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TMI Blog2010 (3) TMI 886X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessment order, on account of investment in GIDC plot not fully disclosed in the books of account under section 69B of the Income-tax Act." 3. During the course of assessment proceedings, the Assessing Officer found that the assessee has purchased land along with building on 22-12-2003 from Selecto Plot No. 30/4, Phase-III, GIDC Industrial Estate, Naroda, Ahmedabad amounting to Rs. 18.90 lakhs, through deed of assignment and stamp duty of Rs. 2,11,700 was paid thereon. The Assessing Officer noted from the Sale Deed that the Sub-Registrar, Ahmedabad-6 (Naroda) had registered the document vide Registration No. 3758/2003 and had collected additional stamp duty of Rs. 3,47,337 vide Receipt No. 2398371, dated 29-12-2003. According to Assessing Officer, the Sub-Registrar has assessed the value of property at Rs. 49,91,400 at the prevalent market value as per the 'Jantri' and additional stamp duty at the rate of 10.8 per cent was collected from the assessee. The assessee has declared the purchase consideration in books of account at Rs. 18.90 lakhs only as against the value determined by the revenue authorities at Rs. 41,91,400. Accordingly, assessee has not disclosed the undisclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the buyer equating the deemed sale consideration for the purchase consideration. The Assessing Officer has not found that the appellant had paid more than recorded in the books of account. Admittedly, the appellant paid extra stamp duty as determined by the Registration Officials. But that alone is not conclusive or reasonable proof that there was any excess investment. In that view of the matter, the decisions relied on by the appellant shall be of assistance to the appellant's claim and, accordingly, I hold that the addition made by Assessing Officer is purely on notional basis not supported by either facts or a legal basis but only on presumption. In that view of the matter, the addition made under section 69B is directed to be deleted." Aggrieved, revenue came in appeal before us. 4. We have heard the rival contentions and gone through the facts and circumstances of the case. We have also perused the case records including the assessment order as well as the order of CIT(A). Now the only issue in this appeal of the revenue is that, whether the provision of section 50C of the Act applies to purchaser or not. For this, we have to go to the relevant provision of section 50C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The relevant provision of section 50C of the Act was explained and elaborated in the following portion of the Departmental Circular No. 8 of 2002, dated 27-8-2002, as under :- "37. Computation of capital gains in real estate transactions, - 37.1 The Finance Act, 2002 has inserted a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property. 37.2 It provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed, accordingly, under section 48 of the Income-tax Act. 37.3 It is further provided that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer, and he has not disputed the value so adopted or assessed in any appeal or revision or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act 1957, shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act. The Valuation Officer shall be the Valuation Officer as defined in clause (c) of section 2 of the Wealth-tax Act, 1957. The proposed sub-section (3) provides that where the value ascertained under sub-section (2) exceeds the value adopted or assessed by the authority referred to in sub-section (1), the value so adopted or assessed by the authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. This amendment will take effect from 1st April, 2003, and will, accordingly, apply in relation to the assessment year 2003-04 and subsequent years." Memorandum Explaining Provisions of section 50C in the Finance Bill, 2002, as under :- "The Bill proposes to insert a new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of property. (ii)It is open to the taxpayer to plead that such stamp value is abnormal and contest the same in appeal under the stamp law requiring adoption of reduced value. If such value is reduced in appeal under the provisions of the relevant stamp law, such reduced value would alone be adopted. (iii)Where such stamp value is not disputed, it is open to the assessee to require the Assessing Officer to refer the valuation to the Valuation Officer, who shall fix the valuation by adoption of the procedure prescribed under section 16A of the Wealth-tax Act. It is such value, which will be adopted by the Assessing Officer. We further find from the Memorandum Explaining the provision of section 50C in the Finance Bill, 2002, which clearly states that where the consideration declared to be received or accruing as a result of transfer of land or building or both is less than the value adopted or assessed by any authority of a State Government for the purposes of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains shall be computed, accordingly, under section 48 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp;(Mad.), it is held that legal fictions are for a definite purpose and are limited to the purpose for which they are created and should not be extended beyond its legitimate field. The statutory fiction introduced in one enactment cannot be incorporated in another enactment. The point that legal fiction cannot be extended to a new field was highlighted by Hon'ble Madras High Court in CIT v. T.S. Rajam [1980] 125 ITR 207 wherein it is held that section 41(2) creates a legal fiction under which the balancing charge is treated as business income chargeable to tax but when this amount is distributed to shareholders then it would not become deemed dividend and it would be only a capital receipt and not distribution of accumulated profits. Thus, a legal fiction was invoked in the hands of the assessee-company and was not extended in the hands of the shareholders. In the present case, section 50C creates a legal fiction for taxing capital gains in the hands of the seller and it cannot be extended for taxing the difference between apparent consideration and valuation done by Stamp Valuation Authorities as undisclosed investment under section 69. In fact, section 69 itself is a legal fic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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