2022 (3) TMI 216 - AT - Income Tax

Addition as short term capital gain by invoking the provisions of section 50C - determination of market value of asset as on the date of sale by the DVO - difference between the declared sale consideration and the value determined by the DVO - HELD THAT - In the facts of the present case, admittedly, after determination of market value of asset as on the date of sale by the DVO, the difference between the declared sale consideration and the market value is within the range of 5%, as referred to, in third proviso to section 50C(1) of the Act. This, being a beneficial provision, in our considered opinion, the benefit provided under the third proviso to section 50C(1) of the Act, should be extended to the assessee, as, ultimately the value determined by the Stamp Valuation Authority has been substituted by DVO's valuation in terms of sub-section (3) of section 50C of the Act. Thus, in our considered opinion, the addition towards short term capital gain needs to be deleted. Accordingly, we delete the same.

Summary

Issues:
Addition of short term capital gain under section 50C of the Income-tax Act, 1961.

Detailed Analysis:

1. Background and Assessment: The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2005-06 regarding the addition of ?2,37,400 as short term capital gain under section 50C of the Income-tax Act, 1961. The Assessing Officer substituted the declared sale consideration with the value determined by the Stamp Valuation Authority, resulting in a computation of short term capital gain at ?15,45,172. The assessee objected to this action, leading to an appeal before the Commissioner (Appeals).

2. Contentions and Proceedings: The primary contention of the assessee was that the Assessing Officer did not refer the valuation to the Departmental Valuation Officer (DVO) before adopting the value determined by the Stamp Valuation Authority. Upon direction from the Commissioner (Appeals), the DVO determined the property's value at ?92,37,400. Consequently, the addition towards short term capital gain was restricted to ?2,37,500, being the difference between the declared sale consideration and the value determined by the DVO.

3. Judicial Review and Decision: The Tribunal noted that the difference between the declared sale consideration and the DVO's valuation was ?2,37,400, falling within the 5% range as per the third proviso to section 50C(1) of the Act. The Tribunal applied this beneficial provision retrospectively, citing relevant judicial precedents. Therefore, considering the DVO's valuation, the Tribunal decided to delete the addition of ?2,37,400 towards short term capital gain. Consequently, the appeal was allowed, and the addition was removed.

4. Conclusion: The Tribunal's decision highlighted the application of the third proviso to section 50C(1) of the Act in cases where the value determined by the Stamp Valuation Authority is within a certain range of the declared sale consideration. By extending the benefit of this provision to the assessee, the Tribunal concluded that the addition of ?2,37,400 towards short term capital gain should be deleted, resulting in the allowance of the appeal.