Shri Rakesh Babulal Shah, Baroda V. The Income Tax Officer, Ward-5(4), Baroda

ITA 2986/AHD/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6379 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-07-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 13-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APOORVA BHARADWAJSR
• Assessee Lawyers: J P SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.2986/AHD/2014 ( / ASSESSMENT YEAR : 2009-10) RAKESH BABULAL SHAH C/O. DEVENDRA TEXTILE NAVABAZAR BARODA 390 006 / VS. THE INCOME TAX OFFICER WARD-5(4) BARODA 390 007 ./ ./ PAN/GIR NO. : AGYPS 4233 P ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI J.P. SHAH, AR / RESPONDENT BY : SHRI APOORVA BHARADWAJ,SR.DR / DATE OF HEARING 12/07/2019 !'# / DATE OF PRONOUNCEMENT 29/07/2019 / O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER : THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGA INST THE ORDER OF LD.COMMISSIONER OF INCOME TAX(APPEALS)-V, BARODA [CIT(A) IN SHORT] DATED 20/08/2014 PASSED FOR ASSESSMENT YEAR (AY) 2009-10. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE NO.8 OF THE ITAT RULES, 1963, THEY ARE DESCRIP TIVE AND ITA NO.2986/AHD /2014 RAKESH BABULAL SHAH VS. ITO ASST.YEAR 2009-10 - 2 - ARGUMENTATIVE IN NATURE. IN BRIEF, GRIEVANCE OF T HE ASSESSEE RELATES TO DETERMINATION OF CAPITAL GAIN ASSESSABLE IN HIS HAN DS ON ACCOUNT OF SALE OF PROPERTY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED HIS RETURN OF INCOME ON 29/03/2011 DECLARING TOTAL INCOME AT R S.2,74,356/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND A NOTICE U/S.143(2) OF THE ACT WAS ISSUED AND SERVED UPON TH E ASSESSEE. THE ASSESSEE HAD ACQUIRED A LAND AND BUILDING AT DARJIP URA, DIST.BARODA IN AY 2005-06 FOR AN ALLEGED CONSIDERATION OF RS.16,66 .259/-. HE ENTERED INTO AN AGREEMENT FOR SALE OF THIS PROPERTY ON 12/1 0/2008 WITH S/SHRI BHAVIK B.TRIVEDI, MILIND V. VARAVADEKAR AND SMT.M ADHUBEN J. TRIVEDI. THE SALE CONSIDERATION WAS FIXED AT RS.22 LAKHS. THIS WAS BY WAY OF A NOTARIZED AGREEMENT. THE PROPERTY WAS ULT IMATELY SOLD ON 21/11/2008 VIDE REGISTRATION NO.30154 IN FAVOUR OF M/S.V.TRANS (INDIA) LIMITED FOR A CONSIDERATION OF RS.45 LAKHS. ACCORD ING TO THE ASSESSEE, HE HAS COMPUTED THE CAPITAL GAIN BY TAKING SALE CONSID ERATION AT RS.22 LAKHS. HE DETERMINED THE INDEX COST OF ACQUISITION AT RS.1 9,51,232/-. HE DETERMINED THE CAPITAL GAIN ASSESSABLE IN HIS HANDS AT RS.2,48,768/-. WHEN ASSESSEE WAS CONFRONTED THAT IT IS A SHORT TER M CAPITAL GAIN ASSESSABLE IN HIS HANDS AND NOT LONG TERM CAPITAL G AIN, THEN HE ADMITTED HIS FAULT AND FILED A REVISED COMPUTATION. ANYWAY, THAT IS NOT THE ISSUE IN DISPUTE BEFORE THE TRIBUNAL. ITA NO.2986/AHD /2014 RAKESH BABULAL SHAH VS. ITO ASST.YEAR 2009-10 - 3 - 4. THE LD.AO HAS OBSERVED THAT INFORMATION WAS CALL ED FOR FROM STAMP DUTY VALUATION AUTHORITY U/S.133(6) OF THE AC T, WHO RESPONDED THAT FOR THE PURPOSE OF STAMP DUTY VALUE OF THE PROPERTY IS DETERMINED AT RS.76,45,700/-. THE ASSESSING