2017 (7) TMI 417 - AT - Income Tax

Invoking provisions of section 50C(2) - Disallowance to cost of improvement in the property and expenses in relation to transfer - reference to DVO - Held that - From the facts of the case it is apparent that the learned Assessing Officer and the learned Commissioner of Income Tax (Appeals) did not comply with the provisions of section 50C(2) of the Act. Further no opportunity was given to the assessee to establish the correct market value of the land sold by him. It also appears that the assessment was done hurriedly due to paucity of time since the assessment was time barring. Therefore in the interest of justice we hereby remit back the entire case to the file of the learned Assessing Officer for de novo consideration. However we also direct the assessee to promptly co-operate with the Revenue in their proceedings failing which the Revenue authorities shall be at liberty to pass appropriate orders in accordance with merit & law based on the materials on record. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:

1. Disallowance of cost of improvement and expenses related to property transfer.
2. Confirmation of a non-existent income.
3. Adoption of guideline value instead of actual sale consideration.
4. Valuation of property consisting of different categories.
5. Completion of assessment without DVO report.

Detailed Analysis:

1. Disallowance of Cost of Improvement and Expenses Related to Property Transfer:

The assessee claimed expenses of ?11,56,130/- for cost of improvement and ?20,00,000/- related to property transfer. The AO disallowed these expenses due to lack of evidence. The CIT(A) upheld this disallowance, stating that the expenses were not related to the transfer of property. The assessee failed to provide adequate proof linking these expenses to the property transfer. The Tribunal noted that the AO and CIT(A) did not follow section 50C(2) provisions and remitted the issue back to the AO for fresh consideration.

2. Confirmation of a Non-Existent Income:

The AO added ?1,00,000/- as income from other sources, which was confirmed by the CIT(A) due to lack of proper explanation from the assessee. The Tribunal remitted this issue back to the AO for de novo consideration, emphasizing the need for a proper opportunity for the assessee to present evidence.

3. Adoption of Guideline Value Instead of Actual Sale Consideration:

The AO adopted the market value of ?2,77,10,000/- instead of the sale consideration of ?2,10,00,000/- as per section 50C. The CIT(A) confirmed this, noting the stamp valuation authority and the valuation officer's agreement on the market value. The Tribunal found that the AO and CIT(A) did not comply with section 50C(2) provisions, and remitted the issue back to the AO for fresh consideration, ensuring the assessee is given an opportunity to establish the correct market value.

4. Valuation of Property Consisting of Different Categories:

The assessee argued that the property, consisting of commercial and school (residential) categories, should have different values. The CIT(A) dismissed this, stating the assessee failed to provide evidence of sales at lesser values in the locality. The Tribunal remitted this issue back to the AO, directing a fresh consideration and proper opportunity for the assessee to present evidence.

5. Completion of Assessment Without DVO Report:

The AO completed the assessment without receiving the DVO report, which the CIT(A) confirmed. The Tribunal noted the non-compliance with section 50C(2) and remitted the issue back to the AO for de novo consideration, ensuring compliance with the statutory provisions and providing the assessee an opportunity to present evidence.

Conclusion:

The Tribunal remitted the entire case back to the AO for de novo consideration, emphasizing the need for compliance with section 50C(2) and providing the assessee an opportunity to establish the correct market value and present evidence for the claimed expenses. The appeal was allowed for statistical purposes.