TaxTMI 
TaxTMI 
2008 (11) TMI 300
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....had taken place. 3. Because the authorities below have erred on facts and in law in not accepting the sale consideration of the seven plots, aggregating to Rs. 1,47,00,000 without realizing the fact that the plots which were on the main road fetched higher price, whereas the plots situated in the back side fetched lower price, hence there was difference in the sale consideration. 4. Because the authorities below were not justified in adopting the sale consideration of the such plots at Rs. 1,64,61,773 as against Rs. 1.47 crores received by the appellant. 5. Because the authorities below were not justified in computing the capital gain at Rs. 67,58,710 as against Rs. 49,96,937 declared by the appellant by wrongly applying the provisions of s. 50C of the Act, thereby making an addition of Rs. 17,61,773 which addition is contrary to the provisions of law, be deleted. 6. Because the authorities below have failed to appreciate that the capital gain has to be worked on a composite basis, taking the entire land as one piece and not plot-wise as sold, for the reason that the plots sold are sub-divided and part of one single large plot only. 7. Because the authorities have fa....
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....bsp; consideration --------------------------------------------------------------- 1. Smt. Ekta Agarwal Shri Asit Agarwal Smt. Sarveshwari Agarwal 29,44,200 25,00,000 30-7-2003 --------------------------------------------------------------- 2. Shri Sanjay Pandey 22,57,330 16,00,000 1-7-2003 --------------------------------------------------------------- 3. Shri Pankaj Pandey 19,84,723 17,00,000 25-7-2003 --------------------------------------------------------------- 4. Shri Vivek Agarwal Shri Aman Agarwal 28,75,520 25,00,000 5-8-2003 --------------------------------------------------------------- 3. The AO gave an opportunity to the assessee as to why the full value of consideration as shown by him be not substituted by valuation as per SVA as per s. 48 and s. 50C(1) of the Act. It was claimed before the AO that provisions of s....
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....arned Authorised Representative submitted that as per provisions of s. 50C, the AO is duty-bound to refer the capital asset to the DVO and obtain a report from him. He, thereafter ought to compare the valuation done by the DVO and SVA and adopt what is favourable to the assessee. If valuation done by the DVO is less than the sale consideration shown by the assessee then sale consideration so shown by the assessee should be adopted for the purposes of working out capital gains. The learned Authorised Representative emphasized that the word "may" used in s. 50C(2) in fact means "shall and therefore, in every case where valuation as per SVA is more than sale consideration, the AO had to refer the capital asset for valuation to the DVO and compare the three valuations i.e., (i) sale consideration shown by the assessee, (ii) valuation as per SVA and (iii) valuation as per DVO, and adopt whatever is the least or in the alternative, should not disturb the sale consideration shown by the assessee. 6. The learned Authorised Representative submitted that provisions of s. 50C(2) describes two circumstances enabling the AO to refer the capital asset to the DVO. One is where the assessee cla....
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....im before the AO that valuation as per SVA is more than the market value and therefore, matter should be referred to the DVO. Since in the present case, no such claim or request has been made by the assessee then question of reference to DVO within the meaning of s. 50C(2) does not arise. The learned Departmental Representative then submitted that cl. (a) and cl. (b) of s. 50C(2) has to be read sequentially and in continuity. In other words, according to him, as no conjunction such as "or" or "and" has been provided then the clauses have to be read in continuity which means that conditions laid down in both the clauses have to be satisfied before the AO decides to refer the capital asset for valuation to DVO. If the argument of the learned Authorised Representative is accepted then provisions of s. 50C(1) will become otiose in the sense that wherever valuation as per SVA is not disputed under Stamp Duty Act then AO has to necessarily refer every capital asset which is subject-matter of capital gains to the DVO without necessity of its valuation being compared with market value of the capital asset as provided in cl. (a). The learned Departmental Representative then submitted that t....
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....herwise on addition to the declared income so made. Thus, charging section cannot be made otiose merely because assessee did not get opportunity to claim deduction or make investment for claiming deduction in respect of additional income assessed. 8. We have considered the rival submissions and perused the material on record. In our considered view, the argument of learned Authorised Representative that the AO has to necessarily refer the capital asset for valuation to the DVO even though there is no claim made by the assessee is not acceptable. In this regard, we refer to s. 50C(2) as under: "50C. Special provision for full value of consideration in certain cases........ (2) Without prejudice to the provisions of sub-s. (1), where- (a) the assessee claims before any AO that the value adopted or assessed by the SVA under sub-s. (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the SVA under sub-s. (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, Court or the High Court, the AO may refer the valuation of the capital asset to a Valuation O....
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....ses where valuation as per SVA is more than fair market value and such valuation by SVA is not under challenge. Thus, where fair market value of the capital asset under transfer is less than the valuation as per SVA and such valuation as per SVA becomes final under Stamp Duty Act then the assessee is left with no choice and has to pay tax on the notional sale consideration on the valuation as per SVA This will cause a genuine hardship to the taxpayers. Intention of the legislature in enacting s. 50C is to plug loopholes whereby certain taxpayers used to understate sale consideration and pass on the difference in cash presumably unaccounted. It was considered to substitute the sale consideration by valuation as per SVA as reflective of the fair market value of the capital asset under transfer and therefore, substitute the same for declared sale consideration for charging capital gains. But where fair market value is actually less than valuation as per SVA and AO has mandate to substitute sale consideration by valuation as per SVA (in accordance with s. 50C(1)) then it will cause genuine hardship to the taxpayers and therefore. it was provided in s. 50C(2) that assessee has to provid....
