Sri. V. Pushparaj, Bangalore V. ITO, Bangalore

ITA 686/BANG/2011

• Counselvise Citation: 68621114 RSA 2011
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 27-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR SATYA SAI RATH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Opportunity of being heard; Principle of natural justice; Fair market value
• Section: 143(3); 50C; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.686/BANG/2011 (ASSESSMENT YEAR : 2007-08) SHRI V. PUSHPARAJ, NO.41, 3 RD CROSS, POLICE ROAD, RANASINGHPET, BANGALORE-560 053. . APPELLANT. PAN AFJPP1140C VS. INCOME TAX OFFICER, WARD 1(3), HMT BHAVAN, BANGALORE. .. RES PONDENT. APPELLANT BY : SHRI GURUSWAMY H. RESPONDENT BY : DR. SATYA SAI RATH. DATE OF HEARING : 05.06.2012. DATE OF PRONOUNCEMENT : 29.06.2012. O R D E R PER SHRI JASON P. BOAZ, A.M . : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE DATED 15.2.2011 F OR ASSESSMENT YEAR 2007-08. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE FILED HIS RETURN OF INCOME FOR ASS ESSMENT YEAR 2007-08 ON 22.6.2007 ADMITTING TOTAL INCOME OF RS. 2,66,127. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (H EREIN AFTER REFERRED AS 'THE ACT') AND THE CASE WAS TAKEN UP FOR SCRUTINY BY ISSUE OF NOT ICE UNDER SECTION 143(2) ON 25.8.2008. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY AN ORDER UNDER SECTION 143(3) OF THE ACT ON 30.12.2009 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 20,94,883. THIS WAS 2 ITA NO.686/BANG/11 INCLUSIVE OF SHORT TERM CAPITAL GAINS (STCG) ATTRIB UTABLE TO THE SHARE OF THE ASSESSEE, BEING 50% ARISING OUT OF THE JOINT DEVELOPMENT AGRE EMENT (JDA) DT.2.6.2006 ENTERED INTO BY AND BETWEEN THE ASSESSEE AND THE DEVELOPERS M/S. S.V. DEVELOPERS IN RESPECT OF LAND BEARING SURVEY NO.115/2, B. NARAYANA PURA VILL AGE, K.R. HOBLI, BANGALORE EAST TALUK MEASURING 10 GUNTAS, EQUIVALENT TO 10,890 SQ. FT. ACCORDING TO THE TERMS OF THE JDA, THE ASSESSEE WAS ENTITLED TO 12 FLATS WITH CORRESPONDIN G 12 CAR PARKING SLOTS, BEING 45% OF THE BUILT UP AREA IN LIEU OF TRANSFER OF 55% OF THE UND IVIDED PORTION OF THE VACANT LAND IN FAVOUR OF THE DEVELOPERS FOR CONSTRUCTION OF 16 FLA TS WITH AN EQUAL NUMBER OF PARKING SLOTS. THUS THE TOTAL NUMBER OF FLATS AGREED TO BE CONSTRUCTED WERE 28 OUT OF WHICH THE ASSESSEE WAS ENTITLED TO GET 12 FLATS WITH EQUAL NU MBER OF PARKING SLOTS AND THE DEVELOPER WAS ENTITLED TO THE REMAINING 16 FLATS WITH EQUAL N UMBER OF PARKING SLOTS. THE ASSESSEE RECEIVED A NON-REFUNDABLE DEPOSIT OF RS. 15 LAKHS. APART FROM THIS DEPOSIT, THE ASSESSEE HAD NOT RECEIVED ANY OTHER CONSIDERATION IN THE REL EVANT PERIOD. THE ASSESSING OFFICER HELD THAT THE TRANSFER OF 55% OF THE LAND IN FAVOUR OF THE DEVELOPER WAS A DEEMED TRANSFER UNDER SECTION 53A OF THE TRANSFER OF PROPE RTY ACT, 1882 RWS 2(47)(V) OF THE ACT AND THE SAME WAS EXIGIBLE TO LEVY OF CAPITAL GAINS TAX IN THE YEAR IN WHICH THE JDA WAS ENTERED INTO. ACCORDING TO THE ASSESSING OFFICER, AS THE JDA WAS ENTERED INTO ON 2.6.2006, ACCORDINGLY THE ASSESSEE WAS LIABLE FOR L EVY OF CAPITAL GAINS IN THE PERIOD RELEVANT TO ASSESSMENT YEAR 2007-08. IN SUPPORT OF HIS FINDING, THE ASSESSING OFFICER PLACED RELIANCE ON THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CHATURBHUJ DWARAKA DAS KAPADIA V. CIT (2003) 260 IT R 491. IN ORDER TO QUANTIFY THE AMOUNT OF CONSIDERATION FOR THE PURPOSE OF CAPITAL GAINS, THE ASSESSING OFFICER RELIED ON THE GUIDANCE VALUE PRESCRIBED BY THE STATE GOVERNME NT AUTHORITIES AS COMMUNICATED BY THE SUB-REGISTRAR IN RESPONSE TO INFORMATION CALLED FOR BY THE ASSESSING OFFICER UNDER SECTION 133(6) OF THE ACT AND ON THE BASIS OF THE V ALUE OF RS. 400 PER SQ. FT. COMMUNICATED BY THE SUB- REGISTRAR