DCIT Vs Goverdhan Prasad Singhal (ITAT Jaipur)
AO failed to follow the procedure as prescribed under section 50C(2), held that the CIT(A) was not justified in confirming the action of the AO in adopting deemed sale consideration in violation of section 50C(2) of the Act. Actual sale consideration adopted for LTCG
Facts-
The main contention of the assessee is that sale consideration adopted at Rs.11,19,00,441/- as per stamp duty valuation as against fair consideration Rs. 8,81,00,000 which exceeded the fair market value of property as per valuation reported is unjustified.
Conclusion-
As per the judgement of ITAT in the case of Smt. Sharda Devi Alwar Vs ITO it is observed that if objection is made by the assessee for value taken, AO should have adopted provision of section 50C(2). In the present case, it is noted that AO neither discussed the contentions of the assessee for taking actual consideration as fair market value of the property sold nor referred the matter to the DVO as was required U/s 50C(2). The AO and the CIT(A) have also not found or alleged that the assessee received any excess amount over the sale consideration mentioned in the deeds. In the light of these facts and particularly on the failure of the AO to follow the course as prescribed under section 50C(2) and respectfully following various decisions discussed above, we hold that the CIT(A) was not justified in confirming the action of the AO in adopting deemed sale consideration in violation of section 50C(2) of the Act.
Held that it is the failure of the AO to follow the procedure as prescribed under section 50C (2) in particular, and therefore, the CIT(A) action in confirming such order is held unjustified and against law by sustaining stamp duty value of property Rs 11,19,40,441/- as deemed sale consideration u/s 50C against actual sale consideration and fair market value Rs 8,81,00,000/-. Accordingly, the AO is directed to adopt the value of sale consideration at Rs 8,81,00,000/- of the subject property for the purpose of computation of Long Term Capital Gains.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
These appeals are the cross appeals filed against the order of the ld. CIT(A) dated 21-12-2021, National Faceless Appeal Centre, Delhi[hereinafter referred to as (NFAC)] for the assessment year 2017-18.
2. In ITA 64/JP/2022,the grounds of appeal raised by the department are as under:-
1. Whether on the facts and circumstances of the case and in law the ld. CIT(A) was justified in allowing deduction to the assessee u/s 54F of the I.T. Act, 1961 though the assessee had more than one house property.
2. Whether on the facts and circumstances of the case and in law the ld. CIT(A) was justified in allowing relief to the assessee by considering lesser value u/s 50C of the I.T. Act, 1961 of the property sold as taken by the assessee himself.
3. The assessee in ITA 72/JP/2022 has raised the following grounds of appeal:
1. That on the facts and circumstances of the case and in law, the ld. CIT(A) grossly erred in sustaining the stamp duty value o f the property at Rs.11,19,40,441/- as deemed consideration u/s 50C of the I.T. Act as against the actual sale consideration o f Rs.8,81,00,000/- coincides with the fair market value of property prevailing on the date of transfer of property. The ld. CIT(A) ignored the fact that the objection raised by the appellant during the assessment proceedings giving full particulars of the fair market value of the property.
2. That on the facts and circumstances of the case and in law, the ld. CIT(A) grossly erred in sustaining gain from sale of building of discontinued business treated as short term capital gain in terms of Section 50 without considering the fact that WDV was on date o f discontinue of business, the buildings of discontinued business as kept investment for period more than 3 years and since then no depreciation claimed on that building.
3. That on the facts and circumstances of the case and in law the ld. CIT(A) grossly erred in directing to computing notional rent an old unusuable house on ratio laid down in the case of M/s. AnsalHousing Finance and Leasing Ltd. by the Hon’ ble High Court of Delhi ignoring the fact that the Hon’ble Court applied rent a l income has to be computed on the unsold constructed flats accounted as stock-in-trade which are unusable condition but in case of appellant, the house purchases was in damaged condition and not fit to use and kept only for trading purposes.
