2017 (11) TMI 2013 - AT - Income Tax

Short-term capital gains made u/s. 50C - AO adopted the jantri rate and made his own valuation on the basis of assessable rate of stamp duty on the date of registration of sale deed - rate adopted on the basis of information collected from Stamp Duty Authorities with regard to various rates which were adopted for the purpose of payment of stamp duty in respect of transfer of property in various area - Jantri rate is higher than the agreement value shown in the registered documents - AO observed that new jantri rate was outcome of survey held by Government in year 2006 and same was made applicable from 01.04.2008, hence, the AO was of the view that jantri rate of 3500 per sq. mtr is not the rate of year 2008 but it was well before the date of registration of document - HELD THAT - On the basis of information AO worked out the value of land sold and adopted the same for the purpose of stamp duty made taken the same for the purpose of computing capital gain. In our opinion, this exercise is to be made by the AO Stamp Duty Authorities and not by the AO. AO therefore, not justified to adopt the value other than as adopted by the Stamp Duty Authorities As per the provision of section 50C only assessed value by the Stamp Duty Authorities is to be considered for the purpose of sale consideration of property if the consideration shown in agreement to sale In doing so, less than the Stamp Duty Authorities valuation. In view of these facts and circumstances, and respectfully following the decision of Co-ordinate Bench 2011 (4) TMI 643 - ITAT, AHMEDABAD we do not find any fault or infirmity in the order of Id. CIT (A), fair same is upheld. Consequently, appeal of the revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of short-term capital gains under section 50C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Short-term Capital Gains under Section 50C of the Income Tax Act, 1961:

The Revenue's appeal challenges the CIT(A)'s order, which deleted an addition of Rs. 3,72,57,828 made by the AO under section 50C of the Act. The AO had made this addition based on the jantri rate being higher than the agreement value shown in the registered documents.

Brief Facts:
The assessee, an individual earning income from house property, partnership income, and short-term capital gains, sold his 53% share in a property located in Sachin, Surat, for Rs. 52,36,000. The cost of acquisition and stamp duty for the assessee's share was Rs. 9,74,888, resulting in a declared short-term capital gain of Rs. 42,61,112. The AO observed discrepancies in the payment dates and the jantri rates applicable before and after 01.04.2008. The AO calculated the jantri price at Rs. 5,81,80,500 for the entire property and determined a short-term capital gain of Rs. 3,72,57,828 for the assessee, which was added to the total income.

CIT(A)'s Findings:
The CIT(A) held that section 50C could not be invoked as the valuation by the Stamp Duty Authorities matched the agreement value. The CIT(A) stated that the AO could not substitute his own valuation for that of the Stamp Duty Authorities. The reference to the Valuation Officer (VO) by the AO was deemed incorrect, and the rejection of the VO's valuation was arbitrary. The CIT(A) concluded that the AO's actions lacked justification and deleted the addition.

Revenue's Argument:
The Revenue argued that the jantri rate on the registration date (25.07.2008) was higher than the stamp duty valuation based on the rate before 31.03.2008. Therefore, the AO was correct in adopting the market rate and stamp duty rate for valuation under section 50C.

Assessee's Argument:
The assessee contended that section 50C was not applicable as the sale consideration matched the stamp duty valuation accepted by the authorities. The assessee emphasized that the amendment to section 50C, which included "or assessed or assessable," came into effect from 01.10.2009 and was not applicable to the assessment year 2009-10.

Tribunal's Findings:
The Tribunal found that the assessee had entered into an agreement to sell on 29.03.2008, with cheques dated 24.03.2008 and 25.03.2008, which were cleared in September 2008. The deed was registered on 25.07.2008, and the stamp duty valuation matched the sale consideration. The Tribunal held that the AO was incorrect in adopting the market value assessable for stamp duty purposes, as the provisions of section 50C, effective from 01.10.2009, were not applicable for the year under consideration.

The Tribunal referred to the case of Hasmukhbhai M. Patel v. ACIT, where it was held that the AO could not substitute the value adopted by the Stamp Duty Authorities. The Tribunal concluded that the AO's action was unjustified and upheld the CIT(A)'s order, dismissing the Revenue's appeal.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition made by the AO under section 50C, as the stamp duty valuation matched the sale consideration, and the provisions of section 50C, effective from 01.10.2009, were not applicable for the assessment year 2009-10. The appeal of the Revenue was dismissed.

Order Pronouncement:
The order was pronounced in the open Court on 22.11.2017.