Sandeep Abrol, Bangalore V. Deputy Commissioner Of Income Tax, International Taxation, Circle-1(1), Bangalore

ITITA 847/BANG/2022

AI Insights

The case involves Sri. Sandeep Abrol, a non-resident Indian based in the USA, who sold an apartment in Bangalore and declared a long-term capital loss in his tax return for the assessment year 2019-2020. The Assessing Officer (A.O.) doubted the transaction's authenticity due to the same person being involved in both the purchase and sale, leading to a referral to the District Valuation Officer (DVO) and an estimated higher sale consideration. The Dispute Resolution Panel (DRP) upheld the A.O.'s decision, prompting the appeal to the Tribunal. The Tribunal found that the A.O. incorrectly substituted the sale consideration with an estimated value, as the actual sale consideration was higher than the stamp duty value, and section 50C of the Income Tax Act did not apply.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 115219 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 07-12-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 07-12-2022
• Assessment Year: 2019-2020
• Appeal Filed On: 15-09-2022
• Other Referred Cases: Pr.CIT v. Shanubhai M.Patel, Punjab Poly Jute Corporation vs Assistant Commissioner of Income Tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Question of law; Cost of acquisition; Fair market value; Valuation report; Capital Gains
• Section: 50C; 144C; 48; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “B”, BANGALORE Before Shri George George K, JM & Shri Laxmi Prasad Sahu, AM IT(IT)A No.847/Bang/2022 : Asst.Year 2019-2020 Sri.Sandeep Abrol Apartment 3114 Cornwall Block Prestige Kensington Gardens 17 HMT Main Road, Jalahalli Bangalore – 560 013. PAN : AZPHA3903E. v. The Deputy Commissioner of Income-tax, International Taxation Circle 1(1) Bengaluru. (Assessee) (Respondent) Assessee by : Sri.R.E.Balasubramaniyan, CA Respondent by : Sri.Manjunath Karhihalli, CIT-DR Date of Hearing : 08.12.2022 Date of Pronouncement : 08.12.2022 O R D E R Per George George K, JM : This appeal at the instance of the assessee is directed against final assessment order dated 21.07.2022 passed u/s 143(3) r.w.s. 144C(13) of the I.T.Act. The relevant assessment year is 2019-2020. 2. The brief facts of the case are as follows: The assessee is a non-resident Indian, who is based in USA. For the assessment year 2019-2020, the return of income was filed on 16.08.2019 declaring taxable income of Rs.3070 and long term capital loss of Rs.2,75,48,412. The long term capital loss was on account of sale of an apartment by the name `Fairmount’, situated in Banaswadi, Bangalore on 12.10.2018 for a consideration of Rs.3,20,00,000. This IT(IT)A No.847/Bang/2022 2 property was purchased on 23.11.2012 for a total cost of Rs.4,25,34,580. 3. The assessment was selected for scrutiny and notice u/s 143(2) of the I.T.Act was issued on 31.03.2021. The Assessing Officer was of the view that since the purchase and sale was made from / to the same person, the purchase and sale consideration provided by the assessee were doubtful. The A.O. referred the matter to the DVO for arriving at the cost of acquisition. Further, the A.O. stated that since the sale consideration is less than the purchase cost, he has to undertake the valuation of said property. The A.O. then determined the sale consideration based on Kaveri online services website along with comparative studies on private websites like magicbricks.com. The A.O. arrived at the notional sale consideration of Rs.6,20,31,386 as on 2021 and adopted the same in the draft assessment order. As a result of estimating the sale consideration at Rs.6,20,31,386 instead of sale consideration disclosed in the sale deed, the long term capital loss was converted into long term capital gains of Rs.24,82,974. The draft assessment order was passed with the observation that as and when the DVO gives his report, suitable modification would be made. 4. Aggrieved by the draft assessment order passed u/s 143(3) r.w.s. 144C of the I.T.Act, the assessee filed objections before the Dispute Resolution Panel (DRP). The objections raised before the DRP are two folds and the same are as under:- IT(IT)A No.847/Bang/2022 3 “(i) Whether in the absence of applicability of section 50C, the AO can proceed to determine the value of consideration for the purposes of section 48. (ii) Whether the AO was right in referring the matter to the DVO for arriving at the cost of acquisition when there were no reservations expressed by the AO regarding the same.” 5. When proceedings were pending before the DRP, the DVO submitted the valuation report with the cost of acquisition value as on 23.11.2012 at Rs.3,38,77,000. The DVO did not give any value of the flat as on the date of sale i.e., on 12.10.2018. The DRP vide its directions dated 24.06.2022 rejected the objections filed by the assessee. The DRP held that the A.O. has correctly referred the case to the DVO to ascertain the fair market value of the property as on 23.11.2021. The DRP directed the A.O. to adopt the fair market value determined by the DVO in his valuation report as the cost of acquisition. Pursuant to the DVO’s objections, the impugned final assessment order was passed on 21.07.2022. 