TaxTMI 
TaxTMI 
2021 (6) TMI 536
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....nd in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the addition to the tune of Rs. 29,51,572/- out of addition made by ld. AO. Appellant prays addition confirmed by ld. CIT(A) deserves to be deleted." 3. In ITA No. 558/JP/2019, the Revenue has taken the following grounds of appeal:- "1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in allowing certain concessions in value of the property as against the valuation made by the DVO who is an expert in the field and has taken into consideration all the aspects of the properties particularly the situation of the properties in question?" 4. The ld. AR submitted that in this case, an order was initially passed u/s 163 of the Income Tax Act, 1961 dated 24.03.2011 wherein the assessee was held as Representative Assessee (within the meaning of section 160 of the I.T. Act, 1961) of Smt. Pamela Colleco, a non-resident. The assessee was appointed as the power of attorney holder by Smt. Pamela Colleco in respect of her immovable property situated at 55-A and 55-B, Opp. Central Jail, Agra Road, Jaipur in terms of specific power of attorney ma....
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....tion on account of capital gain of Rs. 6,34,62,356/- was made on substantive basis. 9. Against the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A), who after holding the assessee as representative assessee of Smt. Pamela Colleco, sustained the addition made on account of long term capital gain on substantive basis in the hands of the assessee. 10. Aggrieved by the said order of Ld. CIT(A), assessee preferred an appeal before the ITAT, Jaipur bench. The ITAT vide its order dated 05.03.2014 setaside the matter to the Assessing Officer with the directions to refer the matter to valuation officer for determination of the Fair Market Value of the subject property. 11. In compliance of the said directions of the ITAT, the Ld. AO referred the matter to Valuation Officer u/s 55A of the Act for the purpose of determination of FMV of the subject property. Thereafter, by misinterpreting the valuation done by the Valuation Officer, the Ld. AO passed the impugned assessment order u/s 147/143(3)/(set-aside) of the Act and made addition of Rs. 2,83,94,600/- on account of capital gains in the hands of assessee by taking the full value of consideration u/s 50C at Rs....
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....de by the Hon'ble ITAT to the file of Ld. AO with the direction to complete assessment de novo, the same could have been done only in the hands of the assessee in the capacity of representative assessee of Smt. Pamela Jean Colleco and not as an individual. However, the fresh assessment order so passed does not show assessee as representative assessee of Smt. Pamela Jean Colleco, but as an individual. This action of Ld. AO is clearly bad in law and renders the entire assessment order null and void. On appeal, ld. CIT(A) also upheld the validity of Assessment order so passed in "Individual capacity" of assessee by treating the same as mistake curable u/s 292BB of the Act. 17. It was submitted that in the instant case, no income in the shape of capital gain has accrued to the assessee, and therefore, he cannot be assessed with an income which has not accrued to him. Accrual or receipt of income is the basis for charging tax on such income by assessee in his individual capacity. In the instant case however, by way of the original assessment order, the assessee was taxed by virtue of a legal fiction created by section 160 of the Act, with effect of which assessee was assessed as repr....
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....ed during assessment stage. In other words, section 292BB cures only procedural infirmities that too specifically relating to service of notice. In fact, there are various judicial pronouncements which hold that if a validly issued notice is served to unauthorized person or at a wrong address, such defects are not curable and render entire proceedings null and void even though the intention of AO may not be that. Similarly, notice u/s 148 issued in the name of dead person, even though served on legal representative (even if all subsequent notices issued in the name of Legal representative) of such deceased renders entire proceedings bad in law even though intention of assessing officer may be to assess legal representative of deceased. Your honours would appreciate that passing assessment order in the "Individual capacity" as against in "Representative capacity of Non resident" is as good as passing assessment order in the name of some other person which is a serious error and not curable. It was accordingly submitted that the order of Ld. AO may please be declared illegal /void and be quashed accordingly. 22. In her submissions, the ld DR vehemently opposed the contentions adva....