VALUED THE DEEMED CONSIDERATI ON OF THE UNDIVIDED PORTION OF LAND AT RS. 23,96,000 AS PER SECTION 50C OF THE ACT. 3 ITA NO.686/BANG/11 2.2 AGGRIEVED, THE ASSESSEE FILED AN APPEAL BE FORE THE LEARNED CIT(A) DISPUTING THE LIABILITY ATTRIBUTABLE TO CAPITAL GAINS. THE ASSES SEE HAS ALSO DISPUTED THE LEVY OF TAX ON THE NON-REFUNDABLE DEPOSIT OF RS. 15 LAKHS ON THE G ROUND THAT IT WAS NOT LIABLE FOR TAX SINCE IT IS SUB-SUMMED IN THE TOTAL DEEMED CONSIDER ATION OF RS. 23,96,000 QUANTIFIED BY THE ASSESSING OFFICER UNDER SECTION 50C OF THE ACT IN RESPECT OF TRANSFER OF 55% OF THE UNDIVIDED PORTION OF LAND EQUIVALENT TO 5990 SQ. FT . AT THE GUIDANCE VALUE OF RS. 400 PER SQ. FT. PRESCRIBED FOR THE PURPOSE OF LEVY OF STAMP DUT Y. BEFORE THE CIT(A) THE ASSESSEE CONTENDED THAT HE WAS NOT LIABLE FOR LEVY OF CAPITA L GAINS TAX IN PURSUANCE OF THE JDA DT.2.6.2006 WHICH HE SUBMITTED DID NOT CONSTITUTE T RANSFER OF LAND AS PER SECTION 45 OF THE ACT. THE ASSESSEE PLACED RELIANCE FOR ITS CONT ENTION ON THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN ITA NOS.534/BANG/1999 & 14 7/BANG/2003 DT.29.4.2004 IN THE CASE OF H.B. JAIRAJ VS. DCIT WHEREIN IT HAD BEEN HE LD THAT THE LEVY OF CAPITAL GAINS TAX WAS NOT EXIGIBLE IN A SCHEME OF JOINT DEVELOPMENT W HICH IS NOT A SALE OR TRANSFER OF ASSET FOR CASH AND THUS IT WAS HELD THAT SECTION 45(1) OF THE ACT WAS NOT APPLICABLE IN RESPECT OF JOINT DEVELOPMENT SCHEMES. THE ASSESSEE ALSO CONTE NDED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DETERMINING THE DEEMED CONSIDERATI ON BY INVOKING THE PROVISIONS OF SECTION 50C OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF HI S CASE. 2.3 THE LEARNED CIT(A) DID NOT ACCEPT THE CONTE NTIONS OF THE ASSESSEE AND HELD THAT THE CAPITAL GAINS ARISING OUT OF THE JOINT DEVELOPM ENT AGREEMENT ARE CHARGEABLE TO TAX IN VIEW OF THE DECISION OF THE HON'BLE HIGH COURT OF B OMBAY IN THE CASE OF CHATURBHUJ DWARAKA DAS KAPADIA (SUPRA). THE LEARNED CIT(A) AL SO HELD THAT THE NON-REFUNDABLE DEPOSIT OF RS. 15 LAKHS IS CHARGEABLE TO TAX FOR TH E REASON THAT THE COST OF 12 FLATS AND 12 PARKING SLOTS CONSTRUCTED ON 45% OF THE LAND BY THE DEVELOPER IS NOT COMMENSURATE WITH 16 FLATS AND 16 PARKING SLOTS CONSTRUCTED ON 55% O F THE LAND OF THE JOINT DEVELOPER AND THAT IT MAY THEREFORE INDIRECTLY BE SAID THAT RS. 1 5 LAKHS REPRESENTED THE COST OF SALE OF 4 FLATS WITH 4 PARKING SLOTS BY THE ASSESSEE TO THE D EVELOPER/BUILDER. THE ASSESSEES APPEAL WAS DISPOSED OFF ALLOWING THE ASSESSEE MARGINAL REL IEF OF RS. 5,21,433 ON ACCOUNT OF RECOMPUTATION OF CAPITAL GAINS BY TAKING THE COST O F ACQUISITION OF THE PROPERTY AT RS. 4 ITA NO.686/BANG/11 13,62,800 AS PER THE PURCHASE DEED IN PLACE OF RS. 4,33,614 ESTIMATED BY THE ASSESSING OFFICER. 3.1 AGGRIEVED BY THE ORDER OF THE LEARNED CIT( A), THE ASSESSEE IS BEFORE US. THE GROUNDS OF APPEAL RAISED ARE AS UNDER : 1. THE APPELLATE ORDER DT.15.2.2011 IS OPPOSED TO LAW AND FACTS OF THE CASE IN SO FAR AS IT IS OPPOSED TO THE INTEREST OF THE APPE LLANT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-I, BANGALORE OUGHT TO HAVE NOT HELD THAT THE SHORT CAPITAL GAINS ARE CHAR GEABLE TO TAX FOR THE ASSESSMENT YEAR 2007-08 WITHIN THE AMBIT OF SECTION 45(1) OF THE ACT IN RESPECT OF THE DEEMED TRANSFER OF 55% OF THE LAND I N FAVOUR OF THE DEVELOPER IN THE SCHEME OF JOINT DEVELOPMENT AGREEMENT, DATED 2.6.2006. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-I, BANGALORE OUGHT TO HAVE NOT RELIED UPON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE CHATURBHUJ DWARKA DAS KAPADIYA VS. CIT (2003) 260 I TR 491 IGNORING THE JURISDICTIONAL ITATS DECISIONAL IN THE CASE OF SRI H.B. JAIRAJ VS. DCIT SPECIAL RANGE 2, BANGALORE IN ITA NO.534/BANG/1999/1995-96, DATED 29.4.2004. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-I, BANGALORE OUGHT TO HAVE NOT HELD THAT THE NON-REFUNDABLE DEPOSIT OF R S. 15,00,000 WAS CHARGEABLE TO TAX AS IT INDIRECTLY REPRESENTED THE COST OF 4 F LATS WITH 4 CAR PARKING SLOTS, WHICH IS NOT FACT ON RECORD. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-I, BANGALORE OUGHT TO HAVE NOT HELD THAT THE CASE FOR THE ASSESSMENT YEAR 2007-08 WAS SELECTED FOR SCRUTINY MERELY ON THE SUBMISSION OF THE ASSESSING OFFICER WITHOUT ANY CORRESPONDING EVIDENCE ON RECORD TO JUSTIFY THE SEL ECTION FOR SCRUTINY WITHIN THE PARAMETERS OF THE SCRUTINY GUIDELINES. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D AND DELETE ANY OF THE GROUNDS AT THE TIME OF HEARING. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, IT IS RESPECTFULLY PRAYED THAT YOUR HON'BLE AUTHORITY BE PLEASED TO PASS ORDERS DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDIT IONS MADE IN THE ASSESSMENT ORDER AND TO RESTORE THE INCOME DECLARED BY THE APP ELLANT AND FURTHER BE PLEASED TO PASS ORDERS THAT THE APPELLANT WAS LIABL E FOR SHORT TERM CAPITAL GAINS TAX ON THE STRENGTH OF THE JOINT DEVELOPMENT AGREEMENT AND FURTHER BE PLEASED TO PASS SUCH OTHER ORDERS GRANTING SUCH OTH ER RELIEF THAT YOUR HON'BLE AUTHORITY MAY DEEM FIT IN THE INTEREST OF EQUITY AN D JUSTICE. 5.1 THE GROUND RAISED AT S.NO.1 IS GENERAL IN NATURE AND NO ADJUDICATION IS THEREF ORE CALLED FOR THEREON. 5 ITA NO.686/BANG/11 5.2 THE GROUND OF APPEAL RAISED AT S.NO.5 HAS NOT BEEN PRESSED IN THIS APPEAL BY THE LEARNED COUNSEL FOR THE ASSESSEE AND IS THEREFORE D ISMISSED AS INFRUCTUOUS. 5.3 IN RESPECT OF GROUNDS RAISED AT S.NOS.2 TO 4 , THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE FINDINGS OF THE LEARNED CIT(A) A RE NOT ACCEPTABLE AS THEY ARE FACTUALLY INCORRECT AND ARE BASED ON SURMISES AND B ASELESS ASSUMPTIONS. IT WAS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT TH E LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE NON-REFUNDABLE DEPOSIT OF RS. 15 L AKHS REPRESENTED THE COST OF SALE OF 4 FLATS WITH 4 PARKING SLOTS WHEN THERE WAS NO FACTUA L OR EVIDENTIARY BASIS TO HOLD SO AND ALSO WHICH WAS NOT THE SUBJECT MATTER OF ASSESSMENT OR IN RESPECT OF ANY ISSUE IN APPEAL BEFORE THE LEARNED CIT(A). IT IS FURTHER POINTED O UT BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT WHILE THE ASSESSEE WAS ENTITLED TO ON LY 12 OUT OF THE PROPOSED 28 FLATS AND THE DEVELOPER TO THE REMAINING 16 FLATS, THE LEARNE D CIT(A) WAS FACTUALLY INCORRECT IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO 16 FLATS. IT WAS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE NON-REFUNDABLE DE POSIT OF RS. 15 LAKHS WAS THE ONLY ACTUAL AMOUNT OF CONSIDERATION RECEIVED BY THE ASSE SSEE WHICH WAS SUB-SUMMED IN THE TOTAL DEEMED CONSIDERATION QUANTIFIED BY THE ASSESS ING OFFICER AND THEREFORE THIS NON- REFUNDABLE DEPOSIT OF RS. 15 LAKHS WAS NOT SEPARATE LY EXIGIBLE TO TAX CAPITAL GAINS WHEN THE TOTAL CONSIDERATION WAS SUBJECTED TO TAX. IN THE C OURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BEL OW WERE NOT JUSTIFIED IN DETERMINING THE DEEMED CONSIDERATION UNDER SECTION 50C OF THE A CT WHICH IS NOT APPLICABLE TO THE INSTANT CASE OF THE ASSESSEE. 