ITO, New Delhi v. M/s. Em Pee Cold Storage, New Delhi

ITA 1802/DEL/2009 | 2004-2005
Pronouncement Date: 31-03-2010 | Result: Allowed

Appeal Details

RSA Number 180220114 RSA 2009
Assessee PAN URING3710S
Bench Delhi
Appeal Number ITA 1802/DEL/2009
Duration Of Justice 10 month(s) 30 day(s)
Appellant ITO, New Delhi
Respondent M/s. Em Pee Cold Storage, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 31-03-2010
Date Of Final Hearing 10-02-2010
Next Hearing Date 10-02-2010
Assessment Year 2004-2005
Appeal Filed On 01-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI R.C. SHARMA I.T.A. NO. 1802/DEL/2009 ASSESSMENT YEAR: 2004-05 INCOME-TAX OFFICER VS. M/S. EM PEE COLD STORAGE (P) WARD 11(1) LTD. B-34 LAWRENCE ROAD NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI STEPHEN GEORGE CIT(DR) ASSESSEE BY: SHRI J S KOCHAR CA ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LEARNED CIT(APPEALS) DATED 14.01.2009 PASSED FOR ASSESSMENT YEAR 2004-05. THE SOLITARY SUBSTANTIAL GROUND OF APPEAL TAKEN BY THE REVENUE READS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.4 21 07 012 MADE ON ACCOUNT OF LONG TERM CAPITAL GAIN & RS.2 72 28 056 MADE ON ACCOUNT OF SHORT TERM CAPITAL GAIN ON SALE OF BUILD ING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE COMPANY WAS ENGAGED IN RUNNING OF A COLD STORAGE AND GRINDING JOB WORK. IT HAS FILED ITS RETURN OF 2 INCOME ON 14.1.2004 DECLARING AN INCOME OF RS.2780. A NOTICE UNDER SEC. 143(2) OF THE INCOME-TAX ACT 1961 WAS ISSUED ON 2. 2.2005. SHRI JS KOCHAR CA ATTENDED THE PROCEEDINGS BEFORE THE ASSESSING OF FICER ALONG WITH SHRI JOGINDER SINGH SACHDEVA DIRECTOR. IT EMERGES OUT F ROM THE RECORD THAT PRIOR TO INCORPORATION OF THE ASSESSEE COMPANY FOUR INDI VIDUALS NAMELY SHRI JOGINDER SINGH SACHDEVA SMT. HARBANS KAUR SHRI MO HINDER PAL SINGH AND SHRI DAVENDER PAL SINGH HAD PURCHASED A PLOT OF LAN D COMPRISED IN B-34 LAWRANCE ROAD INDUSTRIAL AREA DELHI MEASURING 371 0 SQ. YDS. ON 16.11.1972. THE PLOT WAS TAKEN FROM DELHI DEVELOPME NT AUTHORITY ON PERPETUAL LEASE BASIS FOR A CONSIDERATION OF RS.2 1 0 500. THIS LAND WAS INTRODUCED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY DURING THE YEAR ENDED ON 30.6.1974. THE FOLLOWING ACCOUNTING ENTRIE S WERE PASSED IN THE BOOKS OF THE ASSESSEE COMPANY: LAND ACCOUNT DR. RS.2 14 021/- TO EQUITY CAPITAL SHARE CR. RS.1` 90 000 TO DIRECTORS LOAN ACCOUNTS CR. RS. 24 0 21 3. THE ASSESSEE HAS CONSTRUCTED A BUILDING ON THIS LAND FOR THE PURPOSE OF ITS BUSINESS. THE BUILDING WAS USED FOR THE PURP OSE OF THE BUSINESS TILL FINANCIAL YEAR ASSESSMENT YEAR 2003-04. SMT. HARBAN S KAUR WAS EXPIRED AND 3 HER SHARE WAS DEVOLVED IN FAVOUR OF SH. JOGINDER SI NGH. ON SCRUTINY OF THE ACCOUNTS ASSESSING OFFICER FOUND THAT ASSESSEE EXE CUTED AN AGREEMENT TO SELL