TaxTMI 
TaxTMI 
2021 (8) TMI 1184
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....er according to provisions u/s 55A of the I.T. Act and not mentioning the reasons in the assessment order as requested by the assessee." 3. From a perusal of the aforesaid grounds, it reveals that the assessee is aggrieved by the action of the Ld. CIT(A) confirming the assessment made by the A.O by making addition of Rs. 54,88,952/- u/s 43CA of the Income Tax Act 1961 (hereinafter the 'Act') without referring the case to the Valuation Officer according to provisions u/s 55A of the Act despite requisition by the assessee to this effect. 4. The brief facts as noted by the A.O is that the assessee had filed return of income disclosing total income of Rs. 1,98,39,040/-. The A.O notes that the assessee is engaged in the business of real estate promoter & developer during the relevant year under consideration. The A.O noted that the assessee company is developing housing project on land owned by it and it is also developing flats on land owned by other persons or companies. The A.O notes that the return filed by the assessee was selected for scrutiny through CASS. Thereafter, he issued statutory notices. According to the A.O, the assessee responded to the notices and had filed repl....
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....e addition of Rs. 54,88,952/- made by the AO u/s.43CA on account of the difference between the sale value of properties as disclosed in the books and the stamp duty circle rate as assessed by Stamp Duty Authority. The basic facts of the case are that the appellant has shown, in the books of accounts, the sale value of five properties, during the previous year, at Rs. 1,77,90,600/-. The valuation of these five properties as per the stamp duty circle rate is Rs. 2,32,79,552/- The sale consideration shown by the appellant and has not been disputed by the valuation as per the Stamp Duty authority appellant. The difference amount of Rs. 54,88,952/- has been added by the A.O under the provision of section 43CA. As per the provision of section 43CA, the value assessed by the Stamp Duty authority, on transfer of land or building shall be deemed to be the full value of the consideration received by the appellant on transfer of such properties. Accordingly, the AO has treated the sale value of these properties as per stamp duty rate at Rs. 2,32,79,552/- and thereby has made an addition of the difference amount of Rs. 54,88,952/-. Before me it has been contended by ....
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....re, the addition made u/s.43CA of Rs. 54,88,952/- is also confirmed." 6. Aggrieved by the aforesaid action of the Ld. CIT(A), the assessee is before us. 7. We have heard both the parties and perused the records. At the outset, the Ld. AR of the assessee, Shri Miraj D. Shah, has submitted that the A.O has made the addition of Rs. 54,88,952/- by invoking the provision of section 43CA of the Act on the basis that in the case of Five (5) flats, the value of sales recorded in its books of account were lower than the value adopted for charging stamp duty on registration of such flats. According to the Ld. AR, during the assessment proceedings, the assessee disputed the valuation made by the Stamp Duty Authorities and claimed that the Market Value of the property was much less than the Stamp Duty value assessed in the depressed market. According to the Ld. AR, in fact, the assessee advertised in the news paper to find the buyers of unsold flats at a lower price having location disadvantage compared to other flats in the building/project. According to the Ld. AR, the assessee, therefore, requested the A.O. that he may refer the case to the Valuation Officer (DVO) according to the pro....
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....in the Deeds of Conveyance upon which the assessee was relying. Presumably, the case of the assessee was that price offered by the buyer was the highest prevailing price in the market. If this is his case then it is difficult to accept the proposition that the assessee had accepted that the price fixed by the District Sub Registrar was the fair market value of the property. No such inference can be made as against the assessee because he had nothing to do in the matter. Stamp duty was payable by the purchaser. It was for the purchaser to either accept it or dispute it. The assessee could not, on the basis of the price fixed by the Sub-Registrar, have claimed anything more than the agreed consideration of a sum of Rs. 10 lakhs which, according to the assessee, was the highest prevailing market price. It would follow automatically that his case was that the fair market value of the property could not be Rs. 35 lakhs as assessed by the District Sub Registrar. In a case of this nature the assessing officer should, in fairness, have given an option to the assessee to have the valuation made by the departmental valuation officer contemplated under Section 50C. As a matter of course, in a....