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....ards the valuation of the land & assessment of the capital gains thereon instead of the capacity in which the liability was to be paid being a representative or an individual. There is no inherent preference for assessment directly on the principal and the only limitation on the assessment vis-a-vis these two parties, i.e., agent and the principal, are concerned, that once an assessment is made on one of them, the assessment for the same income thereafter cannot be made on the other. The fact that there was no evidence of the assessee having transferred any amount of the sale consideration to his alleged "principal" Pamella Colleco, made him liable for capital gains in his capacity as an individual & I see nothing wrong in the said assessment accordingly once the direction of the superior court was clear that the liability of capital gains was assessable on "Substantive" basis in hands of the assessee. The initial dispute was only in regard to the assessee's denial that as power of attorney holder of Pamella Colleco he should be liable for capital gains tax & should only be a representative assessee u/s 163 of the I.T. Act. Now the A.O. assessing the said amou....
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....e properties by virtue of order u/s 163 dated 24.03.2011 passed by the AO and thus a representative assessee u/s 160(1)(i) of the Act. The assessee unsuccessfully contested the matter before the ld CIT(A) and thereafter, before the Tribunal where the Tribunal vide its order dated 5.03.2014 confirmed the action of the AO in treating the assessee as representative assessee of Smt. Pamela Jean Colleco. Admittedly, this matter has attained finality in absence of any further appeal by the assessee and the action of the AO in treating the assessee as representative assessee therefore carries all the necessary consequences and implications in terms of section 160, 161 and 162 of the Act. As part of the same, the AO initiated the proceedings u/s 147 by issue of notice u/s 148 dated 25.03.2011 to the assessee as representative assessee of Smt. Pamela Jean Colleco and the proceedings were thereafter completed by passing of the assessment order u/s 147/144 dated 29.12.2011 where long term capital gains on sale of the two properties was assessed in the hands of the assessee as representative assessee of Smt. Pamela Jean Colleco on protective basis which on appeal by the assessee, was conver....
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....the Hon'ble High Court and therefore, as far as the matter treating the assessee as representative assessee of Smt. Pamela Jean Colleco is concerned, it has attained finality with passing of the order of Hon'ble High Court and the order of the AO passed u/s 147/144 has since merged with the order of the Hon'ble High Court in so far as treating the assessee as representative assessee of Smt. Pamela Jean Colleco is concerned and the same carries the necessary consequences and implication in terms of section 160, 161 and 162 of the Act. 25. Now, coming to the impugned order passed by the AO u/s 147/144/setaside dated 9.03.2016, we find that the same is pursuant to directions of the Tribunal vide the aforesaid order dated 5.03.2014 wherein the matter was restored to the file of the AO with the following directions: "3.3 The ld. DR also supported the arguments advanced by the AR of the assessee and submitted that the matter should have been referred to the valuation officer to determine the fair market value of the subject property since the assessee has not accepted the value adopted by the stamp authorities and has challenged it before the competent authority. 3.4....
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....144, proceedings in respect of which were initiated by issuance of notice u/s 148 and also pursuant to directions of the Tribunal, in order to give effect to such directions, such an order has been passed and not on account of any fresh jurisdiction acquired by the AO. The order so passed therefore have to be read and understood accordingly and not otherwise and what needs to be seen is as to whether the directions so given by the Tribunal has been complied with or not by the AO while passing the impugned order and which we find has been duly followed by the AO by referring the matter to the DVO and taking into consideration the valuation report so submitted by him, determination of fair market value. In fact, if we look at the body of the order so passed in the set-aside proceedings, it refers to the order of the Tribunal and directions so given and also the past history of the case and infact, towards the end, it does provide that "Since the assessee has failed to make payment of Long Term Capital Gain tax on account of transfer of capital assets which were sold by the assessee as representative assessee of the foreigner, whereon tax @ 20% on 2,83,94,600/- as capital gain was req....
