TaxTMI 
TaxTMI 
2024 (7) TMI 500
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.... liable to be quashed. 2.1 The learned Commissioner of Income tax (Appeals) has also erred in confirming the reopening of assessment by learned Assessing Officer. The conditions precedent for issue of notice u/s. 148 of I.T. Act, 1961 having not been satisfied, the reopening of assessment was bad in law and hence the learned Commissioner of Income tax (Appeals) should have instead of confirming the assessment order, quashed the reopening of assessment. 2.2 In any case, the passing of the order without complying with the legal and statutory requirements of reassessment proceeding also makes the order bad in law and such order is liable to be quashed. 3.1 In any case and without prejudice, the learned Commissioner of Income tax (Appeals) has erred in holding that the provisions of Section 50C of the Act are applicable in the instant case and thus confirming the additions made by Assessing officer u/s. 50C of I.T. Act, 1961. On the fact and circumstances of the case and on proper appreciation of law it would be clear that the provisions of Section 50C of I.T. Act, 1961 are not applicable to the case of appellant and thus no addition was called for and the en....
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....ee's 1/5th share works out to Rs. 11,28,000. The assessee replied to the show cause notice on 18.03.2022 objecting to addition of Rs. 11,28,000 relying on various judgments of ITAT. The AO noted that section 50C was amended by the Finance Act 2016 and added proviso which is effective from 01.04.2017 and did not accept the submissions of the assessee and completed assessment by making addition to the total income of assessee. 3. On appeal, the CIT(Appeals) also dismissed the appeal of the assessee. Against this, the assessee is in appeal before the ITAT. 4. The ld. AR reiterated the submissions made before the lower authorities and she pressed ground No.4 and submitted as under:- "1. The appellant, an Individual, Sri B. N. Ratna Balraj expired on 16.09.2023. A copy of the Death certificate is filed before the learned CIT(Appeals), NFAC, Delhi vide a separate submission dated 15.01.2024. In this scenario, Sri B. R. Rakesh, one of the legal heirs is filing this submission on behalf of the deceased. 2. The year under appeal is assessment year 2016-17. 3. The appeal filed by the appellant on being aggrieved by order passed u/s 147 r.w.s 144B of the Incom....
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....e acknowledgement no.222262110005 in which the appellant had objected to the very issue of notice u/s. 148. In this letter, the appellant had also asked for copy of reasons recorded for issue of notice u/s. 148 of the Act. 10. a) In response thereto, the appellant received letter dated 30.06.2021 from the learned Assessing Officer, W-7(2)(1), Bangalore stating that the details asked for by the appellant in letter dated 13.04.2021, i.e. copy of reasons and satisfaction obtained, could not be revealed before filing return of income in response to notice issued u/s. 148 of the Act. b) In response to the above letter dated 30.06.2021, the appellant manually filed a letter dated 01.07.2021 on 07.07.2021 vide acknowledgement no. 222262110010 with ITO, Ward- 7(2)(1), Bangalore stating the fact that the appellant had already uploaded the return of income electronically in response to notice u/s 148 on 17.04.2021 and that this return was filed in response to notice issued u/s 148 dated 31.03.2021. c) Further, the appellant requested that in the light of dictum of Supreme Court, the appellant may kindly be given: 1) A copy of the reasons if any recorded fo....
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....explaining that the provisos to section 50C of the Act are applicable and that the consideration received on sale being more than the guidance value on the date of agreement to sell, the addition should not be made to returned income. It was also stated in the letter that even otherwise, the difference in the sale consideration received and the guidance value on the date of sale was within the tolerance limit of 10%. 13. a) However, the learned Assessing Officer did not accept the submissions of the appellant and passed assessment order u/s. 147 r.w.s 144B dated 21.03.2022 by making addition of Rs. 11,28,000/- to the returned income under the head capital gains on the following grounds: a. That the payment encashed on 04.02.2015 towards sale consideration has been received by the appellant long after the date of agreement to sell i.e., 15.10.2014 and that the second proviso to section 50C of the Act will be applicable only if the payment is received on or before the agreement. b. That the First and second provisos to section 50C(1) of the Act have been implemented w.e.f 01.04.2017 i.e. FY 2017-18 relevant to AY 2018-19. However, the case of the appellant ....
