Calcutta High Court decision in the case of CIT vs. Madan Theatres Ltd.
The facts of this case were that the assessee sold property for a consideration of Rs. 2.50 crore. However, for the purpose of stamp duty, the property was valued at Rs. 5.19 crore and stamp duty was paid on that value. In its return of income, the assessee declared capital gains on the basis of the sale consideration of Rs. 2.50 crore. The Assessing Officer, invoking the provisions of section 50C, held that the transfer consideration has to be taken at Rs. 5.19 crore and computed the assessee’s capital gains on this basis. The Assessing Officer imposed penalty u/s 271(1)(c) in respect of the capital gains’ income enhanced in the assessment. The penalty was however deleted by the Commissioner (Appeals) and the Tribunal.
The facts of this case were that the assessee sold property for a consideration of Rs. 2.50 crore. However, for the purpose of stamp duty, the property was valued at Rs. 5.19 crore and stamp duty was paid on that value. In its return of income, the assessee declared capital gains on the basis of the sale consideration of Rs. 2.50 crore. The Assessing Officer, invoking the provisions of section 50C, held that the transfer consideration has to be taken at Rs. 5.19 crore and computed the assessee’s capital gains on this basis. The Assessing Officer imposed penalty u/s 271(1)(c) in respect of the capital gains’ income enhanced in the assessment. The penalty was however deleted by the Commissioner (Appeals) and the Tribunal.
The appeal filed by the Department was also rejected by the High Court. The High Court held that though the assessee could have disputed the valuation on the basis of the deemed value and chose not to do so, the fact remains that the actual amount received was offered for taxation. It is only on the basis of the deemed consideration that the proceedings u/s 271(1)(c) was started. According to the High Court, the Revenue had failed to produce any iota of evidence that the assessee actually received one paise more than the amount shown to have been received by him. In these circumstances, the High Court dismissed the appeal of the Department.
Readers may note that the decision of the High Court can also be supported by further independent reasoning. It is true that the provisions of the section 50C (1) deem stamp duty valuation as the transfer consideration, where the same is more than the transfer consideration declared by the assessee in his return. But, according to the me, this deeming is only a presumption, which is capable of being rebutted by the assessee.
How does the law require the assessee to rebut this presumption? A careful reading of the provisions of sub-section (2) of section 50C will show all that the assessee is required to do is to make a claim before the Assessing Officer that according to him, the stamp duty valuation is more than the fair market value of the property transferred. There is no legal requirement in the provisions that the claim has to be supported by evidence at this stage of the assessment. A mere claim by the assessee to this effect should therefore suffice. Once such a claim is made, the presumption raised against the assessee in section 50C (1) stands rebutted and the onus shifts to the Assessing Officer to disprove the assessee’s claim by referring the valuation of the property to his Valuation Officer.
According to me, even when the assessee declares the sale consideration as per the sale agreement as the transfer consideration for capital gains’ computation in his return, this very act operates as a notice of his claim to the Assessing Officer that he disputes the substitution of the stamp valuation as the transfer consideration.
We have seen above that the provisions of section 50C nowhere mandate that if the stamp duty valuation is more than the consideration declared in the sale agreement, the assessee is bound to offer his capital gains’ income in his return on the basis of the stamp duty valuation only. On the contrary, he is free to compute his capital gains’ income in his return on the basis of sale consideration as per sale agreement and resist its substitution by the stamp duty valuation in the assessment proceedings. Whether he chooses to pursue this claim in further assessment proceedings or abandon it is his prerogative.
As far as the issue of concealment of income by an assessee is concerned, the same is always to be tested qua his return of income. This is because the return is the place where the assessee is bound to declare his income to the income tax department. If the assessee has declared the income in his return in the manner the law permitted him to do so, then there cannot be any quarrel if the income is subsequently enhanced in the assessment. Therefore, where the assessee has fully declared the sale consideration as per the sale consideration in his return of income, there cannot be concealment of income attributable to him if the transfer consideration is enhanced by the Assessing Officer under section 50C. Readers may thus ponder over the above propositions.
The facts of this case were that the assessee sold property for a consideration of Rs. 2.50 crore. However, for the purpose of stamp duty, the property was valued at Rs. 5.19 crore and stamp duty was paid on that value. In its return of income, the assessee declared capital gains on the basis of the sale consideration of Rs. 2.50 crore. The Assessing Officer, invoking the provisions of section 50C, held that the transfer consideration has to be taken at Rs. 5.19 crore and computed the assessee’s capital gains on this basis. The Assessing Officer imposed penalty u/s 271(1)(c) in respect of the capital gains’ income enhanced in the assessment. The penalty was however deleted by the Commissioner (Appeals) and the Tribunal.
The facts of this case were that the assessee sold property for a consideration of Rs. 2.50 crore. However, for the purpose of stamp duty, the property was valued at Rs. 5.19 crore and stamp duty was paid on that value. In its return of income, the assessee declared capital gains on the basis of the sale consideration of Rs. 2.50 crore. The Assessing Officer, invoking the provisions of section 50C, held that the transfer consideration has to be taken at Rs. 5.19 crore and computed the assessee’s capital gains on this basis. The Assessing Officer imposed penalty u/s 271(1)(c) in respect of the capital gains’ income enhanced in the assessment. The penalty was however deleted by the Commissioner (Appeals) and the Tribunal.
The appeal filed by the Department was also rejected by the High Court. The High Court held that though the assessee could have disputed the valuation on the basis of the deemed value and chose not to do so, the fact remains that the actual amount received was offered for taxation. It is only on the basis of the deemed consideration that the proceedings u/s 271(1)(c) was started. According to the High Court, the Revenue had failed to produce any iota of evidence that the assessee actually received one paise more than the amount shown to have been received by him. In these circumstances, the High Court dismissed the appeal of the Department.
Readers may note that the decision of the High Court can also be supported by further independent reasoning. It is true that the provisions of the section 50C (1) deem stamp duty valuation as the transfer consideration, where the same is more than the transfer consideration declared by the assessee in his return. But, according to the me, this deeming is only a presumption, which is capable of being rebutted by the assessee.
How does the law require the assessee to rebut this presumption? A careful reading of the provisions of sub-section (2) of section 50C will show all that the assessee is required to do is to make a claim before the Assessing Officer that according to him, the stamp duty valuation is more than the fair market value of the property transferred. There is no legal requirement in the provisions that the claim has to be supported by evidence at this stage of the assessment. A mere claim by the assessee to this effect should therefore suffice. Once such a claim is made, the presumption raised against the assessee in section 50C (1) stands rebutted and the onus shifts to the Assessing Officer to disprove the assessee’s claim by referring the valuation of the property to his Valuation Officer.
According to me, even when the assessee declares the sale consideration as per the sale agreement as the transfer consideration for capital gains’ computation in his return, this very act operates as a notice of his claim to the Assessing Officer that he disputes the substitution of the stamp valuation as the transfer consideration.
We have seen above that the provisions of section 50C nowhere mandate that if the stamp duty valuation is more than the consideration declared in the sale agreement, the assessee is bound to offer his capital gains’ income in his return on the basis of the stamp duty valuation only. On the contrary, he is free to compute his capital gains’ income in his return on the basis of sale consideration as per sale agreement and resist its substitution by the stamp duty valuation in the assessment proceedings. Whether he chooses to pursue this claim in further assessment proceedings or abandon it is his prerogative.
As far as the issue of concealment of income by an assessee is concerned, the same is always to be tested qua his return of income. This is because the return is the place where the assessee is bound to declare his income to the income tax department. If the assessee has declared the income in his return in the manner the law permitted him to do so, then there cannot be any quarrel if the income is subsequently enhanced in the assessment. Therefore, where the assessee has fully declared the sale consideration as per the sale consideration in his return of income, there cannot be concealment of income attributable to him if the transfer consideration is enhanced by the Assessing Officer under section 50C. Readers may thus ponder over the above propositions.
1 comment:
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Best wishes to the author.
SathikondaA
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