The ITO, Ward-4(3),, Surat v. Solitaire Fabrics Pvt.Ltd., Surat

ITA 2576/AHD/2009 | 2006-2007
Pronouncement Date: 08-01-2010 | Result: Dismissed

Appeal Details

RSA Number 257620514 RSA 2009
Assessee PAN MARCH2006T
Bench Ahmedabad
Appeal Number ITA 2576/AHD/2009
Duration Of Justice 3 month(s) 27 day(s)
Appellant The ITO, Ward-4(3),, Surat
Respondent Solitaire Fabrics Pvt.Ltd., Surat
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 08-01-2010
Assessment Year 2006-2007
Appeal Filed On 11-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.2576/AHD/2009 ASSESSMENT YEAR:2006-07 DATE OF HEARING:10.11.09 DRAFT ED:24.12.09 INCOME TAX OFFICER WARD-4(3) RANGE-4 ROOM NO.220 AAYAKAR BHAVAN SURAT V/S . SOLITAIRE FABRICS PVT. LTD. 130-131 SUPER YARN MARKET ZAMPA BAZZAR SURAT PAN NO.AAJCS5196B (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M.C. PANDIT SR.DR RESPONDENT BY:- SHRI MANAJ MAKHANIA AR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE OR DER OF COMMISSIONER OF INCOME-TAX (APPEALS)-III SURAT IN APPEAL NO. CAS/I II/121/08-09 DATED 20-07-2009. THE ASSESSMENT WAS FRAMED BY THE INCOME-TAX OFFICER WARD-4(3) RANGE-4 SURAT U/S. 143(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTE R REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 21-10-2008 FOR THE ASSESSMENT YEAR 2005 -06. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED INVESTMENT IN PURCHASED OF LAND U/S.69B OF THE ACT. FOR THIS THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUND:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A)-III SURAT HAS ERRED IN DELETING THE ADDITIO N OF RS.6 94 373/- MADE ON ACCOUNT OF UNACCOUNTED INVESTMENT IN PURCHASE OF LA ND U/S.69B OF THE ACT. ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 2 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSEE-COMPANY IS ENGAGED IN TRADING OF YARN AND FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 22-12-2006. AFTER PROCESSING RETURN U/S. 143(1) OF THE ACT THE ASSESSING OFFICER ISSUED NOTICE U/S.143(2) R.W.S 142(1) OF TH E ACT. THE ASSESSEES ACCOUNTS WERE AUDITED AND ASSESSEE PRODUCED BOOKS OF ACCOUNT INCLUDING THE BILLS AND VOUCHERS WHICH ARE EXAMINED BY THE AO. THE AO DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM THE DOCUMENTS OF LAND PURC HASE AT SURVEY NO.146/3 BLOCK NO.222 AT KAMRAJ DIST. SURAT FOR WHICH THE ASSESSEE PAID STAMP DUTY OF RS.58 744/- AMOUNTING TO RS.3 47 165/- AS PER DOCUMENT. THE ASS ESSEE-COMPANY PAID EXTRA STAMP DUTY OF RS.87 494/- ON ACCOUNT OF STAMP DUTY VALUATION OF RS.10 41 538/-. FOR THAT A SHOW CAUSE NOTICE WAS ISSUED ON 05-09-2008 WHICH READS AS UNDER:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT HA S BEEN FOUND THAT YOU HAVE INVESTED IN IMMOVABLE PROPERTY AT KARANJ TAL: MANDVI DIST. SURAT AS DETAILS BELOW:- SR NO . DESCRIPTIO N CONSIDERATIO N AS PER SALE DEED (RS) VALUE AS PER STAMP DUTY 32 C VALUATION (RS) DIFFERENC E (RS) AMOUN T OF STAMP DUTY (RS) AMOUNT OF ADDITION AL STAMP DUTY AS PER DEED (RS) EXCESS AMOUNT OF STAMP DUTY (RS.) 1. S.NO. 146/3 BLOCK NO.2 AT KARANJ 2 67 540/- 8 02 538/- 5 34 998/ - 58 744/ - 87 494/- 28 750/ - 2. -DO- 11 375 34 200/- 22 824/- 3. -DO- 68 250/- 2 04 800/- 1 36 550/ - TOTAL 3 47 165/- 10 41 538 /- 6 94 373/ - FROM THE ABOVE IT IS EVIDENT THAT YOU HAVE PAID E XCESS STAMP DUTY OF RS.28750/- ON THE DIFFERENCE IN VALUE OF ADDITIONAL JANTRI VALUE