Anant Chetan Agarwal, Bareily V. Dy. Commissioner of Income Tax, Circle-I, Bareily

ITA 571/LKW/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1780 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 11-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PINKI MAHAWAR
• Assessee Lawyers: YOGESH AGRAWAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Principle of natural justice; Cost of acquisition; Fair market value
• Section: 50C; 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 571/LKW/2017 ASSESSMENT YEAR: 2013 - 14 ANANT CHETAN AGARWAL 65, RADHEY SHYAM ENCLA VE CIVIL LINES, BAREILLY V. DCIT CIRCLE I BAREILLY T AN /PAN : AGFPA3795H (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI YOGESH AGRAWAL, ADVOCATE RESPONDENT BY: SMT. PINKI MAHAWAR, D.R. DATE OF HEARING: 23 08 201 8 DATE OF PRONOUNCEMENT: 31 08 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A), BAREILLY DATED 11/7/2017 AS PER FOLLOWING GROUNDS OF APPEAL: - 1 . THE LD. COMMISSIONER OF INCOME TAX (APPEALS), BAREILLY [HERE - IN - AFTER REFERRED TO AS THE LD. CIT (A)'S] GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS. 12,19,610 / - MADE ON ACCOUNT OF LONG TERM CAPITAL GAINS BY PARTIALLY DISALLOWING THE DEDUCTION SO CLAIMED U/S 54F OF THE INCOME TAX ACT, 1961 WITHOUT APPRE CIATING THE TRUE FACTS ON WHOLLY MISCONSTRUED NOTIONS, CONJECTURES AND SURMISES. 2 . IN CONFORMING THE ADDITION OF RS. 12,19,610 / - THE LD. CIT (A)'S CHOSE TO IGNORE OR RATHER FAILED TO APPRECIATE THE FACT AND THE SETTLED LAW ON THIS ISSUE THAT THE DEDUCTION SO CLAIMED WAS U/S ITA NO.571/LKW/2017 PAGE 2 OF 8 54F READ WITH SEC.45 OF THE ACT AND WHICH REQUIRES THAT THE NET CONSIDERATION IS REQUIRED TO BE INVESTED WHICH HAS BEEN DONE AND THUS THE DEDUCTION SHOULD BE ALLOWED KEEPING IN MIND THE ACTUAL SALE CONSIDERATION RECEIVED AND NOT DEEMED VALU E AS PER SEC. 50C. 3 . THAT WHILE CONFORMING THE ADDITION THE LD. CIT (A)'S GROSSLY ERRED IN LAW AND IN NOT APPRECIATING THE SETTLED VIEW THAT DEEMING FICTION IN SEC. 50C IS TO BE APPLIED ONLY TO SEC. 48 AND THE WORDS FULL VALUE OF CONSIDERATION AS MENTIONED I N OTHER PROVISIONS OF THE ACT ARE NOT GOVERNED BY THE MEANING OF THESE WORDS AS MENTIONED IN SEC. 50C THUS MEANING OF FULL VALUE OF CONSIDERATION AS REFERRED TO IN EXPLANATION TO SEC. 54F(1) IS NOT GOVERNED BY THE MEANING OF THE WORDS 'FULL VALUE OF CONSID ERATION' AS MENTIONED IN SEC. 50C. SECTION 54F IS AN INDEPENDENT SECTION AS HAS ALSO BEEN PROVIDED IN THE CHARGING SECTION 45 AND THUS AS THE COST OF THE NEW ASSET IS MORE THAN THE NET CONSIDERATION THE WHOLE OF THE CAPITAL GAINS IS NOT CHARGEABLE TO TAX A ND THUS AS THE ACTION OF THE LD. CIT (A)'S IS UNJUST, ARBITRARY AND AGAINST THE SETTLED PRINCIPLES OF LAW THE SAME MAY KINDLY BE ORDERED TO BE QUASHED AND RELIEF GRANTED ACCORDINGLY. NOTWITHSTANDING AND WITHOUT PREJUDICE TO ALL THE ABOVE GROUNDS: - 4 . THE LD. CIT (A)'S FURTHER ERRED ON FACTS AND IN LAW IN IGNORING THE OBJECTIONS FILED AGAINST THE DEPARTMENTAL VALUATION OFFICERS REPORT VALUING THE PROPERTY AT RS.40,63,640/ - AGAINST THE ACTUAL SALE CONSIDERATION OF RS.27,45,649/ - WITHOUT FORMATION OF BELIEF REGAR DING VARIANCE WITH ITS FAIR MARKET VALUE AND FURTHER IGNORING THE DOCUMENTARY EVIDENCES AND PECULIAR CIRCUMSTANCES DUE TO WHICH THE PROPERTY WAS SOLD AT LOW RATES AND THUS THE ADDITION SO SUSTAINED EVEN ON THIS GROUND IS NOT SUSTAINABLE AND LIABLE TO BE ST RUCK DOWN. ITA NO.571/LKW/2017 PAGE 3 OF 8 5 . IN CONFORMING THE ADDITION THE LD. CIT (A)'S AGAIN ERRED ON FACTS IN NOT BEEN GUIDED BY THE COMPARABLE SALE INSTANCES FILED BY THE APPELLANT OF TWO PLOTS SOLD IN THE IMMEDIATE VICINITY WHICH WERE EVEN LOWER THAN THE APPELLANT AND THUS NON CONSID ERATION OF THE SAME HAS RESULTED IN AN ARBITRARY AND BIASED ORDER WHICH IS NOT AT ALL SUSTAINABLE IN LAW AND NEEDS TO BE QUASHED. 6 . THE ADDITION SO SUSTAINED IS VERY HIGHLY EXCESSIVE, CONTRARY TO FACTS, LAWS AND PRINCIPLES OF NATURAL JUSTICE AND FAIR - PLAY AN D THUS MAY KINDLY BE ORDERED TO BE QUASHED/ANNULLED. 2 . THE FACTS IN THIS CASE , AS APPEARING IN THE ASSESSMENT ORDER , ARE THAT THE ASSESSEE SOLD AN AGRICULTURAL LAND (CAPITAL ASSET BEING SITUATED WITHIN 8 KMS FROM THE MUNICIPAL LIMIT OF B AREILLY) FOR A CONSID ERATION OF RS. 27,45,649 / - , VALUE OF WHICH AS PER CIRCLE RATE WAS RS.58,06,000 / - . THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 54F OF THE ACT AMOUNTING TO RS.27,45,649 / - I.E. ENTIRE NET SALE CONSIDERATION. THE INVESTMENT MADE IN THE HOUSE PROPERTY AS CLAIME D UNDER SECTION 54F WAS EXAMINED BY THE ASSESSING OFFICER AND ASSESSEE WAS REQUIRED TO EXPLAIN AS TO WHY THE CAPITAL GAIN ON ENTIRE CONSIDERATION OF RS.58,06,000 / - (AS PER PROVISIONS OF SECTION 50C) MAY NOT BE CHARGED. THE ASSESSEE SUBMITTED THAT WHATEVER SALE CONSIDERATION WAS RECEIVED BY HIM, HAS BEEN INVESTED UNDER SECTION 5 4F AND , THEREFORE, PROVISIONS OF SECTION 50C ARE NOT ATTRACTED. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE AND HAS HELD THAT PROVISIONS OF SECTION S 45, 48 AND 50C OF THE ACT APPLIES TO THE CASE OF THE ASSESSEE AND DEDUCTION UNDER SECTION 54F OF THE ACT IS NOT APPLICABLE. THE ASSESSING OFFICER WAS OF THE OPINION THAT SECTIONS 45 AND 48 OF THE ACTS ARE CHARGING SECTION S AND PROVISIONS OF SECTION 50C OF THE ACT ARE APPLICABLE AS PER FAIR MARKET VALUE DETERMINED BY THE DVO. THE MATTER WAS ALSO REFERRED TO THE DVO BY THE ASSESSING OFFICER ITA NO.571/LKW/2017 PAGE 4 OF 8 AND DVO VIDE HIS REPORT DATED 7/3/2016 DETERMINED THE FAIR MARKET VALUE OF THE PROPERTY AT RS.40,63,640/ - AS AGAINST V ALUE OF CIRCLE RATE AMOUNTING TO RS.58,06,000/ - . ASSESSEE WAS SHOW CAUSED AS TO WHY VALUE OF PROPERTY MAY NOT BE TREATED AT RS.40,63,640/ - FOR THE PURPOSE OF CHARGING CAPITAL GAIN. IT