2019 (1) TMI 1827 - AT - Income Tax

LTCG on the sale of the property - Applicability of second proviso of Sec. 50C(1) - as submitted by the assessee that as an agreement to sell was executed in respect of the property under consideration, therefore, the sale value was to be fixed as per the value therein taken and not as per that adopted by the subregistrar for the purpose of payment of stamp duty - HELD THAT - As borne from the records that the assessee had claimed before the A.O that the value adopted by the stamp valuation authority exceeded the fair market value of the property under consideration. However, we find that the objection raised by the assessee to the proposed adoption of the circle value/segment rate by the A.O for the purpose of computing the LTCG on the sale of the property was however bypassed by the A.O, who reworked the LTCG by adopting the circle value/segment rate as the deemed sale consideration . When the A.O despite specific objection raised by the assessee that the value adopted by the stamp valuation authority exceeded the fair market value of the property under consideration, had however failed to refer the matter to the valuation officer for ascertaining the same, therefore, the reworking of the LTCG by him not being in conformity with the mandate of law cannot be accepted. We thus are of a strong conviction that as the very mandate of law prescribed under the statute had whimsically been bypassed by the A.O, therefore, the consequential addition of ₹ 72,00,000/- made by him on the basis of the impugned reworking of the capital gains cannot be sustained, and deserves to be deleted. We set aside the order of the learned CIT(A) and delete the addition made - Decided in favour of assessee.

Summary

Issues:
1. Challenge to the order passed by CIT (Appeals) under Sec. 143(3) of the Income Tax Act, 1961.
2. Dispute regarding the computation of Long Term Capital Gain (LTCG) at a different value than the returned figure.
3. Interpretation of Section 50C(1) in the context of adopting circle value/segment rate for computing LTCG.

Issue 1:
The appeal was filed against the order of CIT (Appeals) sustaining an assessment made by the Assessing Officer (A.O) under Sec. 143(3) of the Income Tax Act, 1961. The appellant contested the legality of the order.

Issue 2:
The dispute centered around the computation of Long Term Capital Gain (LTCG) by the A.O, who adopted a circle value/segment rate of ?1 crore as the deemed sale consideration, resulting in a higher LTCG figure than the one declared by the assessee. The CIT (Appeals) upheld the A.O's decision, leading to the appeal.

Issue 3:
The key contention revolved around the interpretation of Section 50C(1) concerning the adoption of the circle value/segment rate for computing LTCG. The assessee argued against this adoption, citing locational disadvantages and other factors affecting the property's value. Despite the objections, the A.O proceeded with the higher value, bypassing the requirement to refer the valuation to a Valuation Officer as mandated by Section 50C(2)(a).

The Tribunal, after thorough deliberation, found that the A.O's failure to refer the valuation to a Valuation Officer, despite specific objections by the assessee, was not in compliance with the statutory obligation under Section 50C(2). Citing a similar precedent, the Tribunal held that such non-compliance rendered the A.O's reworking of LTCG invalid. Consequently, the addition of ?72,00,000 made by the A.O based on the higher value was deemed unsustainable and was deleted.

In conclusion, the Tribunal set aside the CIT (Appeals) order and allowed the appeal of the assessee, deleting the contested addition of ?72,00,000 towards LTCG.