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TMI Blog2014 (8) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... lue adopted by the SRO for stamp duty purpose was Rs. 1,87,36,000/-. The AO being of the opinion that there is under valuation of sale consideration in terms of section 50C(1) of the Act, reopened the assessment u/s 147 of the Act after recording reasons and issued a notice u/s 148 of the Act on 06/12/2010. In response to the said notice, assessee filed a return of income on 04/01/2011 revising the total income to Rs. 3,94,100/- after including interest earned on savings bank account. During reassessment proceeding, the AO on the basis of information available with him noticed that the assessee had purchased a property comprising of house and land appurtenant thereto bearing MCH No. 8/8-2-93/82/JI/Ploy 509/, at Road No 83, Jubilee Hills, Hyderabad on the site admeasuring 623 sq.yard on 29/12/2005 at Hyderabad dated 29/09/2006 for sale consideration of Rs. 90,50,000/-, though, the SRO for stamp duty purposes has adopted the fair market value of Rs. 1,87,36,000/-. The AO, therefore, asked the assessee to explain as to why the value adopted by the SRO for stamp duty purposes should not be considered as the amount deemed to have been received by the assessee for the purpose of computat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that the Government of Andhra Pradesh has substantially increased the fair market value of the property for levy of stamp duty from Rs. 12000 per yard to Rs. 30000 per yard i.e. 150% increased in the value within a short span of 9 months without considering the market conditions prevailing at that time. The revised fair market value does not correctly reflect the value of the property with so many deficiencies/defects mentioned above." 4. In addition to the aforesaid main ground, assessee raised the following additional grounds before the Tribunal and requested for adjudicating the same. "1. The learned AO ought not to have exercised the jurisdiction u/s 147 of the IT Act, 1961 inasmuch as there are no reasons to believe that the income got escaped assessment from tax, inasmuch as, the provisions of section 50Cof the IT Act, 1961 had enacted only rebuttable presumption and it can only be a starting point of an enquiry, but cannot be the sole concluding reason to hold that there was understatement of sale consideration. 2. Without prejudice to the above ground, the learned CIT(A) ought not to have applied the provisions of section 50C of the IT Act, 1961 in view of the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the registered sale deed filed in course of the assessment proceeding for the subsequent assessment year. 2. AO had no tangible material available with him on the basis of which he could have formed a reason to believe that income chargeable to tax had escaped assessment. For this proposition, he relied on the following decisions: i) CIT Vs. Orient Craft Ltd., [2013] 354 ITR 536 (Del.) ii) Ratna Trayi Reality Services P. Ltd., V. ITO [2013] 356 ITR 493 (Guj.) iii) Inductotherm (India) Pvt. Ltd. V. M. Gopalam, DCIT [2013] 356 ITR 481 (Guj.) iv) Indivest Pte Ltd. Vs. Addl. DIT [2013] 350 ITR 120 v) Mohan Gupta (HUF) V. CIT-XI and Anr. - W.P.(C) 7660/2012, dated 28/01/14 - Delhi High Court. 3) section 50C(1) is not an absolute provision for making addition simply because the recorded consideration is lower than the value adopted for stamp duty purposes by the SRO. Sub-section (2) & (3) of section 50C provide exceptions. Since exceptions are provided, there cannot be any absolute reason to believe that income has escaped assessment. The provision contained u/s 50C(1) can give raise for a reason to suspect, but, not reason to believe. Assessment cannot be reopened o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly mentioned as Rs. 1,27,36,000/-). Since assessee has computed capital gain for the impugned assessment year by adopting registered sale consideration of Rs. 90,50,000/-, AO was of the view that there is an understatement of income in terms with section 50C(1) of the Act. In our view, on the basis of the aforesaid facts, it can be concluded that there is escapement/understatement of income in terms with section 147 of the Act, enabling the AO to exercise his jurisdiction for reopening the assessment. The contention of the learned AR that section 50C(1) is not absolute provision for making the addition as sub-section (2) & (3) of section of section 50C, in our view, is devoid of merit. There is no dispute to the fact that section 50C(1) is a deeming provision, which, mandates that if the fair market value adopted by the SRO for stamp duty purposes is more than the sale consideration disclosed by the assessee, fair market value adopted by the SRO for stamp duty purposes should be deemed to be sale consideration. Though, the assessee in terms with section 50C(2) can object to adoption of such value, it cannot be denied that understatement in sale value in terms with section 50C(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale of property by the assessee. It was, therefore, contended that clause (1) of section 2(22B) was not complied. Further, it was submitted that DVO has based his opinion on the basis of the value assessed by the SRO for registration purposes. It was submitted that DVO has chosen comparable instances of sale which are not proximate either from time angle or from situation angle of the subject property. It was submitted that though the assessee had raised specific objections with regard to adverse factors which contributed for considerable reduction in value of the property, such, as vaastu defects, leveling of land and on account of shortage of area but the DVO had not at all considered them in proper perspective. It was submitted that though these specific objections were raised at all stages by the assessee, neither the DVO nor the AO or CIT(A) considered them in a proper manner. The learned AR submitted that adoption of average value of land on the basis of SRO value, cannot be considered as fair market value. It was submitted that the concept of fair market value envisages of hypothetical seller and hypothetical buyer in hypothetical market, therefore, determination of fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur mind to the decisions cited by the parties. As can be seen from the facts on record from the stage of reassessment proceedings, the assessee has tried to justify sale consideration mentioned in the sale deed by stating that though the area of land as per the document was 623 sq.yds. but land physically available was only 580 sq.yds. It is the further contention that due to severe vaastu defect area of 125 sq.yds. was not usable for construction purposes and the buyer has also spent an amount of Rs. 30 lakhs towards leveling and construction of retention wall. It is seen that, though the DVO has accepted certain specific issues raised by the assessee in this regard, he has not properly given discount towards the same. Further, as can be seen from the Annexure - II of the valuation report, which contains sale instances considered by the DVO for comparability purpose, in all these cases sales were effected starting from the period 02/05/2007 to 02/11/2007 i.e. in F.Y. 2007- 08, whereas assessee has sold the property on 19/09/2006 in FY 2006-07 relevant to AY 2007-08. As can be seen from the facts on record, assessee has purchased the property on 29/12/2005 and sold it on 29/09/2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No other evidence has also been produced by the assessee in the nature of comparative instances of sale in the same locality on relevant date to show that sale consideration mentioned in the registered sale deed is the actual fair market value on the relevant date. Therefore, in the absence of all these evidences, assessee's claim also cannot be accepted in toto. Learned AR has relied upon a number of decisions to justify his contention and also for the proposition that matter should not be remitted to the AO. Though there cannot be any dispute regarding the principles laid down in these decisions, however, ratio decided therein are in the context of the facts involved in those cases. Hence, they cannot be made applicable uniformally to all cases irrespective of the factual differences. Therefore, considering the totality of facts and circumstances of the case, we are inclined to remit the mater back to the file of the AO for ascertaining the fair market value of the property as on the date of sale. AO/DVO must conduct necessary enquiry to find out comparative instances of sale on the relevant date or near by date in the same locality or near by locality to have fair estimatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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