2022 (4) TMI 614 - AT - Income Tax

Revision u/s 263 - capital gains computation on the sale by the assessee of 23 acres of his land - cost of acquisition to be adopted - land being in his (including his predecessor s) possession since prior to 1.4.1981, and it was only the formal transfer of title that was completed in 1987 - section 50C applicability - HELD THAT - The cost, upon indexation, amounts as claimed, so that the assessee had per his return claimed excess cost. The difference though nominal, which is only incidentally so, validates the invocation of s.263. The assessee s consent is again only incidental as the cost adopted by him was neither enquired into in assessment nor, consequently, substantiated. The consent by the assessee was itself given in the s.263 proceeding, so that relying thereon, even as he challenges the said proceedings, is itself anomalous. The consent is even otherwise irrelevant inasmuch as there is no estopple against law. Further, the enquiry into cost only follows that into the manner and year of acquisition in the s.263 proceedings. Lack of enquiry, as explained by the Apex Court in Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT is per se a sufficient ground for assuming jurisdiction u/s. 263. Applicability of section 50C - We are unable to on the basis of the clear language of s. 50-C, draw any distinction between a genuine or a non-genuine agreement, or, those whose genuineness can be doubted and others. Rather, a non-genuine agreement, where so, has no sanctity in law, and any benefit there-under cannot be availed of under law. This is particularly so as the subject matter of s.50C is the transfer consideration (for the purpose of computing capital gains u/s. 48) and, inasmuch as it deems the same by adopting the value declared or assessed by the State for the purpose of levy of stamp duty on the transfer of immovable property, it fairly provides for a mechanism for an assessee to contest the said adoption in his case. This is even as the stamp valuation itself is guided by the consideration of fmv of the relevant property, making the provision complete and legally firm. It is for this reason that we stated the argument advanced by and on assessee s behalf to be flawed, both in law and on facts. To conclude, s.50C is clearly applicable, and which forms another reason for upholding the revision. If the amendment to s. 50C by way of first and second provisos thereto, by Finance Act, 2016, w.e.f. 1.4.2017, is prospective or retrospective? - The section, as originally cast, did not contemplate a situation where the transfer of an immovable property (IP) is not accompanied by, for any reason, execution of transfer deed. This led to an anomaly inasmuch as for such transfers it is only the stated consideration that would hold. This was met by adding the words or assessable after the word assessed in s. 50C(1) by Finance (No.2) Act, 2009, w.e.f. 01/10/2009, so that the stamp valuation as would have been applicable in respect of the transfer would get substituted as the deemed consideration. This amendment, made clearly to overcome an unintended consequence of a category of transfers, falling in the same class, escaping s.50C which seeks to provide a uniform basis for all transfers of IPs, was held as clarificatory and, thus, retrospective, by Hon'ble Calcutta High Court in Bagri Impex (P.) Ltd. 2013 (2) TMI 237 - CALCUTTA HIGH COURT - The amendment by Finance Act, 2016 falls in the same series. That is, to cure the hardship caused by the transfer not taking place in the year of the (transfer) agreement fixing the value of the transfer. The same, therefore, is, to our mind, also retrospective, even as held by the Tribunal in Hansaben Bhaulabhai Prajapati 2017 (11) TMI 510 - ITAT AHMEDABAD relied upon by the assessee. This gets also supported by the stipulation of the Agreement being accompanied or preceded by receipt of consideration, or part thereof, by cheque or electronically which is clearly to eschew back-dated documents. We, thus, have no doubt that the amendment by Finance Act, 2016 is retrospective, and that s.50C shall apply. Provision as it reads provides for reference to the VO in case of claim of the guideline value being in excess of the fmv as on the date of transfer, which in the instant case continues to be 28.10.2011, and not the date of the Agreement. That, however, makes the provision incoherent and internally inconsistent. When the guideline value as on the date of agreement substitutes that on the date of transfer, it is this value that would in a given case be liable to be disputed before the VO. There is nothing in the proviso to suggest restricting the exception only to cases governed by proviso to s.50C(1), and s.50C(2) is without prejudice to the entire s.50C(1). The assessee s challenge to the revisionary proceedings fails for being barred by time and, besides, is, even on merits, misconceived. As apparent from the facts discovered and found in the set-aside proceedings, as well as issues arising qua the applicability or otherwise of s.50C, discussed in detail in the instant order, prove the assessment subject to revision as being a clear case of non-application of mind by the assessing authority. The assessee s case on quantum, which is the same as found acceptance by the assessing authority at the time of the earlier assessment, is, in the main, that he was bound by the court order, which overlooks the fact that the court has only endorsed the agreement entered into by him and, two, the argument would be valid where the court had opined on the fmv which is the subject matter of s. 50C, of the subject land. The assessee s CO is supportive. The reference to the VO, sought initially by the assessee, stands abandoned in view of the stamp valuation as on the date of agreement, as against the date of transfer, having found acceptance in first appeal, which we have upheld. The AO shall, in computing the capital gains u/s. 48 on the subject land the cost of acquisition of which stands agreed to at ₹ 81,70,805, in case he has not already done so in compliance with the directions vide the impugned order, adopt the stamp valuation as of September, 2005 as its deemed sale consideration. Further, inasmuch as the sale deed in favour of OC was, despite being called for during hearing, not produced and, further, the assessee s Application before the Hon ble High Court making for sale at a total of 23.5 (instead of 23) acres of his land during the year, the AO shall bring the capital gains to tax accordingly. As explained by the Apex Court in CIT v. Walchand Co. (P.) Ltd. 1967 (3) TMI 2 - SUPREME COURT the Tribunal shall deal with and determine questions which arise out of the subject matter of the appeal in the light of the evidence, and consistently with the justice of the case.

