SHRIMATI RITU KAPOOR, SRINAGAR V. INCOME TAX OFFICER WARD-III(2), SRINAGAR

ITA 42/ASR/2020

AI Insights

The case involves Smt. Ritu Kapoor, the proprietor of M/s R. D. Kapoor & Co., who appealed against the order of the Commissioner of Income Tax (Appeals), Jammu, concerning the assessment year 2006-07. The primary issues revolved around the validity of the notice issued under Section 148 and the subsequent reassessment, as well as the valuation adopted for capital gains tax. The appellant contested that the notice was not served at her correct address and challenged the valuation adopted for the property sold, which was significantly higher than the sale consideration. The Tribunal examined the procedural validity of the notice and the substantive issues related to the valuation of the property for capital gains tax.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114382 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-12-2022
• Assessment Year: 2006-2007
• Appeal Filed On: 19-01-2020
• Other Referred Cases: Y. Narayana Chetty and Another Vs ITO 35ITR 389
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value; Reassessment proceedings; Ignorance of law; Capital Gains
• Section: 148; 37; 143(3); 50C; 54EC; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (VIRTUAL COURT) BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T. A. No. 42/Asr/2020 Assessment Year: 2006-07 Smt. Ritu Kapoor Prop. M/s R. D. Kapoor & Co., Raj Bagh Srinagar [PAN: ALWPK 5757H] (Appellant) V. Income Tax Officer, Ward-III(2), Srinagar (Respondent) Appellant by None (Written submission) Respondent by Ms. Priyanka Singla, Sr. D.R. Date of Hearing : 26.12.2022 Date of Pronouncement : 31.01.2023 ORDER Per Dr. M. L. Meena, AM: The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), Jammu dated 30.09.2019 in respect of Assessment Year 2006-07. 2. The assessee has raised the following grounds of appeal: ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 2 “1. That the order under appeal is against law and facts of the case. 2. That on the facts and circumstances of the case the Ld. CIT(A) has erred in law in not accepting the submission of the appellant that the assessment is vitiated in law as the notice under Section 148 is alleged to have been issued on M-106,llnd Floor, Greater Kailash, Part-I, New Delhi address, when the return for the assessment year under consideration stood duly filed earlier under the address of 14-13 Rajbagh Srinagar and as the said notice under Section-148 was not served upon the appellant. 3. That the Ld. CIT(A) has also erred in justifying the issue issuance of the notice on the address as mentioned in the Sale Deed of the property, as business and residential address of the appellant was duly mentioned in the return filed as of 14-13 Rajbagh Srinagar and on this address the appellant is being assessed since the date of start of business as it is the established law that notice should be served on the address given in the return of income. 4. That the burden of proving that notice issued u/s 148 was served on the appellant was upon the Ld. A.O. but the said onus has not been discharged, the Ld. CIT(A) therefore has erred in law in not following the judgment of the Supreme Court in Y. Narayana Chetty and Another Vs ITO 35ITR 389 and other judgments of the Supreme Court and in not holding the assessment as not valid in law. 5. That the Ld. CIT(A) in view of adverse circumstances explained to him and to the Ld. A.O. has also erred in not accepting that the value adopted for registration purposes cannot in law here can be taken as the fair market value of the property on the basis of the capital gain could be calculated as only the amount mentioned in the sale deed is the fair market value. 6. That the onus of proving that the value adopted for registration purposes is the fair market value of the property was upon the Ld. Assessing Officer, but as this onus has not been discharged the Ld. CIT(A), has erred in confirming the adopted value for registration as the fair market value of the property. 7. That the ld. CIT(A) on the facts and circumstances of the case has committed a serious error of law by ignoring the submission of the appellant that the whole long term capital gain cannot be assessed in the ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 3 hands of the appellant as the property in question was sold by 3 persons – the appellant and her two children and as it is not denied that the share of the appellant in the sale proceeds is only 1/3 rd of sale price is assessable in the hands of the appellant. 8. That no capital gain is assessable in the hands of the appellant as the appellant has already deposited Rs. 25,00,000/- with National Housing Bank, the deduction of which is allowable for determination of assessable capital gain of the appellant. The appellant submits that if the amount deposited with National Housing Bank is reduced from 1/3 rd share of the sale price of the property in question there remains no capital gain in the hands of the appellant on which the tax may be imposed. 9. That the Ld. CIT(A) has also erred in not deleting the interest charged u/s 234-B of the Income Tax Act as this interest is not chargeable. 10. That the appellant reserves the right to take any additional or alternative grounds of appeal at the time of hearing with permission of the Hon’ble Tribunal.” 