Saturday, May 10, 2014

PENALTY UNDER SECTION 271(1)(c) NOT LEVIABLE WHEN AN ASSESSEE ACTED IN BONA FIDE BELIEF OR THE ISSUE WAS CONTROVERSIAL?

[2014] 41 taxmann.com 165  (Article)
PENALTY UNDER SECTION 271(1)(c) NOT LEVIABLE WHEN AN ASSESSEE ACTED IN BONA FIDE BELIEF OR THE ISSUE WAS CONTROVERSIAL?
AKHILESH KUMAR SAH
Advocate
Introduction
1. The penalty under section 271(1)(c) has remained the most vexing one for the assessees. A lot of cases have been decided on the imposition of penalty while many rulings have also relieved assessees. The basic thing to save penalty is that there should not be mens rea and there should not be deliberate action on the part of the assessee to evade tax. Many a times an assessee acts honestly without having any mala fide intention of evading tax under his bona fide belief or where a particular circumstance remains the controversial, i.e., more in favour of assessee, in those cases the penalty levied under section 271(1)(c) of the Income- tax Act, 1961(hereinafter referred to as 'the Act') can be deleted on the facts & circumstances of the case.
2.1 Relevant Case Laws - The Supreme Court in Price Waterhouse Coopers (P.) Ltd. v. CIT [2012] 348 ITR 306/25 taxmann.com 400/211 Taxman 40, : held that all that happened in the present case was that through a bona fide and inadvertent error the assessee failed to add the provision for gratuity to its total income. This could only be described as a human error which we are all prone to make. The calibre and expertise of the assessee had little or nothing to do with the inadvertent error. That the assessee should have been careful could not be doubted, but the absence of due care, would not mean that the assessee was guilty of either furnishing inaccurate particulars or was attempting to conceal its income. Consequently, given the peculiar facts of this case, the imposition of penalty on the assessee was not justified.'
2.2 In Dy. CIT v. Rural Electrical Co-operative Society Ltd. [2006] 152 Taxman 237/[2005] 279 ITR 319 (M.P.), the AO imposed penalty of Rs.1 lakh; it was set aside by CIT (Appeals) and the order of CIT (appeals) was maintained by the Tribunal holding, inter alia, that no case for imposing penalty under section 271(1)(c) was made out, so far as applicability of the Explanation to section 271(1)(c) was concerned, the same was not attracted. The issue of Explanation was considered on facts and it was held that the same was properly explained on facts, every concealment would not attract the rigour of section 271(1)(c); it must be deliberate and intentional being in the knowledge of assessee so as to evade payment of income-tax. The assessee, being a non-profit organization, managed and controlled by the Government of India for supply/distribution of electricity in the State, it could not be held that they had any deliberate intention to evade payment of tax. If due to some accountancy system maintained, one entry could not be subjected to tax, the same was rightly not made basis for imposing a penalty of Rs.100,000 under section 271(1)(c).
2.3 Pandit Govind Prasad Mishra v. CIT  - The Allahabad High Court, in the case of Pandit Govind Prasad Mishra v. CIT [1999] 238 ITR 338/[2000] 109 Taxman 160, held that a reading of section 271(1)(c) made it abundantly clear that the amount added or disallowed as a result of the rejection of any explanation offered by such person, if such explanation is bonafide and all the facts relating to the same and material to the computation of his total income are disclosed, no penalty proceedings could be initiated.
2.4 Bharat Rice Mill v. CIT -In Bharat Rice Mill v. CIT [2005] 278 ITR 599/148 Taxman 145 (All.), while completing the reassessment, the AO issued penalty notice to the applicant-rice miller in terms of section 271(1)(c). It was explained on behalf of the applicant before the AO that "non-disclosure of closing stock of Ghuta (rice) was not intentional and it was only a mistake by the accountant not to have included it in the closing stock".
The AO did not accept the explanation to be satisfactory and he imposed the penalty of Rs. 33,380. The Allahabad High Court held that the word "concealment" inherently carried with it the element of mens rea. The explanation offered by the applicant in the present case was bona fide also stood substantiated specially when the closing stocks of Ghuta rice and Kinki rice though omitted to had been disclosed in the previous year relevant to the assessment year in question had been voluntarily disclosed in the revised return filed by the applicant and which stocks had been bona fide disclosed by the applicant in the subsequent assessment year, i.e., 1982-83, and had also been subjected to tax in that year also, apart from being subjected to tax in the assessment year 1981-82 by the re-assessment order. Thus, the Tribunal was not justified in upholding the levy of penalty.
2.5 CIT v. JKA Subramania Chettiar - In CIT v. J K A Subramania Chettiar [Appeal No. 560 of 2009, dated 4-5-2010] the assessee had claimed deduction under section 80-IA under the bona fide belief that it was entitled to deduction under section 80-IA of the Act. Thereafter, the assessee had withdrawn the same vide its revised return. According to the Tribunal, when the assessee had committed the default under a bona fide belief which was rectified by filing a revised return, it could not be held liable for penalty under section 271(1)(c) of the Act.
The Gujarat High Court held that in the light of the concurrent findings recorded by the Commissioner (Appeals) as well as by the Tribunal, it was apparent that the assessee had bona fide made a claim for deduction under section 80-IA of the Act, which came to be rectified by filing a revised return withdrawing the claim and that, as such, there was no concealment or furnishing of inaccurate particulars of income on the part of the assessee.
[Also see CIT v. J.K.A. Subramania Chettiar [1977] 110 ITR 602 (Mad.)].
2.6 CIT v. Harshvardhan Chemicals & Minerals Ltd. - The Rajasthan High Court in CIT v. Harshvardhan Chemicals & Mineral Ltd. [2003] 259 ITR 212/133 Taxman 320, has held that when the assessee claimed some amount that was debatable, in such cases, it could not be said that the assessee had concealed any income or furnished inaccurate particulars of income for the evasion of tax.
2.7 Dhoolie Tea Co. Ltd. - In the case of CIT v. Dhoolie Tea Co. Ltd. [1998] 231 ITR 65, the Calcutta High Court has held that where the assessee had bona fide belief that his income was not taxable and he had failed to disclose such income under bona fide belief, no penalty had to be imposed under section 271(1)(c) of the Act.
2.8 CIT v. Reliance Petroproducts (P.) Ltd.  - In CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322, the Supreme Court had observed that because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1) (c). That is clearly not the intendment of the Legislature.
2.9 In CIT v. Sambhav Media Ltd. [2013] 32 taxmann.com 371 (Guj.) for the assessment year 2000-01, the assessee claimed deduction under section 24 as well as also for depreciation. The Assessing Officer disallowed deduction on plea that assessee was disentitled to claim double deduction of depreciation as well as deduction under section 24 and made addition to its income. The AO also imposed penalty under section 271(1)(c) upon it. The Gujarat High Court held that this being a matter of bona fide difference of opinion between assessee and department regarding allowability of claim, imposition of penalty was not justified in the case.
2.10 In Dy. DIT (International Taxation)-2(1) v. Satellite Television Asian Region Ltd. [2012] 23 taxmann.com 100/[2013] 53 SOT 22 (Mum.) (URO) relying on the decision in CIT v. Eli Lilly & Co. (P.) Ltd. [2009] 312 ITR 225/178 Taxman 505 (SC), held that if the assessee had a bona fide belief that it was not required to deduct tax at source even if the amount was held taxable later on, would not result in levy of penalty on it under section 271C of the Act.
2.11 The Apex Court in the case of K.C. Builders v. Asstt. CIT [2004] 135 Taxman 461/265 ITR 562 (SC) has observed at page 425 as follows :
"One of the amendments made to the above-mentioned provisions is the omission of the word 'deliberately' from the expression 'deliberately furnished inaccurate particulars of such income'. It is implicit in the word 'concealed' that there has been a deliberate act on the part of the assessee. The meaning of the word 'concealment' as found in Shorter Oxford English Dictionary, third edition, Volume I, is as follows:
'In law, the intentional suppression of truth or fact known, to the injury or prejudice of another'.
The word 'concealment' inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if it takes out the case from the purview of non-disclosure, it cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income, unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under section 271(1)(iii) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. Where the additions made in the assessment order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment and, therefore, in such a case no such penalty can survive and the same is liable to be cancelled as in the instant case. Ordinarily, penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled as in the instant case ordered by the Tribunal and later cancellation of penalty by the authorities."
2.12 In Northland Development & Hotel Corpn. v. CIT [2012] 349 ITR 363/25 taxmann.com 369/210 Taxman 249 (SC), the outstanding balance of loan was shown by appellant as Rs. 52,07,873 along with interest while the amount payable in the bank books was Rs. 42,45,477. Due to classification by bank the loan as a non-performing asset the interest was probably not charged by bank. The loan was settled to be paid by appellant through consent decree, to the tune of Rs.42,45,477.
On the issue of levy of penalty before the Apex Court (on the appeal against the decision of the Allahabad High Court) it was held, on the facts and circumstances of the case, that the penalty was not leviable under section 271(1)(c).
2.13 The SC in Cement Marketing Co. of India Ltd. v. Asstt. CST [1980] 124 ITR 15/4 Taxman 44 has held that a return cannot be "false", unless there is an element of deliberateness in it. If there was omission to include certain item in return of turnover on bona fide belief that it was not taxable, the return was not false (held in respect of S. 43 of M.P. General Sales Tax Act, 1958/s. 9(2) of Central Sales Tax Act,1956).
2.14 DIT v. Asia Attractive Dividend Stock Fund - Penalty for the concealment of income could not be levied in the case of bona fide error which was rectified by the assessee on its own [DIT v. Asia Attractive Dividend Stock Fund [2013] 35 taxmann. com 265 (Bom)].
2.15 CIT v. Trident Infotech Corp. Ltd. - Where additions were made on the basis of decision of the High Court, it did not establish that assessee had earlier concealed its income or furnished inaccurate particular of income, penalty was deleted. Also, the assessee claimed deduction on account of bad debt and later on he withdraw this treating it to be an inadvertent mistake and offered same as additional income, it was held that assessee had not furnished particulars of income [CIT v. Trident Infotech Corp. Ltd. [2013] 34 taxmann. com 132/216 Taxman 58 (Punj. & Har.) (Mag.)].
2.16 CIT v. Madhushree Gupta - Mere making of claim, which was not sustainable, in law, would not ipso facto, amount to furnishing inaccurate particulars regarding income [CIT v. Madhushree Gupta [2013] 33 taxmann.com 286/216 Taxman 65 (Delhi) (Mag.)].
2.17 CIT v. Jaswinder Singh Ahuja  - Where issue of capital gains was debatable at the time of filing of return, penalty was deleted [CIT v. Jaswinder Singh Ahuja [2013] 34 taxmann.com 116/216 Taxman 67 (Delhi)(Mag.)].
2.18 CIT v. Celetronix Power India (P.) Ltd. - When assessee had claimed deduction relying upon a judgment which was subsequently reverted by the Supreme Court, penalty was deleted [CIT v. Celetronix Power India (P) Ltd. [2013] 34 taxmann.com 90/216 Taxman 68 (Mag.)/352 ITR 70 (Bom.)].
2.19 CIT v. Yahoo India (P.) Ltd. - Where the very issue was debatable, penalty was held to be not justified [CIT v. Yahoo India (P) Ltd. [2013] 33 taxmann.com 332/216 Taxman 66 (Bom.)(Mag.)].
2.20 CIT v. Sundaram Finance Ltd. - When assessee withdrew excess claim only in view of action initiated by I T Deptt., there being lack of bona fide on the part of the assessee, penalty under section 271(1)(c) levied on the assessee was not deleted [CIT v. Sundaram Finance Ltd. [2013] 35 taxmann.com 65/216 Taxman 60/353 ITR 375 (Mad.)].
2.21 Hindustan Steel Ltd. v. State of Orissa - In Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), the Supreme Court has held that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed, unless the party obliged by either acting deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances.
Concluding remark
3. It appears that the issue of levy of penalty under section 271(1)(c), where the assessee has acted in a bona fide belief is finally in the favour of him in view of various decisions, but where the assessee lacks bona fide action, penalty can be levied.
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• DT - Sec. 271.

u/s 271(1)(c)- Krishi Tyre Retreading & Rubber Industries

IT: Merely because books of account of assessee were rejected or estimated addition was made, no penalty is leviable under section 271(1)(c)
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[2014] 44 taxmann.com 9 (Rajasthan)
HIGH COURT OF RAJASTHAN
Commissioner of Income-tax
v.
Krishi Tyre Retreading & Rubber Industries*
NARENDRA KUMAR JAIN AND J.K. Ranka, JJ.
D.B. ITA No. 542 of 2008
SEPTEMBER  19, 2013 
Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income (In case of addition on estimate basis) - Assessment year 1996-97 - Whether where addition had been sustained purely on estimate basis and no positive fact or finding had been found so as to even make said addition, no penalty was leviable under section 271(1)(c) - Held, yes [In favour of assessee]
FACTS


A survey operation came to be carried out at the business premises of the assessee, where some documents were found, which, according to the Assessing Officer, were not satisfactorily explained and, accordingly, on account of the said discrepancies, an estimated addition was made of Rs. 1,44,000. The addition was sustained by the Commissioner (Appeals) but on second appeal, the Tribunal restricted the addition to Rs. 1,00,000 preferring to the fact that the addition was made on estimate basis by lower authorities.

