2021 (4) TMI 5 - AT - Income Tax

Capital gain computation - Disallowance of discount allowed to customers - recomputation of long term capital gain by adopting market value determined for the purpose of payment of stamp duty as per provisions of section 50C - HELD THAT - We find that both the counsels for the assessee as well as Revenue have agreed for set aside the appeal to the file of the AO to reconsider the issue of disallowance of discount allowed to customers and recomputation of long term capital gains from sale of property by referring valuation to the DVO. Therefore, without considering merits of the case, we deem it appropriate to set aside the appeal to the file of Assessing Officer and direct him to reconsider the issue of disallowance of discount allowed to customers in light of claim of the assessee that it has furnished various evidences to justify its claim. Similarly, the issue of recomputation of long term capital gains has also been set aside to the file of Assessing Officer, with a direction to the Assessing Officer to determine correct market value of the property by referring valuation to the DVO, in accordance with the provisions of section 50C(2) of the Act. Needless to say, the assessee shall furnish necessary evidences before the Assessing Officer to justify its case. Appeal filed by the assessee is treated as allowed for statistical purposes.

Summary

Issues involved:
1. Disallowance of selling expenses representing discount allowed to customers on assaying and Hall marking charges.
2. Failure to refer the valuation of the property to the DVO before adopting the guideline value u/s. 50C for computing long term capital gain.

Issue 1: Disallowance of selling expenses:
The assessee, engaged in gold assaying and hall marking, filed its return for the assessment year 2014-15, declaring income of ?95,56,606. During scrutiny, the Assessing Officer disallowed a deduction of ?25,61,387 claimed as discount allowed to customers on assaying and Hall marking charges. The AO considered the discount non-genuine, as per Bureau of Indian Standards fixed rates, and hence disallowed the deduction. The CIT(A) upheld the disallowance, stating no change in circumstances warranting different treatment. The AR argued that similar expenses were allowed in prior years, and all evidence was provided. The tribunal set aside the issue to the AO for reassessment, directing a reevaluation based on the evidence furnished by the assessee.

Issue 2: Failure to refer property valuation to DVO:
The Assessing Officer, noting a variance in the sale consideration and the market value of a property, recomputed long term capital gain under section 50C, using the higher market value. The AR contended that the AO should have referred the valuation to the DVO for accurate determination, as requested by the assessee. The tribunal agreed with the AR and directed the AO to reevaluate the property's market value by referring it to the DVO, in line with section 50C(2) provisions. The assessee was instructed to provide necessary evidence for this reassessment.

In conclusion, the ITAT Chennai directed the Assessing Officer to reconsider the disallowance of selling expenses and the computation of long term capital gains. The tribunal set aside the appeal for reassessment, emphasizing the need for the AO to review the issues based on the evidence presented by the assessee. The appeal was treated as allowed for statistical purposes, with the decision pronounced on 19th March 2021.