TaxTMI 
TaxTMI 
2026 (9) TMI 516
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.... (Appeals) is contrary to the law, facts and circumstances of the case. 2. The Learned Commissioner of Income Tax (Appeals) erred in not considering the fact that the initiation of the reassessment u/s 147 is solely based on a change of opinion. 3. The Learned Commissioner of Income Tax (Appeals) failed to consider the full disclosure made during the original assessment order passed us 143(3) dated 01.12.2016 vide para number 3.2 of the order wherein, the capital gain was arrived at Rs. 3,15,97,471/- 4. The Learned Commissioner of Income Tax (Appeals) erred in ignoring the guideline value adopted by BIFR in its order as Rs. 65/- per sq.ft for computing the sale consideration. 5. The Learned CIT (Appeals) ignored the fact that the sale transaction is a single transaction executed vide two different sale deeds falling under different financial years and the guideline value has to be ascertained equally based on earlier sale deed. 6. The Learned Commissioner of Income Tax (Appeals) ought to have considered the fact that the pre-emptive right vested in the registered lease deed coupled with BIFR directions constitutes a valid sale agreement ....
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....filed it objections for reopening on the ground that it had made full disclosure of information and material at the time of original assessment itself and that the new process of reassessment is only change of opinion. 6. Subsequently, a show cause notice was issued to the assessee on 18.10.2019 proposing to add the difference in value of sale consideration to the tune of Rs. 4,48,06,356/- as adopted by DRO should be considered for the purpose of valuation as per 50C of the Act. In response to the said show cause notice, the assessee had filed it submissions stressing on following facts: * Stamp value as on the date of agreement should be considered as full value consideration instead of date of registration. * 2nd proviso to Section 50C(1) of the Act operates retrospectively * The tenant has invoked a pre-emptive right to purchase the property. 7. However, without considering the submissions of the assessee, the AO completed the assessment u/s.143(3) r.w.s 147 of the Act, vide order dated 24.12.2019 by making an addition of Rs. 4,31,39,853/- towards difference in Long-Term Capital Gains, thereby assessing the total income at Rs. 3,25,14,753/-. Ther....
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....ent and that the reopening amounted to a mere change of opinion. 11. The AO rejected the objections and proceeded on the basis that the applicability of section 50C had not been examined during the original assessment. The AO relied upon the order of the District Revenue Officer (Stamps), Coimbatore dated 10.08.2016, determining the guideline value at Rs. 150/- per sq.ft., and treated the same as fresh material warranting reopening. 12. The ld.AR further submitted that the said reasoning is contrary to the chronology of events. The original assessment u/s.143(3) was completed on 01.12.2016, whereas the order of the District Revenue Officer relied upon for reopening is dated 10.08.2016. Therefore, the alleged fresh material was already in existence prior to completion of the original assessment and cannot constitute subsequent tangible material for reopening a concluded assessment. 13. Further, the ld.AR stated that the transaction itself was not a subsequent or undisclosed transaction. The assessee had executed a registered Lease Deed dated 11.03.1998 in favour of Pioneer Trust, under which Pioneer Trust had the first option to purchase the property. Advances towards the p....
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....gible material came into the possession of the AO after completion of the original assessment. The order of the District Revenue Officer dated 10.08.2016 was already in existence before the original assessment order dated 01.12.2016. The subsequent proceedings, therefore, amount to a fresh application of mind to the material already available on record and a different view regarding the value to be adopted u/s.50C of the Act. 18. It is further submitted by ld.AR that the mere absence of an express discussion on a particular aspect in the original assessment order cannot, by itself, justify reopening when the underlying transaction and material were before the AO and the issue of capital gains was examined during the scrutiny assessment. The reassessment jurisdiction cannot be used as a means of reviewing the conclusion already reached in the original assessment. 19. The ratio of the aforesaid decisions applies to the facts of the present case. The relevant transaction and capital gains computation were before the AO during the original scrutiny assessment; the alleged fresh material relied upon for reopening was itself dated 10.08.2016 and was therefore available before compl....
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....oceedings, the AO also rejected the assessee's reliance on the retrospective operation of the proviso to section 50C, observing that the amendment was introduced by the Finance Act, 2016 with effect from 01.04.2017. The Appellant's submission that the property had been agreed to be sold to Pioneer Trust in 2010 and that advances had been received from 07.06.2010 was accordingly not accepted. 24. The ld.AR further submitted that in Paras 10.5 to 10.11, the Ld.CIT(A) considered the assessee's contention regarding the advance payments, the date of agreement and the retrospective applicability of the proviso to section 50C of the Act. While the Ld.CIT(A) accepted, in principle, that the amendment to section 50C was beneficial and retrospective in nature, he held that the assessee's case did not satisfy the factual requirement since, according to him, there was no agreement for sale and the payments were made only on the basis of the Board Minutes. The Ld.CIT(A) further held that the genuineness of the advance payments had not been established and that the Board Minutes could not be treated as an agreement for sale. 25. In Para 11.2, the Ld.CIT(A) considered the assessee's relianc....
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....ssion of the property and had a contractual first option to purchase the property. The assessee had executed a registered lease deed in favour of Pioneer Trust on 11.03.1998 for a Lease period of 51 years, registered as Document No.1503 of 1998. The Clause 12 of the said registered lease deed specifically provided that the lessee, i.e., Pioneer Trust, would have the first option to purchase the property at the end of the lease period, if the price was acceptable to both parties. Thus, Pioneer Trust was not an unrelated purchaser who subsequently came forward to purchase the property; it was the existing lessee having a pre-existing contractual option/right in respect of the property. The registered lease deed is placed at Paperbook Page Nos. 54-65. 30. The aforesaid arrangement is also relevant in the context of the subsequent BIFR proceedings. Pioneer Trust was already occupying the property and had constructed and was running educational institutions thereon. The BIFR subsequently took note of the fact that the Trust had constructed educational infrastructure on the property and that the transfer of the property to the Trust formed part of the rehabilitation proposal of the as....
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....er of the subject property and the consideration of Rs. 5,50,15,000/- was identified with reference to the prevailing Government guideline value. This forms the first important link in the chain of events leading to the eventual sale of the property. Pursuant to the aforesaid in-principle approval granted by BIFR, the Board of Directors of the assessee Company, at its meeting held on 03.05.2010, approved the transfer of the entire 19.44 acres of land to Pioneer Trust for a consideration of Rs. 5,50,15,000/-, in terms of the Draft Rehabilitation Scheme. Copy of the relevant Board Minutes/resolution of the assessee dated 03.05.2010 forms part of Paperbook Page Nos. 66 to 68. 35. Thereafter, the Board of Pioneer Trust, at its meeting held on 31.05.2010, resolved to purchase the said land for Rs. 5.50 crores and authorised payment of advance to the assessee. Copy of the relevant Board Minutes/resolution of Pioneer Trust dated 31.05.2010 forms part of Paperbook Page Nos.69 to 70. The resolutions of both parties are therefore contemporaneous with each other and are consistent with the consideration of Rs. 5,50,15,000/- contemplated in the BIFR rehabilitation scheme. The subsequent con....
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....Paperbook Page Nos.71 to 97, with the relevant valuation/compensation discussion appearing at Para 11.8 of the BIFR Order (Page 91 of the Paperbook). 39. The final BIFR order thus confirmed the consideration which had already been acted upon by the parties through their respective Board resolutions and the advance payments made in 2010. The consideration of Rs. 550.15 lakhs was not determined for the first time on the date of execution of the sale deeds; rather, it was part of the rehabilitation scheme and was subsequently confirmed in the final sanctioned scheme. 40. Pursuant to the aforesaid BIFR proceedings and the arrangement acted upon by the parties, the assessee executed two sale deeds in favour of Pioneer Trust covering the entire 19.44 acres. The first sale deed was executed on 18.10.2012 for transfer of 7.37 acres for a consideration of Rs. 2,08,57,024/-. The said sale deed was executed pursuant to the BIFR directions. Thereafter, the second sale deed was executed on 12.08.2013 for transfer of the remaining 12.07 acres for a consideration of Rs. 3,41,57,976/-. The sale deed itself records that amounts had already been paid prior to its execution. In particular, Page....
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....n scheme dated 10.05.2012 cannot be viewed in isolation. The said chronology demonstrates that the sale deeds were the formal registered instruments through which the transfer contemplated and acted upon pursuant to the BIFR rehabilitation scheme was ultimately completed. The consideration was not negotiated or determined afresh on the dates of registration. 46, The existence of the registered lease, the first option in favour of Pioneer Trust, the BIFR proceedings, the specific in-principle approval dated 08.06.2009, the Board resolutions, the advance payments through banking channels, the final BIFR sanction and the ultimate sale deeds, when considered together, establish a clear and contemporaneous chain of events concerning the transfer of the property for the consideration of Rs. 5,50,15,000/-. 47. Further, the ld.AR argued that Section 50C provides for substitution of the declared consideration by the value adopted or assessed by the stamp valuation authority in certain circumstances. At the same time, the proviso to section 50C(1) specifically recognises a situation where the date of agreement fixing the amount of consideration and the date of registration are not the ....
