2019 (12) TMI 1435 - AT - Income Tax

Power of the first appellate authority - Capital gain computation - Invoking section 50C - as pe CIT-A asset as depreciable and accordingly, the AO was right in invoking section 50C - HELD THAT - CIT(A) has directed the AO to make a reference to the Valuation Officer in accordance with provisions of section 50C(2) of the Act. As mentioned earlier, the CIT(A), in an appeal against an order of assessment, may confirm, reduce, enhance or annul the assessment. He has no power to set aside/restore the order to the file of the AO. In such a scenario, the order passed by the Ld. CIT(A) being not in conformity with section 251 of the Act is bad in law. Consequently, we annul the impugned order. Assessee appeal is allowed.

Summary

Issues:
1. Application of section 50C to Short Term Capital Gains.
2. Characterization of units sold as stock-in-trade or capital assets.
3. Assessment based on Stamp Valuation Authority's value.
4. Reference to Valuation Officer under section 50C(2).
5. Jurisdiction of CIT(A) to set aside assessment order.

Issue 1: Application of section 50C to Short Term Capital Gains:
The appellant, a real estate developer, declared Short Term Capital Gains (STCG) from the sale of units. The Assessing Officer (AO) applied section 50C due to a discrepancy in apparent consideration and Stamp Valuation Authority's value. The AO re-computed STCG based on the authority's valuation, following a Tribunal decision. The CIT(A) upheld this, emphasizing the asset's depreciable nature and the AO's correct application of section 50C.

Issue 2: Characterization of units sold as stock-in-trade or capital assets:
The CIT(A) noted the property's history and held that despite being leased, the asset remained depreciable. The AO's invocation of section 50C was justified as the asset did not revert to stock-in-trade. The CIT(A) found the computation method compliant with the law, considering the asset's depreciable status.

Issue 3: Assessment based on Stamp Valuation Authority's value:
The AO substituted the apparent consideration with the authority's valuation for STCG computation. The CIT(A) supported this approach, citing the AO's adherence to section 50C's valuation method. The Tribunal concurred, emphasizing the importance of complying with valuation provisions under section 50C(2).

Issue 4: Reference to Valuation Officer under section 50C(2):
The CIT(A) directed the AO to refer the asset's valuation to a Valuation Officer as per section 50C(2). The Tribunal highlighted the necessity of following this provision when the fair market value is disputed. The failure to refer to a Valuation Officer was considered a procedural lacuna, leading to the direction for a reference.

Issue 5: Jurisdiction of CIT(A) to set aside assessment order:
The CIT(A) directed the AO to refer the valuation to a Valuation Officer, a power withdrawn post-2001. The Tribunal found this action beyond the CIT(A)'s jurisdiction, annulling the order due to non-conformity with section 251 of the Act. The appeal was allowed based on this legal ground.

This detailed analysis of the judgment highlights the application of section 50C, characterization of assets, valuation methods, procedural compliance, and the CIT(A)'s jurisdictional limits, providing a comprehensive understanding of the legal complexities involved in the case.