2017 (11) TMI 510 - AT - Income Tax

Tribunal orders reassessment of capital gains based on stamp duty valuation date

Hansaben Bhaulabhai Prajapati Versus Income Tax Officer, Ward 3 (2) (2), Ahmedabad

The Tribunal accepted the assessee's appeal for statistical purposes, directing the Assessing Officer to re-compute the capital gains based on the stamp ... Long term capital gains addition made after invoking Section 50C - addition in view of jantri price revised on 18.04.2011 i.e. falling between the date of registered agreement coming on 02.02.2011 and sale deed dated 13.07.2011 - Held that:- We notice in view of all these developments that the assessee has received his earnest money in furtherance to the registered sale agreement dated 02.02.2011 on 10.03.2011. Relevant cheques details already find mention in CIT(A)’s order page 9. We observe in these facts that the registered agreement followed by receipt of advance money by banking channel form sufficient reasons to attract the above former proviso to Section 50C of the Act stipulating in very clear terms that where the date of the agreement fixing the amount of consideration and the date of registration regarding transfer of the capital asset in question are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement is to be taken for the purpose of full value of consideration. We therefore accept assessee’s arguments in principle. The Assessing Officer is accordingly directed to verify necessary facts as per law for the purpose of adopting the above agreement value in order to compute the consequential capital gains. - Decided in favour of assessee for statistical purposes. Issues Involved:1. Legality of the reopening notice.2. Long term capital gains addition under Section 50C of the Income Tax Act.Issue-wise Detailed Analysis:1. Legality of the Reopening Notice:The assessee initially challenged the legality of the reopening notice dated 25.03.2015, which led to the reassessment proceedings. However, the assessee's representative, Ms. Shodhan, later submitted that the assessee is no longer interested in pressing this ground. Consequently, this ground was rejected as not pressed.2. Long Term Capital Gains Addition under Section 50C:The primary issue revolves around the addition of Rs. 7,20,956/- as long term capital gains by invoking Section 50C of the Income Tax Act. The property in question is located at block no.13, Village Shilaj, Daskroi Taluk, Ahmedabad, measuring 9004 sq.mtrs. with 22 co-owners. The assessee, holding a 4.76% share, executed a registered agreement to sell on 02.02.2011 for Rs. 33,76,500/- along with five co-owners. The sale deed was executed on 13.07.2011. Meanwhile, the state government increased the jantri price to Rs. 1,58,69,550/-. The sale deed was registered as per the revised jantri price, leading to the Assessing Officer invoking Section 50C and making the addition.The assessee contended that the revised jantri price should not apply as the agreement to sell was executed before the price revision. The Revenue argued that the asset was not transferred before the jantri price increase. The Tribunal referred to a co-ordinate bench decision in Dharamshibhai Sonani vs. ACIT, which considered the second proviso to Section 50C inserted by the Finance Act, 2016, effective from 01.04.2017, to be curative and retrospective.Detailed Legal Analysis:The Tribunal highlighted that Section 50C was introduced to counter suppression of sale consideration on immovable properties. The section presumes that the stamp duty valuation represents the market price. However, discrepancies arise when there's a significant gap between the agreement to sell and the sale deed execution. The Tribunal noted the Easwar Committee's recommendation to amend Section 50C to consider the stamp duty valuation on the agreement date, provided the consideration was received through banking channels before the agreement date.The amendment to Section 50C, effective from 01.04.2017, allows the stamp duty value on the agreement date to be considered if the consideration was received through non-cash modes. The Tribunal, citing various judicial precedents, concluded that this amendment is curative and should be applied retrospectively from 01.04.2003, the date Section 50C was introduced.Tribunal's Decision:The Tribunal directed the Assessing Officer to verify if the registered agreement to sell was executed on 02.02.2011 and if the partial sale consideration was received through banking channels. If verified, the stamp duty valuation as on 02.02.2011 should be adopted for computing the capital gains. The matter was restored to the Assessing Officer for a fresh adjudication, ensuring the assessee's right to seek a valuation from the DVO if dissatisfied with the stamp duty valuation.Conclusion:The assessee's appeal was accepted for statistical purposes, with directions for the Assessing Officer to re-compute the capital gains based on the agreement date's stamp duty valuation, adhering to the retrospective application of the amended Section 50C provisions.Pronouncement:The judgment was pronounced in the open Court on 31st October, 2017.