Better Option Estates Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 948/DEL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6858 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Fair market value
• Section: 50C; 2(14); 131; 11; 2

Judgement Text

ITA NO. 948/DEL/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-948/DEL/2017 ( ASSESSMENT YEAR: 2012-13) BETTER OPTION ESTATES P. LTD. 4 TH FLOOR, PUNJABI BHAWAN, 10, ROUSE AVENUE, NEW DELHI. PAN NO. AACCB8384K VS DCIT CIRCLE 4(2), NEW DELHI. ASSESSEE BY SH. M.P. RASTOGI, ADV. REVENUE BY SH. RAVI KANT GUPTA, SR. DR ORDER PER K. NARSIMHA CHARY, J.M. CHALLENGING THE ORDER DATED 21.10.2016 IN APPEAL NO. 102/15-16 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, NEW DELHI (LD. CIT(A)). ASSESSE E PREFERRED THIS APPEAL. 2. FACTS OF THE CASE ARE THAT BETTER OPTION ESTATES PVT. LTD. THE ASSESSEE, IS A COMPANY INCORPORATED ON 23/02/2006 AND WAS TRADING IN PROPERTIES. FOR THE ASSESSMENT YEAR 2012-13 THE ASSESSEE FILED THEIR RE TURN OF INCOME ON 29/03/2013 DECLARING A TOTAL INCOME OF RS . DATE OF HEARING 09.05.2018 DATE OF PRONOUNCEMENT 25.07.2018 ITA NO. 948/DEL/2017 2 6,51,07,627/- AND REVISED THE SAME ON 12/04/2013. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAD SHOWN INCOME FROM CAPITAL GAINS AND INCOME FROM BUSINESS AND PROFESSION. 3. DURING THE SCRUTINY PROCEEDINGS, LEARNED ASSESSI NG OFFICER (LD. AO) OBSERVED THAT ASSESSEE COMPANY HAD SHOWN LONG TERM CAPITAL GAINS OF RS.6,49,69,400/- O N THE SALE PROCEEDS OF IMMOVABLE PROPERTIES SITUATED IN S EZ, JAIPUR FOR RS.16,34,13,960/- IN ITS COMPUTATION OF INCOME. ON BEING ASKED TO SUBMIT THE DETAILS AND EX PLAIN, THE ASSESSEE SUBMITTED THAT THE RELEVANT LAND WAS PURCHASED IN THE FINANCIAL YEAR 2006-07 AT RS.6,28,95,310/- AND THE COST INFLATION INDEX FOR S UCH YEAR WAS 519, WHEREAS IT WAS 785 FOR THE FINANCIAL YEAR 2011-12, AS SUCH ON APPLICATION OF COST INFLATION I NDEX, THE INDEXED COST CAME TO RS.9,51,30,671/-. 4. FURTHER ACCORDING TO THE ASSESSEE, ON 24/09/2010 THE ASSESSEE COMPANY SOLD 90,000 SQUARE METERS OF L AND IN SEZ, JAIPUR TO M/S. SMART ESTATES PRIVATE LIMITE D (SEPL OR SMART ESTATES) @ RS. 2300/-PER SQUARE METER AND RECEIVED AN ADVANCE SUM OF RS. 2 CRORES BY WAY OF CHEQUES AND CASH NAMELY, RS.1,48,94,900/- VIDE CHEQ UE NO. 000065 DATED 20 TH SEPTEMBER 2010, RS.51,00,000/- VIDE CHEQUE NO. 000062 DATED 10 TH SEPTEMBER 2010 DRAWN ON CITIBANK NA, NEW DELHI AND RS.5,100/- IN CASH. SUBSEQUENTLY BY WAY OF SUPPLEMENTARY AGREEMENT DATE D 20/09/2011 THE AREA OF LAND WAS REDUCED FROM 90,000 ITA NO. 948/DEL/2017 3 SQUARE METERS TO 78,043.125 SQUARE METERS AND THE SALE PRICE WAS INCREASED FROM RS. 2300/- TO RS. 2400/-. 5. ACCORDING TO THE ASSESSEE AS PER THE AGREEMENTS THE PURCHASER MAY GET THE SALE DEEDS IN RESPECT OF THE PLOTS COMPRISING OF THE SAID LAND REGISTERED EITHER IN IT S OWN NAME OR IN THE NAME OF THE NOMINEE AND ALSO THAT OU T OF THE AMOUNTS RECEIVABLE FROM THE END PURCHASERS, ASS ESSEE SHALL BE ENTITLED TO RECEIVE SALE CONSIDERATION AS AGREED UNDER THE AGREEMENT. PURSUANT TO THE SAID AGREEMENT S AN ACCOUNT IN PUNJAB NATIONAL BANK, BHIKAJI CAMA PLACE , NEW DELHI WAS OPENED. SUBSEQUENTLY IN ACCORDANCE WI TH THE TERMS OF THE ABOVE AGREEMENTS, THE ASSESSEE REG ISTERED THE SALE DEEDS IN FAVOUR OF THE PERSONS SUGGESTED B Y THE SEPL. OUT OF THE SALE CONSIDERATION OF RS.21,74,05, 935/- THE ASSESSEE APPROPRIATED A SUM OF