Based on such addition, the Assessing Officer levied penalty under section 271(1)(c).

On appeal, the Commissioner (Appeals) sustained the penalty.

On second appeal, the Tribunal deleted penalty.
HELD


On a perusal of the facts it transpired that the addition has been sustained purely on estimate basis and, no positive fact or finding has been found so as to even make the said addition. It is a pure guess work and on such guess work or estimation, no penalty under section 271(1)(c) can be said to be leviable. For imposing penalty under section 271(1)(c), the Assessing Officer has to clearly prove the conduct of the assessee, which in this case, has not been proved. Merely because the books of account of the assessee were rejected or estimated addition was made, no penalty is leviable. The assessee offered an explanation which could not be termed as not bona fide. In the absence of any corroborative evidence to prove the charge of concealment, the penalty could not be imposed. [Para 9]

Penalty proceedings are entirely distinct from assessment proceedings and, howsoever relevant and good the findings in assessment proceedings may be, they are not conclusive so far as the penalty proceedings are concerned. [Para 10]

From the above discussion, it can be seen that the opinion of the Tribunal with respect to the deletion is based on appreciation of evidence on record. [Para 11]

The finding reached by the Tribunal is essentially a finding of fact and no substantial question of law is involved in the instant appeal. Accordingly, the appeal is dismissed. [Para 24]
CASES REFERRED TO

Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218 (SC) (para 12), CIT v. Kailash Crockery House [1999] 235 ITR 544/107 Taxman 386 (Pat.) (para 13), CIT v. Metal Products of India [1984] 150 ITR 714/18 Taxman 412 (Punj. & Har.) (para 14), CIT v. Whitelene Chemicals [2014] 360 ITR 385/[2013] 32 taxmann.com 192/214 Taxman 93 (Mag.) (Guj.) (para 15), CIT v. Subhash Trading Co. [1996] 221 ITR 110/86 Taxman 30 (Guj.) (para 16), Harigopal Singh v. CIT [2002] 258 ITR 85/125 Taxman 242 (Punj. & Har.) (para 17), CIT v. Shivnarayan Jamnalal & Co. [1998] 232 ITR 311/[1996] 89 Taxman 420 (MP) (para 18), CIT v. Raj Bans Singh [2005] 276 ITR 351 (All.) (para 19), CIT v. Chaturbhuj Bhanwarlal [1987] 166 ITR 659/31 Taxman 363 (Raj.) (para 20), CIT v. Aero Traders (P.) Ltd. [2010] 322 ITR 316 (Delhi) (para 21), CIT v. Modi Industrial Corpn. [2010] 195 Taxman 68 (Punj. & Har.) (para 22) and CIT v. Vijay Kumar Jain [2010] 325 ITR 378/[2011] 10 taxmann.com 9/198 Taxman 156 (Chhattisgarh) (Mag.) (para 23).
JUDGMENT

J.K. Ranka J. - The Revenue is in appeal under section 260A of the Income-tax Act, 1961, against the order of the Income-tax Appellate Tribunal (for short "the ITAT") dated October 6, 2006, raising the following questions for our consideration :
"(i)

Whether, under the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the penalty levied under section 271(1)(c) ?
(ii)

Whether, under the facts and in the circumstances of the case and in law, the order of the Tribunal can be sustained when the additions made by the Assessing Officer were upheld by the Tribunal and, therefore, the assessee was falling under the four corners of section 271(1)(c) ?
(iii)

Whether the penalty is imposable or not when the additions are made on estimation and the same are sustained at the appellate stage ?"
2. The issue pertains to the penalty imposed by the Assessing Officer on the amount of Rs. 1,00,000, which was sustained as addition, which was confirmed by the Commissioner of Income-tax (Appeals) (for short "the CIT(A)") under section 271(1)(c) of the Income-tax Act, 1961 (for short "the Act of 1961"), for the assessment year 1996-97. The said penalty was, however, deleted by the Income-tax Appellate Tribunal (for short "the ITAT")
3. Brief facts may be observed that the respondent is a registered firm and is engaged in retreading of old (worn out) tyres of all vehicles. Besides the job work, the respondent-assessee was also selling such raw material to local parties. A survey operation came to be carried out at the business premises of the respondent on November 16, 1995, where some documents were found, which, according to the Assessing Officer, was not satisfactorily explained and, accordingly, on account of the said discrepancies, an estimated addition was made of Rs. 1,44,000. The respondent preferred an appeal against the said addition of Rs. 1,44,000, which came to be sustained by the Commissioner of Income-tax (Appeals) and on further challenge before the Income-tax Appellate Tribunal, the Tribunal modified the order passed by the lower authorities and restricted the addition to Rs. 1,00,000 by, inter alia, preferring to the fact that the addition was made on estimate basis by lower authorities and looking to the facts on record and the explanation of the assessee, part relief of Rs. 44,000 was granted, thereby sustaining an addition of Rs. 1,00,000 on estimate basis.
4. In the penalty proceedings, the assessee submitted that it has not concealed the particulars of income, nor has it deliberately furnished inaccurate particulars of such income. It was further submitted by the assessee that the addition has been made on estimate basis and only because of the estimated addition, penalty in law under section 271(1)(c) of the Act cannot be levied but the Assessing Officer was not satisfied and, accordingly, penalty came to be imposed by the Assessing Officer. In first appeal the penalty was sustained, as aforesaid. However, the Tribunal, as aforesaid has deleted the said penalty.
5. Ms. Parinitoo Jain, learned counsel for the appellant-Department, submitted that the Tribunal was unjustified in deleting the penalty as the addition was sustained by the final fact finding authority, i.e., the Tribunal itself, who came to the conclusion that the addition was called for and sustained major addition. She submitted that the Assessing Officer had to make the estimated addition as during the course of survey, the assessee could not offer proper explanation which was based on the discrepancies and addition was made. She further submitted that though the addition has been sustained on estimate basis, but then it cannot be said that there is no concealment. Accordingly, she submitted that the Tribunal erred in deleting the penalty and question of law do arise and requires consideration of this court.
6. Mr. B.B. Ojha, learned counsel for the respondent, submitted that merely because the addition has been sustained, that too on estimate basis, it cannot be said that the assessee concealed the income or furnished inaccurate particulars of such income. He further submitted that no positive income has been found or admitted. It is merely rejection of a claim, which could not be substantiated by the assessee and the Assessing Officer has not been able to justify the imposition of penalty and the Tribunal had rightly deleted the penalty. He further submitted that merely because proper explanation was not offered, it does not make out that the assessee became liable for imposition of penalty. He also submitted that it is basically a finding of fact and no question of law arises for consideration.
7. We have considered the arguments advanced by the learned counsel for the parties and have also perused the impugned order.
8. On a perusal of facts, it is apparent that the Tribunal in the regular proceedings had upheld the addition by observing that the Assessing Officer, though justified in making some addition, however, it observed that even the Assessing Officer had made an estimated addition for he was not sure as to exact amount of addition, to be made and considering the peculiar facts of the case, the Tribunal modified the order by observing that "we find justification in the order of the lower authorities who have rightly made the addition on estimate basis. But the same is looking on higher side due to the peculiar facts and circumstances of the case. By modifying both the orders of the lower authorities, we restrict the addition to Rs. 1,00,000 (Rs. one lakh) only. Thus, the assessee will get the relief of Rs.44,000 (Rs. forty four thousand) from the orders of the lower authorities on ad hoc basis".
9. On a perusal of the facts stated hereinbefore, it transpired that the addition has been sustained purely on estimate basis and, in our view, no positive fact or finding has been found so as to even make the said addition. It is, according to us, a pure guess work and, in our view, on such guess work or estimation, no penalty under section 271(1)(c) of the Act can be said to be leviable. For imposing penalty under section 271(1)(c) of the Act, the Assessing Officer has to clearly prove the conduct of the assessee, which in this case, has not been proved. Merely because the books of account of the assessee were rejected or estimated addition was made, in our view, no penalty is leviable. The assessee offered an explanation, which could not be termed as not bona fide. In the absence of any corroborative evidence to prove the charge of concealment, in our view, the penalty could not be imposed.
10. Penalty proceedings are entirely distinct from assessment proceedings and, howsoever relevant and good, the findings in assessment proceedings may be, they are not conclusive so far as the penalty proceedings are concerned.
11. From the above discussion, it can be seen that the opinion of the Tribunal with respect to the deletion is based on appreciation of evidence on record.
12. The hon'ble apex court in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519/161 Taxman 218 has held that if there is no evidence on material to show that the assessee had deliberately furnished inaccurate particulars and there was any mala fide intention on his part so as to make him liable for penalty. A mere omission or negligence would not constitute deliberate act of concealing particulars of income or suppressed or furnished inaccurate particulars of income.
13. The Patna High Court in the case of CIT v. Kailash Crockery House [1999] 235 ITR 544/107 Taxman 386, had an occasion to consider the issue of penalty under section 271(1)(c) on the basis of the fact that the gross profit rate shown by the assessee was found to be low and trading addition was made on estimate basis though the trading addition was sustained by the Tribunal but in so far as penalty under section 271(1)(c) is concerned, it held that the trading addition had been made on the basis of an estimate and on account of estimated trading addition penalty could not be levied under section 271(1)(c) of the Income-tax Act.
14. The Punjab and Haryana High Court in the case of CIT v. Metal Products of India [1984] 150 ITR 714/18 Taxman 412, has held that merely because the addition has been made on estimate basis that did not automatically lead to the conclusion that there was failure to return the correct income.
15. The Gujarat High Court in the case of CIT v. Whitelene Chemicals [2014] 360 ITR 385/[2013] 32 taxmann.com 192/214 Taxman 93 (Mag.) (Guj) has observed that no penalty can be imposed merely because account books of the assessee were rejected and that profit was estimated on the basis of fair gross profit ratio. The assessee filed its explanation which could not be termed as not bona fide and, accordingly, the Gujarat High Court came to a conclusion that mere rejection of books of account and estimation of profit cannot be a ground for imposition of penalty.
16. The Gujarat High Court in the case of CIT v. Subhash Trading Co. [1996] 221 ITR 110/86 Taxman 30, has held as under (headnote) :
"Held, that a best judgment assessment had been made. While the assessee in its books of account disclosed the total sales to be Rs. 7,75,000, the Income-tax Officer on rejection of the books of account estimated the sales to be Rs. 8,75,000 which on appeal, the Tribunal reduced to Rs. 8,00,000. So also, while the gross profit disclosed by the books of account of the assessee was 5 per cent., the Income-tax Officer estimated the gross profit rate at 15 per cent which again was reduced by the Tribunal to 12 per cent. In this circumstance, in the absence of any other material which might reflect on the conduct of the assessee about a deliberate attempt to maintain false books of account, on a preponderance of probabilities, no other conclusion could be reached than that the failure to return the correct income was not on account of any fraud or gross or willful neglect on the part of the assessee. The Tribunal was right in holding that penalty of Rs. 92,894 imposed by the Inspecting Assistant Commissioner under section 271(1)(c) of the Act was not justified."
17. The Punjab and Haryana High court in the case of Harigopal Singh v. CIT [2002] 258 ITR 85/125 Taxman 242, has held as under (page 86) :
"In order to attract clause (c) of section 271(1) of the Act, it is necessary that there must be concealment by the assessee of the particulars of his income or if he furnishes inaccurate particulars of such income. What is to be seen is whether the assessee in the present case had concealed his income as held by the Assessing Officer and the Tribunal. He had not maintained any accounts and he filed his return of income on estimate basis. The Assessing Officer did not agree with the estimate of the assessee and brought his income to tax by increasing it to Rs. 2,07,500. This, too, was on estimate basis. The Tribunal agreed that the income of the assessee had to be assessed on an estimate of the turnover but was of the view that the estimate as made by the Assessing Officer was highly excessive and it fixed the total income of the assessee at Rs. 1,50,000 for the year under appeal. It is, thus, clear that there was a difference of opinion as regards the estimate of the income of the assessee. Since the Assessing Officer and the Tribunal adopted different estimates in assessing the income of the assessee, it cannot be said that the assessee had "concealed the particulars of his income" so as to attract clause (c) of section 271(1) of the Act. There is not even an iota of evidence on the record to show that the income of the assessee during the year under appeal was more than the income returned by him. Additions in his income were made, as already observed, on estimate basis and that by itself does not lead to the conclusion that the assessee either concealed the particulars of his income or furnished inaccurate particulars of such income. There has to be a positive act of concealment on his part and the onus to prove this is on the Department. We are also of the considered view that the Tribunal grossly erred in law in relying on Explanation 1(B) to section 271(1)(c) of the Act to raise a presumption against the assessee. The assessee had justified his estimate of income on the basis of household expenditure and other investments made during the relevant period. It is not the case of the Revenue that he had, in fact, incurred expenditure in excess of what he had stated. In this view of the matter, it cannot be said that the explanation furnished by the assessee had not been substantiated or that he had failed to prove that such explanation was not bona fide."
18. The Madhya Pradesh High Court in the case of CIT v. Shivnarayan Jamnalal & Co. [1998] 232 ITR 311/[1996] 89 Taxman 420 held thus (page 313) :
"We have gone through the orders of the Tribunal and the Commissioner of Income-tax (Appeals). We are satisfied that both the authorities have correctly approached the matter and found that there was no fraudulent attempt on the part of the assessee. The assessee had placed before the authorities whatever books of account it had maintained-whether they were properly maintained or not but it has not withheld or concealed any material or made any deliberate attempt to defraud the authorities. The assessing authority has employed the flat rate for assessing the income of the assessee and on that basis, he has been taxed.
Therefore, we are of the opinion that the view taken by the Tribunal in setting aside the penalty appears to be justified and we answer both these questions against the Revenue and in favour of the assessee."
19. The Allahabad High Court in the case of CIT v. Raj Bans Singh [2005] 276 ITR 351 has held that "On appeal, the Tribunal came to the conclusion that it was a case of an estimate against an estimate and there was no concealment and accordingly it was held that no penalty was imposable".
20. This court in the case of CIT v. Chaturbhuj Bhanwarlal [1987] 166 ITR 659/31 Taxman 363 (Raj.) observed as under (page 682) :
"Having given our anxious consideration to the rival contentions advanced before us and to the law cited by both the sides, we are of the view that the Tribunal proceeded to take into account various circumstances referred to above and had reached the finding after considering those circumstances. It cannot be said that the finding reached by the Tribunal was based on no evidence. All material facts and circumstances positive and negative, constitute evidence and on consideration of the positive and negative circumstances, the finding can be arrived at after weighing the probabilities. Such a finding, in our opinion, cannot be said to be a finding which is vitiated on any count, i.e., such a finding cannot be said to be perverse or based on no evidence. It is true that this course was also open to the Tribunal and the Tribunal should have asked the assessee to submit his explanation with respect to capital accretion considered by the authorities below, but failure to do so by the Tribunal would not in any way affect the jurisdiction of the Tribunal to proceed to decide the appeal on the basis of the material on record. The finding of the Tribunal, therefore, cannot be said to be based on no evidence and the finding that there has been no concealment of income is a finding of fact and it does not raise any question of law and the Tribunal was right in cancelling the penalty imposed on the assessee."
21. The Delhi High Court in the case of CIT v. Aero Traders (P.) Ltd. [2010] 322 ITR 316 has held that penalty is not leviable when income was based on estimated profit and substantially reduced by the Tribunal.
22. The Punjab and Haryana High Court in the case of CIT v. Modi Industrial Corpn. [2010] 195 Taxman 68 has held that where the assessment of the assessee was completed on estimated basis penalty under section 271(1)(c) of the Act was not imposable with respect to the additions made on such estimate by the Assessing Officer.
23. The Chhattisgarh High Court in the case of CIT v. Vijay Kumar Jain [2010] 325 ITR 378/[2011] 10 taxmann.com 9/198 Taxman 156 (Mag.) has held that the assessee declared the net profit by estimating it at the rate of 6.36 per cent. of his gross receipt while it was estimated at the rate of 10 per cent of gross receipts by the Assessing Officer and on these facts held that penalty for concealment cannot be levied as the assessee cannot be said to have concealed any particulars of income or furnished any inaccurate particulars of income.
24. In view of the above facts and what we have observed above, the finding reached by the Tribunal is essentially a finding of fact and no substantial question of law is involved in the present appeal. This appeal has no force and accordingly, the same is dismissed.
■■
 


