2019 (6) TMI 1175 - AT - Income Tax

Computation of capital gain by applying provision of section 50C(1) - non reference to the DVO to determine the value of the property sold - HELD THAT - When the legislature has taken care to provide adequate machinery to give a fair treatment to the tax payer there is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. SUNIL KUMAR AGARWAL VERSUS COMMISSIONER OF INCOME TAX SILIGURI 2014 (6) TMI 13 - CALCUTTA HIGH COURT has observed that even in a case where no request is made by the assessee to make a reference to the DVO the AO while discharging a quasi judicial function is duty bound to act fairly by giving the assessee an option to follow the course provided by law to have the valuation made by the DVO. The assessee s case stands in a much better footing as in the course of assessment proceedings the assessee had objected to adoption of stamp duty value as the deemed sale consideration. AO should have followed the mandate of sub section (2) of section 50C of the Act by making a reference to the DVO to determine the value of the property sold. The Assessing Officer having not done so and the learned Commissioner (Appeals) also failing to rectify the error committed by the Assessing Officer we have no hesitation in restoring the issue to the Assessing Officer with a direction to make a reference to the DVO to determine the value of the property sold in terms of section 50C(2) of the Act and thereafter proceed to compute capital gain in accordance with law. - set aside the impugned order of learned Commissioner (Appeals) and restore the issue to the Assessing Officer for fresh adjudication in terms of our direction herein above. Grounds are allowed for statistical purposes.

Summary

Issues:
Computation of capital gain under section 50C(1) of the Income Tax Act, 1961.

Analysis:

Issue 1: Computation of Capital Gain
The appeal challenged the order pertaining to the assessment year 2011-12, focusing on the computation of capital gain under section 50C(1) of the Act. The Assessing Officer adopted the stamp valuation authority's value of the property as deemed sale consideration, leading to a higher taxable capital gain compared to the declared sale consideration. The assessee objected to this valuation, arguing that the property was encumbered and the stamp duty value should not be used. The Assessing Officer and the Commissioner (Appeals) upheld the decision without referring the valuation to the Departmental Valuation Officer (DVO) as required under section 50C(2) when objections are raised. The tribunal held that the Assessing Officer should have made a reference to the DVO due to the assessee's objection, as mandated by the Act. The tribunal cited precedents emphasizing the importance of fair treatment to taxpayers and the duty of the Assessing Officer to act fairly, even without a specific request from the assessee. Therefore, the tribunal set aside the decision and directed the Assessing Officer to refer the valuation to the DVO for fresh adjudication.

This detailed analysis covers the primary issue of computation of capital gain under section 50C(1) of the Income Tax Act, 1961, highlighting the procedural lapses in not referring the valuation to the DVO as required by law when objections are raised. The tribunal's decision emphasizes the importance of fair treatment to taxpayers and the duty of the Assessing Officer to act in accordance with the law, ensuring a just determination of capital gains.