RS.16,34,13,960/ - UNDER THE AGREEMENTS WHEREAS THE BALANCE AMOUNT OF RS.5,39,91,975/- WAS RECEIVED BY SEPL. 6. THE LD. AO ISSUED SUMMONS TO SEPL. THE REPRESENTATIVE OF THE SEPL APPEARED BEFORE THE LD. AO ON 26/02/2015 AND FILED A LETTER DATED 25/02/2015 ADMITTING THAT THERE IS AN AGREEMENT BETWEEN THE ASSESSEE AND SEPL UNDER WHICH SEPL AGREED TO PURCHA SE 78,043.15 SQUARE METERS OF LAND AT RS. 2400/- PER SQUARE METRE, AND WAS ALSO MUTUALLY AGREED THAT ALL THE PAYMENTS RELATING TO THE SALE OF PLOTS WOULD BE COL LECTED BY THE ASSESSEE AND THE ASSESSEE WILL TRANSFER THE AMOUNTS TO SMART ESTATES AFTER ADJUSTING THEIR BALA NCE AMOUNT UNDER THE AGREEMENTS. IT IS FURTHER STATED T HAT ITA NO. 948/DEL/2017 4 SEPL HAS ALREADY BEEN MERGED WITH M/S AEREN R. ENTERPRISES PVT. LTD. W.E.F. 1 ST APRIL 2011 VIDE HIGH COURT ORDER DATED 25 TH APRIL 2015 IN WRIT PETITION NO. 298/2013 AND M/S AEREN R. ENTERPRISES PVT. LTD. (AEREN) IS ASSESSED TO TAX VIDE PERMANENT ACCOUNT NO. AABCS761 3A BY THE ASSESSING OFFICER, CENTRAL CIRCLE 18, NEW DE LHI ALONG WITH THAT LETTER, SMART ESTATES REPRESENTATIV E FILED THE INCOME TAX RETURN FOR ASSESSMENT YEAR 2012-13 A LONG WITH COMPUTATION OF INCOME AND ALSO THE COPIES OF T HE AGREEMENTS. 7. AGAIN ON 10/03/2015 THE REPRESENTATIVE OF THE SMART ESTATES ATTENDED BEFORE THE LD. AO TO FILE TH E BALANCE SHEET AND P & L ACCOUNT OF SMART ESTATES FO R THE ASSESSMENT YEAR 2012-13. FROM SUCH DETAILS THE LD. AO OBSERVED THAT AS PER THE P & L ACCOUNT THE ASSESSEE HAD EARNED PROFIT OF RS.6,41,86,704/- FOR THE FINANCIAL YEAR 2011-12 WHEREAS AS PER THE RETURN SUBMITTED BY THE ASSESSEE, VIDE HEARING DATED 26/02/2013 IN THE NAME OF M/S. AEREN R ENTERPRISES PRIVATE LIMITED IT HAD SHO WN LOSSES OF CURRENT YEAR TO THE TUNE OF RS.2,03,75,58 6/-. LD. AO ASKED FOR FURTHER DETAILS AND DOCUMENTS AND OBTA INED REPLY FROM THE ASSESSEE. 8. AFTER HEARING THE ASSESSEE LD. AO ISSUED A SHOW CAUSE NOTICE AS TO WHY NOT THE ENTIRE TRANSACTION W ITH M/S. SMART ESTATES PRIVATE LIMITED BE TREATED AS INGENUINE AND THE SALE TRANSACTION SHALL NOT BE TAK EN AS BETWEEN THE ASSESSEE COMPANY AND THE INDIVIDUAL BUY ERS, AND ALSO WHY NOT SALE CONSIDERATION BEING INCREASED TO THE ITA NO. 948/DEL/2017 5 VALUE AS PER SECTION 50C FOR THE PURPOSE OF COMPUTA TION OF CAPITAL GAINS. ASSESSEE DISPUTED THE PROPOSAL MADE BY THE LD. AO BASING ON THE DOCUMENTS SUBMITTED BY THEM AN D ALSO SUBMITTED THAT IT IS NOT AT ALL CORRECT AND HI GHLY UNJUSTIFIED TO INCREASE THE SALE CONSIDERATION TO T HE VALUE AS PER SECTION 50C FOR THE PURPOSE OF COMPUTATION O F CAPITAL GAINS. LD. AO, HOWEVER, RECORDED A FINDING THAT THE WHOLE ARRANGEMENT THAT WAS PLEADED BY THE ASSESSEE WAS ONLY TO REDUCE THE SALE CONSIDERATION RECEIVED BY T HE ASSESSEE AND THEREBY LOWERING ITS TAX LIABILITY UND ER THEY HAD CAPITAL GAINS. ON THIS PREMISE THE LD. AO MADE AN ADDITION OF RS.8,93,27,615/- TO THE INCOME OF THE ASSESSEE. 9. IN APPEAL, LD. CIT(A) DEALT WITH THE QUESTION AS TO WHETHER THE SALE CONSIDERATION AND CONSEQUENTLY THE CAPITAL GAIN ON SALE OF ITS LAND PURPORTEDLY TO ASS ESS SMART ESTATES PRIVATE LIMITED WAS CORRECTLY DISCLOS ED BY THE ASSESSEE? OR WHETHER IT WAS SUPPRESSED THE BY AN AMOUNT OF RS.8,93,27,615/-? LD. CIT(A) HELD THAT T HE ASSESSEE WAS NOT ABLE TO REBUT THE FINDINGS OF THE LD. AO IN HIS ORDER AS WELL AS THE JUDGEMENTS RELIED UPON BY THE LD. ASSESSING OFFICER AND HELD THAT THE PURPORTED AGREEMENTS PRESSED INTO SERVICE BY THE ASSESSEE WER E NOT GENUINE AGREEMENTS AND WERE ONLY DEVICES ADOPTED BY THE ASSESSEE TO EVADE TAX ON THE DIFFERENTIAL AMOUNT RE CEIVED FROM THE INDIVIDUAL BUYERS OVER AND ABOVE THE AMOUN T OF RS.16,34,13,960/- SHOWN TO HAVE BEEN RECEIVED BY TH E ASSESSEE ON SALE OF JAIPUR LAND. LD. CIT(A) FURTHE R ITA NO. 948/DEL/2017 6 OBSERVED THAT EVEN THE SALE CONSIDERATION RECEIVED FROM THE INDIVIDUAL BUYERS IS LESS THAN THE CONSIDERATIO N AS PER CIRCLE RATES AND THE ASSESSEE COULD NOT EXPLAINED W HY SALES BY EACH HAVE NOT BEEN BOOKED AT THE STAMP VAL UE RATE OF RS. 25.27 CRORES AND WHY SECTION 50C SHOULD NOT BE INVOKED IN THIS CASE. FOR THESE REASONS, LD. CIT (A) DISMISSED THE APPEAL AND UPHELD THE FINDINGS OF THE LD. AO. THE ASSESSEE, THEREFORE, FILED THIS APPEAL CHAL LENGING THE FINDINGS OF THE AUTHORITIES BELOW. 10. IT IS THE ARGUMENT OF LD. AR THAT THE AGREEMENT TO SELL DATED 24/09/2010 READ WITH SUPPLEMENTARY AGREEMENT DATED 28/09/2011 AMOUNTS TO DISPOSING OF INTEREST BY THE ASSESSEE IN THE LAND AND CREATION O F INTEREST IN FAVOUR OF M/S. SMART ESTATES PRIVATE LI MITED AND IS IN THE NATURE OF TRANSFER CONTEMPLATED UNDER SECTION 2 (47) OF THE ACT AS EXPLAINED IN THE DECIS IONS REPORTED IN GULSHAN MALIK 223 TAXMAN 243 (DEL); CIT VS. TATA SERVICES LTD. 122 ITR 594 (BOM); CIT VS. RAM G OPAL 230 TAXMAN 205 (DEL); CIT VS. LAKSHMI DEVI 296 ITR 363 (MP); K.R. SRINATH VS. ACIT 268 ITR 436 (MAD), AND CONSEQUENTLY THE CHARGING OF CAPITAL GAIN IN THE HA NDS OF THE ASSESSEE WITHOUT REFERRING TO THE AMOUNT RECEIV ABLE UNDER THE AGREEMENT BUT WITH REFERENCE TO THE SALE PRICE MENTIONED IN THE SALE DEED EXECUTED IN FAVOUR OF TH E END PURCHASER AT THE INSTANCE OF MEASURES SMART ESTATES IS NOT TENABLE. 11. WHILE ASSAILING THE OBSERVATIONS OF THE LD. AO THAT M/S. SEPL HAD COLLECTED PAYMENTS FROM INDIVIDUAL BU YERS ITA NO. 948/DEL/2017 7 IN THE NAME OF THE ASSESSEE COMPANY IS ALSO NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE, LD. AR SUBMITTED THAT THE AGREEMENTS CLEARLY SHOW THAT MR AJAI SEHGAL AND MR RAJESH SINGHAL BELONG TO THE M/S SMAR T ESTATES AND THEY IN FACT OPERATED THE BANK ACCOUNTS AND ACTED ON BEHALF OF M/S SMART ESTATES. ACCORDING TO LD. AR THE AGREEMENT AND THE SUPPLEMENTARY AGREEMENT IN TH IS MATTER ARE EVIDENCING THE COMMERCIAL TRANSACTION PREVALENT IN THE REAL ESTATE BUSINESS AND CONSEQUEN TLY THE CHARGEABILITY OF THE CAPITAL GAIN WHOLLY IN THE HAN DS OF THE ASSESSEE WITH REFERENCE TO THE SALE PRICE SPECIFIED IN THE SALE DATES EXECUTED BY THE REPRESENTATIVES OF M/S S MART ESTATES PRIVATE LIMITED IN FAVOUR OF THE END PURCHA SERS AND NOT WITH REFERENCE TO THE AMOUNT RECOVERABLE UN DER THE AGREEMENTS IS ALSO NOT TENABLE . 12. LD. AR FURTHER ARGUED THAT THE LD. CIT(A) FAILE D TO APPRECIATE THE SUBSTANCE OF THE COMMERCIAL TRANSACT ION AS ENTERED WITH M/S SMART ESTATES PRIVATE LIMITED VIDE AGREEMENT TO SELL DATED 24/09/2010 AND SUPPLEMENTAR Y AGREEMENT DATED 28/09/2011 IN RESPECT OF SALE OF LA ND, WITH THE FINAL SALE PROCEEDS DEPOSITED IN THE PUNJA B NATIONAL BANK, OPERATED BY THE AUTHORIZED PERSONS O F M/S. SMART ESTATES PRIVATE LIMITED WERE FROM THE AM OUNT OVER AND ABOVE THE SALE PRICE AS AGREED BETWEEN THE ASSESSEE AND M/S SMART ESTATES PRIVATE LIMITED HAS BEEN APPROPRIATED BY M/S. SMART ESTATES PRIVATE LIMITED AND CONSEQUENTLY THE CHARGEABILITY OF THE CAPITAL GAIN WITH REFERENCE TO THE TOTAL SALE CONSIDERATION