AND CONSIDERATION AS PER SALE DEED I.E. RS.6 94 373/-. AS YOU HAVE NOT RAISED ANY OBJECTION NOR HAVE YOU DISPUTED JANTRY VALUE OR THE ADDITIONAL STAMP DUTY IT ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 3 IS HELD THAT TOTAL INVESTMENT OF RS.7 23 03/- AS NO T EXPLAINED U/S.69B OF THE IT ACT. IN THIS CONNECTION YOU ARE HEREBY REQUESTED TO SHO W CAUSE AS TO WHY THE ABOVE SUM OF RS.7 23 023/- SHOULD NOT CONSIDERED AS UNEXPLAINED INVESTMENT U/S.69B OF THE ACT AND ADDED TO THE TOTAL INCOME AC CORDINGLY. YOUR EXPLANATION TO THIS SHOW CAUSE NOTICE MAY BE S ENT TO REACH THIS OFFICE SEVEN DAYS FROM THE RECEIPT OF THE NOTICE. IN CASE OF FAILURE IN YOUR PART TO COMPLY WITH THIS NOTICE IT WILL BE RESUMED THAT Y OU DO NOT HAVE ANY EXPLANATION OR REPLY TO OFFER. 4. THE ASSESSEE REPLIED TO THE SHOW CAUSE THAT SO F AR AS PAYMENT OF ADDITIONAL DUTY TO THE COLLECTORATE IS CONCERNED IT WAS WORKE D OUT BY THE REVENUE AUTHORITIES BASED ON CIRCULAR/JANTRI ON VALUE OF THE LAND IN TH AT PARTICULAR AREA OR CIRCLE. THE ASSESSEE STATED THAT THERE IS NO RELATION BETWEEN P URCHASE CONSIDERATION OF THE LAND AND THE CIRCLE/JANTRI VALUE ARRIVED AT BY THE REVEN UE AUTHORITIES. IT WAS STATED THAT THE ADDITIONAL DUTY OF THE LAND WAS PAID BUT NO OBJ ECTION HAS BEEN RAISED DUE TO THE FOLLOWING REASONS:- 1) SIR WE HAD PLACED ORDER AT KOREA TO PURCHASE S ECOND HAND IMPORTED WATER JET LOOMS AND APPLIED FOR TERM LOAN AND CASH CREDIT FACILITY FROM BANK OF BARODA SALABATPURA BRANCH SURAT AGAINST EQUITA BLE MORTGAGE OF LAND AND BUILDING. II) SIR ON 16.03.2006 BANK HAS SANCTIONED TERM LO AN OF RS.54.00 LAC AND CASH CREDIT FACILITY OF RS.40.00 LAC. TO AVAIL DISB URSEMENT FROM BANK WE HAVE TO DEPOSIT TITLE DOCUMENTS OF THE PROPERTY WITH THE BANK TO CREATE EQUITABLE MORTGAGE. III) AS PER CONDITION WITH THE MACHINE SUPPLIER WE HAVE TO MAKE PAYMENT BY LETTER OF CREDIT IN MARCH 2006 THROUGH OUR TERM LO AN ACCOUNT. TO AVAIL DISBURSEMENT MENTIONED ABOVE HENCE WE HAD RELEASE OUR REGD. DEEDS OF LAND BY PAYING ADDITIONAL STAMP DUTY ON 28.03.2006. IV) SIR IF WE RAISE ANY OBJECTION AGAINST THE DIS PUTED JANTARY VALUE OF ADDITIONAL STAMP DUTY THEN WE COULDNT CREATE EQU ITABLE MORTGAGE WITH THE BANK AND UNABLE TO AVAIL THE DISBURSEMENT OF LOAN. V) HENCE LOOKING TO THE FIXED COST OF PROJECT AND DEVELOPMENT OF PROJECT WE HAD PAID ADDITIONAL STAMP DUTY WITHOUT RAISING ANY OBJECTION OF DISPUTED JANTARY VALUE. ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 4 AFTER CONSIDERING THE ARGUMENTS OF THE ASSESSEE TH E ASSESSING OFFICER MADE ADDITION OF UNDISCLOSED INVESTMENTS U/S.69B OF THE ACT BY GIVING FOLLOWING FINDING IN PARA-5 OF HIS ASSESSMENT ORDER:- 5. CONSIDERING THE ABOVE FACT AND ARGUMENT MADE BY THE ASSESSEE- COMPANY IS NOT SATISFACTORY IT IS OPEN SECRET THA T IN IMMOVABLE TRANSACTION ONE OF THE BEIGEST MODE INVESTING BLACK MONEY. NON OF THE IMMOVABLE PROPERTY WOULD BE EVER SOLD ON FAIR MARKET VALUE SP ECIALLY IN AREA LIKE SURAT AND OTHER INDUSTRIAL AREA SITUATED SURROUNDING SURA T CITY AND WITHIN REACHABLE DISTANCE THE PRICE DISCLOSED IN THE DOCUMENT THAT IS SALE DEED APPARENTLY MAKES MOCKERY OF THE RULE OF ECONOMY. IN THIS CASE VALUE OF THE IMMOVABLE PROPERTY I.E. OPEN PLOT OF LAND FOR THE PURPOSE OF PAYMENT OF WAS LESS THAN VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY THE DIFFERENCE BETWEEN THE SALE CONSIDERATION SHOWN IN THE SALE