SHRI SANKET NANDLAL SARAF, Nagpur V. I.T.O. WARD 1(4), Nagpur

ITA 24/NAG/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6956 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 26-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Principle of natural justice; Capital Gains
• Section: 43CA; 50C

Judgement Text

आयकर अपीऱीय अधिकरण, नागप ु र न्यायपीठ, नागप ु र IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH NAGPUR BEFORE SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM आयकर अपीऱ सं./ITA No.24/NAG/2017 Assessment Year. : 2009-2010) Sanket Nandlal Saraf, Saroj, 53, Ramdaspeth, Nagpur-440010 Vs ITO Ward-1(4), Nagpur PAN No. : AEPTS 6477 G (अऩीलाथी /Appellant) .. (प्रत्यथी / Respondent) ननधाारिती की ओर से /Assessee by : Shri R.K.Ganeriwal, CA िाजस्व की ओर से /Revenue by : Smt. Agnes P. Thomas, DR स ु नवाई की तािीख / Date of Hearing : 27/04/2022 घोषणा की तािीख/Date of Pronouncement : 15/07/2022 आदेश / O R D E R Per Arun Khodpia, AM: This appeal filed by the assessee is made against the order passed by the CIT(A)-1, Nagpur, dated 21.11.2016, for the assessment year 2009-2010 on the following grounds of appeal :- 1. The order passed by learned A.O. is illegal, incorrect, bad in law and without natural justice. 2. The addition for Rs.3,42,000/- for increase in value of property on the basis of market value on date of sale deed instead of value taken on the date of agreement to sale is incorrect, illegal, bad in law and without natural justice and the same is to be deleted. 3. Appellant craves a right to add, modify, alter or withdraw and of the ground/s of appeal during the course of hearing. 2. Brief facts of the case are that the assessee filed its return of income on 30.10.2009 declaring total income of Rs.8,20,020/-. The return of the assessee was proceeded u/s.143(1) of the Act and the AO ITA No.24/NAG/17 2 completed the assessment making addition to the tune of Rs.3,42,000/- for Long Term Capital Gains. 3. Aggrieved by the assessment order, the assessee appealed before the CIT(A) and the CIT(A) dismissed the appeal of the assessee, against which the assessee is in further appeal before the Tribunal. 4. Ld. AR before us submitted that the assessee is an individual being partner in Bindal Packaging, B. N. Enterprises and Karvid Technologies. He has other source of income of interest in various assets and he earned long term capital gain of Rs.4,43,914/- during AY 2009-10. It was submitted that the assessee was co-owner of land located at Mouza Pasodi, named as Pragati Bhawan with two family members. He has sold land by agreement to sale on for Rs. 51,00,000/- with two co-owners of the property and his share in the property was 1/3 as per agreement to sale dt. 30.08.2007 and he received part payment of Rs.7,00,000/- by account payee cheque and rest was to be received later on. The sale deed for property was to be executed on receipt of full payment. The payment of Rs.2,00,000/- has been received as on 28.12.2007 and to avoid further delay in execution of sale deed on 27.08.2008 without receiving the full payment. The market value for stamp duty on the date of agreement was Rs. 52,96,023/-. The market value at the time of execution of sale deed was Rs. 61,26,000/-. The Property was in possession of buyer who is a charitable trust and operating school there since 1999. It was submitted by the ld. AR that the sale consideration as per agreement to sale being 1/3 rd share of Rs.17,00,000/-, however, the ITA No.24/NAG/17 3 AO erred in considering the sale value u/s.50C as on date of sale deed 27.08.2008 which Rs.6126,000/- and made addition of Rs.3,42,000/- under the capital gain, to which the CIT(A) confirmed the same, therefore, the addition made by the AO and confirmed by the CIT(A) deserves to be deleted. 5. Ld AR of the assessee at the outset has submitted that the case of assessee is entirely covered by judicial pronouncements of ITAT in the case of Smt Kundanben Ambalal Shah Vs. ITO pronounced in ITA 3354/Ahd/2014 dated 30.11.2017, Ahmedabad and Maniben Laxmichand Dedhia in ITA no 5975/Mum/2018 dated 13.11.2019. The facts of the said judicial pronouncements are entirely akin to the present case. In the case of Smt Kundanben Ambalal Shah Vs. ITO pronounced in ITA 3354/Ahd/2014 dated 30.11.2017 has discussed the case of Dharamshibhai Sonani Vs. ACIT (ITA No. 1237/Ahd/2013, order dated 30.09.2016, wherein provisions and applicability of sec 50C were discussed. Some important portions of the said order are extracted here under for proper adjudication of the present case:- "[4] The fundamental purpose of introducing section 50C was to counter suppression of sale consideration on sale of immovable properties, and this section was introduced in the light of widespread belief that sale transactions of land and building are often undervalued resulting in leakage of legitimate tax revenues. This Section provides for a presumption, a rebuttable presumption though-something with which I am not concerned for the time being, that the value, for the purpose of computing stamp duty, adopted by the stamp duty valuation authority represents fair indication of the market price of the property sold. Section 50C(1) provides 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 or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of ITA No.24/NAG/17 4 payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer". The trouble, however, is