Section 50C shall not be invoked if variation is upto 10% of the Stampduty Value
Fact and Issue of the case
Briefly the facts of the case are that the assessee had originally filed his return of income for the A.Y. 2009-10 on 28.03.2011 admitting income under head ‘House property’ and ‘other sources’ amounting to Rs. 8,27,280/- and after claiming deduction u/s 54F, ‘Capital gain’ as ‘Nil’. Later, it came to the notice of the AO that during the F.Y. 2008-09, assessee along with 3 others had sold immovable property and the Market value of the property for stamp duty was more than the sale consideration stated in the conveyance deed. Hence, a notice u/s.148 was issued as there was an escapement of LTCG in view of the provisions of Sec. 50C of the Act. During Hie reassessment proceedings, the assessee submitted that she invested the sale proceeds in purchase of flat at Lodha Constructions as per the sale agreement dated 30.07.2010 and filed return of income for the A.Y. 2012-13 disclosing unutilized amount of sale consideration of Rs. 26,08,001/- as Capital gain computed in accordance with the provisions of Sec.50C. Accordingly, the reassessment for the A.Y. 2009-10 was made u/s143(3) rws 147 on 29.05.2014 accepting the income returned of 8,27,280/-
The Pr. CIT exercising the powers vested u/s. 263 of the I.T. Act, called for the assessment record of the assessee for the assessment year under consideration and found from the computation statement of total income that the LTCG was calculated by adopting the Market value at Rs.9,44,98,000/- and assessee being the 1/4th beneficiary at Rs. 2,09,62,515/· and after claiming deduction u/s. 54F towards investment in a flat an amount of Rs.26,08,20l/· was offered as capital gain for the A.Y, 2002-03. However, as verified from the records of Joint Sub-Registrar, Government of Telangana, the Market value of the above cited property was of Rs. 9,75,22.000/- and not Rs.9,44,98,000/- adopted by the assessee. Hence, the sale consideration was short considered to the extent of Rs.30,24,000/ and the assessee being 1/4th beneficiary. LTCG was admitted short by Rs.7,56,000/- However, the AO had not considered this amount for addition while finalizing the assessment for the year. Further, he observed that the amount deposited In CGAS was of Rs. 1,34,00,000/- as against the deemed consideration of Rs. 2,43,80,500/- (1/4th of Rs.9,75,22,000/-). Therefore, uninvested amount of 1,09,80,500/- is not eligible for deduction from capital gains for the A.Y. 2009-10 now under consideration. Another aspect noticed is that though assessee legal expenses of Rs.20,00,000/- in relation to transfer of the property has nor submitted any evidence during the assessment proceedings to substantiate the claim of expenses. Hence, 1/4th of legal expenses of Rs. 5,00,000/-needs to be disallowed. In view of the above observations, the Pr. CIT held that the assessment order u/s 143(3) rws 147 of the IT Act dated 29/05/2014 passed is held to be erroneous and prejudicial to the interests of revenue and therefore, set aside the assessment order and directed the AO to bring i) the differential capital gain of Rs. 7,56,000/- and ii) the remaining sale consideration of Rs. 38,39,500/- not deposited in CGAS on or before the specified date, to tax under the head LTGC in addition to the income already assessed in the assessment order dated 29/05/2014 and modify the assessment order accordingly. Aggrieved by the order of the Pr. CIT, the assessee is in appeal before the ITAT.
Observation of the court
The Tribunal has considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The AO passed the assessment order u/s 143(3)/147 and, thereafter, the Pr. CIT exercising his jurisdiction u/s 263 of the Act passed order on 17/03/2017 on the very same issues, which were examined and decided by the AO by issuing notice u/s 148 of the Act. In the statement of LTCG, the assessee had not adopted the market value/SRO value as sale consideration as per section 50C of the Act. In AY 2012-13, the assessee computed LTCG by adopting market value of Rs. 9,44,98,000/- and the assessee being 1/4th share beneficiary of Rs. 2,09,62,515/-, claimed deduction u/s 54F of Rs. 1,83,54,514/- against the investment in residential house and the amount of Rs. 26,08,201/- was offered as capital gain. But, later on, Pr. CIT verified from the record of the office of SRO and found that the market value of the above said property of Rs. 9,75,22,000/- and not Rs. 9,44,98,000/-, as adopted by the assessee. The 1/4th share of the assessee, which was sought to be admitted by the assessee at Rs. 7,56,000/- and before the Pr. CIT, the assessee admitted that there was a short of income of Rs. 7,56,000/- for the AY 2009-10. Further, on going through the latest amendments made by the Finance Act, in section 50(C)(1), 3rd proviso, where the value adopted or assessed or assessable by the same valuation authority does not exceed 10% of the consideration received or accruing as a result of transfer of consideration so received or accruing as a result of the transfer shall for the purpose of section 48 deemed to be the full value of the consideration. As per the above proviso, it is clear that if there is variation of 10% of stamp duty value adopted by the SRO or the value shown by the assessee for computation of capital gains, in such a case, the value offered for tax by the assessee is to be adopted and section 50C does not apply to the case of the assessee. This amendment take effect as retrospective in nature and this view is supported by the decisions of the coordinate benches of ITAT.
The assessee in AY 2012-13, has taken the value of Rs. 9,44,98,000/- whereas Pr. CIT adopted the value of Rs. 9,75,22,000/-, which is less than 10% as per the amended provision. Considering the above judgments, we are of the view that the order passed by the AO is not erroneous and prejudicial to the interests of revenue, as held by the Pr. CIT. In view of the above observations, we are of the view that once the AO has taken a view on the issue, on which two views are possible, the view which is taken by the AO, if Pr. CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law, as per the ratio laid down by the Hon’ble Supreme Court in the case of Malabar Industries ltd. Vs. CIT.
One of the categorical finding of the Hon’ble Supreme Court in the above judgement is, every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. Therefore, in the case under consideration, the view which has been taken by the AO is one of the courses permissible in law, which cannot be brushed aside by the Pr. CIT u/s 263 of the Act. In view of the above observations, we set aside the order of the Pr. CIT passed u/s 263 of the Act, and restore the order of the AO. Accordingly, the grounds raised by the assessee on this issue are allowed. In the result, appeal of the assessee is allowed in above terms.
The tribunal has ruled in favour of the assessee and disposed off the appeal