DEDUCTION AND THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY WORKED OUT OF RS.6 94 373 /- (RS.10 41 538/- 3 47 165/-) CONSIDERING THE PAYMENT OF STAMP DUTY W HETHER REGULAR OR ADDITIONAL THE CORRESPONDING VALUE COME TO RS.10 41 538/- IT IS THEREFORE BELIEVED THAT DIFFERED VALUE FOR PURCHASE OF LAND A MOUNTING TO RS.6 94 373/- (RS.10 41 538/- 3 47 165/-) WERE OUT OF BOOKS OF AC COUNT I.E. ON MONEY AS COMPANY HAS NOT MADE ANY OBJECTION AGAINST THE ADDI TION OF VALUATION MADE BY THE STAMP VALUATION OFFICE AND ALSO AGREE TO PAY EXTRA STAMP DUTY OF RS.28750 (RS.87494 RS.58744/-) I THEREFORE MADE ADDITION OF RS.6 94 373 (10 41 538 3 47 165) AS UNEXPLAINED INVESTMENT U /S.69 OF THE I.T. ACT AND CONSEQUENTLY INITIATED THE CONCEALMENT PENALTY U/S.271(1) FOR FURNISHING INACCURATE PARTICULARS OR CANCEL THE INC OME SEPARATELY. 5. AGGRIEVED THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) RELYING ON THE TRIBUNALS DECISION IN THE CASE OF BHARATKUMAR N PATEL V. ACIT IN ITA NO.1749/AHD/2008 DATED 29-08-2008 HAS DELETED THE ADDITION BY GIVIN G FOLLOWING FINDING IN PARA-5 AND 6 OF HIS APPELLATE ORDER:- 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE THE SUBMISSIONS MADE BY THE LEARNED AR AND THE JUDGMENT RELIED ON BY THE AS SESSING OFFICER AS WELL AS BY THE LEARNED AR. IT IS SEEN THAT THE APPELLANTS CASE IS SQUARELY COVERED BY THE ORDER OF HONBLE ITAT AHMEDABAD DTD. 29.8.2008 IN ITA NO.1749/AHD/2008 IN THE CASE OF BHARATKUMAR N PATEL VS ACIT FOR THE A.Y. 2005-06 WHEREIN A SIMILAR ADDITION MADE U/S.69B OF THE ACT HAS BEEN DELETED BY THE HONBLE JURISDICTIONAL TRIBUNAL WITH THE FOL LOWING OBSERVATIONS:- 10. AFTER CAREFUL CONSIDERATION OF THE RIVAL SUBMI SSIONS FACTS AND CIRCUMSTANCES OF THE CASE PROVISIONS OF LAW AS WEL L AS DECISION(S) OF HONBLE SUPREME COURT AND VARIOUS BENCHES RELIED UP ON BY THE PARTIES WE ARE OF THE OPINION THAT THE CI(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION BY DRAWING THE ANALOGICAL P ROVISIONS OF SECTION 50C OF THE ACT. THE CIT(APPEALS) CONFIRMED THE ADDI TION BY OBSERVING THAT IF THIS PROPOSITION IS TO BE ACCEPTED THEN TH E DEEMING PROVISIONS OF SECTION 50C OF THE ACT WILL BECOME INOPERABLE. HE FURTHER HELD THAT ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 5 SECTION 50C OF THE ACT IS APPLICABLE TO THE SELLER AND PROVIDES THAT THE VALUATION MADE BY THE STAMP VALUATION AUTHORITY IS TO BE DEEMED AS THE CONSIDERATION RECEIVED BY THE SELLER. HAVING SA ID SO THE CIT (APPEALS) FURTHER HELD THAT THE CONVERSE WILL ALSO HAVE TO BE ACCEPTED AS TRUE I.E. THE VALUATION OF THE STAMP VALUATION AUTHORITY WILL HAVE TO BE DEEMED AS THE CONSIDERATION PAID BY THE PURCHASE R OF THE PROPERTY AS WELL. 10.1 WE ARE UNABLE TO AGREE WITH THE AFORESAID ANAL OGY DRAWN BY THE CIT (APPEALS) BECAUSE HAD THE LEGISLATURE INTENDED TO IT COULD HAVE EASILY SPECIFIED SUCH A PROPOSITION IN THE PROVISIO N ITSELF. 11. IN VIEW OF THE SETTLED PROPOSITION OF LAW THAT THE APPELLATE AUTHORITY HAS NO RIGHT EITHER TO ADD OR TO DELETE ANY WORD FR OM THE PROVISIONS OF LAW UNLESS AND UNTIL THE SAME ARE FOUND TO BE HAVIN G SOME AMBIGUITY WE ARE UNABLE TO SUSTAIN THE STAND OF THE CIT (APPE ALS) THERE BEING NO AMBIGUITY IN THE SECTION 50C OF THE ACT WE ARE OF THE OPINION THAT THESE PROVISIONS ARE NOT APPLICABLE TO THE PURCHASER. 6. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE AND THE LEGAL POSITION IN THE MATTER RESPECTFULLY FOLLOWING THE DECISION OF HONBLE ITAT AHMEDABAD IN THE CASE OF SHRI BHARATKUMAR N PATEL (SUPRA) TH E ADDITION OF RS.8 39 325/- MADE U/S.69B IS DELETED. THIS GROUND OF APPEAL IS A LLOWED. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE RELIED O N THE ORDER OF CIT(A) AND ALSO ON DECISION IN THE CASE OF SHRI BHARATKUMAR N PATEL (SUPRA). ON THE OTHER HAND LD. SR. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ASSESSMEN T ORDER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). NOW THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS THAT WHETHER THE PROVISION OF SE CTION 50C OF THE ACT APPLIES TO PURCHASER OR NOT. FOR THIS WE HAVE TO GO TO THE R ELEVANT PROVISION OF SECTION 50C OF THE ACT AS INTRODUCED BY SECTION 24 OF THE FINANCE ACT 2002 WITH EFFECT FROM 1-4- 2003 FOR AND FROM ASSESSMENT YEAR 2003-04 NAMELY: - S.50C. SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION IN CERTAIN CASES - (1 WHERE THE CONSIDERATION RECEIVED O ACCRUING AS A RE SULT 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 STA TE GOVERNMENT (HEREINAFTER IN THIS SECTION REFERRED TO AS THE ST AMP 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 SECT ION 48 BE DEEMED TO BE ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 6 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 CLAIMED BEFORE ANY ASSESSING OFFIC ER THAT THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORIT Y UNDER SUB- SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF THE PR OPERTY AS ON THE DATE OF TRANSFER; (B) THE VALUE SO ADOPTED OR ASSESSED BY THE STAMP V ALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY OTHER AUTH ORITY COURT OR THE HIGH COURT THE ASSESSING OFFICER MAY REFER THE VALUATION OF TH E CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS M ADE THE PROVISIONS OF SUB-SECTIONS (2) (30 (4) (5) AND (6) OF SECTION 16A CLAUSE (I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION 23A SU B-SECTION (5) OF SECTION 24 SECTION 34AA SECTION 35 AND SECTION 37 OF THE WEAL TH-TAX ACT 1957 (27 OF 1957) SHALL WITH NECESSARY MODIFICATIONS APPLY I N RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY TH E ASSESSING OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THAT ACT. EXPLANATION FOR THE PURPOSES OF THIS SECTION VAL UATION OFFICER SHALL HAVE THE SAME MEANING AS IN CLAUSE OF SECTION 2 OF THE WEALTH-TAX ACT 1957 (27 OF 1957). (3) SUBJECT TO THE PROVISIONS CONTAINED IN SUB-SECT ION (2) WHERE THE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY REFERRED TO IN SUB-SE CTION (1) THE VALUE SO ADOPTED OR ASSESSED BY SUCH AUTHORITY SHALL BE TAKE N AS THE FULL VALUE OF THE CONSIDERATION RECEIVED ON ACCRUING AS A RESULT OF T HE TRANSFER. 7. THE RELEVANT PROVISION OF SECTION 50C OF THE ACT WAS EXPLAINED AND ELABORATED IN THE FOLLOWING PORTION OF THE DEPARTME NTAL CIRCULAR NO.8 OF 2002 DATED 27-08-2002 AS UNDER:- 37 . COMPUTATION OF CAPITAL GAINS IN REAL ESTATE TRANS ACTIONS - 37.1 THE FINANCE ACT 2002 HAS INSERTED A NEW SECTION 50C IN THE INCOME-TAX ACT TO MAKE A SPECIAL PROVISION FOR DETERMINING THE FULL V ALUE OF CONSIDERATION IN CASES OF TRANSFER OF IMMOVABLE PROPERTY. 