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TMI Blog2023 (6) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... at it would be in the fitness of things if the impugned order on this score is set aside and the matter is remitted to the file of the AO for making a reference to the DVO for determining the value of the property afresh - Computation of capital gain will be done by the AO after allowing a reasonable opportunity of hearing to the assessee. Additional alternative ground of assessee contending that deduction of cost of acquisition should be given in the computation of the capital gain - As seen that the AO computed capital gain at the gross value of stamp value without allowing any deduction towards cost of acquisition and cost of improvement etc. It is axiomatic that capital gain does not refer to taxing the gross receipt. Section 48 of the Act clearly provides the mechanism for computation of capital gain by stating that cost of acquisition of the asset and cost of any improvement should be reduced from the full value of consideration, in addition to the expenditure incurred wholly and exclusively in relation to the transfer. It is, therefore, directed that while computing the capital gain in the hue of the above observations, the AO shall also grant deduction towards cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant material on record, it is found as an admitted position that the assessee, along with other co-owners, entered into development agreement with M/s. Kunal Realty on 22-01-2016. This agreement was duly registered with stamp value of Rs.10.31 crore on which stamp duty of Rs.61,93,000/- and registration fees of Rs.30,380/- was paid by M/s. Kunal Realty. A copy of the registered agreement has been placed at page 7 onwards of the paper book. This agreement, whose English translation has been provided at page 198 onwards of the paper book, provides through clause (EE) of the preamble that the Vendors had obtained Industrial Exemption order from Hon ble Saha Sanchalak Udyog and Vice Secretary Government of Maharashtra in accordance with Urban Land (Ceiling and Regulation) Act for the first time in year 1986 but in the year 2001, the entire land was declared as non-vacant land. However, in other rights column of 7/12 extract, a remark has been given said property is entitled for exemption order but the Vendors needs to get deleted said remark within three months. Clause (F) of the preamble further refers to encroachments on the said property on account of use by the third person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration. On one hand M/s. Kunal Realty paid Rs.1.54 crore to Electricity department and also stamp duty of Rs.61.93 lakh at the time of registration of the transfer of development agreement, on the other hand, there is a claim by the assessee that the possession of the said land was and has not been transferred to M/s. Kunal Realty. A confirmation letter dated 20-05-2023 from M/s. Kunal Realty has been placed on record as per which the possession of land was still not transferred because of encroachment by school and other few parties not having been cleared. It further states that the development activities on this land have not been started. On a specific query, the ld. AR admitted that Kunal Property has not taken up any civil proceedings against the assessee for recovery of the amounts spent or cancellation of the agreement. 7. The mere fact that the `possession has not been transferred cannot be decisive as to the `transfer inasmuch as there can be a transfer of an encumbered property as well resulting into liability towards capital gains. If a buyer purchases an encumbered property and takes upon himself the task of removing the encumbrances, it will still amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that immediately after entering into agreement for purchase, the assessee also entered into simultaneous agreement to sell the same property to one Mr. Ravindra N. Sakla, as per the terms of which Mr. Sakla paid a part consideration to the sellers of the assessee. The assessee was called upon to explain as to why the provisions of section 56(2)(vii)(b) of the Act be not invoked in respect of the difference between the stamp value and declared consideration in sale (Sathekhat) executed through registered deed. The assessee submitted that the purchase was not complete. The AO observed that after the purchase of land, the assessee entered into an agreement to sell the same and hence the assessee s claim that the purchase was not complete, was wrong. He invoked the provisions of section 56(2)(vii)(b) of the Act and added a sum of Rs.4,95,37,200/-, being, the difference between circle rate of the land and the declared consideration of Rs.1,85,00,000/-. No relief was allowed in the first appeal. 12. After considering the rival submissions and perusing the relevant material on record, it is observed that the assessee did purchase the land at Survey No.24, Balewadi, Haveli, Pune throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer. The word `may in such provision has been interpreted as `shall in many cases, making it mandatory on the part of the AO to make a reference to the DVO, where the assessee asserts that the stamp value is excessive. The additional ground raised before the ld. CIT(A) in this regard has remained undisposed off, which in our considered opinion, is not correct. Going with the mandate of the third proviso to section 56(2)(vii)(b), we are of the considered opinion that it would be in the fitness of things if the impugned order on this score is set aside and the matter is remitted to the file of the AO for making a reference to the Departmental Valuation Officer for determining the value of the property afresh. It is thereafter that the computation of capital gain will be done by the AO after allowing a reasonable opportunity of hearing to the assessee. 14. At this stage, it is relevant to mention that the assessee has raised an additional alternative ground contending that deduction of cost of acquisition should be given in the computation of the capital gain. It is seen that the AO computed capital gain at the gross value of stamp value without allowing any deduction towards ..... X X X X Extracts X X X X X X X X Extracts X X X X
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