Rajpal Yadav, Judicial Member:
1. Assessee is in appeal before the Tribunal against order of ld.CIT(A), Ahmedabad dated 13.10.2016 passed for the assessment year 2012-13.
2. Assessee has taken five grounds of appeal, which are argumentative and descriptive in nature. In brief, its grievance is that the ld.CIT(A) has erred in confirming addition of Rs.23,46,939/- which was added by the AO with aid of section 50C of the Income Tax Act, 1961.
3. Brief facts of the case are that he assessee has filed its return of income on 29.9.2012 declaring total income at Rs.4,62,100/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee has sold two immovable properties in which it has shown documented sale consideration at Rs.35.00 lakhs, whereas for the purpose of stamp duty, value determined by the Sub-Registar office, Sanand was at Rs.79,22,449/-. The AO sought explanation of the assessee as to why value on which stamp duty was paid be not deemed as full consideration received on transfer of these two properties for the purpose of computing capital gain under section 48 of the Income Tax Act. The assessee has given reply which has been reproduced by the AO on page no.3 of the assessment order. The stand of the assessee before the AO was that, it had purchased two plots from Shri Pravinbhai D. Bhanushali bearing plot no.143/1 (1979 sq.meter) and 143/2 (894 sq.meters) situated at Sanand on 30.3.2011. It has further purchased plot bearing no.139/1 and 141/3+4 on 23.9.2010 from Ambika Polypack Industries. The assessee wanted to construct godown on the above premises. However, these plots did not have direct access to and from the road. At the time of purchase seller has given an undertaking that he would arrange access to these plots by road. Ultimately, he could not arrange roads upto these plots, and hence under compelling circumstances, these plots were resold to the original vendor. The stand of the assessee is that it has not resold them rather it has cancelled the sale deed. The ld.AO was not satisfied with the stand of the assessee. He found difference in the value stated in the sale deed vis--vis adopted by the stamp duty valuation authority for the purpose of registration of sale deed. This difference was worked out at Rs.44,22,449/-. It was added to the total income of the assessee for calculating long term capital gain under section 50C.
4. Dissatisfied with the addition, the assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) partly accepted appeal of the assessee. He accepted the stand of the assessee that as far as plot no.143/1 and 143/2 are concerned, it has cancelled the sale deed, because it got refund of Rs.10 lakhs which was paid by it for the purchases. As far as plot no.139/1 and 141/3+4 are concerned, the ld.CIT(A) did not accept the stand of the assessee. The discussion made by the ld.CIT(A) on this issue reads as under:
"4.6. With regard to the addition u/s.50C of the Act, it was observed by the AO that the appellant is a limited liability partnership firm and dealing in import, export, sale and distribution of agricultural products and cattle feeds. The AO has noticed that the assessee has shown two immovable properties which are registered with the Sub-Registrar Office, Sanand. It is further noticed that the total document amount shown is of Rs.35 lakhs as against the value determined by the Sub-Registrar at Rs.79,22,449/-. The AO has addition of the difference of Rs.44,22,449/- u/s.50C of the Act.
During the appellate proceedings, the appellant has contended that it had purchased two plots one on 30.3.2011 and second on 23.09.2010. It is further contended that the above mentioned plots did not have direct access to approach road and the assessee was assured by the seller that the same will be made available to the assessee. It is further contended that the seller could not make the due arrangements of the road and on account of the issue of non-accessibility to the plot it was not possible to make any of these plots. The appellant has also contended that the market value of the said will be automatically depressed and plot would not have been of any use other than those who were in its immediate adjointment. The appellant has further contended that it was able to convince the vendors to refund money back with some compensation and accordingly two deeds were executed one clearly stating as cancellation deed and second with partial compensation. In respect of other plot which was purchased at a price of Rs.17,50,000/-, the transaction is cancelled by receiving a sum of Rs.25 lakhs and by mistake it is executed as a sale deed but the essence of the transaction does not part a nature of sale. The appellant has also furnished affidavit from the vendors confirming the above transactions of cancellation. The appellant has also relied upon the case of Smt. D. Anitha of Hyderabad ITAT wherein it is held that where the property was encumbered and thus she was not absolute owner of property, while computing capital gain arising from transfer of such property, market value of property as taken for purpose of payment of stamp duty could not be adopted as sale consideration by adopting provisions of Section 50C of the Act.