*In favour of assessee.

Tuesday, January 14, 2014

Taxability of income from sale of carbon credits

Taxability of income from sale of carbon credits
Carbon credits are made available to the assessee on account of saving of energy consumption and not because of its business. The entitlement earned for carbon credits could at best, be regarded as a capital receipt and could not be taxed as a revenue receipt.- Vide
Ambika Cotton Mills Ltd. v. Deputy Commissioner of Income Tax (2014) 55 (II) ITCL 12 (Chen 'C'-Trib)

Monday, October 21, 2013

Digest of Section 50C Cases


Citation
[2013] 37 taxmann.com 446 (Lucknow - Trib.)
Court
ITAT
Case Name
Pawan Kumar Agarwal vs. Assistant Commissioner of Income-tax -II, Kanpur
In favour of
Matter remanded
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value of consideration [Stamp Duty Valuation] - Assessment year 2007-08 - Before Commissioner (Appeals), assessee filed affidavit that he disputed stamp dusty valuation - Assessee clarified facts that objection to valuation was on basis of verbal information received from his advocate and in fact, no objection was filed before any authority - However, Commissioner (Appeals) had not asked assessee to file evidence on basis of which he disputed stamp duty valuation - Commissioner (Appeals) invoking clause (b) of sub-section (2) of section 50C, held that once assessee had raised a dispute to stamp valuation, reference could not be made to DVO - Whether Assessing Officer should have examined objection of assessee in light of documentary evidence and if satisfied, he might refer matter of valuation to Valuation Officer - Held, yes [Paras 8 and 9] [Matter remanded]IT: Where assessee's dispute to stamp duty valuation had not been adjudicated by authority properly, matter was to be remitted back


Citation
[2013] 37 taxmann.com 352 (Madras)
Court
HC
Case Name
S. Muthuraja vs. Commissioner of Income-tax, Coimbatore
In favour of
In favour of assessee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases [Reference to Valuation Officer] - Assessment year 2009-10 - Whether where specific objection was made by assessee as to Assessing Officer adopting market value of property under section 50C(2), Assessing Officer ought to have referred valuation of capital asset to valuation officer - Held, yes [Para 5] [In favour of assessee]IT: In case assessee objects value of asset adopted by Assessing Officer for computing capital gain, Assessing Officer ought to refer valuation of asset to valuation officer

Citation
[2013] 36 taxmann.com 393 (Bombay)
Court
HC
Case Name
Commissioner of Income-tax (Central) vs. Prabhu Steel Industries Ltd.
In favour of
In favour of revenue
Headnote
Section 50C of the Income-tax Act, 1961, read with sections 16A and 24 of the Wealth-Tax Act, 1957 - Capital gains - Special provisions for computation of full value of consideration [Report of valuation officer] - Whether valuation officer is an independent and distinct statutory forum for resolving controversy regarding determination of market value of property with all necessary powers; its order or report is made binding on Assessing Officer - Held, yes - Whether when report/order of Valuation Officer under section 50C(2) is objected to by assessee, Commissioner (Appeals) or Tribunal are obliged to extend an opportunity of hearing to such Valuation Officer - Held, yes - Assessee offered long-term capital gain on sale of property and took actual sale consideration of property as basis for computation of capital gain - Assessing Officer found that fair market value of said property was much higher - On reference, Valuation Officer estimated fair market value on date of transfer and Assessing Officer, accordingly, worked out long-term capital gain and made addition to assessee's income - Tribunal rejected valuation officer's report and deleted addition - However, opportunity of being heard was not extended to valuation officer - Whether since a mandatory requirement of law had been violated, order passed by Tribunal was to be set aside - Held, yes [Para 11] [In favour of revenue]IT: When report of Valuation Officer is objected to by assessee, Commissioner (Appeals) or Tribunal are obliged to extend an opportunity of hearing to said Valuation Officer

Citation
[2013] 35 taxmann.com 595 (Mumbai - Trib.)/[2013] 59 SOT 10 (Mumbai - Trib.)(URO)
Court
ITAT
Case Name
Income-tax Officer, 5(2) (1) vs. Inderlok Infra-Agro (P.) Ltd.
In favour of
In favour of assessee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provisions for full value of consideration in certain cases [Sale by developer] - During year assessee, a developer, sold flats in its residential building - It had shown value of stamp duty more than sale value - Assessing Officer applied provisions of section 50C and added difference between sale value and value as per stamp duty to total income of assessee - Whether Assessing Officer was wrong in applying provisions of section 50C in instant case - Held, yes [Para 8][In favour of assessee]IT: Where assessee, a developer, sold flats in its residential building and showed value of stamp duty more than sale value, Assessing Officer was wrong in applying provisions of section 50C and adding difference between sale value and value as per stamp duty to income of assessee

Citation
[2013] 35 taxmann.com 230 (Mumbai - Trib.)
Court
ITAT
Case Name
Suresh C. Mehta vs. Income-tax Officer, Ward - 13(2)(1), Mumbai
In favour of
Matter remanded
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value of consideration [Binding nature of Valuation Officer's report] - Assessment year 2003-04 - Whether where Assessing Officer in terms of provisions of sub-section (2) of section 50C referred valuation of property to Valuation Officer, he was bound by Valuation Officer's report in case it was lower than value assessed by stamp valuation authority - Held, yes - Whether said report was not binding on Commissioner (Appeals) or Tribunal - Held, yes - Whether where assessee had made various objections to such valuation report before Commissioner (Appeals), Commissioner (Appeals) was bound to look into these objections so as to arrive at proper fair market value - Held, yes [Para 7] [Matter remanded]IT: Where Assessing Officer in terms of provisions of section 50C(2) referred valuation of property to Valuation Officer, he was bound by Valuation Officer's report in case it was lower than value assessed by stamp valuation authority, whereas said report was not binding upon Commissioner (Appeals) or Tribunal

Citation
[2013] 34 taxmann.com 258 (Delhi - Trib.)/[2013] 143 ITD 659 (Delhi - Trib.)
Court
ITAT
Case Name
Anil Kumar Jain vs. Income-tax Officer, Ward - 29(3), New Delhi
In favour of
Matter remanded
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value of consideration in certain cases [Reference to Valuation Officer] - Assessment year 2009-10 - Assessee earned short term capital gain on sale of property - Assessee made a claim before Assessing Officer that value adopted or assessed by stamp valuation authority was higher than fair market value - Value adopted by stamp valuation authority had not ever been disputed by assessee in any appeal or revision or otherwise to any other authority or Court as referred to in section 50C(2) - Whether it was incumbent upon Assessing Officer to refer matter for valuation to a Valuation Officer as provided in section 50C(2) - Held, yes [Para 9] [Matter remanded]IT: Where fair market value of a property is claimed to be less than stamp duty valuation, valuation is to be referred to Valuation Officer before invoking deeming provision of section 50C

Citation
[2013] 35 taxmann.com 100 (Gujarat)
Court
HC
Case Name
Commissioner of Income-tax vs. Meghjibhai Popatbhai Virani
In favour of
In favour of assessee
Headnote
Section 69A of the Income-tax Act, 1961 - Unexplained money, etc. [Real estate transactions] - Assessment year 2000-01 - In course of assessment, assessee brought on record a copy of family settlement agreement reflecting receipt of Rs. 20 lakhs in cash from three of his brothers - Assessee also produced a sale agreement reflecting assessee as vendor of property and his brothers and relatives as purchasers - Assessing Officer disbelieved those agreements and added said amount to assessee's taxable income - Commissioner (Appeals) as well as Tribunal found no defect in both agreements and, thus, impugned addition made by Assessing Officer was deleted - Whether since finding recorded by appellate authorities was a finding of fact, no substantial question of law arose therefrom - Held, yes [Paras 4 6] [In favour of assessee]IT : Where assessee in support of certain amount received from his family members on account of sale of property, produced family settlement agreement and sale agreement, there being no defect in said agreements, amount so received by assessee could not be added to his taxable income as unexplained money IT : Revenue cannot take recourse to section 50C in case of purchaser of property
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Whether revenue cannot take recourse to section 50C in case of purchaser of property - Held, yes [Para 9] [In favour of assessee]

Citation
[2013] 33 taxmann.com 87 (Gujarat)/[2013] 215 Taxman 151 (Gujarat)
Court
HC
Case Name
Commissioner of Income-tax vs. Mukesh & Kishor Barot Co-owners
In favour of
In favour of assessee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases [Transfer of stock-in-trade] - Assessment year 2008-09 - Assessee sold a plot of land which was held by him as stock in trade - Whether sale of plot gave rise to business income and not to capital gain and, therefore, section 50C would have no application - Held, yes [Para 6] [In favour of assessee]IT : Where transferred asset was held as stock in trade, section 50C would not apply

Citation
[2013] 32 taxmann.com 274 (Madras)/[2013] 214 Taxman 543 (Madras)/[2013] 352 ITR 488 (Madras)/[2013] 260 CTR 412 (Madras)
Court
HC
Case Name
Commissioner of Income-tax -I, Coimbatore vs. R.Sugantha Ravindran
In favour of
In favour of assessee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2005-06 - Assessee transferred a property in pursuance of an agreement of sale - Sale of property was not registered - Assessing Officer invoking provisions of section 50C computed long term capital gain adopting guideline value as sale consideration, instead of consideration admitted by assessee - Contention of revenue was that word 'assessable' inserted by way of Finance (No.2) Act, 2009 with effect from 1-10-2009 had to be treated as applicable in case of assessee - Whether since Board has issued Circular No. 5/2010, dated 3-6-2010 clarifying that amendment has been made applicable with effect from 1-10-2009, revenue cannot canvass same issue which in effect is against circular issued by Board - Held, yes - Whether even otherwise, insertion of words 'or assessable' by amending section 50C with effect from 1-10-2009 is only an inclusion of new class of transactions, namely, transfer of properties without or before registration, thus, same would have prospective application only and not otherwise - Held, yes - Whether, therefore, assessee's transfer admittedly made earlier to such amendment could not be brought under section 50C - Held, yes [Paras 8 to 10] [In favour of assessee]IT : Insertion of words 'or assessable' in section 50C by way of Finance (No. 2) Act, 2009 with effect from 1-10-2009 is only an inclusion of new class of transactions namely transfer of properties without or before registration and have prospective application only

Citation
[2013] 32 taxmann.com 147 (Kolkata - Trib.)
Court
ITAT
Case Name
Heilgers Development & Construction Co. (P.) Ltd. vs. Deputy Commissioner of lncomc-tax, Central Circle-II, Kolkata
In favour of
In favour of revenue
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provisions for full value of consideration in certain cases [Scope of provisions] - Assessment year 2008-09 - Assessee sold property for consideration less than stamp duty value, claiming that prices had risen between date of agreement and date of conveyance - In absence of official confirmation of increase in prices, Assessing Officer treated stamp duty value as full value of consideration under section 50C - Assessee contended that where difference in stamp duty value and stated sale consideration was less than 15 per cent of stamp duty value, section 50C could not be invoked - Whether, in absence of any tolerance band prescribed in section 50C, it could be read into the provisions to avoid undue hardship to assessee - Held, no - Whether, therefore, section 50C could be invoked even if difference in stamp duty value and stated sale consideration was marginal - Held, yes [Paras 7 to 10] [In favour of revenue]IT: As no tolerance band is prescribed in section 50C, stamp duty value will be taken as full value of consideration, even if difference in stamp duty value and stated sale consideration is marginal

Citation
[2013] 31 taxmann.com 39 (Calcutta)/[2013] 214 Taxman 305 (Calcutta)/[2013] 259 CTR 553 (Calcutta)
Court
HC
Case Name
Bagri Impex (P.) Ltd. vs. Assistant Commissioner of Income-tax, Circle-9, Kolkata
In favour of
In favour of revenue
Headnote
Section 50C, read with section 2(47), of the Income-tax Act, 1961 - Capital gains - Special provisions for full value of consideration in certain cases - Registration in subsequent year - Assessment year 2006-07 - Whether transfer of land or building or both shall be deemed to have been taken place only after stamp duty has been assessed by stamp valuation authority - Held, yes - Whether, where deed of conveyance got registered in year subsequent to year in which consideration was received, applying section 50C, value assessed by stamp valuation authority in such subsequent year, should be taken as full value consideration - Held, yes [Para 7] [In favour of revenue]IT : Where deed of conveyance got registered in year subsequent to year in which consideration was received, applying section 50C, value assessed by stamp valuation authority in subsequent year, should be taken as full value consideration

Citation
[2013] 33 taxmann.com 120 (Chennai - Trib.)/[2013] 21 ITR(T) 627 (Chennai - Trib.)/[2013] 142 ITD 428 (Chennai - Trib.)
Court
ITAT
Case Name
Assistant Commissioner of Income-tax, Co. Circle IV(3), Chennai vs. MIL Industries Ltd.
In favour of
Partly in favour of assessee
Headnote
I. Section 50C of the Income-tax Act, 1961 - Capital gains - Special provisions for full value of consideration in certain cases [Guideline Value] - Assessment year 2005-06 - Assessee-company sold a portion of land of its factory property for a consideration of Rs. 2.22 crores - Guidelines value adopted by registering authority was Rs. 3.95 crores - Assessing Officer on assessee's request referred matter to DVO who determined value of property at Rs. 3.54 crores - Since report of DVO was not available at time of assessment, Assessing Officer worked out capital gains by adopting guideline value of Rs. 3.95 crores - Whether since consideration stated by assessee was less than guideline value and valuation report of DVO was not available at time of assessment, there was no infirmity in order of Assessing Officer - Held, yes - Whether fact that sale made by assessee was a distress sale cannot be a ground to modify valuation of property - Held, yes - Whether, however, considering fact that there were difference in valuation made by assessee's banker, stamp valuation authority and DVO, consideration was to be refixed at Rs. 2.5 crores - Held, yes [Paras 16 to 19] [Partly in favour of assessee]IT: Where sale consideration stated by assessee was lower than guideline value and valuation report of DVO was not available at time of assessment, Assessing Officer rightly adopted guideline value IT: Misfortunes happened to assessee or difficulties faced by assessee or matter of distress sales, etc., cannot be a ground to modify valuation of a property
II. Section 50C of the Income-tax Act, 1961 - Capital gains - Special provisions for full value of consideration in certain cases [In case of distress Sale] - Assessment year 2005-06 - Whether whatever may be problems suffered by an assessee, in reality those reasons cannot be permitted to go beyond scope of section 50C - Held, yes - Whether, therefore, misfortunes happened to assessee or difficulties faced by assessee or matter of distress sales, etc., cannot be a ground to modify valuation - Held, yes [Para 16] [In favour of revenue]

Citation
[2013] 29 taxmann.com 424 (Mumbai - Trib.)/[2013] 56 SOT 12 (Mumbai - Trib.)
Court
ITAT
Case Name
Irfan Abdul Kader Fazlani vs. Assistant Commissioner of Income-tax, Central Circle-44, Mumbai
In favour of
In favour of assessee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases Assessment years 2007-08 and 2008-09 - Assessee was a shareholder in KMPL - KMPL owned two flats - Along with other shareholders, assessee sold entire shares of KMPL to 'R' - Income earned from sale of shares was declared as 'long term capital gain' - Assessing Officer was of view that by engineering sale of shares of all other shareholders of company, i.e. KMPL, assessee effectively transferred immovable property and, therefore, it was an indirect way of transferring immovable properties, i.e. flats, for lesser consideration - Assessing Officer thus invoked provisions of section 50C in respect of sale of flats and calculated capital gains at a higher amount - It was apparent from records that assessee transferred shares in company and not land or building or both - Moreover, assessee did not have full ownership on flats which were owned by company - It was also noted that transfer of shares was never a part of assessment of stamp duty Authorities of State Government - Whether in aforesaid circumstances, assessee's case was not covered by provisions of section 50C and, therefore, impugned order passed by Assessing Officer was to be set aside - Held, yes [Para 12] [In favour of assessee]IT : Where assessee, a shareholder of KMPL, alongwith other shareholders sold entire shares of KMPL to 'R', it could not be regarded as an indirect transfer of flats owned by KMPL to 'R' and, consequently, provisions of section 50C could not be applied to transaction of sale of shares

Citation
[2013] 33 taxmann.com 491 (Mumbai - Trib.)/[2013] 58 SOT 23 (Mumbai - Trib.)/[2013] 152 TTJ 482 (Mumbai - Trib.)
Court
ITAT
Case Name
Shavo Norgren (P.) Ltd. vs. Deputy Commissioner of Income-tax, Circle 3(3)
In favour of
Partly in favour of revenue
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provisions for full value of consideration in certain cases [Scope of provision] - Assessment year 2008-09 - Assessee had taken a plot of land on lease from State Corporation on lease for 95 years - Later on, assessee sold part of said plot to a company - Assessing Officer invoked provisions of section 50C and considered market value of land as long-term capital gain - Whether since assessee transferred rights in plots as well as rights in building, provisions of section 50C were attracted - Held, yes - Whether, however, since complete details of relevant facts were not available on record matter was to be remanded to file of Assessing Officer - Held, yes [Para 19] [Partly in favour of revenue]IT : Where assessee had taken plot of land in question on lease for 95 years and later on transferred rights in part of said plot as well as rights in building standing on said plot, provisions of section 50C were attracted

Citation
[2013] 32 taxmann.com 324 (Hyderabad - Trib.)/[2013] 57 SOT 117 (Hyderabad - Trib.)
Court
ITAT
Case Name
Deputy Commissioner of Income-tax, Circle-11(1), Hyderabad vs. S. Venkat Reddy
In favour of
In favour of assessee
Headnote
Section 50C, read with section 2(47), of the Income-tax Act, 1961 - Capital gains - Special provisions for full value of consideration in certain cases [Date of transfer] - Assessment year 2006-07 - Assessee sold property and transferred possession vide sale agreement on 13-6-2005, but sale deed was registered only on 25-11-2005 - Assessing Officer took stamp duty value on date of registration as full value of consideration under section 50C for computing capital gains - Whether, where transfer was completed in terms of section 2(47) by giving possession of property on date of sale agreement, but registration was delayed on bona fide reasons and execution of sale deed was only a legal formality, stamp duty value on date of sale agreement and not on date of registration was required to be adopted for computing capital gains - Held, yes [Para 19] [In favour of assessee]IT: Where transfer was completed in terms of section 2(47) by giving possession of property on date of sale agreement, but registration was delayed on bona fide reasons and execution of sale deed was only a legal formality, stamp duty value on date of sale agreement was required to be adopted for computing capital gains

