2019 (11) TMI 807 - AT - Income Tax

Short term capital gain - Applicability of the proviso to section 50C - adopting deemed sale value of Karol Bagh property u/s. 50C as per circle rate applicable as on 30.11.2011 against correctly claimed u/s. 50C as per the circle rates applicable as on 05.08.2011 (which is also the actual and apparent sale consideration) - HELD THAT - In terms of section 50C in cases where the consideration received on transfer of the capital asset being land or building, is less than the value adopted, assessed or assessable by stamp valuation authority for the purpose of the payment of a stamp duty in respect of such transfer, then the value so adopted, assessed or assessable shall for the purpose of computing capital gain be deemed as full value of consideration received as a result of transfer. In the case of the assessee Stamp Valuation Authorities valued the property for the purpose of a stamp duty at ₹ 1,84,50,000/-, therefore invoking the section 50C, the AO took the amount of full value consideration at ₹ 1,84,50,000/-as against value of ₹ 1,10,00,000/- declared by the assessee as actual sale consideration. It is also evident that before the CIT(A) assessee has not made any claim of existence of any such agreement dated 28/07/2011, a copy of which has been produced before us for the first time. As the copy of agreement has been produced before us for the first time, in the interest of substantial justice, we admit the same as additional evidence and restore the matter to the learned Assessing Officer afresh for deciding applicability of the proviso to section 50C. The assessee is directed to produce original copy of the agreement before the AO who may carry out inquiries as deemed fit for verifying genuineness or authenticity of the agreement. AO may, if required, verify the date of purchase of stamp used for the agreement purchase date from the register of the stamp vendor or attestation of the agreement from the register of Notary Public, who has attested the agreement or may examine the purchaser of the property and witness(es) who has signed on the copy of the agreement. It will be the responsibility of the assessee to produce all the necessary document or witnesses for carrying out necessary inquiries for verification of the genuineness or authenticity of the agreement. Upon verification, if the AO finds that the agreement is a genuine one, he may decide applicability of first proviso to section 50C of the in accordance with law. - Appeal of the assessee is allowed for the statistical properties.

Summary

Issues:
1. Valuation of property for computing short term capital gain under section 50C of the Income Tax Act.
2. Applicability of the proviso to section 50C regarding the date of agreement fixing consideration and date of registration for transfer of the capital asset.

Issue 1: Valuation of property for computing short term capital gain under section 50C:

The appellant challenged the adoption of the deemed sale value of a property at ?1,84,45,416 under section 50C, as opposed to the declared value of ?1,10,00,000. The Assessing Officer made an addition of ?74,45,416 as short term capital gain. The appellant contended that the sale value could not be disturbed without referring to a valuation officer as provided under section 50C(2) read with section 50C(3). The appellant argued that the declared sale consideration could not be disturbed without sufficient material justifying the higher valuation. The Commissioner of Income-tax (Appeals) upheld the addition, stating that the appellant failed to establish a contractual obligation to sell the property at the declared price. The appellant then submitted additional evidence before the ITAT, including an agreement dated 28/07/2011 fixing the consideration at ?1,10,00,000. The ITAT admitted this agreement as additional evidence and remanded the matter to the Assessing Officer for verification of its authenticity and applicability of the proviso to section 50C.

Issue 2: Applicability of the proviso to section 50C regarding the date of agreement and registration:

The ITAT considered the proviso to section 50C, which allows the value assessed by stamp valuation authorities on the date of agreement to be considered for computing the full value of consideration if the agreement and registration dates differ. The appellant relied on this proviso based on the agreement dated 28/07/2011. The ITAT admitted this agreement as additional evidence, directing the Assessing Officer to verify its authenticity and applicability of the proviso. The ITAT emphasized the importance of substantial justice and directed the Assessing Officer to conduct necessary inquiries, including verifying the date of stamp purchase, attestation of the agreement, and examining relevant witnesses. The ITAT allowed the appeal for statistical purposes, remanding the matter to the Assessing Officer for a fresh decision based on the additional evidence presented.

This detailed analysis of the judgment highlights the issues of property valuation for capital gains computation under section 50C and the application of the proviso to address discrepancies between the agreement and registration dates. The ITAT's decision emphasizes the importance of substantiating claims with appropriate evidence and provides a pathway for further verification by the Assessing Officer to ensure a just outcome.