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....rate receipt of Rs. 1 crore from Pioneer Trust through banking channels during June and July 2010. The subsequent sale deed dated 12.08.2013 itself also records substantial payment having been made prior to its execution. Thus, the factual circumstances contemplated by the provisos to section 50C(1) of the Act are materially present in the case of the assessee. The consideration had been fixed prior to registration, the arrangement was acted upon, and part consideration was received through banking channels prior to registration. 50. The fact that the formal registered instruments were executed subsequently cannot, in the facts of the present case, result in ignoring the earlier date on which the consideration had been fixed and acted upon, particularly when the subsequent sale deeds themselves reflect the very same aggregate consideration of Rs. 5,50,15,000/-. 51. It is further submitted by the ld.AR that the amendment to 2nd proviso to section 50C(1) of the Act introducing the mechanism for considering the stamp valuation as on the date of agreement is a beneficial provision intended to avoid hardship to an assessee where there is a time gap between the fixing of considerat....
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.... based on the Government guideline value for the total area as assessed by the Operating Agency through its valuers as on the agreed upon date. Therefore the ld.AR submits that the consideration determined in the BIFR proceedings was itself linked to the prevailing Government guideline value and cannot be disregarded merely because the stamp valuation authority subsequently adopted a higher value in 2016. 55. Further ld.AR stated that the subject property was already occupied by Pioneer Trust, which had a first option to purchase under the registered lease deed and had constructed educational buildings and facilities on the property. The BIFR itself took note of the fact that the Trust had constructed educational infrastructure on the property and that vacating the property was not considered desirable in the circumstances. Further, the AO referred the matter to the Valuation Officer on 06.11.2019. A copy of the AO's reference letter to valuation officer forms part of Paperbook Page Nos. 121 to 122. A notice dated 11.09.2020 fixing inspection on 12.09.2020 forms part of Paperbook Page Nos. 123 to 124. The inspection was ultimately carried out from outside the premises on 12.09.2....
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....of land to Pioneer Trust through two registered sale deeds, the first dated 18.10.2012 covering 7.37 acres for a consideration of Rs. 2,08,57,024/- and the second dated 12.08.2013 covering 12.07 acres for a consideration of Rs. 3,41,57,976/-. The aggregate consideration under both the sale deeds is exactly Rs. 5,50,15,000/-. The said consideration corresponds with the consideration contemplated under the BIFR rehabilitation scheme and subsequently confirmed in the final sanctioned scheme. 60. It is equally evident from the material placed on record that the transaction did not originate on the respective dates of execution of the sale deeds. The assessee had executed a registered lease deed dated 11.03.1998 in favour of Pioneer Trust for a period of 51 years, containing a first option in favour of the lessee to purchase the property. Subsequently, the transfer of the property to Pioneer Trust became an integral part of the rehabilitation proceedings before the BIFR. The BIFR, in its in-principle approval dated 08.06.2009, specifically contemplated sale of the entire 19.44 acres to Pioneer Trust for a consideration of Rs. 5,50,15,000/-. 61. Thereafter, the respective parties a....
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....of registration. 65. We also find considerable force in the contention of the assessee that the subsequent increase in guideline value cannot, by itself, result in an artificial enhancement of the deemed sale consideration when the consideration had already been fixed and acted upon much earlier. The material on record shows that the consideration of Rs. 5,50,15,000/- was identified in the BIFR rehabilitation process and acted upon by the parties through their respective resolutions and advance payments commencing from June 2010. The second sale deed was executed only subsequently, on 12.08.2013, after the revision of guideline values with effect from 01.04.2013. 66. The second proviso to section 50C(1), as reproduced in the submissions, provides that where the date of agreement fixing the amount of consideration and the date of registration are different, the stamp value as on the date of agreement may be taken for determining the full value of consideration, subject to the prescribed mode of receipt of consideration. The legislative intent behind the proviso is to prevent an assessee from being subjected to tax on an artificial enhancement in the deemed consideration merely....
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....on material on record establishing that the actual fair market value of the property was in fact substantially higher than the consideration recorded in the sale deeds. 71. Further, the DRO order dated 10.08.2016 relied upon by the AO was subsequent to the relevant transfers and, in any event, the consideration under the transaction had already been fixed, acted upon and substantially paid much earlier. The subsequent determination of guideline value cannot retrospectively alter the consideration which had been agreed upon and ultimately incorporated in the registered sale deeds. 72. In our considered view, the cumulative effect of the registered lease deed containing the first option in favour of Pioneer Trust, the BIFR proceedings, the in-principle approval dated 08.06.2009, the resolutions of the respective Boards dated 03.05.2010 and 31.05.2010, the advance payments through banking channels commencing from 07.06.2010, the final BIFR sanctioned scheme dated 10.05.2012 and the ultimate execution of the sale deeds for the very same consideration establishes that the transaction and its consideration had been crystallised well before the subsequent increase in guideline value....