2023 (1) TMI 1252 - AT - Income Tax

Capital gain - Addition u/s 50C - addition by taking the value as per Stamp valuation Authority instead of actual sale consideration - HELD THAT - Addition as made by the AO is wrong because if the AO was of the view that any addition was to be made owing the sale consideration being lower than the stamp value, then he is duty bound to refer to the DVO for determining the market value of the property and only then the addition could have been made. CIT(A) decided the appeal ex-parte when the assessee did not appear on the various dates given. Assessee on the other hand pleads that it could not avail respond as the notices could not be served to the assessee. Where the AO want to substitute the value of Stamp Valuation Authority in place of actual sale consideration then the issue has to be referred to DVO first for ascertaining the value of the property, only then the addition can only be made after giving a fair opportunity to the assessee. This is the ratio laid down in the case of Sunil Kumar Agarwal 2014 (6) TMI 13 - CALCUTTA HIGH COURT Appeal of the assessee is allowed for statistical purpose.

Summary

Issues:
Challenge to assessment order invoking Section 50C of the Act.

Analysis:
The appeal was filed against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi for the AY 2019-20, where the assessee contested the addition made by the AO under Section 50C of the Act. The assessee sold a property for Rs. 1,19,60,000, with a stamp value of Rs. 2,25,36,745. The indexed cost was Rs. 96,34,800, resulting in a gain of Rs. 23,25,200. The assessee invested Rs. 45,00,000 in specified bonds, offsetting the property gain. However, the AO added long-term capital gain of Rs. 1,05,76,745 based on stamp value as deemed consideration.

The Ld. CIT(A) dismissed the appeal due to the appellant's non-compliance and failure to provide submissions or evidence supporting their claim. The Ld. CIT(A) upheld the AO's additions, emphasizing the appellant's burden of proof in appeals regarding tax assessments. Despite multiple opportunities, the appellant did not file written submissions or address discrepancies in tax payable, leading to the dismissal of all grounds of appeal.

Upon review, the ITAT Kolkata observed that the AO's addition based on stamp valuation authority instead of actual sale consideration was erroneous. The tribunal noted that if the AO believed an addition was necessary due to lower sale consideration, referral to the DVO for market value determination was mandatory. Citing a precedent from the Hon'ble Calcutta High Court, the ITAT directed the AO to refer the case to DVO and decide after providing a fair opportunity to the assessee. The ITAT allowed the appeal for statistical purposes, emphasizing the need for due process and fair opportunity in tax assessments.

In conclusion, the ITAT Kolkata's judgment highlighted the importance of following proper procedures and providing opportunities for the assessee to substantiate claims in tax appeals. The decision underscored the necessity of referring valuation discrepancies to appropriate authorities and conducting assessments in accordance with legal principles to ensure justice and fairness in tax matters.