S.p.balasubramaniam v. Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 01.02.2017 CORAM THE HON'BLE MR.JUSTICE HULUVADI G. RAMESH AND THE HON'BLE DR.JUSTICE ANITA SUMANTHT.C(A) NO. 841 OF 2016 S.P.Balasubramaniam .. Appellant/Respondent - vs - Assistant Commissioner of Income Tax Media Circle I No.112, Uttamar Gandhi Salai Chennai 600 034. .. Respondent/Appellant Tax Case Appeal filed under Sec. 260A of the Income TaxAct, 1961 against the order of the Income Tax AppellateTribunal, Madras 'C' Bench, Chennai,dated 18.07.2011 in ITA No.638/Mds/2011. Against the order of the Commissioner Of Income Tax(Appeals) VI Chennai 34 dated 04.01.2011 and made in I.T.A. No185/09-10. GIR NO/PAN for the Assessment year 2007-2008 against the order of the Income Tax Officer (OSD)MediaCircle I, chennai 34 dated 29.12.2009 and made in P.A.No/GIR NoAADPB4195J for the Assessment year 2007-2008. For Appellant : Mr. J.Balachander For Respondent : Mr. M.Swaminathan JUDGMENT (DELIVERED BY DR.ANITA SUMANTH, J.) This appeal comes to us at the instance of the assesseeraising the following three substantial questions of law:- ‘i) Whether on the facts and circumstances ofthe case, the Honourable Income Tax Appellate https://hcservices.ecourts.gov.in/hcservices/ Tribunal was right in law in holding that theapparent consideration stated in the sale deedis to be taken as cost of acquisition when theactual consideration paid is Rs.46,00,000/=(Rupees Forty Six Lakhs only) in terms of theearlier agreement of sale for the purpose ofcomputing capital gains for the Assessment Year2007-2008? ii) Whether on the facts and circumstances ofthe case the Honourable Income Tax AppellateTribunal was right in law in taking intoconsideration only the apparent considerationstated in the sale deed and not the actualconsideration paid by the appellant assessee tothe vendors for purchasing the property for thepurpose of computing capital gains for theassessment year 2007-2008? iii) Whether on the facts and circumstances ofthe case, the order of the Honourable AppellateTribunal is vitiated on account of nonconsideration of the material evidence which arenecessaryforcomputingthecostofacquisition?’ 2. The assessee is an individual and had entered into anagreement on 11.10.2003 for the purchase of a property. Theconsideration set forth in the agreement for sale is an amountof Rs.46,00,000/- (Rupees Forty Six Lakhs only). Thereafter, andafter negotiation, the consideration finally agreed upon by theparties as reflected in the sale deed was a sum ofRs.24,00,000/- (Rupees Twenty Four Lakhs only) as against theconsideration of Rs.46,00,000/- agreed upon earlier. The stampduty was enhanced at the time of registration on the basis ofthe prevailing guideline value and the appellant duly remittedthe differential duty computed. 3. The property was sold by the assessee in the financialyear relevant to assessment year 2007-2008. The sale resulted incapital gains and in the computation thereof, the cost ofacquisition of the property was adopted by the assessee at afigure of Rs.46,00,000/-. The assessing officer was of the viewthat the cost of acquisition was an amount of Rs.24,00,000/-, asstated in the registered deed of sale. Despite objections by theassessee, the assessment was completed computing the capitalgains in the manner proposed by the officer. 3. The property was sold by the assessee in the financialyear relevant to assessment year 2007-2008. The sale resulted incapital gains and in the computation thereof, the cost ofacquisition of the property was adopted by the assessee at afigure of Rs.46,00,000/-. The assessing officer was of the viewthat the cost of acquisition was an amount of Rs.24,00,000/-, asstated in the registered deed of sale. Despite objections by theassessee, the assessment was completed computing the capitalgains in the manner proposed by the officer. 4. An appeal was filed before the Commissioner of IncomeTax (Appeals) (‘CIT(A)’) who, after detailed consideration ofthe matter, allowed the same. The CIT(A) applied the principlecontained in section 50C of the Act that enabled the assessingofficer to substitute the guideline value in place of theconsideration adopted by the parties in the computation ofcapital gain. Since the assessee had paid the stamp duty on thedifferential cost computed by the registering authority on thebasis of guideline value of the property, the CIT(A) was of theview that the consideration relatable to the stamp duty paid wasliable to be adopted as the deemed cost of acquisition. TheRevenue filed an appeal before the Income Tax AppellateTribunal, which, after hearing the counsel on behalf of theRevenue, the assessee not being represented, restored the orderof assessment, only modifying the same to state that theconsideration of Rs.24,00,000/- would be enhanced to the extentof additional stamp duty paid at the time of registration ofsale deed. The assessee is in appeal against the aforesaid order. 5. Before us, Mr.Balachander, learned counsel appearing onbehalf of the appellant/assessee would state that crucialdetails and facts have not been taken into account, in so far asthe Tribunal proceeded to hear the matter exparte. He went onto emphasise that the consideration paid by the assessee at thetime of purchase in the year 2003 was, in fact, a sum ofRs.46,00,000/-, as would be evident from the transfer of theamount through banking channels as well as the fact that theamount has been offered to tax in the hands of the vendors. Percontra, Mr.Swaminathan, learned counsel appearing for theRevenue would point out factual discrepancies between thenumbers on the cheques and the demand drafts as well as betweenthe amounts stated to have been paid as sale consideration andthe amounts offered to tax by the vendors in their respectiveincome tax returns. 6. Before adverting to the facts, we deal with thelegal issue raised. The short point is whether the saleconsideration to be adopted is the ‘apparent’ consideration asreflected in the registered deed of sale or the ‘actual’consideration said to have been paid by the assessee andreflected in the agreement of sale. We are of the view that whatis apparent need not be real and it requires an exercise indetermination, after taking into account all relevant factors,to arrive at the actual/real consideration. In the present case,we find that the Tribunal, the final fact finding authority, hasproceeded on the notion that the consideration, as reflected inthe deed of sale, is the only parameter to be taken intoconsideration. While we agree that this would be one importantfactor, there are other parameters to be looked into beforedetermining the actual consideration paid. 7. The Tribunal notes, in para 7 that additional stamp dutyhas been paid by the appellant at the time of registration.However, the tribunal declines to substitute the sale value asper the registered sale deed, being Rs,25,52,,820/- with theamount stated to be paid by the appellant, being Rs.49,82,300/-stating that the apparent consideration paid by the assesseecannot be substituted by the deemed value determined for thepurpose of stamp duty. We are in agreement with this finding.The computation of capital gains has to be effected on the saleconsideration actually received and not a notional or deemedamount. The CIT(A) had proceeded to adopt a notional amountrelatable to the stamp duty paid as being the saleconsideration, merely by application of section 50 C of the Act.The provisions of section 50C have been inserted to provide fora situation where there is an understatement of sale/purchaseconsideration as compared to the guideline value. Thesubstitution of the guideline value for the alleged understatedsale consideration is not absolute but subject to the provisionsof section 50C(2) which provide a window of opportunity to theassessee to establish why the deeming provision is notapplicable and why and on what basis the actual considerationpaid is to be determined. The purpose of such opportunity isevidently to ensure that the real and actual consideration paidis determined and brought to tax and such opportunity has to beextended in all situations where there is a dispute relating tothe determination of consideration. 8. The Tribunal, while rightly holding that the deemingprovisions of section 50C are not applicable to a situation likethe present one, erred in not taking into account variousfactors relevant to arrive at a proper determination of theactual consideration paid. This is on account of the fact thatthe assessee did not appear for the hearing and the matter washeard by the Tribunal exparte, qua the assessee. We have noticedthat the assessee has nowhere explained why the sale deed wasregistered when, according to him, the consideration containedtherein was not the actual sale consideration agreed upon, norwhy an Addendum was not executed by the parties correcting themistake in sale consideration, once the error was noticed. This,and all other relevant facts relating to the matter, requirethorough examination to arrive at the actual consideration paid.In order to ensure that the matter is considered in the properperspective and all relevant details are taken into account, wedeem it fit to remit the issue to the file of the AssessingOfficer to be considered and adjudicated upon de novo. Theassessing officer shall afford adequate opportunity to theassessee to furnish all particulars as may be necessary toarrive at the real and actual price paid by the assessee foracquisition of the property. 9. Substantial questions of law (i) and (ii) are decidedin the above terms and substantial question of law (iii) isallowed in favour of the assessee by way of remand. The appealis partly allowed. In the circumstances of the case, there shallbe no order as to costs. -s/d- Assistant Registrar(CO) True Copy Sub-Assistant RegistrarTo1. Assistant Commissioner of Income Tax Media Circle I No.112, Uttamar Gandhi Salai Chennai 600 034.2. The Commissioner of Income Tax Chennai 343. The Deputy Commissioner of Income Tax Company circle VI(3) Chennai 344. The Assistant Registrar Income Tax Appellate Tribunal, Rajaji Bhavan IIIrd Floor, Besant Nagar Chennai 600 090+1 CC to Mr. M.Swaminathan, sr 6449 T.C.A. NO.841 OF 2016sp/20/4 https://hcservices.ecourts.gov.in/hcservices/