3. Ground Nos. 1 to 4 are interlinked to each other pertaining validity of notice issued u/s 148 and in turn validity of the assessment order passed by the AO u/s 143(3) r.w.s. 147 of the Act. 4. The appellant challenged the validity of notice and reassessment proceedings by alleging that, the AO has issued notice u/s 148 to the assessee on the address M. 106, II Flore, Greater Kalan Part (i), New Delhi as per the sale deed whereas the assessee was residing at 14B Rajbagh, Srinagar, the address as per the PAN Number and claimed to be shown in the return of income filed. The Ld. CIT(A) has uphold the validity of ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 4 reassessment proceedings qua the service of notice u/s 148 of the act, vide para 3.1, by observing as under: “3.1. I have considered the facts of the case and the written submissions filed by the Authorized Representative of the appellant. I have also considered the Remand Report of the A.O. and the Rejoinder submitted by the appellant through her AR. The ground No.1 is general in nature and does not require adjudication. The Grounds No. 2 & 3 are in respect of validity of reassessment proceedings qua the service of notice u/s 148. It has been alleged by the appellant before the Assessing Officer as well as before me that no notice u/s 148 was served upon the assessee on the address given on the return of income where address was given as Smt. Ritu Kapoor Prop. M/s R.D. Kapoor & Co. Rajbagh, Srinagar. The Assessing Officer has observed that while perusing the records of his office, it was verified and found that the notice u/s 148 of the Income tax Act, 1961 dated 15.07.2010 had been issued and served upon the assessee on the address provided by the ITO Ward 23(1), New Delhi as Mrs Ritu Kapoor c/o M-106 2nd Floor, Greater Kailash, Part-1, New Delhi, the same address is also mentioned in the sale letter duly registered in the office of the Registrar of sales Dehradun. Therefore, it is the contention of the Assessing Officer that the explanation given by the assessee with regard to the non-service of notice u/s 148 of the Income Tax Act, 1961 for the year under consideration is not correct. It is also seen that this address of Delhi is also given by the appellant on the NHB Capital Gains Bonds (which were purchased on 27th March 2006 for deduction u/s 54EC of the Income-tax Act, 1961) from National Housing Bank, Core 5A, India Habitat Centre, Lodhi Road, New Delhi-110 003. The Authorized Representative of the appellant has not been able to controvert the observations of the A.O. and has nowhere mentioned that the assessee was not available at the address where notice u/s 148 was issued. In my opinion, this stand has been taken by the appellant only to vitiate the assessment proceedings. The appellant could have filed an affidavit to show that no notice under section 148 was ever served upon her and that the addresses given on sale deed as well as on the NHB Bonds belonged to someone else. Considering these undisputed facts of the case, the grounds no. 2 and 3 are dismissed.” 4.1 Heard the Ld. DR at length and considered the written submissions of the appellant. It has been alleged by the appellant before the AO, the ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 5 CIT(A) as well as before us that no notice u/s 148 was served upon the assessee on the address given in the return of income where address was given as Smt. Ritu Kapoor Prop. M/s R.D. Kapoor & Co. Rajbagh, Srinagar. The Assessing Officer noted that while perusing the records of his office, it was verified and found that the notice u/s 148 of the Income tax Act, 1961 dated 15.07.2010 had been issued and served upon the assessee on the address provided by the ITO Ward 23(1), New Delhi as Mrs Ritu Kapoor c/o M-106 2nd Floor, Greater Kailash, Part-1, New Delhi, the same address is also mentioned in the sale letter duly registered in the office of the Registrar of sales Dehradun. The Ld CIT(A) has therefore, observed that it was the contention of the Assessing Officer that the explanation given by the assessee with regard to the non-service of notice u/s 148 of the Income Tax Act, 1961 for the year under consideration is not correct. It is seen from the record that this address of Delhi is also given by the appellant on the NHB Capital Gains Bonds (which were purchased on 27th March 2006 for deduction u/s 54EC of the Income-tax Act, 1961) from National Housing Bank, Core 5A, India Habitat Centre, Lodhi Road, New Delhi-110 003. Neither the Authorized Representative of the appellant nor the assesse has been able to controvert the observations of the A.O. either before the Ld. CIT(A) or before us and that it was nowhere mentioned that the assessee ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 6 was not available at the address where notice u/s 148 was issued. The judgment of Hon’ble Apex Court and other judgements cited by the appellants are distinguishable on peculiar facts of the instant case. In our view, such a stand has been taken by the appellant before the AO, the CIT(A) and even before us with the deliberate intention to vitiate the assessment proceedings. Whether there has been substance in the ground of the appellant, she ought to have filed an affidavit to show that no notice under section 148 was ever served upon her and that the addresses given on sale deed as well as on the NHB Bonds belonged to someone else. Considering the factual matrix of the case, we uphold the finding of the Ld. CIT(A) in confirming the validity of reassessment proceedings qua the service of notice u/s 148 of the act. Thus, ground no. 1 to 4 of the assesse are rejected. 