Citation
[2012] 28 taxmann.com 93 (Delhi)/[2012] 211 Taxman 510 (Delhi)/[2013] 256 CTR 371 (Delhi)
Court
HC
Case Name
Commissioner of Income-tax, Delhi-II vs. Khoobsurat Resorts (P.) Ltd.
In favour of
In favour of assessee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Full value of consideration in certain cases, special provision for - Stamp duty valuation - Assessment year 2007-08 - Assessee-resort purchased properties - Declared value of property was found to be less than value on which stamp duty was paid for acquisition - Assessing Officer added back to assessee's income difference between consideration mentioned in sale deeds and consideration declared for purpose of stamp duty - Whether provisions of Stamp Act levy stamp duty at predetermine or notified rates - Held, yes - Whether where higher cost of acquisition is declared for stamp duty, assessing authority should analyze contemporary comparable sales before adopting such higher cost as cost of acquisition and without doing so no addition could be made - Held, yes [Para 15] [In favour of assessee]
Section 68 of the Income-tax Act, 1961 - Cash credits - Purchase of properties - Assessment year 2007-08 - Assessee-company purchased properties - It claimed that sale consideration on its behalf was paid by proprietary concern belonging to one of directors of assessee-company - Assessee filed all necessary documents including confirmation from said director, PAN, complete address, copies of returns of proprietary concern and director and sources of investment made by director - Assessing Officer concluded that genuineness of source of funds made available to assessee had not been proved and added back amount of sale consideration to income of assessee as unexplained cash credit under section 68 - Appellate authorities deleted impugned addition holding that assessee had discharged its onus of proving that funds were received - Whether orders of appellate authorities did not call for interference - Held, yes [Para 16][In favour of assessee]

Citation
[2013] 30 taxmann.com 216 (Chandigarh - Trib.)/[2013] 21 ITR 149 (Chandigarh - Trib.)(TRIB.)/[2013] 141 ITD 21 (Chandigarh - Trib.)/[2013] 151 TTJ 1 (Chandigarh - Trib.)(UO)
Court
ITAT
Case Name
Manjit Singh vs. Deputy Commissioner of Income-tax, Circle III, Ludhiana
In favour of
Partly in favour of assessee
Headnote
Sale consideration of an asset as recorded in Registered Sale Deed is generally understated and, hence, cannot be taken as 'Fair Market Value' of a capital asset as on 1-4-1981; determination of FMV would involve an element of estimation based on relevant...

Citation
[2013] 29 taxmann.com 23 (Mumbai - Trib.)/[2013] 55 SOT 288 (Mumbai - Trib.)/[2012] 150 TTJ 537 (Mumbai - Trib.)
Court
ITAT
Case Name
Rallis India Ltd. vs. Additional Commissioner of Income-tax, Range 1(3), Mumbai
In favour of
Partly in favour of revenue
Headnote
I. Section 50C, read with section 50, of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Depreciable asset - Assessment year 2006-07 - Assessee-company declared short-term capital gains on sale of flats under section 50 - Assessing Officer noticed that Stamp Valuation Authority had adopted a higher stamp value for a flat - He thus having invoked provisions of section 50C, made addition on basis of value adopted for stamp duty purposes - Assessee challenged said addition contending that in respect of depreciable asset, i.e., flat, provisions of section 50 were applicable in which event method prescribed under section 50C could not be invoked - Whether sections 50 and 50C operate in two different fields and if value adopted by Stamp Valuation Authority is accepted by purchaser/seller, there cannot be any variation for limited purposes of computing consideration received under section 50C - Held, yes - Whether since, in instant case, assessee had not challenged valuation adopted by stamp valuation authority, impugned addition made by Assessing Officer was to be upheld - Held, yes [Para 17] [In favour of revenue]IT : Sections 50 and 50C operate in two different fields and if value adopted by Stamp Valuation Authority is accepted by purchaser/seller, there cannot be any variation for limited purposes of computing consideration received, under section 50C
II. Section 145A of the Income-tax Act, 1961 - Method of accounting - In certain cases - Valuation of closing stock - Assessment year 2006-07 - Whether value of purchase tax has to be taken into account while valuing closing stock; however, in such a case, opening stock valuation has to be correspondingly adjusted - Held, yes [Para 11] [Matter remanded]

Citation
[2012] 27 taxmann.com 306 (AHD)/[2012] 54 SOT 556 (AHD)
Court
ITAT
Case Name
Deputy Commissioner of Income-tax, Circle-9 vs. Vallabhbhai
In favour of
In favour of asssesee
Headnote
Section 50C, read with section 69B, of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value of consideration - Scope of provisions - Whether section 50C is applicable in case of a seller of property and, therefore, cannot be invoked in case of purchase of property for purpose of section 69B - Held, yes [Para 12] [In favour of assessee]
Section 69B, read with section 50C, of the Income-tax Act, 1961 - Undisclosed investments - Property transactions - Assessment year 2006-07 - Assessee had purchased agricultural land - Assessing Officer found that purchase price shown by assessee was quite low as compared to prevailing market price - Assessing Officer on basis of some other sale instances and also subsequent revised jantri fixed by Government, estimated purchase price and added difference to assessee's income - Whether where Assessing Officer had not made any independent enquiry or collected corroborative evidences to support estimation made by him no addition was called for - Held, yes [Para 17] [In favour of assessee]

Citation
[2012] 28 taxmann.com 289 (Mumbai)/[2013] 55 SOT 175 (Mumbai)
Court
ITAT
Case Name
A.T.E. Enterprises (P.) Ltd. vs. Deputy Commissioner of Income-tax, Range-2(1)
In favour of
In favour of assessee
Headnote
I. Section 28(i), read with section 36(1)(vii), of the Income-tax Act, 1961 - Business/deduction - Allowable as - Bad debts - Assessment year 2003-04 - Assessee incurred exhibition expenses on behalf of its principal - On failure of assessee to recover said amount from principal, it was written-off as bad debt - Assessing Officer rejected assessees claim - Whether Assessing Officer rightly concluded that exhibition expenses could not be allowed as bad debt under section 36(1)(vii) - Held, yes - Whether having regard to fact that exhibition expenditure was incurred by assessee on behalf of its principal in ordinary course of business, non-recovery of same could be allowed as business loss - Held, yes [Para 8] [In favour of assessee]
II. Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Reference to DVO - Assessment year 2005-06 - Whether where assessee objected to valuation adopted by stamp valuation authority and also filed copy of valuation report by an approved valuer, Assessing Officer was required to make a reference to valuation officer in terms of section 50C(2) to ascertain correct fair market value of property - Held, yes [Para 15] [In favour of assessee]
III. Section 68 of the Income-tax Act, 1961 - Cash credits - Sale - Assessment year 2005-06 - In course of assessment, assessee declared certain amount as long-term capital gain arising on sale of flat - Assessing Officer treated said amount, as deemed income under section 68, which was credited in books of account on ground that assessee had failed to bring any evidence on record that it was on account of sale of said property - It was noted that assessee had filed a copy of sale agreements in respect of sale of flat wherein it had been mentioned that said property had been sold for a total sale consideration of Rs. 13.80 lakhs - Whether since money had been received by way of sale of a property duly mentioned in sale agreement, same could not be treated as unexplained - Held, yes - Whether, consequently, impugned addition made by Assessing Officer was to be deleted - Held, yes [Para 21] [In favour of assessee]

Citation
[2012] 26 taxmann.com 13 (Ahmedabad)/[2012] 138 ITD 255 (Ahmedabad)/[2013] 151 TTJ 219 (Ahmedabad)
Court
ITAT
Case Name
Deputy Commissioner of Income-tax, Circle-9 vs. Virjibhai Kalyanbhai Kukadia
In favour of
In favour of assessee
Headnote
Section 50C, read with section 69B, of the Income-tax Act, 1961 - Capital gains - Full value of consideration in certain cases - Whether section 50C is a deeming provision where under stamp duty rate is treated as full value of consideration for purpose of computing capital gain under section 48 - Held, yes - Whether it is applicable to seller of property and therefore, cannot be invoked in case of purchaser of property for purpose of section 69B - Held, yes - Whether where Assessing Officer estimated value of land purchased by assessee by relying on prevailing jantry price of land without bringing any material on record to prove that assessee had in fact made investments over and above than that recorded in books, no addition could be made under section 69B by invoking section 50C - Held, yes [In favour of assessee]

Citation
[2012] 25 taxmann.com 543 (AHD)/[2012] 53 SOT 378 (AHD)
Court
ITAT
Case Name
Assistant Commissioner of Income-tax, Circle-5 vs. Prakash Ratanlal Sheth
In favour of
In favour of asssesee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Full value of consideration in certain cases - Assessment year 2008-09 - Whether matter cannot be referred under section 50C(2) to DVO in a case where assessee had shown sale value as a result of transfer at a rate higher than value adopted by stamp valuation authority - Held, yes [In favour of assessee]
Section 55A, read with section 48, of the Income-tax Act, 1961 - Capital gains - Reference to valuation officer - Assessment year 2008-09 - Whether full value of consideration under section 48 cannot be construed as fair market value for purpose of section 55A - Held, yes [In favour of assessee]

Citation
[2012] 24 taxmann.com 30 (BANG)/[2012] 53 SOT 166 (BANG)
Court
ITAT
Case Name
Smt. T.V. Nagasena vs. Income-tax Officer, Ward 13(1), Bangalore
In favour of
In favour of asssesee
Headnote
I. Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2008-09 - Whether Assessing Officer is required under Act to put assessee on notice before invoking provisions of section 50C - Held, no - Whether however, where assessee had objected to action of Assessing Officer in adopting guideline value of property in place of stated consideration in sale deed, Assessing Officer ought to make a reference to Valuation Officer for valuation of said property in accordance with provisions of section 50C(2)(a) - Held, yes [In favour of assessee]
II. Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2008-09 - Assessing Officer, on examination of assessee's bank account, found that there were a number of cash deposits - Assessee submitted that those cash deposits were savings out of money given to her for expenses by her husband who was assessed to tax - However, lower authorities made addition under section 68 without examining veracity of claim - Whether issue had to be remitted for re-examination and readjudication - Held, yes [In favour of assessee]

Citation
[2012] 22 taxmann.com 37 (PUNE)/[2012] 52 SOT 381 (PUNE)
Court
ITAT
Case Name
K.K. Nag Ltd. vs. Additional Commissioner of Income-tax, Range-9, Pune
In favour of
In favour of asssesee
Headnote
I Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2005-06 - Whether where assessee had claimed before Assessing Officer that value of land and building assessed by stamp valuation authority exceeded fair market value of property, then in terms of section 50C(2) Assessing Officer ought to have referred matter to Valuation Officer instead of straightaway deeming value adopted by Stamp valuation authority as full value of consideration - Held, yes [In favour of assessee]
II Section 115JB of the Income-tax Act, 1961, read with section 211 of the Companies Act, 1956 - Minimum alternate tax - Assessment year 2005-06 - Whether in view of section 211 of Companies Act, net profit as shown in Profit & Loss account for purposes of Explanation 1 of second proviso to section 115JB is to be understood with reference to Notes to accounts accompanying annual accounts also - Held, yes - Whether therefore, incremental liability towards leave encashment not debited to profit and loss account but otherwise disclosed in Notes to accounts, would have to be deducted while determining 'book profits' under section 115JB - Held, yes [In favour of assessee]
III Section 36(1)(vii) of the Income-tax Act, 1961 - Bad debts - Assessment year 2005-06 - Amount of bad debts in question represented cost of corrugated boxes charged by assessee to a company in an earlier year - Whether since cost of boxes as charged constituted a part of income of assessee for earlier year, condition for claiming bad debts had been fulfilled and same could not be disallowed holding same as reimbursement, being not an income - Held, yes [In favour of assessee]

Citation
[2013] 33 taxmann.com 593 (Delhi - Trib.)/[2012] 18 ITR(T) 267 (Delhi - Trib.)
Court
ITAT
Case Name
Assistant Commissioner of Income-tax vs. Anjali Dua
In favour of
In favour of assessee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2007-08 - Where sale consideration received by assessee for sale of land was much higher than applicable circle rate, Assessing Officer was not justified in applying section 50C and making addition to sale consideration on basis of report of DVO [In favour of assessee]

Citation
[2012] 21 taxmann.com 457 (INDORE)/[2012] 52 SOT 159 (INDORE)/[2012] 150 TTJ 527 (INDORE)
Court
ITAT
Case Name
Assistant Commissioner of Income-tax-1(1), Bhopal vs. ETC Industries Ltd.
In favour of
Partly in favour of revenue
Headnote
I. Section 68 of the Income-tax Act, 1961 - Cash Credit - Assessment year 2006-07 - Whether for treating some investment as undisclosed income, revenue must show that such investment made by subscribers actually emanated from coffers of assessee - Held, yes - Whether where assessee, having received share application money, furnished required information to establish creditworthiness of applicant, and had discharged its onus by establishing identity of share-holder along with nature and source of money and Assessing Officer had not brought any adverse material on record to prove otherwise, no addition could be made in hands of assessee - Held, yes [In favour of assessee]
II. Section 50C, read with section 50, of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2006-07 - Whether provisions of section 50C are applicable to transfer of depreciable asset covered by section 50 and capital gain arising from such transfer has to be computed by adopting stamp duty valuation - Held, yes [In favour of revenue]

Citation
[2012] 20 taxmann.com 424 (AHD)/[2012] 18 ITR(T) 253 (AHD)/[2012] 52 SOT 344 (AHD)/[2012] 147 TTJ 94 (AHD)
Court
ITAT
Case Name
Income-tax Officer, Ward 5(4) vs. Yasin Moosa Godil
In favour of
In favour of asssesee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2006-07 - Assessee was an individual who booked a flat which was under construction - Agreed purchase price was Rs. 16.12 lakhs out of which assessee paid Rs. 15.12 lakhs - During relevant assessment year assessee requested builder to cancel booking and refund booking amount - A new buyer was found - Subsequently, assessee, builder and new buyer entered into a tripartite sale agreement whereunder assessee transferred all his rights and title in flat in favour of new buyer and received back booking amount from him - Builder gave possession of said flat to buyer - Assessing Officer observed that for registration purpose flat was valued at Rs. 57.57 lakhs against amount of Rs. 16.12 lakhs - He, accordingly, applying provisions of section 50C, treated difference as assessee's undisclosed income - Whether it is essential for application of section 50C that transfer must be of a capital asset, being land or building or both - Held, yes - Whether since it was builder who was transferring capital asset, by handing over possession as also legal ownership of flat to new buyer and assessee only received back booking advance paid by transferring booking rights, booking advance could not be equated with capital asset and, therefore, provisions of section 50C were not applicable - Held, yes - Whether, therefore, addition made by Assessing Officer was to be deleted - Held, yes [In favour of assessee]

Citation
[2012] 20 taxmann.com 381 (ALL)/[2012] 208 Taxman 478 (ALL)
Court
HC
Case Name
Commissioner of Income-tax - II vs. Kan Construction and Colonizers (P.) Ltd.
In favour of
In favour of asssesee
Headnote
Section 50C, read with section 2(14), of the Income-tax Act, 1961 - Capital gains - Full value of consideration in certain cases - Assessment year 2006-07 - Assessing Officer treated a transaction of sale of a plot by assessee-builder as sale of capital asset and determined capital gain under section 50C - It was found that investment in sale and purchase of plots was ancillary and incidental to business activity of assessee-builder - Further, assessee had treated land as stock-in-trade as corroborated from its balance sheet - Whether section 50C would have no application as it was a case of transfer of plot which was stock-in-trade and income from such transaction was to be treated as business income - Held, yes [In favour of assessee]

Citation
[2012] 21 taxmann.com 324 (Mumbai)/[2012] 51 SOT 461 (Mumbai)/[2013] 152 TTJ 38 (Mumbai)(UO)
Court
ITAT
Case Name
Mrs. Nila V. Shah vs. Commissioner of Income-tax (Appeals), XXV
In favour of
Partly in favour of revenue
Headnote
Section 2(29A) of the Income-tax Act, 1961 - Capital gains - Long-term capital gains - Assessment year 2005-06 - Assessee was having an office premises of 225 sq. ft. in a property on tenancy basis for last 30 years - Other portions of said property were occupied by several tenants - Owners of said property desired to sell property to highest bidder - Thereupon all tenants including assessee entered into an agreement on 10-6-1999, by which they formed a co-operative housing society and purchased aforesaid property on same space through open bidding - Later on said property was demolished and a new property was constructed - New property was completed in assessment year 2002-03 and possession was given to all tenants with same space in same year - Total cost for purchase of office premises in old property, demolishing charges and construction of new office premises in hands of assessee came to Rs. 4.75 lakhs - Later on assessee had sold newly constructed office for Rs. 16 lakhs and invested said amount in a bond - For determining cost of acquisition of office premises for purpose of calculating capital gains, assessee got valuation of office premises by an approved valuer, who determined market value of office premises as on 10-6-1999 at Rs. 10 lakhs - Accordingly, assessee in return of income filed for assessment year 2005-06 declared cost of acquisition of office premises at Rs. 10 lakhs - She further claimed capital gain arising from transfer of office premises as a long-term capital gain - Assessing Officer held that capital gain was a short-term capital gain - He further adopted cost of acquisition of office premises at Rs. 4.75 lakhs, which was cost incurred for acquiring office premises - Assessing Officer further having noticed that stamp valuation authority for purpose of payment of stamp duty adopted sale value of office premises at Rs. 24.48 lakhs invoked provisions of section 50C and adopted sale value of office premises at Rs. 24.48 lakhs - Lastly Assessing Officer allowed deduction under section 54EC on an amount of Rs. 16 lakhs - Whether since agreement dated 10-6-1999 clearly gave interest and right to assessee in old property, date of acquisition of office premises in old property could safely be said to be on 10-6-1999 - Held, yes - Whether since sale of office premises was made on 17-9-2004, capital gain in question was clearly a long-term capital gain - Held, yes [In favour of assessee]
Section 49 of the Income-tax Act, 1961 - Capital gains - Cost with reference to certain modes of acquisition - Assessment year 2005-06 - Whether since in view of facts mentioned under heading 'Capital gains - Long-term capital gains' it was evident that assessee had bought office premises and not ownership rights, cost of acquisition of office premises would be taken at Rs. 4.75 lakhs and not Rs. 10 lakhs as had been contended by assessee - Held, yes [In favour of revenue]
Section 50C of the Income-tax Act, 1961 - Capital gains - Full value of consideration in certain cases - Assessment year 2005-06 - Whether in view of facts mentioned under heading 'Capital gains - Long-term capital gains/assets' Assessing Officer in light of provisions of section 50C was justified in adopting sale value of office premises for purpose of computation of capital gain at Rs. 24.48 lakhs - Held, yes [In favour of revenue]
Section 54EC of the Income-tax Act, 1961 - Capital gains - Not to be charged on investment in certain bonds - Assessment year 2005-06 - Whether in view of facts mentioned under heading 'Capital gains - Long-term capital gains' Assessing Officer was justified in allowing deduction under section 54EC for an amount of Rs. 16 lakhs, which was actual sale consideration and had been invested in bonds - Held, yes [In favour of revenue]

Citation
[2012] 21 taxmann.com 133 (KOL)/[2012] 51 SOT 440 (KOL)
Court
ITAT
Case Name
Chandra Bhan Agarwal vs. Additional Commissioner of Income-tax, Range-31, Kolkata
In favour of
In favour of asssesee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2006-07 - Whether where DVO while estimating fair market value of property, did not take into consideration factors having any depressing or appreciative effect on value of property and, he simply based his report on basis of valuation made by Registrar for stamp valuation purposes, valuation so made by DVO could not be accepted - Held, yes [In favour of assessee]

Citation
[2012] 19 taxmann.com 4 (KOL)/[2012] 16 ITR(T) 45 (KOL)/[2012] 50 SOT 391 (KOL)/[2012] 147 TTJ 87 (KOL)
Court
ITAT
Case Name
Deputy Commissioner of Income-tax, Central Circle VI vs. Tejinder Singh
In favour of
In favour of asssesee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2008-09 - Whether provisions of section 50C will apply on receipt of consideration on transfer of a property, being land or building or both, however, these provisions will not come into play in a case where only tenancy rights are transferred or surrendered - Held, yes [In favour of assessee]
Section 54F of the Income-tax Act, 1961 - Capital gains - Exemption of, in case of investment in residential house - Assessment year 2008-09 - Whether where assessee having transferred its tenancy rights in a property, made qualifying investment under section 54F which was more than consideration for surrender of tenancy rights, he was not liable to pay capital gain tax in respect of aforesaid transaction - Held, yes [In favour of assessee]

Citation
[2012] 19 taxmann.com 66 (Chandigarh)/[2012] 50 SOT 377 (Chandigarh)/[2013] 152 TTJ 252 (Chandigarh)
Court
ITAT
Case Name
Income-tax Officer, Ward 6(3), Mohali vs. Mrs. Inderjit Kaur
In favour of
In favour of assessee
Headnote
Section 50C, read with section 69B, of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2006-07 - Whether deeming fiction created under section 50C, for purpose of section 48, regarding full value of consideration received or accrued to seller, cannot be extended to provisions of section 69, in case of a purchaser - Held, yes - Whether when Assessing Officer refers a property to Valuation Cell, on direction of Commissioner (Appeals), in such a case, Commissioner (Appeals) is not competent to delete addition made by Assessing Officer under section 50C without waiting for such report from Valuation Cell - Held, yes [In favour of assessee]

Citation
[2013] 33 taxmann.com 47 (Karnataka)/[2013] 215 Taxman 145 (Karnataka)
Court
HC
Case Name
Gouli Mahadevappa vs. Income-tax Officer, Ward 2, Hospeth
In favour of
Partly in favour of assessee
Headnote
Section 50C, read with section 54F, of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases [Scope of provision] - Whether when assessee does not avail opportunity to question correctness of registration value fixed by State Government, in such a case deemed full value of consideration as stated in section 50C would come into effect - Held, yes - Whether, however, where capital gain is assessed on notional basis, whatever amount is invested in new residential house within prescribed period under section 54F, entire amount so invested, would get benefit of deduction irrespective of fact that funds from other sources are also utilized for new residential house - Held, yes [Para 7] [Partly in favour of assessee]IT : Where capital gain is assessed on notional basis under section 50C, whatever amount is invested in new residential house within prescribed period under section 54F, entire amount so invested would get benefit of deduction irrespective of fact that funds from other sources are also utilized for new residential house

Citation
[2012] 25 taxmann.com 149 (Jodhpur - Trib.)/[2012] 143 TTJ 65 (Jodhpur - Trib.)(UO)
Court
ITAT
Case Name
Ran Mal Bhansali vs. Assistant Commissioner of Income-tax
In favour of
Partly in favour of assessee
Headnote
I. Section 50C of the Income-tax Act, 1961 - Capital gains - Special provisions for full value consideration in certain cases - Assessment year 2004-05
II. Section 28(i), read with section 45 of the Income-tax Act, 1961 - Business income - Chargeable as - Assessment year 2004-05

Citation
[2013] 30 taxmann.com 293 (Allahabad)/[2013] 213 Taxman 52 (Allahabad)(MAG.)/[2012] 349 ITR 210 (Allahabad)
Court
HC
Case Name
Commissioner of Income-tax vs. Dr. Indra Swaroop Bhatnagar*
In favour of
In favour of assessee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Full value of consideration in certain cases, special provision for - DVO's report - Assessment year 2003-04 - Assessee sold a property for certain consideration - Assessing Officer rejected valuation of property done by assessee's registered valuer and referred matter to DVO to obtain fair market value - He also rejected valuation done by DVO and adopted valuation done by Stamp valuation authorities as full value of consideration received and accordingly calculated capital gains - Whether when Assessing Officer had obtained DVO's report, same was binding on him - Held, yes - Whether, therefore, valuation done by DVO was to be adopted as sale consideration - Held, yes [Para 11] [In favour of assessee]