IS IN THIS CONTEXT THAT THE ASSESSING OFFICER HAS HELD THAT CHARGING S ECTIONS TO BE 45 AND 48 OF THE ACT AND APPLICABILITY OF SECTION 50C IS THERE, SINCE FAIR MARKET VALUE WAS DETERMINED BY THE DVO AND, THEREFORE, ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 54F OF THE ACT. 3 . WHEN THE MATTER TRAVELLED UPTO THE FIRST AP PELLATE STAGE, A DETAILED WRITTEN SUBMISSION WAS FILED BY THE ASSESSEE AND THE ARGUMENTS WERE REITERATED BEFORE HIM THAT IT IS THE NET CONSIDERATION WHICH MEANS FULL VALUE OF CONSIDERATION RECEIVED AS A RESULT OF TRANSFER OF CAPITAL ASSET AND THAT WILL BE APPLICABLE IN THEIR CASE AND DEDUCTION UNDER SECTION 54F IS ALLOWABLE SINCE ENTIRE NET CONSIDERATION , WHATEVER HAS RECEIVED , HAS BEEN INVESTED IN ACQUIRING THE HOUSE PROPERTY. IT WAS ALSO ARGUED THAT SECTION 50C IS A DEEMING PROVISION AND IT PROVIDES THAT WHEN A STATE GOVERNMENT AUTHORITY MAKES A VALUATION AND THAT VALUATION IS MORE THAN ACTUAL CONSIDERATION RECEIVED, IN SUCH A SCENARIO FOR THE PURPOSE OF STAMP DUTY VALUATION SO ADOPTED BY SUCH AUTHORITY SHALL BE DEEMED TO BE THE COST OF ACQUISITION. THER EFORE, IT IS A DEEMING PROVISION AND WHEREAS SECTION 54F IS AN EXTENSION TO THE CHARGING SECTION OF 45 IN CASE OF CAPITAL GAINS WHEREIN IF NET CONSIDERATION RECEIVED BY THE ASSESSEE IN TRANSFERRING ANY LONG TERM CAPITAL ASSET NOT BEING A RESIDENTIAL HOUSE AND THUS THE ENTIRE NET CONSIDERATION IS USED AS THE COST OF NEW ASSET PROCURED, THEN IN SUCH CASE CAPITAL GAIN SHALL NOT BE CHARGED UNDER SECTION 45 AND THIS IS A SPECIFIC PROVISION AND, THEREFORE, ASSESSEE IS COVERED UNDER SECTION 54F OF THE ACT. ITA NO.571/LKW/2017 PAGE 5 OF 8 4 . THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ASSESSMENT ORDER AND FACTS OF THE CASE WENT WITH THE VERSION OF THE ASSESSING OFFICER AND AS PER REASONS GIVEN BY HIM AS APPEARING IN HIS ORDER , WHICH ARE ON RECORD AND NEED NOT BE REPEATED HEREIN AGAIN, UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER. 5 . THE LD. A.R. OF THE ASSESSEE AT THE TIME OF HEARING BEFORE US RELIED ON THE DECISION OF IT AT JAIPUR BENCH IN THE CASE OF ITO VS. RAJ KUMAR PARASHAR IN ITA NO. 1 1 /JP/2016 , ORDER DATED 28 / 09 / 2017 AND ANOTHER DECISION ITAT JAIPUR BENCH IN THE CASE OF PRAKASH KARNAWAT VS. ITO IN ITA NO. 364/JP/2011 , ORDER DATED 18 / 11 / 2011 . LD. A.R. OF THE ASSESSEE VEHEMENTLY ARGUED THAT THESE CASE S ARE SQUARELY APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE AND AT THE SAME TIME REITERATED THE SUBMISSIONS PLACED BEFORE THE REVENUE AUTHORITIES. THE SUBMISSION OF THE LD. A.R. OF THE ASSESSEE WAS ALSO THAT CHARGING SECTION IN CASE OF CAPITAL GAIN IS SECTION 45 AND IN THAT SECTION ITSELF THERE IS AN EXCLUSI ON CLAUSE THAT IF AN ASSESSEES CASE FALLS WITHIN CERTAIN PROVISIONS WHICH INCLUDES SECTION 54F ALSO , IN SUCH CIRCUMSTANCES THOSE CASES SHALL BE OUTSIDE THE PURVIEW OF BEING CHARGED UNDER THE HEAD CAPITAL GAINS FOR THE PURPOSE OF TAXATION. IT IS THE SUBMI SSION OF THE LD. A.R. OF THE ASSESSEE THAT REVENUE HAS NOT DISPUTED ON THE AMOUNT THAT THEY HAVE RECEIVED I.E. THE NET CONSIDERATION FROM TRANSFER OF LONG TERM CAPITAL ASSET. THEY HAVE ENTIRE LY INVESTED NET CONSIDERATION FOR PROCUREMENT OF RESIDENTIAL HOU SE. THIS IS ALSO NOT DISPUTED BY THE REVENUE. REVENUE IS CLUBBING CHARGING SECTION OF 45 READ WITH SECTION 50C WHICH IS A DEEMING PROVISION AND HOLDING THE ASSESSEE TO BE COVERED IN THESE SECTIONS JUST BECAUSE VALUATION ARRIVED AT BY THE CONCERNED AUTH ORITY IS MORE THAN THE ACTUAL NET CONSIDERATION RECEIVED BY THE ASSESSEE. THIS IS SIMPLY AN EXERCISE OF CHARGING THE ASSESSEE ON A NOTIONAL AND HYPOTHETICAL BASIS. SECTION 48 , WHICH THE ASSESSING OFFICER SAYS IS A ITA NO.571/LKW/2017 PAGE 6 OF 8 CHARGING SECTION , IS ACTUALLY THE PROVIS ION PROVIDING FOR MODE OF COMPUTATION OF CAPITAL GAINS AND IS NOT A CHARGING SECTION. LD. A.R. OF THE ASSESSEE FURTHER SUBMITS THAT REVENUE IS ALSO NOT I N DISPUTE REGARDING PROVISO TO SECTION 54F OF THE ACT. NEITHER THE ASSESSING OFFICER NOR THE LD. CIT( A) HAS DEALT WITH AND EXAMINED WHETHER THE NET CONSIDERATION RECEIVED BY THE ASSESSEE WAS USED FOR PROCURING NEW HOUSE PROPERTY. THEY HAVE ONLY FOCUSED ON THE APPLICABILITY OF SECTION 45 READ WITH 50C OF THE ACT. 6 . THE LD. D.R., ON THE OTHER HAND, ARGUED TH AT BASIC PURPOSE FOR SECTION 50C IN THE PROVISION IS THAT THERE SHOULD NOT BE ANY LOSS TO THE REVENUE AND IF ANY ASSESSEE TRIES TO UNDERVALUE THE PRICE OF LONG TERM CAPITAL ASSET , THAT MAY BE SCRUTINIZED AND CAREFULLY LOOKED INTO BY THE CONCERNED AUTHORITY AS PROVIDED IN SECTION 50C AND TO SAFEGUARD THE INTEREST OF THE REVENUE SECTION 50C HAS BEEN BROUGHT INTO STATUTE. THE LD. D.R. ALSO RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7 . WE HAVE PERUSED THE CASE RECORD AND HEARD THE CONTENTIONS OF THE PARTIES. ON A PERUSAL OF PROVISIONS OF SECTION 50C WE FIND THAT IT SPECIFICALLY MENTIONS THAT FOR THE PURPOSE OF SECTION 48 VALUE ADOPTED WAS ASSESSED FOR THE PURPOSE OF STAMP DUTY SHALL BE DEEMED TO BE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER. MEANING THEREBY , DEEMING FICTION CREATED IN SECTION 50C IS LIMITED ONLY TO THE EXTENT AND FOR THE PURPOSE OF SECTION 48 AND THIS DEEMING FICTION CANNOT BE EXTENDED OR INTERPRETED AS MEANT FOR THE PURPOSE OF OTHER PROVISIONS OF THE ACT INCLUDI NG SECTION 54F. PROVISIONS OF SECTION 45 IS THE CHARGING SECTION OF CAPITAL GAIN WHEREIN ITSELF CONDITIONS FALLING UNDER SECTION 54F IS EXEMPTED FROM CHARGEABILITY AND SECTION 48 PROVIDES FOR MODE OF COMPUTATION IN CASE OF CAPITAL GAINS. PROVISIONS OF SE CTION 50C CAN ONLY BE APPLIED TO THE EXTENT OF SECTION 48 AND NOT ITA NO.571/LKW/2017 PAGE 7 OF 8 BEYOND THAT . IF PROVISIONS OF SECTION 50C ARE INCORPORATED AS SUBMITTED BY THE LD. D.R. TO