IN HIGH COURT OF JUDICATURE AT MADRAS DATED :: 15-02-2019 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE C.V.KARTHIKEYAN T.C.A.No.142 of 2019 M/s.Jagannathan Sailaja Chitta ... Appellant -vs- Income Tax Officer, International Taxation 2 (2), Chennai - 34. ... Respondent Appeal under Section 260A of Income Tax Act,1961, against order of Income Tax Appellate Tribunal, Chennai 'A' Bench, dated 27.09.2017, passed in ITA No.1207/Mds/2017. For Appellant : Mr.R.Sivaraman For Respondent : Mr.Karthik Ranganathan, Senior Standing Counsel, assisted by Mr.S.Rajesh, Standing Counsel. 1 of 25 http://www.judis.nic.in JUDGMENT (Judgment of Court was delivered by Dr.Vineet Kothari,J.) Assessee, namely, M/s.Jagannathan Sailaja Chitta, Chennai, has filed this Appeal under Section 260-A of Income Tax Act,1961, in short, 'Act', assailing order passed by Income Tax Appellate Tribunal, in short, 'Tribunal' on 27.09.2017 in I.T.A.No.1207/Mds.2017, against Assessee for Assessment Year 2012-2013, whereby learned Tribunal upheld order of Commissioner of Income Tax (Appeals), in short, 'CIT (A)', holding that 'Guidance Value' as per Section 50C of Act, as determined by State Government, could be adopted as 'Fair Market Value' for sale consideration for imposition of Capital Gains Tax on Assessee on sale of property by her during relevant Assessment Year. 2. Appellant/Assessee has raised following Substantial Questions of Law : (i) Whether on facts and in circumstances of case, learned Income Tax Appellate Tribunal was justified in adopting fair market value under Section 50C of Income Tax Act, without 2 of 25 http://www.judis.nic.in considering objections of Assessee with regard to fair market value of property sold by Assessee during relevant Assessment Year 2012- 2013, based on report of Departmental Valuation Officer as well as against presumptive value of capital asset as per Section 50C of Act ? (ii) Whether on facts and in circumstances of case, Appellate Authorities themselves could decide objections of Assessee or should have remitted matter back to Assessing Authority for said purpose ? 3. Assessee also claimed exemption under Section 54F of Act on account of reinvestment of sale consideration in acquisition of new property. 4. issue raised before this Court in present appeal by learned counsel for Assessee is that sale consideration of property in question, as disclosed by Assessee, was Rs.17,09,80,000/- in three 'Documents of Sale' executed in year 2011, details of which are given in Paragraph 5 of order of Tribunal, showing that for sale consideration of Rs.17,09,80,000/-, value adopted by 3 of 25 http://www.judis.nic.in Stamp Value Authority was Rs.19,70,85,992/- as per Section 50C of Act and thus difference amount of Rs.2,61,05,992/- was added to levy Capital Gains Tax by CIT (A) for first time and without considering question of Section 54F , said valuation under Section 50C was adopted by CIT (A), which was upheld by Tribunal in impugned order. Tribunal, however, gave relief under Section 54F of Act in said valuation under Section 50C of Act. 5. Learned counsel for Assessee, relying upon decision of Delhi High Court in case of Commissioner of Income Tax v. Khoobsurat Resorts (P) Ltd., (2012) 28 Taxmann.com 93 (Delhi), has submitted that Assessee had raised objections against higher valuation and sought for fresh valuation of said property by his letter, dated 10.03.2015, under Section 142A of Act from Departmental Valuation Officer (DVO), but, since assessment was getting time barred, assessment was completed by Assessing Authority on 30.03.2015, adopting aforesaid stamp duty valuation on 'Guidance Value' and on which difference of stamp duty was even paid by Buyer and when 4 of 25 http://www.judis.nic.in matter was taken before CIT (A), thereafter, for first time, before CIT (A) only, Assessing Authority produced said Departmental Valuation Officer (DVO)'s Report, valuing said property at even still higher amount of Rs.27,36,04,000/-. Assessee raised objections before CIT (A) against such higher valuation and same, as quoted in order, dated 27.03.2017, of learned CIT (A), are as follows : Objections of Assessee : following aspects of property brought down its value as compared to Stamp Duty Value for retail plots adopted by stamp duty authority : 5. ECR Link Road was sluggish and connecting roads to ECR were not complete and were in progress during year of sale. These Road were completed fully only during 2012-13. Hence adopting value of fully completed connected roads with that of unconnected roads for computing stamp value is incorrect. 6. There were no housing project and commercial project started up to 2012 on either side of ECR Link Road. It is to state that there were open lands only. Hence place was completely underdeveloped. However values adopted were of retail plots after 5 of 25 http://www.judis.nic.in land was developed which is unfair. 7. guideline rate published by government from 2007 to 2012 was Rs.1000/- per sq. feet all through these years. guideline was revised upwards at end of 2012 and rate specified is Rs.1500/- per square feet in said location. Hence value before 2012 should be adopted. 8. entire parcel of land to extent of 3.32 acres was sold by three sale deeds at same date - 28th April 2011. land being underdeveloped guideline rate prescribed by government for developed saleable land cannot be yard-stick for valuing underdeveloped large parcel of land. II. In this regard we reply on decision of Hon'ble Delhi High Court in case of CIT vs. Khoobsurat Resorts (P.) Ltd. (2012) 28 taxmann.com 93. It was held in para 15 as under : 'This court is of opinion that express provision of Section 50-C enabling revenue to treat value declared by assessee for payment of stamp duty, ipso fact, cannot be legitimate ground for concluding that there was undervaluation, in acquisition of immovable property. If parliamentary intention was to enable such 6 of 25 http://www.judis.nic.in finding, provision akin to Section 50-C would have been included in statute book, to assess income on basis of similar fiction in case of assessee who acquires such asset. No doubt, declaration of higher cost for acquisition for stamp duty might be starting point for inquiry in that regard; that inquiry might extend to analyzing sale or transfer contemporaneously at time of transaction. Yet, finding cannot start and conclude with fact that such stamp duty value or basis is higher than consideration mentioned in deed. compulsion for such higher value, is mandate of Stamp Act, and provisions which levy stamp duty at pre-determined or notified dates. In present case, revenue did not rely on any objection fact or circumstances; consequently, Court holds that there is no infirmity in approach of lower authorities and Tribunal, granting relief to assessee. This question is accordingly answered in favour of assessee, and against revenue.' III. Without prejudice to above, difference between value adopted by appellant and Stamp Valuer is Rs.18052 per square feet which is only 15% of guideline value. Considering larger size of land, margin of 15% can be allowed since value of retail plots was adopted as comparable. Findings of CIT (Appeals) : 7 of 25 http://www.judis.nic.in appellant's above contentions along with reliance on case laws referred above have been carefully considered. I find that case laws referred are squarely distinguishable on facts and accordingly, appeal is adjudicated on this issue. appellant has raised ground of appeal that AO has erred in adding Rs.2,61,05,992/- as difference between sale consideration shown and value adopted by stamp value authority u/s.50C in computing capital gains. AR contended that when AO issued Show Cause notice as to why difference between sale consideration shown and value adopted by stamp value authority should not be added back, in reply to Show Cause Notice, appellant has submitted that for purpose of stamp duty, there was dispute between buyer and State Government and only at time of assessment proceedings, assessee came to know that buyer had paid some extra stamp duty to get registration completed. However, when sale deed was executed, consideration money as stated in sale deed was only received. Hence, substituting stamp value as sale consideration will be gross injustice. During assessment proceedings, assessee has requested AO vide letter dated 10.03.2015 to carry out valuation of 8 of 25 http://www.judis.nic.in property by valuation officer u/s.142A of Act. However, assessment was getting time barred on 31.03.2015 and by that time valuation report was not received by AO. Accordingly, AO considered sale consideration of property at 50C value and computed LTCG. Therefore, difference of sale consideration as shown in sale deed and 50C value of property was added in computing LTCG. appellant has filed appeal against order by raising grounds of appeal supra on issue. During appeal proceedings, AO has further forwarded valuation report dated 15.07.2015 determining value of property at 27,36,04,000/- of valuation officer. copy of valuation report dated 15.07.2015 was handed over to AR for his comment on