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2025 (3) TMI 712 - AT - Income TaxAdjustment u/s 50C(1) u/s 143(1)(a) - HELD THAT - As following the reasoning given in the case of Inder Jeet Malik 2022 (7) TMI 1583 - ITAT DELHI hold that the no adjustment/addition u/s 50C can be made while processing the ITR u/s 143(1) - Appeal of the assessee is allowed.
ISSUES PRESENTED and CONSIDERED
The primary issue considered in the judgment is whether the addition/adjustment of Rs. 36,51,250/- made under section 50C(1) of the Income Tax Act, 1961 can be included within the ambit of adjustments provided under section 143(1)(a) of the Act. The Tribunal also examined whether the Assessing Officer (AO) was required to refer the valuation to the Department Valuation Officer (DVO) when the assessee objected to the stamp duty value used for the adjustment. ISSUE-WISE DETAILED ANALYSIS 1. Legal Framework and Precedents Section 50C of the Income Tax Act deals with the valuation of capital gains on the sale of immovable property, where the sale consideration is less than the stamp duty value. Sub-section (1) allows the stamp duty value to be considered as the deemed sale consideration. However, sub-section (2) provides a mechanism for the assessee to object to this value, necessitating a reference to the DVO for valuation. Section 143(1)(a) outlines the adjustments permissible during the processing of a return, including correcting arithmetical errors and disallowing incorrect claims apparent from the return. The Tribunal referred to the precedent set by the Co-ordinate Bench in the case of Inder Jeet Malik, which held that adjustments under section 50C(1) cannot be made under section 143(1)(a) as it deprives the assessee of the opportunity to contest the stamp duty value through the DVO. 2. Court's Interpretation and Reasoning The Tribunal interpreted that section 50C must be read in its entirety, not limited to sub-section (1). It emphasized that the deeming provision in section 50C is comprehensive, and the right to object to the stamp duty value is a statutory right under sub-section (2). The Tribunal reasoned that adjustments under section 143(1)(a) should not infringe upon this right, as it would prevent the assessee from utilizing the mechanism provided for contesting the valuation. 3. Key Evidence and Findings The Tribunal noted that the assessee had disclosed both the sale consideration and the circle rate in the ITR, and had objected to the use of the circle rate for computing capital gains. Despite this objection, the AO proceeded with the adjustment without referring the matter to the DVO, as required when the assessee contests the stamp duty value. 4. Application of Law to Facts The Tribunal applied the legal framework of section 50C and section 143(1)(a) to the facts, determining that the AO's adjustment under section 143(1)(a) was inappropriate. The Tribunal held that the AO failed to follow the procedure outlined in section 50C when the assessee objected to the stamp duty value, which should have led to a referral to the DVO. 5. Treatment of Competing Arguments The Tribunal considered the arguments of both the assessee's representative and the Senior Departmental Representative. The assessee's representative argued that the AO's failure to refer the matter to the DVO was a procedural lapse, while the Department contended that the adjustment was justified under section 143(1)(a). The Tribunal favored the assessee's argument, aligning with the precedent set by the Co-ordinate Bench in Inder Jeet Malik. 6. Conclusions The Tribunal concluded that the addition made by the AO under section 50C(1) through section 143(1)(a) was unsustainable. It emphasized that such adjustments should not be made without allowing the assessee the opportunity to contest the stamp duty value through the DVO, as provided under section 50C(2). SIGNIFICANT HOLDINGS The Tribunal held that adjustments under section 50C(1) cannot be made under section 143(1)(a) during the processing of returns, as it denies the assessee the statutory right to challenge the stamp duty value. The Tribunal stated, "By making an adjustment of the nature contemplated under sub-section (1) to section 50C, that too, by CPC, the Department takes away a valuable statutory right given to the assessee to object to the value determined by stamp valuation authority." The Tribunal reiterated the principle that section 50C must be read as a whole, and the procedural rights under sub-section (2) must be preserved. It concluded that the addition of Rs. 36,51,250/- was to be deleted, and the appeal of the assessee was allowed.
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