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....ion 80IB of the Act. In other words if there is any enhancement happening due to addition made after reference to the DVO, then assessee should be given the benefit of the deduction under Chapter VI-A on the enhanced amount if any. For that, he has relied on the logic stated in the Circular No.37/2016 issued by the CBDT on 2nd November 2016. Though the Board has accepted in the ibid Circular disallowance made u/s 32, 40(a)(ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, and which resulted in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance. 12. We find force in the submission of the Ld. AR that if the income/profits from the sale of flats, in question, falls in the eligibility project for claiming deduction 80IB(10) of the Act, then even if there is any enhancement in the income of the assessee by virtue of valuation made by the DVO, then the A.O after examination of this fact should give the benefit of the deduction under Chapter VI-A on the enhanced amount if any, i....
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....n declared by the assessee and fair market value as determined by the DVO u/s 50C is less than 10 percent, the Assessing Officer was not justified in substituting the value determined for sale consideration disclosed by the assessee. The Co-ordinate Bench after considering the provisions of Section 50C of the Act and the provision of section 23A and 24(5) of the Wealth Tax Act held as under :- "13. A combined reading of the above provisions shows that the valuation adopted by the DVO is subject to appeal and the same is not final. In the instant case we find that as Aagainst the value of Rs. 28,73,000/- adopted by the stamp valuation authorities, the DVO has determined the FMV on the date of transfer at Rs. 20,55,000/- . This itself shows that there is wide variation between the two values. Further, the value adopted by the DVO is also based on some estimate. We find that the difference between sale consideration shown by the assessee at Rs. 19,00,000/- and the FMV determined by the DVO at Rs. 20,55,000/- is only Rs. 1,55,000 which is less than 10 per cent. The Courts and Tribunals are consistently taking a liberal approach in favour of the assessee where the difference be....
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.... addition on part of revenue. In absence of any evidence no reliance could be placed on the report of DVO for making addition. 10. Thus, in view of the fact that the difference between sale consideration and the market value determined by the DVO is not substantial and is approximately little over 2 per cent of the actual sale consideration, we find no reason for rejecting actual sale consideration mentioned in the Sale Deed for determining long term capital gain. Accordingly, the ground No.1 raised in appeal by the assessee is allowed. The Assessing Officer is directed to adopt actual sale consideration as mentioned in the Sale Deed as a fair market value for determining the long term capital gain." 6. In the light of the facts of the case and the decisions discussed above, we find merit in the submissions of assessee. In the present case, since difference between the value declared by the assessee and the value determined by the DVO is less than 10%, no addition in respect of Long Term Capital Gains is warranted. The findings of Commissioner of Income Tax (Appeals) on this issue are accordingly, set aside and the appeal of assessee is allowed." 14. We note th....
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....quences of the scheme of Section 50C. It makes perfect sense, and truly reflects a very pragmatic approach full of compassion and fairness, that just because there is a small variation between the stated sale consideration of a property and stamp duty valuation of the same property, one cannot proceed to draw an inference against the assessee, and subject the assessee to practically prove his being truthful in stating the sale consideration. Clearly, therefore, this insertion of the third proviso to Section 50C(1) is in the nature of a remedial measure to address a bonafide situation where there is little justification for invoking an anti-avoidance provision. Similarly, so far as enhancement of tolerance band to 10% by the Finance Act 2020, is concerned, as noted in the CBDT circular itself, it was done in response to the representations of the stakeholders for enhancement in the tolerance band. Once the Government acknowledged this genuine hardship to the taxpayer and addressed the issue by a suitable amendment in law, the next question was what should be a fair tolerance band for variations in these values. As a responsive Government, which is truly the hallmark of the present G....
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....nsidered view, therefore, the provisions of the third proviso to Section 50C (1), as they stand now, must be held to be effective with effect from 1st April 2003. We order accordingly. Learned Departmental Representative, however, does not give up. Learned Departmental Representative has suggested that we may mention in our order that "relief is being provided as a special case and this decision may not be considered as a precedent". Nothing can be farther from a judicious approach to the process of dispensation of justice, and such an approach, as is prayed for, is an antithesis of the principle of "equality before the law," which is one of our most cherished constitutional values. Our judicial functioning has to be even-handed, transparent, and predictable, and what we decide for one litigant must hold good for all other similarly placed litigants as well. We, therefore, decline to entertain this plea of the assessee." As has been aptly explained above, the rational for holding newly inserted proviso to subsection (1) to section 50C of the Act as curative in nature, hence, having retrospective application, the same analogy would apply to the provisions of Section 43CA of....