4. Apropos Ground No. 2of the department and Ground No. 1 of the assessee pertain to the common issue of adoption of value as deemed consideration u/s 50C of the I.T. Act as against the actual sale consideration of the impugned property Under Section 50C of the Act. The facts as emerges from the order of the ld. CIT(A) are as under:-
6.1
Ground No. 1: In this ground, appellant has contended that the sale consideration adopted at Rs.11,19,40,441/ – as per stamp duty valuation as against actual fair consideration Rs.8,81,00,000/ – which exceeded the fair market value of property as per valuation report submitted by the appellant is unjustified and against the law.
6.1.1. The Assessing Officer in Para 3.13 discussed the provisions of Section 50 Cas introduced by the Finance Act, 2002 with effect from 1st April 2003 and the proviso inserted to sub-section 1 of Section 50C by the Finance Act, 2016 effect from 1st April 2017 with reference to section45(1) and section 48.
In the case on hand. appellant has shown full value of consideration of the property received on transfer of capital asset, viz., land and buildings at Rs. 8,81,00,000/ – whereas the Stamp Valuation Authority has fixed the value of the property-. The Assessing Officer commented that capital gain upon transfer of capital asset is to be charged as per provisions of section 45 of the Act, which shall be deemed to be the income of the assessee for the previous year in which the transfer took place. Section 48 of the Act provides the mode of computation of capital gain. It is at the stage of computation that section 50C of the Act comes into action. Having discussed the provisions of sections 50C, 45, & 48 of the Income Tax Act, 1961, the Assessing Officer stated that the stamp valuation assessment by stamp duty officer of the state government would be deemed to be the sale consideration of capital asset, replacing the declared sale consideration, if it happens to be less than Stamp Duty valuation. For charging capital gain in view of Section 45, to be computed as provided in Section 48, this deemed consideration would be applied. As per Para 3.11 of the assessment order, since assessee has not furnished separate consideration received from the sale of land and building, the Assessing Officer requisitioned the Sub-Registrar, Jhanwar, Jodhpur to furnish the details of the DLC value of the land and building separately taken by him for charging the stamp duty on sale of property under reference. In response, the Sub-Registrar, Jhanwar, Jodhpur vide his office letter No. 298 dated 23.12.2019, informed that out of full value of the property at Rs.11,19,40,441/-,the value of land is Rs.9,90,99,000/- and that of buildings is Rs.1,28,41,441/-. Accordingly, value of consideration of the land for the purpose of computation of capital gain is taken at Rs.9,90,99,000/-in accordance with the provisions of section 50C(1) the Income Tax Act, instead of Rs.6,55,07,063/-taken by the assessee in his income tax return for computation of capital gain. After deducting transfer expenses of Rs.6,62,496/-and in dexed cost of acquisition of Rs. 1,78,41,644/-,net long-term capital gainis arrived at Rs. 8,05,94,860/-.
6.1.2 During the appellate proceedings, appellant uploaded written submission on various dates submitted before the Assessing Officer during assessment proceedings wherein, one of the issues disputed by the appellant is adopting the value fixed by the Stamp Duty Valuation Officer as the sale consideration of the impugned property as per Section 50C(1) instead of sale consideration stated to have been received by the appellant, for the urpose of computing capital gains. It is stated herein and reiterated during the appellant proceedings that the value adopted by Stamp Duty Valuation Authority exceeds the fair market value of the property as on date of transfer in support of which appellant submitted valuation report of fair market value by a registered valuer. Appellant submitted that the sold land situated in Industrial Park, Bornada Industrial Area is adjacent to the boundary wall of Agro Food Park, Boranada and share common boundary wall but the land in Agro Food park has been valued by the Stamp Valuation Authority at Rs.2,500/- per square meter whereas appellant’s land has been valued at Rs.7000/- per square meter. It is apparent that the stamp duty authority has taken different DLC rate for virtually the same part and parcel of land without any reasonable basis. Further, it is stated that the buyer of the impugned property contested hat stamp duty assessed by the Stamp Duty Valuation Authority was excessive and a legal notice w was served to the stamp duty authority to refund excess stamp duty charged. The appellant also contended that the Assessing Officer adopted deemed value for land at Rs.9,90,99,000/ – and for building at Rs.2,18,50,441/- totaling to Rs.12,09,49,441/-which is higher than the stamp duty value of Rs.11,19,40,441/ consideration of objection raised by appellant and without referring to DVO as laid down in Section 50C(2). The appellant desired to make correction in the ground of appeal by replacing the figure of Rs.11,1 9,40,441/- originally written in Form-35 due to clerical mistake with Rs.12,09,49,441/-,being the total value of the property adopted by the Assessing Officer in the assessment made u/s.143(3).Based on the above submission and placing reliance on several judicial precedents cited in his written submission, appellant submitted to direct the Assessing Officer to accept the actual sale consideration which coincides with fair market value for the purpose of computing capital gain.
