| SooperKanoon Citation | sooperkanoon.com/75500 |
| Court | Income Tax Appellate Tribunal ITAT Jodhpur |
| Decided On | Mar-08-2007 |
| Judge | R Syal |
| Reported in | (2008)110ITD525(Jodh.) |
| Appellant | Navneet Kumar Thakkar |
| Respondent | income Tax Officer |
2. The only issue raised in this appeal is against the sustenance of addition of Rs. 1,07,122 on account of long-term capital gain.
3. Briefly stated, the facts of this case, as recorded in the assessment order are that the assessee transferred plot No. 180, measuring 311.11 sq. yds. situated at Goverdhan Nagar, Tonk Road, Sanganer, Jaipur, through an agreement dt. 30th Nov., 2002 for a consideration of Rs. 36,000. The said plot was purchased on 7th Nov., 1993 for Rs. 18,770 from Vikas Bhawan Nirman Sahakari Samiti Ltd., Jaipur. On transfer of capital asset, long-term capital gain was shown at Rs. 1,614. The AO observed that the fair market value of the capital asset seemed to be much higher as against that shown by the assessee through agreement dt. 30th Nov., 2002. He referred the matter to the Asstt. Valuation Officer under Section 55A who estimated the value of the said plot at Rs. 1,43,122 as against sale consideration shown by the assessee at Rs. 36,000. The differential amount of Rs. 1,07,122 was added. In the first appeal, the assessee made various submissions including the inapplicability of Section 50C to the facts of the case.
The learned CIT(A) did not accept the assessee's contention on merits and held that the value adopted by the Valuation Officer appeared reasonable and there was no reason to deviate from the same.
Resultantly the addition was sustained.
4. I have heard the rival submissions and persued the relevant material on record. The learned Authorised Representative has vehemently argued that Section 50C is not applicable to this case as the sale was made through agreement without getting it registered. It is further noted that this contention was also raised before the learned CIT(A) who has recorded the assessee's submission on this count in the impugned order but had not adjudicated upon this aspect. At this juncture, it would be relevant to consider the relevant provision, which runs as under: 50C. Special provision for full value of consideration in certain cases-(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 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 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.
It is observed that Section 50C was inserted by the Finance Act, 2002 w.e.f. 1st April, 2003. Clause 24 of the Finance Bill as per Notes on Clauses states that the insertion of this provision is to provide for a special provision for the full value of consideration in certain cases.
It has been provided that 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 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 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.
Memorandum Explaining Provisions of Finance Bill, 2002, states in this regard as under: The Bill proposes to insert a new Section 50C in the IT Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property.
It is proposed to provide that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly under Section 48 of the IT Act.
It is further proposed to provide that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer and he has not disputed the value so adopted or assessed in any appeal or revision or reference before any authority or Court the AO may refer the valuation of the relevant asset to a Valuation Officer in accordance with Section 55A of the IT Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the AO may take such fair market value to be full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the AO shall not adopt such fair market value and will take the full value of consideration to be the value adopted or assessed for stamp duty purposes.
It is also proposed to provide that if the value adopted or assessed for stamp duty purposes is revised in any appeal, revision or reference, the assessment made shall be amended to recompute the capital gains by taking the revised value as the full value of consideration.
These amendments will take effect from 1st April, 2003, and will, accordingly, apply in relation to the asst. yr. 2003-04 and subsequent years.
From the perusal of Notes on Clauses and Memorandum Explaining the Provisions in the Finance Bill, 2002, it becomes explicitly clear that if the consideration declared to be received on sale of land or building or both is less than the value adopted or assessed by any authority of the State Government for the purposes of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of consideration and capital gain shall be computed accordingly under Section 48 of the Act.
5. Here it is relevant to note that prior to the insertion of this section, there was no such provision for adoption of fair market value in substitution of the actual sale consideration. The amount received or accruing to the assessee on transfer of land or building was considered as full value of sale consideration. Where the Department, alleged that the declared consideration was lower than the actual consideration, the onus was wholly upon it to prove the understatement.
The Hon'ble Supreme Court in the case of K.P. Varghese v. ITO and Anr.
held that "the burden lies on the Revenue to show that there is an understatement of the consideration". It was further held that "to throw the burden of showing that there is no understatement of the consideration on the assessee would be to cast an almost impossible burden upon him to establish a negative, namely, that he did not receive any consideration beyond that declared by him".