37.2 IT PROVIDES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF LAND OR BUI LDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STA TE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER THE VALUE SO ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 7 ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY UND ER SECTION 48 OF THE INCOME-TAX ACT. 37.3 IT IS FURTHER PROVIDED THAT WHERE THE ASSESSEE CLA IMS 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 ASSESSING OFFICER MAY REFER THE VALUATION OF THE RELEVANT ASSET TO A VALUATION OFFICER IN ACCORDANCE WITH SECTION 55A OF THE INCOME-TAX ACT. IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS LESS THAN THE VALUE ADOPTED FOR STAMP DUTY PURPOSES THE ASSESSING OFFICER MAY TAKE SUCH FAIR MARKET VALU9E TO BE THE FULL VAL UE OF CONSIDERATION. HOWEVER IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY P URPOSES THE ASSESSING OFFICER SHALL NOT ADOPTED SUCH FAIR MARKET VALUE AN D SHALL TAKE THE FULL VALUE OF CONSIDERATION TO BE THE VALUE ADOPTED OR ASSESSED F OR STAMP DUTY PURPOSES. 37 4 THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL 2003 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YE AR 2003-04 AND SUBSEQUENT YEARS [SECTION 4]. 8. WE FURTHER FIND THAT THIS PROVISION WAS ELABORAT ED IN THE NOTES ON CLAUSES AND MEMO. EXPLAINING PROVISIONS IN THE FINANCE BILL 20 02 AS UNDER:- NOTES ON CLAUSES:- CLAUSE 24 SEEKS TO INSERT A NEW SECTION 50C IN THE INCOME-TAX ACT TO PROVIDE FOR A SPECIAL PROVISION FOR FULL VALUE OF CONSIDERA TION IN CERTAIN CASES. THE PROPOSED SUB-SECTION (1) OF THE SAID SECTION SE EKS TO PROVIDE 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 STA TE 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 RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. THE PROPOSED SUB-SECTION (2) OF THE SAID SECTION SE EKS TO PROVIDE THAT WHERE THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER TH AT THE VALUE ADOPTED OR ASSESSED BY THE AUTHORITY UNDER SUB-SECTION (1) EXC EEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER AND THE VALUE SO ADOPTED OR ASSESSED BY THE AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BE FORE ANY OTHER AUTHORITY COURT OR A HIGH COURT THE ASSESSING OFFICER MAY RE FER THE VALUATION OF THE CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE THE PROVISIONS OF SUB-SECTIONS (2) (3) (4) (5) A ND (6) OF SECTION 16A CLAUSE (I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION 23A SUB-SECTION ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 8 (5) OF SECTION 24 SECTION 34AA SECTION 35 AND SEC TION 37 OF THE WEALTH-TAX ACT 1957 SHALL WITH THE NECESSARY MODIFICATIONS APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESSING OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THA T ACT. THE VALUATION OFFICER SHALL BE THE VALUATION OFFICER AS DEFINED IN CLAUSE OF SECTION OF THE WEALTH- TAX ACT 1957. THE PROPOSED SUB-SECTION (3) PROVIDES THAT WHERE T HE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE AUTHORITY REFERRED TO IN SUB-SECTION (1) THE VALUE SO ADOPTE D OR ASSESSED BY THE AUTHORITY SHALL BE TAKEN AS THE FULL VALUE OF THE C ONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL 2003 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2003-2004 AND SUBSEQUENT YEARS. MEMORANDUM EXPLAINING PROVISIONS OF SECTION 50C IN THE FINANCE BILL 2002 AS UNDER:- THE BILL PROPOSES TO INSERT A NEW SECTION 50C IN THE INCOME-TAX 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 CONSIDERAT ION 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 