ON 5.1.2004 WITH SHRI JOGINDER SINGH SHRI DAV ENDER PAL SINGH AND SHRI MOHINDER PAL SINGH. THE LAND AND BUILDING WERE TRAN SFERRED IN FAVOUR OF THESE THREE INDIVIDUALS FOR A CONSIDERATION OF RS.4 47 309.25 WHICH HAS BEEN BIFURCATED IN ACCORDANCE WITH SHAREHOLDING PATTERN DISCERNIBLE AS UNDER: NAME OF THE VENDEE SHARE LAND (RS.) BUILDING (RS. TOTAL (RS.) JOGINDER SINGH SACHDEVA 50% 1 07 010.83 1 16 643.80 2 23 654.63 DAVINDER PAL SINGH 25% 53 505.41 58 321.90 1 11 827.31 MOHINDER PAL SINGH 25% 53 505.41 58 321.90 1 11 827.31 100% 2 14 021.65 2 33 287.60 4 47 309.25 4. THE ASSESSING OFFICER HAS REPRODUCED THE CONTENT S OF AGREEMENT TO SELL IN PARAGRAPH 4. HE OBSERVED THAT ASSESSEE HAS BEEN SHOWN AS VENDOR WHEREAS THE THREE INDIVIDUALS HAVE BEEN SHOWN AS VE NDEE. THE DETAILS OF PAYMENTS EXTRACTED SUPRA HAS BEEN INCORPORATED IN C LAUSE (D). IN CLAUSE (G) 4 IT HAS BEEN PROVIDED THAT IN PART PERFORMANCE OF TH E AGREEMENT TO SELL THE VENDOR COMPANY HAS DELIVERED VACANT PHYSICAL POSSES SION TO THE VENDEES AT THE TIME OF EXECUTION OF THE AGREEMENT. ASSESSING O FFICER FOUND THAT LAND AS WELL AS BUILDING WERE SHOWN IN BALANCE SHEET AS THE ASSETS OF THE ASSESSEE FOR THE LAST MANY YEARS. THE ASSESSEE HAS BEEN PAYING H OUSE-TAX AS WELL AS LEASE TAX TO THE DDA AND CLAIMING IT AS EXPENSES. THE ASS ESSEE HAS NOT SHOWN ANY CAPITAL GAIN ON SALE OF ABOVE LAND AND BUILDING IN THE RETURN OF INCOME. HE ISSUED A SHOW-CAUSE NOTICE INVITING ASSESSEES EXPL ANATION AS TO WHY CAPITAL GAIN ON SALE OF LAND AND BUILDING BE NOT COMPUTED. 5. IN RESPONSE TO THE QUERY OF THE ASSESSING OFFICE R ASSESSEE HAS FILED ITS REPLY ON 27.9.2005. THE ASSESSING OFFICER HAS REPR ODUCED THE CONTENTIONS OF ASSESSEE IN PARAGRAPH 6 WHICH READ AS UNDER: 1. THE ASSESSEE COMPANY NEVER OWNED ANY LAND WHICH IT COULD TRANSFER. 2. THE BUYERS ALLOWED THE ASSESSEE COMPANY TO CONSTRUC T BUILDING THEREON WITHOUT TRANSFERRING LAND TO THE COMPANY. 3. NO IMMOVEABLE PROPERTY CAN BE TRANSFERRED WITHOUT A REGISTERED SALE DEED. 4. THUS THE COMPANY NEVER BECAME THE OWNER OF THE LAND AND HENCE WAS INCAPABLE OF SELLING OR OTHERWISE TRANSFE RRING THE SAME TO ANY BODY. 5 5. THE COMPANY TOOK THE LAND OFF ITS BALANCE SHEET IN F.Y. 2003- 04 BY MAKING DEBITS IN THE ACCOUNTS OF THE BUYERS/T HEIR SUCCESSORS IN INTEREST. 6. SINCE THE COMPANY NEVER HELD THE LAND AS A CAPITAL ASSET THERE CAN BE NO INCOME ACCRUING TO THE COMPANY BY WAY CAP ITAL GAIN ON LAND. 7. AN UNREGISTERED AGREEMENT TO SELL IS NOT ENVISAGED UNDER SEC. 53A OF THE TRANSFER OF PROPERTY ACT AT IT STANDS AF TER THE AMENDMENT OF 2001. 8. THE PROPOSAL TO SUBSTITUTE FAIR MARKET VALUE OF LAN D IN PLACE OF FULL VALUE OF CONSIDERATION IS MISCONCEIVED AND DOE S NOT HAVING THE BACKING OF LAW. IN CASE OF SALE THE FUL L VALUE OF CONSIDERATION IS THE PRICE AGREED TO BETWEEN THE PA RTIES AS EVIDENCED BY THE INSTRUMENT OF TRANSFER. THE ONLY O CCASION FOR SUBSTITUTING THE FULL VALUE OF CONSIDERATION WOULD ARISE IF PROVISIONS OF SEC. 50C ARE ATTRACTED I.E. THE CIRCL E RATE FIXED BY THE STATE GOVERNMENT FOR LEVY OF STAMP DUTY IS MORE THAN THE SALE CONSIDERATION AS PER THE INSTRUMENT OF TRANSFE R. HOWEVER SINCE THE STATE GOVT. OF DELHI HAS NOT NOTIFIED ANY CIRCLE RATES IN DELHI SECTION 50C HAS NO APPLICABILITY. 9. SECTION 45(4) WHICH CONTEMPLATES ADOPTION OF FAIR MARKET VALUE AS THE FULL VALUE OF CONSIDERATION IS ALSO NO T APPLICABLE AS THAT SECTION APPLIES TO PARTNERSHIP FIRMS. THE ASSE SSEE IS A COMPANY AND NOT A PARTNERSHIP FIRM. SECTION 52 WHIC H WAS ON THE STATUTE BOOK AT ONE POINT OF TIME ENVISAGED SUB STITUTION OF 6 THEIR MARKET VALUE FOR THE FULL VALUE OF CONSIDERAT ION. HOWEVER SECTION 52 WAS OMITTED FROM THE STATUTE BOOK W.E.F. 1988. 10. HOWEVER WITH REGARD TO BUILDING THERE IS NO CONTR OVERSY WITH REGARD TO ITS OWNERSHIP. THE BUILDING WAS CONSTRUED WITH THE FUNDS OF THE ASSESSEE COMPANY AND AS SUCH BELONGED TO IT. 11. BUT SINCE THE PURPORTED AGREEMENT TO SELL DATED 05. 01.2004 WAS NOT REGISTERED IT DOES NOT OPERATE AS A TRANSFER E VEN FOR THE PURPOSES OF SEC. 53A OF THE TRANSFER OF PROPERTY AC T AFTER ITS AMENDMENT OF 2001. 12. IF IT IS HELD TO BE A TRANSFER SINCE IT IS A DEPRE CIABLE ASSET THERE WOULD BE ELIGIBILITY TO SHORT TERM CAPITAL GAIN ON ITS TRANSFER U/S.50 OF THE I.T. ACT IF THE SALE CONSIDERATION EX CEEDED ITS WRITTEN DOWN VALUE OF THE BUILDING THE COMPUTATION OF SHORT TERM CAPITAL GAIN WOULD BE NIL 6. ASSESSING OFFICER AFTER CONSIDERING THE CONTENTI ONS OF THE ASSESSEE MADE A REFERENCE TO SUB-CLAUSE (V)(VI) OF SEC. 2(47 ) OF THE ACT WHEREIN DEFINITION OF TRANSFER IN RELATION TO CAPITAL ASSET S HAS BEEN PROVIDED. ACCORDING TO THE ASSESSING OFFICER TRANSFER FOR THE PURPOSE OF CAPITAL GAIN RESULTS IF ANY CONDITION MENTIONED IN SEC. 2(47) I S FULFILLED. SUB-CLAUSE (VI) OF SEC. 2(47) PROVIDES THAT TRANSFER INCLUDES ANY M ETHOD THROUGH WHICH THE ENJOYMENT OF THE CAPITAL ASSETS IS TRANSFERRED TO A NY OTHER ENTITY OR PERSON. IN THE OPINION OF THE ASSESSING OFFICER THE AGREEMENT TO SELL SPECIFICALLY 7 PROVIDED THE DELIVERY OF PHYSICAL POSSESSION BY TH E ASSESSEE TO THREE INDIVIDUALS THUS IT INDICATES THAT CAPITAL ASSET HAS BEEN TRANSFERRED BY THE ASSESSEE TO THREE INDIVIDUALS WITHIN THE MEANING OF SEC. 2(47) OF THE ACT. AFTER ARRIVING AT THE CONCLUSION THAT A CAPITAL ASS ET HAS BEEN TRANSFERRED BY THE ASSESSEE HE PROCEEDED TO COMPUTE THE CAPITAL G AIN. HE MADE A REFERENCE TO THE VALUATION OFFICER WHO HAS DETERMINED THE FAI R MARKET VALUE OF THE PROPERTY AS ON 5.1.2004 AT RS.7 14 79 000. FAIR MAR KET VALUE OF THE LAND HAS BEEN DETERMINED AT RS.4 40 19 489 AND THAT OF BUILD ING WAS AT RS.2 74 59 600. ASSESSING OFFICER AFTER GIVING THE BENEFIT OF INDEXATION AS ON 1.4.1981 COMPUTED THE LONG TERM CAPITAL GAIN ON LAND AT RS.4 21 07 012 WHEREAS SHORT TERM CAPITAL GAIN UNDER SEC. 50 OF TH E ACT ON THE BUILDING HAS BEEN DETERMINED AT RS.2 72 28 066. 