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.... his submissions and in response to the same, the assessee submitted detailed submissions/objections before the Valuation Officer vide letter dated 21.05.2015 and complete details as required by the Valuation Officer were also supplied by the assessee. However without considering the objections raised by assessee against the proposed valuation, the Valuation Officer provided his valuation report vide letter dated 28.08.2015 wherein the value of each of the plots was wrongly assessed at Rs. 3.00 crores. 29. It was submitted that before the Valuation Officer as well as the AO, it was submitted by the assessee that the plots in question are absolutely of residential nature and use and therefore, cannot be valued on the basis of commercial rates. However, ld. Valuation officer valued the subject properties by holding 40% Commercial and 60% Residential. Moreover, a completely hypothetical rate of 82,500/- per sq mtr was adopted for valuing such alleged commercial component (even when Valuation Officer himself had computed per sq. mtr. rate of commercial property at Rs. 41,214/-per sq mtr) and thus Valuation was made at Rs. 3,00,00,000/- for each property and consequently addition was....
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....ut also spread their possession to the premises not under lease. Repeated requests were made to Sethi family to vacate the premises, however, they were not ready to vacate their occupancy. As submitted above, the main front of the subject property was in the possession of Sethi family, therefore, the approach to the remaining portion of the plot was almost impossible as the only entrance was under the possession of the tenant. Further due to the reason that the actual owner of the property i.e. Pamela Colleco was not residing nor in the position to look after the said premises some Anti-Social elements had taken illegal and unauthorized possession on the remaining portion as a result of which even the sale of the subject property became almost impossible. It is further submitted that due to the existence of the Central Jail just opposite to the subject property, construction could not be permitted for more than two floors above the ground floor and therefore any commercial establishment in the shape of commercial complex is not viable on the property. Further one side of the subject property is occupied by Government quarters of jail employees who use to dump thei....
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....tted that in light of above, following facts were apparent and were submitted before the Ld. Valuation Officer for the purpose of determination of FMV of the subject properties: 1. That, the assessee has already disputed the valuation adopted by the Stamp Valuation Authorities before the appropriate appellate authorities. Copy of relevant papers of such litigation as submitted before Valuation officer. 2. That, the subject properties are purely residential prior to sale as well as post sale period and the land use has not been converted by the prospective buyers of the land. 3. The Municipal Corporation, Jaipur has already certified the said properties as 'residential' and a Certificate issued by the Municipal Corporation to such effect has already been submitted before the Ld. Valuation Officer, which is placed on record. 4. That, the buyers namely, Sh. Vivek Gupta and Sh. Ashish Gupta had applied for obtaining approval of construction of residential house on the said land which further proves the fact that the land in no case could be characterized as commercial land and therefore, the same should be valued by taking the land use as residential....
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....ces, the assessee has also submitted some more sale instances which are of the commercial shops auctioned by Jaipur Development Authority in nearby / adjoining area of commercial property which were required to be considered for determination of fair market value of the property under reference. Those sale instances are as under: S.No Address of Property Date of sale Area (in sq. mtrs) Minimum selling price Auction rate Auctioned amount Estimated rate per sq. metr) 1. Plot No. 02, Subhash Chowk, Nala Pannigran 24.08.2006 42.82 10,00,000 - 10,21,000 23,844 2. Plot No. 01, Fateh Singh Ki Dharmshala 03.10.2006 145.82 12,000 24,250 35,36,135 24,250 3. Plot No. 5, Subhash Chowk, Nala Pannigran 29.09.2006 42.82 10,00,000 - 10,31,000 24,077 4. Plot No. 6, Subhash Chowk, Nala Pannigran 29.09.2006 42.82 10,00,000 - 10,30,000 24,054 5. Plot No. 8, Subhash Chowk, Nala Pannigran 29.09.2006 42.82 10,00,000 - 10,81,000 25,245 6. Fatehsingh Ki Dharmshala 20.01.2007 1672 25,000 37,000 6,18,64,000 37,000 Average Rate ....
