Prem Chand Mittal, New Delhi vs Department Of Income Tax

ITO, Vs. Prem Chand Mittal, Ward 27(4), 6/52, Punjabi Bagh (West), New Delhi. New Delhi.

PAN: AAMPM1160H

(Appellant) (Respondent)

Assessee By : Shri Ved Jain, & Smt. Rano Jain, Advocates Department By : Shri Vikram Sahay, Sr. DR

Date of Hearing : 11.03.2015. Date of Pronouncement : 12 .03.2015.

ORDER PER R.S. SYAL, AM:

This appeal by the Revenue is directed against the order passed by

the CIT(A) on 18.2.2011 in relation to the assessment year 2005-06. ITA No.2389/Del/2011

2. The only issue raised in this appeal is against the direction to adopt

sale consideration at Rs.12.50 lac instead of a higher value computed by

the Departmental Valuation Officer (hereinafter called 'the DVO').

3. Briefly stated, the facts of the case are that the assessee sold certain

properties during the year in question. One of the properties sold was B-

1/455, Janak Puri, New Delhi, in which the assessee had half share.

Long-term capital gain of Rs.9,90,294/- was declared from the transfer

of this property. Such property was sold for a sum of Rs. 25 lac and the

full value of consideration in relation to the assessee's half share was

taken at Rs.12.50 lac. The AO was not satisfied with the amount of sale

consideration at this level. He deputed an Income-tax Inspector to make

a fair estimate of the market value of the property, who gave the

approximate value at Rs.1.25 crore. Thereafter, the matter was referred

by the AO to the DVO, who determined the fair market value of the

property at Rs.76,46,300/-. By considering this valuation of the DVO,

the AO adopted the sale price at Rs.38,23,150/-, being half share in the

property and re-computed the amount of long-term capital gain. The ld.

2 ITA No.2389/Del/2011

CIT(A) overturned the assessment order on this issue. The Revenue is

aggrieved against the reduction in the amount of full value of

consideration of this property.

4. We have heard the rival submissions and perused the relevant

material on record. It can be observed that the only point agitated by the

Revenue before us is the computation of the full value of consideration

of the property. Section 45(1) provides that any profit or gains arising

from the transfer of a capital asset effected in the previous year shall be

chargeable to income-tax under the head 'Capital gains.' Section 48 is

the `Mode of computation' of income. This section provides that the

income under the head 'Capital gains' shall be computed by deducting:

(i) expenditure incurred wholly and exclusively in connection with the

transfer of property and (ii) the cost of acquisition of the asset and the

cost of any improvement thereto; from `the full value of the

consideration received or accruing as a result of the transfer of the

capital asset'.

3 ITA No.2389/Del/2011 5. Coming back to the factual matrix of the case, it can be seen that the

property was apparently transferred for a sum of Rs.25 lac. Now, the

question arises as to whether the AO was right in substituting `the full

value of the consideration received or accruing as a result of the

transfer of the capital asset' with the 'fair market value' determined by

the DVO. The answer to this question has to be given in the negative

alone. The obvious reason is that when the legislature has provided to

consider the full value of the consideration received or accruing as a

result of the transfer of the capital asset, there can be no question of the

AO substituting it with the fair market value as determined by the DVO.

Of course, the AO is entitled to carry out investigation and conclusively

prove with some clinching evidence that the 'full value of the

consideration received or accruing as a result of the transfer of a capital

asset' was, in fact, any amount higher than the one depicted in the sale

deed. In the absence of any such an evidence, there can be no scope for

frustrating the prescription of section 48, which mandates that the

computation of capital gains should be done by considering the full

4 ITA No.2389/Del/2011

value of the consideration received or accruing as a result of the transfer

of a capital asset.

6. The Hon'ble Supreme Court in the case of K.P. Varghese vs. ITO

(1981) 131 ITR 597 (SC) has held that the onus of establishing that the

conditions of taxability are fulfilled, is always on the Revenue. It is for

the Revenue to show that there is an understatement of the

consideration. It has further been laid down that to throw the burden of

showing that there is no understatement of the consideration on the

assessee, would be to cast an almost impossible burden upon him to

establish a negative. Similar view has been reiterated in CIT vs.

Shivakami Co. P. Ltd. (1986) 159 ITR 71 (SC). In this case, their

Lordships have laid down that no addition can be made unless there is

evidence that more consideration than what was stated in the document,

was received. In the light of the above decisions, it is manifest that no

addition can be made unless the Revenue proves understatement of

consideration with some cogent evidence. A mere report of the DVO

estimating higher value of the property cannot be considered as an

5 ITA No.2389/Del/2011

evidence of the actual full value of consideration received or accruing as

a result of the transfer of capital asset.

7. To curb the practice of understatement of sale consideration in

transactions of sale of property and the resultant loss of taxes, the

legislature stepped in by inserting a deeming provision in terms of

section 50C w.e.f. 1.4.2003 containing a special provision for 'full value

of consideration in certain cases.' Sub-section (1) of section 50C

provides that : `Where the consideration received or accruing as a result

of the transfer by an assessee of a capital asset, being land or building or

both, is less than the value adopted or assessed or assessable by any

authority of a State Government (hereafter in this section referred to as

the "stamp valuation authority") for the purpose of payment of stamp

duty in respect of such transfer, the value so adopted or assessed or

assessable shall, for the purposes of section 48, be deemed to be the full

value of the consideration received or accruing as a result of such

transfer'. A bare perusal of this provision indicates that where 'the full

value of consideration received or accruing as a result of transfer of a

6 ITA No.2389/Del/2011

capital asset' is less than the stamp value, then, such stamp value is to be

substituted with 'the full value of consideration.' Reverting to the facts

obtaining in this case, it is manifest from a copy of the Registered sale

deed that the stamp value of the property is the same figure, which is the

value of consideration received at Rs.25 lac. In that view of the matter,

the provisions of section 50C are also of no help to the Revenue.

8. In view of the foregoing discussion, we are of the considered

opinion that the ld. CIT(A) was justified in directing to take full value of

consideration of the property transferred at Rs.12.50 lac.

9. In the result, the appeal is dismissed.

The order pronounced in the open court on 12.03.2015.

Sd- Sd-

[A.T. VARKEY] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated, 12th March, 2015. dk

7 ITA No.2389/Del/2011

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT

AR, ITAT, NEW DELHI.

8