issue. AR contended that they have raised objection before DVO. Thereafter, DVO has passed valuation report dated 15.07.2015 valuating property at Rs.27,36,04,000/- and order of DVO is incorrect and cannot be adopted as it exceeds stamp duty value. I have given careful consideration to assessee's objection (sic !) raised before DVO. From valuation report, it is apparent that DVO has given careful consideration 9 of 25 http://www.judis.nic.in to assessee's objection raised before him and accordingly arrived to value of property at Rs.27,36,04,000/-. Moreover, statute provision of sec.50C (2) r.w.s. 50C (3) has mandate that subject to provision contained in sub-section (2), where value ascertained under sub-section (2) exceeds value adopted or assessed or assessable by Stamp Valuation Authority referred to in sub-section (1), value so adopted or assessed or assessable by such authority shall be taken as full value of consideration received or accruing as result of transfer. Accordingly, I confirm action of assessing officer adopting 50C value of property as sale consideration for computing capital gain. ground of appeal on this issue is dismissed. 6. Assessee insisted before CIT (A) that sale value declared in sale deed was fair market value of property in question and, therefore, not only valuation given by Departmental Valuation Officer could not be adopted for imposition of Capital Gains Tax nor presumptive value under Section 50-C of Act could be so adopted. 7. From above quoted portions of order of CIT (A), it 10 of 25 http://www.judis.nic.in appears that CIT (A) had neither himself considered objections of Assessee in detail nor did he choose to remit matter back to Assessing Officer on that issue. Instead, learned CIT (A) chose to observe that since Departmental Valuation Officer had 'carefully' considered objections of Assessee and accordingly arrived at value of Rs.27,36,04,000/-, but he would still approve 'Guidance Value' under Section 50C of Act, to be adopted by Assessing Authority for computing Capital Gains Tax liability of Assessee. Tribunal also dismissed appeal of Assessee in this regard and upheld 'Guidance Value' as determined by State Government for stamp duty purposes as 'Fair Market Value' and thus upheld addition of Rs.2,61,05,992/- in declared sale value of asset in Sale Deeds. Tribunal, thus, adopted said Fair Market Value under Section 50C of Act and directed Assessing Authority to compute relief under Section 54F of Act accordingly. relevant Paragraphs 7.5 and 7.6 of order of Tribunal, dated 27.09.2017, are quoted below for ready reference : 11 of 25 http://www.judis.nic.in 7.5 With regard to full value of consideration as result of transfer of capital asset, provisions of section 48 of Act is very clear that income chargeable under head "Capital gains" shall be computed, by deducting from full value of consideration received or accruing as result of transfer of capital asset. In this case, as per section 50C(1) of Act, where consideration received by assessee as result of transfer of capital asset, being land, building or both, is less than value adopted or assessed by authority of State Government [Stamp Valuation Authority] for purpose of stamp duty, value so assessed shall, for purpose of section 48 of Act, be deemed to be full value of consideration received on such transfer. Thus, full value adopted for purpose of computation of capital gain tax as per provisions of section 45 r.w. section 50C of Act was at Rs.19,70,85,992/-, as determined by Stamp Value Authority. In same scenario, for claiming exemption under section 54F of Act from capital gain chargeable under section 45 of Act, full value on transfer of asset should also be same as determined by Stamp Value Authority and not less than that. As explained in CIT v. Citi Bank N.A. [2003] 261 ITR 570 (Bom), different provisions of Chapter IV-E of Act form part of one integrated code. same are to be read harmoniously and not disjointedly. deeming provision, it is trite law, is to be read in light of object of provision and, further, is to be taken to its logical end. When, for purpose of computation under section 48 of Act, full value of consideration was taken as per section 50C of Act, Assessing Officer was not justified in adopting sale consideration as admitted in sale deed viz., Rs.17,09,80,000/-. Similar view has also been taken by Tribunal in ITO v. Kondal Reddy Mandal Reddy in 12 of 25 http://www.judis.nic.in I.T.A. No. 848/Hyd/2015 dated 13.05.2016. 