The facts of the case and the submissions are considered. The main contention of the appellant is that the plots purchased by it were of no use due to absence of access of road and it has to cancel the transactions and gave back the plots to the original owner. Therefore, these are not to be considered as sale and provisions of Section 50C is not applicable on such transaction. The contention of the appellant is found to be acceptable in respect of plot No.143/1 and 143/2 at Sanand purchased from Pravinbhai B. Bhanushali. The appellant has purchased this plot for a price of Rs.10 lakhs on 30.3.2011 and same was given back to the original owner by way of cancellation deed at the same price of Rs.10 lakhs on 25.07.2011. The appellant has also furnished affidavit from Shri Pravinbahi D. Bhanushali clearly stating that the transaction is cancelled. Considering these facts, it cannot be said that this transaction is a sale which comes under the purview of Section 50C of the Act.
With regard to the other plot No.139/1 and 141/3 + 4 purchased from Ambica Polypack Industries, the contention of the appellant is not found to be correct. The appellant has purchased this plot for a price of Rs. 17,50,000/- on 23.09.2010 and it was sold for a consideration of Rs.25 lakhs though to the same person. Here the contention of the appellant is that by mistake this deed is executed as a sale deed. The appellant has also furnished affidavit of Pravinbhai B. Bhanushali who is the partner of the same firm. This document of sale is registered as sale deed before the Sub-Registrar, Sanand on a higher price. This cannot be treated as cancellation deed and the AO has rightly applied the provisions of Section 50C of the Act for the sale of these plots. Thus the ground of appeal is partly allowed."
5. Before us, the ld.counsel for the assessee reiterated submissions as were made before the ld.CIT(A). He contended that with regard to second plot, the lawyer who got the alleged deed drafted committed a mistake by mentioning it as a sale deed instead of cancellation deed. He further contended that there is no transfer of plot in this exercise and section 50C ought not to be applied. During the course of hearing, he produced site plan wherein geographical location of plots is being displayed. On the strength of this site plan, he contended that remaining plot nos.139/1 and 141/3+4 are concerned, they are of no use to the assessee because it has purchased the specific area including plot no.143/1 and 143/2. Once the deed for 143/1 and 143/2 stand cancelled and accepted by the ld.CIT(A), then it is to be construed that the assessee could not fetch price equivalent to the one on which stamp duty was paid. The potential of remaining plot from a big chunk had reduced the price substantially. This encumbrance ought to be considered by the AO. Thus, alternatively he contended that if the deed for plot no.139/1 and 141/3+4 is being not accepted as cancellation deed, then issue be remitted to the file of the AO for making a reference to the DVO under section 50C(2) of the Income Tax Act for determining fair market value of the plot. On the other hand, ld.DR relied upon the order of the ld.CIT(A).
6. We have duly considered rival submissions and gone through the record carefully. As far as the stand of the assessee that it has cancelled the deed qua plot no.139/1 and 141/3+4 is concerned, no doubt, it has filed an affidavit in support of its contentions. But a plot which was purchased on 23.9.2010 by executing legal documents, whose mutation must have been sanctioned in the revenue record, cannot be cancelled simply by executing other deed. The assessee ought to have filed a suit for declaration in the Civil Court for cancelling the deed of 23.9.2009, it has executed fresh deed on 30.1.2012 for a consideration of Rs.25 lakhs. The earlier purchase deed executed on 23.9.2010 was for Rs.17.50 crores. How it could be said that original deed was cancelled ? The ld.first Appellate Authority has rightly rejected this stand of the assessee. If the original deed was cancelled, then status of the plot as on 23.9.2010 would be restored. Here the assessee has created fresh right to Ambica Polypack Industries.
7. As far alternative contention is concerned, we are of the view that section 50C provides that where the consideration received or accruing as a result of transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall for the purposes of section 48, be deemed to be the full value of the consideration. In other words, full consideration mentioned in section 48 is to be replaced by the consideration on which value of the property was adopted for the purpose of payment of stamp duty.
8. Sub-Section (2) of section 50C further contemplates that in case assessee alleges that stamp duty valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, then, the AO may refer the valuation of the capital
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asset to the Valuation Officer. No doubt the assessee had purchased an area of 2468 sq.meters, 1936 sq.meters, 1979 sq.meters and 893.sq.meters consisting of four survey numbers. Out of that cancellation qua area 1979 sq.metes and 893 sq.meters (143/1 and 143/2) stand accepted by the ld.CIT(A). If an industrialist wants a particular piece of land and that fallen short of expectation of its potential user, then it would make a distress sale qua the remaining area. It is also pertinent to observe that none of the authorities have examined, whether the remaining area has access from the road or not. Hence, in order to ascertain fair market value as contemplated in section 50C(2), a reference ought to be made to DVO. We set aside both orders of the ld.Revenue authority below. Restore these issues to the file of AO and direct him to make a reference under section 50C(2) of the Act to the DVO for determining fair market value of the plot as on the date of sale i.e. 31.1.2012. On the basis of that report, he would work out capital gain assessable in the hands of the assessee. 9. In the result, the appeal of the assessee is partly allowed for statistical purpose.