M/S. WIDEANGLE CONSTRUCTION COMPANY PVT. LTD.,KOLKATA vs. I.T.O., WARD - 9(1), KOLKATA, KOLKATA

The assessee has taken five grounds of appeal but its grievances revolve around a single issue, namely ld. Assessing Officer has erred in making the addition of Rs.1,10,21,820/- with the aid of section 50C of the Income Tax Act. In other words, the grievance of the assessee relates to computation of income on account of sale of a house property with the help of section 50C of the Income Tax Act.

Brief facts of the case are that the assessee has filed its return of income electronically on 29.03.2015 declaring total income of Rs.7,73,200/-. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was issued and served upon the assessee. The ld. Assessing Officer while making an addition of Rs.1,10,21,820/- made the following discussion:- “During the course of assessment proceedings it is observed from the sale deed that the sale consideration of the property sold on 30.05.2012 is Rs.2,80,00,000/- . But as per the reply received from SubRegistrar, Nibandhan Bhawan, Kanpur Nagar. Uttar Pradesh dated 18/02/2016 the Fair Market Value of the relevant property is Rs. 3,90,21,820/-., and , sale consideration as shown in the Deed is shown to be Rs. 2,80,00,000/-. The Director of the Co. Shri Nimesh Tandon was asked to furnish the explanation as to the difference between the Sale Consideration shown and as per the market value of the property, Shri Nimesh Tandon, Director of the company furnished the explanation that the property 2

Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee.

Before us, ld. Counsel for the assessee raised three- fold of submissions. In his first-fold of submission, it was contended that the assessee has purchased its landed property on 19.01.2012 for a consideration of Rs.2,38,00,000/-. It was sold on 30.05.2012 for a consideration of Rs.2,80,00,000/-. The property was kept by the assessee for a period of less than 3.5 months. The stand of the assessee was that the capital gain is not being claimed by the assessee on account of sale of this property, rather it was in the nature of adventure in the trade or business hence section 50C is not at all applicable. 3

In his second-fold of contention, it was contended that fair market value provided in section 50C, equivalent to the valuation for the purpose of stamp duty payment is required to be adopted if capital gain under section 48 is being calculated. The ld. Assessing Officer has nowhere made such calculation, i.e. there is no finding discernable from the assessment order that cost of acquisition, whether short-term capital gain is to be computed or not.

In his third-fold of contention, he submitted that since holding period is of roughly 3.5 months, therefore, it is to be ascertained whether this property could command a price as construed by the ld. Assessing Officer at Rs.3,90,21,820/-. The ld. Assessing Officer in this situation ought to have called for a report from the Departmental Valuation Officer as contemplated in section 50C, sub-section (2) of the Income Tax Act.

On the strength of the decision of the Hon’ble Calcutta High Court in the case of Sunil Kumar Agarwal –vs.- CIT, ld. counsel submitted that even if an assessee has not specifically made prayer for calling of a report under section 50C(2), then also, in the given circumstances such report ought to have been obtained by the ld. Assessing Officer. The ld. Counsel for the

We have duly considered the rival contentions and gone through the record carefully. Section 48 has a direct bearing on the controversy in hand, therefore, we take note of the relevant part of this section, which reads as under:- “Mode of computation:- 48. The income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:— (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto; (iii) in case of specified entity referred to in sub-section (4A) of section 45, the amount included in the total income of such specified entity under sub-section (4A) of section 45 which is attributable to the capital asset being transferred, calculated in the prescribed manner. x x x x x x x

A perusal of the above section would reveal that a capital gain shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the amounts namely (a) expenditure incurred for transfer of such a

Section 50C provides so and the relevant part of this section reads as under:- “Special provision for full value of consideration in certain cases:- 50C: Where 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 or assessable by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer: Provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer: Provided further that the first proviso shall apply only in a case where the amount of consideration, or a part thereof, has been received by way of an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account or 6

A perusal of the above section would reveal that when capital gain is to be computed under section 48 of the Income Tax Act, 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 7

However, sub-clause (2) of section 50C further provides that if an assessee claims that the value adopted or assessed by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer, then the ld. Assessing Officer may refer the valuation of the capital asset to the Valuation Officer. 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 ld. Assessing Officer on the strength of stamp duty valuation, the ld. Assessing Officer should have referred it to the Valuation Cell. The ld. CIT(Appeals) has erred in observing that since the assessee has not asked the Assessing Officer to refer the valuation of this property to the Valuation Cell, therefore, there was no necessity at the end of the ld. Assessing Officer to determine the fair market value under section 50C(2) of the Income Tax Act. It is pertinent to observe that 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. Assessing Officer that this property was purchased for a sum of

With the above directions, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on May 1st, 2023.