2024 (7) TMI 500 - AT - Income Tax

Capital gain computation - difference between the guidance value and sale consideration - applicability of section 50C of the Act and stamp duty value adopted by the Registering Authority - determination of tolerance limit of 10% - HELD THAT - The agreement is made on 15.10.2014 for Rs. 8,70,00,000. Accordingly there is a difference of Rs. 56,40,000. The Sale Deed was registered on 21.03.2016. The payment is received by the assessee through Post Dated Cheques which was encashed on 04.02.2015. Considering the entire arguments noted supra, as per the mandate provisions the tolerance band of 10% was introduced by the Finance Act, 2018. The difference between the sale consideration received and stamp duty valuation is less than 10% of the tolerance limit as per section 50C(1) third proviso, for purpose of section 48, be deemed to be the full value of the consideration. As relying on Amrapali Cinema 2021 (4) TMI 1160 - ITAT DELHI we hold that the actual consideration received is within the 10% of tolerance limit as per section 50C(1) third proviso, therefore the actual consideration received is to be considered as sale value for the purpose of computation of Long Term Capital Gain u/s 48 of the Act. and the amendment made by the Finance Act. 2018 will apply in the case of the assessee. Accordingly we allow the ground No. 4 of the assessee.

Issues Involved:
1. Validity of the assessment order passed in the name of a deceased assessee.
2. Legality of the reopening of assessment under Section 148 of the Income Tax Act, 1961.
3. Applicability of Section 50C of the Income Tax Act, 1961, and the corresponding additions made by the Assessing Officer.
4. Applicability of the 10% tolerance limit under the third proviso to Section 50C.
5. Liability to pay interest under Sections 234B and 234C of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order Passed in the Name of a Deceased Assessee:
The appellant argued that the assessment order was passed in the name of a deceased assessee, despite specific intimation of the death to the authorities. The appellant's legal heir filed a submission on behalf of the deceased. The Tribunal noted that the death certificate was submitted to the CIT(Appeals) and found that passing an assessment order in the name of a deceased person is bad in law and void ab initio.

2. Legality of the Reopening of Assessment under Section 148:
The appellant contended that the reopening of the assessment was invalid as the conditions precedent for issuing a notice under Section 148 were not satisfied. The Tribunal observed that the appellant had not been provided with the reasons for reopening, despite multiple requests, which is a violation of the Supreme Court's directive in G.K.N. Driveshafts. The Tribunal concluded that the Assessing Officer's failure to furnish reasons within a reasonable time made the reopening of the assessment bad in law.

3. Applicability of Section 50C and Corresponding Additions:
The appellant argued that the provisions of Section 50C were not applicable as the sale consideration received was more than the guidance value on the date of the agreement to sell. The Tribunal noted that the agreement to sell was executed on 15.10.2014, and the sale deed was executed on 21.03.2016. The appellant received post-dated cheques, which were encashed on 04.02.2015. The Tribunal found that the first and second provisos to Section 50C(1) applied, as the payment was received through cheques before the date of the agreement. Therefore, the guidance value on the date of the agreement should be adopted for computing the sale consideration.

4. Applicability of the 10% Tolerance Limit under the Third Proviso to Section 50C:
The appellant contended that the difference between the guidance value and the sale consideration was within the 10% tolerance limit as prescribed in the third proviso to Section 50C, which is retrospective in nature. The Tribunal relied on various judicial pronouncements, including Amrapali Cinema vs. ACIT and Maria Fernandes Cheryl vs. ITO, which held that the third proviso to Section 50C is curative and retrospective. The Tribunal concluded that the actual consideration received was within the 10% tolerance limit, and thus, the addition made by the Assessing Officer was erroneous and should be deleted.

5. Liability to Pay Interest under Sections 234B and 234C:
The appellant denied liability to pay interest under Sections 234B and 234C, arguing that the interest was levied erroneously. The Tribunal, considering the deletion of the addition under Section 50C, directed the deletion of the consequential interest levied under Sections 234B and 234C of the Income Tax Act, 1961.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the assessment order passed in the name of the deceased assessee, invalidating the reopening of the assessment, and directing the deletion of the addition made under Section 50C and the consequential interest levied under Sections 234B and 234C. The Tribunal emphasized that the amendments to Section 50C, including the 10% tolerance limit, are retrospective and applicable to the appellant's case.

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