2017 (2) TMI 1282 - HC - Income Tax

Determination of actual consideration paid - whether the sale consideration to be adopted is the apparent consideration as reflected in the registered deed of sale or the actual consideration said to have been paid by the assessee and reflected in the agreement of sale? - section 50 applicability - Held that - Tribunal, while rightly holding that the deeming provisions of section 50C are not applicable to a situation like the present one, erred in not taking into account various factors relevant to arrive at a proper determination of the actual consideration paid. This is on account of the fact that the assessee did not appear for the hearing and the matter was heard by the Tribunal exparte, qua the assessee. We have noticed that the assessee has nowhere explained why the sale deed was registered when, according to him, the consideration contained therein was not the actual sale consideration agreed upon, nor why an Addendum was not executed by the parties correcting the mistake in sale consideration, once the error was noticed. This, and all other relevant facts relating to the matter, require thorough examination to arrive at the actual consideration paid. In order to ensure that the matter is considered in the proper perspective and all relevant details are taken into account, we deem it fit to remit the issue to the file of the Assessing Officer to be considered and adjudicated upon de novo. The assessing officer shall afford adequate opportunity to the assessee to furnish all particulars as may be necessary to arrive at the real and actual price paid by the assessee for acquisition of the property.

Summary

Issues Involved:
1. Interpretation of sale consideration for computing capital gains.
2. Application of section 50C of the Income Tax Act.
3. Consideration of material evidence for determining cost of acquisition.

Issue 1: Interpretation of Sale Consideration:
The appellant contested the Income Tax Appellate Tribunal's decision regarding the sale consideration for computing capital gains. The initial agreement stated a consideration of ?46,00,000, but the final sale deed reflected a reduced amount of ?24,00,000. The Tribunal considered only the sale deed amount, leading to a dispute on the actual consideration paid. The High Court emphasized the need to determine the actual consideration, not just the apparent consideration in the deed. While acknowledging the importance of the deed amount, the Court highlighted the necessity to consider all relevant factors to ascertain the real consideration paid.

Issue 2: Application of Section 50C:
The Commissioner of Income Tax (Appeals) applied section 50C, allowing the assessing officer to substitute guideline value for consideration in computing capital gains. The Court noted that section 50C aims to address understatement of consideration compared to guideline value. However, the Court stressed that the actual consideration paid must be determined, not a notional or deemed amount. The Tribunal's error was noted in not considering various factors to determine the actual consideration. The Court emphasized the need for the assessee to provide necessary details to establish the real price paid for the property.

Issue 3: Consideration of Material Evidence:
The Court highlighted the importance of considering all relevant details to determine the actual consideration paid. The Tribunal's decision was criticized for not thoroughly examining factors such as the registration of the sale deed despite discrepancies in consideration amounts. The Court decided to remit the issue back to the Assessing Officer for a fresh adjudication, emphasizing the need for a comprehensive assessment considering all relevant facts. The Court allowed the appeal partly, emphasizing the importance of determining the actual consideration paid for the property acquisition.

In conclusion, the High Court's judgment focused on the need to determine the actual consideration paid for computing capital gains, emphasizing the importance of considering all relevant factors and material evidence in such assessments. The Court highlighted the inadequacy of solely relying on apparent consideration in sale deeds and stressed the significance of accurately determining the real consideration to ensure fair taxation.