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2023 (5) TMI 836 - AT - Income TaxCapital gain - computation of income on account of sale of a house property with the help of section 50C - FMV determination - HELD THAT - When capital gain is to be computed u/s 48 then full value of the consideration received or accruing as a result of the transfer by an assessee of a capital asset being land or building or both, is less than the value adopted or assessed by any authority of a State Government for charging the stamp duty, then such valuation determined by such State Government would be deemed to be the full value of consideration. The moment assessee pointed out that it has sold the property within 3.5 months and it cannot fetch the price as deemed by the AO on the strength of stamp duty valuation, AO should have referred it to the Valuation Cell. CIT(Appeals) has erred in observing that since the assessee has not asked the AO to refer the valuation of this property to the Valuation Cell, therefore, there was no necessity at the end of the AO to determine the fair market value u/s 50C(2) of the Income Tax Act. Quasi judicial authorities are being respected not on account of their power to legalise the injustice on technical ground but because they are capable of removing injustice and is expected to do so. Once the fact was brought to the notice of ld. AO that this property was purchased for a sum of Rs.2.38 crores and it is actually being sold after three half months for Rs.2.80 crores, then before deeming its sale value at Rs.3,90,00,000/-, AO ought to have applied his mind and ought to have got its value determined by the DVO. We set aside both the impugned orders and remit this issue to the file of ld. Assessing Officer for re-adjudication. AO is directed to call for a valuation report under sub-clause (2) of section 50C for determining the fair market value of the property on the date of transfer. AO is also directed to decide the claim of the assessee whether the gain is to be assessed as a capital gain or a business income. Appeal of the assessee is treated as allowed for statistical purposes.
Issues involved:
The judgment involves the computation of income on account of the sale of a house property with the aid of section 50C of the Income Tax Act. Comprehensive details of the judgment: 1. The assessee filed an appeal against the order of the Commissioner of Income Tax, challenging the addition of Rs.1,10,21,820/- under section 50C of the Income Tax Act for the assessment year 2013-14. 2. The Assessing Officer noted a variance between the sale consideration and the Fair Market Value of the property, deeming the latter as the full value of consideration received. The assessee's explanation was considered but the addition was made as per Section 50C. 3. The appeal to the CIT(A) did not provide relief to the assessee, leading to the matter being brought before the Tribunal. 4. The assessee raised three submissions before the Tribunal: firstly, the property was held for a short period and not for capital gains; secondly, the Assessing Officer did not calculate the fair market value for the purpose of capital gains; and thirdly, a valuation report from the Valuation Officer should have been obtained. 5. The Tribunal considered Section 48 and Section 50C of the Income Tax Act. It highlighted the necessity to replace the "full value of consideration" with the stamp duty valuation determined by the authorities. 6. The Tribunal observed that if the stamp duty valuation exceeds the fair market value, the Assessing Officer should refer the valuation to the Valuation Officer. The failure to do so led to setting aside the previous orders and remitting the issue back to the Assessing Officer for re-adjudication. 7. The Tribunal directed the Assessing Officer to obtain a valuation report under Section 50C(2) to determine the fair market value of the property and decide whether the gain is to be assessed as capital gain or business income. 8. The appeal of the assessee was treated as allowed for statistical purposes, with the order pronounced on May 1st, 2023.
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