not exist on the date of sale deed. These observations by the Commissioner (Appeals) clearly mean that the ratio of the decisions cited was applicable in this case. g) The observations by the Commissioner (Appeals) (para 6.4, page 16) to the effect that banakhat does not have evidentiary value and is not enforceable is erroneous as such banakhat is supported by registration with Government authority and receipt of advance through banking channels. These facts are seen in the banakhat executed on 13 April, 2009. There is no reason why such evidences may be considered to have no value. It is irrelevant for this purpose that possession is not given or could not have been given at the time of banakhat as these facts are duly considered while fixing the consideration. Distinction on that ground that status of the land has changed from Navi Sharat to Juni Sharat during the period from determination of sale consideration and actual sale deed is irrelevant as this fact was considered while determining the sale consideration as seen from page 4, para 3 of the banakhat. Further this is all the more reason for the stamp duty value to be higher than actual sale consideration and means that the difference is unlikely to be understated sale consideration. Hence this is not a valid ground for differentiating the judicial decisions. h) The observation in para 7 on page 17 that the Appellant did not seek reference to DVO is also inappropriate as it was for the Assessing Officer to make reference when the Assessee submitted that actual consideration and value on relevant date was lower. Section 50C mandates such reference and this is not conditional on specific request for such reference by the Assessee. In view of the above, we request Your Honour to delete the addition on this ground. 2. Transfer expenses Rs.26,09,432 i) Ground of appeal The only other ground of appeal in effect is that the learned Commissioner (Appeals) erred in directing disallowance of ITA No.1853/Ahd/2019 Assessment Year: 2013-14 Page 6 of 8 Rs.26,09,432/- being expenses relating to transfer of the property while computing capital gain on sale of the property. ii) Observations of the Commissioner (Appeals) The expenses were not disallowed by the Assessing Officer but the Commissioner (Appeals) made an enhancement order and directed such disallowance on the ground that no evidences were produced to show that the expenses were incurred by the Appellant. iii) Appellant's submissions a) The Relevant facts are as under: The computation of capital gains as per Return of income is as under: Sales consideration 46,09,432 Less Transfer expenses 26.14.432 Actual sale price 19,95,000 Less: Indexed cost 11,02,775 Deduction under section 54B 54,1,330 16,44,105 Capital gains 3.50.895 b) Based on the above Computation, the Commissioner (Appeals) held that the Appellant is not entitled to deduction of expenses of Rs.26,14,432/- as such expenses are admittedly paid by the purchaser and not the Appellant. c) It is submitted that we are not challenging that the expenses of Rs.26,14,432/- are originally paid by the purchaser and not the Appellant. Our submission is that these expenses have been deducted from the sale consideration received by the Appellant and effectively borne by the Appellant. d) The above fact is evidenced by the following: - The amount of sale consideration as seen from the sale deed is Rs.4,60,94,320 (Appellant's share is 10% i.e. Rs.46,09,432) - The aforesaid sale consideration is paid to the sellers as under: Particulars Amount 1/10 th Share Amounts received by the co-owners 1,99,50,000 19,95,000 Add: Expenses paid; Paid to Government (Deposited in State Bank of India) for change in condition and approval of sale. 2,39,94,320 Paid to Shakun Developers for compromise of dispute 21,50,000 2,61,44,320 26,14,432 4,60,94,320 46,09,432 ITA No.1853/Ahd/2019 Assessment Year: 2013-14 Page 7 of 8 Aforesaid details are seen on page 5 to 11 of the Sale deed. e) It is submitted that the aforesaid document was with the Commissioner (Appeals) and the matter was also explained to him but he did not understand the facts. Also the Assessing Officer has verified these expenses as seen from page 6 in para 5 of the Assessment Order and has also disallowed small part of the deduction. Hence, the Commissioner (Appeals) had no basis to make the enhancement which is based on misunderstanding of facts. In view of above, we request your Honour to delete the addition on this ground.” 6. Ld. DR submitted that the assessee did not ask for DVO’s report and, therefore, the Assessing Officer has rightly taken the amount as per the Sale Deed executed on date when the registration took place. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). As regards transfer expenses, the Ld. DR submitted that expenditure incurred was not stated in the agreement and, therefore, the same was rightly disallowed by the Assessing Officer and the CIT(A). 7. Heard both the parties and perused all the relevant material available on record. As regards to ground nos.1 & 2, it is pertinent to note that the Assessing Officer as well as the assessee never called for DVO’s report as per Section 50C of the Act. The execution of the Sale Deed was in the year 2012 and, therefore, as per Section 50C of the Act the stamp duty value as on the date of registration of the Sale Deed should have been taken, but in the present case what is the determination of actual land cost was not clear from the Stamp Value Authorities quantification as well as value adopted by the Assessing Officer. Therefore, the issue needs proper adjudication and verification and, therefore, the same is remanded back to the file of the Assessing Officer thereby calling upon the DVO’s report and take cognisance of the objections filed by the assessee during that period and take appropriate decision on merit. Needless to say the assessee be given opportunity of hearing by following the principles of natural justice. 8. As regards to ground no.3 related to transfer expenses, the assessee has established that there was encroachment on the land and, therefore, the assessee has incurred transfer expenses and the same should have been taken into account by ITA No.1853/Ahd/2019 Assessment Year: 2013-14 Page 8 of 8 the Assessing Officer. These expenses have a bearing on the actual cost/value of the land and, therefore, this issue also needs to be verified and the same is remanded back to the file of the Assessing Officer for proper adjuration and verification. Needless to say the assessee be given opportunity of hearing by following the principles of natural justice. 9. In the result, appeal of the assessee is partly allowed for statistical purpose. Order pronounced in the open Court on this 24 th day of February, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 24 th day of February, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad