2017 (4) TMI 520 - AT - Income Tax

Lon term capital gain computation - valuation u/s 50C - whether CIT(A) has merely accepted DVO report without any application of mind? - Held that - As the assessee submitted that there was no registered agreement with the builder. The documents registered were power of attorney s only and not the agreement for sale, hence, section 50C of 1961 Act is not applicable. Also that the authorities below adopted stamp duty valuation which is legally unsustainable. The DVO has not considered the objections raised by the assessee vide letter dated 8.3.2011, submitted in response to notice dated 09-02-2011 issued by DVO . The said non-consideration of objections has led to serious prejudice to the assessee. It was submitted that the MOU w.r.t. these properties was registered on 25.05.1996 and power of attorney was registered on 12.09.2005. It was submitted by learned counsel for the assessee also that matter may be set aside so that there is proper consideration of the objections by the authorities below. Thus, in nutshell both the ld. Counsel for the assessee and the ld. D.R. had both fairly agreed that these issues in cross appeal requires reconsideration by authorities below and matter need to be set aside for re-determination of the issues on merits, after granting proper and sufficient opportunity to the assessee and the AO as per Rule 46A(3) of 1962 Rules, also after considering the objections of the assessee.

Summary

Issues:
1. Applicability of section 50C on sale/transfer of capital assets.
2. Acceptance of Stamp Duty Valuation of Power of Attorney.
3. Determination of appellant's share in a plot.
4. Deemed sale price calculation based on valuation date.
5. Acceptance of Valuation Report without considering negative factors.
6. Determination of appellant's share in a property.
7. Allowance of deduction u/s 54E without original claim.

Analysis:
1. The cross-appeals involved issues related to the applicability of section 50C on the sale/transfer of capital assets, specifically plot numbers 749 and 750. The assessee contended that section 50C should not apply as the Agreement for Sale was not registered. The Revenue challenged the acceptance of Stamp Duty Valuation of Power of Attorney without considering negative factors attached to the property sold.

2. Dispute arose regarding the determination of the appellant's share in plot number 750, with the CIT(A) holding it at 1/8th based on DVO findings. The Revenue argued that the appellant's share should be 1/4th, and the CIT(A) erred in accepting the DVO report without proper consideration. The issue of determining the share was deemed crucial to the case.

3. The genesis of the appeals was the income from long-term capital gain on the sale of two plots, leading to disagreements on the appellant's share in plot number 749. The CIT(A) held the share at 1/8th, while the Revenue contended it should be 1/4th. The matter was raised to address the grave mistake in determining the appellant's share, impacting the overall appellate order.

4. The disagreement extended to the deemed sale price calculation, with the appellant arguing for a different valuation date than the one considered by the authorities. The appellant's submission highlighted the need for a reevaluation of the market value based on the date of the Memorandum of Understanding signed with the Purchaser.

5. The acceptance of the Valuation Report without considering negative factors attached to the property was a significant point of contention. The appellant raised concerns about the lack of consideration given to objections submitted in response to the DVO's notice, leading to prejudice. The need for a proper review of objections and a fair consideration of all factors was emphasized.

6. The issue of allowing a deduction u/s 54E without the original claim being made in the return or revised was raised by the Revenue. The CIT(A) was directed to reconsider the matter in light of the appellant's failure to claim the deduction initially, citing legal precedents to support their argument.

7. In conclusion, the Tribunal allowed both appeals for statistical purposes, setting aside the matter for de novo determination by the CIT(A) to address the various issues raised by both parties. Proper consideration of objections, principles of natural justice, and adherence to legal rules were emphasized for a fair and just resolution.