2020 (7) TMI 17 - AT - Income Tax

Computation of capital gain by adopting sale consideration as per provisions of section 50C - Assessee objected to the adoption of stamp duty valuation before the AO by stating that the property sold by him did not have any approach road and is away from main road - HELD THAT - Reply furnished by the assessee would amount to objection to the adoption of stamp duty value. In that case, in terms of section 50C(2) of the Act, the A.O. should have referred the matter of valuation to the DVO. Since the provisions of section 50C(2) of the Act have not been complied with, we are of the view that this issue requires fresh examination at the end of the A.O. Accordingly, we set aside the order passed by CIT(A) on this issue and restore the same to the file of the A.O. for examining the same afresh in terms of section 50C(2) - After affording adequate opportunity of being heard to the assessee, the A.O. may take appropriate decision in accordance with law. Difference between gross receipts declared by the assessee and that was shown in form 26AS - HELD THAT - Assessee is following cash system of accounting. The submission of the data before tax authorities was that his clients, who are following mercantile system of accounting, might have deducted TDS on the amount payable by them and hence those amounts have been reflected in form no.26AS. However, since the assessee is following cash system of accounting, the amount actually received by him was declared in the income tax return filed by him. It was also submitted that the assessee did not receive the difference amount, shown in form 26AS till the date of completion of the assessment. However, the above said explanation was rejected by the tax authorities without making further enquiries in this regard. In our view, the A.O. should have made necessary enquiries from the parties who had deducted TDS and should have taken decision accordingly. In this view of the matter, this issue also requires fresh examination of the addition at the end of the A.O. Accordingly, we set aside the order passed by the Ld. CIT(A) on this issue also. Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Computation of capital gain by adopting sale consideration as per section 50C of the Income-tax Act, 1961.
2. Addition of ?4.01 lakhs on account of difference in gross receipts reported in form 26AS and declared by the assessee.

Issue 1: Computation of Capital Gain

The assessee declared long term capital gain on the sale of a property, claiming 50% share of the sale consideration. The Assessing Officer (AO) determined the stamp value at ?2.25 crores and concluded that the sale consideration should be ?1,12,50,000 (50% of the stamp value) as per section 50C of the Act. The assessee argued that the property lacked an approach road and was distant from the main road, justifying the declared sale consideration. However, both the AO and the Ld. CIT(A) upheld the adoption of the stamp duty value without referring the matter to the DVO as required by section 50C(2) of the Act. The ITAT set aside the CIT(A)'s order, directing the AO to re-examine the valuation issue in compliance with section 50C(2) after giving the assessee a fair hearing.

Issue 2: Addition of ?4.01 Lakhs on Gross Receipts Discrepancy

The assessee, following a cash system of accounting, reported a difference in gross receipts compared to form 26AS due to TDS deductions by clients using the mercantile system. The assessee clarified that the actual amounts received were in line with the income tax return, as he had not received the additional amount shown in form 26AS at the assessment completion date. Despite this explanation, the tax authorities rejected it without conducting further inquiries. The ITAT held that the AO should have investigated with the parties deducting TDS before making a decision. Consequently, the ITAT set aside the CIT(A)'s order, requiring the AO to re-examine the addition after conducting necessary inquiries.

In conclusion, the ITAT allowed the appeal for statistical purposes, emphasizing the need for a thorough examination of valuation issues under section 50C and proper inquiries into discrepancies in gross receipts to ensure fair treatment for the assessee.