SATE 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 UND ER SECTION 48 OF THE INCOME-TAX ACT. IT IS FURTHER PROPOSED TO PROVIDE THAT WHERE THE AS CLAIMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES EXCEEDS THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE ATE OF TRANSFER AND HE H AS NOT DISPUTE THE VALUE SO ADOPTED OR ASSESSED IN ANY APPEAL OR REVISION OR RE FERENCE BEFORE ANY AUTHORITY OR COURT THE ASSESSING OFFICER MA REFER THE VALUATION OF THE RELEVANT ASSET TO A VALUATION OFFICER IN ACCORDANCE WITH SEC TION 55A OF THE INCOME-TAX ACT. IF THE FAIR MARKET VALUE TO BE THE FULL VALUE OF CONSIDERATION. HOWEVER IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION O FFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES THE ASSESSING OFFICER SHALL NOT ADOPT SUCH FAIR MARKET VALUE AND WILL TAK E THE FULL VALUE OF CONSIDERATION TO BE THE VALUE ADOPTED OR ASSESSED F OR STAMP DUTY PURPOSES. IT IS ALSO PROPOSED TO PROVIDE THAT IF THE VALUE AD OPTED OR ASSESSED FOR STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL REVISION OR REFERENCE THE STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL REVISION OR REFE RENCE THE ASSESSMENT MADE SHALL BE AMENDED TO RE-COMPUTE THE CAPITAL GAI NS BY TAKING THE REVISED VALUE AS THE FULL VALUE OF CONSIDERATION. ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 9 THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL 2003 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2003-2004 AND SUBSEQUENT YEARS. [CLAUSES 24 AND 59] 9. IN VIEW OF THE ABOVE PROVISION AND EXPLAINING TH E PROVISION WE ARE OF THE VIEW THAT THE LAW U/S. 50C HAD BEEN PROVIDED ADEQUATE PR OTECTION TO THE TAX-PAYERS AGAINST ADOPTION OF ARBITRARY VALUES FOR THE COMPUT ATION OF CAPITAL GAINS AND THE FOLLOWING PRECAUTIONARY ARE PROVIDED:- (I) THE VALUE WHICH IS CONSIDERED AS THE PROPER VAL UE OF THE PROPERTY AS FIXED BY THE AUTHORITY FOR REGISTRATION FOR STAMP DUTY PU RPOSES IS PRESUMED TO BE THE FAIR MARKET VALUE FOR THE PURPOSES OF COMPUTATION O F CAPITAL GAINS ON THE SALE OF PROPERTY. (II) IT IS OPEN TO THE TAXPAYER TO PLEAD THAT SUCH STAMP VALUE IS ABNORMAL AND CONTEST THE SAME IN APPEAL UNDER THE STAMP LAW REQU IRING ADOPTION OF REDUCED VALUE. IF SUCH VALUE IS REDUCED IN APPEAL UNDER THE PROVISIONS OF THE RELEVANT STAMP LAW SUCH REDUCED VALUE WOULD ALONE BE ADOPTE D. (III) WHERE SUCH STAMP VALUE IS NOT DISPUTED IT IS OPEN TO THE ASSESSEE TO REQUIRE THE ASSESSING OFFICER TO REFER THE VALUATIO N TO THE VALUATION OFFICER WHO SHALL FIX THE VALUATION BY ADOPTION OF THE PROC EDURE PRESCRIBED UNDER SECTION 16A OF THE WEALTH-TAX ACT. IT IS SUCH VALUE WHICH WILL BE ADOPTED BY THE ASSESSING OFFICER. WE FURTHER FIND FROM THE MEMORANDUM EXPLAINING THE PROVISION OF SECTION 50C IN THE FINANCE BILL 2002 WHICH CLEARLY STATES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF LAN D OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A SAT E GOVT. FOR THE PURPOSES 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 CONSIDE RATION AND CAPITAL GAINS SHALL BE COMPUTED ACCORDINGLY U/S.48 OF THE ACT. IN CASE TH E VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL REVIS ION OR REFERENCE THE ASSESSMENT MADE SHALL BE AMENDED TO RE-COMPUTE THE CAPITAL GAI NS BY TAKING THE REVISED VALUE ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 10 AS THE FULL VALUE OF