2014 (1) TMI 349 - AT - Income Tax

Applicability of Section 50C of the Act Held that - CIT(Appeals) considered the issue whether section 50C is prospective or retrospective - the actual dispute is the date of transfer of the property for determination of fair market value - The CIT(Appeals), without considering this important aspect, simply went on whether section 50C of the Act applies prospective or retrospective - Whether the transfer is effected on 26.10.2001 or 22.10.2003 has to be seen in the light of the original agreement entered into upon the assessee - The CIT(Appeals) has not considered the agreement and he also not considered the payment made before registration - no copy of the agreement /sale deed executed by the vendor and vendee has been placed on record - order passed by the CIT(Appeals) set aside and the matter remitted to the CIT(A) for reconsideration. Exemption u/s 54 of the Act Held that - The assessee has claimed exemption under section 54 of the Act - The assessee has sold the Visweswarapuram property, which is in dispute for the purpose of determination of fair market value on 22.10.2003 - He has purchased the property at Chamiers Road Chamiers Road property and sale deed was executed on 15.07.2002 - The CIT(Appeals) without examining the facts in correct prospective, simply following some case law decided the issue - Even the assessee has not explained as to how the property was purchased prior to the date of sale of Visweswarapuram property is eligible for exemption under section 54 - The issue requires reconsideration afresh order of the CIT(A) set aside and the mater remitted back to CIT(A) for reconsideration. Mandatory requirement of notice u/s 251(2) of the Act - Income enhanced without giving notice Held that - CIT(Appeals) has enhanced the cost of acquisition without issuing notice to the assessee - As per section 251(2), before enhancing any income, a prior notice should be given to the assessee order of the CIT(A) set aside and the matter remitted for reconsideration Decided in favour of Assessee and Revenue both.

Summary

Issues involved:
1. Determination of fair market value under section 50C of the Income Tax Act.
2. Eligibility for exemption under section 54 of the Income Tax Act.
3. Enhancement of income without issuing notice under section 251(2) of the Act.

Issue 1: Determination of fair market value under section 50C:
The case involved a dispute regarding the fair market value of a property transferred by the assessee. The Assessing Officer adopted the stamp value of the property as the fair market value under section 50C of the Act. The assessee contended that the property was sold for a lower value due to circumstances beyond their control. The CIT(Appeals) held that section 50C could not be applied retrospectively and relied on relevant Supreme Court decisions. The Tribunal set aside the CIT(Appeals) order, directing a fresh consideration of the issue after examining the sale agreement and relevant aspects.

Issue 2: Eligibility for exemption under section 54:
The assessee claimed exemption under section 54 for the purchase of a property at Chamiers Road, Chennai. The Assessing Officer denied the claim, stating that the purchase date of the new property was more than one year before the sale of the disputed property. The CIT(Appeals) allowed the claim based on certain decisions without discussing the facts. The Tribunal found that the date of acquisition of the new property was disputed and required reconsideration. The order of the CIT(Appeals) was set aside for a fresh examination of the issue.

Issue 3: Enhancement of income without issuing notice:
The assessee raised a concern regarding the enhancement of income by the CIT(Appeals) without issuing a prior notice, as mandated by section 251(2) of the Act. The Tribunal noted this procedural lapse and directed the CIT(Appeals) to issue a notice, consider the assessee's objections, if any, and pass a fresh order.

In conclusion, the Tribunal allowed both the appeals for statistical purposes, emphasizing the need for a thorough reconsideration of the issues related to fair market value determination under section 50C, eligibility for exemption under section 54, and the procedural requirement of issuing a notice before enhancing income. The judgment highlighted the importance of examining all relevant aspects and legal provisions in tax disputes to ensure a fair and just outcome.