Summary

Issues Involved:
1. Validity of the Section 263 order.
2. Applicability of Section 50C of the Income Tax Act, 1961.
3. Determination of the cost of acquisition for capital gains computation.
4. Retrospective applicability of the amendment to Section 50C by Finance Act, 2016.
5. Delay in filing the appeal against the Section 263 order.
6. Adoption of guideline value for stamp duty purposes.

Detailed Analysis:

1. Validity of the Section 263 Order:
The assessee's appeal against the Section 263 order was delayed by 208 days, explained by a change of residence. The Bench found the explanation insufficient as the assessee had received notices at the same address during the revisionary proceedings. The delay was attributed to gross negligence, and the appeal was dismissed as not maintainable. The Tribunal noted that the assessment subject to revision exhibited non-application of mind by the assessing authority, validating the invocation of Section 263.

2. Applicability of Section 50C of the Income Tax Act, 1961:
The assessee contended that Section 50C should not apply as the sale deed was executed pursuant to a court order. The Tribunal held that Section 50C applies as the court only endorsed the agreement entered into by the parties. The court did not opine on the fair market value (FMV) of the land, which is the subject matter of Section 50C. The Tribunal concluded that the provision applies irrespective of the court's endorsement of the agreement.

3. Determination of the Cost of Acquisition for Capital Gains Computation:
The Tribunal held that the cost of acquisition should be the fair market value as of 1.4.1981 (?10.41 lacs) instead of the cost in 1987 (?16.09 lacs), for which no basis was shown by the assessee. The cost, upon indexation, amounted to ?81,70,805, not ?84,20,852 as claimed by the assessee, resulting in an excess claim of ?2,50,047. This discrepancy justified the revision under Section 263.

4. Retrospective Applicability of the Amendment to Section 50C by Finance Act, 2016:
The Tribunal held that the amendment to Section 50C by Finance Act, 2016, which allows for the adoption of the guideline value as of the year of agreement, is retrospective. This amendment mitigates the hardship caused by delays in executing the transfer deed. The Tribunal referenced the decision in Hansaben Bhaulabhai Prajapati vs. ITO, supporting the retrospective application of the amendment.

5. Delay in Filing the Appeal Against the Section 263 Order:
The assessee's appeal against the Section 263 order was delayed by 208 days. The Tribunal found the explanation for the delay insufficient and attributed it to gross negligence. The appeal was dismissed as not maintainable due to the delay.

6. Adoption of Guideline Value for Stamp Duty Purposes:
The Tribunal held that the guideline value for stamp duty purposes should be adopted as of the year of the agreement (FY 2005-06) instead of the year of transfer (FY 2011-12). The Tribunal concluded that the conditions for the applicability of the amended Section 50C were substantially met, and the guideline value of September 2005 should be adopted for computing capital gains.

Conclusion:
The assessee's appeal against the Section 263 order was dismissed as not maintainable due to the delay. The Tribunal upheld the applicability of Section 50C and the retrospective application of the amendment by Finance Act, 2016. The cost of acquisition was determined based on the fair market value as of 1.4.1981. The guideline value for stamp duty purposes was adopted as of the year of the agreement. The Revenue's appeal was dismissed, and the assessee's cross-objection was allowed.