2018 (5) TMI 1767 - AT - Income Tax

Addition in the computation of short term capital gain arising to the assessee - mandation of reference to DVO - not providing assessee an opportunity for getting the value of the capital asset determined by the DVO - Held that - AO ought to have given an opportunity to the assessee for making an application for the purpose of section 50C(2). When the assessee has disputed adoption of value equivalent to the amount on which stamp duty was paid, then the ld.CIT(A) itself ought to have called for a report under section 50C(2) of the Act. The failure of the Revenue authorities for is an irregularity which deserves to be rectified. Therefore, we allow the appeal of the assessee; set aside both the orders and restore this issue to the file of the AO for readjudication. The ld.AO shall make reference under section 50C(2) to the DVO and obtain report of the DVO for deciding the value required to be deemed as full sale consideration for the purpose of computation of capital gain - Appeal of the assessee is allowed for statistical purpose.

Summary

Issues:
Appeal against the addition of short term capital gain.

Analysis:
The assessee appealed against the addition of ?44,24,800 in short term capital gain confirmed by the ld.CIT(A). The case involved the sale of four pieces of land with a declared aggregate sale consideration of ?7.75 lakhs. The ld.AO, using section 50C, adopted the stamp duty valuation of ?51,99,800 as the sale consideration, resulting in the addition. The assessee contended that under section 50C(2), they could request the AO to refer the matter to the valuation officer for determining the fair market value (FMV) of the property on the transfer date. The assessee argued that as they were not given the opportunity to make such a request, both orders should be set aside.

The Tribunal considered the contentions and relevant provisions. Section 50C deems the value assessed by the stamp duty authority as the full consideration for the purpose of computing capital gain. However, section 50C(2) allows the assessee to dispute this valuation and request a reference to a Valuation Officer if the stamp duty value exceeds the FMV. The Tribunal noted that the AO should have provided the assessee with the opportunity to apply under section 50C(2). As the assessee disputed the stamp duty valuation, the ld.CIT(A) should have called for a report under section 50C(2). The failure to allow the assessee this opportunity was deemed an irregularity. Consequently, the Tribunal allowed the appeal, set aside both orders, and remanded the issue to the AO for readjudication. The AO was instructed to refer the matter to the DVO for determining the value to be considered as the full sale consideration for capital gain computation. The appeal was allowed for statistical purposes.

In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the addition of short term capital gain and remanding the matter to the AO for proper consideration in accordance with section 50C(2) provisions.