2023 (1) TMI 21 - AT - Income Tax

Capital gain computation - sale of agriculture land - Applicability of section 50C - CIT-A upheld the substitution of the sale consideration received by the assessee by stamp duty value as per section 50C but at the same time, rejected valuation of cost of acquisition of the property adopted by the AO on the basis of valuation done by the DVO, and directed the AO to adopt the value of cost of acquisition taken by the assessee - HELD THAT - We find merit in the contentions of the ld.counsel for the assessee that actual consideration received by the assessee was to be considered for computing capital gain as opposed to its substitution by the stamp duty value as per section 50C of the Act, on account of the third proviso to section 50C whichthough brought on the statute w.e.f. 1.4.2019, has been held in series of decision by the ITAT as cited before us by the ld.counel for the assessee, to be retrospective in nature. Ground no.1 raised by the assessee is, therefore, allowed. Deduction u/s 54F - absence of any documents furnished by the assessee to substantiate its claim of having reconstructed his residential house - HELD THAT - We have noted from the assessment order that there isno mention that the assessee had been put to notice before denial of this claim of deduction under section 54F - CIT(A) noted that the assessee had furnished evidence by way of certificate of Talati of the village and vouchers bills supporting the claim of reconstruction of house to the extent of Rs.6,75,000/- on which he claimed deduction under section 54F - CIT(A) refused to admit these evidences since they were not produced before the AO. In this backdrop of facts the denial of claim of deduction u/s 54F of the Act for want of evidence appears unjustified. We consider it fit to send the issue back to the file of the AO to verify the claim of the assessee, and thereafter adjudicate the issue in accordance with law. Ground no.2 is allowed for statistical purposes.

Summary

Issues:
1. Computation of capital gains based on stamp duty value and fair market value.
2. Denial of deduction under section 54F of the Income Tax Act.

Issue 1: Computation of Capital Gains
The case involved the computation of capital gains by the Assessing Officer (AO) based on the stamp duty value of the property as per section 50C of the Income Tax Act and the fair market value of the property sold as on 1.4.1981 as per the Departmental Valuation Officer (DVO). The AO computed the capital gains at a higher amount than declared by the assessee, leading to an addition to the assessee's income. The Commissioner of Income Tax (Appeals) upheld the substitution of the sale consideration with the stamp duty value but directed the AO to adopt the value of cost of acquisition taken by the assessee. The appellant challenged this decision, arguing that the difference between the actual consideration received and the deemed consideration under section 50C was less than 10%, making the actual consideration the full value received. Citing the third proviso to section 50C, the appellant contended that the actual consideration should be used for computing capital gains, not the stamp duty value. The Tribunal agreed with the appellant, allowing the appeal and directing the deletion of the addition sustained by the Commissioner of Income Tax (Appeals).

Issue 2: Denial of Deduction under Section 54F
The second issue revolved around the denial of the deduction under section 54F of the Income Tax Act by the AO and upheld by the Commissioner of Income Tax (Appeals). The denial was based on the lack of documents furnished by the assessee to substantiate the claim of having reconstructed their residential house for a specific amount. The appellant argued that all necessary evidence was available and that the denial of the claim without proper notice and consideration of the provided evidence was unjustified. The Tribunal noted that there was no mention of the assessee being put on notice before the denial of the deduction. The Commissioner of Income Tax (Appeals) refused to admit the evidence submitted by the assessee as it was not produced before the AO. In the interest of justice, the Tribunal decided to send the issue back to the AO for verification of the claim and subsequent adjudication in accordance with the law, granting the assessee a due opportunity of hearing. The second ground was allowed for statistical purposes.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, directing the deletion of the addition in the computation of capital gains and the reconsideration of the deduction under section 54F by the Assessing Officer.