6.1.3 I have carefully perused the submission of the appellant with reference to the facts manating from the assessment order. The appellant is aggrieved that the stamp duty value has been adopted by the Assessing Officer as sale consideration of the property for the purpose of computing capital gains. In this regard appellant has contended that (i) the actual sale consideration of Rs.8,81,00,000/-coincides with the fair market value prevailing on the date of transfer of the property, (ii) the rate of Rs.7000/- per square Meter adopted by the Stamp Duty Valuation Authorities for the said land of the appellant is very much on the higher side when compared to the rate of Rs.2,500/- of the land in Argo Food park which is adjacent to that of the appellant’s land and shares a common boundary and (iii) despite objection raised by the appellant on adopting the stamp duty value, Assessing Officer has not referred the matter to the DVO as required u/s.50C(2). In support of his contention, appellant placed reliance on the ratio laid down by judicial authorities in several case laws. I have carefully perused the case laws and I find the facts of the case apparently dictates invoking the provisions of Section50 Case the value of the impugned property fixed by the Stamp Valuation Authority is higher than the sale consideration for which appellant has sold the impugned property. As per the provisions of Section 50C, if the sale consideration declared by the assessee (seller) is less than the stamp duty value, then the stamp duty value shall become deemed sale consideration for the purpose of calculating capital gain tax. Therefore, in the first place, the Assessing Officer is obligated to adopt the stamp duty value as the deemed sale consideration for calculating capital gain. However, the objection raised by the appellant during the assessment proceedings in response to the proposal put forth by the AO should have been considered and the Assessing Officer should have referred the matter to the District Valuation Officer (DVO) which has not been done. Having stated as above, I find there is an inhibiting factor for the Assessing Officer to refer to the DVO, since in this case against the stamp duty value fixed by the Stamp Valuation Authority, the buyer has contested before the Stamp Valuation Authority to refund the excess stamp duty collected. In the event of pendency of an appeal under the Stamp Act, filed before the Stamp Duty Valuation Authority, making reference to the DVO on the same issue -is legally unviable.
6.1.4
Nevertheless, before this Office during the appellate proceedings, the appellant has not made any submission regarding the outcome of the appeal filed before the Stamp Valuation Authority by the buyer of the impugned property. In the given facts and circumstances, considering the entire facts discussed above, I am inclined to uphold heaction of the Assessing Officer in invoking the provision to Section 50C, there by adopting the Stamp Duty value as sale consideration of the impugned property for computing capital gains u/s.48. Having held as above, I must point out here, that the Assessing Officer has adopted the stamp duty value of Rs.9,90,99,000/- for the land but for the buildings the Assessing Officer chose to adopt the value at Rs.2,18,50,441/- stated by the appellant in its submission during the assessment proceedings because it is higher than the value of Rs.1,28,41,441/- fixed for the buildings by the Stamp Valuation Authority. In this respect, the appellant is right in contending that the Assessing Officer’s adaptation of deemed value for land at Rs.9,90,99,000/- and for building at Rs. 2,18,50,441/- totals to Rs. 12,09,49,441/-which is higher than the stamp duty value of the impugned property, land and building ofRs.11,19,40,441/-. The Assessing Officer cannot apply double standard in adopting the stamp duty value for land alone and not for the buildings when the Stamp Valuation Authority has specifically fixed the value for buildings at Rs.1,28,41,441/-.Therefore, the AO is directed to adopt the stamp duty value of Rs.1,28,41,441/-as the value/sale consideration for the buildings as well. Except as above, in the absence of any documentary proof that the dispute raised by the buyer before the Stamp Valuation Authority has been decided in favour of the buyer thereby lowering the stamp duty value, I sustained the stamp duty value of the property at Rs.11,19,40,441/ as deemed consideration of the impugned property inconformity with the provisions of Section 50C and direct the Assessing Officer to take the value of land at Rs.9,90,99,000/- as deemed sale consideration of land for computing long-term capital gain. Accordingly, ground of appeal No.1 is dismissed subject to the above direction.