6. Aggrieved by the final assessment order, the assessee has filed the present appeal before the Tribunal. The limited submission of the learned AR during the course of hearing was that the A.O. is not correct in substituting the sale value with the estimated value (the sale consideration as per the sale deed is Rs.3,20,00,000 with the estimate value of Rs.6,20,31,386). The learned AR has filed a paper book comprising of 146 pages inter alia enclosing therein the case laws relied on, copies of the State Gazette Notification (in Kannada and English), the screenshots of the Kaveri online IT(IT)A No.847/Bang/2022 4 services website with different parameters being selected, the valuation report submitted by the DVO, the purchase deed dated 23.11.2012 and the sale deed dated 12.10.2018. The learned AR submitted that when the provisions of section 50C(1) of the I.T.Act are not attracted, the Income-tax Act does not provide for any other means for substitution of sale consideration. In support of his contention, the learned AR relied on the judgment of the Hon’ble Gujarat High Court in the case of Pr.CIT v. Shanubhai M.Patel reported in (2016) 73 taxmann.com 138 (Gujarat). 7. The learned Departmental Representative submitted that the reference has been made correctly to the DVO by the A.O. to ascertain the cost of acquisition of the property as on the date of purchase. As regards the substitution of sale consideration with an estimated sale value, the learned DR relied on the finding of the A.O. and the DRP. 8. We have heard rival submissions and perused the material on record. Section 48 of the I.T.Act, states that the income from capital gains shall be computed by considering full value of consideration received or receivable on the transfer of a capital asset. The only provision in the Act which allows a value other than the actual sale consideration received to be deemed as Full value of consideration is section 50C of the I.T.Act. Section 50C of the I.T.Act reads as follows: "50C. (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 or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp IT(IT)A No.847/Bang/2022 5 valuation authority'] for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable 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.........” 9. A plain reading of the above section would show that the section provides for the substitution of the value of consideration by any other value only in the case where the stated sale consideration in the registered document is less than the value adopted or assessed by the Stamp Valuation Authority. In the instant case, there is no such variation made by the sub-registrar and the sale deed has been registered for the consideration recorded in the sale deed. The AO has also not brought anything on record to show that the assessee was in receipt of any sum over and above what was recorded in the sale deed. In fact there is not even a whisper about Section 50C of the I.T.Act anywhere in the assessment order. The Assessee has sold the asset for an amount of Rs.3,20,00,000 The copy of the state (both in Kannada and English) notifying the guidance value for the Fairmont towers in Halasuru area as of 2017-18 is enclosed in support of assessee’s contention (refer page 89 to 102 of the paper book submitted by the assessee). A perusal of the above in Sl. no. 22 of the document (refer page 94 of Paper book) shows that the guidance value for the property in question is Rs. 86,600 per sqm. Thus, for 3800 sq.ft the guidance value comes to Rs.3,05,72,278. It can be clearly seen that the actual sale value is higher than the value that would have been adopted by the Stamp valuation authority. Considering that the sale deed has been registered without any adverse remarks, it IT(IT)A No.847/Bang/2022 6 can be safely concluded that the Stamp Valuation Authority has also accepted the value declared by the