2016 (8) TMI 1226 - AT - Income Tax

Addition applying the provisions of sec 50-C - Held that - We find that the assessee has disputed the valuation considered by the Stamp Duty Authorities and, therefore, requested the AO as well as CIT(A) to refer the matter to DVO for valuation. Therefore, as per the provisions of Sec 50C(2) of the Act, the AO should have made the reference to the Valuation Officer when the assessee has made specific request in this regard. In the light of the above, we setaside this matter to the file of the AO for making reference to the DVO to arrive at the fair market value of the property. Similarly, the issue of brokerage is also referred to the file of AO to examine brokers before making any disallowance. Addition on account of Dalali paid by the assessee in respect of the property sold by him - Held that - We find that the assessee has failed to submit the details of cost of construction of second floor of the house except certificate from A.N. Associates and also failed to submit the requisite details for cost of improvement for the assessment year 2004- 05. Since these aspects have not properly examined by the AO, therefore, the same are required to be re-examined in proper manner after affording the reasonable opportunity of being herd. The assessee is directed to cooperate with the proceedings and produce the concerned contractor for examination of the AO. It may also be pertinent to note that valuation adopted u/s 50C has been set-aside for making reference to the DVO. Therefore, with a view to fair play and consider the fair market value of the property and consequently deduction on account of exemption and cost of improvement claimed by the assessee are also required to be reexamined and re-adjudicated at the level of the AO. Therefore, the entire assessment is set-aside to the file of AO Both the appeals of the assessee allowed for statistical purposes

Summary

Issues involved:
1. Appeal against separate orders of the Commissioner of Income-tax (Appeals) regarding assessment orders.
2. Addition under section 50-C of the Income-tax Act, 1961 and disallowance of brokerage.
3. Dispute over valuation of property and brokerage amount.
4. Exemption claim under section 54F and disallowance of cost of improvement.

Issue 1: Appeal against separate orders of the Commissioner of Income-tax (Appeals) regarding assessment orders.
The appeal involved two separate orders of the Commissioner of Income-tax (Appeals) related to assessment orders dated 27.03.2014 and 24.11.2010 issued by the Income Tax Officer, Ward 2(1), Ujjain. The Appellate Tribunal ITAT Indore considered the appeals filed by the assessee against these orders.

Issue 2: Addition under section 50-C of the Income-tax Act, 1961 and disallowance of brokerage.
In the first appeal (I.T.A.No. 703/Ind/2015), the issue revolved around the addition of ?6,21,000 under section 50-C of the Income-tax Act, 1961, and the disallowance of brokerage amounting to ?50,000. The Stamp Duty Officer valued the property sold by the assessee at ?35,21,000, while the assessee declared the sale value at ?29,00,000. The Assessing Officer disallowed the cost of improvement and brokerage, resulting in an enhanced long-term capital gain. The Appellate Tribunal directed a reference to the Valuation Officer for fair market value determination and re-examination of the brokerage issue.

Issue 3: Dispute over valuation of property and brokerage amount.
The assessee disputed the valuation adopted by the Stamp Duty Authorities and requested a reference to the District Valuation Officer (DVO) for a correct valuation. The Appellate Tribunal found that the AO should have referred the valuation to the DVO as per the provisions of Sec 50C(2) of the Act. The issue of brokerage was also referred back to the AO for further examination.

Issue 4: Exemption claim under section 54F and disallowance of cost of improvement.
In the second appeal (I.T.A.No. 702/Ind/2015), the assessee challenged the withdrawal of exemption claimed under section 54F and the disallowance of the cost of improvement. The CIT(A) held that the assessee did not invest the sale consideration in a residential house as required by section 54F. The Appellate Tribunal directed a re-examination of the cost of construction and improvement after the assessee failed to provide adequate details, setting aside the entire assessment to the file of the AO for proper examination.

In conclusion, the Appellate Tribunal allowed both appeals for statistical purposes, directing re-examination of valuation, brokerage, exemption claim, and cost of improvement by the Assessing Officer.