2020 (7) TMI 41 - AT - Income Tax

Appeal dismissed for A.Y. 2007-08, ruling favors assessee on section 50C application. Revenue's appeal rejected.

The appeal for A.Y. 2007-08 was dismissed as withdrawn. However, for A.Y. 2008-09 and 2009-10, the court ruled in favor of the assessee regarding the ... Capital gain computation - invoking of provisions of section 50C - Adoption of rates of land on the sale date for computing the income from long term capital gains - where the difference between the declared value and 50C guidance value was about 2.6%, can the same be adopted for computing the income from long term capital gains ? - HELD THAT:- Once the assessee had entered into an agreement, the MOU, on 20.09.2002 then the rates as available on the date of actual transaction are to be adopted since, the assessee had received substantial amount on the date of entering into an agreement. Undoubtedly the development agreement was executed on 12.01.2004 but as is clear from the terms of the transaction, the assessee had already received substantial amount of consideration before 12.01.2004. Hence, we find no merit in the order of the AO in adopting the revised SR value as in 2004 for computing the income under the head long term capital gains, as the date of MOU (20.09.2002) is the relevant date for computing the terms of agreement between the parties. Hyderabad Bench of the Tribunal in bunch of matters with lead order of Sri. Mohd Imran Beg vs. ITO [2015 (12) TMI 987 - ITAT HYDERABAD] had laid down similar proposition of applying the SR rate on the date of agreement to sell and not on the date of sale deed if, there was gap between the two dates. Second proposition raised by the assessee that in case the difference between the sale value declared by the assessee and sale value adopted by the AO is less than 5%, then there is no merit in applying the 50C guidance value. It is a settled proposition of law that in case the difference between the value shown by the assessee and the valuation done by the Revenue authorities is less than 10%, where the value worked out by the Revenue authorities is estimated, then actual sale consideration is to be adopted for computing the income in the hands of the assessee. Such is the proposition laid down by the Hyderabad Bench of the Tribunal in ACIT vs. Smt. S. Suvarna Rekaha [2010 (10) TMI 1051 - ITAT HYDERABAD] and in M/s. Radhika Sales Corporation vs. ACIT [2018 (11) TMI 1788 - ITAT PUNE]. The objection of the learned DR at this juncture was that in case valuation had been referred to DVO as under the provisions of section 50C of the Act then, such proposition could be applied. We find no merit in the plea of the Revenue in this regard. The AO has applied 50C guidance value for computing the income from long term capital gains. There is no merit in the said exercise carried on by the AO and we reverse the same. The income from long term capital gains declared by the assessee is to be accepted. The ground of appeal in assessee in assessment years 2008-09 and 2009-10 are allowed. Adopted for indexation of cost of acquisition of the property - HELD THAT:- We find that the said issue now stands settled by the decision of Hon’ble Bombay High Court in CIT vs. Manjula J. Shah [2009 (10) TMI 646 - ITAT MUMBAI] wherein it has been held that indexed cost of acquisition has to be computed with reference to the year in which the previous owner has held the asset. Applying the said parity of the reasoning, we find no merit in the case of the Revenue and the grounds of appeal raised by the Revenue are dismissed. Issues Involved:1. Jurisdiction and validity of proceedings initiated under section 147 of the IT Act.2. Application of section 50C of the IT Act.3. Adoption of the cost of acquisition and indexation for computing long-term capital gains.Detailed Analysis:1. Jurisdiction and Validity of Proceedings Initiated Under Section 147 of the IT Act:- The assessee contended that the proceedings initiated by the assessing officer under section 147 were without jurisdiction, void, and not based on evidence.- It was argued that the assessing officer reopened the assessment in the absence of 'new material' and failed to issue reasons for believing that the income had escaped assessment.- The assessee also claimed that the assessing officer did not dispose of objections raised by the assessee through a speaking order.- However, the grounds of appeal related to these issues were not pressed by the assessee and were dismissed as not pressed.2. Application of Section 50C of the IT Act:- The primary issue was against invoking the provisions of section 50C and the consequent addition made in the hands of the assessee.- The assessee argued that the sales consideration received was less than the guidance value adopted by the AO under section 50C.- The assessee contended that the difference between the sale value shown and the value adopted by the AO was minimal (2.6% for A.Y. 2008-09 and 0.89% for A.Y. 2009-10) and should not attract section 50C provisions.- The Tribunal noted that the assessee had entered into a joint development agreement in 2002, and the sale consideration should be based on the rates prevailing at that time, not the revised rates in 2004.- The Tribunal relied on precedents that if the difference between the declared value and the 50C guidance value is less than 10%, the actual sale consideration should be adopted.- The Tribunal found no merit in the AO's exercise of applying the 50C guidance value and ruled in favor of the assessee, allowing the grounds of appeal related to section 50C.3. Adoption of the Cost of Acquisition and Indexation for Computing Long-Term Capital Gains:- The issue was whether the cost of acquisition and indexation should be based on the year the property was acquired by the previous owner (assessee's parents) or the year it was inherited by the assessee.- The CIT(A) upheld that the cost of acquisition should be based on the year the previous owner acquired the property, and indexation should be allowed from that year.- The Tribunal confirmed this view, relying on the decision of the Special Bench in Dy. CIT vs. Manjula J. Shah and the Bombay High Court's ruling in CIT vs. Manjula J. Shah.- The Tribunal found no merit in the Revenue's appeal and dismissed it, confirming that the indexed cost of acquisition should be computed with reference to the year the previous owner held the asset.Conclusion:- The appeal for A.Y. 2007-08 was dismissed as withdrawn.- The appeals for A.Y. 2008-09 and 2009-10 were allowed, ruling in favor of the assessee regarding the application of section 50C and the adoption of the cost of acquisition.- The Revenue's appeal was dismissed, confirming the adoption of the cost of acquisition and indexation from the year the previous owner held the asset.