7.6 In view of foregoing, we direct Assessing Officer to adopt full value on transfer of asset as was determined under provisions of section 50C of Act, viz., Rs.19,70,85,992/- for allowing claim of exemption under section 54F of Act. Accordingly, ground raised by assessee is allowed and Assessing Officer is directed to recompute taxable income after allowing claim of exemption under section 54F of Act. 8. Mr.Karthik Ranganathan, learned Senior Standing Counsel for Revenue, supported impugned order of Tribunal and urged that Assessing Authority and also Appellate Authorities were bound to adopt valuation given as per 'Guidance Value' under Section 50C of Act and that Assessing Authority did not have any discretion in matter in this regard. 9. We have heard learned counsel for parties and given our due consideration to rival submissions and also material available on record. 10. Section 50C of Act, as it now stands after its 13 of 25 http://www.judis.nic.in amendment by Finance Act, 2018, with effect from 01.04.2019, adding Third Proviso to Section 50C (1), is quoted below for ready reference: 50C. Special provision for full value of consideration in certain cases. (1) Where consideration received or accruing as result of transfer by assessee of capital asset, being land or building or both, is less than value adopted or assessed or assessable by any authority of State Government (hereafter in this section referred to as -stamp valuation authority) for purpose of payment of stamp duty in respect of such transfer, value so adopted or assessed or assessable shall, for purposes of section 48, be deemed to be full value of consideration received or accruing as result of such transfer. Provided that where date of agreement fixing amount of consideration and date of registration for transfer of capital asset are not same, value adopted or assessed or assessable by stamp valuation authority on date of agreement may be taken for purposes of computing full value of consideration for such transfer: Provided further that first proviso shall apply only in case where amount of consideration, or part thereof, has been received by way of account payee cheque or account payee bank draft or by use of electronic clearing system through bank account, on or before date of agreement for transfer. Provided also that where value adopted or 14 of 25 http://www.judis.nic.in assessed or assessable by stamp valuation authority does not exceed one hundred and five percent of consideration received or accruing as result of transfer, consideration so received or accruing as result of transfer shall, for purposes of section 48, be deemed to be full value of consideration. (2) Without prejudice to provisions of sub- section (1), where (a) assessee claims before any Assessing Officer that value adopted or assessed or assessable] by stamp valuation authority under sub- section (1) exceeds fair market value of property as on date of transfer; (b) value so adopted or assessed or assessable] by stamp valuation authority under sub- section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or High Court, Assessing Officer may refer valuation of capital asset to Valuation Officer and where any such reference is made, provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub- section (5) of section 24, section 34AA, section 35 and section 37 of Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to reference made by Assessing Officer under sub-section (1) of section 16A of that Act. Explanation 1. For purposes of this section, -''Valuation Officer'' shall have same meaning as in 15 of 25 http://www.judis.nic.in clause (r) of section 2 of Wealth-tax Act, 1957 (27 of 1957). Explanation 2. For purposes of this section, expression -''assessable'' means price which stamp valuation authority would have, notwithstanding anything to contrary contained in any other law for time being in force, adopted or assessed, if it were referred to such authority for purposes of payment of stamp duty. (3) Subject to provisions contained in sub- section (2), where value ascertained under sub- section (2) exceeds value adopted 1 [or assessed or assessable] by stamp valuation authority referred to in sub-section (1), value so adopted 1 [or assessed or assessable] by such authority shall be taken as full value of consideration received or accruing as result of transfer. 11. Delhi High Court, in case of CIT v. Khoobsurat Resorts (P.) Ltd., referred to above, dealing with similar question held in our respectful opinion rightly and we fully agree with same, that provisions of Section 50C of Act only enable Revenue to adopt Guidance Value declared by State for payment of stamp duty, as Fair Market Value under Section 48 of Act. But, that Guidance Value cannot, ipso facto, be taken as valuation for purpose of computing Capital Gains Tax liability in hands of assessee/seller. Sub-section (2) of 16 of 25 http://www.judis.nic.in Section 50C of Act itself provides for reference to Departmental Valuation Officer if Assessee objects to invoking of Section 50C (1) of Act. relevant Paragraph 15 of said judgment is quoted below for ready reference : 15. This Court is of opinion that express provision of Section 50-C enabling revenue to treat value declared by assessee for payment of stamp duty, ipso facto, cannot be legitimate ground for concluding that there was undervaluation, in acquisition of immovable property. If Parliamentary intention was to enable such finding, provision akin to Section 50-C would have been included in statute book, to assess income on basis of similar fiction in case of assessee who acquires such asset. No doubt, declaration of higher cost for acquisition for stamp duty might be starting point for inquiry in that regard; that inquiry might extend to analyzing sale or transfer deeds executed in respect of ITA 776/2011 Page 12 similar or neighbouring properties, contemporaneously at time of transaction. Yet, finding cannot start and conclude with fact that such stamp duty value or basis is higher than consideration mentioned in deed. 17 of 25 http://www.judis.nic.in compulsion for such higher value, is mandate of Stamp Act, and provisions which levy stamp duty at pre-determined or notified dates. In present case, revenue did not rely on any objective fact or circumstances; consequently, Court holds that there is no infirmity in approach of lower authorities and Tribunal, granting relief to assesse. This question is accordingly answered in favour of assessee, and against revenue. 12. In our considered opinion also, Assessee's objections against higher valuation by DVO as well as in terms of Section 50C of Act were never dealt with by any of authorities including Appellate Authorities in present case, firstly because, objections could be raised by Assessee only before CIT (A), as Assessing Authority adopted valuation as per Section 50C of Act and produced Report of DVO only before CIT (A). Even though reference was made to Departmental Valuation Officer few days prior to completion of assessment on 30.03.2015 in terms of Section 50C (2) of Act, since DVO's Report did not come forth before assessment could be completed, same was confronted by assessee for first time only before CIT (A). objections raised by assessee were never really considered by 18 of 25 http://www.judis.nic.in CIT (A) nor did he choose to remit matter back to Assessing Officer for that purpose. Thus, presumptive value under Section 50C of Act giving rise to additions to extent of Rs.2,61,05,992/- to declared sale value, as disclosed by assessee, was adopted by Appellate Authorities, without meeting objections of assessee at all. As such, presumption under Section 50C (1) of Act, even though rebuttable in law, was never allowed to be rebutted by Assessee at all. so called 'careful consideration' of objections by CIT (A) or by DVO himself is not borne out at all on record and, therefore, nothing can be said about that. But, in any case, consideration of objections of Assessee by Assessing/Appellate Authorities was must to be undertaken exercise. But, that was not done. In other words, Departmental authorities failed to meet objections of Assessee, which were raised before CIT (A) for first time at appeal stage, but were never overruled by speaking order and Guidance Valuation as per Section 50C (1) of Act was taken as Gospel Truth against disclosed and declared value of sale by Assessee. This was not permitted in law. 13. Why 'Guidance Value' under Section 50C (1) of Act 19 of 25 http://www.judis.nic.in should not be taken as Gospel Truth and why Section 50C (2) provided for reference to DVO in case objection is raised by Assessee has another reason too. 'Guidance Value' fixed for stamp duty purposes is fixed by authority concerned, taking into account location, current market price of property in particular area etc., as standard measure to iron out differences of personal factors, such as, sale in distress for meeting financial emergency, sale to related parties and host of such other factors. But, in Income Tax Act, concept of levy of tax on ''real income'' exists. Therefore, Capital Gains Tax can also be levied on 'real' capital gains and not on presumptive capital gains. need to determine Fair Market Value upon fact finding exercise is sine qua non. But, such fact finding exercise by Departmental authorities, be that Assessing Authority or even Appellate Authority, was not really undertaken in present case and that is where, failure and miscarriage of justice has occurred. 