5.4 THE LEARNED COUNSEL FOR THE ASSESSEE, IN WR ITTEN SUBMISSION FILED ON 5.6.2012 ON THIS ISSUE, HAS SUBMITTED AS UNDER : THE LEARNED ASSESSING OFFICER HAS INVOKED THE PRO VISIONS OF SECTION 50C OF THE ACT FOR QUANTIFICATION OF THE DEEMED CONSIDERATION OF T HE LAND TO AN EXTENT OF 55%, WHICH WAS SUBJECT MATTER OF JOINT DEVELOPMENT AGREE MENT. FOR THE PURPOSE OF QUANTIFICATION OF THE DEEMED CONSIDERATION, THE LEA RNED ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 133(6) OF THE ACT TO CALL FOR THE GUIDANCE VALUE OF THE PROPERTY FROM THE SUB-REGISTRAR, K.R.PURAM, BAN GALORE. ON THE BASIS OF THE INFORMATION GATHERED FROM THE SUB-REGISTRAR, K.R. P URAM, BANGALORE, THE LEARNED 6 ITA NO.686/BANG/11 ASSESSING OFFICER HAS DETERMINED THE DEEMED CONSIDE RATION OF 55% OF THE UNDIVIDED PORTION OF THE LAND MEASURING 5990 SQ.FT AT RS. 23 ,96,000/- AT THE RATE OF 400 PER SQ FT AS PER SECTION 50C OF THE ACT. HOWEVER, BEFORE DETERMINATION OF THE DEEMED CONSIDERATION THE LEARNED ASSESSING OFFICER HAS NOT PROVIDED ANY OPPORTUNITY TO THE APPELLANT FOR FILING OF HIS OBJECTIONS AS REQUIRED UNDER SUB SECTION 2 OF SECTION 50C OF THE ACT. THE LEARNED ASSESSING OFFICER WAS BOUN D TO PROVIDE UNDER THE LAW AN OPPORTUNITY TO THE APPELLANT FOR FILING HIS OBJECTI ONS BEFORE THE DETERMINATION OF THE DEEMED CONSIDERATION U/S. 50C OF THE ACT. PROVIDIN G AN OPPORTUNITY U/S. 50C(2) OF THE ACT IS A MANDATORY REQUIREMENT OF LAW, WHICH HA S NOT BEEN FOLLOWED BY THE LEARNED ASSESSING OFFICER. THE LEARNED AO HAS UNIL ATERALLY DETERMINED THE DEEMED CONSIDERATION WITHOUT PROVIDING ANY OPPORTUNITY TO THE APPELLANT OF BEING HEARD IN THE MATTER. THE APPELLANT IN THIS CONNECTION, SUBMITS THAT TH E LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED TO INVOKE THE PROVISIONS OF SECTI ON 50C OF THE ACT AS THE SAID PROVISIONS ARE NOT APPLICABLE TO THE APPLICANT AS T HE STAMP VALUATION AUTHORITIES HAVE NOT ADOPTED OR ASSESSED ANY VALUE IN RESPECT O F THE TRANSFER OF UNDIVIDED PORTION OF THE LAND MEASURING 5990 SQ.FT. THE PROVISIONS OF SECTION 50C OF THE ACT ARE ENF ORCEABLE ONLY IN A CIRCUMSTANCE WERE THE CONSIDERATION RECEIVED OR ACC RUING AS A RESULT OF THE TRANSFER OF ANY CAPITAL ASSET IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITIES OF STATE GOVERNMENT (REFERRED TO AS THE STAMP VALUATIO N AUTHORITY). IT IS A FACT ON RECORD THAT THE STAMP VALUATION AUTHORITIES HAVE NO T EITHER ADOPTED OR ASSESSED ANY VALUE IN RESPECT OF THE TRANSFER OF 5990 SQ.FT OF UNDIVIDED PORTION OF LAND. THE APPELLANT FOR THE SAKE OF CONVENIENCE AND IMM EDIATE REFERENCE REPRODUCED HEREWITH THE PROVISIONS OF SECTION 50C O F THE ACT WHICH LEADS AS UNDER :- 50C. SPECIAL PROVISION FOR FULL VALUE OF CONSIDERA TION IN CERTAIN CASES. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A R ESULT 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 GOV ERNMENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORI TY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALU E SO ADOPTED OR ASSESSED SHALL, FOR THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FUL L VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECTION (1), WHERE (A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER T HAT THE VALUE ADOPTED OR ASSESSED 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 BY THE STAMP VALU ATION 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 LEARNED AO HAS NOT COMPLIED WITH THE REQUIREMEN T OF PROVISIONS OF SECTION 50C OF THE ACT. THE LEARNED AO, ON RECORD WAS NOT IN POSSESSION OF ANY MATERIAL INFORMATION AS TO THE VALUE ADOPTED OR ASS ESSED BY THE STAMP VALUATION AUTHORITIES TO INVOKE THE PROVISIONS OF SECTION 50C OF THE ACT. THE LEARNED AO WAS 7 ITA NO.686/BANG/11 NOT ENTITLED TO INVOKE THE PROVISIONS OF SECTION 50 C OF THE ACT AS LONG AS THE STAMP VALUATION AUTHORITIES HAVE NOT EITHER ADOPTED OR AS SESSED THE VALUE FOR TRANSFER OF LAND. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER WITH THE DEEMED CONSIDERATION RELEVANT FOR COMPUTATION O F CAPITAL GAINS IS NOT IN ACCORDANCE WITH THE LAW AND HENCE THE ASSESSMENT OR DER DATED 30-12-2009 PASSED BY THE LEARNED ASSESSING OFFICER IS NOT SUSTAINABLE UNDER THE LAW AND THE SAME IS LIABLE TO BE CANCELLED. THE APPELLANT BEFORE THE LEARNED CIT(A)-I, BANGALO RE HAS AGITATED THE ISSUE REGARDING DETERMINATION OF DEEMED CONSIDE RATION U/S. 50C OF THE ACT. THE LEARNED CIT(A)-I, BANGALORE HAS ADDRESSED THE ISSUE IN PARA 7.1 OF THE APPELLATE ORDER WHICH IS REPRODUCED AS UNDER :- 7.1 IN THE WORDS OF A.R 3. DEEMED CONSIDERATION U/S. 50C OF THE ACT : - THE LEARNED ASSESSING OFFICER HAS ADOPTED THE DEEMED SALE CONSIDERATION AMOUNTING TO RS. 23,96,000/- AS PER THE GUIDANCE VALUE STATED TO HAVE BEEN OBTAINED FROM TH E SUB-REGISTRAR, K.R. PURAM, BANGALORE, AS PER THE NOTIFICATION NO. IGR/CVC/3/20 04-05, DATED 07-10-2005 ISSUED BY THE GOVERNMENT OF KARNATAKA. IN THIS CONNECTION, THE APPELLANT HAS OBJECTED THAT THE LEARNED ASSESSING OFFICER HAS NOT FOLLOWED THE PROCEDURE LAID DOWN UNDER SUB-SECT ION 2 OF SECTION 50C OF THE ACT. THE APPELLANT SUBMITS THAT THE APPLICATION OF SECTI ON 50C OF THE ACT ARISES ONLY IN A CIRCUMSTANCE WHERE A PROPERTY HAS BEEN REGISTERED A S A DOCUMENT UNDER THE REGISTRATION ACT, WHEREIN THE MARKET VALUE OF THE P ROPERTY WAS DETERMINED BY THE STAMP VALUATION AUTHORITIES OR OTHERWISE, SECTION 5 0C OF THE ACT IS NOT APPLICABLE IN COMPUTING THE DEEMED CONSIDERATION. IT IS A FACT ON RECORD THAT THE PROPERTY WAS NEITHER SOLD FOR ANY ASCERTAINABLE CONSIDERATION NO R ANY VALUE HAS BEEN DETERMINED BY STAMP VALUATION AUTHORITIES. UNDER SUCH CIRCUMS TANCES APPLICATION OF SECTION 50C OF THE ACT ABSOLUTELY NOT MAINTAINABLE UNDER TH E LAW. THE LEARNED ASSESSING OFFICER IN THE REMAND REPORT HAS ADMITTED THE VIOLA TION OF THE PROCEDURE PRESCRIBED U/S. 50C(2) OF THE ACT AND THEREFORE, THE ISSUE WAS LEFT TO THE CONSIDERATION OF YOUR HONBLE AUTHORITY. ADMITTEDLY THE DEEMED CONSIDERA TION OBTAINED FROM THE SUB- REGISTRAR HAS VITIATED THE ASSESSMENT IN VIEW OF TH E VIOLATION OF THE PROCEDURE LAID DOWN UNDER THE ACT. THEREFORE, THE 23,96,000/- ADO PTED BY THE LEARNED ASSESSING OFFICER IS AGAINST TO THE PROVISIONS OF ACT AND THE REFORE, THE APPELLANT PRAYS THAT YOUR HONBLE AUTHORITY BE PLEASED TO DELETE THE DEE MED CONSIDERATION IN THE INTEREST OF EQUITY AND JUSTICE THE LEARNED AO AGAINST THE ABOVE SUBMISSIONS OF T HE APPELLANT REGARDING APPLICATION OF SECTION 50C OF THE ACT HAS SUBMITTED HIS REPORT (AS FOUND IN PARA 7.2 OF THE APPELLATE ORDER), WHICH IS REPRODUCED HEREUN DER FOR THE SAKE OF CONVENIENCE AND IMMEDIATE REFERENCE :- 7.2 THE A.O SUBMITTED AS UNDER ON THESE ISSUES. 2. PARA.3 DEEMED CONSIDERATION U/S. 50C OF THE I.T. ACT.: THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE FO R THE FOLLOWING FACTS: (A) THE VALUE ADOPTED FOR THE DEEMED SALE CONSIDERATION AMOUNTING TO RS. 23,96,000/- IS BASED ON THE MARKET VALUE AS PER THE GUIDANCE VA LUE FIXED BY THE STATE 8 ITA NO.686/BANG/11 GOVERNMENT FOR THE RELEVANT PERIOD AS CERTIFIED BY THE SUB-REGISTRAR. EVEN IF THE CONTENTION OF THE ASSESSEE IS ACCEPTED REGARDING AP PLICATION OF SECTION 50C OF THE I.T.ACT., THE ONLY WAY OUT FOR THE ASSESSING OFFICE R TO ARRIVE AT THE MARKET RATE FOR THE RELEVANT PERIOD IS TO ADOPT THE GUIDANCE VALUE FIXE D BY THE STATE GOVERNMENT. SINCE THE ISSUE IS BASED ON DEEMED TRANSACTION, THE ACTIO N OF THE ASSESSING OFFICER IS JUSTIFIED. EVEN WITHOUT APPLICATION OF SECTION 50C ALSO, THE AMOUNT HAS BEEN RIGHTLY APPLIED. THE LEARNED CIT(A)-I, BANGALORE HAS CONSIDERED THE RIVAL SUBMISSIONS, BUT HE HAS NOT GIVEN ANY CLEAR FINDINGS ON THE ISSUE AS REGARD APPLICABILITY OF PROVISIONS OF SECTION 50C OF THE ACT. HOWEVER, HE HAS ADDRESS ED THE ISSUE IN PARA 7.3 OF THE APPELLATE ORDER AS UNDER:- 7.3 I HAVE GONE THROUGH THE ABOVE. I OBSERVE THAT THE INITIAL OBJECTION OF THE A.O FOR DETERMINATION OF THE FULL VALUE OF THE CONSIDERATIO N OF THE