PROTECT THE INTEREST OF THE REVENUE . S IMILARLY SECTION 54F IS THERE TO PROTECT THE INTEREST OF TH E ASSESSEE SUBJECT TO THE CONDITIONS SPECIFIED THEREIN. IF ONE IS ALLOWED TO ENCROACH UPON THE TERRITORY OF OTHER, THEN EITHER OF THE PROVISIONS BECOMES REDUNDANT WHICH IS DEFINITELY NOT THE INTENTION OF THE LEGISLATURE. GIVEN THE FACTS AND CIRCUMSTANCES OF EVERY CASE , SECTION 50C TO BE APPLIED SEPARATELY AND AGAIN IN ANOTHER SET OF FACTS AND CIRCUMSTANCES WHERE THERE IS APPLICABILITY OF SECTION 54F , THAT IS TO BE APPLIED. SANCTITY , AS WE OBSERVED , WITH REGARD TO SECTION 54F IS CONCERNED , WH ETHER ENTIRE NET CONSIDERATION RECEIVED BY THE ASSESSEE HAS BEEN UTILIZED OR NOT. ASSESSEE CANNOT BE EXCEPTED TO DO MORE THAN WHATEVER HE HAS RECEIVED; MEANING THEREBY ASSESSEE CAN INVEST THAT AMOUNT ONLY WHICH HE HAS ACTUALLY PHYSICALLY RECEIVED FROM TRANSFER OF LONG TERM CAPITAL ASSET OTHER THAN RESIDENTIAL HOUSE AS PROVIDED UNDER SECTION 54F OF THE ACT. THERE IS A DOCTRINE OF IMPOSSIBILITY OF PERFORMANCE WHEREIN IT IS ONLY TO THE EXTENT OF FUNDS AVAILABLE WITH THE ASSESSEE THAT HE CAN BE EXPECTED TO INVEST. THIS V IEW HAS BEEN ADOPTED BY VARIOUS JUDICIAL PRONOUNCEMENTS LIKE IN THE CASE OF NATIONAL AVIATION CO. OF INDIA VS. DCIT [2011] 137 TTJ 662 BY MUMBAI BENCH OF THE TRIBUNAL AND IN THE CASE OF JAGDISH MALPANI VS. ACIT [2005] 94 TTJ 321 BY INDORE BENCH OF THE TRIB UNAL. NOW THE CONTENTION OF THE ASSESSEE IS THAT ENTIRE NET CONSIDERATION HAS BEEN INVESTED IN THE NEW HOUSE PROPERTY, THEREFORE, HE WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 54F AND ASSESSEE IS NOT LIABLE TO PAY ANY CAPITAL GAIN TAX. ON PERUSAL OF S ECTION 54F , WHAT IS , THEREFORE , RELEVANT IS THE INVESTMENT OF THE NET CONSIDERATION IN RESPECT OF ORIGINAL ASSET WHICH HAS BEEN TRANSFERRED AND WHETHER NET CONSIDERATION IS FULLY INVESTED IN THE NEW ASSET. THE NET C ONSIDERATION AS DETERMINED UNDER SECTION 50C BASED ON THE STAMP DUTY AUTHORITY ITA NO.571/LKW/2017 PAGE 8 OF 8 VALUATION IS NOT A CONSIDERATION WHICH HAS BEEN RECEIVED BY OR HAS ACCRUED TO THE ASSESSEE. THE LD. D.R. DID NOT PLACE RELIANCE ON THE PROVISO TO SECTION 54F. IT IS, THEREFORE, CLEAR THAT THE ENTIRE NET CONSIDERATIO N AND WHATEVER HAS PHYSICALLY RECEIVED AND ACCRUED TO THE ASSESSEE, THE ENTIRE AMOUNT HAS BEEN INVESTED AND IN SUCH CIRCUMSTANCES , PROVISIONS OF SECTION 54F(1)(A) ARE COMPLIED WITH BY THE ASSESSEE AND , THEREFORE , ASSESSEE BECOMES ELIGIBLE FOR DEDUCTION IN RESPECT OF WHOLE OF THE CAPITAL GAINS TO BE COMPUTED UNDER SECTION 45 READ WITH SECTION 48 AND 54F(1)(A) OF THE ACT. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 8 . IN THE RESULT, APPEAL OF THE AS SESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 / 0 8 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST AUGUST , 201 8 JJ: 2308 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR