2019 (8) TMI 502 - AT - Income Tax

Appeal Dismissed, Long-Term Capital Gains Upheld Under Section 50C

Shri Bonifacio D’souza Versus ITO-30 (1) (2), Mumbai

The appeal was dismissed, and the addition of Rs. 26,75,724/- as long-term capital gains under Section 50C was upheld. The Tribunal found no merit in the ... Long term capital gains - invoking Section 50C - assessee filed an affidavit stating therein that he had gifted to his relatives the above property - HELD THAT:- In the instant case, there is no gift deed as it has not been filed before the AO or CIT(A) or the Tribunal. In absence of a gift deed, the affidavit dated 12.05.2017 filed by the assessee loses significance. The contentions of the assessee are that provision of section 50C is not applicable because (i) he has transferred the above immovable property to one of his relative and (ii) the difference between the transaction value and stamp duty value is the gift made by the assessee to the relative are far fetched because the assessee has not filed any gift deed either before the AO or CIT(A) or the ITAT. The attempt to rope in section 56(2)(vi) by the assessee fails because there is no gift deed. All the more, as mentioned earlier, the assessee had not disclosed any capital gains from the sale of the above property. Only after the AO noticed that the assessee had sold an immovable property as per ITS details for ₹ 28,00,000/- under Registration No. 2982/2012 and issued a notice u/s 142(1) dated 11.09.2015 and thereafter followed it on 16.11.2015, the assessee filed a revised computation of income working out the capital gains i.e. LTCG at ₹ 13,11,224/- and claimed that provisions of section 50C is not applicable as it was sold to his brother-in-law and brother-in-law’s wife. The fact remains that the computation of LTCG filed by the assessee is not voluntary. It has been furnished only after the issue of notice u/s 142(1) dated 11.09.2015 issued by the AO and followed thereafter by order sheet notings dated 16.11.2015. As decided in VIMAL CHAND GHEVARCHAND JAIN & ORS. VERSUS RAMAKANT EKNATH JAJOO [2009 (3) TMI 997 - SUPREME COURT] Section 50C makes it obligatory on the part of the AO to treat the value adopted by the stamp valuation authority as the deemed sale consideration received or accrued as a result of transfer. - Decided against assessee. Issues Involved:1. Addition of Rs. 26,75,724/- as long-term capital gains by invoking Section 50C of the Income Tax Act.2. Validity of the transaction as a gift under Section 56(2)(vi) of the Income Tax Act.Detailed Analysis:Issue 1: Addition of Rs. 26,75,724/- as Long-Term Capital Gains by Invoking Section 50C of the Income Tax Act:The assessee filed a return of income for AY 2013-14 declaring a total income of Rs. 3,48,000/-. During assessment proceedings, the Assessing Officer (AO) noticed that the assessee had sold immovable property for Rs. 28,00,000/- but did not declare any capital gains. The stamp valuation of the property was Rs. 41,64,500/-. The AO applied Section 50C, which mandates adopting the stamp valuation as the sale consideration for computing capital gains, resulting in a recalculated Long Term Capital Gain (LTCG) of Rs. 26,75,724/-. The AO rejected the assessee's revised computation of income submitted during assessment proceedings, noting that no revised return was filed under Section 139(5) and the submission was not voluntary but prompted by the AO's notice.The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the transaction could not be considered a gift since the transfer deed indicated a sale for Rs. 28,00,000/-, and the stamp duty and registration charges were borne by the transferees. The CIT(A) emphasized that in a gift, there is no consideration involved, and the assessee's claim of partial gift and partial sale was deemed an afterthought to minimize tax liability.Issue 2: Validity of the Transaction as a Gift under Section 56(2)(vi) of the Income Tax Act:The assessee contended that the property was sold to a relative at a lower price and the difference between the market value and transaction value was a gift, exempt under Section 56(2)(vi). The assessee submitted an affidavit stating his intention to gift the property, but this was filed only before the CIT(A) and not during the assessment proceedings.The Tribunal examined the requirements for a valid gift, which include a transfer without consideration, acceptance by the donee, and proper execution and registration of a gift deed. In this case, there was no gift deed submitted, and the transaction was registered as a sale deed. The Tribunal held that without a gift deed, the affidavit loses significance, and the provisions of Section 50C apply, making it obligatory to adopt the stamp valuation as the sale consideration.The Tribunal upheld the CIT(A)'s order, stating that the assessee's attempt to classify the transaction as a gift was not substantiated by proper documentation and was an afterthought. The Tribunal emphasized that the AO's application of Section 50C was correct and dismissed the appeal.Conclusion:The appeal was dismissed, and the addition of Rs. 26,75,724/- as long-term capital gains under Section 50C was upheld. The Tribunal found no merit in the assessee's claim of the transaction being a gift under Section 56(2)(vi) due to the lack of a gift deed and proper documentation. The order of the CIT(A) was affirmed, and the appeal was dismissed.