5. The ld. DR for the department relied on the order of the AO and submitted that the AO has explicitly dealt with the issue at para 3.13.5 in his order. The relevant para to this effect is as under:-
3.13.5 ……. Sub-section 1 of section 50C provides that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or plotor both is less than the value adopted or assessed or assessable by stamp valuation authority for the purpose of stamp duty collection in respect of such transfer, the value so adopted, assessed or assessable shall for the purpose of section 48 be deemed to be the full value of consideration for transfer received or accruing as are sult of such transfer. In plain terms, the stamp valuation assessment by the stamp duty officer of the State Governme ntwould be deemed to be the sale consideration of capital asset, replacing the declared sale consideration, if it happens to be less than stamp duty valuation. For the purpose of charging capital gain in view of section 45, to be computed as provided in section 48, this deemed consideration would be applied.
6. The Ld. AR of the assessee submitted that the ld. CIT(A) grossly erred in law and on facts in sustaining the stamp duty value of the property at Rs.11,19,40,441/- as deemed consideration u/s 50C of the I.T. Act as against the actual sale consideration of Rs.8,81,00,000/- coincides with the fair market value of property prevailing on the date of transfer of property by ignoring the objection raised by the appellant during the assessment proceedings giving full particulars of the fair market value of the property. In support of arguments, the assessee has filed written submission as under:-
‘2.1.1 The ld CIT appeal unjust, wrong and against the law for sustaining stamp duty value of property Rs 111940441 as deemed sale consideration u/s 50C against actual sale consideration and fair market value Rs 88100000 without consideration of fact and fair market value as per valuation report of approved valuer submitted by the appellant as objection raised during course of assessment proceeding by ignoring the provision of section 50C(2). The ld CIT Appeal again misconception of fact by stating to be pendency of an appeal under the stamp Act filed before stamp duty authority, making reference to DVO on the same issue is legally unviable. In fact there was no any such appeal pending before such authority. The fact is that only the buyer given notice to Sub Registrar itself (Who made the stamp duty valuation) to intimate the excess stamp duty charged and no any appeal to appellate authority under the Stamp Duty Act. (PB page no 135-138). As such there is no any appeal is pending before stamp duty authority. The Ld CIT Appeal factually wrong while rejecting ground of appellant.
2.1.2 That the appellant sold the property at fair market value as on the date of transfer. However Stamp duty authority charged higher stamp duty from buyer considering excess value without looking the fact or visit of property. It is also stated that the sold land situated in Industrial Park, Bornada Industrial Area which is just adjacent to the boundary wall of Agro Food Park, Boranada and share common boundary wall. The land in Agro food park has been valued by authority at Rs 2500/- per square meter whereas this land situated just adjacent to that has been valued Rs 7000/- per square meter. It become apparent that the stamp duty authority has considered the different DLC rate for virtually the same part and parcel of land without any reasonable basis.
2.1.3 It is undisputed fact that during course of hearing, the appellant have objected and claimed that the value adopted by stamp valuation authority exceed the fair market value of the property as on date of transfer and also submitted valuation report of fair market value by registered valuer. The claim of appellant was ignored by the assessing officer only stating his disagreement with valuation report submitted in support of claim. However if the assessee had made an objection for invoking section 50C(1), the Assessing Officer has to referred to the Valuation Officer as per section 50C(2). Without doing so, the Assessing Officer had estimated the capital gains tax with taking estimated value, higher from the actual consideration or fair market value. In the various judicial decision, it is very much clear that in such case, the LD A.O.should have adopt the provision of section 50C(2) for applying deeming provision of sale consideration.
