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2022 (7) TMI 1150
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....ndemic. We noted that the Hon'ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. In term of the directions of Hon'ble Supreme Court, we condone the delay in filing of this appeal by assessee and admit the appeal for adjudication. 3. The only issue in this appeal of assessee is as regards to the order of PCIT assuming jurisdiction u/s.263 of the Act and consequently revising the assessment order by directing the AO to add back a sum of Rs.25 lakhs being difference in the purchase price of property as per the consideration recorded in the sale deed and value fixed as per guideline of sub registrar of the registration department to be added as per the provisions of section 56(2)(viib)(ii) of the Act. 4. Brief facts are that the assessee is an individual engaged in the business of construction of residential and commercial buildings i.e., real estate business. The assessee filed his return of income for assessment year 2015-....
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....al income of the assessee and order u/s.143(3) of the Act dated 26.12.2017 was modified accordingly by the PCIT. Aggrieved, assessee preferred appeal before the Tribunal. 5. Before us the ld.AR for the assessee Shri N. Arjun Raj, CA argued that the difference in the investment made by assessee of Rs.3.25 crores and the guideline value as per stamp duty valuation fixed by Stamp Valuation Authority at Rs.3.50 crores is only to the extent of Rs.7.69%. He stated that this difference in valuation adopted by Stamp Valuation Authority is marginal and this fact has been considered by legislature lately in section 56(2)(viib)(ii) which is substituted by 56(2)(x)(b)(A) of the Act and in which a concession is given or a mark-up is given whereby if the difference is 5% of the consideration, the same has to be ignored. The ld.AR took us through the relevant provision of section 56(2)(x)(b)(A) of the Act, which reads as under:- 56. Income from other sources. (1)............. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head ―Income from other ....
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....the provisions of section 50C of the Act on principle, while applying to the purchaser, a similar provision is made in the provisions of section 56(2)(viib)(ii) of the Act and subsequently substituted by section 56(2)(x)(b)(A) of the Act. The ld.AR stated that in the present case before us, difference is that 7.69% i.e., between the stamp value adopted by some valuation authority as per guideline value and sale deed registered by assessee. The ld.AR stated that in any case, this is highly debatable issue and once there is debate and AO has taken one of the possible view, the PCIT cannot revise that assessment u/s.263 of the Act for the reason that there is no error in the order of AO at that point of time. In view of this, the ld.AR only requested that the order of PCIT revising the assessment be quashed. 6. On the other hand, the ld. CIT-DR stated that ld.AR only arguing the equity principle and equity does not apply to income tax proceedings because equity is stranger to tax jurisprudence. The ld.CIT-DR stated that provisions of section 50C of the Act are independent and similarly a deeming provision of section 56(2)(viib)(ii) of the Act as applicable in the present case are i....
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....s explained in Circular 8 of 2018 titled Explanatory Notes to the provisions of The Finance Act 2018 as under : 16. Rationalization of section 43CA, section SOC and section 56 16.1 Before amendment by the Act, for computing income from business profits (section 43CA), capital gains (section SOC) and other sources (section 56) arising out of transactions in immovable property, the higher of sale consideration or stamp duty value was adopted. The difference was taxed as income both in the hands of the purchaser and the seller. 16.2 It has been pointed out that the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including shape of the plot or location. 16.3 In order to minimize hardship in case of genuine transactions in the real estate sector, section 43CA, section 50C and section 56 of the Income-tax Act have been amended to provide that no adjustments shall be made in a case ITA No. 4850/Mum/2019 Assessment year: 2011-12 Page 4 of 9 where the variation between stamp duty value and the sale consideration is not more than five per cent ....
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....es that where any person receives, in any previous year, from any person or persons on or after 1st April, 2017, any immovable property, for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration shall be charged to tax under the head "income from other sources". It also provide that where the assessee receives any immovable property for a consideration and the stamp duty value of such property exceeds five per cent of the consideration or fifty thousand rupees, whichever is higher, the stamp duty value of such property as exceeds such consideration shall be charged to tax under the head "Income from other sources". Thus, the present provisions of section 43CA, 50C and 56 of the Act provide for safe harbour of five per cent. Representations have been received in this regard requesting that the said safe harbour of five per cent may be increased. It is, therefore, proposed to increase the limit to ten per cent.. This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessm....
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....for a specific time period only. There is no good reason for holding the curative amendment to be only as prospective in effect. Dealing with a somewhat materially identical situation in the case of Rajeev Kumar Agarwal Vs ACIT [(2014) 45 taxmnann.com 555 (Agra)] wherein a coordinate bench was dealing with the question whether insertion of a proviso to Section 40(a)(i) to cure intended consequence could have retrospective effect, even though not specifically provided for, and speaking through one of us (i.e. the Vice President), the coordinate bench had, after a detailed analysis of the legal position, observed that, "Now that the legislature has been compassionate enough to cure 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 th....
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....at the actual market rate is less than the stamp duty valuation, he can have the matter referred to a Departmental Valuation Officer for the ascertainment of the market value, but then it is a cumbersome procedure and, at the end of the day, every valuation, whether by the departmental valuation officer or under the stamp duty valuation notification, is an estimate, and there can always be bonafide variations, though to a certain limited extent, in these estimations. Unless, therefore, some kind of a tolerance band or a safe harbour provision, in respect of such bonafide variations, is implicit in the scheme of law, the assessees are bound to face undue hardships. 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 co....
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....ion 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 Government, even though the initial tolerance band level was taken at 5%, in response to the representations by the stakeholders, this tolerance band, or safe harbour provision, was increased to 10%. There is no particular reason to justify any particular time frame for implementing this enhancement of tolerance band or safe harbour provision. The reasons assigned by the CBDT, i.e., "the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same 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 am....
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....intended to be resorted to only in cases where there is an attempt at tax evasion by significant under-valuation of immovable property agreed to be sold. This conclusion is strengthened by Instruction N0. 1A88 issued by the Central Board of Direct Taxes of the Government of India, Ministry of Finance, Department of Revenue, which was filed in the Court by learned Attorney General. In the said document it is emphasised by the Central Board that the main objective of the provisions of Chapter XX-C is to check proliferation of black money in real estate transactions and to enforce declaration of the true value of immovable properties that are subject of transfer between the parties. The Central Board has pointed out in the said Instructions that, in administering the provisions of the said Chapter, it has to be ensured that no harassment is caused to bona fide and honest purchasers or sellers of immovable property and there is no erosion of the confidence of the public in the sense of justice and fair play of the Income Tax Department. Paragraph 3 of the Instruction makes it clear that the right of pre-emptive purchase has to be exercised by the appropriate authority only when it has ....
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....ncerned is found to be at least 15% more than the apparent consideration and this limit has not to be mechanically applied but a reasonable margin for probable error taken into account. The affidavit of Hemant Sarangi further states that the following types of properties should not ordinarily be purchased: (a) cases of doubtful or disputed titles; (b) transactions by and with Government, semi-Government Organisations, Public Sector Undertakings, Universities etc.: (c) properties with bona fide tenancies of long standing; and (d) properties with too many restrictions on user. Subsequently, Hon'ble Supreme Court finally laid down the principle that where there is a significant under valuation of the property to the extent of 15% or more in the agreement of sale, as evidenced by the apparent consideration being lower than the fair market value by 15% or more, in that case only the provisions of chapter XX-C can be resorted to. Hon'ble Supreme Court finally in para 30 held as under:- 30. In the light of what we have observed above, we are clearly of the view that the requirement of a reasonable opportunity being given to the concerned par....
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....ment to sell lead to the conclusion that before such an imputation can be made against the parties concerned, they must be given an opportunity to show cause that the under-valuation in the agreement for sale was not with a view to evade tax. Although Chapter XX-C does not contain any express provision for the affected parties being given an opportunity to be heard before an order for purchase is made under Section 269UD, not to read the requirement of such an opportunity would be to give too literal and strict an interpretation to the provisions of Chapter XXC and in the words of Judge Learned Hand of the United States of America "to make a fortress out of the dictionary." Again, there is no express provision in Chapter XX-C barring the giving of a show cause notice or reasonable opportunity to show cause nor is there anything in the language of Chapter XXC which could lead to such an implication. The observance of principles of natural justice is the pragmatic requirement of fair play in action. In our view, therefore, the requirement of an opportunity to show cause being given before an order for purchase by the Central Government is made by an appropriate authority under Sectio....