BALWANT TEXTILE MILLS LTD.,,SANGLI vs. INCOME-TAX OFFICER,,

The assessee has raised the following grounds of appeal:- “1. The learned CIT(A) erred on facts and in law in upholding the addition of Rs.86,50,736 on account of long term capital gain on sale of land calculated by the learned AO by estimating the value of property (cost of acquisition). 2. The learned CIT(A) erred on facts and in law in upholding addition of Rs.86,50,736 of long term capital gain determined on the basis of per square meter rate of alleged nearby which is in fact much distant to the location of the said property. 3. The learned CIT(A) erred on facts and in law in not allowing the assessee company to get the valuation done from a registered valuer. 4. The appellant craves leave to add, alter, delete or substitute all or any of the above grounds of appeal.”

The issue raised in the present appeal is against the computation of Long Term Capital Gains on sale of land.

Briefly, in the facts of the case, the assessee during the year under consideration had sold immovable property for Rs.70,00,000/-. The assessee in the return of income had not declared any income from Capital Gains. The assessee was asked to file the details in this regard. However, the assessee failed to do so. The Assessing Officer obtained the copy of the sale deed from the office of Sub-registrar, Sangli, as per which the sale value was taken for stamp duty purpose at Rs.3,85,21,000/-. The assessee was show caused as to why the sale value be not adopted as per section 50C of the Act. However, the assessee failed to appear before the Assessing Officer. Hence, the assessment was completed ex-parte the assessee u/s. 144 of the Act. For computing the Capital Gains, deemed sale consideration was taken at Rs.3.85 crores. The cost of acquisition was taken @ Rs.500/- per Sq. Mtr. for the calendar year 1989. The Assessing Officer computed Long Term Capital Gains after indexation at Rs.86,50,736/-.

Before the Commissioner of Income Tax (Appeals), the assessee submitted that the fair market value of property was much higher than the cost of acquisition adopted by the Assessing Officer. Hence, request was made to file the valuation report as per the registered valuer in order to compute the correct fair market value of property. The Commissioner of Income Tax (Appeals) however rejected the plea of assessee as no such request was made at the stage of assessment.

The assessee is in appeal against the order of Commissioner of Income Tax (Appeals).

The ld. AR for the assessee pointed out that in view of the provisions of section 50C(2) of the Act, it was incumbent upon the Assessing Officer to refer the matter to DVO before adopting the deemed sale consideration.

The ld. DR for the Revenue on the other hand placed reliance on the orders of authorities below.

We have heard the rival contentions and perused the record. The assessment in the case was completed ex-parte the assessee, as the assessee failed to appear before the Assessing Officer on appointed date of hearing. The assessee had furnished the return of income declaring loss of Rs.20,30,945/-. However, as per the AIR information received by the Assessing Officer, the assessee had sold immovable property for Rs.70,00,000/- during the year. However, no income from Capital Gains was shown by the assessee. Because of non-cooperative attitude of the assessee,

Section 50C(2) of the Act lays down that where the assessee raises objections against stamp duty valuation, then the Assessing Officer on the request of assessee may refer the matter for valuation of the said property as on date of the sale, to the DVO. As against the sale consideration of Rs.70,00,000/- mentioned in the sale document, the deemed sale value was for stamp duty worked out at Rs.3.85 crores. We are of the view that this is a fit case to send back to the Assessing Officer with directions to make reference to

In the result, the appeal of assessee is allowed for statistical purposes.