Citation
[2011] 15 taxmann.com 19 (DELHI)/[2011] 48 SOT 339 (DELHI)
Court
ITAT
Case Name
Income-tax Officer, Ward 32(1), New Delhi vs. Ms. Namita Singh
In favour of
Matter remanded
Headnote
I - Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2004-05 - Assessee sold a flat for a consideration of Rs. 12 lakhs - Said property was purchased by assessee for a sum of Rs. 12 lakhs - Capital gain on account of sale of property was admitted as 'Nil' - Assessing Officer referred matter to valuation officer (DVO) who estimated value of property at Rs. 57,58,400 - Assessing Officer adopted sale consideration as per DVO's report and computed capital gain of Rs. 39,36,760 - Commissioner (Appeals) determined value of flat at Rs. 14,40,000 - Whether in absence of any material to effect that assessee had received amount over and above value on which stamp duty was payable, full value of consideration would be value adopted for purpose of stamp valuation in respect of transfer of asset - Held, yes - Whether value for purpose of stamp valuation has to be adopted as per circle rates as on date of transfer - Held, yes - Whether from sale deed or from assessment order or appellate order of Commissioner (Appeals) it was not clear as to whether flat was transferred at circle rate prescribed for purpose of stamp valuation - Held, yes - Whether, therefore, it was proper to set aside matter to file of Assessing Officer with directions to examine whether value of property sold was at Rs. 14,40,000 or value was higher as per circle rate applicable as on date of transfer, than this amount for purpose of stamp valuation - Held, yes [Matter remanded]
II - Section 142A of the Income-tax Act, 1961 - Estimate by valuation officer in certain cases - Assessment year 2004-05 - Whether Assessing Officer can make reference to valuation officer under section 142A for determination of fair market value of property for purpose of assessment in respect of properties received without consideration referred to in section 56(2) and that too when assessee claims that value adopted or assessed or assessable by stamp valuation authority exceeds fair market value of property as on date of transfer - Held, yes - Assessee had made investment in shop Nos. 11, 12 and 12A for an amount of Rs. 24 lakhs - As per assessee, investment was made out of sale proceeds of flat and from personal sources - All three properties were let out to 'B' for a monthly rent of Rs. 65,000 and a lease agreement was entered into by assessee wherein interest free security of Rs. 1,35,000 had been provided being three months security - In order to verify fair market value of investment, matter was referred to DVO under section 142A who estimated value of assets at Rs. 1,51,26,800 - Assessing Officer estimated valuation of property by adopting rent capitalization method at Rs. 1,46,88,062 and reduced sale consideration of flat which was determined at Rs. 57,58,400 - Undisclosed investment was determined at Rs. 89,29,622 - Whether rent capitalization method of valuation of property for estimating value of investments is also an approved method recognized in law and prescribed in Wealth-tax Act which is also applicable for valuation of property covered by section 69/69A/69B - Held, yes - Whether, therefore, investment in properties were rightly valued by adopting rent capitalization method - Held, yes - Whether, however, valuation of property, by adopting rent capitalization method was to be made as per rule 3 of Schedule III of Wealth-tax Act, 1957 and, therefore, matter was to be restored to file of Assessing Officer to compute value of property as per said rule - Held, yes [Matter remanded]

Citation
[2011] 14 taxmann.com 161 (DELHI)/[2011] 48 SOT 61 (DELHI)(URO)
Court
ITAT
Case Name
Assistant Director of Income-tax, Circle 1(2), International Taxation, New Delhi vs. Ranjay Gulati
In favour of
In favour of asssesee
Headnote
Section 50C, read with sections 45 and 48, of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2007-08 - Assessee sold an industrial plot for a sum of Rs. 2.90 crores - Assessing Officer made a reference to District Valuation Officer (DVO) to ascertain fair market value of plot on date of sale who arrived at a valuation of Rs. 5.36 crores - Assessing Officer without giving an opportunity of being heard to assessee, adopted valuation made by DVO and, accordingly, enhanced amount of capital gain liable to tax - On appeal, Commissioner (Appeals) deleted addition made by Assessing Officer - It was noted from records that value of assessee’s property as per circle rates was Rs. 2 crores as against sale consideration of Rs. 2.90 crores admitted by assessee - Further, there was nothing on record to suggest that assessee had received more than what was stated in sale deed - Whether in aforesaid circumstances, Assessing Officer had to adopt amount received by assessee as full value of sale consideration for calculating capital gain liable to tax - Held, yes - Whether even otherwise, adoption of report of DVO without providing an opportunity of being heard to assessee was against principles of natural justice - Held, yes - Whether, consequently, impugned addition made by Assessing Officer was rightly deleted - Held, yes [In favour of assessee]

Citation
[2011] 15 taxmann.com 103 (AHD)/[2011] 48 SOT 231 (AHD)
Court
ITAT
Case Name
Sanjaybhai Z. Patel vs. Assistant Commissioner of Income-tax, Circle-2
In favour of
In favour of revenue
Headnote
Section 50C, read with section 48, of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2006-07 - Assessee sold a piece of land - Value with which sale deed was registered was found to be below value determined by Stamp Valuation Authority - Assessing Officer invoked provisions of section 50C and brought to tax the differential - Whether in view of fact that assessee had accepted valuation determined by Stamp Valuation Authority for purpose of payment of stamp duty for registration of deed and further in view of fact that assessee had not availed opportunity under sub-section (2) of section 50C as to demonstrating that fair market value was less than stamp duty valuation, it was to be held that Assessing Officer had rightly invoked section 50C - Held, yes [In favour of revenue]

Citation
[2011] 11 taxmann.com 344 (MUM)/[2011] 46 SOT 90 (MUM)
Court
ITAT
Case Name
Mrs. Nandita Khosla vs. Income-tax Officer 12(1)(1), Mumbai
In favour of
In favour of asssesee
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2006-07 - Whether in some cases where assessee points out strong reasons that sale consideration is less than value determined for stamp duty, such cases have to be referred to DVO and in such cases sale consideration which has been deemed to be value adopted for stamp duty purposes as per main provision, would be value adopted by DVO - Held, yes - Whether once matter is referred to DVO, then valuation given by DVO has to be adopted as deemed consideration - Held, yes

Citation
[2011] 11 taxmann.com 92 (MUM)/[2011] 11 ITR(T) 120 (MUM)/[2011] 132 ITD 499 (MUM)/[2011] 141 TTJ 69 (MUM)
Court
ITAT
Case Name
Atul G. Puranik vs. Income-tax Officer, 12(1)(1)
In favour of
Partly in favour of revenue
Headnote
Section 2(14), read with section 45, of the Income-tax Act, 1961 - Capital gains - Capital asset - Assessment year 2006-07 - Whether sole criteria for considering whether asset transferred is capital asset under section 2(14) or not is to consider nature of asset so transferred in previous year and not origin or source from which such asset came to be acquired - Held, yes - Whether, therefore, if a 'capital asset' as per section 2(14) is purchased out of agricultural income, that would not lose its character of capital asset notwithstanding fact that income exempt from tax was employed for purchasing such capital asset - Held, yes [In favour of revenue]
Section 49 of the Income-tax Act, 1961 - Capital gains - Cost with reference to certain modes of acquisition - Assessment year 2006-07 - Whether in order to apply mandate of section 49(1), it is sine qua non that capital asset acquired by assessee in any of modes prescribed in clauses (i) to (iv) should become subject-matter of transfer and only in such a situation where such capital asset is transferred, cost to previous owner is deemed as cost of acquisition of asset - Held, yes - Whether, however, once such capital asset is transferred and another capital asset is acquired, there is no applicability of section 49(1) to such converted asset - Held, yes [In favour of revenue]
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2006-07 - Whether in view of provisions of section 50C, deeming fiction of substituting adopted or assessed or assessable value by stamp valuation authority as full value of consideration is applicable only in respect of 'land or building or both' - Held, yes - Whether lease right in a plot of land can not be included within scope of 'land or building or both' and, thus, in case of transfer of leasehold rights in land, provisions of section 50C cannot be invoked - Held, yes [In favour of assessee]

Citation
[2011] 14 taxmann.com 95 (AHD)/[2011] 48 SOT 16 (AHD)
Court
ITAT
Case Name
Income-tax Officer, Ward-7(1) vs. Nitin Jayantilal Shah
In favour of
In favour of asssesee
Headnote
Section 50C, read with section 55A, of the Income-tax Act, 1961 - Capital gains - Special provisions for full value of consideration in certain cases - Assessment year 2006-07 - Whether in case of immovable property reference to DVO can be made only under section 50C(2) and not under section 55A - Held, yes - Assessee sold certain property for Rs. 1,30,41,000 on 14-11-2005 - This was also valuation done by stamp valuation authorities (SVA) - For purpose of working out capital gain, assessee obtained report from approved valuer who determined fair market value of property as on 1-4-1981 as Rs. 26,24,269 - Indexed cost of acquisition of Rs. 26,24,269 for assessment year 2005-06 was shown at Rs. 1,30,42,617 - Assessing Officer, however, referred property to DVO for its valuation who valued sale value as on 14-11-2005 at Rs. 3,05,66,700 and determined value of property as on 1-4-1981 at Rs. 15,78,000 - Assessing Officer adopted said values and accordingly, worked out long-term capital gain - Whether since full value of consideration was equal to valuation done by SVA, reference to DVO for determining fair market value as on date of sale and adoption of fair market value in place of sale consideration declared by assessee were not legally proper - Held, yes - Whether further estimate made by registered valuer was not less than fair market value as adopted by Assessing Officer on basis of DVO's report and, therefore, Assessing Officer could not make any reference under clause (a) of section 55A - Held, yes [In favour of assessee]
Section 55A of the Income-tax Act, 1961 - Capital gains - Reference to valuation officer - Assessment year 2006-07 - Whether section 55A cannot be invoked when transfer of immovable property being land or building or both are involved - Held, yes [In favour of assessee]

Citation
[2011] 12 taxmann.com 300 (AHD)/[2011] 46 SOT 419 (AHD)
Court
ITAT
Case Name
Hasmukhbhai M. Patel vs. Assistant Commissioner of Income-tax, Cir. 1(1), Baroda
In favour of
Partly in favour of revenue
Headnote
I. Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2004-05 - Whether once a document is registered with stamp duty authority, value adopted by stamp duty authority is to be considered as value of asset for purpose of clause (b) of section 50C - Held, yes - Whether Assessing Officer cannot substitute value which stamp duty authority ought to have adopted for purpose of stamp duty - Held, yes - Assessing Officer made addition on account of capital gain in respect of assets of assessee - It was seen that value disclosed by assessee was accepted by stamp valuation authority and no further stamp duty was levied - Whether Assessing Officer had to consider value adopted by stamp valuation for purpose of payment of stamp duty in respect of such transfer - Held, yes
II. Section 71 of the Income-tax Act, 1961 - Losses - Set off of from one head against income from another - Assessment year 2004-05 - Assessee sold certain shares of company 'A' and claimed capital loss - Assessing Officer disallowed loss holding that assessee had sold shares so as to set off this loss against capital gains arising on sale of land - Whether since shares were duly transferred and recorded in books of account and further, assessee also explained circumstances in which he sold shares, there was no justification for disallowing capital loss from sale of shares - Held, yes
III. Section 2(47) of the Income-tax Act, 1961 - Capital gains - Transfer - Assessment year 2004-05 - Whether where assessee was given possession of property as per sale agreement dated 3-4-1999 and assessee had also made part-payment of consideration, Commissioner (Appeals) had rightly held that assets would be deemed to be transferred to assessee on 3-4-1999 and since said land was sold on 4-4-2003/2-5-2003, it would be a long-term capital asset, gains wherefrom would constitute long-term capital gains - Held, yes

Citation
[2011] 10 taxmann.com 320 (MUM) (SB)/[2011] 9 ITR(T) 639 (MUM) (SB)/[2011] 130 ITD 113 (MUM) (SB)/[2011] 138 TTJ 129 (MUM) (SB)
Court
ITAT
Case Name
Income-tax Officer-22(3)(4) vs. United Marine Academy
In favour of
In favour of revenue
Headnote
Section 50C read with section 50, of the Income-tax Act, 1961 - Capital gains - Full value of consideration in certain cases - Whether in a case where capital gain arising from transfer of depreciable asset is computed as per special provisions contained in section 50, provisions of section 50C can be applied so as to adopt value assessed for purpose of payment of stamp duty to be full value of consideration received or accruing as a result of such transfer - Held, yes

Citation
[2011] 12 taxmann.com 170 (AGRA)/[2011] 46 SOT 315 (AGRA)
Court
ITAT
Case Name
Shri Pyare Mohan Mathur, HUF vs. Income-tax Officer, Ward - 2, Aligarh
In favour of
In favour of asssesee
Headnote
I. Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2005-06 - Whether in view of provisions of section 50C, circle rates are deemed to be full value of consideration received or accruing as a result of transfer but those rates do not represent fair market value of property for purpose of computation of capital gain - Held, yes
Section 55A of the Income-tax Act, 1961 - Capital gains - Reference to Valuation Officer - Assessment year 2005-06 - Assessee had shown long-term capital loss of Rs. 2,30,000 by taking fair market value of property as on 1-4-1981 to be cost of acquisition for purpose of computation of capital gains - He got valuation of property done through registered valuer - Assessing Officer did not agree with assessee and deputed Inspector who adopted circle rate of village where land was situated - Assessing Officer adopted circle rate to be fair market value and, accordingly, recomputed amount of capital gain - Whether there is no provision under Chapter relating to computation of capital gain, that circle rate will be treated to be cost of acquisition - Held, yes - Whether, even otherwise, once assessee had submitted necessary evidence by way of valuation report made by registered valuer, onus got shifted on Assessing Officer to contradict report of registered valuer - Held, yes - Whether since Assessing Officer was not agreeable with report of Registered Valuer, he was duty bound to refer matter to DVO for determining fair market value of land as on 1-4-1981 - Held, yes - Whether since Assessing Officer failed to do so, impugned order passed by him was to be set aside and, matter was to be remanded back with a direction to re-compute capital gain after taking fair market value of land as on 1-4-1981, as claimed by assessee - Held, yes
II. Section 68 of the Income-tax Act, 1961 - Cash credit - Assessment year 2005-06 - In course of assessment, cash deposited in bank account was found disproportionate to income shown by assessee in return of income - Assessee was, thus, required to explain source of these deposits and to furnish cash flow statement - Though assessee furnished cash flow statement, but for want of any evidence in support thereof and also fact that assessee did not prepare and personal statements of affairs nor maintained any books of account, cash flow statement furnished by assessee was doubted and amount in question was added to income of assessee - It was noted from records that assessee had filed cash flow statement for assessment years 2004-05 and 2005-06 which reflected all cash transactions entered by him - Further, department had failed to bring any evidence on record to belie cash transactions shown in cash flow statement submitted by assessee nor was there any such objection that such cash transactions entered by assessee were not verifiable from bank account - Whether on facts, impugned addition made by Assessing Officer was to be deleted - Held, yes

Citation
[2011] 11 taxmann.com 180 (AHD)/[2011] 11 ITR(T) 317 (AHD)/[2011] 131 ITD 1 (AHD)/[2011] 140 TTJ 430 (AHD)
Court
ITAT
Case Name
Income-tax Officer, Ward - 2(4), Ahmedabad vs. Chandrakant R. Patel
In favour of
In favour of asssesee
Headnote
Section 55A, read with section 48, of the Income-tax Act, 1961 - Capital gains - Reference to valuation officer - Whether, section 55A is meant only to ascertain fair market value of a capital asset but not meant to determine full value of consideration received as a result of transfer and therefore it has its own limitation for its operation - Held, yes - Whether if a reference can be made to ascertain fair market value of a property, then wherever this phrase 'to determine fair market value of property' is used there only recourse of section 55A is possible- Held, yes - Whether since section 48 do not prescribe determination of capital gain on fair market value it is out of ambit of reference prescribed under section 55A - Held, yes
Section 50C of the Income-tax Act, 1961 - Capital gains - Full value of consideration in certain cases - Whether Assessing Officer can refer for valuation of capital assets to valuation officer under section 50C if he finds that consideration received is less than value adopted by stamp valuation authority for purpose of stamp duty - Held, yes
Section 48 of the Income-tax Act, 1961 - Capital gains - Computation of - Whether for purposes of computation of capital gain under section 48, a reference can be made to DVO only in a situation as prescribed under section 50C and not otherwise - Held, yes
Section 142A of the Income-tax Act, 1961 - Assessment - Estimate by valuation officer in certain cases - Whether area of operation of section 142A is limited in its span and confined to provisions of section 69, etc., and section 56(2) - Held, yes

Citation
[2012] 19 taxmann.com 121 (KOL)/[2012] 17 ITR(T) 431 (KOL)/[2012] 135 ITD 345 (KOL)/[2012] 146 TTJ 762 (KOL)
Court
ITAT
Case Name
Income-tax Officer, Ward-42(1) vs. Gita Roy
In favour of
In favour of asssesee
Headnote
Section 50C, read with section 48, of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2005-06 - Assessee sold a property and disclosed sale consideration for her half share at Rs. 20 lakhs and computed long-term capital gains at nil by taking indexed cost of acquisition at Rs. 30.81 lakhs - Assessing Officer noticed that stamp valuation of property was at Rs. 1.3 crores - Accordingly, adopting stamp duty valuation, Assessing Officer computed long-term capital gain at Rs. 50.70 lakhs towards share of assessee - On appeal, Commissioner (Appeals) referred matter to DVO for ascertaining fair market value of said property and directed Assessing Officer to adopt value of property as per valuation by DVO - Fair market value as assessed by DVO was lower than value adopted by Stamp Duty Authorities - Whether value adopted by DVO had to be adopted by Assessing Officer for purpose of computation of LTCG - Held, yes [In favour of assessee]

Citation
[2011] 10 taxmann.com 235 (MUM)/[2011] 46 SOT 199 (MUM)(URO)
Court
ITAT
Case Name
Mrs. Arlette Rodrigues vs. Income-tax Officer, Ward 15(2)(2), Matru Mandir Tardeo, Mumbai
In favour of
In favour of asssesee
Headnote
Section 50C, read with section 48, of the Income-tax Act, 1961 - Capital gains - Special provision for full value consideration in certain cases - Assessment year 2006-07 - Assessee and her sons were having 50 per cent share in a property - They decided to develop said property and accordingly entered into development agreement with a developer - It was claimed by assessee that development rights were transferred to developer to extent of 4171.48 sq.ft. out of total area of 9931.48 sq.ft. (932 sq.mtrs) - In respect of development rights given to developer assessees were paid Rs. 1.5 crores - Assessing Officer taking into account fact that at time of registration of development agreement, assessee paid stamp duty on fair market value of said property determined by registration authorities at Rs. 3,98,31,000 invoked section 50C and adopted valuation made by registration authorities in place of value declared by assessee and, accordingly, determined capital gain - Whether as per development agreement to extent of 4171.48 sq.ft development rights had been transferred in favour of developer out of total area and, therefore, for purpose of computing capital gain consideration attributable to 4171 sq. ft. of area only was to be considered - Held, yes - Whether when development rights are transferred, it is nothing but right to exploit said property in favour of developer, and same is covered under sub-clause (i) of section 2(47) and, therefore, provisions of section 50C were applicable when rights to develop property was transferred - Held, yes - Whether since assessee had filed objection before Assessing Officer in respect of valuation adopted for payment of stamp duty for registration of conveyance, Assessing Officer should have referred matter to DVO as per provisions of section 50C(2) - Held, yes - Whether therefore, issue of valuation was to be restored to the file of the Assessing Officer with direction that he should refer valuation matter to Departmental Valuation Officer (DVO) as per provisions of sub-section (2) of section 50C and thereafter re-compute capital gains - Held, yes
Section 55 of the Income-tax Act, 1961 - Capital gains - Cost of acquisition - Assessment year 2006-07 - Whether it cannot be said that when right to develop of property is transferred it is only independent right not attached to ownership of property and, hence, there is no cost of acquisition - Held, yes

Citation
[2011] 10 taxmann.com 45 (JODH)/[2011] 46 SOT 149 (JODH)/[2011] 141 TTJ 511 (JODH)
Court
ITAT
Case Name
Manjula Singhal vs. Income-tax Officer, Ward 2(1), Udaipur
In favour of
Matter remanded
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2004-05 - Whether term 'may' used in sub-section (2) of section 50C is to be read as 'shall' and, thus, if stamp valuation adopted by stamp valuation authority is disputed before Assessing Officer, then Assessing Officer is bound to refer matter to DVO for determining fair market value of property - Held, yes

Citation
[2011] 9 taxmann.com 90 (MUM)/[2011] 45 SOT 257 (MUM)/[2011] 140 TTJ 413 (MUM)
Court
ITAT
Case Name
Arif Akhatar Hussain vs. Income-tax Officer, 12(2) (1)
In favour of
In favour of revenue
Headnote
Section 50C of the Income-tax Act, 1961 - Capital gains - Full value of consideration in certain cases - Assessment year 2006-07 - Assessee along with other co-owners inherited a property - He entered into an agreement with developer for development of said property against consideration of Rs. 63 lakhs - Instant property was valued by Stamp Valuing Authorities at Rs. 4,73,48,000 - Assessing Officer accordingly, issued a show-cause notice to assessee to explain as to why provisions of section 50C should not be invoked in their case - Assessee contended that provision of relevant section were not applicable as instant case was not a case of transfer of land or other capital asset but was a case of transfer of development rights - Assessing Officer set aside assessee’s contention but on his request, property was referred to DVO for revaluation - DVO considered all relevant factors attached with property and thereby valued property at Rs. 1,81,34,749 as against value arrived at by stamp valuing authority at Rs. 4,73,48,000 - Thus, capital gains were re-worked out by Assessing Officer as per DVO’s report - Whether when assessee had received sale consideration and handed over possession of property in question vide development agreement, then conditions prescribed under section 53A of Transfer of Property Act were satisfied and, accordingly, as per provisions of section 2(47)(v), transaction amounted to transfer - Held, yes - Whether further since DVO had already taken into account all aspects while making valuation of property and assessee had participated in proceedings before DVO accordingly, there was no error or illegality in valuation made by DVO which was much less to valuation made by Stamp Valuation Authority - Held, yes

Citation
[2011] 9 taxmann.com 223 (MUM)/[2011] 133 ITD 172 (MUM)/[2011] 139 TTJ 308 (MUM)
Court
ITAT
Case Name
Mrs. Gopi S. Shivnani vs. Income-tax Officer-21(1)(2)
In favour of
Matter remanded
Headnote
Section 55 of the Income-tax Act, 1961 - Capital gains - Cost of acquisition - Assessment year 2005-06 - Assessee acquired a property on 1-9-1978 - She sold said property during assessment year in question - Assessee, while filing return of income had taken its cost of acquisition as on 1-9-1978 - After making valuation as on 1-4-1981, assessee arrived on indexed cost of acquisition at Rs. 2.93 lakhs - During assessment proceedings assessee filed a valuation report stating value as on 1-4-1981 at Rs.3,80,000 - Assessing Officer did not accept said claim as assessee had not filed any revised return - Commissioner(Appeals) upheld order of Assessing Officer - Whether provision of section 55(2)(b) permits assessee to adopt either actual cost of acquisition or fair market value of asset as on 1-4-1981 if said asset is acquired prior to 1-4-1981 - Held, yes - Whether, therefore, authorities below erred in not entertaining assessee's claim in respect of cost of acquisition which was a legally permissible claim - Held, yes
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases - Assessment year 2005-06 - During relevant assessment year, assessee filed its return showing sale of a property at Rs. 21 lakhs - Revenue authorities, however, adopted sale consideration of Rs. 30.08 lakhs on basis of report of DVO - Whether since authorities below had adopted sale consideration as mentioned by DVO without considering objections of assessee, impugned order passed by them was to be set aside and, matter was to be remanded back to Assessing Officer for disposal afresh - Held, yes
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