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....ose in punctuation, namely, to divide sentences and parts of sentences, the only difference being that the semi-colon makes the division a litter more prolonged than the comma." 11. The Hon'ble Allahabad High Court in the case of Sita Ram Gupta vs. Union of India (1982) 29 CTR (All) 107 : (1982) 137 ITR 819 (All), had occasion to consider the effect of semi-colon used in r. 41 of Estate Duty Rules, 1953. This rule requires following qualification for a person to appear as an Authorized Representative: (i) Such person is an income-tax practitioner as defined in cl. (iv) of sub-s. (2) of s. 61 of the IT Act, 1961. (ii) He has at any time before the commencement of the Estate Duty (Amendment) Act, 1958 (XXXIII of 1958) appeared before any IT authority in his capacity as income-tax practitioner; and (iii) he is not disqualified to represent an assessee in any income-tax proceeding by reason of any direction made under sub-s. (3) of s. 61 of the IT Act. 12. It was held by the Hon'ble Allahabad High Court that all the three conditions must be cumulatively satisfied for a person to be eligible to appear as an Authorized Representative. 13. In other words, semi-colon was ....
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....of either condition a duty is imposed on the AO or whether both the conditions laid down in cls. (a) and (b) are to be cumulatively satisfied before authorities on whom a duty is cast is to act thereafter as per statutory directions. 17. For this purpose, we refer to explanatory notes to the amendment introduced by Finance Act, 2002 w.e.f 1st April, 2003. Clause 37.3 of the explanatory notes would suffice to explain the intention of legislature. It reads as under: "37.3 It is further provided that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer, and he has not disputed the value so adopted or assessed in any appeal or revision or reference before any authority or Court, the AO may refer the valuation of the relevant asset to a Valuation Officer in accordance with s. 55A of the IT Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the AO may take such fair market value to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value ....
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....ma facie based on material submitted by the assessee. If AO has to take a contrary view i.e., he does not want to take the statutory action then he has to justify and give reasons for not proceeding the way statute requires him to proceed. The AO has to give a finding about the claim of the assessee whether it is genuine or not and such finding has to be based on material. 21. Thus, a whole reading of s. 50C(2) clearly indicates that when assessee claims that fair market value of property under transfer is less than the valuation done by SVA and there is prima facie material to justify this claim of the assessee then AO is statutorily required to refer the property to the DVO unless he justifies that materials submitted by the assessee in this regard are false or it could not lead to the inference that assessee wants him to draw. Ordinarily, expression "may" in a statutory context is not an expression of compulsion but is an enabling word intending capacity or discretion. Contextually it may constitute an expression of power coupled with duty. Whether the word "may" is mandatory or discretionary can also be decided where in the same provision the words "shall" or "may" are used.....
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....s. Reading of those sections make this interpretation further clear in the sense that saving of capital gains would be limited to the extent conditions mentioned therein are fulfilled. For the sake of clarity, we refer to s. 54F asunder: "54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.-(1) Subject to the provisions of sub-s. (4), where, in the case of an assessee being an individual or an HUF, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under s. 45; ....
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....arly indicating that legislature intended to apply the provisions of s. 54F and alike sections subsequent to application of ss. 45, 48 and 50C unless so expressly provided in subsequent sections. 26. We are also not impressed with the argument of learned Authorised Representative that where no capital gains is chargeable on account of entire sale consideration declared by the assessee is invested in new asset then provisions of s. 50C could not be invoked for the reason that there is no real profit to the assessee and once there is no real profit to the assessee on account of substitution of notional sale consideration he could not have any occasion to invest the deemed surplus into a new asset and therefore, he could not have availed the exemption as provided under s. 54F and alike sections. Provisions of IT Act, 1961 provide taxing of deemed income. It is so in the case of ss. 68, 69, 69A, 69B and 69C. Thus, while computing total income not only real but also deemed income under certain circumstances are included and taxes levied thereon. There is also no occasion to the assessee to claim any exemption/deduction by investing such notional addition to the total income in specif....
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.... assessee as to why sale consideration shown by him is lower and thus there was a claim made by the assessee. However, in the case of the assessee, no claim of any sort was made. Thus, the facts in the case of the assessee are different than the facts in the case of Meghraj Baid vs. ITO. The second decision is of Tribunal, Delhi T Bench in the case of Ravi Kant vs. ITO (2007) 110 TTJ (Del) 297, dt. 13th July, 2007. This decision is on the proposition that sale consideration in any case cannot be taken more than the market value of the property determined by the DVO. However, it does not help the case of the assessee as it has not made any claim for referring the property to the DVO. 30. So far as the applicability of s. 50C(1), 50C(2) and 50C(3) are concerned, the same has been explained in detail by this Bench in the case of Jitendra Mohan Saxena. It has been held therein that: (i) Where sale consideration is less than valuation by SVA the valuation as per SVA would be substituted for sale consideration for the purposes of computing capital gains. (ii) Assessee claims before the AO that fair market value of the property under transfer is less than valuation made by SVA an....