IN THE ITAT KOLKATA BENCH ‘A’
Deputy Commissioner of Income-tax, Circle-9
Bagri Impex (P.) Ltd.
IT Appeal NO. 498 (KOL.) OF 2012
[ASSESSMENT YEAR 2006-07]
AUGUST 9, 2012
Sanjay Arora, Accountant Member
This is an Appeal by the Revenue arising out of the Order by the Commissioner of Income-tax (Appeals)-XXXII, Kolkata (‘CIT(A)’ for short) dated 11-01-2012, allowing the assessee’s appeal contesting its assessment u/s. 143(3) of the Income-tax Act, 1961 (‘the Act’ hereinafter) dated 04-08-2008 for the assessment year (A.Y) 2006-07.
2. The Revenue has raised three grounds per its present appeal, reading as under:-Online GST Certification Course by TaxGuru & MSME- Click here to Join
“1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in accepting fresh evidence which is in violation of Rule 46A of the I.T. Rules, 1962.
2. That on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in directing the A.O to delete the addition of Rs.76,18,080/- in the sale value consideration for computing long term capital gain.
3. That on the facts and circumstances of the cases and in law, Ld. CIT(A) has erred in not considering the fact that the Assessing Officer is within his right to adopt the sale consideration as per the valuation of stamp duty authority which is higher than the value declared by the assessee.”
The matter was heard at length.
3. Qua the first ground, the Revenue’s case is that while all the fifteen (15) conveyance deeds, per which the land in question was conveyed by the assessee, were produced before the first appellate authority, only one copy was supplied to the assessing authority. Toward this, the ld. AR clarified that all the relevant material was before the Assessing Officer (AO), and there has been no wrong assumption of any fact by him in deciding the assessee’s case. Reference was made by him to the observation by the ld. CIT(A) to this effect in the operating part of his impugned order. Further, copy of the assessees’s letter dated 16-07- 2008 to the AO was placed by him on record to exhibit that one copy each of the two deeds dated 15-01-1998 and 26-05-2006, i.e., the two dates on which the entire bunch of 15 deeds were executed, were filed as specimen copies before the AO; the other deeds being identical in all other respects. Had the AO wanted, he averred, the assessee could have supplied the copies of all the other deeds as well. The ld. DR, after seeking an adjournment for making verification, confirmed the said letter (dated 16/7/2008) as forming part of the assessment record. He also could not demonstrate any wrong assumption of fact/s by the AO. Under the circumstances, we find no merit in which Revenue’s case qua its Ground No.1, so that the same is dismissed.
4. That leaves us with the issue on merits, which stand projected by the Revenue per its Ground Nos. 2 and 3 (supra).
4.1 At this stage, it would be relevant to delineate the background facts of the case. The assessee sold his 2/5th share in the land situate at 14A Burdwan Road, Kolkata, along with the two other co-owners, being group companies, i.e., Bagari Investments Pvt. Ltd. and Bagari Synthetics Pvt. Ltd., to fifteen (15) different buyers, per separate conveyance deeds, i.e., qua each conveyance. The respective agreements to sales were in all cases executed on 15-10-1996. While five (5) conveyance deeds were executed on 15-01-1998, and registered – after paying stamp duty – on 22-02-1999, the balance ten (10) were executed on 26-05-2006; the corresponding date of registration being 27-11-2007, when the stamp duty was finally assessed. The bulk of the sale consideration stood received, as well as possession made over, in almost all cases by January, 1998, whereat the five (5) deeds were executed. The assessee, however, returned long term capital gains (‘LTCG’ for short) arising on the said transfers for the current assessment year, i.e., A.Y. 2006-07, at Rs. 97,14,463/-. The AO, however, assessed it at Rs.1,73,32,543/- by deeming the sale consideration at Rs. 214.18 lakhs i.e., as against the actual sale consideration (i.e., in respect of the assessee’s 2/5th share) of Rs.138 lakhs, or increasing it by Rs. 76,18,080/-. It is this enhancement of sale consideration, for the purpose of assessment of LTCG, by invoking the provision of section 50C of the Act, that is the subject matter of dispute between the assessee and the Revenue, with the assessee having been granted relief by the first appellate authority, so that the Revenue is in appeal before us.