CONSIDERATION. ACCORDINGLY WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 50C ARE APPLICABLE ONLY FOR THE COMPUTAT ION OF CAPITAL GAINS IN REAL ESTATE TRANSACTION IN RESPECT TO SELLER ONLY AND NOT FOR T HE PURCHASER. WE FIND FROM SECTION 50C OF THE ACT THAT IT CREATES A LEGAL FICTION THER EBY APPARENT CONSIDERATION IS SUBSTITUTED BY VALUATION DONE BY STAMP VA LUATION AUTHORITIES AND CAPITAL GAINS ARE CALCULATED ACCORDINGLY. LEGAL FICTION CANNOT BE EXTENDED ANY FURTHER AND HAS TO BE LIMITED TO THE AREA FOR WHICH IT IS CREATED. HON 'BLE ANDHRA PRADESH HIGH COURT IN ADDL. CIT V. DURGAMMA P. (1987) 167 1TR 776 (AP) HE LD THAT IT IS NOT POSSIBLE TO EXTEND THE FICTION BEYOND THE FIELD LEGITIMATELY IN TENDED BY THE STATUTE. THE HON'BLE COURT WAS DEALING WITH THE PROVISIONS OF SEC. 171 (1) OF THE I.T.ACT IN THE CONTEXT OF WHICH IT WAS HELD THAT JOINT FAMILY SHALL BE DEEMED TO CONTINUE FOR THE LIMITED PURPOSE OF ASSESSING CASES OF JOINT FAMILIES WHICH HAVE BEEN HITHERTO ASSESSED AS SUCH. IT IS NOT POSSIBLE TO EXTEND THAT FICTION TO OTHER CASES. SIMILAR VIEW WAS TAKEN BY THE HON'BLE KERLA HIGH COURT IN CIT V. KAR VALVE S LTD. (1987) 168 ITR 416 (KER.) WHEREIN IT IS HELD THAT LEGAL FICTION IS LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND COULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FR AME HON'BLE KERALA HIGH COURT WAS DEALING WITH THE CASE WHERE ASSESSEE SOUGHT TO TAKE ADVANTAGE OF SEC.41(2) BY SUBMITTING THAT IF LIABILITIES ARE NOT LIQUIDATE D AND OUTSTANDING ARE NOT COLLECTED THEN BUSINESS COULD BE DEEMED TO CONTI NUE. HON'BLE ALLAHABAD HIGH COURT IN CONTROLLER OF ESTATE DUTY V. KRISHNA KUM AR DEVI (1988) 173 ITR 561 (ALL) HELD THAT IN INTERPRETING THE LEGAL FICTION THE COU RT SHOULD ASCERTAIN THE PURPOSE FOR WHICH IT WAS CREATED 2ND AFTER DOING SO ASSUME ALL FACTS WHICH ARE LOGICAL TO GIVE EFFECT TO THE FICTION HON'BLE SUPREME COURT IN CIT V. MOTHER INDIA REFRIGERATION PVT. LTD. (1985) 155 ITGR 711 (SC) HELD THAT LEGAL FIC TIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THEY MUST BE LIMITED TO THAT P URPOSE AND SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. IN CI T V BHARANI PICTURES (1981) 129 ITR 244 (MAD ) IT IS HELD THAT LEGAL FICTIONS ARE FOR A DEFINITE PURPOSE AND ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND SHOULD NOT BE EXTENDED BEYOND ITS LEGITIMATE FIELD. THE STATUTORY FICTION INTRODUCED IN ONE ENACTMENT CANNOT BE INCORPORATED IN ANOTHER ENACTMENT. THE POINT THAT L EGAL FICTION CANNOT BE EXTENDED TO A NEW FIELD WAS HIGHLIGHTED BY HON'BLE MADRAS HI GH COURT IN CIT V. RAJAM T.S (19SS) 125 ITR 207(MAD ) WHEREIN IT IS HELD THAT SE CTION 41(2) CREATES A LEGAL FICTION UNDER WHICH THE BALANCING CHARGE IS TREATED AS BUSINESS INCOME CHARGEABLE TO TAX BUT WHEN THIS AMOUNT IS DISTRIBUTED TO SHAREH OLDERS THEN IT WOULD NOT BECOME ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 11 DEEMED DIVIDEND AND IT WOULD BE ONLY A CAPITAL RECE IPT AND NOT DISTRIBUTION OF ACCUMULATED PROFITS. THUS A LEGAL FICTION WAS INVO KED IN THE HANDS OF THE ASSESSEE COMPANY AND WAS NOT EXTENDED IN THE HANDS OF THE SH AREHOLDERS. IN THE PRESENT CASE SECTION 50C CREATES A LEGAL FICTION FOR TAXIN G CAPITAL GAINS IN THE HANDS OF THE SELLER AND IT CANNOT BE EXTENDED FOR TAXING THE DIF FERENCE BETWEEN APPARENT CONSIDERATION AND VALUATION DONE BY STAMP VALUATION AUTHORITIES AS