2024 (6) TMI 923 - AT - Income Tax

Capital gain computation - addition by invoking the deeming provisions of section 50C - HELD THAT - Since the assessee has claimed and received the sale consideration amounting to Rs. 35 lakh which is equivalent to the fair market value of the said property and not the value as adopted by the Stamp Valuation Authority at Rs. 45 lakh therefore the lower authorities ought to have referred the matter to the Departmental Valuation Officer for valuing the fair market value of the property. Therefore grounds raised in the assessee s appeal are allowed for statistical purposes and the matter is restored to the jurisdictional AO for carrying out necessary exercise of referring the matter to the Departmental Valuation Officer and decide the issue in accordance with law as discussed herein above. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
The judgment involves issues related to the retention of addition made by the Assessing Officer (AO) u/s 143(1), appointment of a Departmental valuation Officer, rejection of sale value, and the computation of capital gain.

Retention of Addition u/s 143(1):
The assessee appealed against the addition of Rs. 10,00,000 made by the AO u/s 143(1) based on stamp value as sale proceeds of a residential flat. The contention was that the market value, being the contract value at which the property was sold, was ignored. The Tribunal found that the fair market value of the property was Rs. 35 lakh as claimed by the assessee, not the Rs. 45 lakh adopted by the Stamp Valuation Authority. The Tribunal held that the lower authorities should have referred the matter to the Departmental Valuation Officer for valuing the fair market value of the property. The appeal was allowed for statistical purposes, and the matter was restored to the Assessing Officer for further action.

Appointment of Departmental Valuation Officer:
The assessee contended that the Departmental Valuation Officer should have been appointed to ascertain the market value of the residential flat sold. The Tribunal agreed that in cases where the fair market value is disputed, the assessing officer should give the assessee an option to have the valuation made by the Departmental Valuation Officer, as provided under Section 50C of the Act. The Tribunal emphasized the importance of using the machinery provided by the legislature to ensure fair treatment to the taxpayer. The order under challenge was set aside, and the matter was remanded to the Assessing Officer for necessary valuation and assessment in accordance with the law.

Rejection of Sale Value:
The Tribunal considered the rejection of the sale value shown by the appellant without sufficient material, solely relying on the stamp value and adjustments made by the AO u/s 143(1). It was found that the fair market value claimed by the assessee was Rs. 35 lakh, which should have been considered for computing the long term capital gain. The Tribunal highlighted the need for a fair valuation process and directed the matter to be referred to the Departmental Valuation Officer for accurate valuation.

Computation of Capital Gain:
The Tribunal analyzed the computation of capital gain by the AO, where the sale consideration was taken as Rs. 35 lakh, but the Stamp Valuation Authority mentioned Rs. 45 lakh. The Tribunal emphasized that the fair market value claimed by the assessee should be the basis for determining capital gain. The Tribunal referred to a relevant judgment of the Jurisdictional High Court, which supported the assessee's claim. The appeal was allowed for statistical purposes, and the matter was remanded to the Assessing Officer for appropriate action.