2023 (6) TMI 722 - AT - Income Tax

Adjustments u/s 143(1)(a) - adjustment u/s 50C by adopting Stamp Duty Valuation as Full Value of Consideration - CPC Bangalore disallowed the benefit of deduction claimed by the Assessee of investment in RECL Bonds - HELD THAT - As relying on Sudesh Sachdev 2022 (11) TMI 1368 - ITAT DELHI we hold that the provisions of Section 50C(2) as an inbuilt provision for adhering to principles of natural justice which has not been observed while making adjustments u/s 143(1)(a) of the Act and hence, the action of the revenue is not sustainable.

Summary

Issues involved:
The issues involved in the judgment are related to adjustments made under section 143(1)(a) of the Income Tax Act, 1961, specifically focusing on the application of section 50C and the valuation of property for tax purposes.

Grounds of Appeal:
1. The first issue raised by the assessee is the arbitrary adjustment in the Intimation Order passed u/s 143(1)(a) of the Income Tax Act, 1961, which was considered beyond the scope of provisions of section 143(1)(a).
2. The second issue concerns the adjustment made u/s 50C by adopting "Stamp Duty Valuation" as "Full Value of Consideration" without proper appreciation of the provisions of section 50C and the Valuation Report.
3. The third issue relates to the addition made without considering the actual consideration received for the sale of property, despite the genuineness of the full value of sale consideration and the valuation report obtained by the appellant.
4. The final issue questions the justification of the orders passed by lower authorities, claiming them to be unjustified on facts and bad in law.

Detailed Summary:
The appellant filed an appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, dated 14.07.2022. The primary contention of the appellant was the improper adjudication of grounds related to adjustments made under section 143(1)(a) of the Income Tax Act, 1961, specifically u/s 50C. The appellant argued that the adjustment made by the Centralized Processing Centre (CPC) was arbitrary and beyond the scope of the provisions of the Act. The appellant highlighted that the valuation report obtained for the property sale transaction supported the claim of sales consideration, making the addition made by the CPC illegal and misconceived.

Furthermore, the appellant pointed out that the action of the lower authorities in not properly appreciating the detailed submissions and documents filed by the appellant was unjustified. The appellant emphasized that the addition made under section 50C without reference to the Department Valuation Officer (DVO) was illegal and not sustainable under the law. The appellant also raised concerns regarding the lack of action taken by the Assessing Officer despite the appellant's request to refer the matter to the Valuation Cell for property valuation.

Additionally, the appellant filed a Rectification Application u/s 154 for rectification of mistakes in the intimation order passed u/s 143(1) of the Act, which was still pending before the Assessing Officer. The appellant, without prejudice to the adjustments made in the Intimation Order, deposited a certain amount as Income Tax. The appellant argued that the provisions of Section 143(1) did not justify the adjustments made by the CPC, especially in light of the valuation discrepancies and the statutory rights of the assessee under section 50C.

Co-ordinate Bench Decision:
A similar issue was adjudicated by the Co-ordinate Bench of ITAT in the case of Sudesh Sachdev Vs. DCIT, where the addition made under section 50C was challenged. The Co-ordinate Bench held that the adjustment made under section 50C(1) cannot fall within the ambit of adjustment provided under section 143(1)(a) of the Act. It was emphasized that the provisions of Section 50C(2) serve as an inbuilt provision for adhering to principles of natural justice, which were not observed while making adjustments u/s 143(1)(a) of the Act. Consequently, the Co-ordinate Bench allowed the appeal of the assessee, highlighting the unsustainability of the revenue's actions in making such adjustments.

Conclusion:
In conclusion, the judgment addresses the issues raised by the appellant regarding adjustments made under section 143(1)(a) of the Income Tax Act, 1961, particularly focusing on the application of section 50C and the valuation discrepancies in the property sale transaction. The decision emphasizes the importance of adhering to statutory rights and principles of natural justice while making such adjustments, ultimately leading to the allowance of the appellant's appeal.