UNDISCLOSED INVESTMENT U/S 69. IN FACT SECTION 69 ITSELF IS A LEGAL FICTION WHEREBY INVESTMENT INTO AN ASSET IS TREATED AS INCOME IF IT IS NOT DISCLOSE D IN THE REGULAR BOOKS OF ACCOUNT. NO FURTHER LEGAL FICTION FROM ELSEWHERE IN THE STATUTE CAN BE BORROWED TO EXTEND THE FIELD OF SECTION 69. IT IS FOR THE LEGISLATURE TO INTRODU CE LEGAL FICTION TO OVERCOME DIFFICULTY IN TAXING CERTAIN RECEIPTS OR EXPENDITURE WHICH OTHERW ISE WAS NOT POSSIBLE UNDER NORMAL PROVISIONS OF THE ACT. IT IS WITH THIS PURPO SE THAT WHEN IT WAS FOUND DIFFICULT TO PREVENT TAX EVASION BY UNDERSTATING APPARENT SALE C ONSIDERATION AS COMPARED TO THE VALUATION MADE BY STAMP VALUATION AUTHORITIES FOR T HE PURPOSES OF LEVYING STAMP DUTY THEN IT WAS THOUGHT NECESSARY TO INTRODUCE SEC TION 50C FOR SUBSTITUTING APPARENT SALE CONSIDERATION BY VALUATION DONE BY STAMP VALUA TION AUTHORITIES. THIS FICTION CANNOT BE EXTENDED ANY FURTHER AND THEREFORE CANN OT BE INVOKED BY ASSESSING OFFICER TO TAX THE DIFFERENCE IN THE HANDS OF THE P URCHASER. HON'BLE MADRAS HIGH COURT IN CGT V R. DAMODARAN (2001) 247 ITR 698 HEL D THAT STAMP VALUATION AUTHORITIES HAVE THEIR OWN METHOD OF EVALUATING T HE PROPERTY. MERELY BECAUSE FOR THE PURPOSE OF STAMP DUTY PROPERTY IS VALUED AT HI GHER COST IT CANNOT BE SAID THAT ASSESSES HAS MADE MORE PAYMENT THAN WHAT IS ST ATED IN THE SALE DEED. HON'BLE ALLAHABAD HIGH COURT IN DINESH KURNAR MITTA L V. ITO (1992) 193 ITR 770 (ALL.) QUASHED THE ORDER OF AUTHORITIES BELOW WHEREIN HALF OF THE DIFFERENCE BETWEEN THE AMOUNT PAID AND THE VALUE FO R PURPOSES OF STAMP DUTY WAS ADDED AS INCOME OF THE ASSESSEE BY THE ASSESSING OF FICER. IT IS HELD THAT THERE IS NO RULE OF LAW TO THE EFFECT THAT THE VALUE DETERMINED FOR THE PURPOSES OF STAMP DUTY IS THE ACTUAL CONSIDERATION PASSED BE TWEEN THE PARTIES TO THE SALE. IN THE PRESENT CASE THE ASSESSING OFFICER HAS APPLIED THIS PROVISION OF SECTION 50C FOR THE COMPUTATION OF UNEXPLAINED INVESTMENT U/S.69B O F THE ACT AND WHICH IS NOT PERMISSIBLE UNDER THE ACT. APART FROM THE STAMP DU TY VALUATION THERE IS NOTHING ON RECORD WHICH SUGGESTS THAT THE REVENUE HAS PROVED T HAT THE ASSESSEE HAS ACCEPTED OVER AND ABOVE WHAT HAS BEEN RECORDED AS PURCHASE CONSIDERATION OF THE LAND IN THE INSTRUMENT I.E. THE SALE DEED. WE ARE IN FULL AGREEMENT WITH THE ARGUMENTS OF THE ITA NO.2576/AHD/2009 A.Y. 2006-07 ITO WD-4(3) SURAT V. SOLITAIRE FABRICS PVT. LTD. PAGE 12 ASSESSEE THAT SECTION 50C IS NOT APPLICABLE IN THE CASE OF PURCHASER AND THIS PROVISION BEING A DEEMING PROVISION WILL APPLY FOR DETERMINING THE FULL VALUE OF CONSIDERATION AS A RESULT OF TRANSFER OF CAPITAL AS SETS FOR THE PURPOSES OF COMPUTATION OF CAPITAL GAINS U/S.48 OF THE ACT. WE FURTHER FIN D THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE CONSIDERATION OVER AND ABOVE WHAT HAS BEEN RECORDED IN THE SALE DEED HAS BEEN MADE BY THE ASSESSEE AND IN THE ABSE NCE OF THE SAME NO ADDITION OF UNDISCLOSED INVESTMENT CAN BE MADE BY INVOKING T HE PROVISION OF SECTION 69B OF THE ACT. ACCORDINGLY WE CONFIRM THE ORDER OF CIT( A) DELETING THE ADDITION AND THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. 10. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 08/01/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 08/ 01/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-III SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD