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TMI Blog2022 (7) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. In term of the directions of Hon'ble Supreme Court, we condone the delay in filing of this appeal by assessee and admit the appeal for adjudication. 3. The only issue in this appeal of assessee is as regards to the order of PCIT assuming jurisdiction u/s.263 of the Act and consequently revising the assessment order by directing the AO to add back a sum of Rs.25 lakhs being difference in the purchase price of property as per the consideration recorded in the sale deed and value fixed as per guideline of sub registrar of the registration department to be added as per the provisions of section 56(2)(viib)(ii) of the Act. 4. Brief facts are that the assessee is an individual engaged in the business of construction of residential and commercial buildings i.e., real estate business. The assessee filed his return of income for assessment year 2015-16 on 28.03.2017 and accordingly, assessee's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odified accordingly by the PCIT. Aggrieved, assessee preferred appeal before the Tribunal. 5. Before us the ld.AR for the assessee Shri N. Arjun Raj, CA argued that the difference in the investment made by assessee of Rs.3.25 crores and the guideline value as per stamp duty valuation fixed by Stamp Valuation Authority at Rs.3.50 crores is only to the extent of Rs.7.69%. He stated that this difference in valuation adopted by Stamp Valuation Authority is marginal and this fact has been considered by legislature lately in section 56(2)(viib)(ii) which is substituted by 56(2)(x)(b)(A) of the Act and in which a concession is given or a mark-up is given whereby if the difference is 5% of the consideration, the same has to be ignored. The ld.AR took us through the relevant provision of section 56(2)(x)(b)(A) of the Act, which reads as under:- 56. Income from other sources. (1)............. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head ―Income from other sources, namely:- (i)............................................. (ii).................. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly substituted by section 56(2)(x)(b)(A) of the Act. The ld.AR stated that in the present case before us, difference is that 7.69% i.e., between the stamp value adopted by some valuation authority as per guideline value and sale deed registered by assessee. The ld.AR stated that in any case, this is highly debatable issue and once there is debate and AO has taken one of the possible view, the PCIT cannot revise that assessment u/s.263 of the Act for the reason that there is no error in the order of AO at that point of time. In view of this, the ld.AR only requested that the order of PCIT revising the assessment be quashed. 6. On the other hand, the ld. CIT-DR stated that ld.AR only arguing the equity principle and equity does not apply to income tax proceedings because equity is stranger to tax jurisprudence. The ld.CIT-DR stated that provisions of section 50C of the Act are independent and similarly a deeming provision of section 56(2)(viib)(ii) of the Act as applicable in the present case are independent and once deeming provisions are to be applied, these are to be applied as it is and no violence can be done to the deeming provision. 7. We have heard rival contentions and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come from business profits (section 43CA), capital gains (section SOC) and other sources (section 56) arising out of transactions in immovable property, the higher of sale consideration or stamp duty value was adopted. The difference was taxed as income both in the hands of the purchaser and the seller. 16.2 It has been pointed out that the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including shape of the plot or location. 16.3 In order to minimize hardship in case of genuine transactions in the real estate sector, section 43CA, section 50C and section 56 of the Income-tax Act have been amended to provide that no adjustments shall be made in a case ITA No. 4850/Mum/2019 Assessment year: 2011-12 Page 4 of 9 where the variation between stamp duty value and the sale consideration is not more than five per cent of the sale consideration. 16.4 Applicability: These amendments take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years Explanatory Notes to Finance Act 2020 Increase in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exceeds such consideration shall be charged to tax under the head "income from other sources". It also provide that where the assessee receives any immovable property for a consideration and the stamp duty value of such property exceeds five per cent of the consideration or fifty thousand rupees, whichever is higher, the stamp duty value of such property as exceeds such consideration shall be charged to tax under the head "Income from other sources". Thus, the present provisions of section 43CA, 50C and 56 of the Act provide for safe harbour of five per cent. Representations have been received in this regard requesting that the said safe harbour of five per cent may be increased. It is, therefore, proposed to increase the limit to ten per cent.. This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years. Thus, the safe harbour limit of 5% is applicable upto AY 2020-21 and 10% is specifically from AY 2021-22 onwards. It is humbly submitted that in the present case the variation is 6.55% which is more than specified safe harbour limit of 5%. It is further humbly submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded consequence could have retrospective effect, even though not specifically provided for, and speaking through one of us (i.e. the Vice President), the coordinate bench had, after a detailed analysis of the legal position, observed that, "Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced". Referring to this decision, and extensively reproducing from the same, including the portion extracted above, Hon'ble Delhi High Court, in the case of CIT Vs Ansal Landmark Township Pvt Ltd [(2015) 61 taxmann.com 45 (Del)], has approved this approach and observed that "(t)he Court is of the view that the above reasoning of the Agra Bench of ITAT as regards the rationale behind the insertion of the second proviso to Section 40(a)(ia) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lways be bonafide variations, though to a certain limited extent, in these estimations. Unless, therefore, some kind of a tolerance band or a safe harbour provision, in respect of such bonafide variations, is implicit in the scheme of law, the assessees are bound to face undue hardships. The mechanism under section 50C proceeds on the assumption that when the sale consideration is less than the stamp duty valuation, the sale consideration is to be treated as understated. This assumption is, however, laid to rest when the variations between the stated consideration and the stamp duty valuation figure are treated as explained. The insertion of the third proviso to Section 50C(1) provides for this tolerance band with respect to a certain degree of variations between the stamp duty valuation and the stated consideration of an immovable property. In other words, as long as the variations are within the permissible limits, the anti-avoidance provisions of Section 50C do not come into play. As we have noted earlier, the CBDT itself accepts that there could be various bonafide reasons explaining the small variations between the sale consideration of immovable property as disclosed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tify any particular time frame for implementing this enhancement of tolerance band or safe harbour provision. The reasons assigned by the CBDT, i.e., "the variation between stamp duty value and actual consideration received can occur in respect of similar properties in the same area because of a variety of factors, including the shape of the plot or location," was as much valid in 2003 as it is in 2021. There is no variation in the material facts in this respect in 2021 vis-à-vis the material facts in 2003. What holds good in 2021 was also good in 2003. If variations up to 10% need to be tolerated and need not be probed further, under section 50C, in 2021, there were no good reasons to probe such variations, under section 50C, in the earlier periods as well. We are, therefore, satisfied that the amendment in the scheme of Section 50 C(1), by inserting the third proviso thereto and by enhancing the tolerance band for variations between the stated sale consideration vis-à-vis stamp duty valuation to 10%, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to the date when the related statutory provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id document it is emphasised by the Central Board that the main objective of the provisions of Chapter XX-C is to check proliferation of black money in real estate transactions and to enforce declaration of the true value of immovable properties that are subject of transfer between the parties. The Central Board has pointed out in the said Instructions that, in administering the provisions of the said Chapter, it has to be ensured that no harassment is caused to bona fide and honest purchasers or sellers of immovable property and there is no erosion of the confidence of the public in the sense of justice and fair play of the Income Tax Department. Paragraph 3 of the Instruction makes it clear that the right of pre-emptive purchase has to be exercised by the appropriate authority only when it has good reason for acquiring the property. When the property purchased by the Central Government by an order of an appropriate authority is put up for sale the reserve price is required to be fixed at a minimum of 15% above the purchase price shown as the apparent consideration under the agreement between the parties. Thus it is pointed out by the Board that the right of pre-emptive purchase h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , semi-Government Organisations, Public Sector Undertakings, Universities etc.: (c) properties with bona fide tenancies of long standing; and (d) properties with too many restrictions on user. Subsequently, Hon'ble Supreme Court finally laid down the principle that where there is a significant under valuation of the property to the extent of 15% or more in the agreement of sale, as evidenced by the apparent consideration being lower than the fair market value by 15% or more, in that case only the provisions of chapter XX-C can be resorted to. Hon'ble Supreme Court finally in para 30 held as under:- 30. In the light of what we have observed above, we are clearly of the view that the requirement of a reasonable opportunity being given to the concerned parties, particularly, the intending purchaser and the intending seller must be road into the provisions of Chapter XX-C. In our opinion, before an order for compulsory purchase is made under Section 269UD, the intending purchaser and the intending seller must be given a reasonable opportunity of showing cause against an order for compulsory purchase being made by the appropriate authority concerned. As we have already pointed ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to read the requirement of such an opportunity would be to give too literal and strict an interpretation to the provisions of Chapter XXC and in the words of Judge Learned Hand of the United States of America "to make a fortress out of the dictionary." Again, there is no express provision in Chapter XX-C barring the giving of a show cause notice or reasonable opportunity to show cause nor is there anything in the language of Chapter XXC which could lead to such an implication. The observance of principles of natural justice is the pragmatic requirement of fair play in action. In our view, therefore, the requirement of an opportunity to show cause being given before an order for purchase by the Central Government is made by an appropriate authority under Section 269UD must be read into the provisions of Chapter XXC. There is nothing in the language of Section 269UD or any other provision in the said Chapter which would negate such an opportunity being given. Moreover, if such a requirement were not read into the provisions of the said Chapter, they would be seriously open to challenge on the ground of violations of the provisions of Article 14 on the ground of non-compliance with pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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