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2014 Supreme(Mad) 2418
High Court of Judicature at Madras
R. SUDHAKAR & G.M. AKBAR ALI, JJ.
Appadurai Vijayaraghavan
Versus
The Joint Commissioner of Income Tax
Tax Case (Appeal) No.28 of 2014
Decided On : 12-08-2014
For the Appellant:Sriraman, Advocate.
For the Respondent: T. Ravikumar, Standing Counsel.
The main legal point established in the judgment is the importance of considering the claim made by the assessee and the need to refer the valuation to the Valuation Officer as per Section 50C(2) of the Income Tax Act.
Headnote:
Tax Case - Application of Section 50C of the Income Tax Act - [Section 50C] - The court discussed the applicability of Section 50C of the Income Tax Act, which deems the value assessed by the stamp valuation authority as the full value of consideration for the transfer of a capital asset. The court emphasized the importance of considering the claim made by the assessee and the need to refer the valuation to the Valuation Officer as per Section 50C(2) of the Income Tax Act.
Fact of the Case:
The assessee entered into sale agreements in 2001 but the sale was completed in 2006. The Assessing Officer determined capital gains based on the value assessed by the stamp valuation authorities, leading to an appeal.
Finding of the Court:
The court found that the assessee's claim for consideration as per Section 50C(2) was not considered by the Assessing Officer, and therefore set aside the order of the Tribunal and restored the matter to the files of the Assessing Officer to work out the capital gains by invoking Section 50C(2) of the Income Tax Act.
Issues: The issues revolved around the application of Section 50C of the Income Tax Act, the claim made by the assessee, and the failure to refer the valuation to the Valuation Officer as per Section 50C(2).
Ratio Decidendi: The court emphasized the importance of considering the claim made by the assessee and the need to refer the valuation to the Valuation Officer as per Section 50C(2) of the Income Tax Act.
Final Decision: The order of the Tribunal was set aside and the matter was restored to the files of the Assessing Officer to work out the capital gains by invoking Section 50C(2) of the Income Tax Act.
G.M. Akbar Ali, J.
1. This Tax Case (Appeal) is filed at the instance of the assessee as against the order of the Income Tax Appellate Tribunal confirming the order of the Assessing Officer and the Commissioner of Income Tax (Appeals) that the evidentiary value of the registered document is more than that of unregistered document and the provisions of Section 50C of the Income Tax Act shall be applicable.
2. The brief facts are as follows:
On 27.10.2001, the assessee entered into two sale agreements with one Smt. G.Rajamani and Shri. V.R.Govindasamy to sell the property for a total consideration of Rs.1,70,41,261/- divided as Rs.85,41,261/- for the sale to V.R.Govindasamy and Rs.85,00,000/- for the sale to Smt. G.Rajamani. The total land measuring 9,420 sq.ft. together with building thereon at Arumbakkam, Chennai was given as collateral security for the loan raised from SIPCOT. It is stated in the sale agreement that since the original title deeds were deposited with SIPCOT, the sale deeds shall be executed after the release of original title deeds. From 22.3.2002 to 28.7.2002, a sum of Rs.21 lakhs has been given to the assessee by the intending purchaser V.R.Govindasamy towards part of the advance sale consideration. On 05.01.2005, Catholic Syrian Bank took over the security for recalling the loan. Thereafter, on 16.5.2006, a further payment of Rs.56.00 lakhs was made to the assessee towards balance sale consideration. On 17.5.2006, sale deeds were executed by the assessee in favour of the above-said purchasers. In the meanwhile, on 01.04.2003, Section 50C of the Income Tax Act was introduced from the assessment year 2003-04. The assessee filed his return of income on 31.3.2008 for the assessment year 2007-08 admitting a total income of Rs.12,72,019/- and the same was processed under Section 143(1) of the Income Tax Act. Thereafter, the case was reopened under Section 148 of the Income Tax Act and notice under Section 148 of the Income Tax Act was issued for the following reasons:
“During the course of assessment proceedings in the case of one Smt.G.Rajamani for AY 2007-08 (assessed in Salary ward V(4), it came to light that the said Smt.G.Rajamani had purchased immovable property from the assessee for an apparent consideration of rs.85,00,000/-. However, the registering authority had valued the said property at Rs.1,60,00,000/- for stamp duty purposes. Smt.G.Rajamani had also stated that her husband had also purchased the other half of the property for a similar consideration. Thus, the total sale consideration for the purpose of section 50C comes to rs.3,20,00,000/-. However, the assessee has not shown any capital gains in his return of income filed for AY 2007-08."
3. In response to the notice, and during the course of the proceedings, the assessee replied as follows:
“the assessee who is the Managing Director of M/s.AVRN Hotels Pvt.Ltd., had borrowed a loan from SIPCOT for the purpose of the hotel project on the security of hotel property and also property at No.112A Ashok Nagar, Chennai-600 106 were deposited with SIPCOT in 1999. The company had faced a financial crisis to complete the project since the loan sanctioned by SIPCOT was rs.650 lakhs where as the loan applied was 750 lakhs. This forced me to enter into a distress sale of the said property on 27.10.11 (i.e., in the financial year 2001-02 relevant to the assessment year 2002-03) with Mr.V.R.Govindasamy and his wife Mrs.G.Rajamani for a total sale consideration of Rs.1,70,41,261/- (Rs.85,41,261/- and Rs.85,00,000/-respectively).
Clause No.2 of the said sale agreements clearly states that the property is given collateral security for the loans raised form SIPCOT and hence, the original title deeds are deposited with SIPCOT and the sale deeds shall be executed soon after the release of the original title deeds.
Clause No.7 of the said sale agreements says that the possesion of the property is handed over to the purchasers on thedate of the sale agr
