2016 (7) TMI 835 - AT - Income Tax

Short term capital gains u/s 50 - stamp duty valuation - refer the matter to the DVO - assessee is a mutual association registered u/s 25 of the Companies Act 1956 engaged in strengthen the cooperative spinning sector and seeking redressal of its various problems - Held that - A.O. has rightly invoked and applied the deeming provisions of section 50C of the Act whereby the value adopted by the stamp duty authorities of 1, 71, 75, 000/- was adopted by the AO as full value of consideration for the purposes of Section 48 of the Act in which we donot find any infirmity in law and on facts keeping in view the fact that the DVO report received subsequent to the assessment order has valued the said property at higher than the value adopted by stamp duty valuation authorities thus keeping in view provisions of Section 50C(3) of the Act the value adopted by the AO of 1, 71, 75, 000/- as full value of consideration for the purposes of Section 48 of the Act stands confirmed by us. Hence we set aside the order of the ld. CIT(A) and confirm the orders of the A.O. adopting 1, 71, 75, 000/- as full value of consideration under deeming provisions of Section 50C of the Act for the purposes of Section 48 of the Act Non-granting of credit for tax deducted at source and non-granting of credit for self assessment tax paid - CIT(A) has dismissed these grounds observing that the alternative remedies for the grievances of the assessee are available with the assessee which could be availed - Held that - his aspect of non grant of prepaid taxes as claimed by the assessee needs verification by the authorities below and we are inclined to set aside and restore these issues of non-credit of pre-paid taxes by the AO as set-out above back to the file of the A.O. and the A.O. shall examine and verify the claim of the assessee on merits and proper tax credit should be granted to the assessee on merits after due verification by the AO. Thus we set aside the orders of the learned CIT(A) on both these issues and restore these issues to the file of AO for de-novo determination on merits after examination and verification of the claim of the assessee as indicated above.

Summary

Issues Involved:
1. Invocation of Section 50C of the Income Tax Act, 1961.
2. Enhancement of income by ?17,19,800/- without providing an opportunity to the appellant.
3. Non-granting of credit for tax deducted at source (TDS) amounting to ?11,165/-.
4. Non-granting of credit for self-assessment tax paid of ?14,85,000/-.

Issue-wise Detailed Analysis:

1. Invocation of Section 50C of the Income Tax Act, 1961:
The assessee company sold a capital asset for ?1,60,00,000/-, while the stamp valuation authority valued it at ?1,71,75,000/-. The AO invoked Section 50C(1) of the Act, adopting the stamp duty value for computing short-term capital gains, resulting in an addition of ?11,75,000/- to the income. The assessee contended that the title of the property was disputed, affecting its sale value. The AO referred the matter to the Departmental Valuation Officer (DVO), but the DVO's report was not available at the time of assessment. The CIT(A) later received the DVO's report valuing the property at ?1,88,94,800/-, higher than the stamp duty value. The CIT(A) adopted the DVO's value, enhancing the income by ?17,19,800/-. The Tribunal held that as per Section 50C(3), if the DVO's value exceeds the stamp duty value, the latter should be adopted. Thus, the AO's adoption of ?1,71,75,000/- was correct, and the CIT(A)'s enhancement was set aside.

2. Enhancement of income by ?17,19,800/- without providing an opportunity to the appellant:
The CIT(A) enhanced the income by adopting the DVO's valuation of ?1,88,94,800/- without giving the assessee an opportunity to contest this enhancement. The Tribunal noted that this action violated principles of natural justice. Consequently, the Tribunal set aside the CIT(A)'s order and confirmed the AO's adoption of the stamp duty value of ?1,71,75,000/-.

3. Non-granting of credit for tax deducted at source (TDS) amounting to ?11,165/-:
The assessee claimed that TDS credit amounting to ?11,165/- was not granted. The CIT(A) dismissed this ground, suggesting alternative remedies. The Tribunal found this issue required verification and set aside the CIT(A)'s order, directing the AO to verify and grant appropriate TDS credit after due examination.

4. Non-granting of credit for self-assessment tax paid of ?14,85,000/-:
Similarly, the assessee argued that credit for self-assessment tax paid of ?14,85,000/- was not granted. The CIT(A) dismissed this ground as well. The Tribunal set aside the CIT(A)'s order, directing the AO to verify the claim and grant appropriate credit for the self-assessment tax paid after proper verification.

Conclusion:
The appeal was partly allowed for statistical purposes. The Tribunal confirmed the AO's adoption of the stamp duty value of ?1,71,75,000/- for computing short-term capital gains and set aside the CIT(A)'s enhancement based on the DVO's higher valuation. The issues regarding non-granting of TDS credit and self-assessment tax credit were remanded back to the AO for verification and appropriate action.