5. In ground No. 5 to 8 the appellant has challenged that the value adopted for registration purposes cannot be taken as the fair market value of the property for computation of capital gain. 5.1 The Ld. CIT(A) has discussed and adjudicated the issue considering the partial compliance made by the appellant before him. It is evident from the impugned order the appellant is granted the desired relief by the Ld. ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 7 CIT(A) whereby he has directed the Assessing Officer to verify the cost of acquisition as provided by the appellant and thereafter grant exemption u/s 54EC on the resultant capital gains as per the law by observing as under: “3.2 In respect of grounds no. 4 to 6, it is observed by the Assessing Officer that during the year under consideration the assessee had sold property at Dehradun for a sale consideration of Rs.17.5 lacs, however, the stamp duty has been paid at Rs. 4,41,300/- against market value of Rs.44,12,150/- which has not been agitated by the Assessee before the Registering Authority, which in other words means that the sale consideration is equivalent to market value adopted by the Registering authority for payment of stamp duty. It is also pertinent to mention here that the total consideration as per the information received is mentioned at Rs. 17,50,000/- and at the same time the Assessee has stated and also as per the computation of income annexed to the Return of income that a sale consideration of Rs 25 lacs has been received by her which also figures in the bank account of the Assessee. However the only substantial evidence available on record is the registration document of the registering authority Dehradun, wherein the value of consideration has been adopted at Rs. 44,12,150/- on which the stamp duty has also been paid at Rs. 4,41,300/-. The Ld. Authorized Representative has contested that the stamp value is notional and in actual, the property was sold at the registered price of Rs.17.5 lakhs only. The Authorized Representative has narrated the reasons for low consideration as dispute in property and non realization of rent from the tenants besides the impugned property being owned by six co-owners. 3.3 The appellant has claimed deduction u/s 54EC of the Act amounting to Rs.25 lakhs. Section 54EC of the Act pertains to capital gain not to be charged on investment in certain bonds. Relevant portion of this section reads as under:- "54 EC - (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 8 as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say, - (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45." Section 50C of the Act introduced by the legislature under Finance Act 2002 with effect from 01.04.2003, reads as under:- '50 C. - (1) 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 by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer the value so adopted or assessed 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. "Provided 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: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer. (2) Without prejudice to the provisions of sub-section (1), where— ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 9 (a) the assessee claims before any Assessing Officer that the value adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, subsection (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. [Explanation 1] — For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). [Explanation 2]- For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.] (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed [or assessable] by the stamp valuation authority referred to in sub section (1), the value so adopted or assessed [or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.]' Combined reading of these provisions would show that capital gain upon transfer of a capital asset is to be charged as per section 45 of the Act and which shall be deemed to be the income of the assessee for the previous year in which the transfer took place. In terms of the provisions contained in section 48 the capital ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 10 gain would be computed by deducting from the full value of consideration received or accruing as a result of transfer, expenditure incurred wholly and exclusively in connection with the transfer and the cost of acquisition of the asset and cost of improvement thereof. It is at the stage of computation that section 50C of the Act kicks in. This provision, as can be seen, provides for a deeming fiction. Sub-section (1) of section 50C 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 plot or both is less than the value adopted or assessed or assessable by stamp valuation authority for the purpose of stamp duty collection in respect of such transfer, the value so adopted, assessed or assessable shall for the purpose of section 48 be deemed to be the full value of consideration for transfer received or accruing as a result of such transfer. In plain terms, the stamp valuation assessment by the stamp duty officer of the State Government would be deemed to be the sale consideration of capital asset, replacing the declared sale consideration, if it happens to be less than stamp duty