PROPERTY TRANSFERRED TO THE DEVELOPER @ RS.400/- IS NO LONGER AGITATED DURI NG THE APPELLATE HEARING AFTER GETTING THE FULL DETAILS IN THIS RESPECT FROM THE A .O. DURING REMAND STAGE. I OBSERVE WITHHOLDING OF INFORMATION GOES AGAINST THE PROPER DELIVERY OF THE JUSTICE. AT THE ASSESSMENT STAGE, THE A.O HAD UTILIZED SUCH INFORMA TION WITHOUT CONFRONTING THE SAME TO THE ASSESSEE. THE LEARNED CIT(A)-I, BANGALORE IN SPITE OF THE APPELLANTS OBJECTIONS AS REGARDS APPLICABILITY OF SECTION 50C OF THE ACT HAS NOT GIVEN ANY CLEAR FINDING WHETHER THE PROVISIONS OF SECTION 50C OF THE ACT AR E APPLICABLE OR NOT, BUT CONFIRMED THE ADDITION OF RS. 23,96,000/- WHICH WA S QUANTIFIED BY THE LEARNED AO AS FULL VALUE OF THE CONSIDERATION OF THE UNDIVIDED PORTION OF LAND TRANSFERRED TO THE DEVELOPER. THE LEARNED CIT(A)-I, BANGALORE HAS HELD IN TH E APPELLATE ORDER IN PARA 7.3 AT PAGE 40 OF THE APPELLATE ORDER AS UNDER :- I SEE JUSTIFICATION IN THE ARGUMENT OF THE AO RS. 23,96,000/- IS THE VALUE OF THE CONSIDERATION OF THE ENTIRE PROPERTY. THE LEARNED CIT(A)-I, BANGALORE WAS NOT JUSTIFIED T O CONFIRM THE ADDITION OF RS. 23,96,000/- BEING THE DEEMED CONSIDERATION QUAN TIFIED THE LEARNED AO WITHOUT GIVING ANY FINDING AS TO THE APPLICABILITY OF SECTI ON OF 50C OF THE ACT. THEREFORE, THE ORDER OF THE LEARNED CIT(A)-I, BANGALORE ON THIS IS SUE IS NOT IN ACCORDANCE WITH LAW AND HENCE THE SAME IS LIABLE TO BE SET ASIDE. 5.5 THE OTHER ISSUE AGITATED BY THE ASSESSEE IS THAT THE NON-REFUNDABLE DEPOSIT OF RS. 15 LAKHS IS NOT CHARGEABLE TO TAX SEPARATELY AS THE SAME IS SUBSUMED IN THE DEEMED CONSIDERATION QUANTIFIED BY THE ASSESSING OFFICER. THE WRITTEN SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE DT.5.6.2012 ON THI S ISSUE ARE AS UNDER : NON-REFUNDABLE DEPOSIT :- WITHOUT PREJUDICE TO THE CONTENTION AS TO THE APPLICABILITY OF SECTION 50C OF THE ACT, THE APPEL LANT SUBMITS THAT THE LEARNED ASSESSING OFFICER HAS HELD THE NON-REFUNDABLE DEPOS IT OF RS. 15,00,000/- AS INCOME OF THE APPELLANT IN ADDITION TO THE DEEMED CONSIDER ATION OF RS. 23,96,000/- 9 ITA NO.686/BANG/11 QUANTIFIED U/S. 50C OF THE ACT. IN THIS CONNECTION , THE APPELLANT SUBMITS THAT ONCE THE VALUE OF DEEMED CONSIDERATION IS A ESTIMATED U/ S. 50C OF THE ACT, THE NON- REFUNDABLE DEPOSIT IS NOT LIABLE TO BE TAXED AS THE SAME REPRESENTS PART AND PARCEL OF THE DEEMED CONSIDERATION. THE NON-REFUNDABLE DE POSIT BEING PART OF THE DEEMED CONSIDERATION IS NOT SEPARATELY CHARGEABLE TO TAX A S THE SAME IS SUBSUMED IN THE TOTAL DEEMED CONSIDERATION QUANTIFIED U/S. 50C OF T HE ACT. THEREFORE, THE NON- REFUNDABLE DEPOSIT IS LIABLE TO BE DELETED. THE LEARNED CIT(A)-I, BANGALORE ON PAGE 28 OF THE APPELLATE ORDER HAS HELD THAT THE NON-REFUNDABLE DEPOSIT AND THE DEEMED CONS IDERATION ARE TWO DIFFERENT OCCURRENCES AND HENCE, THE NON-REFUNDABLE DEPOSIT C ANNOT BE DELETED ON THE GROUND THAT THE DEEMED CONSIDERATION IS CHARGED TO TAX. T HE APPELLANT SUBMITS THAT THE LEARNED CIT(A)-I, BANGALORE HAS NOT APPRECIATED THE FACT THAT THE APPELLANT HAS RECEIVED CONSIDERATION OF RS. 15,00,000/- BEING NON -REFUNDABLE DEPOSITS IN LIEU OF TRANSFER OF 55% OF LAND IN FAVOUR OF THE DEVELOPER. APART FROM THE SAID NON- REFUNDABLE DEPOSIT OF RS. 15,00,000/-, HE HAS NOT R ECEIVED ANY OTHER AMOUNT OF CONSIDERATION. IN FACT, THE NON-REFUNDABLE DEPOSIT RECEIVED AS CONSIDERATION FOR THE TRANSFER OF 55% OF LAND WAS FOUND TO BE INADEQUATE BY THE LEARNED ASSESSING OFFICER AND THEREFORE THE DEEMED CONSIDERATION WAS DETERMIN ED U/S. 50C OF THE ACT AND HENCE THE NON-REFUNDABLE DEPOSIT BEING THE LESS THA N THE DEEMED CONSIDERATION IS NOT SEPARATELY CHARGEABLE TO TAX. THE LEARNED CIT(A)-I, BANGALORE HAS CONFIRMED THE ADDITION OF NON- REFUNDABLE