2022 (11) TMI 1368 - AT - Income Tax

Addition made enhancement of capital gain u/s 50C - adjustment u/s 143(1) - as argued addition made u/s 50C(1) of the Act can not fall within the ambit of adjustment provided u/s 143(1)(a) - HELD THAT - Sub-section (1) to section 50C cannot be considered in isolation. By making an adjustment of the nature contemplated under subsection (1) to section 50C, that too, by CPC, the Department takes away a valuable statutory right given to the assessee to object to the value determined by stamp valuation authority. Therefore, such type of adjustment, in my considered opinion, cannot be made u/s 143(1)(a) of the Act. This is so because, at the stage of processing of return u/s 143(1)(a), if such an adjustment is made, the assessee does not get an opportunity to object, as per section 50C(2) of the Act. More so, when conditions of the 1st and 2nd proviso to section 143(1)(a) are not complied. Therefore, hold that the addition made by CPC under section 50C(1) of the Act by way of adjustment u/s 143(1)(a)(ii) is unsustainable. Accordingly, delete the addition. Disallowance of benefit of brought forward losses of earlier years - assessee s claim of set off and carry forward of loss was rejected by Commissioner (Appeals), since, he did not find merit in assessee s ground contesting the addition made u/s 50C(1) - HELD THAT - While deciding ground No. 1 and 2 of assessee s appeal I have deleted the addition made under section 50C(1) of the Act. Therefore, the reasoning of learned Commissioner (Appeals) in disallowing assessee s claim of loss has become redundant. Hence, Assessing Officer is directed to allow assessee s claim of loss in accordance with law.

Summary

Issues:
1. Challenge to addition made under section 50C of the Income Tax Act 1961.
2. Disallowance of benefit of brought forward losses of earlier years.

Analysis:

Issue 1: Challenge to addition made under section 50C of the Income Tax Act 1961

The appeal was against an order dated 25.11.2021 of the Commissioner of Income Tax (Appeals) for the assessment year 2019-20. The assessee contested the addition made on account of enhancement of capital gain under section 50C of the Income Tax Act 1961. The Centralised Processing Centre (CPC) adjusted Rs. 5,07,000 to the income of the assessee based on the stamp valuation authority's determination of the property value exceeding the declared sale consideration. The assessee argued that the addition under section 50C(1) cannot fall within the adjustment provided under section 143(1)(a) of the Act. The Tribunal analyzed the provisions of section 143(1)(a)(ii) along with the Explanation and concluded that the addition under section 50C(1) does not qualify as an incorrect claim apparent from the information in the return. The Tribunal emphasized that section 50C should be read as a whole, including sub-sections (1), (2), and (3), and highlighted the statutory right of the assessee to object to the stamp duty value. The Tribunal held that such an adjustment cannot be made under section 143(1)(a) as it deprives the assessee of the opportunity to object, especially when the conditions of the provisos to section 143(1)(a) are not met. Consequently, the Tribunal deleted the addition made under section 50C(1) by CPC.

Issue 2: Disallowance of benefit of brought forward losses of earlier years

The third ground of the appeal related to the disallowance of the benefit of brought forward losses of earlier years. The Commissioner (Appeals) had rejected the claim of set off and carry forward of loss, citing the lack of merit in the assessee's ground contesting the addition made under section 50C(1) of the Act. However, since the Tribunal deleted the addition made under section 50C(1) in grounds No. 1 and 2, the reasoning for disallowing the claim of loss became redundant. The Tribunal directed the Assessing Officer to allow the assessee's claim of loss in accordance with the law. Consequently, the appeal was allowed, and the order was pronounced in the open court on 16th November 2022.