DEVENDRA K CHEDA, MUMBAI V. ITO 21(1)(1), MUMBAI

ITA 6012/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2383 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 19-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 26-09-2014
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Sale consideration of property below Jantri Value; Additional evidence; Question of law; Cost of acquisition; Fair market value
• Section: 143(3); 50C

Judgement Text

, , D, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , , , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.6012/MUM/2014 ASSESSMENT YEAR: 2010-11 SHRI DEVENDRA K. CHEDDA, 502, NIPPON-1, 37, JUHU TARA ROAD, JUHU, MUMBAI-400049 / VS. ITO - 21(1)(1) MUMBAI-400051 ( APPELLANT ) ( REVENUE ) P.A. NO . AAAPC5200C APPELLANT BY DR. K. SHIVARAM , (AR) REVENUE BY SHRI B.S. BIST ( SR. DR) ! ' # $% / DATE OF HEARING : 19/10/2016 # $% / DATE OF ORDER: 19/10/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX, MUMBAI-32, {(IN SHORT CIT}, DATED 26.08.2014 PASSED AGAINST THE A SSESSMENT ORDER OF THE AO U/S 143(3) DATED 28.03.2013 FOR THE ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS: DEVENDRA K. CHEDDA 2 1.THE LEARNED CIT(A) ERRED IN CONFIRMING ORDER OF ASSESSING OFFICER ASSESSING LONG TERM CAPITAL GAINS OF RS. 6,66,44,262/- AS AGAINST RETURNED LONG TERM CAPITAL LOSS OF RS. 4,47,826/- BY INVOKING PROVISIO N OF S. 50C TO SALE OF UNDETERMINED BENEFICIAL RIGHTS IN THE LAND AT CHEMBUR WITHOUT APPRECIATING THAT PROVISION S OF S. 50C ARE APPLICABLE ONLY TO SALE OF LAND AND BUIL DING AND IT DOES NOT APPLY TO SALE OF RIGHTS IN LAND AND BUI LDING. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING ORDER OF ASSESSING OFFICER ASSESSING LONG TERM CAPITAL GAINS OF RS. 6,66,44,262/- AS AGAINST RETURNED LONG TERM CAPITAL LOSS OF RS. 4,47,826/- BY INVOKING PROVISIO N OF S. 50C TO SALE OF UNDETERMINED BENEFICIAL RIGHTS IN THE LAND AT CHEMBUR WITHOUT APPRECIATING THAT SALE AGREEMENT DATED 28/7/2007 WAS NOT REGISTERED AND HENCE PROVISIONS OF S. 50C HAD NO APPLICATION TO SU CH SALE TRANSACTION PRIOR TO 1/10/2009. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT IF THE ARGUMENT OF LEARNED CIT(A) THAT PROVISIONS OF S. 50 C AS EXISTING POST 1/10/2009 ARE APPLICABLE TO THE FACTS OF THE PRESENT CASE, THEN THERE CAN BE NO LONG TERM CAPITA L GAINS THAT COULD BE SAID TO HAVE BEEN ACCRUED DURIN G THE YEAR ESPECIALLY WHEN NO POSSESSION HAS BEEN GIVEN T O THE ASSIGNEE. 4. WITHOUT PREJUDICE TO ABOVE THE LEARNED CIT(A) AN D ASSESSING OFFICER ERRED IN ADOPTING THE READY RECKO NER VALUE IN PLACE OF AGREED CONSIDERATION WITHOUT REFE RRING THE MATTER TO THE DVO FOR VALUATION, MORESO WHEN TH E ASSESSEE HAD SPECIFICALLY CLAIMED BEFORE BOTH THE AUTHORITIES THAT THERE WERE LEGAL IMPEDIMENTS FOR FREELY TRANSFERRING THE ASSET AND THAT THE IMPUGNED LAND WAS FULL OF ENCROACHMENTS, ENCUMBRANCES AND VARIOUS LITIGATIONS WERE PENDING WITH RESPECT TO THE SAID L AND. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y DR. K. SHIVARAM, AUTHORISED REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND BY SHRI B.S. BIST, DEPARTMENTAL REPRESENTATIVE (CIT-DR) ON BEHALF OF THE REVENUE. DEVENDRA K. CHEDDA 3 3. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN THIS A PPEAL IS WHETHER THE LOWER AUTHORITIES WERE JUSTIFIED IN SUB STITUTING THE SALES CONSIDERATION WITH THE AMOUNT FOR DEEMED SALE S CONSIDERATION BY INVOKING PROVISIONS OF SECTION 50C FOR COMPUTING LONG TERM CAPITAL GAINS WITH RESPECT OF S ALE OF RIGHTS IN LAND MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 3.1. THE BRIEF FACTS BROUGHT BEFORE US ARE THAT ON 28 TH JULY 2007 (FALLING IN EARLIER A.Y. I.E. 2008-09), THE AS SESSEE HAD VIDE AN AGREEMENT SOLD HIS RIGHT TO ACQUIRE/ OWN 5000 SQ . YARDS OF LAND SITUATED AT CHHEDA NAGAR, GHATKOPAR FOR A CONS IDERATION OF RS.23,53,000/- ON AS IS WHERE IS BASIS TO M/S. C HHEDA REALITY PVT. LTD. DURING THE YEAR, FULL PAYMENT WAS RECEIVED BY THE ASSESSEE AND THEREFORE, IT DISCLOSED LONG TERM CAPITAL LOSS FOR AN AMOUNT OF RS.4,47,826/- BY TAKING ACTUAL SAL E CONSIDERATION AT RS.24,03,000/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE AO THAT AFORESAID AGREEMENT WAS NOT REGISTERED WITH THE STAMP DUTY AU THORITIES AND ALSO POSSESSION OF THE LAND WAS NOT GIVEN TO TH E ASSESSEE. BUT, ACCORDING TO HIM ASSESSEE HAD RIGHT IN THE PRO PERTY AND THEREFORE, LIABLE FOR TAX UNDER THE HEAD CAPITAL GA INS. UNDER THESE CIRCUMSTANCES, THE AO HELD THAT PROVISIONS OF SECTION 50C WERE APPLICABLE AND THUS, HE ADOPTED THE SALE CONSIDERATION ON THE BASIS OF STAMP DUTY READY RECK ONER BY TAKING RATE AT RS.17,300/- PER SQ. METER AS APPLIC ABLE FOR FINANCIAL YEAR 2009-10 AND THUS, HE SUBSTITUTED THE SALES CONSIDERATION AT RS.7,23,24,899/- AND AFTER DEDUCTI NG THE DEVENDRA K. CHEDDA 4 INDEX COST OF ACQUISITION HE COMPUTED AMOUNT OF LON G TERM CAPITAL GAIN OF RS.6,66,44,262/-. 3.2. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) WHEREIN DETAILED ARGUMENTS WERE MADE BY THE ASSESSEE. IT WAS INTER ALIA ARGUED THAT THE AGREEMENT OF THE ASSESSEE WAS NOT REGISTERED AND THEREFORE, PRE-AMEN DED PROVISIONS OF SECTION 50C WERE NOT APPLICABLE UPON THE ASSESSEE. THE AMENDMENT WAS MADE W.E.F. 01.10.2009, BUT TRANSACTION WAS COMPLETED BEFORE THE SAID DATE. THE RELIANCE IN THIS REGARD WAS ALSO PLACED UPON THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. R. SUGANTHA RAVINDRAN 352 ITR 488(MAD) FOR THE PROPOSITION THAT THE AMENDMENT MADE IN SECTION 50C W.E.F. 01.10.2009 WHE REIN THE WORD ASSESSABLE WAS INSERTED, WAS PROSPECTIVE IN NATURE AND THUS NOT APPLICABLE UPON THE TRANSACTIONS COMPL ETED BEFORE THE SAID DATE. IT WAS ALSO CONTENDED THAT