2020 (8) TMI 66 - AT - Income Tax

Capital gain computation - adoption of Valuation report from the Ld. DVO in accordance with the provisions of section 50C - HELD THAT - Sale value declared by the assessee is only 46% of the SRO value of ₹ 16,54,500/- (₹ 7,56,250 X 100 / 16,54,500). Since the property sold by the assessee is a litigated property, I am of the considered view that the market value of the property cannot exceed the actual sale consideration received by the assessee of ₹ 7,56,250/-. Hence, do not find it appropriate to adopt the SRO value for the purpose of computation of the capital gains in the hands of the assessee, rather it would be appropriate to adopt the actual market value of the property taking into consideration of the litigation involved in the property, which is nothing but the actual sale consideration received by the assessee. Therefore,hereby direct the Ld. AO to compute the capital gains in the hands of the assessee based on the actual sale consideration received by the assessee of ₹ 7,56,250/-. Claim of deduction u/s. 54F - Even before us at this stage, the assessee has not produced any evidence to prove that she had invested in another residential house property. Claim of the assessee that she had invested in residential house property by way of payment through cheque to her spouse alone will not establish that she has actually acquired the residential house by complying with all the other provisions of the Act. Therefore, find no merit on this ground raised by the assessee. Hence, hereby confirm the order of the Ld. Revenue authorities on the issue. Appeal of the assessee is partly allowed.

Summary

Issues:
1. Adoption of sale consideration under section 50C of the Act.
2. Denial of deduction under section 54F of the Act.

Issue 1: Adoption of Sale Consideration under Section 50C of the Act
The case involved a dispute over the adoption of the sale consideration of an immovable property sold by the assessee. The Assessing Officer (AO) adopted the Stamp Valuation Officer's value under section 50C of the Act as the sale consideration, which was higher than the actual amount received by the assessee. The assessee challenged this decision, arguing that the property was litigated, and the actual sale consideration should be considered. The Tribunal held that in cases of defective property titles, the market value decreases significantly. The AO failed to obtain a valuation report from the Departmental Valuation Officer (DVO) despite the challenge raised by the assessee. The Tribunal concluded that the market value should not exceed the actual sale consideration, directing the AO to compute capital gains based on the actual amount received by the assessee.

Issue 2: Denial of Deduction under Section 54F of the Act
The second issue revolved around the denial of deduction under section 54F of the Act by the AO and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee claimed the deduction for investment in another residential property, but failed to provide sufficient evidence to prove the acquisition of the property as per the Act's provisions. The Tribunal found that the evidence presented by the assessee, including payment through a cheque to her spouse, was insufficient to establish the acquisition of the residential property. Consequently, the Tribunal confirmed the decision of the revenue authorities to deny the deduction under section 54F of the Act.

In conclusion, the Tribunal partly allowed the appeal of the assessee, directing the AO to compute capital gains based on the actual sale consideration received by the assessee. The Tribunal emphasized the importance of considering the extraordinary circumstances, such as the Covid-19 pandemic, in the delivery of the judgment.