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Writ court need not interfere with a well-reasoned remand order directing reconsideration of LTCG issue in light of sale consideration adopted by assessee subject to corroboration: HC

2019-TIOL-1996-HC-AHM-IT

IN THE HIGH COURT OF GUJARAT

AT AHMEDABAD

R/Tax Appeal No. 1277 Of 2018
R/Tax Appeal No. 1279 Of 2018

PRINCIPAL COMMISSIONER OF INCOME TAX-2
VADODARA

Vs

RITAL R PATEL

J B Pardiwala & A C Rao, JJ

Dated: August 05, 2019

Appellant Rep by: Mr Varun K Patel(3802)
Respondent Rep by: 
Mrs Sangeeta N Pahwa(527)

Income Tax – Section 50(c) & 55(2)(b)

Keywords – Brokerage expenses – Fair market value – Jantri rate – LTCG

THE assessee, in the return for the relevant AY declared LTCG and claimed brokerage expenses. The AO held that there was a transfer in terms of section 2(47) and the assessee failed to file all the details regarding the sale consideration, it was a fit case to compute capital gain by adopting the fair market value of the property. The CIT(A) also upheld that part of the assessment order where it held that there was a transfer as per section 2(47) but directed the AO to compute the capital gain by adopting the sale consideration offered by the assessee rather than the fair market value as the former amount was higher that the jantri rate. The CIT(A) however deleted the addition made on account of brokerage expenses. The ITAT, remanding the matter to the AO, held that sale consideration adopted by the AO was not correct. Instead, the AO was directed to adopt the value offered by the assessee. The Revenue contested the matter before the High Court on the ground that when the assessee had failed to furnish any documentary evidence such as sale deed inter alia, the sale consideration as offered by the assessee cannot be accepted.

Having heard the parties, the High Court held that,

Whether in the absence of any error, a reasoned remand order of the ITAT which directs the AO to re-consider the issue of LTCG in light of sale consideration adopted by the assessee subject to corroboration, merits any interference by the writ court – NO: HC

++ the tribunal has recorded reasons for remanding the matters to the AO. Consequently, as held by the tribunal, now the AO to decide the issue afresh in the light of the claim of the assessee for substituting the fair market value as on 1/4/1981 as the cost of acquisition and the assessee is directed to furnish necessary details in support of its claim and the AO to consider the claim of exemption as per the provisions of the law in light of the relevant CBDT Circular and after giving reasonable opportunity of being heard to the assessee. Hence, the orders passed by the tribunal in remanding the matter does not require any interference. In the result, no substantial question of law arise and both the appeals are dismissed.

Revenue’s appeals dismissed

JUDGEMENT

Per: A C Rao:

1.00. As common question of law arise in both these appeals, the same are heard, decided and disposed of by this common judgement and order treating the Tax Appeal No.1277/2018 as main Appeal.

2.00. Tax Appeal No.1277 of 2018 under section 260A of the Income Tax Act, 1961 (“the Act” for short) has been preferred by the revenue challenging the order passed by the Income Tax appellate Tribunal in ITA No.710/Ahd/2014 dated 12/7/2017 for A.Y. 2009-2010, with the following proposed questions of law :-

“[a] Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in not deciding the following grounds raised by the appellant department on merits :

(i). On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to adopt the consideration shown by the assessee by holding that assessee has sold the property at prevailing market rate by comparing the same with the jantri rates from valuation officer, without appreciating the fact about evidence on sale consideration.

(ii). On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to give deduction of 1/3rd of Rs.25 lakhs in computation of long term capital gain on account of brokerage paid in relation to the transfer of property, without appreciating the fact that the assessee had failed to substitute its claim without documentary evidence?

[b] Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in not upholding the sale consideration taken by the Assessing Officer instead of sale consideration offered by the assessee, even though the assessee had failed to furnish any documentary evidence such as sale deed etc. to substantiate its claim regarding the sale consideration?

[c] Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in not rejecting the claim of the assessee for deduction towards brokerage expenses as the assessee had failed to furnish any documentary evidence to substitute the said brokerage expenses?”

2.01. Tax Appeal No.1279 of 2018 under section 260A of the Act has been preferred by the revenue challenging the order passed by the Income Tax appellate Tribunal in ITA No.709/Ahd/2014 dated 12/7/2017 for A.Y. 2009-2010, with the following proposed questions of law:-

“[a] Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in not deciding the following grounds raised by the appellant department on merits :

(ii). On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to adopt the consideration shown by the assessee by holding that assessee has sold the property at prevailing market rate by comparing the same with the jantri rates from valuation officer, without appreciating the fact about evidence on sale consideration.

(ii). On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to give deduction of 1/3rd of Rs.25 lakhs in computation of long term capital gain on account of brokerage paid in relation to the transfer of property, without appreciating the fact that the assessee had failed to substitute its claim without documentary evidence?

[b] Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in not upholding the sale consideration taken by the Assessing Officer instead of sale consideration offered by the assessee, even though the assessee had failed to furnish any documentary evidence such as sale deed etc. to substantiate its claim regarding the sale consideration?

[c] Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in not rejecting the claim of the assessee for deduction towards brokerage expenses as the assessee had failed to furnish any documentary evidence to substitute the said brokerage expenses?”

3.00. Facts leading to Tax Appeal No.1277 of 2018 are under :-

3.01. The respondent – assessee filed the return of income on 31/3/2011 declaring total income of Rs.2,21,510/-. The return was processed u/s. 143(1) of the Act. Thereafter the case was selected for scrutiny assessment and notice under section 143(2) of the Act was issued. The assessment under section 143(3) of the Act was completed on 30/12/2011 assessing total income at Rs.5,50,58,288/- and thus, the A.O. made addition of Rs.5,48,36,783/- towards long term capital gain. The A.O. also initiated penalty proceeding under section 271(1)(c) of the Act.

