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2023 (3) TMI 149 - AT - Income TaxCapital gain computation - Addition invoking provisions of Section 50C - issue of valuation to DVO was rejected by taking view that it is a time barring matter - HELD THAT - Assessee right from the beginning is claiming that the assessee and his co-owner agreed that the purchaser shall bear the levy of charges for conversion of land use from Navi sharat to Juni sharat and the payment of Rs. 1.61 Crore was paid by the purchaser on behalf of assessee as the assessee and his brothers were not having such means. No investigation of facts about the payment of said premium paid by purchaser, in a consequence acquisition of asset, was carried out by the assessing officer or by ld CIT(A). Considering the confirmation filed by the purchaser that land premium of Rs. 1.61 Crore paid by the purchaser was integral part of the sale consideration it was paid by the purchaser, in furtherance of oral contract. No doubt such premium was paid by purchaser directly to the state revenue authorities. In making such payment apart from showing in sale deed, there was no financial loss to the State Government on payment of stamp duty as the stamp duty was collected as per jantri rate, which was much more than the sale consideration shown on the sale deed. The Hon ble jurisdictional High Court in PCIT Vs Ravjibhai Naginbhai Thesia 2016 (9) TMI 645 - GUJARAT HIGH COURT held that once reference made to the DVO under section 50C, even though it is lesser than value adopted by stamp valuation authority, the assessing officer is to compute capital gain by taking valuation given by DVO. Similar view was taken by Allahabad High Court in CIT Vs Dr Indira Swaroop Bhatnagar ( 2013 (2) TMI 456 - ALLAHABAD HIGH COURT - We find that that actual difference in the sale consideration claimed by the assessee at Rs. 3.41 Crore and the value determined by DVO at Rs. 3.56 Crore, is only 6.66%, therefore, the assessee is entitled for the benefit of third proviso to section 50C(1), which has been held as retrospective in series of decision by Tribunal. We direct the assessing officer to compute the capital gain by consideration the cost of entire asset at Rs. 3.41 Crore and grant benefit of third proviso to section 50C(1). In the result, the appeal of the assessee is allowed in the above terms.
Issues Involved:
1. Invocation of Section 50C of the Income Tax Act for deemed capital gains. 2. Determination of fair market value by the Departmental Valuation Officer (DVO). 3. Condonation of delay in filing the appeal. 4. Treatment of land premium paid for conversion of land use as part of sale consideration. 5. Consistency in the treatment of co-owners' cases. Detailed Analysis: 1. Invocation of Section 50C of the Act for Deemed Capital Gains: The assessee challenged the invocation of Section 50C by the Assessing Officer (AO), which led to the substitution of the sale consideration with the value determined by the Stamp Valuation Authority. The AO added Rs. 96.81 lakhs to the assessee's income based on this provision. The assessee argued that the land's fair market value was less than the Jantri value due to its "Navi Sharat" status, which restricted its use and transferability, and requested a reference to the DVO for a fair market valuation. 2. Determination of Fair Market Value by the DVO: The DVO estimated the land's fair market value at Rs. 3.54 crores, lower than the Stamp Valuation Authority's Rs. 4.70 crores but higher than the sale consideration of Rs. 1.80 crores. The CIT(A) directed the AO to recompute the capital gains based on the DVO's valuation. The Tribunal noted that the DVO's valuation being less than the Stamp Valuation Authority's value should be considered for computing capital gains, in line with the jurisdictional High Court's ruling in PCIT Vs Ravjibhai Nagin Bhai Thesia. 3. Condonation of Delay in Filing the Appeal: The Tribunal condoned the 91-day delay in filing the appeal, accepting the assessee's reasons, including pursuing rectification under Section 154 and health issues. The Tribunal emphasized that substantial justice should prevail over technicalities, referencing the Supreme Court's decision in Collector, Land Acquisition Vs Mst. Katiji. 4. Treatment of Land Premium Paid for Conversion of Land Use as Part of Sale Consideration: The assessee contended that the land premium of Rs. 1.61 crores paid by the purchaser for converting the land from "Navi Sharat" to "Juni Sharat" should be included in the sale consideration. The Tribunal accepted this argument, noting that the premium was an integral part of the sale consideration, bringing the total to Rs. 3.41 crores. The Tribunal held that the actual sale consideration, including the premium, was within 10% of the DVO's valuation, thus no addition under Section 50C would survive. 5. Consistency in Treatment of Co-Owners' Cases: The Tribunal observed that similar treatment should be accorded to all co-owners. In the case of one co-owner, the department accepted the sale consideration and the premium paid by the purchaser. The Tribunal directed that the same treatment be extended to the assessee, ensuring consistency and fairness. Conclusion: The Tribunal allowed the appeal, directing the AO to compute the capital gains based on the actual sale consideration, including the land premium, and to grant the benefit of the third proviso to Section 50C(1). The Tribunal emphasized the importance of consistency in the treatment of co-owners' cases and condoned the delay in filing the appeal, prioritizing substantial justice.
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