DEPOSIT OF RS. 15,00,000/- FOR THE REASO NS STATED IN THE APPELLATE ORDER ON PAGE 29 AND 30 WHICH ARE REPRODUCED AS UNDER:- THUS AFTER BEING OPEN TO EACH OTHER THE ONLY DISSE NSION REMAIN IN RESPECT OF ADDITION OF THE NON-REFUNDABLE DEPOSIT OF RS. 15 LA KHS. THE AR PLEADS FOR THE DELETION ON THE GROUND THAT ONCE THE MARKET VALUE O F THE PROPERTY IS DEEMED AS PER THE SUB-REGISTRARS ESTIMATION AT RS. 23.96 LAKHS, IT SHOULD ALSO COVER WITHIN IT THE RECEIPT OF RS. 15 LAKHS AS NON-REFUNDABLE DEPOSIT. FURTHER ADDITION WOULD INFLATE THE FAIR MARKET VALUE AND SUCH IS NOT THE PROPER WAY OF COMPUTATION OF CAPITAL GAINS. THE AO ON THE OTHER HAND SUBMITTED THAT THE FULL VA LUE OF CONSIDERATION CONSIDERED AT RS. 23.96 LAKHS RELATES TO THE LAND PORTION ONLY AND NOT THE VALUE OF THE COST OF CONSTRUCTION OF THE 12 NO OF FLATS WITH 12 PARKING SLOTS BUILT ON 45% OF THE LAND RETAINED BY THE APPELLANT. I SEE JUSTIFICATION IN THE ARGUMENT OF THE AO. RS. 23,96,000/- IS THE FULL VALUE OF CONSIDERATION OF T HE ENTIRE PROPERTY. THE COST OF 12 FLATS AND 12 PARKING SLOTS CONSTRUCTED ON 45% OF T HE LAND BY THE BUILDER IS NOT IN COMMENSURATE WITH 16 FLATS WITH 16 PARKING SLOTS CO NSTRUCTED ON 55% OF THE LAND OF THE BUILDER. IT MAY THEREFORE INDIRECTLY BE SAID T HAT RS. 15 LAKHS REPRESENTED THE COST OF SALE OF 4 FLATS WITH 4 PARKING SLOTS BY THE APPELLANT TO THE BUILDER. HENCE I UPHOLD SUCH ADDITION TO THE STCG GAINS DETERMINED A T RS. 15,73,450/- VIDE PAGE 29 OF THIS ORDER. THE ADDITION OF RS. 15,00,000/- IS UPHELD. IN THIS REGARD, THE APPELLANT SUBMIT S THAT THE LEARNED CIT(A)-I, BANGALORE WAS NOT JUSTIFIED TO HOLD THAT THE NON-REFUNDABLE D EPOSIT OF RS. 15,00,000/- WAS A CONSIDERATION FOR 4 FLATS WITH THE CORRESPONDING CA R PARKING SLOTS. IN FACT, THE CONSTRUCTION OF 4 FLATS WITH CORRESPONDING CAR PARK ING SLOT WAS NOT A SUBJECT MATTER 10 ITA NO.686/BANG/11 OF THE ASSESSMENT ORDER AND THEREFORE, THE NON-REFU NDABLE DEPOSIT OF RS. 15,00,000/- WAS NOT RELATED TO THE CONSTRUCTION COS T OF 4 FLATS WITH CAR PARKING SLOTS. THE LEARNED AO HAS NOT STATED ANYTHING IN THIS REGA RD IN THE ASSESSMENT ORDER, BUT WITH AN AFTER THOUGHT IN HIS REMAND REPORT HE HAS S UBMITTED THAT A NON-REFUNDABLE DEPOSIT IS A SEPARATE CONSIDERATION ATTRIBUTABLE TO 4 FLATS WITH CAR PARKING SLOT, WHICH WAS NOT DISCUSSED IN THE ASSESSMENT ORDER. THE RELEVANT ISSUE IN THE ASSESSMENT ORDER WAS CHARGEABILITY OF DEEMED CONSIDERATION TO TAX IN THE SCHEME OF JOINT DEVELOP MENT FOR TRANSFER OF 55% OF UNDIVIDED PORTION OF LAND IN FAVOUR OF THE DEVELOPE R. THE CONSIDERATION CHARGEABLE TO TAX WAS ESTIMATED BY THE LEARNED AO U/S. 50C OF THE ACT WHICH INCLUDES THE NON- REFUNDABLE DEPOSIT. THEREFORE, THE ADDITION CONFIRMED RELATIN G TO THE NON-REFUNDABLE DEPOSIT OF RS. 15,00,000/- IS NOT JUSTIFIABLE AS TH E LEARNED AO HAS ESTIMATED THE AMOUNT OF CONSIDERATION CHARGEABLE TO TAX U/S. 50C OF THE ACT. 5.6 THE LEARNED DEPARTMENTAL REPRESENTATIVE ON H IS PART PLACED RELIANCE ON THE FINDINGS IN THE ORDERS OF THE AUTHORITIES BELOW. 5.7 WE HAVE HEARD BOTH PARTIES AND HAVE CAREFUL LY PERUSED AND CONSIDERED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSE SSEE ENTERED INTO A JDA WITH M/S. S.V. DEVELOPERS VIDE AGREEMENT DT.2.6.2006 IN RESPECT OF LAND MEASURING 10 GUNTAS EQUIVALENT TO 10,890 SQ. FT. AND FOR WHICH THE ASSESSEE WAS EN TITLED TO 12 FLATS AND 12 CAR PARKING SLOTS CORRESPONDING TO 45% OF THE BUILT UP AREA IN LIEU OF THE TRANSFER OF 55% OF THE UNDIVIDED PORTION OF THE VACANT LAND IN FAVOUR OF T HE DEVELOPER/BUILDER COMPRISING 16 FLATS AND 16 CAR PARKING SLOTS. THE ASSESSEE HAS ALSO BE EN PAID NON-REFUNDABLE DEPOSIT OF RS. 15 LAKHS. ON CONSIDERATION OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, WE ARE IN AGREEMENT WITH THE FINDING OF THE ASSESSING OFFICER THAT THE TRANSFER OF RIGHTS IN 55% OF THE UNDIVIDED PORTION OF THE LAND IN FAVOUR OF THE DEVE LOPER BY VIRTUE OF THE JDA DT.2.6.2006, RENDERED THIS TRANSACTION LIABLE TO LEVY OF CAPITA L GAINS IN THE PERIOD RELEVANT TO ASSESSMENT YEAR 2007-08. IN COMING TO THIS FINDING , WE DRAW SUPPORT FROM THE FINDING IN THE DECISIONS OF THE HON'BLE HIGH COURT OF BOMBAY I N THE CASE OF CHATURBHUJ DWARKA DAS KAPADIA (SUPRA) AND DECISION OF THE HON'BLE HIGH CO URT OF KARNATAKA IN THE CASE OF CIT V. DR. T.K. DAYALU IN ITA NO.3209 OF 2005 DT.20.6.2011. 11 ITA NO.686/BANG/11 5.8 THE OTHER ISSUE FOR OUR CONSIDERATION IS WH ETHER THE NON-REFUNDABLE DEPOSIT OF RS. 15 LAKHS IS EXIGIBLE TO TAX SEPARATELY IN ADDITION TO THE DEEMED CONSIDERATION OF RS. 23,96,000 QUANTIFIED BY THE ASSESSING OFFICER UNDER SECTION 50C OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT WHEN TH E DEEMED CONSIDERATION IS EXIGIBLE TO TAX, THE NON-REFUNDABLE DEPOSIT HAVING BEEN SUBSUMM ED THEREIN CANNOT BE ONCE AGAIN SEPARATELY CHARGED TO TAX. IN FACT, THE LEARNED CO UNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT AS PER THE SCHEME OF THE JDA, THE ASSESSEE HAS RECEIVED ONLY AN AMOUNT OF RS. 15 LAKHS AS NON-REFUNDABLE DEPOSIT. ON CARE FUL PERUSAL AND CONSIDERATION OF THE RECORDS, THE SUBMISSION MADE AND THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CONSIDER ATION OF RS. 15 LAKHS BEING THE NON- REFUNDABLE DEPOSIT, RECEIVED WAS FOUND TO BE INADEQ UATE CONSIDERATION AND THEREFORE APPEARS TO HAVE INVOKED THE PROVISION OF SECTION 50 C OF THE ACT TO QUANTIFY THE DEEMED CONSIDERATION AMOUNTING TO RS. 23,96,000. IN THIS VIEW OF THE MATTER, WE ARE OF THE OPINION THAT WHEN THE ASSESSING OFFICER HAS QUANTIF IED THE DEEMED CONSIDERATION AT RS. 23,96,000, IT IS BUT NATURAL THAT THE NON-REFUNDABL E DEPOSIT OF RS. 15 LAKHS IS SUBSUMED THEREIN AND THEREFORE WE HOLD THAT THE NON-REFUNDAB LE DEPOSIT OF RS. 15 LAKHS WOULD NOT BE SEPARATELY EXIGIBLE TO TAX. 5.9 HOWEVER, THE OTHER ISSUE TO BE RESOLVED IN THE INSTANT CASE IS WHETHER THE ASSESSING OFFICER WAS JUSTIFIED IN QUANTIFYING THE DEEMED CONSIDERATION IN ACCORDANCE WITH THE PROVISION OF SECTION 50C OF THE ACT AND AL SO WHETHER INFORMATION OBTAINED BY HIM UNDER SECTION 133(B) OF THE ACT COULD HAVE BEEN USE D AGAINST THE ASSESSEE AND WHICH WAS NOT PUT TO THE ASSESSEE ? ON PERUSAL OF THE ORDER OF ASSESSMENT, WE DO NOT FIND THAT THE INFORMATION OBTAINED BY THE ASSESSING OFFICER UNDER SECTION 133(B) OF THE ACT WAS PUT TO THE ASSESSEE BEFORE BEING USED AGAINST HIM. THIS, IN OUR OPINION, IS VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE. THE ISSUE WAS ALSO AGITATED BEFORE THE LEARNED CIT(A) BUT WE FIND HE HAS NOT ADJUDICATED THEREON. WE, THEREF ORE, IN THE INTEREST OF EQUITY AND JUSTICE, ARE OF THE CONSIDERED VIEW THAT THIS ISSUE OF DETERMINING THE CONSIDERATION EXIGIBLE FOR CAPITAL GAINS, IN THE RELEVANT PERIOD ON THE TRANSFER OF RIGHTS OF 55% OF THE 12 ITA NO.686/BANG/11 UNDIVIDED PORTION OF LAND IN THE ASSESSEES PROPERT Y PURSUANT TO THE JDA DT.2.6.2006 REQUIRES TO BE REMITTED BACK TO THE FILE OF THE ASS ESSING OFFICER FOR DE NOVO CONSIDERATION AFTER PROVIDING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD. THE ASSESSEE IS DIRECTED TO FILE DETAILS CALLED FOR BY THE ASSESSING OFFICER IN THIS REGARD SO THAT THE MATTER CAN BE DISPOSED OFF EXPEDITIOUSLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2012. SD/- SD/- (P. MADHAVI DEVI) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED: 29.06.2012. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - A BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R SR. PRIVATE SECRETARY, IT AT, BANGALORE .