SE CTION 50C WAS NOT APPLICABLE ON SALE OF RIGHTS, AS IT WAS APP LICABLE ONLY ON SALE OF IMMOVABLE PROPERTY AND NOT UPON SALE OF RIGHTS IN THE IMMOVABLE PROPERTIES. IT WAS ALSO ARGUED THAT T HE IMPUGNED LAND INVOLVED HUGE LITIGATION AND ASSESSEE WAS NOT GIVEN POSSESSION OF THE SAID LAND. THEREFORE, RATE AS PER READY RECKONER COULD NOT HAVE BEEN ADOPTED BLINDLY. BUT, LD. CIT(A) DISMISSED ALL THE ARGUMENTS OF THE ASSESSEE. WITH R ESPECT TO THE ARGUMENT ON RETROSPECTIVE NATURE OF THE AMENDME NT MADE IN SECTION 50C E.W.F. 01.10.2009, THOUGH THE LD. CI T(A) AGREED IN PRINCIPLE THAT THE AFORESAID SAID AMENDMENT WAS PROSPECTIVE, BUT HE DISTINGUISHED THE CASE OF THE A SSESSEE ON FACTS ON THE GROUND THAT EXECUTION OF DOCUMENTS WHI CH WOULD DEVENDRA K. CHEDDA 5 HAVE EFFECT OF TRANSFERRING OF PROPERTY TO THE ASSI GNEES WAS NOT EXECUTED BEFORE 01.10.2009. 3.3. BEFORE US LD. COUNSEL OF THE ASSESSEE VEHEMENTLY A RGUED THE CASE AND REITERATED ALL THE SUBMISSIONS MADE BE FORE THE LD. CIT(A). HE PLACED BEFORE US PETITION UNDER RULE 29 DATED 30.09.2016 FOR ADMISSION OF ADDITIONAL EVIDENCES RE LATING TO FAIR MARKET VALUE OF THE IMPUGNED LAND, KEEPING IN VIEW VARIOUS FACTS OF THE CASE. HE ALSO PLACED BEFORE US DETAILS AND DOCUMENTARY EVIDENCES SHOWING THAT ENTIRE TRANSACTI ONS WAS COMPLETED BEFORE 01.10.2009 AND THEREFORE AMENDMENT IN SECTION 50C WAS NOT APPLICABLE. HE HEAVILY RELIED U PON THE JUDGMENT OF HONBLE MADRAS HIGH COURT AS WAS ALSO R ELIED UPON BEFORE THE LD. CIT(A). IN ADDITION TO THAT, HE RELIED UPON THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. SHIMBHU MEHRA 65 TAXMANN.COM 142(ALL) FOR TH E PROPOSITION THAT IF AGREEMENT FOR SALE WAS ENTERED INTO BETWEEN THE PARTIES ON 04.07.2001 WHEN PROVISIONS OF SECTIO N 50C WAS NOT APPLICABLE, SINCE THEY COME INTO EFFECT FROM 01 .04.2003, THEREFORE, PROVISIONS OF SECTION 50C CANNOT BE INVO KED RETROSPECTIVELY. 3.4 . PER CONTRA, LD. DR STATED THAT NO EVIDENCE WAS BR OUGHT ON RECORD TO SHOW THAT TRANSACTION WAS COMPLETED BE FORE 01.10.2009 AND THEREFORE, AMENDMENT MADE IN SECTION 50C IS APPLICABLE UPON THE ASSESSEE. FOR OTHER ARGUMENTS, HE RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 3.5. IN REJOINDER, LD. COUNSEL DREW OUR ATTENTION UPON THE BANK STATEMENT SHOWING THAT REMAINING PART OF CONSI DERATION AMOUNTING TO RS.5,95,800/- WAS RECEIVED BY THE ASSE SSEE ON DEVENDRA K. CHEDDA 6 26 TH SEPTEMBER 2009 AND ALL THE OTHER FORMALITIES HAD A LSO BEEN COMPLETED BY THAT DATE. UNDER THESE CIRCUMSTAN CES, IT COULD BE VERY WELL SAID THAT FOR THE PURPOSE OF SEC TION 50C, THE TRANSFER HAD TAKEN PLACE PRIOR TO THE AMENDMENT MAD E W.E.F. 01.10.2009, AND THEREFORE, AMENDED PROVISIONS COULD NOT HAVE BEEN APPLIED UPON THE ASSESSEES CASE. 3.6. WE HAVE GONE THROUGH THE FACTS OF THE CASE AS WERE BROUGHT OUT BY BOTH THE PARTIES BEFORE US. IT IS UN DISPUTED FACT THAT AGREEMENT TO SALE WAS UNDOUBTEDLY ENTERED INTO BETWEEN THE PARTIES ON 28 TH DAY OF JULY 2007. THIS IS ALSO UNDISPUTED THAT THE AGREEMENT IS UNREGISTERED AGREEMENT. THUS, STAMP DUTY HAS NOT BEEN ASSESSED FOR THE IMPUGNED TRANSAC TIONS BY THE STAMP VALUATION AUTHORITY. THE CASE OF THE REVE NUE IS THAT WORD ASSESSABLE HAS BEEN INSERTED IN SECTION 50C. IT IS CONTENDED BY THE LD. COUNSEL THAT THE AFORESAID INS ERTION HAS BEEN MADE W.E.F. 01.10.2009 AND THE SAID AMENDMENT IS PROSPECTIVE AS HAS BEEN CLARIFIED BY THE CBDT AND R IGHTLY EXPLAINED BY HONBLE MADRAS HIGH COURT IN THE AFORE SAID JUDGMENT AND NO CONTRARY JUDGMENT HAS BEEN BROUGHT BY THE REVENUE BEFORE THE TRIBUNAL. 3.7. WE FIND FORCE IN THE ARGUMENT OF LD. COUNSEL. APPA RENTLY AND UNDISPUTEDLY, AGREEMENT TO SALE WAS MADE ON 28 TH JULY 2007. THE READING OF THE AGREEMENT MAKES IT CLEAR T HAT INTENTION OF THE PARTIES TO MAKE TRANSFER OF THE PR OPERTY IS CLEARLY DISCERNIBLE FROM PERUSAL OF ALL THE CLAUSES IF THESE ARE READ TOGETHER. IT WAS CLEARLY LAID DOWN IN THE AGRE EMENT THAT OUT OF TOTAL SALE CONSIDERATION OF RS.23,53,000/-, AN AMOUNT RS.8,44,600/- WAS PAID AT THE TIME OF AGREEMENT DAT ED 28 TH DEVENDRA K. CHEDDA 7 JULY 2007, AND THE REMAINING AMOUNT WAS PAYABLE UPO N COMPLETION OF THE TRANSACTION. IT IS NOTED THAT THE TOTAL CONSIDERATION STOOD PAID UPTO 26.09.2009 IN INSTALL MENTS. THUS, FOR ALL PRACTICAL PURPOSE THE TRANSFER OF THE PROPERTY WAS COMPLETED BEFORE 01.10.2009 AS FAR AS THE ASSESSEE IS CONCERNED. UNDER THESE CIRCUMSTANCES, LET US EXAMIN E IF THE AMENDMENT MADE IN SECTION 50C W.E.F. 01.10.2009 (I. E. SUBSEQUENT TO 26.09.2009) CAN BE MADE APPLICABLE UP ON THIS CASE. IN THIS REGARD, IT IS NOTED BY US THAT IT WAS CLARIFIED BY THE CBDT VIDE ITS CIRCULAR NO. 5 OF 2010 DATED 03.0 6.2010 (REPRODUCED IN 324 ITR 293(STATUTE) THAT AFORESAID AMENDMENT MADE IN SECTION 50C IS ONLY PROSPECTIVE IN NATURE, AND THUS, IT CANNOT BE APPLIED RETROSPECTIVELY. IT IS NOTED THAT IT HAS BEEN CLARIFIED BY THE BOARD THAT AFORESAID AMENDMENT SHA LL BE APPLIED IN RELATION TO TRANSACTIONS UNDERTAKEN ON/O R AFTER 01.10.2009. THE SAID CIRCULAR HAS BEEN PROPERLY EXP LAINED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. R. SUGANTHA RAVINDRAN (SUPRA). IT IS FURTHER NOTED THA T THAT THEIR LORDSHIPS ANALYSED THE PROVISION INDEPENDENTLY ALSO AND FOUND THAT THE IMPUGNED AMENDMENT WAS NOT APPLICABLE ON T HE TRANSACTIONS DONE PRIOR TO 01.10.2009. THE RELEVANT PORTION OF OBSERVATIONS OF HONBLE HIGH COURT IS REPRODUCED HE REUNDER: EVEN OTHERWISE, WE ARE OF THE FIRM VIEW THAT THE INSERTION OF THE WORDS 'OR ASSESSABLE' BY AMENDING SECTION 50C WITH EFFECT FROM OCTOBER 1, 2009, IS NE ITHER A CLARIFICATION NOR AN EXPLANATION TO THE ALREADY EXI STING PROVISION AND IT IS ONLY AN INCLUSION OF NEW CLASS OF TRANSACTIONS, NAMELY, THE