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....f the subject property at Rs. 3.00 crores for each plot. For the purpose of this valuation, the Ld. AO has treated the property as being in use partly for residence and partly for commercial i.e. 40% - Commercial (front portion) and 60% - residential (back portion). In this regard it is submitted that the Ld. AO has ignored a very vital fact that the entire property was being used solely for residential purpose and no part of it was being used for commercial purposes. The Ld. Valuation Officer has recorded a wrong finding of fact that the factual use of 40% property was commercial. It must be noted that he has not supported this observation with any single evidence which could show that the property was being used for commercial purposes. On the other hand, the Ld. Valuation Officer himself has admitted that certain portion of the property is only falling under industrial shed, and there is no observation to the effect that the said part was being put to use as commercial property. Further, the Ld. Valuation Officer himself has accepted that the adjacent land has residential quarters for the jail staff, and that the most structures on the road stretch adjacent to jail boundary are ....
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....he property as residential and part commercial and apply differential rates and provide relief to the assessee. It was accordingly submitted that the findings of the ld CIT(A) should be set-aside and that of the AO/DVO should be upheld. 38. We have heard the rival contentions and perused the material available on record. The assessee is challenging the findings of the ld CIT(A) for considering part of property as residential and part commercial, and submitted that entire property is residential and should therefore be valued at Rs. 1.21 crores each as alternatively determined by the DVO in his valuation report. The Revenue is equally challenging the findings of the ld CIT(A) for considering part of property as residential and part commercial and at the same time, submitted that entire property be treated and valued as commercial property as done by the DVO and should therefore be valued at Rs. 3.00 crores each as determined by the DVO in his valuation report. 39. On perusal of the DVO report, it is noted that the DVO has valued both the properties after modifying/adjusting the value of other sale instances of the properties situated on MI road and other adjoining areas which ....
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....00 per sq mtr for residential property, has arrived at the value of Rs. 172,78,488/- for each of the two properties. 41. As far as the findings of the ld CIT(A) that various documentary evidences in support of property being residential in nature have not been considered by the DVO while determining the fair market value of the property, the Revenue has failed to demonstrate as to how the said findings of the ld CIT(A) are perverse and not borne out of material available on record. As we have observed earlier, the two properties have been treated and valued as commercial properties by the DVO apparently guided by the fact that these two properties also lie on the main agra road in front of Central jail, Jaipur and the fact that the stamp duty authorities have also adopted the commercial rates. The same become more clear if we read the findings of the DVO where he has stated in Para 10 of his valuation report that "the assessee was informed that the Circle Rates are for commercial use and this office has no jurisdiction regarding the land use and the calculation done in Annexure III." In our view, the determination of circle rate is clearly not within the jurisdiction of the D....
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.... land use and not entirely residential or commercial is hereby confirmed. The said fact is also corroborated by two sale deeds where there is a clear assertion, at pages 12 and 23 of assessee's paperbook, that a part of the property has been given on rent to M/s Sethi Transport and also as per assessee's own submissions before us wherein it has been stated as under: "Mr. T.H. Alexander in terms of lease deed dated 8th December, 1958 had given the front portion of the said land to one Shri Ramditta Mal Sethi, Prop. Of M/s Sethi Transport Co., copy of rent deed and rent receipts issued from time to time are enclosed for ready reference. Thereafter Mr. T.H. Alexander further allowed Shri Ramditta Mal Sethi to open showroom for tyres, oils etc. on the leased premises and accordingly Shri Sethi remained occupant of the front portion of the land." 44. Therefore, the fact that a part of the property at the time of execution of sale deed was under commercial usage cannot be denied especially where there is a clear assertion and acknowledgment by both the parties executing the sale deeds. Infact, it is the assessee's claim that there were disputes relating such possession by Set....