14. It would be insult to honest tax payer to adopt assumed higher market value to impose Capital Gains Tax without allowing him or her opportunity to rebut even legal presumption under Section 50C (1) of Act, even though law itself provides for further fact finding 20 of 25 http://www.judis.nic.in exercise to be undertaken by reference to DVO under Section 50C (2) of Act and thereupon meeting objections of Assessee and allowing him full opportunity to prove that value declared in sale deeds is true and fair Market Value of Capital Asset and actual consideration received by him and, therefore, Capital Gains Tax can be imposed only on that basis. 15. It is undoubted that both Appellate Authority and Assessing Authority, in law, had powers of Civil Court also vide Section 131 of Act and, therefore, Valuation Report of Departmental Valuation Officer as well as presumption under Section 50C of Act about Fair Market Value has to be treated as evidence or legal presumption, which is open to be rebutted by Assessee in accordance with law. 16. bare reading of Scheme of Section 50C of Act would show that Assessee can object to presumptive value as per Section 50C (1) and, therefore, it is only after hearing objections of Assessee, Fair Market Value of Capital Asset as per 'Guidance Value' can be determined by authorities. Assessee cannot be denied 21 of 25 http://www.judis.nic.in opportunity to raise his objections even against presumptive Fair Market Value under Section 50C (1) of Act or Report of DVO under Section 50C (2) of Act and Assessing Authority or Appellate Authorities, whose powers are co-extensive with those of Assessing Authority, cannot refuse to meet those objections point by point. 17. Fair Assessment Procedure under scheme of assessment in Income Tax Act has it at root principles of natural justice and same has not been denied by presumptive provisions, such as Section 50C of Act and several other provisions in scheme of Act. 18. In present facts noted above, we are of opinion that CIT (A), where, for first time, Report of DVO came up, could either deal with objections of Assessee himself or remit matter back to Assessing Authority for dealing with said objections in appropriate and detailed manner. But, such exercise does not seem to have been undertaken by him in present case. 19. Therefore, we are constrained to remit matter back to 22 of 25 http://www.judis.nic.in Assessing Authority even at this stage, even though belatedly, and allow Appeal of Assessee for said purpose. We, accordingly, allow this Appeal and set aside orders passed by learned CIT (A) and also learned Tribunal and remit matter back to Assessing Authority to decide both questions about valuation of property to be taken while dealing with objections of assessee against Report of Departmental Valuation Officer as well as presumptive value under Section 50C of Act and then compute 'Fair Market Value' under Section 48 of Act and relief under Section 54F of Act. 20. In view of above, Substantial Questions of Law framed above are answered in favour of Assessee and against Revenue. 21. Before parting, we may say, that for weighing evidence by Assessing Authority, Assessing Authority has powers of Civil Court conferred upon him by virtue of Section 131 of Act by way of enforcing attendance of any person, including any officer of banking company or examining him on oath, production of documents, discovery and inspection, as case may be. Therefore, while dealing with 23 of 25 http://www.judis.nic.in aforesaid piece of evidence, namely, Departmental Valuation Officer's Report or in allowing Assessee to controvert presumptive value under Section 50C of Act, Assessing Authority can very well exercise said powers conferred upon him. 22. With above observations and directions, this Tax Case Appeal is allowed. No costs. Index : Yes (V.K.,J.) (C.V.K.,J.) Internet : Yes 15-02-2019 Speaking Order dixit To 1.The Income Tax Officer, International Taxation 2 (2), Chennai - 34. 2.Income Tax Appellate Tribunal, Chennai 'A' Bench, Chennai. 24 of 25 http://www.judis.nic.in DR.VINEET KOTHARI, J. and C.V.KARTHIKEYAN, J. dixit T.C.A.No.142 OF 2019 15-02-2019 25 of 25 http://www.judis.nic.in Jagannathan Sailaja Chitta v. Income-tax Officer, International Taxation 2 (2), Chennai