2017 (11) TMI 1060 - AT - Income Tax

Taxability of the transaction with the builder - Capital gain computation - transfer u/s 2(47) - three flats stated in the agreement have yet not been given by the builder and the likelihood of getting it is also doubtful - LR has pointed out that there does not appear to be a transfer u/s 2(47) inasmuch as the absence of taking possession by the Transferee is quite significant, and shows that the transferee is not performing his part of the contract, and thus there is no transfer to workout capital gains; and the amount received is merely in the nature of advance - Held that - The aforesaid plea being set-up by the assessee requires a factual appreciation of the affairs, which could appropriately be undertaken at the level of the Assessing Officer. Notably, in the orders of the authorities below, there are significant gaps in culling out the proper fact-situation. For instance, the entire terms and conditions of the Conveyance Deed dated 10.08.2008 between the assessee and her family members and M/s. Saroj Associate, the builder on the other hand have also not been culled out and to compound the matters further, even before the Tribunal the copy of the agreement has not being filed. Therefore, in my view, it would be appropriate if the matter is revisited by the Assessing Officer who shall consider all the facts which have a bearing on the tax liability of the assessee vis-a-vis the transaction with the builder with respect to the Deonar property, and decide afresh. There is another fallacy which is quite apparent and needs to be examined. Pertinently, assessee had pointed out that the three flats have not been received and, therefore, the stated value of consideration was not crystallized. At this stage, the stated consideration was required to be crystallized, and only then it could be compared with the value adopted by the Stamp Duty Valuation authority for the purposes of section 50C of the Act. However, the Assessing Officer adopted the Stamp Duty valuation of the entire property; and, the same ought to have been appropriately dealt with by the lower authorities. However, I find that it has also been given a go-by and the CIT(A)who has upheld the action of the Assessing Officer in adopting the Stamp Duty valuation as the full value of the consideration for the purposes of computing Capital Gains. For all the above reasons, deem it fit and proper to set-aside the order of the CIT(A) and direct the Assessing Officer to consider the issue

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Determination of Long Term Capital Gains.
3. Application of Section 50C of the Income Tax Act.
4. Taxability of the transaction under Section 2(47)(v) of the Income Tax Act.
5. Consideration of cost of acquisition and exemption under Section 54 of the Income Tax Act.

Analysis of Judgment:

1. Condonation of Delay in Filing the Appeal:
The appeal was filed with a delay of 1406 days. The assessee sought condonation of delay supported by an affidavit citing financial constraints and lack of proper legal assistance. The Tribunal emphasized that the quality of explanation for the delay is more important than the length of the delay. The Tribunal referred to the judgment of the Hon'ble Madras High Court in the case of United Christmas Celebration Committee Charitable Trust vs. ITO, where a delay of 1631 days was condoned due to lack of legal assistance. The Tribunal also cited the Supreme Court's judgment in Collector, Land Acquisition vs. Mst. Katiji, which advocates a liberal approach towards condonation of delay to further the cause of substantial justice. Considering these precedents and the bona fide reasons provided by the assessee, the Tribunal condoned the delay.

2. Determination of Long Term Capital Gains:
The Assessing Officer computed the Long Term Capital Gain at ?18,36,213/- after adopting the full value of consideration at ?33,63,333/- based on the Stamp Duty valuation and allowing exemption under Section 54 for the purchase of a new residential property. The assessee contended that the entire consideration received was ?10,00,000/- and that the flats mentioned in the agreement were not received. The Tribunal noted that the CIT(A) allowed the benefit of the cost of acquisition but upheld the application of Section 50C by the Assessing Officer.

3. Application of Section 50C of the Income Tax Act:
The Assessing Officer applied Section 50C, adopting the Stamp Duty valuation of ?2,01,80,000/- for the property, resulting in the assessee's 1/6th share being valued at ?33,63,333/-. The CIT(A) upheld this valuation, noting that the taxability of capital gains does not require the entire amount to be actually received by the assessee. The Tribunal found that the issue required a factual appreciation of the terms and conditions of the Conveyance Deed and the actual receipt of flats.

4. Taxability of the Transaction under Section 2(47)(v) of the Income Tax Act:
The assessee argued that there was no transfer of capital asset as per Section 2(47)(v) since the builder had not commenced construction, and the possession of the property was not handed over. The Tribunal found merit in this argument, citing the Bombay High Court's judgment in Zuari Estate Development and Investment Co. Pvt. Ltd., which held that the absence of taking possession by the transferee indicates no effective transfer. The Tribunal directed the Assessing Officer to revisit the matter and consider all relevant facts.

5. Consideration of Cost of Acquisition and Exemption under Section 54:
The assessee claimed exemption under Section 54 for the purchase of a new residential property. The Assessing Officer allowed this exemption, reducing the capital gains accordingly. The Tribunal noted that the CIT(A) allowed the benefit of the cost of acquisition but failed to properly address the crystallization of the stated consideration and its comparison with the Stamp Duty valuation.

Conclusion:
The Tribunal set aside the order of the CIT(A) and remanded the matter back to the Assessing Officer for a fresh examination. The Assessing Officer was directed to consider the taxability of the transaction with the builder based on the material and evidence provided by the assessee, allowing a reasonable opportunity of being heard. The appeal was allowed in favor of the assessee.

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