2022 (3) TMI 1294 - HC - Income Tax

Capital gains u/s 45 - FMV determination - explanation as to why the improvement cost in excess of what has been reported in the valuation report of DVO should not be disallowed from the cost of acquisition of the above-mentioned property for calculation of capital gains under Section 45 - HELD THAT - Upon perusal of the paper book, this Court finds it strange that though the property in question was mortgaged in favour of Yes Bank, yet the property in question was sold to a company in which the wife of the person in management of the Yes Bank was a Director. Further, admittedly, the property in question was sold by the Petitioner below the circle rate (stamp value rate) contrary to Section 50C of the Act. Consequently, this Court is of the view that the AO has the jurisdiction to examine in detail the transaction in question. In view of the aforesaid, this Court is of the opinion that the present writ petition is bereft of any merit. Accordingly, the writ petition and applications are dismissed.

Summary

Issues:
Quashing of impugned Show Cause Notices for Assessment Year 2018-19.

Analysis:
The petitioner filed a petition seeking the quashing of Show Cause Notices issued for the Assessment Year 2018-19. The Notices pertained to the calculation of long-term capital gain on the sale of a property and discrepancies in share transactions. The impugned Notices raised concerns about the fair market value of the property, improvement cost disallowance, and loss claimed due to share transactions. The petitioner argued that the proposed additions/disallowances were without jurisdiction, arbitrary, unreasonable, and illegal. The Court noted that the property was sold below the circle rate and involved connections with a company where the wife of a Yes Bank management person was a Director. Consequently, the Assessing Officer was deemed to have jurisdiction to scrutinize the transaction thoroughly.

The Court found it significant that the property was sold below the circle rate, raising questions about the transaction's details and connections with individuals related to the mortgagee bank. The Assessing Officer was considered to have the authority to delve into the transaction due to these circumstances. The petitioner's contentions regarding the proposed additions and disallowances were dismissed, emphasizing that the Assessing Officer should assess the case in accordance with the law. The Court held that the writ petition lacked merit, allowing the petitioner to present all contentions before the Assessing Officer for due consideration.

This comprehensive analysis of the judgment highlights the issues involved, the arguments presented by the parties, and the Court's decision regarding the quashing of the impugned Show Cause Notices for the Assessment Year 2018-19.