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2015 (7) TMI 563 - ITAT HYDERABAD

2015 (7) TMI 563 - ITAT HYDERABAD - TMI - Addition on account of long term capital gain - AO adopting the stamp duty valuation as sale consideration - CIT(A) adopting the sale consideration of ₹ 11,34,93,000 in place of ₹ 9,06,00,000 shown by the assessee by invoking the provisions of S.50C - assessee in the present case is a partnership firm - Held that:- As relying on the decision of the Hon'ble Bombay High Court in the case of Bhatia Nagar Premises Co-operative Society Ltd. V/s. U .....

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by him. The additional grounds raised by the assessee are accordingly dismissed.

As already noted, the assessee in the original grounds raised in this appeal has challenged the valuation of its property as determined by the DVO in his valuation report. In this regard, it is observed that the additional evidence in the form of letter dated 20.1.2012 issued by the General Manager, A.P. Industrial Infrastructure Corporation was filed by the assessee before the learned CIT(A), wherein it .....

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d 20.1.2012 was obtained by the assessee only after the completion of assessment by the Assessing Officer on 30.12.2011 and since the same was not available at the relevant time, it could not be filed before the Assessing Officer. Keeping in this submission made by the learned counsel for the assessee, we are of the view that the learned CIT(A) should have admitted the additional evidence filed by the assessee in the form of letter dated 20.1.2012 issued by the General manger, A.P. Infrastructur .....

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evidence. The impugned order of the learned CIT(A) on this issue is accordingly set aside and the matter is restored to the file of the Assessing Officer for deciding the same afresh - Decided partly in favour of assessee for statistical purposes. - ITA No.1802/Hyd/2012 - Dated:- 8-7-2015 - Shri P.M.Jagtap and Shri Saktijit Dey, JJ. For the Petitioner : Shri Y.Ratnakar For the Respondent : Shri Ramakrishna Bandi DR ORDER Per P.M.Jagtap, Accountant Member : This appeal filed by the assessee is di .....

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see in the present case is a partnership firm. During the year under consideration, a property comprising of industrial sheds with plinth area of 1,511 sq. metres. and the land appurtenant thereto admeasuring 3,641 sq. metres situated at A-5, Industrial Estate, Ward No.7, Block No.2, Sanathnagar, Hyderabad, was sold by the assessee and the capital gain arising from the said sale as computed at ₹ 4,39,59,860 was declared in the return of income filed on 28.7.2006. The said return was origin .....

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roceedings, the assessee was called upon by the Assessing Officer to explain as to why the market value of the property as taken by the Stamp Valuation Authority at ₹ 11,34,93,000 should not be taken as the sale consideration in place of the lower consideration of ₹ 9,06,00,000 shown in the agreement, for the purposes of computation of capital gains in accordance with the provisions of S.50C of the Act. In reply, it was submitted by the assessee that the value adopted by the Stamp Va .....

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aised the following objections in respect of the valuation report prepared and furnished by the DVO- "The Valuation Cell Authorities have given notice dt 1911212011 u/s.16(A) of the Wealth Tax Act, read with sex. 50C of the Income-taxAct, Calling for objections on valuation of property valued at ₹ 15,99,81,000/-.The Valuation Cell Authorities have not considered our objections. The Valuation Cell Authorities final report given on 26-12-2011 stating the value of the property ₹ 15 .....

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strial area. The valuation cell authorities have not considered any of these conditions. They have valued the property simply on the Registration Authorities general value. Even after filing our objections they have not considered our objections. Hence we are not agreeing the valuation report value on the property. We are herewith giving evidence that the property fair market value of property is less than Registration Authority value. Whereas we have purchased the property from Andhra Pradesh S .....

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y Registration value is ₹ 8,01,57,000/-. As we have purchased the property in Open Auction for ₹ 3,69,50,000/- that is the fair market value at that time even though Registration Authority Value is ₹ 8,01,57,000/. Hence it is evident from this transaction Registration Authority value is more than fair market value. In the same way it is at the time of sale of property also. In this regard our honorable request to the Honorable g Officer to consider the facts of the case. That t .....

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as per the registering authority has existed even at the time of sale also had no basis. He held that the property of the assessee over a period of time had gained much commercial value and as per the specific provisions contained in S.50C the value adopted by the Stamp Valuation authority was required to be taken as sale consideration for the purpose of computing the long term capital gains. Accordingly, such value, which was less than the value determined by the DVO was adopted by the Assessin .....

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se of appellate proceedings before the learned CIT(A), a letter dated issued by the general Manger(Finance), Andhra Pradesh Industrial Infrastructure Corporation Ltd. stating that the land rate in Industrial Estate, Sanathnagar fixed by the Price Fixation Committee during February, 2006 was ₹ 3,750 per sq. metre, was filed by the assessee as additional evidence seeking admission thereof. The learned CIT(A), however, noted that sufficient opportunity was afforded to the assessee at the asse .....

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uld justifiably be exercised. Accordingly, she declined to admit the additional evidence filed by the assessee and proceeded to uphold the action of the Assessing Officer in computing the long term capital gains by adopting the stamp duty valuation as sale consideration by invoking the provisions of S.50C. Aggrieved by the order of the learned CIT(A), assessee has preferred this appeal before the Tribunal. 5. At the outset, it is observed that there is a delay of 23 days on the part of the asses .....

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e assessee is, therefore, condoned and we now proceed to dispose of the same on merits. 6. In the original grounds raised in this appeal, the assessee has raised various issues challenging the valuation of its property as determined by the DVO. During the course of appellate proceedings before the Tribunal, the assessee has filed an applications seeking admission of the following additional grounds- 1. It is contended that provisions of 50C are inapplicable to the facts of the appellant s case i .....

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has received more moneys by way of sale consideration in addition to what was recorded in the sale deed. As this being not the case it is contended that section 50C is inapplicable and cannot be invoked by the Assessing Officer. 4. The appellant seeks leave to add, alter or take up any other ground as the occasion may warrant. 7. Since the common issue raised in the additional grounds challenging the applicability of the provisions of S.50C is a legal issue and the adjudication of the same does .....

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valuation of capital asset being land or building or both, and that the assessee has received something more than the consideration specified in the relevant agreement, the said requirement has to be read into the provisions of S.50C. In support of this contention, he mainly relied on the decision of the Hon'ble Supreme Court in the case of K.P.Varghese V/s. ITO (131 ITR 597), wherein it was held while interpreting the provision of S.52(2) that strict literal interpretation of the provision .....

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sary that the full value of the consideration in respect of the transfer is understated or, in other words, shown at least at a lesser figure than that actually received by the assessee. It was held that provisions of S.52(2) therefore, cannot be invoked by the Revenue, unless there is understatement of the consideration in respect of the transfer and the burden of showing that there is such understatement is on the Revenue. It was also held that under Entry 82 List 1 of Seventh Schedule of the .....

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other words, the consideration actually received by the assessee is more than what is declared or disclosed by him, as held by the Hon'ble Supreme Court in the case of K.P.Varghese (supra). 10. The learned counsel for the assessee also relied on other caselaws wherein a similar view, as expressed by the Hon'ble Supreme Court in the case of K.P.Varghese (supra), was taken in the context of the proviso to S.12B(2) of the Indian Income-tax Act, 1922. He also relied on the decision of the H .....

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clear and there being no ambiguity in the language of S.50C , the intention of the legislature is required to be gathered from the language used. He contended that the provisions of S.50C make it abundantly clear that there is no legal requirement of any evidence to be brought on record by the department to prove under valuation of the capital asset by showing that the assessee has actually received something more as sale consideration than what is declared in the relevant agreement. He contende .....

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al Representative contended that all the case-laws cited by the learned counsel for the assessee are in the context of S. 52(2) of the Income Tax Act,1961 and proviso to S.12B of the Indian Income-tax Act, 1922, the provisions of which are different from the provisions of S.50C, and therefore, the ratio of the said caselaws cannot be applied in the context of S.50C. He contended that the Assessing Officer for invoking the proviso to S.12B of the Indian Incometax Act, 1922 and S.52(2) of the Inco .....

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tion on this issue has entirely changed after the insertion of S.50C in the statute and if the contention of learned counsel for the assessee is accepted, the very purpose of S.50C will be defeated, rendering the said provision redundant. 13. As regards the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT V/s. Chandani Bhochar (supra), cited by the learned counsel for the assessee, the Learned Departmental Representative submitted that the same is rendered in the case .....

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n record. In the present case, the capital gain arising from the sale of its property being land and building declared by the assessee in the return of income at ₹ 4,39,59,860 was enhanced by the Assessing Officer to ₹ 6,68,52,860 by adopting the stamp duty valuation of ₹ 11,34,93,000 as sale consideration instead of sale consideration of ₹ 9,06,00,000 declared by the assessee by invoking the provisions of S.50C of the Act. On appeal, the addition made by the Assessing Of .....

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ound that in the absence of anything brought on record by the Revenue to show the under valuation of the property or to show that the assessee has received something more than what is declared as sale consideration, provisions of S.50C cannot be invoked merely on the basis of higher valuation made by the stamp duty authority. In this regard, the learned counsel for the assessee has contended before us that though there is no such requirement specifically envisaged in the provisions of S.50C, the .....

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Act,1961 as well as the proviso to S.12B(2) of Indian Incometax Act, 1922 and it is therefore, necessary to refer to these provisions alongwith the provision of S.50C, which are relevant in the present case. The said provisions read as under: S.52 of the Income Tax Act,1961 52 (1) Where the person who acquires a capital asset from assessee is directly or indirectly connected with the assessee and the Income-tax officer has reason to believe that the transfer was effected with the object of avoi .....

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l value of the consideration d d by the assessee in respect of the transfer of such capital assets by an amount of not less than fifteen per cent of the value red, the full value of the consideration for such capital asset shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be its fair market value on the date of its transfer. (Emphasis supplied) *********** S.12B of the Indian Income Tax Act,1922 12B. Capital gains. - (1) The tax shall be payable by an assess .....

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le, exchange or transfer of the capital asset is made, namely :- (i) expenditure incurred solely in connection with such sale, exchange or transfer; (ii) the actual cost to the assessee of the capital asset, including any expenditure of a capital nature incurred and borne by him in making any additions or alterations thereto, but excluding any expenditure in respect of which any allowance is admissible under any prov of sections 8, 9, 10 and 12 : Provided that where a person who acquires a capit .....

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the fair market value of the capital asset on the date on which the sale, exchange or transfer took place : ..... Provided further that........" *************** (Emphasis supplied) S.50C of the Income Tax Act,1961 50C. Special provision for full value of consideration in certain cases. -(1) Where the consideration received or accruing as a lt 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 S .....

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atio of the decisions rendered in the context of S.52(2) and the proviso to S.12B(2) is applicable even in the context of S.50C, the comparative reading of the relevant provisions clearly shows that the Assessing Officer, for invoking the provision of S.52(2) as well as the proviso to S.12B(2) was required to have a reason to believe that the transfer was effected by the assessee with the object of avoidance or reduction of the tax liability, by understating the sale consideration of the capital .....

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0C which, as rightly contended by the Learned Departmental Representative, are plain and simple. No doubt, S.50C also creates a deeming fiction, but for applying the said provision, what is required is that consideration received or accruing as a result of the transfer by the assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of State Government for the purpose of payment of stamp duty in respect of such transfer. If this situ .....

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the scope of S.52(2) as well as proviso to S.12B(2) and the ratio of the decisions of the Hon'ble Supreme Court in the case of K.P.Varghese (supra) as well as other case-laws cited by the assessee, which are rendered in the context of S.52(2) as well as proviso to S.12B(2) cannot be applied in the context of S.50C. 16. While relying on the decision of the Hon'ble Supreme Court in the case of K.P.Varghese (Supra), learned counsel for the assessee has specifically invited our attention to .....

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e Madras High Court and in the case of Bhatia Nagar Premises Cooperative Society Ltd. V/s. Union of India and others (334 ITR 145) before the Hon'ble Bombay High Court. It was contende on behalf of the assessee in this regard that the power of Central Legislature to tax on capital gain arises under Entry 82 List 1 of Schedule VII of the Constitution of India and although the word income has to be interpreted in a liberal sense, the amount sought to be taxed must bear a reasonable relation to .....

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tion between the subject matter of tax and the standard by which the amount of tax is measured. Explaining further, it was observed by the Hon'ble Supreme Court in the case of A.Sansyasi Rao and Others (supra) that having regard to the past difficulties in making a normal assessment and collection in the case of a certain categories assesses, for convenience sake, the legislature has chosen to make appropriate provision for collection of taxes at an anterior stage by adopting purchase price .....

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ge the gap as it was found that assessees were not correctly declaring the full value of the consideration or in other words, resorting to the practice of undervaluation. 17. It is interesting to note that in the case of K.R.Palanisamy (supra), a reference was specifically made by the Hon'ble Maras High Court to the decision of the Hon'ble Supreme Court in the case of K.P.Varghese (supra) which is heavily relied upon by the learned counsel for the assessee in the present case. It was obs .....

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ntained in sub-section (2) and (3) of S.50C to rebut the presumption as to the full market value of the capital asset arrived at by the stamp duty authorities and therefore, the contention raised on behalf of the assessee, as to reading down of the provisions of S.50C has to be rejected. 18. In view of the above discussion, as well as relying on the decision of the Hon'ble Bombay High Court in the case of Bhatia Nagar Premises Co-operative Society Ltd. V/s. Union of India and Others (supra) .....

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by the assessee are accordingly dismissed. 19. As already noted, the assessee in the original grounds raised in this appeal has challenged the valuation of its property as determined by the DVO in his valuation report. In this regard, it is observed that the additional evidence in the form of letter dated 20.1.2012 issued by the General Manager, A.P. Industrial Infrastructure Corporation was filed by the assessee before the learned CIT(A), wherein it was stated that the land rate in industrial E .....

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after the completion of assessment by the Assessing Officer on 30.12.2011 and since the same was not available at the relevant time, it could not be filed before the Assessing Officer. Keeping in this submission made by the learned counsel for the assessee, we are of the view that the learned CIT(A) should have admitted the additional evidence filed by the assessee in the form of letter dated 20.1.2012 issued by the General manger, A.P. Infrastructure Corporation Ltd. 20. During the course of a .....

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ng been available with the assessee at the relevant time during the assessment proceedings, the same should have been filed by the assessee before the Assessing Officer. The learned counsel for the assessee, however, has submitted that the copy of the said letter has been obtained by the assessee subsequent to the passing of the impugned order by the learned CIT(A). He has also submitted that the valuation of the property, as determined by the DVO, was challenged by the assessee during the cours .....

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