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.... declared sale consideration of Rs. 1,50,00,000/- as per the sale deed should be substituted and considered as fair market value or can such difference being less than 10% of the declared sale consideration be ignored and declared sale consideration be accepted. Similar is the position in respect of the other property where difference comes to 7.79% of the declared sales consideration. The assessee has raised the contention to this effect though in context of value of Rs. 1,92,54,100/- where he says that the same being quite close to the declared sale consideration of Rs. 150,00,000/- and the same thus may be ignored and actual sale consideration may be considered for the purposes of arriving at the fair market value. Given that there is a downward revision in the value so arrived at Rs. 1,58,79,497/- and Rs. 1,61,68,716/- as against the declared sale consideration and difference has further narrowed down, we deem it necessary to examine the said contention. 47. In this regard, it is noted that the legislature has inserted third proviso to Section 50C(1) of the Act, as per which, where the difference between stamp value and the actual consideration is 5% or less, the same shall ....
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....ure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced". Referring to this decision, and extensively reproducing from the same, including the portion extracted above, Hon'ble Delhi High Court, in the case of CIT Vs Ansal Landmark Township Pvt Ltd [(2015) 61 taxmann.com 45 (Del)], has approved this approach and observed that "(t)he Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a)(ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from 1st April 2005, merits acceptance". The same was the path followed by another bench of this Tribunal in the case of Dharmashibhai Sonani Vs ACIT [(2016) 161 ITD 627 (Ahd)] which has been approv....
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....ips. The mechanism under section 50C proceeds on the assumption that when the sale consideration is less than the stamp duty valuation, the sale consideration is to be treated as understated. This assumption is, however, laid to rest when the variations between the stated consideration and the stamp duty valuation figure are treated as explained. The insertion of the third proviso to Section 50C(1) provides for this tolerance band with respect to a certain degree of variations between the stamp duty valuation and the stated consideration of an immovable property. In other words, as long as the variations are within the permissible limits, the anti-avoidance provisions of Section 50C do not come into play. As we have noted earlier, the CBDT itself accepts that there could be various bonafide reasons explaining the small variations between the sale consideration of immovable property as disclosed by the assessee vis-à-vis the stamp duty valuation for the said immovable property. Obviously, therefore, disturbing the actual sale consideration, for the purpose of computing capital gains, and adopting a notional figure, for that purpose, will not be justified in such cases. On a c....
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....me area because of a variety of factors, including the shape of the plot or location," was as much valid in 2003 as it is in 2021. There is no variation in the material facts in this respect in 2021 vis-à-vis the material facts in 2003. What holds good in 2021 was also good in 2003. If variations up to 10% need to be tolerated and need not be probed further, under section 50C, in 2021, there were no good reasons to probe such variations, under section 50C, in the earlier periods as well. We are, therefore, satisfied that the amendment in the scheme of Section 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à-vis stamp duty valuation to 10%, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related statutory provision of Section 50C, i.e. 1st April 2003. In plain words, what is means is that even if the valuation of a property, for the purpose of stamp duty valuation, is 10% more than the stated sale consideration, the stated sale consideration will be accepted at the face va....
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....o section 50C(1) of the Act, various Coordinate Benches have held that where there is difference of less than 10%, the same shall be ignored. In this regard, we refer to decision of the Jaipur Benches of the Tribunal in case of Smt. Sita Bai Khetan Vs. ITO (ITA No.823/JP/2013 dated 27.7.2016) wherein it was held as under: "4.2 We have heard rival contentions and perused the material available on record. We find that the Hon'ble Coordinate Bench in ITA No. 1.543/PN/2007 in the case of Rahul Constructions Vs. DCIT (Supra) has held as under:- "We find that the Pune Bench of the Tribunal in the case of Asstt. vs. Harpreet Hotels (P) LTd. Vide ITA No. 1156-1160/Pn/2007 and relied on by the learned counsel for the assessee had dismissed the appeal filed by the Revenue where the CIT(A) had deleted the Unexplained investment in house construction on the ground that the difference between the figure shown by the assessee and the figure of the DVO is hardly 10 per cent. Similarly, we find that the Pune Bench of the Tribunal in the case of ITO vs. Kaaddu Jayghosh Appasahebh, following the decision of the J&K High Court in the case of Honest Group of Hotels (P) Ltd. Vs, UT (2....