MANISHA RITHESBHAI SONI,AHMEDABAD vs. THE ITO, WARD-5(3)(4), AHMEDABAD

Grievance of the assessee is that the ld.CIT(A) has erred in confirming the addition of Rs.6,35,925/- which was added by the AO under section 50C of the Income Tax Act, 1961.

In the next ground of appeal, the assessee has contended that ld.Revenue authorities ought to have made a reference to the DVO under section 50C(2) of the Act before determining the capital gain taxable in the case of the assessee with the help of section 50C of the Act.

Brief facts of the case are that the assessee has filed her return of income electronically on 22.4.2016 declaring total income at Rs.1,220/-. After scrutiny of the accounts, the ld.AO has confronted the assessee that property bearing survey no.169/A and 169B was sold by the assessee showing sale consideration at Rs.5 lakhs. However, a perusal of the information would reveal that stamp valuation authorities have valued the property at Rs.38,62,225/- for the purpose of stamp duty valuation. He confronted the assessee to show as to why the value determined by the stamp valuation authority be not deemed as full sale consideration received by the vendor on sale of this property for the purpose of computing the capital gain under section 48 of the Income Tax Act. It was contended by the assessee that she has 1/5th share in the property. It was never used by the assessee and was occupied by the tenant. She has not received anything more than the disclosed in the return of income. The AO was not satisfied with the explanation of the assessee. He observed that the sale consideration shown by the vendors at Rs.5.00 lakhs ought to be replaced by Rs.38,67,225/-. If this sale consideration is being divided by ‘5’ being 1/5 shares of the assessee, then receipt in the hands of the assessee are to be worked out at Rs.7,72,245/-. After reducing the index cost, he worked out the capital gain at Rs.6,35,925/-. Appeal to the CIT(A) did not bring any relief to the assessee.

With the assistance of the ld.representatives, we have gone through the record carefully. Section 48 contemplates income charge under the head “capital gain” shall be computed by deducting from the full value of the consideration received or accruing as a result of transfer of the capital asset, the amounts viz. (a) expenditure incurred wholly and exclusively in connection with such transfer, (b) cost of acquisition of assets and the cost of any improvement thereto. The expression “full value of the consideration” employed in section 48 would be replaced by way of deeming fiction providing in section 50C. This section contemplates that where the consideration received or accruing as a result of transfer of capital asset being plant & building or both, is less than the value adopted by the stamp valuation authority of the State Government, for the purpose of charging stamp duty, then the valuation so adopted would be deemed as full value of consideration referred in section 48 of the Income Tax Act, as received or accruing as a result of such transfer. There is no dispute with regard to the applicability of section 50C in the present case. The case of the assessee is that this property was being occupied by the tenant, hence, it could not fetch value equivalent to the amount on which stamp duty was paid. Therefore, reference to the DVO under section 50C(2) ought to have been made by the AO. On the other hand, the ld.DR pointed out that no such specific request was made by the assessee before the AO.

On due consideration of the above facts, we note that sub-section (2) of section 50C further provides that where an assessee raises a dispute about adoption of value determined by the stamp valuation authority, for the purpose of charging stamp duty, the reference will be made to the DVO for determining fair market value of the property on

Observation made by us hereinabove will not impair or injure the case of the AO and will not cause any prejudice to the defence/explanation of the assessee.

In the result, appeal of the assessee is allowed for statistical purpose. Pronounced in the Open Court on 26th March, 2019.