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....plicable and the guidance value as on date of agreement to sell was Rs. 7,01,80,000/- only, as against guidance value of Rs. 9,26,40,000/- prevailing on the execution of sale deed. Copy of the guidance value notification is enclosed as Annexure - 5. 21. The guidance value in the area was enhanced to as per notification later to date of agreement to sell. 22. As stated above, the agreement to sell was entered into on 15.10.2014 and the entire sale consideration for the sale was received through cheques only. The cheque dated 15.12.2014 paid as advance as per agreement to sell was encashed on 04.02.2015. 23. Though there was a delay in realization of cheque, yet it was presented and cleared within 3 months from the date of issue of cheque. Hence, the date of payment would go back to the date of issue of cheque. 24. The date of first realisation of cheque is 04.02.2015 which would date back to the date of issue of cheque which is 15.12.2014. Thus, it is crystal clear that the first payment realised on 04.02.2015 will go back to the date of issue of cheque as mentioned in the Agreement to sell i.e., 15.12.2014. 25. The late realization of ch....
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.... fastened with the liability of higher rate of valuation of the property. 29. The case of the appellant is clearly governed by first and second proviso to section 50C of the Act and since the consideration received on sale is not less than the guidance value on the date of agreement to sell, there is no question of any addition to income. 30. For the sake of convenience, provision of 50C are reproduced as follows; Special provision for full value of consideration in certain cases. 50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer : Provided that where the date of the agreement fixing the amount of consideration and the ....
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....n 2.-For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty. (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. 31. General background of Section 50C a) Generally, in a transaction of transfer of land or building or both ('asset") there is a considerable time gap between the date when the vendor agrees to sell the asset and the date of actual transfer by way of a registered instrument to the buyer. The price is fixed between the parties at the time of entering into an agreement to sell. Thereafter, the buyer investigates the title of the ve....
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.... for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer. Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account, on or before the date of the agreement for transfer." 34. Explanatory Memorandum to the Finance Bill, 2016 The Explanatory Memorandum to the Finance Bill, 2016 states as under - "Rationalization of Section 50C in case sale consideration is fixed under agreement executed prior to the date of registration of immovable property. Under the existing provisions contained in Section 50C, in case of transfer of a capital asset being land or building or both, the value adopted or assessed by the stamp valuation authority for the purpose of payment of stamp duty shall be taken as the full value of consideration for the purposes of computation ....
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.... gains tax liability. Aggrieved, the assessee filed an appeal to CIT(A) who upheld the action of the AO. 36. The Ahmedabad Bench of the Tribunal, in the case of Dharamshibhai Somani v. ACIT [(2016) 161 ITD 627 (Ahd. - Trib.)(SMC)](ITA No. 1237/Ahd/2013; AY 2008- 09; order dated 30.9.2016)(Ahd Trib SMC) held that - The present amendment, being an amendment to remove an apparent incongruity which resulted in undue hardships to the taxpayers, should be treated as retrospective in effect; The proviso to section 50C should also be treated as curative in nature and with retrospective effect from 1st April, 2003, i.e. the date effective from which Section 50C was introduced The Tribunal has observed that the amendment is one step short of what ought to have been done in as much as the amendment, in tune with the judge made law, ought to have been effective from the date on which the related legal provisions were introduced. 37. Dharamshibhai Somani v. ACIT(Ahd Trib SMC) - observes that the proviso inserted by FA, 2016 is optional to the assessee The Tribunal has made the following observations which are to the effect that the ....
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..... ITO [(2017) 79 taxmann.com 104 (Visakhapatnam - Trib.)] Thus, it can be seen that though the first proviso is inserted from 01.04.2017, the effect thereof is retrospective is applicable to appellant for the year. 39. From the above detailed discussion, it is very clear that the benefit of proviso is applicable retrospectively and further in the appellant's case all the advances have come by cheque. Therefore, the appellant is fully entitled to benefit given under the law and on proper consideration it will be clear that there is no understating of consideration and hence no variation is called for. Alternatively, without prejudice, the appellant wishes to submit as follows; 40. Even otherwise alternatively the case of the appellant is also saved by the third proviso to sec. 50C. a) Insertion of third proviso to section 50C by Finance Act, 2018 The Finance Act, 2018 has further amended the provisions of section 50C of the Act by inserting the following third proviso with effect from 1.4.2019 i.e. effective Assessment Year 2019-20 - "Provided also that where the value adopted or assessed or assessable by the stamp valua....
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...., will apply or atleast a variation of 5% ought to be permitted based on subsequent amendment. Option for approaching Valuation Officer, under section 50C(2), for valuing property in question continues to be available even subsequent to the amendment. Illustration Particulars Situation 1 Situation 2 Consideration as per agreement of transfer 10,000 10,000 Stamp duty value 12,000 10,400 Stamp duty value as a percentage of declared consideration 120% 104% Whether stamp duty value exceeds 105% of consideration as per agreement of transfer Yes No Consideration for computing capital gains 12,000 10,000 d) Why the Safe Harbour Limit of 10% Should be Retrospective? Legal maxim 'Law Prospicit Non Respicit' presumes law to be prospective & not retrospective. However, where the legislation is enacted with a purpose of mitigating undue hardship the provision in such a case has to be given a reasonable & equitable construction & has to be considered to be retrospective in nature so as to make the provisions workable. The rule of beneficial construction should apply in such a case. Hon. Ap....
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....39;unintended consequence' of section 50C(1) that even in such bona fide situations, this provision, which is inherently in the nature of an anti-avoidance provision, is invoked. viii. Once this situation is sought to be addressed, this situation needs to be addressed in entirety for the entire period in which such legal provisions had effect, and not for a specific time period only ix. The Tribunal observed that - x. On a conceptual note, an estimation of market price is an estimation nevertheless, even if by a statutory authority like the stamp duty valuation authority, and such a valuation can never be elevated to the status of such a precise computation which admits no variations. The rigour of section 50C(1) was thus relaxed, and very thoughtfully so, to take these bona fide cases of small variations between the stated sale consideration vis-à-vis stamp duty valuation, out of the scope of adjustments contemplated in the computation of capital gains under this anti-avoidance provision. It is a case of a curative amendment to take care of unintended consequences of the scheme of section 50C. xi. Parliament has introduced third provi....
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....unal has held it to be curative in nature in the case of Chandra Prakash Jhunjhunwala (supra) and accordingly held that the proviso shall apply since the date of insertion of sec.50C of the Act. Accordingly, the above said reasoning given by the Kolkata bench of ITAT also supports the contentions of the assessee. In view of the foregoing discussions, we find merit in the prayer of the assessee. We notice that the addition of Rs. 15,92,800/- sustained by Ld CIT(A) works out to less than 10% of the actual consideration of Rs. 2,33,00,000/- paid by the assessee. Accordingly, we modify the order passed by Ld. CIT(A) and direct the A.O. to ignore the difference between fair market value determined by CIT(A) and the actual consideration as the same is less than 10% of the actual consideration. b) Maria Fernandes Cheryl v. Income Tax Officer, (International Taxation), 2(3)(1) (ITAT Mumbai) [2021] 123 taxmann.com 252 (Mumbai - Trib.) dated 15.01.2021. Para 7 of the decision makes a reference to the Central Board of Direct Taxes (CBDT) Circular (Circular No. 8 of 2018): "These submissions, however, do not impress us. As noted by the Central Board of Direc....
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....y, 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 value and the anti-avoidance provisions under section 50C will not be invoked. 8. Once legislature very graciously accepts, by introducing the legal amendments in question, that there were lacunas in the provisions of Section 50C in the sense that even in the cases of genuine variations between the stated consideration and the stamp duty valuation, anti-avoidance provisions under section 50C could be pressed into service, and thus remedied the law, there is no escape from holding that these amendments are effective with effect from the date on which the related provision, i.e., Section 50C, itself was introduced. These amendments are thus held to be retrospective in effect. In our considered 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. c) Mamatha Divakar Shetty vs ITO in ITA No. 1204/H/2017 for AY 2009-10 dated 30.09.2021. (ITAT Hyderabad) 9. ............ Further, on going through t....
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....uests that the order as made be quashed or atleast all the additions made in the order be deleted and interest levied be also deleted. 45. The appellant denies the consequential interest levied under section 234B and 234C of the Act. The interest being levied is erroneous, incorrect and excessive and needs to be deleted. 46. The appellant prays and submits accordingly." 5. The ld. AR also relied on Amrapali Cinema Vs. ACIT, [2021] 127 Taxmann.com 376 (Delhi-Trib.) order dated 28.4.2021. 6. The ld. DR relied on the orders of lower authorities. 7. Considering the rival submissions, we note that the dispute is only with regard to applicability of section 50C of the Act and stamp duty value adopted by the Registering Authority of Rs. 9,26,40,000. The agreement is made on 15.10.2014 for Rs. 8,70,00,000. Accordingly there is a difference of Rs. 56,40,000. The Sale Deed was registered on 21.03.2016. The payment is received by the assessee through Post Dated Cheques which was encashed on 04.02.2015. Considering the entire arguments noted supra, as per the mandate provisions the tolerance band of 10% was introduced by the Finance Act, 2018. The difference between ....
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....tended 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 the same, including the portion extracted above, Hon'ble Delhi High Court, in the case of CIT v. 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 ....
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....uation notification, is an estimate, and there can always be bona fide 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 bona fide 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 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 bona fide reasons explaining the small variations between the sale co....
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....as increased to 10%. There is no particular reason to justify any particular time frame for implementing this enhancement (ITA No. 4850/Mum/2019 Assessment year: 2011- 12) 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 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, eve....