2019 (4) TMI 1022 - AT - Income Tax

Capital Gain or business income - sale of property - Computation of short-term capital gain - addition invoking section 50C - obligation to refer the matter to the DVO - assessee not made any request for reference to the valuation officer - HELD THAT - In the instant case, the assessee himself has shown the transactions of sale of the property under the head capital gain and filed the return of income. Even in case of one property, the assessee declared long-term capital gain and claimed deduction under section 54F. Though the assessee is carrying business of trading in Agarbatties , Papad and Badies , but no books of accounts have been maintained in respect of the sale of properties. It is also seen that properties have not been shown as a stock-in-trade or business asset in any of the earlier years since purchase of the properties. When all these factual observation are seen cumulatively, the claim of the assessee that the activity of sale of properties should be treated as business fails. We reject the claim of the assessee that gain on sale of the properties should be assessed under the head profit of the business. In the instant case before us, neither the assessee made any request for reference to the valuation officer nor filed any valuation report of the registered valuer in support of claim of fair market value of the properties. In view of the aforesaid, we reject the contention of the learned counsel that the Assessing Officer was bound to refer the matter to the learned DVO. In our opinion, the findings of the Ld. CIT(A) on the issue in dispute are well reasoned and we do not find any error in the same and accordingly, we uphold the same. - Decided against assessee.

Summary

Issues Involved:
1. Addition of ?50,61,000/- upheld by CIT(A).
2. Applicability of provisions of section 50C of the Income-tax Act, 1961.
3. Computation of capital gains and the fair market value of the property.
4. Chargeability of interest under sections 234B, 234C, and 234D of the Act.

Detailed Analysis:

1. Addition of ?50,61,000/- Upheld by CIT(A):
The appellant contested the addition of ?50,61,000/-, which comprised two components: ?49,12,040/- by invoking section 50C and ?1,48,956/- by treating a declared loss of ?74,478/- as profit. The appellant argued that the Assessing Officer (AO) made an arithmetical error by starting the computation with a profit of ?74,478/- instead of a loss. The Tribunal directed the AO to verify this claim.

2. Applicability of Provisions of Section 50C:
The appellant argued that section 50C, which pertains to the valuation of capital assets for calculating capital gains, should not apply as the gains were from business activities. However, the Tribunal noted that the appellant had declared the income as short-term capital gains in the return and had not revised the return or raised this issue before the lower authorities. The Tribunal rejected the appellant's claim, stating that the nature of the transaction should align with the declared return.

3. Computation of Capital Gains and Fair Market Value:
The AO computed the short-term capital gain by considering the higher value between the actual sale consideration and the value adopted by the Stamp Valuation Authority (SVA). The appellant contended that the AO should have referred the matter to the District Valuation Officer (DVO) under section 50C(2) as the SVA's value exceeded the fair market value. The Tribunal noted that the appellant neither requested a reference to the DVO nor provided a valuation report. The Tribunal upheld the CIT(A)'s decision, which found no infirmity in the AO's action as the appellant did not invoke the specific remedy available under section 50C.

4. Chargeability of Interest Under Sections 234B, 234C, and 234D:
The appellant's challenge to the chargeability of interest under sections 234B, 234C, and 234D was not specifically addressed in detail, as the primary focus was on the applicability of section 50C and the computation of capital gains.

Conclusion:
The Tribunal dismissed the appeal, upholding the CIT(A)'s decision to apply section 50C and compute the capital gains based on the higher value adopted by the SVA. The Tribunal also directed the AO to verify the alleged arithmetical error. The grounds of the appeal were dismissed, and the order was pronounced in the open court on April 12, 2019.