2023 (1) TMI 955 - AT - Income Tax

Long-term capital gain - cost of acquisition - capital gain worked out by the DVO - Assessee contended that Section 50C contemplates a deeming situation whereby the full value of the sale consideration is to be deemed equivalent to the amount on which stamp duty was paid for the purpose of calculating the capital gain - HELD THAT - Assessee has brought to the notice of the ld. CIT(Appeals), the report of DVO, his submission which has duly been noticed by the ld. 1st Appellate Authority, but he failed to take cognizance of this report. The reference to the DVO was made during the pendency of the assessment proceeding. In such situation, its cognizance ought to have been taken. Therefore, 1st Appellate Authority failed in its duty to follow the correct procedure required for the disposal of the appeal. Similarly both the authorities have erred in rejecting the calculation submitted by the assessee regarding cost of acquisition. They have calculated the long-term capital gain simply by taking into consideration the stamp duty valuation by applying section 50C ignoring all other provisions. Therefore, we direct the ld. Assessing Officer to calculate the capital gain assessable in the hands of the assessee on the basis of computation made by the assessee (extracted supra). The capital gain will be calculated at Rs.47,77,384/-, out of that assessee has already calculated and shown at Rs.11,22,636/-. The addition is to be restricted to Rs.36,54,748/- instead of Rs.54,84,714/-. To be very specific, the capital gain including the gain disclose d by the assessee is directed to be calculated in the hands of the assessee at Rs.47,77,384/-. The credit of already shown of Rs.11,22,636/- is to be given to the assessee (Rs.47,77,384/- minus Rs.11,22,636/-) net Rs.36,54,748/-. Appeal of the assessee is allowed.

Summary

Issues Involved:

1. Condonation of Delay in Filing the Appeal
2. Determination of Long-Term Capital Gain (LTCG)
3. Applicability of Section 50C of the Income Tax Act
4. Consideration of District Valuation Officer (DVO) Report
5. Calculation of Cost of Acquisition

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal delayed by 507 days. The delay was attributed to reliance on an Authorized Representative who failed to act timely, the COVID-19 pandemic, and subsequent lockdowns. The Tribunal, considering the bona fide reasons and the Supreme Court's liberal approach towards condonation of delays, allowed the application to condone the delay, emphasizing that the delay was not a strategy to prolong litigation.

2. Determination of Long-Term Capital Gain (LTCG):
The core issue was the computation of LTCG on the sale of jointly held land. The Assessing Officer determined the LTCG at Rs.66,19,249/- based on the development agreement executed by the assessee. The Tribunal noted that the assessee's share in the property was 28.16%, and the sale consideration was calculated accordingly. The Tribunal directed the Assessing Officer to recalculate the LTCG based on the DVO's report and the assessee's computation, which considered the correct cost of acquisition and indexed cost.

3. Applicability of Section 50C of the Income Tax Act:
Section 50C deems the full value of consideration for capital gains to be the value adopted for stamp duty purposes. The Tribunal highlighted that if the assessee disputes this value, the Assessing Officer should refer the matter to the DVO to determine the fair market value. The Tribunal found that the Assessing Officer failed to consider the DVO's report, which was available before the CIT(A).

4. Consideration of District Valuation Officer (DVO) Report:
The DVO's report, which valued the property at Rs.1,86,94,154/-, was not considered by the CIT(A). The Tribunal emphasized that the DVO's valuation should be taken into account, reducing the sale consideration from Rs.2,35,05,857/- to Rs.1,86,94,154/-. This adjustment significantly impacted the LTCG calculation.

5. Calculation of Cost of Acquisition:
The Tribunal noted discrepancies in the cost of acquisition used by the Assessing Officer. The assessee claimed the fair market value as on 01.04.1981 was Rs.1,84,135/-, indexed to Rs.4,86,890/-. The Tribunal found merit in the assessee's computation and directed the Assessing Officer to adopt this value for calculating the LTCG.

Conclusion:
The Tribunal allowed the appeal, directing the Assessing Officer to recalculate the LTCG at Rs.47,77,384/-, considering the DVO's report and the correct cost of acquisition. The net addition to the assessee's income was restricted to Rs.36,54,748/- after giving credit for the LTCG already declared by the assessee.