2020 (9) TMI 408 - AT - Income Tax

Capital Gain Calculation: Date of Sale Agreement Valuation. Banking Payments Impact. Interest, Penalty Dismissed.

The Tribunal partly allowed the appeal, determining that the full sale consideration for computing long-term capital gain should be based on the value as ... Computation of capital gain - determination of sale consideration for the purpose of section 50C - HELD THAT:- An agreement enforceable in law was executed by the assessee on 30.12.2010. For the purpose of demonstrating authenticity of this agreement, corroborative evidence in the shape of receipt of part payment through banking channel has been furnished. The assessee has received part payment of the sale consideration at the time of sale agreement, and those payments have also been recognized in the final sale deed. No hesitation in concluding that agreement executed on 30.12.2010 has been given effect by the parties which resulted in execution of the sale deed roughly after one and half years. Circle rate at the time of execution of agreement was lesser than one adopted by the parties as sale consideration. Therefore, the facts in the case of Rahul G. Patel [2018 (9) TMI 1696 - ITAT AHMEDABAD] are fully applicable on the facts of the present case, and full sale consideration for the purpose of computing long term capital gain in the hands of the assessee is to be adopted at ₹ 81 lakhs being 25% of share of ₹ 3,24,00,000/-. Appeal of the assessee is partly allowed. Issues Involved:1. Determination of sale consideration for the purpose of section 50C of the Income Tax Act.2. Receipt of Rs. 20,10,000/- as part of consideration and its chargeability to capital gain.3. Charging of interest under sections 234A, 234B, and 234C of the Act.4. Initiation of penalty under section 271(1)(c) of the Act.Issue-wise Detailed Analysis:1. Determination of Sale Consideration for the Purpose of Section 50C of the Income Tax Act:The primary grievance of the assessee was the confirmation of an addition of Rs. 50,20,750/- while computing long-term capital gain on the sale of agricultural land. The assessee had filed a return of income declaring taxable income of Rs. 2,55,836/-. The case was selected for scrutiny, revealing that the assessee, along with co-owners, sold properties valued by the sub-Registrar at Rs. 5,24,83,000/- against the sale consideration shown by the assessee at Rs. 3,24,00,000/-. The AO issued a show cause notice, and the assessee contended that the value for section 50C purposes should be based on the agreement date, supported by part payment through an account payee cheque. However, the AO adopted the sale consideration based on the stamp duty value on the sale deed date, leading to an addition of Rs. 50,20,750/-.The Tribunal referred to the case of Rahul G. Patel Vs. DCIT, where it was held that the value on the date of the agreement should be considered if part payment was received through banking channels. The Tribunal noted that the agreement to sell was executed on 30.12.2010, and part payments were received and recognized in the sale deed. The Tribunal concluded that the full sale consideration for computing long-term capital gain should be Rs. 81 lakhs, being 25% of Rs. 3,24,00,000/-.2. Receipt of Rs. 20,10,000/- as Part of Consideration and Its Chargeability to Capital Gain:The assessee contended that the receipt of Rs. 20,10,000/- should not be considered as part of the consideration and chargeable to capital gain. However, the assessee's counsel submitted that this ground was consequent to an issue raised in the Revenue's appeal, which was dismissed due to low tax effect. Consequently, the assessee did not press this ground of appeal.3. Charging of Interest under Sections 234A, 234B, and 234C of the Act:The assessee challenged the charging of interest under sections 234A, 234B, and 234C of the Act. The Tribunal noted that this issue was consequential in nature and dismissed it as such.4. Initiation of Penalty under Section 271(1)(c) of the Act:The assessee challenged the initiation of penalty under section 271(1)(c) of the Act. The Tribunal found this issue to be premature at this stage and dismissed it.Conclusion:The Tribunal partly allowed the appeal of the assessee, concluding that the full sale consideration for computing long-term capital gain should be based on the value as on the date of the agreement to sell, supported by part payments received through banking channels. Other grounds related to the receipt of Rs. 20,10,000/-, charging of interest, and initiation of penalty were dismissed. The order was pronounced on 8th September 2020 at Ahmedabad.