OFFICER CONFRONTED THE ASSESSEE TO SHOW, AS TO WHY CAPITAL GAIN IN HIS HANDS BE NOT DETERMIN ED U/S.50C OF THE ACT BY DEEMING THE FULL CONSIDERATION EQUIVALENT TO THE AMOUNT ON WHICH STAMP DUTY WAS PAID. THE STAND OF THE ASSESSEE, ON THE OTHER HAND, WAS THAT HE HAS RECEIVED ONLY RS.22 LAKHS AND THE BALAN CE RS.23 LAKHS OUT OF TOTAL SALE CONSIDERATION OF RS.45 LAKHS WAS RECEIVE D BY THREE CONFIRMING PARTIES IN WHOSE FAVOUR HE HAS EXECUTED AN AGREEMEN T TO SELL ON 12/10/2008. THE LD. AO DID NOT ACCEPT THIS CONTEN TION OF THE ASSESSEE. HE TOOK THE FULL SALE CONSIDERATION AT RS.76,45,700 /- AND AFTER DEBITING INDEXATION COST, DETERMINED THE CAPITAL GAIN ASSESS ABLE IN THE HANDS OF ASSESSEE AT RS.59,79,441/-. 5. APPEAL TO THE CIT(A), DID NOT BRING ANY RELIEF T O THE ASSESSEE. 6. BEFORE US, LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS FILED AN APPLICATION FOR PERMISSION TO LEAD ADDITIO NAL EVIDENCE. HE SUBMITTED WHILE DETERMINING THE CAPITAL GAIN ASSESS ABLE IN THE HANDS OF CONFIRMING PARTIES, THIS PROPERTY WAS REFERRED TO T HE DISTRICT VALUATION OFFICER (DVO) FOR DETERMINATION OF FAIR MARKET VAL UE, WHO HAS DETERMINED THAT VALUE AT RS.52,56,245/- AND IN VIEW OF THIS DEVELOPMENT ITA NO.2986/AHD /2014 RAKESH BABULAL SHAH VS. ITO ASST.YEAR 2009-10 - 4 - IT IS INCORRECT AT THE END OF REVENUE TO TAKE THE S ALE CONSIDERATION UNDER THE DEEMING FICTION AT RS.76,45,700/- IN THE HANDS OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN. HE PRAYED T HAT ISSUE BE REMITTED TO THE FILE OF ASSESSING OFFICER FOR CONDUCTING AN ENQUIRY UNDER SUB- SECTION(2) OF SECTION 50C OF THE ACT. 7. ON THE OTHER HAND, LD.DR RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES. 8. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. SECTION 48 OF THE INCOME TAX ACT PROVIDES MODE OF COMPUTATION OF CAPITAL GAIN. IT CONTEMPLATES THAT INCOME ARISING UNDER THE HEAD CAPITAL GAIN SHALL BE COMPUTED BY DEDUCT ING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING, AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSETS THE FOLLOWING AMOUNT: (A) THAT, EXPENDITURE INCURRED WHOLLY AND EXCLUSIV ELY IN CONNECTION WITH SUCH TRANSFER; (B) THAT, THE COST OF ACQUISITION OF THE ASSET AN D THE COST OF ANY IMPROVEMENT THERETO. 9. SECTION 50C OF THE ACT FURTHER PROVIDES THAT WHE RE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T RANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ITA NO.2986/AHD /2014 RAKESH BABULAL SHAH VS. ITO ASST.YEAR 2009-10 - 5 - ADOPTED OR ASSESSED BY ANY AUTHORITY FOR THE PURPOS E OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOP TED OR ASSESSED SHALL FOR THE PURPOSES OF SECTION 48 OF THE ACT, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION. IN OTHER WORDS, FULL CONSIDERED MENTIONED IN SECTION 48 IS TO BE REPLACED BY THE CONSIDERATION ON WHICH VALUE OF THE PROPERTY WAS ADOPTED FOR THE PURPOSE OF PAYMENT OF STAMP DUT Y. 10. SUB-SECTION (2) OF SECTION 50C FURTHER CONTEMPL ATES THAT IN CASE ASSESSEE ALLEGES THAT STAMP DUTY VALUATION AUTHORIT Y UNDER SUB-SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER, THEN THE ASSESSING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSET TO THE VALUATION OFFICER. 11. IN THE PRESENT CASE, FOLLOWING TWO FACTORS HAVE BEEN POINTED OUT TO US. (I) THAT IN THE HANDS OF CONFIRMING PARTY EXERCISE U/S. 50C(2) HAS BEEN CARRIED OUT AND THE DVO HAS DETERMINED THE VAL UE OF THE PROPERTY AT RS.52,62,245/-. IN THIS SITUATION, FUL L CONSIDERATION REQUIRED TO BE DEEMED U/S.50C FOR THE PURPOSES OF S ECTION 48 OF THE ACT CANNOT EXCEED THIS AMOUNT. (II) SECOND FACTOR IS THAT ASSESSEE HAS ENTERED INTO AN AGREEMENT FOR SALE ON 12 TH OF OCTOBER 2008 IN FAVOUR OF THREE CONFIRMING ITA NO.2986/AHD /2014 RAKESH BABULAL SHAH VS. ITO ASST.YEAR 2009-10 - 6 - PARTIES. NO DOUBT, IT IS ONLY A NOTARIZATION AGREE MENT, BUT FOR THE PURPOSE OF EVIDENTIARY VALUE IN A SUIT FOR SPEC IFIC PERFORMANCE, ADMISSIBILITY OF SUCH AN AGREEMENT IS SAVED IN THE PROVISO TO SECTION 49 OF THE INDIAN REGISTRATION AC T. 12. IT IS PERTINENT TO OBSERVE THAT WHEN THIS AGRE EMENT WAS EXECUTED IN RESPECT OF THE IMMOVABLE PROPERTY, A RIGHT IN PERSONA IS CREATED IN FAVOUR OF THE TRANSFEREE/VENDEE (CONFIRMING PARTY). WHEN SUCH RIGHT IS CREATED IN FAVOUR OF THE VENDEE, THE VENDOR IS REST RAINED FROM SELLING THE SAID PROPERTY TO SOMEONE ELSE BECAUSE VENDEE IN WHO SE FAVOUR RIGHT IN PERSONA IS CREATED HAS LEGITIMATE RIGHT TO ENFORCE SUCH SP ECIFIC PERFORMANCE OF THE AGREEMENT, IF THE VENDOR FOR SOM E REASON IS NOT EXECUTING THE SALE DEED. THUS, BY VIRTUE OF AGREEM ENT TO SELL, SOME RIGHT IS GIVEN TO THE VENDEE BY THE VENDOR. IT IS ENCUMB RANCE ON THE PROPERTY AND ON RELINQUISHMENT OF SUCH RIGHT CONFIRMING PART IES WERE GETTING RS.23 LAKHS WHICH HAS ALSO BEEN MADE SUBJECT TO TAX IN THEIR HANDS. IN THIS SITUATION, WE ARE OF THE VIEW THAT THE ISSUE N EEDS TO BE REMITTED BACK TO THE ASSESSING OFFICER FOR DETERMINING THE FAIR M ARKET VALUE OF THE PROPERTY SOLD BY THE ASSESSEE ON THE DATE OF SALE. HE WILL KEEP TWO FACTORS IN MIND, (A) THE FAIR MARKET VALUE DETERMIN ED BY THE DVO WHILE CONSIDERING THE CASE OF CONFIRMING PARTIES, AND (B) ENCUMBRANCE CREATED ON THE PROPERTY BY VIRTUE OF AGREEMENT DATED 10/12/ 2008 IN FAVOUR OF ITA NO.2986/AHD /2014 RAKESH BABULAL SHAH VS. ITO ASST.YEAR 2009-10 - 7 - THREE BUYERS S/SHRI BHAVIK B.TRIVEDI, MILIND V. V ARAVADEKAR AND SMT.MADHUBEN J. TRIVEDI. AFTER ASSESSING THE EFFEC T OF THESE FACTORS, HE WILL DETERMINE THE FAIR MARKET VALUE OF THE PROPER TY WHICH CAN BE CONSIDERED AS DEEMED FULL CONSIDERATION U/S.50C FOR THE PURPOSES OF COMPUTING CAPITAL GAIN U/S.48 OF THE ACT. 13. WITH THE ABOVE OBSERVATION, THE ISSUE IS REMITT ED BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 29 TH JULY-2019 AT AHMEDABAD. SD/- SD/- ( PRADIP KUMAR KEDIA) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 29/ 07 /2019 &.., .(../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE CIT(A)-V, BARODA 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD