TaxTMI 
TaxTMI 
2024 (7) TMI 500
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....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 entire addition as made is to be deleted. 3.2 In any case and without prejudic....
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....ecting 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 Income Tax Act 1961 dated 21.03.2022 by NfAC, Delhi assessing the appellant at an income of Rs. 1,87,49,640/- and raising a demand of Rs. ....
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....corded 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 for the issue of notice u/s. 148 of the Act. 2) Copy of the satisfaction obtained from the Range -7(1), Bangalore (as noted in the notice issued u/s 148). d) The appellant has not been provided the rea....
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....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 pertains to AY 2016-17 and hence does not fall under this proviso. b) Against this order dated 21.03.2022, the appeal is filed by the appellant. 14. The appellant has disputed the impugned assessment order on Technical Points as well as on Merits of the case. 15. During F.Y. 2014-15 rele....
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....s 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 cheque does not in any way invalidate / negate the effect of agreement. The agreement was quite valid, effective and is totally implemented. The significance of the agreement cannot be given a go by. It is pertinent to note that the said cheque is not bounced / dishonoured. In any case, the allegation that this was also done to evade tax is baseless allegation. There was absolutely no colourable devi....
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....ision 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 date of registration 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....
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....thority 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 vendor, payment is made and the document of transfer, generally, a conveyance is executed and registered in favour of the buyer. b) Based on the language of section 50C, prior to its amendment by the FA, 2016, it was possible to take a view that the stamp duty value as on the date of transfer has to be compared with the consideration stated in the instrument of transfer and if the stamp duty value as on the date of transfer is more than the consideration stated in the instrument of transfer, the stamp duty value is to be regarded as full value o....
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....he 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 of capital gains. The Income Tax Simplification Committee (Easwar Committee) has in its report, pointed out that this provision does not provide any relief where the seller has entered into an agreement to sell the property much before the actual date of transfer of the immovable property and the sale consideration is fixed in such agreement, whereas similar provision exists in section 43CA of the Act i.e. when an immovable property is sold as a stock-in-trade. It is proposed to amend the provisions of section 50C so as to provide that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date ....
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....served 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 amendment is optional to the assessee - "The amendment in Section 50C was brought in to provide relief to the assessee in a situation in which the stamp duty valuation of a property has risen between the date of execution of agreement to sell and execution of sale deed, as is the norm rather than exception, but the real estate market is now traversing through a difficult phase and there can be situations in which there is a fall in the stamp duty valuation rates with the passage of time. Such a situation has actually arisen in many places in the country, such as in Gurgaon, New Delhi and even in Dehradun (Uttarakhand) and some other places. It is therefore possible that, at first sight, first proviso to Section 50C may seem to work to the dis....
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....tion 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 valuation authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration." Third proviso to section 50C(1) provides that stamp duty value of the capital asset transferred will be deemed to be full value of consideration only if stamp duty value exceeds 105 per cent of the consideration received or accruing as a result of transfer The Finance Act, 2020 has further amended the provisions of section 50C of the Act by inserting the following third proviso with effect from 1.4.2021 i.e. effective Assessment Year 2021-22 Provided also that where the value adopted or assessed or assessable by the stamp valuation authority does not e....
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....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. Apex Court has followed reasonable construction instead of strict interpretation in the following cases:- 1. R.B. Jodha Mal Kuthiala vs. CIT 82 ITR 570 (SC) [1971] 2. CIT vs. J.H. Gotla 156 I.T.R. 323(SC) [1985] 3. Good Year India Ltd. vs. State of Haryana 188 ITR 402 SC [1991] e) In CIT v. Calcutta Export Company (SC) (2018) 93 taxmann.com 51. The issue before the Hon. Apex Court was whether the amendment to sec 40(a)(ia) by Finance Act 2010 can be considered to be retrospective in nature. The hon. Apex Court after considering the relevant schema of Section 40(a)(ia) & taking into consideration the purpose of the amendment was to mitigate undue hardship held the amendment to be retrospective in nature. f) Is the tolerance limit of 10% retrospective? i. Finance Act, 2018 has w.e.f. 1.4.2019 inserted third proviso to Section 50C which provides for a tolerance limit of 5% of the consideration received or accruing as a result of the transfer. ii. The limit of....
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....unintended consequences of the scheme of section 50C. xi. Parliament has introduced third proviso in section 50C(1) of the Act, as per which the difference in stamp duty valuation and actual consideration should be ignored, if it is less than 5%/10%. The Kolkata Bench of Tribunal has held it to be curative in nature in the case of Chandra Prakash Jhunjhunwala [2019 (8) TMI 1192 - ITAT KOLKATA] has held that the proviso shall apply since the date of insertion of sec.50C of the Act. The Tribunal was of the view that even prior to introduction of the proviso the Tribunals were allowing a variation of upto 10%. It also noted that the amendment is procedural in nature. xii. Reliance is placed on decision rendered by Mumbai Tribunal in the case of Joseph Mudaliar v. Deputy Commissioner of Income-tax, CC-4(3), Mumbai [2021] 130 taxmann.com 250 (Mumbai - Trib.) Dated 14.09.2021 wherein it was held that Amendment made in section 50C(1) by inserting third proviso by Finance Act, 2018, with effect from 1-4-2019 is curative in nature and same would apply retrospectively. xiii. Reliance is also placed on the decision rendered by jurisdictional Bangalore ITAT and other tribunals where in i....
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.... Direct Taxes circular # 8 of 2018, explaining the reason for the insertion of the third proviso to Section 50C(1), has observed that "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 the shape of the plot or location". Once the CBDT itself accepts that these variations could be on account of a variety of factors, essentially bonafide factors, and, for this reason, Section 50C(1) should not come into play, it was an "unintended consequence" of Section 50(1) that even in such bonafide situations, this provision, which is inherently in the nature of an anti-avoidance provision, is invoked. Once this situation is sought to be addressed, as is the settled legal position- as we will see a little later in our analysis, 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. There is no good reason for holding the curative amendment to be only as prospective in effect." 7. ............ The reasons assigned by the CBDT, i.e., "the va....
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....oviso, where the value adopted or assessed or assessable by the same valuation authority does not exceed 10% of the consideration received or accruing as a result of transfer of consideration so received or accruing as a result of the transfer shall for the purpose of section 48 deemed to be the full value of the consideration. As per the above proviso, it is clear that if there is variation of 10% of stamp duty value adopted by the SRO or the value shown by the assessee for computation of capital gains, in such a case, the value offered for tax by the assessee is to be adopted and section 50C does not apply to the case of the assessee. This amendment take effect as retrospective in nature and this view is supported by the decisions of the coordinate benches of ITAT, which are as under: 1. Maria Fernandes Cheryl Vs. ITO, [2021] 123 Taxmann.com 252 (Mumbai -Trib.) 2. Amrapali Cinema Vs. ACIT, [2021] 127 Taxmann.com 376 (Delhi-Trib.) 9.1. The assessee in AY 2012-13, has taken the value of Rs. 9,44,98,000/- whereas Pr. CIT adopted the value of Rs. 9,75,22,000/-, which is less than 10% as per the amended provision. Considering the above judgments, we are of the view that the or....
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....on 48, be deemed to be the full value of the consideration. The amendment made is retrospective as per the judgment of the coordinate Bench of Tribunal in Amrapali Cinema Vs. ACIT, [2021] 127 Taxmann.com 376 (Delhi- Trib.) wherein it is held as under:- "8. We have heard the rival contentions and perused the material available on record. We find that there is no dispute with regard to fact that fair market value determined by the DVO at Rs. 8,89,63,168/- against the actual sale consideration of Rs. 8,78,00,000/- as disclosed in Sale Deed. The resulting difference is Rs. 11,63,168/- which is 1.02%. The Co-ordinate Bench of this Tribunal in the case of Maria Fernandes Cheryl (supra) has held as under:- 7. 'These submissions, however, do not impress us. As noted by the Central Board of Direct Taxes circular # 8 of 2018, explaining the reason for the insertion of the third proviso to Section 50C(1), has observed that "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 the shape of the plot or location". Once the CBDT itself acc....
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.... followed by another bench of this Tribunal in the case of Dharmashibhai Sonani v. ACIT [(2016) 161 ITD 627 (Ahd)] which has been approved by Hon'ble Madras High Court in the judgment reported as CIT v. Vummudi Amarendran [(2020) 429 ITR 97 (Mad)]. The question that we must take a call on, therefore, is as to what is the rationale behind the insertion of the third proviso to section 50C(1), and if that rationale is to provide a remedy for unintended consequences of the main provision, we must hold that the third proviso to section 50C(1) comes into force with effect from the same date on which the main provision, unintended provisions of which are sought to be nullified, itself was brought into effect. Let us understand what the nature of the provisions of Section 50C is. In terms of this provision, if the property is sold below the stamp duty valuation rate, which is often called circle rate, this stamp duty valuation report is assumed as sale consideration for the property in question, and, accordingly, capital gains tax is levied. This deeming fiction to substitute apparent sale considerations by notional consideration computed on the basis of a stamp duty valuation rate, wa....
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....ng 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 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. In our humble understanding, it is a case of a curative amendment to take care of unintended consequences 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, a....
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....t 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 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. We order accordingly. Learned Departmental Representative, however, does not give up. Learned Departmental Representative has suggested tha....