Similar view has been taken in the case of CIT v. Shivakami Co. (P) Ltd. more consideration than what was stated in the document of transfer was received, the declared sale consideration was to be accepted. Series of judgments have been delivered on this aspect by relying on the above-noted celebrated decisions of the Hon'ble Supreme Court. The sum and substance of these judgments is that the sale consideration declared by the assessee has to be accepted by the Revenue as true unless it is proved to be wrongly declared. The burden of proof is upon the Revenue to establish that the assessee had understated such sale consideration. It has further been held in several decisions that in coming to the conclusion that the assessee had shown lower sale consideration, the value for stamp duty purposes cannot be taken into consideration as the sole criteria in computing the capital gain on transfer of land and building.
6. It was with the view to overcome such a settled legal position that the legislature inserted Section 50C w.e.f. 1st April, 2003. After the addition of this new section in the statute book, the earlier legal position qua the transfer of land or building or both is no more a good law inasmuch as the value adopted or assessed by any authority of State Government for the purpose of payment of stamp duty in respect of such transfer has to be considered as full value of consideration received as a result of transfer and capital gain has to be computed accordingly. The rigour of sub-s. (1) of Section 50C has been toned down by Sub-section (2), the relevant portion of which provides that: where the assessee claims before any AO that the value adopted or assessed by the stamp valuation authority under sub-s. (1) exceeds the fair market value of the property as on the date of transfer, the AO may refer the valuation of the capital asset to a Valuation Officer and then proceed accordingly.
where the value ascertained under sub-s. (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-s. (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.
The net effect of Section 50C is that the value adopted or assessed by the authorities of the State Government for the purpose of payment of stamp duty shall be considered as full value of consideration and if the assessee disputes it to be higher, the procedure prescribed would follow and the lower of such finally assessed value or as determined by the Valuation Officer would be taken as full value of consideration.
7. A deeming provision has been enshrined in Section 50C by virtue of which a legal fiction has been created for assuming the value adopted or assessed by any authority of State Government as the full value of sale consideration received in respect of such transfer. A legal fiction has been created only in respect of the cases where the consideration received by the assessee is less than the value adopted or assessed by the stamp valuation authority of the State Government for the purpose of payment of stamp duty "in respect of such transfer".
It is a trite law that the legal fiction cannot be extended beyond the purpose for which it is enacted. Section 50C embodies the legal fiction by which the value assessed by the stamp duty authorities is considered as the full value of consideration for the property transferred. It does not go beyond the cases in which the subject transferred property has not become the subject-matter of registration and the question of valuation for stamp duty purposes has not arisen. By no stretch of imagination, the legal fiction confined to restricted operation can be widened to include within its sweep all the cases where "such property" has not been valued by the State authorities for stamp duty purposes.
The Hon'ble Supreme Court in the case of CIT v. Amarchand N. Shroff has held that "legal fiction are only for a definite purpose and they are limited to the purpose for which they are created and should not be extended beyond the legitimate field". Similar view has been reiterated by the Hon'ble Summit Court in the case of CIT v.Mother India Refrigeration Industries (P) Ltd. . Thus, what is relevant for the attractability of Section 50C, is that the property which is under transfer from the assessee to another person should have been assessed at a higher value for stamp valuation purpose than that received or accruing to the assessee. The value adopted or assessed by the stamp valuation authorities has to be of the very same property, which is the subject-matter of transfer. The language of this section provides in unambiguous terms that the value adopted or assessed by the stamp valuation authority has to be substituted with the sale consideration of the "such property". But for Section 50C, there is absolutely no warrant for replacing the value adopted by the stamp valuation authority with the actual sale consideration for the purposes of computing capital gain. Thus it is clear that the property in respect of which valuation is made for purposes of stamp duty must be the very same property, which is the subject-matter of transfer for calculating capital gain by invoking the provisions of this section. It is wholly irrelevant to consider the assessed value of another property for stamp duty purposes as full value of consideration by making reference to the Valuation Officer under Section 55A. Unless the property transferred has been registered by sale deed and for that purpose the value has been assessed and stamp duty has been paid by the parties, Section 50C cannot come into operation. In such a situation, the position existing prior to Section 50C would apply and the onus would be upon the Revenue to establish that sale consideration declared by the assessee was understated with some clinching evidence. The relevant judgments discussed above viz., K.P. Varghese (supra) and Shivakami Co. (P) Ltd. (supra) would come into operation and govern the determination of full value of consideration.
8. Adverting to the facts of the case, it is noticed that the assessee transferred the property in question by executing an agreement which was not registered with the registering authority. In such a case, Section 50C could not have come into operation and the resultant application of Section 55A by which the AO got the property valued and adopted the report of the Valuation Officer as the sole basis for making the impugned addition was wholly invalid. As the AO has not embarked upon making enquiries from the purchaser about the actual sale consideration, and has not brought on record any other material worth the name to show that the sale consideration declared by the assessee was understated, in my considered opinion the addition was wrongly made and sustained. I, therefore, order for the deletion of the addition.