7. DISSATISFIED WITH THE COMPUTATION OF LONG TERM C APITAL GAIN ON LAND AS WELL AS SHORT TERM CAPITAL GAIN ON THE BUILDING AS SESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS). IT HAS RAIS ED TEN GROUNDS OF APPEAL WITH REGARD TO COMPUTATION OF LONG TERM CAPITAL GAI N ON SALE OF LAND AND SIX GROUNDS OF APPEAL IN RESPECT OF COMPUTATION OF SHOR T TERM CAPITAL GAIN ON BUILDING. ALL THESE GROUNDS HAVE BEEN REPRODUCED BY THE LEARNED CIT(APPEALS) WHICH ARE ARGUMENTATIVE IN NATURE. LEA RNED CIT(APPEALS) HAS 8 SUMMARIZED THE BROAD PROPOSITION RAISED BY THE ASSE SSEE DURING THE APPELLATE PROCEEDINGS AND THOSE PROPOSITIONS READ AS UNDER: (A) CAPITAL GAINS HAVE TO BE COMPUTED U/S.48 OF TH E INCOME-TAX ACT BY TAKING THE SALE CONSIDERATION AGREED TO BETWEEN THE PARTIES AS THE FULL VALUE OF CONSIDERATION AS THERE IS NOT EVEN AN ALLEGATION MUCH LESS ANY EVIDENCE THAT ANYTHING OVER AND ABOVE THE STATED CONSIDERATION WAS PAID OR RECEIVED AS CONSIDERATION FOR TRANSFER. (B) SECTION 52 OF THE INCOME-TAX ACT HAVING BEEN RE PEALED W.E.F. 01.04.1988 WAS NOT APPLICABLE FOR AN ALLEGED TRANSF ER THAT TOOK PLACE ON 05.01.2004. EVEN IF HYPOTHETICALLY THAT WAS APPL ICABLE IT COULD NOT HAVE BEEN INVOKED AS THE NECESSARY INGREDIENT FOR I TS INVOCATION I.E. EVIDENCE TO THE EFFECT THAT CONSIDERATION WAS UNDER STATED WAS ABSENT. (C) SECTION 50C OF THE INCOME-TAX ACT THOUGH ON THE STATUTE BOOK ON 05.01.2004 COULD NOT HAVE BEEN APPLIED AS THE GO VT. OF NATIONAL CAPITAL TERRITORY OF DELHI HAD NOT PRESCRIBED ANY C IRCLE RATES BEFORE 18.07.2007 NOR ANY VALUE WAS ASSESSED FOR THE PURPO SE OF PAYMENT OF STAMP DUTY. (D) IN TERMS OF SECTION 50C REFERENCE TO DVO FOR D ETERMINATION OF FAIR MARKET VALUE COULD ONLY BE MADE AT THE INSTANC E OF THE ASSESSEE FOR HIS OWN BENEFIT AND THE ASSESSEE NEVER SOUGHT A NY SUCH REFERENCE. FAIR MARKET VALUE CANNOT BE ADOPTED TO THE DETRIMEN T OF THE ASSESSEE. 9 8. THE LEARNED CIT(APPEALS) AFTER CONSIDERING THE A BOVE BROAD PROPOSITION HAS OBSERVED THAT SECTION 48 OF THE INC OME-TAX ACT 1961 PROVIDES THE MODE OF COMPUTATION OF THE CAPITAL GAI N. ACCORDING TO THIS SECTION THE INCOME CHARGEABLE UNDER THE HEAD CAPI TAL GAIN SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CO NSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF THE CAPITAL ASS ETS THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRAN SFER AND THE COST OF ACQUISITION OF THE ASSETS AND THE COST OF ANY IMPRO VEMENT THERETO. THE EXPRESSION FULL VALUE OF CONSIDERATION EMPLOYED I N SEC. 48 CANNOT BE SUBSTITUTED BY ANY OTHER VALUE UNTIL AND UNLESS THE RE IS AN EVIDENCE TO SHOW THAT SALES CONSIDERATION HAS BEEN UNDERSTATED AND T HE SELLER HAS ACTUALLY RECEIVED MORE THAN WHAT HAS BEEN DECLARED BY HIM. F OR BUTTRESSING HIS FINDING LEARNED CIT(APPEALS) HAS MADE REFERENCE TO THE FOUR DECISIONS OF HON'BLE SUPREME COURT IN CIT VS. GEORGE HENDERSON A ND CO. LTD. (1967) 66 ITR 622(S.C) CIT VS. GILLANDERS ARBUTHNOT AND CO. (1973) 87 ITR 407 (S.C) K.P. VERGHESE VS. ITO (1981) 131 ITR 597 (S. C) AND CIT VS. SHIVAKAMI CO. (P) LTD. (1986) 159 ITR 171 (S.C). HE FURTHER OBSERVED THAT SEC. 50-C IS ALSO NOT APPLICABLE IN THE ASSESSEES CASE AS GOVERNMENT OF 10 NATIONAL CAPITAL TERRITORY OF DELHI HAD NOT PRESCRI BED ANY CIRCLE RATE BEFORE 18 TH JULY 2007. 9. IN THIS WAY LEARNED CIT(APPEALS) HAS HELD THAT ASSESSING OFFICER IS NOT AUTHORIZED TO SUBSTITUTE THE FULL VALUE OF CONS IDERATION DECLARED BY THE ASSESSEE BY THE FAIR MARKET VALUE ESTIMATED ON THE BASIS OF DVOS REPORT. 10. LEARNED DR WHILE IMPUGNING THE ORDER OF THE LEA RNED CIT(APPEALS) RELIED UPON THE ORDER OF THE ASSESSING OFFICER. HE CONTENDED THAT LEARNED CIT(APPEALS) HAS TOTALLY IGNORED APPLICABILITY OF S EC. 50C THE CASE LAWS RELIED UPON BY THE LEARNED CIT(APPEALS) ARE PRIOR T O THE INTRODUCTION OF SEC. 50-C ON THE STATUTE BOOK. ON THE OTHER HAND LEARNE D COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE LEARNED CIT(APPEALS) A ND THE SUBMISSIONS MADE BEFORE HIM. HE SUBMITTED THAT ASSESSING OFFICE R CANNOT SUBSTITUTE THE SALES CONSIDERATION BY FAIR MARKET VALUE BECAUSE TH ERE IS NO BACKING IN LAW FOR SUCH SUBSTITUTION. HE FURTHER RELIED UPON THE T WO DECISIONS OF THE HON'BLE DELHI HIGH COURT IN THE CASES OF CIT VS. SMT. NILOF ER AND DEV KUMAR JAIN VS. ITO REPORTED IN 309 ITR AT PAGE NOS. 233 AND 24 0 RESPECTIVELY. 11. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. SECTION 2(47) SECTION 48 AND SEC TION 50-C HAVE A DIRECT 11 BEARING ON THE CONTROVERSY THEREFORE IT IS SALUTA RY UPON US TO TAKE NOTE OF THE RELEVANT CLAUSES OF THESE SECTIONS. THEY READ A S UNDER: 48. MODE OF COMPUTATION.THE INCOME CHARGEABLE UND ER THE HEAD CAPITAL GAINS SHALL BE COMPUTED BY DEDUCTING FRO M THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS NAMELY:-- (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONN ECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST O F ANY IMPROVEMENT THERETO: (A) AS PER SECTION 2(47) TRANSFER IN RELATION TO A CAPITAL ASSET INCLUDES (I) TO (IV) X X X X X X X X X X X X X X X (V) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSE SSION OF ANY IMMOVEABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT 1882 (4 OF 188 2); OR (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBE R OF OR ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY COMPAN Y OR OTHER 12 ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT O R ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHIC H HAS THE EFFECT OF TRANSFERRING OR ENABLING THE ENJOYMENT O F ANY IMMOVABLE PROPERTY. SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION I N CERTAIN CASES. 