4.2 The Revenue’s case is that the provision of sec. 50C having come on the statute book with effect from 1-4-2003, and the capital asset which is the subject-matter of transfer, being land, the same would apply, and thus stands rightly invoked by the AO. The assessee’s case, and on the basis of which it found favour with the first appellate authority, is that the transfer in the first five (5) cases stood effected much prior the relevant year, i.e., on 15-01-1998, so that it could not be subject to the rigor of section 50C. In fact, there is no dispute between the sale value adopted by the assessee and that assessed by the Stamp Valuation Authority (‘SVA’ for short) in these cases. For the balance 10 (ten), the assessment by the SVA took place only on 27-11-2007, i.e., subsequent to the date of transfer. The words “or assessable” in s. 50C(1) stand inserted in the section only by Finance (No.2) Act 2009, with effect from 1-10-2009. The amendment is prospective and, as such, would have no application for the current year. That is, prior to 01-10-2009, it is only where the transfer under reference is subject to assessment by the SVA in the same year, i.e., the year of transfer, that the legal fiction per section 50C would come into play. Reliance is placed on the decisions in the case of ITO v. Mangal Shree Estate Ltd. (ITA No.88/Jp/2011 dated 05-08-2011) and Smt. Rajshree Bihani v. ITO  48 SOT 594 (Kol) (copy on record).
4.3 We have perused the material on record, as well as the case law cited. The primary facts are not in dispute, and the only issue arising is of the applicability or otherwise of section 50C of the Act to the LTCG disclosed by the assessee for the relevant year in the given facts and circumstances of the case. Our first observation in the matter is that year of transfer is not in dispute. This aspect was got specifically confirmed by the Bench during hearing from both the parties, as there is no question of assessment of capital gains u/s. 45 for the current year, much less applicability of section 50C, if no transfer has taken place during the relevant year. In fact, we also observe no dispute with regard to this aspect before the authorities below and, consequently, no finding by them in the matter per their respective orders. The only issue, therefore, that survives, and which stood agitated before us (also refer ground nos. 2 and 3 by the Revenue) is the applicability or otherwise of section 50C to the impugned transfers per the 15 (fifteen) conveyance deeds in the facts and circumstances of the case.
4.4 Section 50C stands co-opted on the statute by Finance Act, 2002, with effect from 01-04-2003. Its relevant part reads as under:-
‘Special provisions for full value of consideration in certain cases.
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 by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed 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.”
The words “or assessable” stand inserted after the word “assessed” and before the words “by any authority” by Finance (No.2) Act, 2009 with effect from 1-10-2009.
4.5 Our first observation in the matter is that section 50C would apply in respect of capital gains arising on the transfer of any capital asset, being land or building or both, chargeable u/s. 45 of the Act for A.Y. 2003-04 or any subsequent year. As such, the impugned capital gains, being chargeable u/s. 45 for the current year, i.e., AY 2006-07, section 50C would be per se applicable.
4.6 Now let us examine the assessee’s case, which is in two separate limbs, vis-à-vis the said provision. For the first five (5) deeds dated 15-01-1998, the issue is academic inasmuch as undisputedly there is no difference between the value assessed by the SVA and that disclosed by the assessee per the said deeds. There is no question, as has been done by the AO, of the value assessable for a subsequent year, i.e., subsequent to the assessment by the SVA, as being relevant or made applicable for the purpose of sec. 50C. As such, section 50C, though applicable in principle for the first 5 (five) deeds dated 15-01-1998, would be of no consequence, and no modification to the disclosed sale consideration could be made with reference to section 50C.
4.7 Next, we take up the assessee’s case qua the balance ten (10) conveyance deeds for an aggregate disclosed sale consideration of Rs.96 lakhs, executed on 26-05-2006. The assessee’s case is that the assessment of the fair market value of the property (land) by the SVA was done only on 27-11-2007 and, therefore, there being no assessment by it by the end of the relevant year, i.e., 31-03-2006, section 50C would not apply; the words “or assessable” having been brought on the statute only with effect from 01-10-2009. We find no force in the argument. There is no dispute that a circle rate had been prescribed by the competent authority (of the State Government) under the Stamp Act for the relevant year and, further, that the transfer under reference is covered by sec. 50C. It is this value that is relevant, and to be adopted by the assessee while filing his return of income, i.e., where no formal assessment has been made by the SVA. Again, if it has been by the due date of filing of the return of income or the actual filing of return, the same being available, and only in relation to the transfer, capital gains on which has arisen for the relevant year, the same would stand to be adopted. The words “adopted” or “assessed” (as also “assessable”) in s. 50C(1) qualify the word “value” preceding it, and not the word “transfer”. The only condition is that the said value should be in respect of the relevant transfer, i.e., of a defined capital asset, capital gains on which is assessable for the relevant year. In our view, the purport or relevance of the word ‘assessable’, the prospective operation of which is being advanced by the assessee as the