SPECIFIED IN THE ITA NO. 948/DEL/2017 8 SALE DEEDS EXECUTED BY THE REPRESENTATIVES OF M/S S MART ESTATES CANNOT BE TAXED IN THE HANDS OF THE ASSESSE E. LD. AR ARGUED THAT INASMUCH AS THE RIGHT TO GET THE SAL E DEEDS EXECUTED AS ACQUIRED BY SEPL IS A CAPITAL ASS ET IN TERMS OF SECTION 2(14) OF THE ACT AND ONCE SUCH RIG HT HAS BEEN ASSIGNED IN FAVOUR OF THIRD PERSON, THEN THE A MOUNT REALIZED ON ACCOUNT OF SUCH A RIGHT TO ACQUIRE THE PROPERTY IS LIABLE TO TAX IN THE HANDS OF THE PERS ON WHO HOLDS SUCH RIGHT TO ACQUIRE THE ASSET. 13. ACCORDING TO HIM THE LD. CIT(A) HAD FAILED TO APPRECIATE THAT THE ASSIGNMENT OF THE RIGHT TO GET CONVEYANCE, WHICH IS A CAPITAL ASSET, BY M/S SMART ESTATES PRIVATE LIMITED IN FAVOUR OF ITS NOMINEES T HAT IS THE AND PURCHASERS, AMOUNTS TO TRANSFER OF CAPITAL ASSET IN THE HANDS OF M/S SMART ESTATES PRIVATE LIMITED A ND ACCORDINGLY THE LD. AO HAS TO APPORTION SUCH SALE CONSIDERATION BETWEEN THE ASSESSEE AND M/S SMART ESTATES PRIVATE LIMITED IN TERMS OF THE AGREEMENT A ND CONSEQUENTLY THE CAPITAL GAIN WITH REFERENCE TO THE TOTAL AMOUNT OF SALE CONSIDERATION SPECIFIED IN THE SALE DEEDS EXECUTED BY THE REPRESENTATIVES OF M/S SMART ESTATE S PRIVATE LIMITED CANNOT BE CHARGED IN THE HANDS OF T HE ASSESSEE . 14. IT IS FURTHER ARGUED BY LD. AR THAT THE AUTHORI TIES BELOW IGNORED THE FACT THAT THE 78,043.15SQUARE MET RES OF LAND SOLD BY THE ASSESSEE TO M/S SMART ESTATES PRIV ATE LIMITED AND THE SUBSEQUENT SALE OF SAME BY M/S SMAR T ESTATES ARE DULY REFLECTED IN THE BOOKS OF ACCOUNTS OF M/S ITA NO. 948/DEL/2017 9 SMART ESTATES PRIVATE LIMITED AND ALSO REFLECTED IN THE NOTE NO 08 AND NOTE NO 10 OF THE BALANCE SHEET OF M /S SMART ESTATES PRIVATE LIMITED FOR THE YEAR ENDED ON 31.03. 2012 PLACED ON RECORD OF THE LD. AO BY M/S S MART ESTATES PRIVATE LIMITED THROUGH THE LETTER DATED 25/02/2015 PURSUANT TO THE SUMMONS ISSUED UNDER SECTION 131 OF THE ACT. 15. THE NEXT CONTENTION OF LD. AR IS THAT IN UTTER DISREGARD TO THE AGREEMENT TO SELL DATED 24/09/2010 AND SUPPLEMENTARY AGREEMENT DATED 28/09/2011 WITH THEIR CONSEQUENTIAL EFFECT, THE LD. AO INVOKED THE PROVIS IONS OF SECTION 50C OF THE ACT IN THIS CASE. ACCORDING TO H IM THE LD. AO SHOULD HAVE APPORTIONED THE DEEMED SALE CONSIDERATION AS CONTEMPLATED UNDER SECTION 50C OF THE ACT, BEING THE VALUE AS A DETERMINED BY THE STAMP AUTHORITIES, BETWEEN THE ASSESSEE AND M/S SMART EST ATES PRIVATE LIMITED IN PROPORTION TO THE RIGHTS OWNED A ND ENJOYED BY THE PARTIES IN THE PROPERTY, AS SUCH THE AUTHORITIES BELOW OUGHT NOT TO HAVE CHARGED THE CAP ITAL GAINS WHOLLY IN THE HANDS OF THE ASSESSEE. HE FURTH ER SUBMITTED THAT THE TAXABILITY OF CAPITAL GAIN IN TE RMS OF SECTION 50C OF THE ACT ON THE BASIS OF VALUATION MA DE BY THE STAMP AUTHORITIES IS MEANT FOR EXECUTION OF SAL E DEEDS AND THE ACTUAL VALUE IN TERMS OF SUBSECTION (2) OF SECTION 50 C OF THE ACT HAS TO BE DETERMINED. FURTHER THESE REASONS LD. AR PRAYED TO ALLOW THE APPEAL AND TO DE LETE THE IMPUGNED ADDITION. ITA NO. 948/DEL/2017 10 16. PER CONTRA, IT IS THE SUBMISSION OF LD. DR THAT THE AGREEMENTS TO SELL THE PROPERTY ARE UNSTAMPED AND UNREGISTERED. THEY ARE NOT VALID AGREEMENTS ESPECIA LLY AFTER THE AMENDMENT TO STAMP ACT, 1999 AND REQUIREM ENT OF SECTION 53 A OF THE TRANSFER OF PROPERTY ACT ARE NOT COMPLIED WITH. LD. DR PLACED RELIANCE ON THE DECISI ON REPORTED IN SURAJ LAMP & INDUSTRIES PRIVATE LIMITED VS. STATE OF HARYANA (SC) 2009 (7) SCC 363 AND CIT VS. BALBIR SINGH MAINI (SC) 2017-SC-TS-444 FOR THE PRINCIPLE T HAT THE IMMOVABLE PROPERTY CAN BE LEGALLY AND LAWFULLY TRANSFERRED OR CONVEYED ONLY BY REGISTERED DEED OF CONVEYANCE AND NOT THROUGH ANY GPA SALES. 17. LASTLY BY PLACING RELIANCE ON THE DECISION REPO RTED IN CIT VS. M/S. AKASH ASSOCIATION (JUDGEMENT DATED 05/09/2017 IN TAX APPEAL NO. 646 OF 2017 BY THE HON BLE GUJARAT HIGH COURT) HE SUBMITTED THAT SECTION 50C O F THE ACT PROVIDES FOR SPECIAL PROVISION FOR FULL VALUE O F CONSIDERATION IN CERTAIN CASES; THAT SUBSECTION (1) OF SECTION 50 C PROVIDES FOR THE ADOPTION OF VALUE TAK EN BY THE STAMP VALUATION AUTHORITY FOR THE PURPOSE OF ST AMP DUTY NOT ONLY WHEN IT IS ADOPTED OR ASSESSED BUT W HERE IT IS ASSESSABLE BY SUCH AUTHORITY AND THE EXPRESSION ADOPTED OR ASSESSABLE OR ASSESSABLE WOULD IN CLUDE EVEN A CASE WHERE THE DOCUMENT EVIDENCING TRANSFER OF THE CAPITAL ASSET HAS NOT BEEN PRESENTED FOR REGISTRATI ON. THE EXPIRATION ASSESSABLE WOULD PERMIT THE REVENUE AUTHORITIES TO APPLY WHAT IS POPULARLY REFERRED TO AS JANTRI RATES WITH RESPECT TO THE LAND IN QUESTION FOR THE PURPOSE ITA NO. 948/DEL/2017 11 OF SECTION 48 OF THE ACT WITH THE AID OF DEEMING FI CTION CONTAINED IN SUBSECTION (1) OF SECTION 50 C OF THE ACT. LD. DR, THEREFORE, RELATED TO DISMISS THE APPEAL. 18. WE HAVE CAREFULLY PERUSED THE RECORD IN THE LIG HT OF THE SUBMISSIONS MADE ON EITHER SIDE. AS STATED ABOV E, IN THIS APPEAL, GRIEVANCE OF THE ASSESSEE IS TWOFOLD. FIRSTLY, ASSESSEE IS CHALLENGING THE ACTION OF THE LD. AO IN NOT REFERRING THE MATTER UNDER 50 C (2) OF THE ACT TO T HE DVO FOR REDETERMINATION OF THE FAIR MARKET VALUE. SECON DLY ASSESSEE IS DISPUTING THE OBSERVATIONS OF THE AUTHO RITIES BELOW THAT THE ARRANGEMENT BETWEEN THE ASSESSEE AND M/S. SMART ESTATES IS A DEVICE ONLY TO EVADE TAX. 19. IT IS EVIDENT THAT THE ENTIRE EDIFICE OF THE CA SE OF THE ASSESSEE IS BASING ON THE AGREEMENTS DATED 24/09/20 10 AND 20/09/2011. ACCORDING TO THE ASSESSEE UNDER LEA SE TO AGREEMENTS, M/S. SMART ESTATES ACQUIRED A RIGHT TO GET THE CONVEYANCE IN RESPECT OF THE PROPERTY ON THE NA MES OF THE 3 RD PARTIES THEY SUGGEST. ACCORDING TO THE ASSESSEE SUCH TYPE OF AGREEMENTS OR IN VOGUE IN THE TRADE OF REAL ESTATE. LD. AR, THEREFORE, SUBMITS THAT THE INASMUC H AS THE SEPL ACQUIRED THE RIGHT TO GET THE SALE DEEDS E XECUTED ON THE NAMES OF THE 3 RD PARTIES, ANY AMOUNT REALIZED ON ACCOUNT OF SUCH A RIGHT TO ACQUIRE THE PROPERTY IS LIABLE TO BE TAXED IN THE HANDS OF M/S SMART ESTATES. FOR THI S PURPOSE LD. AR PLACED RELIANCE ON THE ADDITIONS REP ORTED IN CIT VS. DAKSHA RAMANLAL 197 ITR 123 AND ALSO CIT VS. RAMGOPAL TO 90 TAXMAN 205 (DELHI), CIT VS. LAXMI DE VI TO 96 ITR 363 (MP). ITA NO. 948/DEL/2017 12 20. FURTHER, BY PLACING RELIANCE ON THE EDITION REP ORTED IN CIT VS. MOTOR AND GENERAL STORES PRIVATE LIMITED 66 ITR 692 (SC) AND CIT VS. BM KHANNA 72 ITR 603, LD. AR SUBMITTED THAT WHEN THE TRANSACTIONS ARE EMBODIED I N A DOCUMENT, THE LIABILITY TO TAX DEPENDS UPON THE MEA NING AND CONTEXT USED IN ACCORDANCE WITH THE ORDINARY RU LES OF CONSTRUCTION AND THE TAXING STATUTE HAS TO BE APPLI ED IN ACCORDANCE WITH THE LEGAL RIGHTS OF THE PARTIES TO THE TRANSACTIONS AND NOT ON SUBSTANCE OF THE MATTER U NLESS THE TRANSACTION IS PROHIBITED BY LAW. 21. ON THIS ASPECT, IT IS THE OBSERVATION OF THE LD . AO THAT ON TWO OCCASIONS THE REPRESENTATIVE OF THE M/S SMART ESTATES APPEARED BEFORE HIM AND FILED LETTERS ADMIT TING THE TRANSACTION EVIDENCED BY THE AGREEMENTS OF SALE , ALONG WITH THE COPIES OF THE BALANCE SHEET AND P & L ACCO UNT. WHETHER OR NOT ANY RIGHTS PASSED UNDER THE AGREEMEN TS OF SALE IN QUESTION FOR WANT OF STAMP DUTY AND REGISTR ATION DOES NOT FALL FOR CONSIDERATION BEFORE THE LD. AO, INASMUCH AS THE PROCEEDINGS BEFORE THE LD. AO ARE N OT RELATING TO THE ENFORCEMENT OF ANY RIGHTS EMANATING FROM THE AGREEMENTS. COMPLIANCE WITH THE STAMP AND REGISTRATION LAWS IN RESPECT OF THE AGREEMENTS IS N OT RELEVANT FOR THE CONSIDERATION OF THE LD. AO FOR TH E TAXABILITY OF THE AMOUNTS IN VIEW OF THE FACT THAT THE RECIPIENT OF THE ALLEGED AMOUNTS ADMITS TO HAVE ENT ERED INTO SUCH AGREEMENTS AND DOES NOT DENY TO HAVE RECE IVED ANY AMOUNTS RELATABLE TO THEM. IN SUCH AN EVENT WE DOUBT WHETHER THE LD. AO CAN QUESTION THE VALIDITY OF THE ITA NO. 948/DEL/2017 13 AGREEMENTS FOR WANT OF STAMP DUTY AND REGISTRATION, AS ARGUED BY LD. DR. FACT ADMITTED NEED NOT BE ENQUIRE D NOR COULD BE REQUIRED TO BE PROVED. IN THE ABSENCE OF A NY FINDING BY LD. AO THAT THE AMOUNT SET TO HAVE BEEN PAID TO OR RECEIVED BY M/S. SMART ESTATES HAD COME BACK TO THE ASSESSEE IN ANY OTHER WAY OR THERE IS A DENIAL BY M/S SMART ESTATES TO HAVE RECEIVED THE AMOUNT, THE ENQU IRY BY THE LD. ASSESSING OFFICER AS TO THE GENUINENESS OF THE TRANSACTION UNDER THE AGREEMENTS IS A MISDIRECTED O NE. 22. IN A SITUATION WHERE THE EXECUTION AND EXISTENC E OF THE AGREEMENTS IS NOT IN QUESTION AND VERY MUCH ADM ITTED BY THE REPRESENTATIVE OF M/S SMART ESTATES, NOW THE QUESTION ARISES AS TO THE COERCE TO BE ADOPTED BY T HE LD. AO. ON A PERUSAL OF THE AGREEMENTS AS WELL AS THE L ETTER DATED 25/02/2015 ADMITTING THE TRANSACTION BEFORE H IM, THE BALANCE SHEET AND THE P & L ACCOUNT OF M/S AERE N R ENTERPRISES PRIVATE LIMITED, LD. AO DIRECTED THE REPRESENTATIVE OF THE SMART ESTATES TO RECONCILE TH E DIFFERENCE BETWEEN THE P & L ACCOUNT COMPUTATION OF INCOME WITH THE RETURN OF INCOME. HOWEVER, ACCORDIN G TO THE LD. AO NO ONE TURNED UP SUBSEQUENTLY ON BEHALF OF M/S SMART ESTATES. ASSESSING OFFICER NOTED THAT M/S . SMART ESTATES HAD NOT FILED ANY RETURN FOR THE ASSE SSMENT YEAR 2012-13. 23. IN THE CIRCUMSTANCES, LD. AO DIRECTED THE ASSES SEE TO PRODUCE THE DIRECTORS OF M/S SMART ESTATES FOR EXAMINATION, AND ON THE FAILURE OF THE ASSESSEE TO PRODUCE THE DIRECTORS OF M/S SMART ESTATES THE LD. AO HAVIN G GONE ITA NO. 948/DEL/2017 14 THROUGH THE RECORD AVAILABLE BEFORE HIM, REACHED A CONCLUSION THAT THE AGREEMENTS ALLEGED TO HAVE BEEN ENTERED INTO BETWEEN THE ASSESSEE AND M/S SMART EST ATES ARE NOT GENUINE ONES. THIS APPROACH OF THE LD. AO D OES NOT SEEM TO BE CORRECT. WHEN AN ESCAPEMENT OF INCOM E HAD ARISEN OUT OF NON-FILING OF RETURNING BY M/S TH E SMART ESTATES, LD. AO SHOULD HAVE CONSIDERED THE DESIRABI LITY OF TAKING COERCIVE STEPS AGAINST SUCH AN ENTITY WHICH FAILED TO FILE THE RETURNS OF INCOME OR FAILED TO COOPERAT E WITH THE PROCEEDINGS. LAW EMPOWERS THE LD. AO TO TAKE COERC IVE STEPS IN THAT EVENT OF ESCAPEMENT OF INCOME ARISING OUT OF NON FILING OF RETURN BY M/S SMART ESTATES. INSTEAD OF CATCHING A SOFT TARGET THE LD. AO SHOULD HAVE PROCE EDED TO TAKE STEPS AGAINST M/S. THE SMART ESTATES OR FOR TH AT THAT THE MATTER M/S AEREN R ENTERPRISES PRIVATE LIMITED WITH WHOM M/S SMART ESTATES WAS MEASURED PURSUANT TO THE ORDERS OF THE HONBLE HIGH COURT. LD. AO, HOWEVER, PENALIZED THE ASSESSEE FOR NOT PRODUCING THE DIRECT OR OF M/S SMART ESTATES FOR EXAMINATION, BY BRINGING TO T AX SUCH AMOUNT AS HAS BEEN ADMITTED TO HAVE BEEN RECEI VED AND APPROPRIATED BY M/S SMART ESTATES, IN THE HANDS OF THE ASSESSEE. FURTHER WE ARE IN AGREEMENT WITH THE LD. AR THAT THE VERIFICATION OF THE DETAILS OF THE ACCOUNT WITH PUNJAB NATIONAL BANK SHOULD HAVE THROWN SOME LIGHT ON THE ASPECT OF THE GENUINENESS OF THE TRANSACTION PL EADED BY THE ASSESSEE. 24. IT IS AN ADMITTED FACT THAT ALL THE DETAILS REL ATING TO MEASURES SMART ESTATES OR M/S AEREN R ENTERPRISES ITA NO. 948/DEL/2017 15 PRIVATE LIMITED INCLUDING THE PAN CARD NO ARE AVAIL ABLE BEFORE THE LD. AO. RECORD DOES NOT REVEAL THAT AT A NY POINT OF TIME THE LD. AO HAD ISSUED ANY NOTICE TO M /S AEREN R ENTERPRISES PRIVATE LIMITED, THOUGH THE FAC T OF M/S SMART ESTATES MERGING WITH M/S AEREN R ENTERPRI SES PRIVATE LIMITED WAS INTIMATED TO HIM. WE FIND ANY A MOUNT OF STRENGTH IN THE ARGUMENT OF THE COUNCIL THAT THE INCOME HAS TO BE ASSESSED IN THE HANDS OF A PROPER PERSON WHO HAS ENJOYED THE ACTUAL INCOME IN LAW AND IF M/S AER EN R ENTERPRISES FAILED TO DISCLOSE THE INCOME OF SEPL I N THE RETURNS OF INCOME FOR THE ASSESSMENT YEAR 2012-13, LD. AO SHOULD HAVE REALIZED THAT THE ESCAPEMENT OF INCO ME IS IN THE HANDS OF M/S AEREN R ENTERPRISES BUT NOT THE ASSESSEE, AND IN ALL FAIRNESS THE LD. AO SHOULD HAV E TAKEN STEPS UNDER SECTION 147/148 OF THE ACT AGAINST M/S AEREN R ENTERPRISES. 25. WE ARE AT A LOSS TO UNDERSTAND AS TO HOW THE ASSESSEE COULD BE MADE RESPONSIBLE FOR THE ESCAPEME NT OF INCOME IN THE HANDS OF M/S AEREN ENTERPRISES AND TO MAKE THE ASSESSEE ANSWERABLE FOR THE SAME. WE UNDERSTAND THAT THE THINGS WOULD HAVE BEEN DIFFEREN T SHOULD M/S SMART ESTATES OR FOR THAT MATTER M/S AER EN R ENTERPRISES DENIED THE EXECUTION OR EXISTENCE OF TH E AGREEMENTS OF SALE OR M/S SMART ESTATES RECEIVING THE AMOUNT. SUCH ENTITIES HAVE NEVER DISPUTED THE TRANSACTION OR THE RECEIPT OF AMOUNTS. IN SUCH AN E VENT NOTHING PREVENTED THE LD. AO FROM MAKING FURTHER ENQUIRY BY CALLING FOR THE POST MERGER FINANCIALS O F M/S ITA NO. 948/DEL/2017 16 AEREN R ENTERPRISES OR TO CONSIDER THE POSSIBILITY OF TAKING APPROPRIATE STEPS AGAINST M/S AEREN R ENTERPRISES. THE PROCESS ADOPTED BY THE LD. AO IN THIS FACT-FINDING EXERCISE IS NOT SATISFACTORY. 26. THE NEXT CONTENTION OF THE LD. AR IS THAT WHEN ONCE THE ASSESSEE DISPUTED THE INCREASE IN THE SALE CONSIDERATION TO THE VALUE AS PER SECTION 50C FOR T HE COMPUTATION OF CAPITAL GAINS IS HIGHLY UNJUSTIFIED; THE LD. AO HAS TO REFER THE MATTER TO THE DVO FOR THE VALUA TION OF THE PROPERTY. SECTION 50C OF THE ACT IS A DEEMING PROVISION AND ACCORDING TO WHICH WHERE CONSIDERATIO N RECEIVED OR ACCRUED AS A RESULT OF TRANSFER OF CAPI TAL ASSET BEING LAND OR BUILDING IS LESS THAN THE VALUE ADOPT ED OR ASSESSED BY THE STAMP AUTHORITIES FOR THE PURPOSE O F STAMP VALUATION, THE VALUE SO ADOPTED OR ASSESSED T HE SHALL FOR THE PURPOSE OF SECTION 48 OF THE ACT BE D EEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF SUCH TRANSFER. SUBSECTION 2 OF SECTI ON 50C OF THE ACT, HOWEVER, SAYS THAT WHERE THE ASSESSEE CLAI MS BEFORE THE LD. AO THAT THE VALUE ADOPTED OR ASSESSE D BY THE STAMP VALUATION AUTHORITY UNDER SUBSECTION (1) THEREOF EXCEEDS THE FAIR MARKET VALUE OF THE PROPER TY AS ON THE DATE OF TRANSFER, LD. AO MAY REFER THE VALUATIO N OF THE CAPITAL ASSET TO VALUATION OFFICER. 27. IN THE INSTANT CASE THE SALE CONSIDERATION AS P ER THE SALE DATES AS NOTED BY THE LD. AO IS RS.21,74,05,93 5/-, AND THE STAMP VALUATION AUTHORITY VALUED THE SAME A T RS.25,27,31,575/-. IN THE LETTER DATED 25/03/2015 ITA NO. 948/DEL/2017 17 SUBMITTED BEFORE THE LD. AO PROPOSING TO INCREASE T HE VALUE AS PER SECTION 50C OF THE ACT FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS, THE ASSESSEE DISPUTED THE SAME BY SAYING THAT IS NOT AT ALL CORRECT AND HIGHL Y UNJUSTIFIED TO INCREASE THE SALE CONSIDERATION TO T HE VALUE AS PER SECTION 50C FOR THE PURPOSE OF COMPUTATION O F CAPITAL GAIN. THE LD. AO DID NOT RECORD ANY REASONS AS TO WHY THE MATTER NEED NOT OR SHALL NOT BE REFERRED TO THE DVO. WHEN IT IS PLEADED THAT THE ACTUAL AMOUNT RECE IVED IS A FAR LESS THAN THE CIRCLE RATES OF THE REGISTRA TION AUTHORITY OR THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY UNDER SUBSECTION (1) THER EOF EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER, THE LD. AO DOES NOT SEEM TO HAVE TAKEN COGNIZANCE OF THE SAME TO REFER THE MATTER TO THE D VO FOR THE DETERMINATION OF THE ACTUAL VALUE UNDER SUBSECT ION 2 OF SECTION 50C OF THE ACT. 28. BY PLACING RELIANCE ON THE DECISIONS REPORTED I N MEGHRAJ BAID VS. ITO [2008] 23 SOT 25 (JODHPUR) (UR O); SARWAN KUMAR VS. ITO[2014] 45 TAXMANN.COM 16 (DEL); SMT. TV NAGASENA VS. ITO[2012] 24 TAXMANN.COM 30 (BANG); AND ANIL KR. JAIN VS. ITO[2013] 34 TAXMANN. COM 258 (DEL) LD. AR SUBMITTED THAT IF THE ASSESSEE OBJ ECTS TO THE ADOPTION OF STAMP VALUATION IN TERMS OF SECTION 50C OF THE ACT, THEN THE REVENUE AUTHORITIES ARE BOUND TO REFER THE MATTER TO DVO IN TERMS OF SECTION 50C(2) OF THE ACT. NO DECISION CONTRARY TO THE ABOVE PROPOSITION IS PL ACED BEFORE US TO TAKE A DIFFERENT VIEW. IN VIEW OF THE DECISIONS ITA NO. 948/DEL/2017 18 RELIED UPON BY THE ASSESSEE WE ARE OF THE CONSIDERE D OPINION THAT THE LD. AO SHOULD HAVE REFERRED THE MA TTER TO DVO IN TERMS OF SECTION 50 C (2) OF THE ACT. 29. ON AN OVERALL CONSIDERATION OF THE MATTER WHAT OCCURS TO OUR MIND IS THAT THE AUTHORITIES BELOW HA VE NOT EXAMINED THE ISSUE FROM A PROPER PERSPECTIVE AND IN THE MANNER IN WHICH THE FACTS DESERVE TO BE INVESTIGATE D, TO ENSURE THAT THE ASSESSMENT IS MADE AS ACCURATELY AS POSSIBLE CONSISTENT WITH THE STATUTORY PROVISIONS. WE ARE, THEREFORE, OF THE CONSIDERED OPINION THAT IS A FIT CASE TO SET ASIDE THE IMPUGNED ORDER AND TO REMAND THE MATTER T O THE FILE OF THE LEARNED ASSESSING OFFICER TO DECIDE THE MATTER AFRESH IN THE LIGHT OF OUR OBSERVATIONS. WE, ACCORD INGLY, REMAND THE MATTER TO THE FILE OF THE LD. ASSESSING OFFICER TO CAUSE FURTHER ENQUIRIES IN THE LIGHT OF OUR ABOV E OBSERVATIONS, AFTER GIVING AN OPPORTUNITY TO THE AS SESSEE OF BEING HEARD. 30. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25.07.2018 SD/- SD/- (G.D. AGRAWAL) (K. NARASIMHA CHARY) PRESIDENT JUDICIAL MEMBER DATED: 25.07.2018 *KAVITA ARORA ITA NO. 948/DEL/2017 19 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 10.07.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.07.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/PS 26.7.18 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 25.7.18 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 26.7.18 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 26.7.18 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 26.7 .18 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER