Section 50C provisions for immovable property sale consideration are retrospective, circle rate on agreement date applies

The ITAT Hyderabad held that section 50C provisions for determining sale consideration of immovable property are retrospective in nature, following the precedent in CIT vs. Shri Vummundi Amarendran. The assessee received Rs. 22 lakhs (Rs. 20 lakhs via cheques and Rs. 2 lakhs cash) per sale agreement dated 15.06.2006. The tribunal directed the Assessing Officer to verify and adopt the circle rate as on the agreement date for calculating capital gains, allowing the assessee's grounds for statistical purposes.

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Issues Involved:
1. Legality of the assessment order under sections 147 and 144 of the I.T. Act, 1961.
2. Applicability of section 50C for determining the sale consideration of the property.
3. Retrospective application of the proviso to section 50C(1) of the I.T. Act.
4. Correct assessment year for capital gains computation.

Issue-wise Detailed Analysis:

1. Legality of the Assessment Order Under Sections 147 and 144 of the I.T. Act, 1961:
The assessee, a Non-resident Individual, had accrued income on account of capital gains that escaped assessment under section 147 of the I.T. Act, 1961. The Assessing Officer (AO) issued a notice under section 148 dated 30.03.2021, but the assessee did not respond. Subsequent notices under section 142(1) also remained uncompiled with. Consequently, the AO completed the assessment under sections 147 r.w.s. 144 of the I.T. Act, determining the long-term capital gain at Rs. 41,35,125/-. The assessee appealed, arguing that the order under section 147 r.w.s. 144 was bad in law since it was not passed under section 144C(13).

2. Applicability of Section 50C for Determining the Sale Consideration of the Property:
The AO noted that the assessee sold an immovable property for Rs. 22,00,000/- against the SRO value of Rs. 1,07,93,300/-. The AO invoked section 50C and determined the deemed sale consideration at Rs. 53,96,650/- (50% of the SRO value) for capital gain computation. The DRP upheld the addition but directed the AO to allow the indexed cost of acquisition, resulting in an addition of Rs. 27,86,328/-.

3. Retrospective Application of the Proviso to Section 50C(1) of the I.T. Act:
The assessee argued that the property was agreed to be sold for Rs. 22,00,000/- as per an agreement dated 15.06.2006, with payments received via cheques dated 15.06.2006 and 15.09.2006. The assessee contended that the correct value to be adopted should be the rate applicable on the date of the agreement, not the date of sale. The assessee cited various decisions, including CIT vs. Shri Vummundi Amarendran and Amit Bansal vs. ACIT, asserting that the amendment to section 50C(1) by the Finance Act 2016 is curative and applies retrospectively. The Tribunal found merit in this argument, noting that the amendment to section 50C(1) is indeed retrospective, and the value on the date of the agreement should be considered.

4. Correct Assessment Year for Capital Gains Computation:
The assessee contended that the transfer of the property concluded in the previous year relevant to AY 2007-08 when the agreement of sale was executed and possession handed over after receiving the entire consideration. The Tribunal considered the bank statements and sale agreement, confirming that the sale consideration was received in 2006. The Tribunal directed the AO to verify the circle rate on the date of the agreement (15.06.2006) and adopt it for capital gain calculation, aligning with the retrospective application of section 50C(1).

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the AO to verify the circle rate on the date of the agreement and adopt it for capital gain computation. The grounds raised by the assessee were allowed for statistical purposes. The order was pronounced in the Open Court on 31st August, 2023.

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