reason for non-applicability of the provision of s. 50C, would be where there is a difference between the value adopted or assessed, and that assessable, on the other. In fact, as we see it, the provision (50C(1)) contemplates no difference in value adopted or assessed or the value assessable by the SVA. It is to be appreciated that the value only seeks to estimate or determine the fair market value of the relevant capital asset on the date of transfer. As such, whether the assessee’s assessment took place during the relevant year or subsequent thereto, would be of little consequence. The other circumstance where the word “assessable” could draw a distinction is where the value under the Stamp Act comes to be stipulated only subsequent to the date of transfer, though from a retrospective date. Clearly, no value having been provided for (in such a hypothetical case), no value could be said to have been adopted or assessed by SVA, so that it can be argued that such a transfer is not covered by section 50C. Similarly, would be the case where the guideline value available (under the Stamp Act) is subject to revision at the relevant time, and a higher value is prescribed subsequently, albeit with retrospective effect. The words “or assessable” would make a distinction inasmuch as the latter prescription (of rate) could give rise to a controversy as to whether the transaction (of transfer) is at all covered u/s.50C, or if the higher value would hold, as the case may be. No such controversy is present in the instant case; we clarifying at the outset, and also confirmed during hearing, that a circle rate obtained in respect of the land under reference during the relevant year (i.e., the previous year relevant to AY 2006-07), and at which it stood assessed, though subsequently. We have, in fact, read the provision considering the words “or assessable” as not present in the provision. Merely because the assessment takes place subsequent to the relevant year, would not make u/s. 50C inapplicable where the transfer is otherwise covered by it. Once a circle rate has been prescribed by the competent authority for the purpose, i.e., the payment of stamp duty, which is a pre-requisite for the registration of any transfer under the Registration Act, 1908, and which in turn is mandatory for the same to have a legal effect, it can fairly be said to be the value adopted by the competent authority, in respect the relevant transfer. One can understand a controversy where the value subsequently assessed is at variance with the value claimed to have been adopted by the said authority. However, no such controversy obtains in the instant case, with, rather, there being a separate procedure where the assessee contests the value as assessed (see s. 50C(2)), so that the same would need to be observed.
4.8 Finally, we may deal with the case law cited before us. The decision in the case of Mangal Shree Estate Ltd. (supra) is based on the decision in the case of Navneet Kumar Thakkar v. ITO  110 ITD 525 (Jd). In the facts of that (latter) case, the transfer, capital gains arising on which was subject to tax, was per an unregistered document. The transfer under the Act being complete, it was held that there was no warrant for the substitution of the actual sale consideration with the value adopted or that may be assessed by the SVA, i.e., if and when the said transfer is subject to registration, for the purpose of computing capital gains under the Act. Accordingly, the position existing prior to the co-option of section 50C of the Act would apply. In fact, this represents one more area or circumstance under which the word “assessable”, which came on the statute only later, would become relevant. The ‘transfer’ in the case of Mangal Shree Estate Ltd. (supra) was, again, only per an unregistered document, with the tribunal finding the words ‘assessable’ in s. 50C (1) as operative from a later date, and which, as clarified earlier, have not been taken into consideration by us. The said decisions are clearly distinguishable on facts inasmuch as each transfer in the instant case stands executed per a registered document. In fact, as sought to be clarified earlier, the assessee himself declares a value, paying stamp duty thereon, with reference to the prescribed circle rate. The said decisions would thus have no application in the facts and circumstances of the present case. In the case of Smt. Rajshree Bihani (supra), the assessee, on the impugned transfer being sought to be subject to the rigor of section 50C, contended that transfer was effected in fact much earlier to the relevant assessment year (being A.Y. 2005-06), i.e., in A.Y. 2001-02. Also, the property purchased out of the sale proceeds was also within the stipulated time of the date of the transfer, so that the capital gains was not assessable even for that year, being exempt u/s.54F. It was in this situation that it was held by the tribunal that no cognizance of the subsequent deed for the purpose of computation of capital gains under the Act could be taken and, accordingly, section 50C could not be applied. In the facts of the present case, without doubt, the assessee has returned capital gains for the current year, and admits it to be the year of the transfer of the relevant land, and which, as clarified at the outset, is not the subject matter of dispute or determination. The capital gains being assessable for the current year, the provision of sec. 50C would apply. The assessee could not possibly take a stand that while capital gains would stand to be charged u/s. 45 for the current year, sec. 50C would not apply; the assessment year under reference being subsequent to AY 2002-03 (also refer para 4.3, 4.5). The said decision is thus, again, distinguishable, and would be of no assistance to the assessee. We decide accordingly.
5. In the result, the Revenue’s appeal is partly allowed.