2020 (12) TMI 626 - AT - Income Tax

Capital gains on the profit derived towards transfer of property u/s 50C - Refrence to DVO's report - value of consideration for the purpose of computing the capital gains on sale of an immovable property - subject matter of the lands are Government lands - HELD THAT - DVO's report extracted by the ld. CIT(A) gave a categorical finding that the subject matter of the lands are Government lands as per the Tehsildar to the DVO. Therefore, there is no SRO value, the value for the Government lands has to be treated as NIL. The AO without considering the report of the DVO, by invoking section 50C considered the sale value of the property at ₹ 10,53,18,400/- is deemed sale consideration. We find that the AO is not correct in invoking section 50C in this case as observed by the ld. CIT(A). We are also find that the ld. CIT(A) after examining the entire details directed the AO to delete the addition. We find no infirmity in the order passed by the ld. CIT(A). Thus, this appeal filed by the Revenue is dismissed. Reopening of assessment u/s 147 - non-communication of the reasons - HELD THAT - Since no reasons are communicated to the assessee therefore as per the decision of Alapati Kasi Subrayan 2018 (12) TMI 1461 - ITAT VISAKHAPATNAM and also N. Surya Prakash Rao 2014 (3) TMI 1170 - ANDHRA PRADESH HIGH COURT CIT-A correctly quashed 148 notice and cancelled the assessment order.

Issues Involved:
1. Validity of reopening the assessment without communication of reasons.
2. Applicability of Section 50C of the Income Tax Act for determining the sale consideration of government land.
3. Validity of sale transactions involving government land by private parties.
4. Computation of capital gains from the sale of government land.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment Without Communication of Reasons:
The Revenue argued that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in quashing the order for non-communication of reasons for reopening the assessment. They cited precedents where non-communication of reasons was not deemed fatal if the assessee was aware of the reasons. The CIT(A) found that the reasons for reopening were not communicated to the assessee, which is a procedural irregularity. The CIT(A) relied on judicial precedents, including the Hon'ble ITAT, Visakhapatnam Bench in the case of Alapati Kasi Subrayan and the Hon'ble Jurisdictional High Court in the case of N. Surya Prakash Rao, to quash the notice issued under Section 148 and cancel the assessment order dated 22/12/2018. The Tribunal upheld this finding, noting no infirmity in the CIT(A)'s decision.

2. Applicability of Section 50C of the Income Tax Act:
The Revenue contended that the CIT(A) erred in quashing the order for non-communication of reasons for reopening the assessment and in not applying Section 50C, which mandates adopting the SRO value as the sale consideration for computing capital gains. The assessee argued that the land sold was government land, and thus, Section 50C should not apply. The CIT(A) and the Tribunal found that the land in question was indeed government land, as confirmed by the Tehsildar and the District Valuation Officer (DVO). Consequently, the value of the government land should be treated as NIL for the purpose of Section 50C, and the actual sale consideration received by the assessee should be used for computing capital gains.

3. Validity of Sale Transactions Involving Government Land by Private Parties:
The assessee argued that the land sold was government land, and thus, the sale transaction was distressed and at a lower price. The CIT(A) found that the private parties had no right to transact government land and that the sale consideration should be treated as NIL. The Tribunal upheld this finding, noting that the DVO's report confirmed the land was government land and that the AO was not justified in adopting the SRO value as the sale consideration.

4. Computation of Capital Gains from the Sale of Government Land:
The AO computed capital gains based on the SRO value of the property, which was significantly higher than the actual sale consideration received by the assessee. The CIT(A) directed the AO to delete the addition, considering the actual sale consideration received by the assessee. The Tribunal upheld this decision, finding no infirmity in the CIT(A)'s order. The CIT(A) also noted that the indexed cost of acquisition allowed by the AO was not in dispute, and thus, the capital gains worked out to NIL.

Separate Judgments Delivered by the Judges:
The judgment was delivered as a consolidated order by the members of the Tribunal, V. Durga Rao (Member - Judicial) and D. S. Sunder Singh (Member - Accountant). The appeals filed by the Revenue and the cross objections filed by the assessee were dismissed.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to quash the reopening of the assessment due to non-communication of reasons and to compute capital gains based on the actual sale consideration received for the government land. The appeals filed by the Revenue and the cross objections filed by the assessee were dismissed.

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