50-C (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUI NG 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 GOVERNM ENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE ST AMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUT Y IN RESPECT OF SUCH TRANSFER THE VALUE SO ADOPTED OR ASSESSED [OR ASSESSABLE] SHALL FOR THE PURPOSES OF SEC. 48 BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACC RUING AS A RESULT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (1) WHERE- (A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICE R THAT THE VALUE ADOPTED OR ASSESSED [OR ASSESSABLE] BY THE ST AMP VALUATION AUTHORITY UNDER SUB-SECTION (1) EXCEEDS T HE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRAN SFER; (B) THE VALUE SO ADOPTED OR ASSESSED [OR ASSESSABLE ] BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN 13 DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTHORITY COURT OR THE HIGH COURT THE ASSESSING OFFICER MAY REFER THE VALUATION OF TH E CAPITAL ASSE4T TO A VALUATION OFFICER . SECTION 50-C IS A SPECIAL PROVISION INTENDED TO DEA L WITH UNACCOUNTED INCOME BY THE PROCESS OF UNDERSTATEMENT OF CONSIDER ATION BY SUBSTITUTING A STATUTORY VALUE IN THE PLACE OF THE APPARENT CONSID ERATION SPECIFIED IN THE DOCUMENT. THIS SECTION IS APPLICABLE FROM ASSESSMEN T YEAR 2003-04. IT PROVIDES THAT WHERE THE CONSIDERATION DECLARED TO B E RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUILDING OR BOT H IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOV ERNMENT FOR THE PURPOSE OF STAMP DUTY IN RESPECT OF SUCH TRANSFER THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDE RATION AND CAPITAL GAIN SHALL BE COMPUTED ACCORDINGLY UNDER SEC. 148 OF THE INCOME-TAX ACT 1961. THUS THIS SECTION CREATES A DEEMING FICTION WHICH AUTHORIZES THE ASSESSING OFFICER TO SUBSTITUTE THE SALES CONSIDERATION WITH THE AMOUNT ON WHICH THE VENDEE OR VENDOR PAID THE STAMP DUTY WHILE GETTING THE DOCUMENT REGISTERED FOR EFFECTING THE TRANSFER OF A PROPERTY. THE SECTI ON FURTHER PROVIDES THE SAFEGUARD ALSO. IT CONTEMPLATES THAT IF THE VALUE A DOPTED OR ASSESSED FOR 14 STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE O F THE PROPERTY AS ON THE DATE OF TRANSFER AND ASSESSEE HAS NOT DISPUTED SUCH ASSESSMENT BEFORE THE COURT OR THE MECHANISM PROVIDED FOR THE PURPOSE OF STAMP DUTY THEN HE CAN ASK THE ASSESSING OFFICER TO MAKE A REFERENCE TO TH E DVO FOR DETERMINING THE FAIR MARKET VALUE OF THE PROPERTY. IN SEC. 2(47 ) OF THE ACT PROVIDES THE DEFINITION OF EXPRESSION TRANSFER IN RELATION TO CAPITAL ASSETS. IN CONTEMPLATES VARIOUS SITUATIONS WHEN TRANSFER OF CA PITAL ASSETS WOULD BE CONSTRUED AS COMPLETE. CLAUSES (V) AND (VI) EXTRACT ED SUPRA ALSO GIVE TWO SITUATIONS WHICH ARE DISTINCT WITH THE CONCEPT OF T RANSFER PROVIDED IN SEC. 53A OF THE TRANSFER PROPERTY ACT AND SEC. 17 OF THE INDIAN REGISTRATION ACT. SECTION 17 OF THE INDIAN REGISTRATION ACT LAID DOWN THAT TRANSFER OF ANY IMMOVEABLE PROPERTY HAVING VALUE OF MORE THAN RS. 1 00 IS REQUIRED TO BE COMPULSORY REGISTERED. THE ONE ANGLE OF CONTROVERSY BEFORE US IS THAT IF TRANSFER OF A CAPITAL ASSET IS COMPLETE FOR THE PUR POSE OF THE INCOME-TAX ACT 1961 IN ACCORDANCE WITH THE DEFINITION PROVIDED IN SEC. 2(47) OF THE ACT CAN THE ASSESSEE ARGUE THAT ASSESSING OFFICER CANNOT TI NKER WITH COMPUTATION OF CAPITAL GAIN ON THE BASIS OF SEC. 50-C BECAUSE IT H AS NOT TRANSFERRED THE CAPITAL ASSETS BY WAY OF A REGISTERED SALE DEED AND THEREFORE THE DEEMING FICTION PROVIDED FOR SUBSTITUTION OF SALES CONSIDER ATION AT PAR WITH THE STAMP 15 DUTY VALUATION IS NOT APPLICABLE. IN OUR OPINION S EC. 50-C IS A MACHINERY PROVISION. IT ONLY PROVIDES THE GUIDELINES TO THE A SSESSING OFFICER HOW TO COMPUTE THE VALUE OF THE PROPERTY. AS PER SECTION 4 5 THE CAPITAL GAIN WOULD BE CHARGEABLE TO TAX THE MOMENT A CAPITAL ASSET IS TRANSFERRED WITHIN THE MEANING OF SEC. 2(47) OF THE ACT. THE REST OF THE C LAUSES I.E. SECTIONS 48 AND 50-C PROVIDE THE MODE OF COMPUTATION. THE OPERATIVE FORCE OF EXPRESSION ADOPTED EMPLOYED IN SECTION 50-C IS TO BE CONSTRU ED AS REFERRING THE PARTICULAR RATE ADOPTED IN THE CASE OF AN ASSESSEE WHO OFFERED THE CONVEYANCE DEED FOR REGISTRATION. AS FAR AS THE OPE RATIVE FORCE OR EXPRESSION ASSESSED EMPLOYED IN SEC. 50C IS CONCERNED IT RE LATES TO THE RATES DETERMINED BY THE STAMP DUTY VALUATION AUTHORITIES FOR THE PURPOSE OF THE STAMP DUTY VALUATION IN THE PARTICULAR AREA. FOR EX AMPLE IF IN A GIVEN CASE AN ASSESSEE DOES NOT WANT TO GET THE CONVEYANCE DEE D REGISTERED BUT TRANSFERRED THE CAPITAL ASSETS WITHIN THE MEANING O F SEC. 2(47) OF THE ACT. THE STAMP DUTY AUTHORITIES HAVE ALREADY NOTIFIED MINIMU M RATES FOR THE PURPOSE OF STAMP DUTY VALUATION IN THAT PARTICULAR AREA CAN THE ASSESSEE ARGUE THAT THOSE RATES COULD NOT BE CONSIDERED FOR THE PURPOSE OF COMPUTATION OF THE CAPITAL GAIN. IN OUR OPINION EXPRESSION ASSESSED EMPLOYED IN SEC. 50-C WOULD COVER SUCH TYPE OF CASES. 16 12. THE LAND WAS ORIGINALLY PURCHASED IN 1972 FOR A CONSIDERATION OF RS.2 10 500. ACCORDING TO THE ASSESSEE ITS FULL VA LUATION IS STILL RS.2 14 021. THE ASSESSEE WANTS TO ARGUE THAT IN THE LAST 30 YEA RS THERE IS NO APPRECIATION. IT IS DIFFICULT FOR US TO ACCEPT THIS ARGUMENT. 