2022 (7) TMI 629 - AT - Income Tax

Capital gain - AO had considered the market value of the property based on the value fixed by the builder i.e. Sudarshan Housing and Finance Ltd., which is relevant for the purpose of levy of transfer charges payable to the builder - HELD THAT - As it is a fact that assessee had filed valuation report dated 16/09/2014 wherein the valuer had valued impugned property at Rs.30,47,633/- and assessee had sold the property for Rs.31,00,000/-. When this valuation report is placed on record, it is incumbent on the part of the lower authorities to either dispute the said valuation report or refer the matter to the ld. Department Valuation Officer (DVO) in terms of Section 50C(2) to determine the fair market value of the property. We find that assessee had indeed objected to adoption of market value of Rs.56,07,907/- and had indeed requested for reference to DVO before the ld. AO. This request has been rejected by the lower authorities without any basis which action, in our considered opinion, is grossly against the provisions of the Act. Hence, in order to meet the ends of justice, we deem it fit and appropriate to remand this issue to the file of the ld. AO, with a direction to refer the valuation of subject mentioned property to the ld. DVO for determination of fair market value and also to consider the value fixed by the stamp duty authority in terms of Section 50C of the Act as on the date of sale and determine the sale consideration as per law. Accordingly, the ground No.1 raised by the assessee is allowed for statistical purposes. Disallowance of brought forward depreciation - Action of the lower authorities ignoring the revised return along with revised computation of income filed by the assessee wherein the assessee seem to rectify the error in the claim of unabsorbed depreciation of earlier year - HELD THAT - We find that the ld. CIT(A) had accepted to the fact that there was an error in the original return filed by the assessee with regard to set off of unabsorbed depreciation and the same was duly rectified by way of a revised return and revised computation of income. From the perusal of the manner in which total income has been determined by the ld. AO in the assessment order, we find that the ld. AO had completely ignored the revised return of income filed by the assessee as it was filed belatedly. AO accordingly has also ignored the revised computation of income filed by the assessee during the course of assessment proceedings - we find that there cannot be any grievance to the assessee in the instant case as it is an admitted fact that there was an error committed by the assessee in the set off of unabsorbed depreciation for A.Y.2006-07 and A.Y.2010-11 to the total extent of Rs.8,51,508/-. Hence, this error needs to be brought in the computation of total income by the ld. AO which has been rightly done by the ld. AO. Hence, we uphold the action of the ld. AO in this regard. Accordingly, the ground No.2 raised by the assessee is dismissed.

Summary

Issues:
1. Valuation of property for tax assessment under Section 50C of the Income Tax Act, 1961.
2. Treatment of revised return and computation of income by the Assessing Officer.

Issue 1: Valuation of property for tax assessment under Section 50C:

The case involved the assessment of the market value of a depreciable asset sold by the assessee to M/s. Janus Consultants Pvt. Ltd. The Assessing Officer (AO) relied on the value provided by the builder, Sudarshan Housing and Finance Ltd., which was contested by the assessee. The assessee requested a reference to the Valuation Officer under Section 50C(2) of the Act, but the AO made an addition to the income based on the builder's value. The assessee also provided a subsequent sale agreement and a valuation report to support a lower value. The Commissioner of Income Tax (Appeals) upheld the AO's decision, but the Income Tax Appellate Tribunal (ITAT) found that the AO's rejection of the assessee's valuation report and request for a DVO reference was against the Act. The ITAT remanded the issue to the AO for fair market value determination and consideration of stamp duty authority's value for Section 50C compliance.

Issue 2: Treatment of revised return and computation of income:

The assessee filed a revised return correcting an error in the claim of unabsorbed depreciation, reducing the figure by Rs. 8,51,508. The AO, however, ignored the revised return and computation, making an addition for the excess depreciation claimed. The ITAT acknowledged the error in the original return and the rectification through the revised return. While the AO disregarded the revised documents due to being filed belatedly, the ITAT upheld the AO's decision to include the corrected depreciation figure in the total income calculation. The ITAT dismissed the assessee's challenge against the AO's treatment of the revised return and computation, concluding that the error correction was appropriately considered in the assessment.

In conclusion, the ITAT partially allowed the appeal for statistical purposes, remanding the valuation issue to the AO for fair market value determination and upholding the inclusion of corrected depreciation figures in the total income calculation.