M/s. Lahiri Promoters Vs. ACIT (ITAT Vishakapatnam)
ITA No. 12/Vizag/2009
The assessee, a partnership firm, filed its return of income for asst. year 2006- 07 declaring the income under the head Capital Gains at Rs. 28,767,565/-, which are related to the gains obtained on sale of three immovable properties. In respect of two properties, the market value of properties for the purposes of stamp duty valuation was shown at Rs. 36,98,500/- and Rs. 38,56,500/- respectively. However the apparent sale consideration of the said two properties was shown at Rs. 29,31,000/- and Rs. 30,70,000/- respectively. Thus there was an aggregate difference of Rs. 15,54,000/- between the apparent sale consideration and the market value determined for the purposes of collecting stamp duty. The assessee had computed the capital gains on the basis of apparent consideration. However, the AO, by invoking the provisions of section 50C, added the above said difference to the income disclosed by the assessee. The said addition was confirmed by Ld CIT(A). Hence the assessee is in appeal before us.
In the instant case also, the assessee herein has fulfilled a contractual obligation on 30-6-2005, which the assessee is bound by law to carry out as per the sale agreement entered in March, 2003. Now the next question that requires to be addressed is whether there was any under statement of actual consideration at the time when the sale agreements were entered into. The assessee has placed a copy of the certificate dated 16.4.2010 issued by the Jt. Sub Registrar, Visakhapatnam by way of additional evidence. According to the said certificate, the market value of the impugned property located at Allipuram Ward was Rs. 5000/- as on 26.03.2003. According to Ld AR, the sale value agreed to by the parties, as per the sale agreement entered into on 27-03-2003 was more than the market value fixed by the Jt. Sub Registrar at the time the sale agreement was entered into. Thus according to Ld AR, there is no understatement or suppression of actual consideration. it is also not the case of revenue that there was any understatement of actual consideration.
Thus, by executing the sale deed in June, 2005, the assessee has only completed the contractual obligation imposed upon it by virtue of the sale agreement. Since the process of sale has been initiated from the date of sale agreements, in our opinion, the character of the transaction vis-à-vis income tax Act should be determined on the basis of the conditions that prevailed on the date the transaction was initially entered into. Accordingly, the applicability of the provisions of section 50C should be looked at only on the date of sale agreement. The assessee has filed a certificate obtained from the Joint Sub Registrar, Visakhapatnam, regarding market value of the impugned property as on the date of the sale agreements. The said certificate was not produced before the tax authorities. We have already held that the provisions of section 50C should be applied to the impugned sale transactions as on the date on which sale agreements were entered into. Since the applicability of section 50C as on the date of sale agreements is required to be examined by the AO, we set aside the issue to the file of the AO with a direction to compute the capital gains on sale of impugned properties after applying the provisions of section 50C as on the date of sale agreements. Accordingly, the order of Ld CIT(A) is reversed.