that while the sale consideration is fixed at the point of time when agreement to sell is entered into, there is sometimes considerable gap in parties agreeing to a transaction (i.e. agreement to sell) and the actual execution of the transaction (i.e. sale deed), and yet, it is the value as on the date of execution of sale deed which is recognized by Section 50C for the purpose of computing the capital gain because that is what is relevant for the purpose of computing stamp duty for registration of sale deed. The very comparison between the value as per sale deed and the value as per stamp duty valuation, accordingly, ceases to be devoid of a rational basis because these two values represent the values at two different points of time. In a situation in which there is significant difference between the point of time when agreement to sell is executed and when the sale deed is executed, therefore, should ideally be between the sale consideration as per registered sale deed, which is fixed by way of the agreement to sell, vis-à-vis the stamp duty valuation as at the point of time when agreement to sell, whereby sale consideration was in fact fixed, because, if at all any suppression of sale consideration should be assumed, it should be on the basis of stamp duty valuation as at the point of time when the sale consideration was fixed. 6. The ITAT Ahmedabad Bench of the Tribunal in the case of Smt Kundanben Ambalal Shah (supra) in page 8 at sub-para 9 has noted as under :- [9] So far as the amendment to Section 50C being retrospective in effect is concerned, there is no doubt about the legal position. I hold the provisos to Section 50C being effective from 1st April 2003. This is precisely what the learned counsel has prayed for. In his detailed written submissions, he has made out of a strong case for the amendment to Section 50C being treated as retrospective and with effect from 1st April 2003. The plea of the assessee is indeed well taken and deserves acceptance. What follows is this. The matter will now go back to the Assessing Officer. In case he finds that a registered agreement to sell, as claimed by the assessee, was actually executed on 29.6.2005 and the partial sale consideration was received through banking channels, the Assessing Officer, so far as computation of capital gains is concerned, will adopt stamp duty valuation, as on 29.6.2005, of the property sold as it existed at that point of time. In case the assessee is not content with this value being adopted under section 50C, he will be at liberty to seek the matter being referred to the DVO for valuation, again as on 29.6.2005, of the said property. As a corollary thereto, the subsequent developments in respect of the property sold (e.g. the ITA No.24/NAG/17 5 conversion of use of land) are to be ignored. It is on this basis that the capital gains will be recomputed. With these directions, the matter stands restored to the file of the Assessing Officer for adjudication de novo, after giving an opportunity of hearing to the assessee and by way of a speaking order. I order so." 7. Further the Tribunal in the case of Smt Kundanben Ambalal Shah (supra) in page 9 at para 4, 5, 6 & 7 has observed as under :- 4. Learned counsel then also invites our attention to a decision of Hon'ble Allahabad High Court in the case of CIT vs Shimbhu Mehra, [2016] 65 taxmann.com 142 (Allahabad), in support of the same proposition. Learned Counsel then invites our attention to the copy of the agreement to sale which is placed at page nos. 1-8 of the paper book as also the copy of the sale deed which is placed at page nos. 9-30 of the paper-book. Learned counsel further points out that the dates on which relevant payments are made are clearly set out in the sale deed at internal page no.12, which are in accordance with the agreement to sale. Learned counsel thus contends that the bonafides of the agreement to sale, in the light of the dates on which the payments are made, cannot be doubted. On the strength of this submission, we are urged to remit this issue to the file of the Assessing Officer with the direction that the stamp duty valuation as on the date on which the agreement to sale was entered into should be taken for the purposes of application of section 50C and not the date on which the sale deed was actually executed. 5. Learned Departmental Representative, on the other hand, relies upon the orders of the authorities below and submits that the provisions of the statute are clear and unambiguous inasmuch as the relevant date for the purpose of section 50C stamp duty value is the date on which the sale deed is entered into. 6. Having heard the rival contentions and having perused the material on record, we find that the issue in appeal is squarely covered by the Tribunal's decision in the case of Dharamshibhai Sonani (supra), which has been subsequently followed by large number of division bench of this Tribunal. As rightly held by the Tribunal in the case of Dharamshibhai Sonani (supra), the amendment brought about by Finance Act, 2016, providing that "where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer", is retrospective in effect and applies from 1st April 2003. The detailed reasons for coming to this conclusion are already set out in the extract from the Tribunal's decision quoted earlier in this order. ITA No.24/NAG/17 6 7. In view of these discussions and bearing in mind entirety of the case, we are of the considered view that the plea of the learned counsel indeed merits acceptance. We, therefore, deem it fit and proper to remit the issue to the file of the Assessing Officer for adjudication de novo in the light of observations above and the legal position set out in Dharamshibhai Sonani (supra). Ordered, accordingly." 8. The ITAT Mumbai Bench of the Tribunal in the case of Maniben Laxmichand Dedhia in ITA No.5975/Mum/2018, order dated 13.11.2019 has observed in para 6 & 7 as under :- 6. The provisions of Sec. 43CA of IT Act which was newly introduced in Finance Act 2013 shall be applicable in case of transfer of ownership of property by any mode. In case, transfer of immovable property takes place without registration of sale deed but by way of execution of sale agreement / power of attorney or by way of transfer with the regulatory authority or in any other manner, provisions of Sec. 43CA shall be applicable. The proviso to Subsection (1) of Sec. 43CA states that „where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than 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 payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of consideration received or accruing as a result of such transfer. 6.1 Further, subsection (3) & (4) of Sec. 43CA provide to adopt stamp duty value of the property assessable as on the date of entering into sale agreement instead of the value assessed as on the date of transfer of the property. Sub. Sec (3) and sub Sec. (4) of Sec. 43CA read as under: "Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub section (1) may be taken as the value assessable by any authority of a state government for the purpose of payment of stamp duty in respect of such transfer on the date of agreement for transfer of the asset". 6.2 Thus, the provision of new sec. 43CA under the Act introducing the provisions for taxability of transfer of immovable property (land or building or both) held in the nature of stock in trade, is also applicable on the similar lines which are applicable for immovable property held in the nature of "capital asset" under section 50C of the Act. Thus, the stamp duty value as on date of initial agreement in the year 2010 can be adopted for the purpose of Sale consideration". ITA No.24/NAG/17 7 7. In view of the above discussion, I direct the A.O to compute capital gain by taking stamp duty value as on date entering agreement in the year 2010, in so far as in the year of entering into agreement assessee had received part payment of Rs. 7,07,000/- by account payee cheque. A.O is liberty to verify the fact of payment received by account payee cheque, I direct accordingly. 9. Ld AR submitted that based on the above judicial pronouncements and legal position of the issue order of the Ld AO and Ld CIT(A) are liable to be quashed. 10. Ld Dr on the other had vehemently relied on the orders of the authorities below. 11. We have considered the submissions of both the parties. Admitted fact of the instant case are that the agreement to sale was executed on 30.08.2007 for Rs. 51,00,000/-. Sale deed of the property was registered on 27.08.2008 for Rs. 5100000/- having equal share of all the co-sellers, assessee’s share was 17,00,000/-being 1/3 of the total. Stamp duty valuation as on 27.08.2008 was Rs. 61,26,000/- and 1/3rd share of the assesse as per AO was 20,42,000/-. Hence an addition of Rs. 3,42,000/- under the head Capital Gains. 12. On careful perusal of the above facts and the material available on records, orders of the revenue authorities and pronouncements relied upon by the Ld AR. It is our considered view that this issue is squarely covered by decision of the coordinate benches of the tribunal, hence respectfully follow the legal preposition decided by the above referred pronouncements whereby it is recognized that subsection (3) & (4) of 43CA provide to adopt stamp duty value of the property assessable as on the date of entering into the sale agreement instead of the value assessed ITA No.24/NAG/17 8 as on the date of transfer of the immovable property (land and building or both) held in the nature of stock in trade, is also applicable on the similar lines which are applicable for immovable property held in the nature of “capital asset” under section 50C of the act. No contrary view to this finding has been offered by the revenue. 13. Therefore, this issue is restored back to the files of the AO, with a direction to re-compute the capital gain, considering sale consideration as on the date of transfer of property on the date of agreement to sale. Consequently, the plea of the assessee is accepted, thus, this appeal is decided in favour of the assessee. 14. In the result, appeal of the assessee is allowed. Order pronounced under Rule 34(4) of ITAT Rules, 1963 on 15/07/2022. Sd/- (SANDEEP GOSAIN) Sd/- (ARUN KHODPIA) न्याययक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER नागप ु र Nagpur; ददनाांक Dated 15/07/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रयिलऱपप अग्रेपिि/Copy of the Order forwarded to : आदेशान ु सार/ BY ORDER, (Assistant Registrar) आयकर अपीऱीय अधिकरण, नागप ु र /ITAT, Nagpur 1. अऩीलाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकि आय ु क्त(अऩील) / The CIT(A), 4. आयकि आय ु क्त / CIT 5. ववभागीय प्रनतननधध, आयकि अऩीलीय अधधकिण, नागप ु र / DR, ITAT, Nagpur 6. गार्ा पाईल / Guard file. सत्यावऩत प्रनत //True Copy//