3.02. The Assessment Order passed by the A.O. was challenged by the assessee by way of appeal being Appeal bearing No.CAB/IV-A-367/2011-12 before the CIT(A), Baroda and in appeal the appellate authority vide order dated 27/12/2013 held that the seller had taken possession of the property and the documents of contract to transfer the property for the consideration of immovable property was in writing and signed by the assessee and therefore, all the conditions of provisions of section 53A of the Transfer of Property Act read with section 2(47) of the Act stand fulfilled and the assessee has also received consideration and therefore, it is taxable as capital gain. However, it was held that the A.O. had invoked the provisions of section 50(c) of the Act, which was not permissible on account of the fact that the sale deed was not executed. The A.O. adopted fair price value as per the information available on the website of the property, instead of the rate assessable by stamp duty officer. The A.O. not allowed deduction of brokerage and other expenses. The A.O. has also not applied provisions of sections of section 55(2) (b) of the Act for fair market value as on 1/4/1981, which is required to be adopted, as the cost of acquisition of the property. The CIT(A) further observed that the A.O. has erred in initiating penalty proceedings u/s.271(1)(c) of the Act. Consequently, the CIT(A) partly allowed the appeal and disallowed the claim of the appellant u/s54EC and assessment was enhanced.

3.03. Against the aforesaid order of the CIT(A), both the assesses and the revenue approached the Income Tax Appellate Tribunal, Ahmedabad D-Bench, Ahmedabad by way of filing separate ITAs and the tribunal allowed both the appeals for statistical purpose. The tribunal observed in paragraph Nos.7, 8 and 9 as under :-

“7. In our considered opinion, the computation of capital gain has to be as per the provisions of the law and when the law has given an option to the assessee to adopt fair market value as on 1/4/1981, the same cannot be denied to the assessee at any stage. Therefore, in the interest of justice and fair play, we set aside the issue to the files of the A.O. with a direction to decide the issue afresh in the light of the claim of the assessee for substituting the fair market value as on 1/4/1981 as the cost of acquisition. The assessee is directed to furnish necessary details in support of its claim Ground No.3 is treated as allowed for statistical purpose.

8. For the sake of completeness of adjudication, we find that the assessee has invested in capital gain exemption bonds and has claimed deduction u/s.54EC of the Act. The A.O. is directed to consider the claim of exemption as per the provisions of the law in light of the relevant CBDT Circular and after giving reasonable opportunity of being heard to the assessee.

9. In the result, all the appeals are treated as allowed for statistical purpose.”

4.00. Mr.Varun Patel, learned counsel for the appellant – revenue in both the appeals has vehemently submitted that the assessee along with other persons had sold the property in Mumbai. The A.O. held that there was a transfer in terms of section 2(47) and since all the details were not filed by the assessee, he computed the capital gain by adopting fair market value of the property. In Appeal, the CIT(A) upheld the A.O.’s decision that there was a transfer in terms of section 2(47) and assessee was liable to tax on capital gains. The CIT(A), however directed the A.O. to compute the capital gain by adopting the sale consideration offered by the assessee as said amount is higher than the jantri rate. The CIT(A) also allowed the deduction on account of brokerage.

4.01. Mr.Patel, learned counsel for the revenue further contended that the ITAT has erred in not upholding sale consideration taken by the AO instead of sale consideration offered by the assessee, even though the assessee failed to furnish any documentary evidence such as sale deed etc. to substantiate its claim regarding the sale consideration.

4.02. Mr.Patel, learned counsel for the revenue further contended that the ITAT has erred in not rejecting the claim of the assessee for deduction towards brokerage expenses as the assessee had failed to furnish any documentary evidence to substantiate the said brokerage expenses.

5.00. Per contra, Ms.Sangeeta Pahwa, learned counsel appearing for the respective assesseee has vehemently opposed both these appeals. She contended that there is no substance in the appeals and both the appeals deserve to be dismissed. She contended that though the tribunal principally agreed with the case of the assessee and held in favour of the assessee, however, erred in remanding the matter. She contended that the tribunal has erred in not considering the additional evidence about Valuation Report of the registered Valuer as on 1/4/1981 and the fair market price as on 1/4/1981 is to be adopted at the cost of acquisition of property only at the option of the assessee.

6.00. Having heard the learned counsel for the respective parties and considering the material on record, we are of the considered opinion that no error has been committed by the tribunal in allowing the appeals and remanding the matters to the A.O. The tribunal has recorded reasons in para 7, 8 and 9 of the order, as reproduced herein above, for remanding the matters to the A.O. So far as the contention raised by the learned counsel for the respective assessee, as noted herein above, is concerned, the same is rightly rejected by the tribunal by holding that the assessee has failed to demonstrate that he was unable to submit the evidence during the assessment proceedings or unable to take a ground before the A.O. on account of some reasonable cause. No such reasonable cost had been shown before the tribunal. The said evidence was rightly not considered by the A.O., Commissioner and the tribunal. The impugned orders passed by the tribunal in remanding the matter does not require any interference at the hands of this Court.

7.00. In the result, no substantial question of law arise in both these appeals for consideration of this Court. Both the appeals are dismissed. Consequently, as held by the tribunal, now the A.O. to decide the issue afresh in the light of the claim of the assessee for substituting the fair market value as on 1/4/1981 as the cost of acquisition and the assessee is directed to furnish necessary details in support of its claim and the A.O. to consider the claim of exemption as per the provisions of the law in light of the relevant CBDT Circular and after giving reasonable opportunity of being heard to the assessee.

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