2021 (2) TMI 535 - AT - Income Tax

Long term capital gain addition after invoking Section 50C - stamp rate of the capital asset transferred by the assessees' at much lower value after invoking Section 50C thereby making the impugned addition - HELD THAT - Revenue at this stage raised the vehement contention that no such reference prayer came in the course of assessment at these assessees' behest. We find no merit in the Revenue's instant technical arguments. Hon'ble Calcutta high court decision Sunil Kumar Agarwal Vs. CIT 2014 (6) TMI 13 - CALCUTTA HIGH COURT holds that Section 50(C)(2) a reference to the DVO is mandatory in Sec. 50C proceedings even if the assessee concerned fails to agitate the same at the appropriate stage. At this stage stated during the course of hearing that the capital asset sold at the assessees' behest in the relevant previous year also involved some title dispute and other distressing factors. We therefore restore this sole issue of long term capital gain addition raised at the assessees' behest back to the AO for his appropriate adjudication after making necessary reference to the DVO as per law. It is made clear that the assessees shall be at liberty to raise all factual/legal pleas in consequential proceedings - Assessees' appeals are treated as allowed for statistical purposes.

Summary

Issues:
Appeals for A.Y. 2009-10 arising from CIT(A)'s order involving proceedings u/s. 143(3) r.ws. 147 of the Income Tax Act, 1961. Challenge to long term capital gain addition under Section 50C of the Act without DVO reference.

Analysis:
The appeals before the Appellate Tribunal ITAT Hyderabad for the assessment year 2009-10 stemmed from the CIT(A)-1, Hyderabad's order dated 25-02-2019. The primary issue revolved around the correctness of the lower authorities' action of adding long term capital gains amounting to ?1,05,00,892 each to the assessees after invoking Section 50C of the Income Tax Act, 1961. This addition was made based on the stamp rate of the capital asset transferred by the assessees, which was considerably lower, as per the provisions of Section 50C.

During the proceedings, it was noted that neither of the lower authorities had made any statutory reference to the Departmental Valuation Officer (DVO) under Section 50C(2) of the Act. The Revenue contended that the assessees had not requested such a reference during the assessment, but the Tribunal referred to a decision of the Hon'ble Calcutta High Court in Sunil Kumar Agarwal Vs. CIT [(2014) 372 ITR 83] (Cal), emphasizing the mandatory nature of the DVO reference in Section 50C proceedings, even if not raised by the assessee.

In light of the above, the Tribunal directed the Assessing Officer to re-examine the issue of long term capital gain addition, considering the title dispute and other distressing factors involved in the capital asset's sale. The Tribunal instructed the Assessing Officer to make the necessary reference to the DVO as per the legal requirements. The assessees were granted the liberty to present all factual and legal arguments during the subsequent proceedings.

Consequently, the appeals of the assessees were treated as allowed for statistical purposes, and a copy of the order was directed to be placed in the respective case files. The order was pronounced in the open court on 4th February 2021 by S.S. Godara, Member (J) of the Appellate Tribunal ITAT Hyderabad.