ITO, New Delhi V. Sh. Sunil Kumar Babbar, New Delhi

ITA 2251/DEL/2013

• Counselvise Citation: 225120114 RSA 2013
• Duration Of Justice: 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 07-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Assessee Lawyers: SUNIL ARORA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value; Onus to prove
• Section: 50C; 56(2); 69

Judgement Text

ITA NO.2251//DEL/13 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI S. V. MEHROTRA, ACCOUNTANT MEM BER AND SHRI JOGINDER SINGH, JUDICIAL MEMBER I.T.A .NO. 2251 /DEL/2013(AY-2009- 10) ITO WARD 33(2), NEW DELHI (APPELLANT) VS SUNIL KUMAR BABBAR 2983/39, BEADONPURA KAROL BAGH NEW DELHI ACXPB2507J (RESPONDENT) APPELLANT BY SMT. RENUKA JAIN GUPTA, SR. DR RESPONDENT BY SH. SUNIL ARORA & RUCHIKA JAIN, FCA ORDER PER S. V. MEHROTRA, AM THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAIN ST THE ORDER OF LD. CIT(A) XXVI DATED 30 TH JANUARY 2013 FOR A. Y 2009-10. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE, AN IN DIVIDUAL, HAD FILED HIS RETURN OF INCOME DECLARING INCOME OF RS. 2,52,430/-. INFORMAT ION WAS RECEIVED FROM AIR THAT THE ASSESSEE HAD ACQUIRED A PROPERTY ON 15 TH OCTOBER 2008 WHICH HAD BEEN REGISTERED AT THE OFFICE OF SUB-REGISTRAR, 3 RD , GZB TEHSIL FOR A CONSIDERATION OF RS.86,96,000/-. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SUBM IT DETAILS OF PROPERTY ACQUIRED ALONG WITH SOURCE OF INVESTMENT. THE ASSESSEE POIN TED OUT THAT HE HAD PURCHASED HALF SHARE OF PROPERTY BEING COMMERCIAL PROPERTY OF 1600 SQ.FT. AT GROUND FLOOR, PLOT NO. S/44, BLOCK/C, SHALIMAR GARDEN EXTENSION/2, GHA ZIABAD, FOR A CONSIDERATION OF RS. 20 LACS. IT WAS POINTED OUT THAT THE VALUE FOR STAMP DUTY PURPOSES HAD BEEN ITA NO.2251//DEL/13 2 TAKEN AT RS.86,96,000/-. IN THE BACK DROP OF THESE FACTS, ASSESSING OFFICER REQUIRED THE ASSESSEE TO JUSTIFY ACQUISITION OF THE PROPERTY AT PRICE MUCH BELOW THE CIRCLE RATE AND TO EXPLAIN AS TO WHY THE VALUE OF TRANSACTION S HOULD NOT BE TAKEN AT THE VALUE AT WHICH STAMP DUTY HAD BEEN PAID AND WHY THE DIFFEREN CE BE NOT TREATED AS UNDISCLOSED INVESTMENT OUTSIDE THE BOOKS OF ACCOUNT AS PER PROVISIONS OF SECTION 69 OF THE INCOME TAX ACT. THE ASSESSEE, IN ITS REPLY, SUBMITTED THAT THE PROPERTY WAS ACQUIRED AT THE DECLARED CONSIDERATION AND TRANSACT ION HAD BEEN ENTERED WITH MUTUAL CONSENT OF BOTH THE SELLER AS WELL AS BUYER. THE A SSESSING OFFICER, AFTER EXAMINING THE PROVISIONS OF SECTION 50C, OBSERVED THAT SINCE FOR THE PURPOSES OF SECTION 50C VALUATION AS FINALLY ACCEPTED FOR STAMP DUTY PURPOS ES IS TAKEN AS FULL VALUE OF CONSIDERATION, THEREFORE, THE SAME IS TO BE TAKEN A S FULL VALUE OF CONSIDERATION. HE POINTED OUT THAT SECTION 50C GIVES GUIDANCE AS TO T HE FAIR MARKET VALUE OF THE PROPERTY AT WHICH IT WOULD HAVE TRANSACTED. HE PO INTED OUT THAT SINCE THE TRANSACTION HAD BEEN ENTERED INTO BETWEEN TWO UNREL ATED PARTIES ACTING AT ARMS LENGTH, THEREFORE, IT HAD TO BE ON MARKET VALUE HE HAS POINTED OUT THAT ASSESSEE COULD NOT DEMONSTRATE ANY REASON AS TO WHY THE PROPERTY W OULD NOT BE TRANSACTED AT THE MARKET RATE. HE, ACCORDINGLY, MADE AN ADDITION OF RS.23,48,000/- U/S 69 OF THE I. T. ACT, FOR THE DIFFERENCE BETWEEN THE STAMP DUTY VALU E OF PROPERTY AND THE STATED CONSIDERATION, TREATING THE SAME AS INVESTMENT MADE BY ASSESSEE OUT OF HIS UNDISCLOSED SOURCES. 3. LD. CIT(A) DELETED THE ADDITION FOR THE FOLLOWIN G REASONS:- (I) THE ADDITION HAD BEEN MADE SOLELY ON THE BASIS OF VALUATION ADOPTED FOR PAYMENT OF STAMP DUTY ON THE BASIS OF SECTION 50C (II) NO OTHER EVIDENCE OR MATERIAL HAD BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE PURCHASE CONSIDE RATION DECLARED IN THE SALE DEED WAS NOT CORRECT. ITA NO.2251//DEL/13 3 (III) THE FICTION CREATED U/S 50C OF THE INCOME TAX ACT 1961 IS NOT APPLICABLE TO BUYER. (IV) CIRCLE RATES ADOPTED BY THE STAMP DUTY AUTHO RITY ARE RELEVANT FOR THE PURPOSES OF COMPUTING CAPITAL GAINS IN THE HANDS OF THE SELLER OF THE PROPERTY. (V) THE PROVISIONS OF SECTION 50C WHICH CREATES A L EGAL FICTION FOR TAXING CAPITAL GAINS IN THE HANDS OF THE SELLER CANNOT BE EXTENDED FOR TAXING THE DIFFERENCE BETWEEN APPARENT CONSIDERATION AND VALUE ADOPTED BY SELLER VALUATION AUTHORITY FOR THE PURPOSE OF PAYMENT OF S TAMP DUTY IN THE HANDS OF THE PURCHASER AS UNDISCLOSED INVESTMENT U/ S 69. (VI) HE RELIED ON VARIOUS DECISIONS RELIED UPON BY ASSESSEE. 4. LD. DR SUBMITTED THAT IT IS INCONCEIVABLE THAT F OR A SINGLE TRANSACTION IN SAME STATUTE TWO VALUATIONS CAN BE ADOPTED. SHE SUBMITT ED THAT SAME TRANSACTION CANNOT BE TREATED FOR DIFFERENT VALUE IN SAME STATUTE. LD . COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF LD. CIT(A). HE SUBMITTED THAT FICT ION CREATED U/S 50C CANNOT BE EXTENDED TO PURCHASER AS THE SAME WAS MEANT ONLY FO R COMPUTING CAPITAL GAINS IN THE HANDS OF SELLER. LD. COUNSEL FURTHER POINTED OUT T HAT AMENDMENT HAS BEEN BROUGHT IN SECTION 56(2) (VII)(B) (II) BY FINANCE ACT 2010 W.R .E.F 1/10/2009 BY VIRTUE OF WHICH THE DIFFERENCE BETWEEN THE STAMP DUTY VALUATION AND STATED CONSIDERATION WOULD BE TREATED AS INCOME OF PURCHASER. HE, THEREFORE, SUB MITTED THAT FOR ASSESSMENT YEAR UNDER CONSIDERATION, NO ADDITION COULD BE MADE, AS THE TRANSACTION TOOK PLACE BEFORE 1/10/2009. HE RELIED ON FOLLOWING DECISIONS:- CIT VS. KHOOBSURAT RESORTS (P) LTD. [2012] 28 TAX MANN.COM 93 (DELHI) DCIT VS. VALLABHABHAI [2012] 27 TAXMANN.COM 306 (AHD.) CIT VS. CHANDNI BHUCHAR [2010] 191 TAXMAN 142 (PUNJ. & HAR.) 5. LD. COUNSEL FURTHER REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF K. P. VARGHESE VS. ITO (1981) 131 ITR 597 (IN THE CONTEXT OF AMENDMENT TO SECTION 52 AND INSERTION OF SUB-SECTION 2) AND P OINTED OUT THAT IT HAS BEEN OBSERVED THEREIN, INTER-ALIA, AS UNDER:- ITA NO.2251//DEL/13 4 THIS CONDITION OF 15% OR MORE DIFFERENCE IS MERELY INTENDED TO BE A SAFEGUARD AGAINST THE UNDUE HARDSHIP WHICH WOULD BE OCCASIONED TO THE ASSESSEE IF THE INFLEXIBLE RULE OF THUMB ENACTED IN SUB-SECTION (2) WERE APPLIED IN MARGINAL CASES AND IT HAS NOTHING TO DO WITH THE QUESTION OF BURDEN OF PROOF, FOR, THE BURDEN OF ESTABLISHING THAT THERE I S AN UNDERSTATEMENT OF THE CONSIDERATION IN RESPECT OF THE TRANSFER ALWAYS RES TS ON THE REVENUE. THE POSTULATE UNDERLYING SUB-SECTION (2) IS THAT THE DI FFERENCE BETWEEN ONE HONEST VALUATION AND ANOTHER MAY RANGE UP TO 15% AND THAT CONSTITUTES THE CLASS OF MARGINAL CASES WHICH ARE TAKEN OUT OF THE PURVIEW O F SUB-SECTION (2) IN ORDER TO AVOID HARDSHIP TO THE ASSESSEE. IT IS, THEREFORE, CLEAR THAT SUB-SECTION (2) CANNOT BE INVOKED BY THE REVENUE UNLESS THERE IS UNDERSTATEMENT OF THE CONSIDERATION IN RESPECT OF THE TRANSFER AND THE BURDEN OF SHOWING THAT THERE IS SUCH UNDERS TATEMENT IS ON THE REVENUE. ONCE IT IS ESTABLISHED BY THE REVENUE THAT THE CONS IDERATION FOR THE TRANSFER HAS BEEN UNDERSTATED OR, TO PUT IT DIFFERENTLY, THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE IS MORE THAN WHAT IS DECLA RED OR DISCLOSED BY HIM, SUB-SECTION (2) IS IMMEDIATELY ATTRACTED, SUBJECT O F COURSE TO THE FULFILLMENT OF THE CONDITION OF 15% OR MORE DIFFERENCE, AND THE RE VENUE IS THEN NOT REQUIRED TO SHOW WHAT IS THE PRECISE EXTENT OF THE UNDERSTAT EMENT OR IN OTHER WORDS, WHAT IS THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE. THAT WOULD IN MOST CASES BE DIFFICULT, IF NOT IMPOSSIBLE, TO SHOW AND HENCE SUB-SECTION (2) RELIEVES THE REVENUE OF ALL BURDEN OF PROOF REGARDI NG THE EXTENT OF UNDERSTATEMENT OR CONCEALMENT AND PROVIDES A STATUT ORY MEASURE OF THE CONSIDERATION RECEIVED IN RESPECT OF THE TRANSFER. IT DOES NOT CREATE ANY FICTIONAL RECEIPT. IT DOES NOT DEEM AS RECEIPT SOM ETHING WHICH IS NOT IN FACT RECEIVED. IT MERELY PROVIDES A STATUTORY BEST JUDG MENT ASSESSMENT OF THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE AN D BRINGS TO TAX CAPITAL GAINS ON THE FOOTING THAT THE FAIR MARKET VALUE OF THE CAPITAL ASSET REPRESENTS THE ACTUAL CONSIDERATION RECEIVED BY THE ASSESSEE A S AGAINST THE CONSIDERATION UNTRULY DECLARED OR DISCLOSED BY HIM. THIS APPROAC H IN THE CONSTRUCTION OF SUB-SECTION (2) FALLS IN LINE WITH THE SCHEME OF TH E PROVISION RELATING TO TAX ON CAPITAL GAINS. IT MAY BE NOTED THAT SECTION 52 IS NOT A CHARGING SECTION BUT IS A COMPUTATION SECTION. IT HAS TO BE READ ALONG WIT H SECTION 48 WHICH PROVIDES THE MODE OF COMPUTATION AND UNDER WHICH THE STARTIN G POINT OF COMPUTATION IS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR AC CRUING. WHAT IN FACT NEVER ACCRUED OR WAS NEVER RECEIVED CANNOT BE COMPUTED AS CAPITAL GAINS UNDER SECTION 48. THEREFORE, SUB-SECTION (2) CANNOT BE C ONSTRUED AS BRINGING WITHIN THE COMPUTATION OF CAPITAL GAINS AN AMOUNT WHICH, B Y NO STRETCH OF IMAGINATION , CAN BE SAID TO HAVE ACCRUED TO THE AS SESSEE OR BEEN RECEIVED BY ITA NO.2251//DEL/13 5 HIM AND IT MUST BE CONFINED TO CASES WHERE THE ACTU AL CONSIDERATION RECEIVED FOR THE TRANSFER IS UNDERSTATED AND SINCE IN SUCH C ASES IT IS VERY DIFFICULT, IF NOT IMPOSSIBLE, TO DETERMINE AND PROVE THE EXACT QUANTU M OF THE SUPPRESSED CONSIDERATION, SUB-SECTION (2) PROVIDES THE STATUTO RY MEASURE FOR DETERMINING THE CONSIDERATION ACTUALLY RECEIVED BY THE ASSESSEE AND PERMITS THE REVENUE TO TAKE THE FAIR MARKET VALUE OF THE CAPITAL ASSET AS THE FULL VALUE OF THE CONSIDERATION RECEIVED IN RESPECT OF THE TRANSFER. 6. WE HAVE CONSISDSERED THE RIVAL SUBMISSIONS AND H AVE PERUSED THE RECORD OF THE CASE. SECTION 50C HAS BEEN INSERTED IN THE INC OME TAX ACT BY THE FINANCE ACT 2002 W.E.F 1/4/2003. THIS SECTION CREATES A PRESUM PTION THAT WHERE STATED CONSIDERATION IN REGARD TO TRANSFER OF A CAPITAL AS SET, BEING LAND OR BUILDING IS LESS THAN THE VALUE ADOPTED FOR THE PURPOSES OF STAMP DU TY THEN THE SALE CONSIDERATION WOULD BE SUBSTITUTED BY THE STAMP DUTY VALUATION FO R THE PURPOSES OF COMPUTATION OF CAPITAL GAIN. THUS, THE PRESUMPTION HAS BEEN DRAWN THAT PROPERTY WAS SOLD FOR A HIGHER VALUE, FOR DETERMINING CAPITAL GAINS, IN CAS E OF THE VALUATION INDICATED BY THE ASSESSEE TO THE STAMP AUTHORITY, BEING HIGHER THAN THE CONSIDERATION DISCLOSED IN THE SALE DEED OR CONVEYANCE. IT IS WELL SETTLED LAW TH AT A LEGAL FICTION IS TO BE LIMITED TO THE PURPOSE FOR WHICH IT WAS CREATED AND SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. IN THIS REGARD, WE MAY REFER TO T HE DECISION OF HONBLE DELHI HIGH COURT RELIED UPON BY THE LD. COUNSEL FOR THE ASSESS EE, IN THE CASE OF CIT VS. KHOOBSURAT RESORTS PVT. LTD (2012) 28 TAX.COM 93 WH EREIN IT HAS BEEN OBSERVED IN PARA 13 AS UNDER:- THE FICTION CREATED BY VIRTUE OF SECTION 50C APPLI ES ONLY IN RESPECT OF ESCAPED INCOME OF A SELLER, FOR THE DETERMINATION O F THE TRUE CAPITAL GAIN. SUCH A SPECIAL PROVISION HAS TO BE CONSTRUED NARROW LY, HAVING REGARD TO THE SUBJECT MATTER, AND THE EXTENSION OF THE FICTION OR PRESUMPTION IN RESPECT OF ANY MATER NOT COVERED BY IT IS UNAUTHORIZED BY THE LAW. THERE IS A BODY OF JUDICIAL AUTHORITY ON THIS ASPECT (GARDEN SILK MILL S LTD VS. UNION OF INDIA AIR 2000 SC 33; UNION OF INDIA VS. SAMPAT RAJ DUGAR AIR 1992 SC 1417). THE PRINCIPLE WAS PROPOUNDED PITHILY BY THE SUPREME COU RT IN BENGAL IMMUNITY CO. LTD VS. STATE OF BIHAR AIR 1955 SC 661 AS FOLLO WS: ITA NO.2251//DEL/13 6 A LEGAL FICTION IS TO BE LIMITED T THE PURPOSE FO R WHICH IT WAS CREATED AND SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE F IELD................................. PARA 15 AS UNDER:- THIS COURT IS OF THE OPINION THAT THE EXPRESS PRO VISION OF SECTION 50-C ENABLING THE REVENUE TO TREAT THE VALUE DECLARED BY AN ASSESSEE FOR PAYMENT OF STAMP DUTY, IPSO FACTO, CANNOT BE A LEGITIMATE GROU ND FOR CONCLUDING THAT THERE WAS UNDERVALUATION, IN THE ACQUISITION OF IMM OVABLE PROPERTY. IF PARLIAMENTARY INTENTION WAS TO ENABLE SUCH A FINDIN G, A PROVISION AKIN TO SECTION 50-C WOULD HAVE BEEN INCLUDED IN THE STATUT E BOOK, TO ASSESS INCOME ON THE BASIS OF A SIMILAR FICTION IN THE CASE OF TH E ASSESSEE WHO ACQUIRES SUCH AN ASSET. NO DOUBT, THE DECLARATION OF A HIGHER CO ST FOR ACQUISITION FOR STAMP DUTY MIGHT BE THE STARTING POINT FOR AN INQUIRY IN THAT REGARD; THAT INQUIRY MIGHT EXTEND TO ANALYZING SALE OR TRANSFER DEEDS EX ECUTED IN RESPECT OF SIMILAR OR NEIGHBORING PROPERTIES, CONTEMPORANEOUSLY AT THE TIME OF THE TRANSACTION. YET, THE FINDING CANNOT START AND CONCLUDE WITH THE FACT THAT SUCH STAMP DUTY VALUE OR BASIS IS HIGHER THAN THE CONSIDERATION MEN TIONED IN THE DEED. THE COMPULSION FOR SUCH HIGHER VALUE, IS THE MANDATE OF THE STAMP ACT, AND PROVISIONS WHICH LEVY STAMP DUTY AT PRE-DETERMINED OR NOTIFIED DATES. IN THE PRESENT CASE, THE REVENUE DID NOT RELY ON ANY OBJEC TIVE FACT OR CIRCUMSTANCES; CONSEQUENTLY, THE COURT HOLDS THAT THERE IS NO INFI RMITY IN THE APPROACH OF THE LOWER AUTHORITIES AND THE TRIBUNAL, GRANTING RELIEF TO THE ASSESSEE. 7. SIMILAR VIEW HAS BEEN TAKEN BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. CHANDNI BUCHAR (2010) 191 TAXMAN 14 2 WHEREIN THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN CIT VS. RAJ KUMAR B IMLA DEVI (2005) 279 ITR 360 WAS TAKEN NOTE OF WHEREIN IT WAS OBSERVED AS UN DER:- . IN THAT CASE ALLAHABAD HIGH COURT HAS RELIED UP ON THE OBSERVATIONS MADE BY HONBLE SUPREME COURT IN THE CASE OF JAWAJEE NAG NATHAM. VS. REVENUE DIVISIONAL OFFICER [1994] 4 SCC 595 TO HOLD THAT TH E BASIC VALUATION REGISTER PREPARED AND MAINTAINED FOR THE PURPOSE OF COLLECTI NG STAMP COULD NOT FORM THE FOUNDATION TO DETERMINE THE MARKET VALUE OF THE ACQUIRED LAND U/S 23 OF THE LAND ACQUISITION ACT, 1894. THE BURDEN OF PROOF IS ALWAYS ON THE CLAIMANT TO PROVE SUCH A FACT AND IN EACH CASE THE PREVAILING M ARKET VALUE AS ON THE DATE OF NOTIFICATION PUBLISHED IN THE STATE GAZETTE U/S 4(1) OF THE ACT HAS TO BE PROVED. ITA NO.2251//DEL/13 7 8. THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE R EGARDING OBJECT OF AMENDMENT OF SECTION 56, NOTED EARLIER, ALSO SUPPOR TS THE ASSESSEES STAND. 9. IN VIEW OF ABOVE DISCUSSION, WE DO NOT FIND INFI RMITY IN THE ORDER OF LD. CIT(A). 10. IN THE RESULT, THE DEPARTMENT APPEAL IS DISMISS ED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 11 TH APRIL 2014. SD/- SD/- (JOGINDER SINGH) (S.V.MEHROTRA) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED: 11/04/2014 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTA NT REGISTRAR ITAT NEW DELHI