valuation. For the purpose of charging capital gain in view of section 45, to be computed as provided in section 48, this deemed consideration would be applied. Sub-Section (1) of section 54EC provides that where the capital gain arising from the transfer of a long-term capital asset being land or plot or both and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or part of the capital gains in specified asset, the capital gain shall be dealt with in accordance with clause (a) and (b) of sub- section (1). As per clause (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45. As per clause (b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, the Assessee would receive proportionate exemption from payment of capital gain. Further proviso of sub-section (1) of section 54EC limits the investment that an assessee can make in any specified asset to Rs.50 lakhs. In other words, .therefore clauses (a) and (b) of sub-section (1) of section 54EC would always have limit of Rs.50 lakhs specified in the further proviso for investment in the specified asset. There is no conflict or any incongruent consequences of applying the provisions of section 50C for the purpose of computation of capital gain tax before claiming exemption under section 54EC of the Act. The deeming fiction under section 50C of the Act, must be given its full effect and while giving full effect to the deeming fiction contained under section 50C of the Act for the purpose of computation of the capital gain under section 48, for which section 50C is specifically enacted, ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 11 the automatic fallout thereof would be that the computation of the assessee's capital gain and consequently the computation of exemption under section 54EC, shall have to be worked out on the basis of substituted deemed sale consideration of transfer of capital asset in terms of section 50C of the Act. Thus, in my considered opinion, the action of the Assessing Officer taking the sale price as Rs. 44,12,150/- is fully justified. However, during the appellate proceedings, the Ld. Authorized Representative has filed calculation of applicable Capital Gains as under: - Important Dates and Valuation 1. Date of filing of return =09.03.2007 2. Date of issuance of notice u/s 148 = 15.07.2010 3. Date of purchase of property =30.05.1967 4. Date of sale of property belonging to Ritu Kapoor, Shiddartha Kapoor, and Radhika Kapoor = 29.10.2005 5. Sale price of the property = Rs. 17,50,000.00 6. Valuation of the property as per circular rate = Rs. 44,12,150.00 7. Index cost declared in the return = Rs. 24,85,000.00 8. Amount deposited with National Housing Bank = Rs. 25,00,000.00 Long Term Capital Gain on sale of Joint Property (1/6 th share) i) 29.10.05 Western Portion Property No. 15A, Lyton Road, Plot No. 49A Subash Road, Dera Doon Sale price = 1750000.00 ii) 29.10.05 Eastern Portion Property No. 15-A Lyton Road, Plot No. 49A Sale Price = 750000.00 Deposit with Standard Chartered Bank Greater Kailash New Delhi ___________ Total Sale Price = 2500000.00 Acquire period to 60 years back Cost of Acquisition for the A/c Year 1981-82 has been taken as = 500000 Index Cost of Acquisition = 2485000 ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 12 500000x497 100 Long term Capital Gain Sale Price = 2500000.00 Less: Acquisition Cost = 2485000.00 = 15000.00 Long Term Capital Gain = 15000.00 Exempted u/s 54-C Restricted = 15000.00 Deposited with National = NIL NIL Housing Bank = 2500000/- Taxable Income 134991.64 Income Tax (Jr. female) NIL The aforementioned calculation is not correct so far as applicability of section 50C is concerned. Thus, sale price has to be taken as Rs.44,12,150/- as held in para above. However, the benefit of cost of acquisition has to be granted to the assessee as per the law which was neither claimed by the appellant before the Assessing Officer nor asked for by him. Thus, the Assessing Officer is directed to verify the cost of acquisition as provided by the appellant and on the resultant capital gain grant exemption u/s 54EC as per the law. Subject to such verification, this ground is treated as partly allowed. 5.2 After hearing the Ld. DR, and considering the written submission of the appellant and the impugned order, it is noted that the appellant’s grievance is that due to ignorance of law on the part of the appellant, she had declared the full consideration of sale in her return as against 1/3 rd share. Therefore, the appellant submitted that 2/3rd share of other co- sharers i.e. of son and daughter of the appellant has wrongly been assessed in her hands and may kindly be deleted. Under the circumstances, we find no perversity in the finding of facts given by the Ld. CIT(A) in directing the Assessing Officer to verify the cost of acquisition as provided by the appellant and on the resultant capital gain grant exemption u/s 54EC as per the law. Thus, the matter restored to the file of the AO for ITA No. 42/Asr/2020 Ritu Kapoor v. ITO 13 limited issue to verify the cost of acquisition and accordingly grant exemption u/s 54EC on the resultant capital gains as per the law. 6. In view of the aforesaid discussion the appeal of the assesse is disposed of in the terms indicated as above. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 on 31.01.2023. Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr./P.S.* Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By Order