2024 (5) TMI 853 - AT - Income Tax

STCG - Addition u/s 50C - taxing the difference between govt. valuation and actual sale consideration - contention of assessee that due to the location of the property the assessee was compelled to sell the property below the guide line value - as argued impugned land located near river bank was vulnerable to floods, it was situated near cremation ground and did not have any approach road and hence, its fair market value was only around Rs. 8,00,000 therefore, the addition made u/s 50C was not justified - HELD THAT - We find that the appellant assessee requested to allow the deduction of cost of the land sold also disputed the determination of fair market value of the land sold on the basis of guide line value of stamp duty before LD CIT(A)/NFAC, but he has not bothered to refer the matter to the valuation officer in the light of section 50C(2) of the IT Act, but only directed the AO to allow the cost of the land sold for the purposes of calculation of short term capital gain. It was the We find force in the contention of assessee that to overcome such situation in section 50C, an option is given to the assessee to object determination of fair market value on the basis of guide line value of stamp duty for the purposes of registration of the property in such a case the AO is bound to refer the matter to the DVO. In the instant case the AO passed ex-parte order therefore the request was made before LD CIT(A)/NFAC which was wrongly denied. Therefore, now we deem it proper to set-a-side the order passed by both the subordinate authorities remand the matter back to the file of the AO to refer the matter to the valuation officer for the purposes of section 50C of the IT Act - AO will refer the matter to the DVO for determining the fair market value of the land sold pass the order as per law in the light of report of the DVO after providing reasonable opportunity of being heard to the assessee. We order accordingly. Ground of appeal raised by the assessee is allowed for statistical purpose.

Summary

Issues Involved:
The appeal challenges the addition made u/s 50C of Rs. 14,25,000, failure to refer the matter to DVO, and the calculation of short term capital gains.

Addition u/s 50C:
The appellant contested the addition u/s 50C, arguing that the fair market value of the land was lower due to its location and condition. The AO added the stamp duty value as income since no compliance was made by the appellant. The CIT(A) partly allowed the appeal, considering the appellant's submissions and valuation report. The Valuation Report indicated a fair price of Rs. 10,10,915, but it was not from the DVO. The CIT(A) rejected the valuation submitted by the appellant but allowed the cost of acquisition and directed computation of capital gain with indexation. The appeal was partly allowed, and the addition was deleted partially.

Failure to Refer to DVO:
The appellant argued that the matter should have been referred to the DVO for fair market valuation as per section 50C(2) of the IT Act. The appellant's counsel cited a decision of the Calcutta High Court emphasizing the need for DVO valuation to avoid miscarriage of justice. The Tribunal agreed with the appellant, stating that the AO should have referred the matter to the DVO. The Tribunal set aside the orders of the lower authorities and remanded the matter to the AO for valuation by the DVO, emphasizing the importance of fair treatment to taxpayers.

Calculation of Short Term Capital Gains:
The appellant contended that the property's sale value was appropriate due to its location near a river bank and cremation ground. The appellant requested setting aside the orders passed by the lower authorities and referring the matter to the DVO for fair market valuation. The Tribunal found merit in the appellant's argument, highlighting the option given to the assessee to object to the fair market value determination based on stamp duty guidelines. The Tribunal set aside the lower authorities' orders and remanded the matter to the AO for valuation by the DVO, ensuring a fair assessment based on the DVO's report.

In conclusion, the Tribunal allowed the appeal for statistical purposes, setting aside the orders of the lower authorities and remanding the matter to the AO for fair market valuation by the DVO in accordance with section 50C of the IT Act.