2021 (5) TMI 155 - AT - Income Tax

Validity of reopening of assessment - long term capital gain s addition made in its hands by invoking Section 50C - assessee alleged fact that the land sold herein is agricultural only than a capital asset u/s.2(14) - HELD THAT - We find no merit in assessee s first and foremost grievance qua legality of the impugned re-opening since the difference between SRO value and actual price very well formed the tangible material for the Assessing Officer to record his reasons to this effect. Section 50C addition - The Revenue s only argument that the issue of assessee s land sold not forming a capital asset u/s.2(14) of the Act ought not to be allowed to be raised in Section 148/147 proceedings since the same is meant for the specific purpose to tax the income escaping assessment for the benefit of the department only fails to evolve our concurrence since applicability of Section 2(14) herein qua the assessee s land sold goes to the very root of the matter. And also it might lead to the impugned capital gains addition without determination of the nature of the corresponding capital asset. The Revenue further fails to dispute that the case law Sunil Kumar Agarwal 2014 (6) TMI 13 - CALCUTTA HIGH COURT holds that Section 50C(2) reference is mandatory even if there is no such prayer from the assessee s side before the Assessing Officer. And that there is no indication about the nearest municipality under Article 243T r.w. Article 243P of the Constitution of India. We thus accept the assessee s identical latter grounds of Section 50C addition and restore the same back to the Assessing Officer for his afresh adjudication after making the necessary reference to the DVO u/s.50C(2) of the Act. Ordered Accordingly.

Summary

Issues Involved:
1. Validity of Section 148/147 proceedings.
2. Addition of long-term capital gains under Section 50C.
3. Nature of the land sold (whether agricultural or capital asset under Section 2(14)).

Detailed Analysis:

1. Validity of Section 148/147 Proceedings:
The assessees challenged the validity of the Section 148/147 proceedings. The Assessing Officer (AO) issued a notice under Section 148 based on the difference between the value adopted for stamp duty purposes and the actual sale consideration, which was deemed as sufficient tangible material to trigger the reopening of the assessment under Section 147. The tribunal found no merit in the assessees' grievance regarding the legality of the reopening, stating that the difference in values formed a valid reason for the AO to believe that the income had escaped assessment. Therefore, the tribunal upheld the validity of the Section 148/147 proceedings.

2. Addition of Long-Term Capital Gains Under Section 50C:
The AO made an addition of ?37,00,000 to the assessees' income by invoking Section 50C, which deems the value adopted for stamp duty purposes as the full value of consideration for computing capital gains. The assessees argued that the land sold was agricultural and not a capital asset under Section 2(14), thus exempt from tax. The CIT(A) and the tribunal found that the assessees failed to provide sufficient evidence to substantiate their claim that the land was agricultural and not within the jurisdiction of any municipal corporation or notified area. The tribunal also noted that the assessees did not dispute the stamp duty value before the Sub-Registrar Office (SRO), and hence, the AO's action in determining the long-term capital gains at ?37,00,000 was justified. However, the tribunal directed the AO to refer the matter to the Department Valuation Officer (DVO) under Section 50C(2) for a fresh adjudication, as mandated by the case law Sunil Kumar Agarwal Vs. CIT (2014) [372 ITR 83] (Cal).

3. Nature of the Land Sold:
The assessees contended that the land sold was agricultural and not a capital asset under Section 2(14), thus exempt from tax. The AO and CIT(A) rejected this claim, stating that the assessees themselves had treated the land as a capital asset in their original return and during the Section 153A assessment. The tribunal acknowledged that the nature of the land sold goes to the root of the matter and must be determined before making any capital gains addition. The tribunal directed the AO to re-examine the nature of the land and make a necessary reference to the DVO under Section 50C(2).

Conclusion:
The tribunal upheld the validity of the Section 148/147 proceedings and the addition of ?37,00,000 under Section 50C but directed the AO to refer the matter to the DVO for a fresh adjudication. The tribunal also emphasized the need to determine the nature of the land sold before making any capital gains addition. The appeals were treated as allowed for statistical purposes, and the AO was directed to re-examine the issues as per the tribunal's directions.