Commissioner of Income Tax vs Mukesh and Kishor Barot Co-owners

Akil Kureshi, J.—Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal {hereinafter to be referred to as, "the Tribunal"} dated 26th July 2012, raising following question for our consideration:

(i) Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal is right in deleting the addition of Rs. 5900262/- made by the Assessing Officer on account of suppression of sale consideration of plots of land?

(ii) Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal was correct in holding that Section 50C is not applicable in the case of the assessee ignoring the fact that the land transferred was indeed a capital assets, which was chargeable to capital gain tax u/s. 45(2) of the Income Tax Act, 1961?

(iii) Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal was correct in holding that Section 50C is not applicable to determine the fair market value of the land, which was being treated by the assessee as stock in trade?

(iv) Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal should have set aside the matter to the file of the Assessing Officer for further inquiry instead of Dismissing the appeal of the revenue?

Briefly stated, facts are that the respondent-assessee sold immovable property in the nature of plot of land admeasuring 3,458.53 sq. mtrs. during the period relevant to Assessment Year 2008-09 for a total sale consideration of Rs. 49,06,492/-. He had sold such land at Rs. 1,419/- per sq.mtr. The Assessing Officer noted that the jantry rates for such land was fixed at Rs. 2,500/- per sq.m. On the jantry rate of Rs. 2,500/- per sq.m, the Assessing Officer applied the co-efficient of 1.25 and arrived at a figure of Rs. 3,125/- per sq.m. He believed that the difference between such rate at which consideration is stated to have been received ie., Rs. 1,419/- per sq.m. should be added to the income of the assessee. He accordingly added a sum of Rs. 59,00,262/-. In such order, he noted the assessees contention that the plot of land was held as "stock in trade" as the assessee was engaged in the business of buying and selling the land and therefore, was not exigible to capital gain and that therefore, Section 50C of the Income Tax Act, 1961 would have no application. He, however, discarded such a contention on the premise that the jantry rate can still be a reference point for ascertaining the undisclosed sale consideration.

In Appeal before the CIT(A), the CIT(A) revered the decision of the Assessing Officer and held that Section 50C of the Act would have no applicability when question of capital gain did not arise. Reliance was placed on the decision of the Delhi High Court in case of Commissioner of Income Tax Vs. Smt. Nilofer I. Singh,

Revenue thereupon approached the Tribunal. Tribunal confirmed the view of the CIT(A), making following observations:-

Rival submissions were considered. Undoubtedly, the lands in question sold were in stock-in-trade. As a matter of fact, in the assessment order, A.O. himself mentioned that assessee is a dealer in plots. Therefore, Section 50C of the I.T. Act, 1961 has no application. Keeping in view the totally of the facts and circumstances of the case, we are of the view that learned CIT(A) has given cogent reasons for deleting the addition of Rs. 59,00,252/- made by A.O. on account of alleged suppression of sale proceeds of land which were held as stock-in-trade. We, therefore, inclined to upheld the order of learned CIT(A).

Having heard learned counsel for the Revenue and having perused the documents on record, we have no hesitation in upholding the decision of the Tribunal. Section 50C provides inter alia that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset is less than the value adopted or assessed by any authority of a State Government 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 consideration received or accruing as a result of such transfer.

Thus, Section 50C of the Act gives rise to a deeming fiction and such deeming fiction is to be applied in case of computation of capital gain u/s 48 of the Act. It is well known that a deeming fiction provided by the statute has to be applied for the purpose of which it is provided and no other. In the present case, if the Assessing Officer had utilized jantry rate as a starting point, to enquire further and ascertain the true market value of the land so sold and having brought some evidence in this direction, surely, the case of the Revenue would have been justified. We have perused the order of the Assessing Officer in detail. Except for making reference to the jantry rates and pointing out that the jantry rate is 2.2 times higher than the sale consideration disclosed by the assessee, the Assessing Officer has brought no evidence on the record to establish that the sale deed did not reflect the full sale consideration. In other words, all that the assessee did was to apply a deeming fiction provided u/s 50C without admitting so, it was not in dispute that the plot was held as "stock in trade" and therefore sale thereof gives rise to the business income and not to capital gain. In the result, Tax Appeal is dismissed.