2015 (12) TMI 987 - AT - Income Tax

Computation of capital gains - whether the date of agreement or the date of execution of sale deed has to be considered for the purpose of adopting the SRO value under S.50C? - Held that - For want of any evidence to the contrary, we hold that the property in question was in residential zone on the date of transfer and therefore, the SRO value for residential property as on 6.3.2006 or the sale consideration received by the assessee whichever is higher is to be adopted under S.50C of the Act. Assessing Officer is directed to compute the capital gains in the hands of the respective assessees accordingly. Reopening of assessment - Held that - As during the assessment proceedings under S.143(3) the capital gains was computed by taking the SRO value and the assessment order was reopened u/s. 147 of the Act for the very same reason, i.e. to consider the DVO report for adopting the value u/s. 50C of the Act. We find that after considering the fact that the DVO value was more than the SRO value, and hence the SRO value is to be adopted u/s. 50C of the Act, the Assessing Officer in the re-assessment proceedings confirmed the assessment order under S.143(3). Thus, as rightly pointed out by the assessee in his grounds of appeal, the assessment order under S.143(3) got merged with the assessment order under S.143(3) read with S.147 of the Act and the assessee s challenge against the same before the CIT(A) is maintainable and the CIT(A) s observations are not sustainable. Therefore, the order of the CIT(A) is set aside. However, since the common issue of computation of capital gains is arising in the case of all the co-owners including the assessee, we are of the opinion that no useful purpose would be served in remanding this case back to the file of the CIT(A). Therefore, we remand this case also to the file of the Assessing Officer for re-computation of capital gains in the hands of this assessee also in the light of the decision of this Tribunal in the case of other co-owners. - Decided in favour of assessee for statistical purposes

Issues Involved:

1. Computation of capital gains under Section 50C of the Income Tax Act.
2. Validity of proceedings under Section 147 of the Income Tax Act.
3. Adoption of SRO value as on the date of agreement vs. date of registration.
4. Nature and valuation of the property (residential vs. commercial).
5. Applicability of the proviso to Section 56(2)(vii)(b) retrospectively.

Issue-wise Detailed Analysis:

1. Computation of Capital Gains under Section 50C:

The primary issue in these appeals was whether the SRO (Sub-Registrar Office) valuation as on the date of registration of the sale deed should be considered for computing capital gains under Section 50C of the Income Tax Act. The assessees contended that the SRO value on the date of the agreement to sell (20.05.2005) should be used instead, citing the first proviso to Section 56(2)(vii)(b). The Tribunal noted that the issue is now settled in favor of the assessee by the Supreme Court in the case of Sanjeev Lal & Smt. Shantilal Motilal (365 ITR 389), which held that the SRO value as on the date of the agreement should be considered for capital gains computation. The Tribunal directed the Assessing Officer to compute the capital gains based on the SRO value as on the date of the agreement.

2. Validity of Proceedings under Section 147:

In the cases of Smt. Ruheema Shireen Begum and Smt. Shaheeda Begum, the validity of the proceedings under Section 147 was initially contested but was later not pressed by the assessees. The Tribunal rejected these grounds as not pressed. In the case of Shri Mohd. Yasser Sattar Baig, the assessment under Section 143(3) was completed by adopting the SRO value, and the reassessment under Section 147 was initiated after receiving the DVO report. The Tribunal found that the reassessment proceedings were maintainable and directed the Assessing Officer to recompute the capital gains in light of the Tribunal's decision for other co-owners.

3. Adoption of SRO Value as on the Date of Agreement vs. Date of Registration:

The assessees argued that the SRO value on the date of the agreement (20.05.2005) should be considered for capital gains computation. The Tribunal upheld this view, relying on the Supreme Court's decision in Sanjeev Lal & Smt. Shantilal Motilal, which established that the SRO value on the date of the agreement should be used if the agreement and registration dates differ.

4. Nature and Valuation of the Property (Residential vs. Commercial):

The assessees contended that the property was residential, but the SRO had adopted a commercial rate. The Tribunal examined the evidence, including the encumbrance certificate and a letter from HMDA, which indicated that the property was in a residential zone. The Tribunal held that the property was residential and directed the Assessing Officer to adopt the SRO value for residential property as on the date of transfer or the sale consideration received, whichever was higher, for capital gains computation.

5. Applicability of the Proviso to Section 56(2)(vii)(b) Retrospectively:

The assessees argued that the proviso to Section 56(2)(vii)(b), which allows for the adoption of the SRO value on the date of the agreement, should be applied retrospectively. The Tribunal noted that this proviso was introduced by the Finance Act of 2013, effective from 1.4.2014. However, since the Tribunal had already decided that the guideline value as on the date of the agreement should be adopted based on legal principles, it did not adjudicate this ground further, considering it an academic exercise.

Conclusion:

The Tribunal partly allowed the appeals, directing the Assessing Officer to recompute the capital gains based on the SRO value as on the date of the agreement and considering the property as residential. The appeal of Shri Mohd. Yasser Sattar Baig was treated as allowed for statistical purposes, with directions for recomputation of capital gains in line with the decision for other co-owners.

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