assessee. Therefore, the provisions of section 50C of he I.T.Act are not attracted and hence the action of the AO in adopting any value other than sale consideration is bad in law and beyond his jurisdiction. Further, when the provisions of section 50C(l) of the I.T.Act are not attracted, the Income Tax Act does not provide for any other means for substitution of the sale consideration. When the assessee has received and declared a value higher than the stamp duty value, there can be no question of deeming any other value as the full value of consideration. In this context, we rely on the judgment of Hon’ble High Court of Gujarat in the case of Principal Commissioner of Income-tax-2 vs Shanubhai M. Patel [2016] 73 taxmann.com 138 (Gujarat). The relevant portion of the Hon’ble Gujarat High Court judgment reads as follows:- "Thus, the condition precedent/or resorting to the provisions of sub-section (I) of section 50C of the Act is that the land or building should have been transferred for a lesser consideration than that adopted or assessed or assessable by [he stamp valuation authority. Adverting to the facts of the present case, undisputedly the valuation made by the assessee exceeds the value adopted by the stamp valuation authority. The condition precedent for invoking sub-section(1) of section 50C of the Act is, therefore, clearly not satisfied. Consequently, there was no question of referring the valuation of the plots in question to the Valuation Officer. The impugned order passed by the Tribunal being in consonance with the provisions of sub-section (1) of section 50C of the Act, does not suffer from any legal infirmity so as to give rise to any question of law, much less, a substantial question of law" (Para 4) 10. The SLP filed by the Revenue in respect of the same has been dismissed by the Hon’ble Supreme Court of India IT(IT)A No.847/Bang/2022 7 reported in 73 Taxmann.com 151 (SC). We also rely on the order of the Amritsar bench of the Hon'ble ITAT in the case of Punjab Poly Jute Corporation vs Assistant Commissioner of Income Tax [2009] 120 ITD 233 (Amritsar), where it has been held that section 50C of the I.T.Act only comes into play when there is a sale consideration at a value lesser than the value adopted by the stamp valuation authority. The relevant findings of the ITAT reads as follow:- "In the present case. the property registered at Rs. 16.34 lakhs at the rate of Rs. 220.81 per sq. yd. The contention a/the Department is that the value of the land is at Rs. 500 per sq. yd., since there is a difference, section 50C is applicable. In our opinion, the argument of the Department is misconceived. Section 50C comes into play only when there is valuation at a higher value [or stamp valuation purposes by the State Authority than declared by assessee in the sale deed. When there is such difference Noticed, valuation adopted by the stamp valuation authority has to be substituted with the sale consideration of such property mentioned in the sale deed. In the present case, the property registered at particular rate, which is adopted i)r registration purpose and there is no question of replacing the valuation adopted by the stamp valuation authority with the DVO for the purpose of computing the capital gain. The purpose of section 50C is that the property, which is under transfer from the assessee to another person, should have been assessed at higher value for stamp valuation purpose than that received by the assessee. Since the stamp valuation authority had accepted the consideration declared by the assessee in sale deed, there is no question of once again referring the matter to the DVO. Accordingly, we allow the ground taken by the assessee”. 11. In the light of the aforesaid reasoning and the judicial pronouncements, cited supra, we hold that the A.O. is not justified in substituting the sale consideration that is documented in the sale deed (which is higher than the circle rate mentioned u/s 50C of the I.T.Act) with the estimated value. Therefore, the A.O. shall recompute the long term IT(IT)A No.847/Bang/2022 8 capital gains / loss by adopting Rs.3,20,00,000 being sale consideration as declared in the sale deed dated 12.10.2018. It is ordered accordingly. 12. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on this 08 th day of December, 2022. Sd/- (Laxmi Prasad Sahu) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 08 th December, 2022. Devadas G* Copy to : 1. The Assessee. 2. The Respondent. 3. The DRP-1, Bangalore. 4. The Pr.CIT, Bangalore. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore