2023 (9) TMI 877 - AT - Income Tax

Capital gain computation - Valuation of Capital Asset as made by valuation officer - property under consideration is in dispute - property was jointly owned by the assessee and his relative - assessee submitted that the title of the property was not clear and marketable, and hence the property has been sold below the Jantri rate - HELD THAT - We observe that in the instant facts, evidently the DVO did not take into consideration the fact that the title of the property was under dispute and the matter was pending before a civil suit at the time when the assessee and his relative jointly sold the property. Further, we observe that the counsel for the assessee has placed evidence on record before us that the civil suit with respect to the title of properties is still going on even today as on the date of hearing before. We further observe in the case of Whiterose Holdings India Pvt. Ltd. 2019 (5) TMI 1506 - ITAT MUMBAI has held that where in respect of a certain property there are disputes and litigations going on and the property is in the possession of the tenant, the property cannot be valued on the basis of development method by considering that developmental potential and built up area in the nearby locality. ITAT Hyderabad in the case of D. Anitha 2015 (4) TMI 723 - ITAT HYDERABAD held that where property held by the assessee was encumbered and thus the assessee was not the absolute owner of the property, while computing the capital gains arising from transfer of such property, value of property taken for the purpose of payment of stamp duty could not be adopted as sale consideration by applying provisions of section 50C of the Act. Therefore, in the light of the facts of the instant case where apparently the DVO has not considered the on-going dispute as to the title of property at the time of sale of property and in the light of observations made by Hyderabad Tribunal on this aspect, in the interest of justice, the matter is being restored to the file of ld. CIT(A) to take appropriate steps for determining the sale consideration as per law taking into consideration the fact that market value of adjacent properties cannot be taken as the benchmark to determine the sale consideration of a property, the title of which itself is under dispute. Accordingly, the matter is being restored to the file of ld. CIT(A) with the above observations.

Summary

Issues Involved:
The appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals) regarding valuation of Capital Asset, addition under section 50C of the Act, disallowance of deductions under sections 54F and 54B, addition of stamp duty charges, addition on account of low household withdrawals, and confirmation of various additions/disallowances made by the assessing officer.

Valuation of Capital Asset:
The assessee contended that the property under consideration was disputed, and a civil suit was ongoing. The matter was referred to the Departmental Valuation Officer (DVO) who valued the property at Rs. 2,89,80,000. The ld. CIT(A) accepted this value and considered the sale consideration at Rs. 2,89,80,000, reducing the addition made by the Assessing Officer. However, the DVO did not consider the ongoing dispute affecting the market value. The Tribunal observed that the civil suit was still ongoing, and the property could not be valued based on adjacent properties. Citing precedents, the Tribunal held that the sale consideration should be determined considering the dispute over the property's title. The matter was remanded to the ld. CIT(A) for appropriate valuation.

Addition under Section 50C:
The ld. CIT(A) confirmed the addition under section 50C of the Act in the hands of the assessee. The Tribunal noted that the property was disputed, and ongoing litigation affected its market value. Referring to relevant case law, the Tribunal directed the matter to be reconsidered by the ld. CIT(A) to determine the sale consideration in light of the property's disputed title, setting aside the previous decision.

Disallowance under Sections 54F and 54B:
The ld. CIT(A) confirmed the disallowance of deductions under sections 54F and 54B of the Act. However, these issues were not further adjudicated upon as the matter was remanded back to the ld. CIT(A) for valuation of the property considering the ongoing dispute over its title.

Stamp Duty Charges and Household Withdrawals:
The ld. CIT(A) confirmed the addition of stamp duty charges and low household withdrawals. These aspects were part of the broader appeal against various additions and disallowances made by the assessing officer, which were not conclusively addressed due to the remand of the case to the ld. CIT(A) for revaluation based on the property's disputed title.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, remanding the matter back to the ld. CIT(A) for a fresh determination of the market value of the property under section 50C of the Act, considering the ongoing dispute over its title. The decision in this case also applied to a related appeal involving another legal heir, resulting in both appeals being allowed for statistical purposes.