13. THE ASSESSEE HAS TAKEN A NUMBER OF PLEAS BEFORE THE ASSESSING OFFICER IN THE REPLY EXTRACTED SUPRA. IT HAS ARGUED THAT SE C. 50-C IS NOT APPLICABLE. ASSESSING OFFICER FAILED TO CONSIDER THIS ASPECT OF THE CASE. HE SIMPLY MADE A REFERENCE TO THE VALUATION OFFICER WITHOUT EXPLOR ING THE POSSIBILITY WHETHER SEC. 50-C IS APPLICABLE OR NOT. THE LEARNED CIT(APPEALS) HAS DELETED THE ADDITION ON THE GROUND THAT FULL VALUE OF CONSIDERATION CONTEMPLATED IN SEC. 48 CANNOT BE SUBSTITUTED BY TH E ASSESSING OFFICER WITHOUT THERE BEING ANY EVIDENCE THAT SALES CONSIDE RATION HAS BEEN UNDERSTATED BY THE ASSESSEE. LEARNED CIT(APPEALS) H AS REFERRED ALL THE CASE LAWS WHICH ARE PRIOR TO INTRODUCTION OF SEC. 50-C O F THE ACT. WE AGREE WITH THE FINDINGS OF THE LEARNED CIT(APPEALS) THAT IF SE C. 50-C IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE THEN ASSESSING OFFICER MAY NOT BE IN A POSITION TO SUBSTITUTE THE FULL VALUE OF SALES CONSIDERATION DI SCLOSED BY THE ASSESSEE WITH THE FAIR MARKET VALUE DETERMINED BY THE ASSESSING O FFICER BECAUSE IN THAT EVENTUALITY THERE IS NO BACKING OF LAW TO THE ASSES SING OFFICER. LEARNED 17 CIT(APPEALS) IN PARAGRAPH 8.5 HAS OBSERVED THAT SEC . 50-C IS NOT APPLICABLE BECAUSE THE GOVERNMENT HAS NOT NOTIFIED THE CIRCLE RATE PRIOR TO 18.7.2007. HOWEVER IN THE ASSESSMENT ORDER WE DO NOT FIND AN Y DISCUSSION ON THIS ISSUE WHETHER THIS AREA WAS ASSESSED FOR THE PURPOS E OF STAMP DUTY VALUATION. THIS INFORMATION CONSIDERED BY THE LEARNED CIT(APPE ALS) IN PARAGRAPH NO.8.5 WAS WHETHER CONFRONTED TO THE ASSESSING OFFI CER OR NOT. THUS TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES PARTICULARLY NO APPRECIATION IN THE VALUE OF LAND SHOWN BY THE ASSE SSEE INSPITE OF AFFLUX OF 30 YEARS. AS FAR AS CASE LAWS RELIED UPON BY THE AS SESSEE ARE CONCERNED THEY PERTAIN PRIOR TO INTRODUCTION OF SECTION 50-C HENC E NOT APPLICABLE ON THE FACTS. WE DEEM IT FIT TO SET ASIDE THE ORDER OF LEA RNED CIT(APPEALS) AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH A DIRECTION TO EXAMINE THE ISSUE AFRESH WITH THE ANGLE OF APPLICAB ILITY OF SEC. 50-C OF THE ACT. LEARNED CIT(APPEALS) HAS NOT DEALT WITH OTHER PLEAS OF THE ASSESSEE WHICH WERE RAISED BEFORE THE ASSESSING OFFICER ALSO . THE ASSESSEE WILL BE AT LIBERTY TO RAISE ALL SUCH PLEAS BEFORE THE ASSESSIN G OFFICER. IT IS NEEDLESS TO SAY THAT THE OBSERVATIONS MADE BY US WILL NOT IMPAI R OR INJURE THE CASE OF A.O. OR WOULD CAUSE ANY PREJUDICE TO THE DEFENCE/EX PLANATION OF THE 18 ASSESSEE. THE ASSESSEE WILL BE AT LIBERTY TO SUBMI T ANY EXPLANATION/EVIDENCE IN SUPPORT OF ITS CLAIM. 14. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 31.03.201 0 ( R.C. SHARMA ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31/03/2010 MOHAN LAL COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR:ITAT ASSISTANT REGISTRAR