TRANSFERS OF PROPERTIES W ITHOUT OR BEFORE REGISTRATION. BEFORE INTRODUCING THE SAID AMENDMENT, ONLY THE TRANSFERS OF PROPERTIES WHERE T HE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION DEVENDRA K. CHEDDA 8 AUTHORITY WERE SUBJECTED TO SECTION 50C APPLICATION . HOWEVER, AFTER INTRODUCTION OF THE WORDS 'OR ASSESS ABLE' AFTER THE WORDS 'ADOPTED OR ASSESSED', SUCH TRANSFE RS WHERE THE VALUE ASSESSABLE BY THE STAMP VALUATION AUTHORITY ARE ALSO BROUGHT INTO THE AMBIT OF SECTIO N 50G. THUS, SUCH INTRODUCTION OF NEW SET OF CLASS OF TRAN SFER WOULD CERTAINLY HAVE THE PROSPECTIVE APPLICATION ON LY AND NOT OTHERWISE. HENCE, THE ASSESSEE'S TRANSFER ADMIT TEDLY MADE EARLIER TO SUCH AMENDMENT CANNOT HE BROUGHT UNDER SECTION 50C. APPLYING THE ABOVE SAID DECISION OF THE HONOURABLE APEX COURT TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS BY CONSIDERING THE SCOPE OF SECTION 50C, WE HOLD TH AT THE REVENUE IS NOT ENTITLED TO CANVASS THE CORRECTN ESS OF THE ORDER PASSED BY THE TRIBUNAL, MORE PARTICULA RLY IN THE LIGHT OF THE CIRCULAR ISSUED BY THE BOARD. ACCO RDINGLY, THE TAX CASE APPEAL IS DISMISSED AND THE SUBSTANTIA L QUESTION OF LAW IS ANSWERED AGAINST THE REVENUE. NO COSTS. 3.8. THUS, IT IS CLEAR FROM THE ABOVE LEGAL DISCUSSION THAT SINCE IN THE FACTS OF THE CASE BEFORE US THE TRANSACTION WAS CARRIED OUT BY THE ASSESSEE PRIOR TO 01.10.2009, THEREFORE PROVISIONS OF SECTION 50C COULD NOT HAVE BEEN APPLIED. SINCE, THE IMPUGNED AGREEMENT WAS NOT REGISTERED, THEREFORE, T HERE WAS NO OCCASION FOR ANY ASSESSMENT OF STAMP VALUATION. UNDER THESE CIRCUMSTANCES, THE AO WAS NOT EMPOWERED TO AD OPT ANY VALUATION IN PLACE OF ACTUAL SALES CONSIDERATION ON THE BASIS OF HIS OWN NOTIONS OR CALCULATIONS. THUS, WE FIND THAT ACTION OF THE LOWER AUTHORITIES IN INVOKING THE PROVISIONS OF SECTION 50C AND IN SUBSTITUTING SOME OTHER VALUATION WAS CLEARL Y BEYOND THE PROVISIONS OF LAW AS APPLICABLE UPON THE IMPUGN ED TRANSACTION. UNDER THESE TRANSACTIONS, WE HEREBY DE LETE THE ADDITION MADE BY THE AO. SINCE, THE RELIEF HAS BEEN ALLOWED TO THE ASSESSEE ON PRELIMINARY GROUND, THEREFORE WE DO NOT FIND IT DEVENDRA K. CHEDDA 9 NECESSARY TO DEAL WITH THE VARIOUS OTHER GROUNDS OF THE ASSESSEE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED IN TERMS OF OUR DIRECTIONS AS GIVEN ABOVE. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCLUSION OF THE HEARING. SD/- (SANJAY GARG ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER ! ' MUMBAI; ' DATED : 19 /10/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. ) *+ / THE APPELLANT 2. ,-*+ / THE RESPONDENT. 3. .$ . ! / ( ) ) / THE CIT, MUMBAI. 4. .$ . ! / / CIT(A)- , MUMBAI 5. 23 , 45 , .$ )% 45$6 , ! ' / DR, ITAT, MUMBAI 6. 7 8 ' / GUARD FILE. / BY ORDER, - 2) , //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ! ' / ITAT, MUMBAI