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Facts
The assessee sold an immovable property and declared long-term capital loss. The Assessing Officer (AO) reassessed the income under Section 143(3) r.w.s. 147, making an addition for long-term capital gain based on stamp duty value as per Section 50C, despite the assessee's request to refer the valuation to the DVO.
Held
The Tribunal held that when an assessee objects to the stamp duty valuation, it is obligatory for the AO to refer the matter to the DVO before invoking Section 50C(1). The CIT(A) erred in confirming the addition without a proper DVO reference.
Key Issues
Whether the AO was justified in adopting the stamp duty value as deemed consideration under Section 50C without referring the matter to the DVO, despite the assessee's objection and request.
Sections Cited
250, 1961, 13.12.2024, 2014-15, 50C, 01.12.2018, 143(3), 147, 139(1), 148, 12.03.2018, 28.08.2018, 271(1)(c), 50C(2)
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
This appeal is filed by the assessee against the order passed under section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act"] by the Office of the Commissioner of Income-tax (Appeals), Addl. JCIT(A)-6, Kolkata dated [hereinafter referred to as “CIT(A)”] 13.12.2024, for the Assessment Year 2014–15, whereby the learned CIT(A) confirmed the addition of Rs.22,02,858/- made by the Assessing Officer towards long-term capital gain under section 50C of the Act as per the order dated 01.12.2018 passed under section 143(3) r.w.s. 147 of the Act.
Facts of the Case 2. The assessee is an individual deriving income from salary and other sources. For the year under consideration, the assessee did not 2 initially file his return of income under section 139(1) of the Act. On the basis of information received by the Assessing Officer regarding sale of an immovable property by the assessee (jointly owned with four others), notice under section 148 of the Act was issued on 12.03.2018. In response, the assessee filed a return of income on 28.08.2018 declaring total income of Rs.2,23,374/-. The return included a claim of long-term capital loss of Rs.22,951/- in respect of the transfer of immovable property. The AO completed reassessment under section 143(3) r.w.s. 147 of the Act computing a total income of Rs.24,26,232/- by making an addition of Rs.22,02,858/- towards long-term capital gain under section 50C, adopting the stamp duty value of Rs.1,12,37,120/- as the deemed sale consideration. The assessee’s 1/5th share was determined at Rs.22,47,424/-, after deducting indexed cost of Rs.2,22,833/-. The AO did not refer the matter to the Departmental Valuation Officer (DVO) under section 50C(2), despite the assessee’s request. Penalty proceedings under section 271(1)(c) were also initiated.
The assessee preferred an appeal before the CIT(A) and submitted that actual consideration received was only Rs.5,00,000/- (1/5th of Rs.25 lakhs) which was declared in the return of income , the property was sold to a community trust and the assessee had specifically requested the AO to refer the valuation to the DVO under section 50C(2). It was also contended that no adverse material or contrary evidence was brought on record by the AO to discredit the sale value declared and therefore the addition based on circle rate without DVO reference is unjustified.
The CIT(A), however, dismissed the appeal. While dealing with the issue in paragraph 5.3 of the appellate order, the CIT(A) observed that the assessee did not file any documentary evidence in support of the objection to the stamp duty valuation. The appellate authority held that in absence of objection, reference to DVO was not mandatory and that the AO was justified in applying section 50C(1) of the Act. The addition of Rs.22,02,858/- was thus confirmed.
Aggrieved by the order of CIT(A) the assessee is in appeal before us raising following grounds:
Most Respectfully Shew with,
1. The Lid. Income Tax Officer S.K. Ward-3, Himmatnagar (hereinafter referred to as AO) has erred in law in passing the assessment order for the A.Y. 2014- 15 u/s.143(3) r.w.s.147 of the Income Tax Act by making addition of Rs.22,02,858/- towards long term capital gain (addition us.50C).
2. The order of the A.O. is erroneous on the facts and in the circumstances of the case. He ought to have accepted the returned income.
3. The Lid. A.O. has not given proper opportunity of being heard to the appellant which is against the principle of national justice.
4. The Lid. CIT(A) has not verified documents and evidences submitted by the appellant during the course of CIT appeal proceeding therefore confirm addition made u/s. 50C in the assessment order is bad in law.
5. The Lid. Assessing Officer has also erred in law taking the sale value as per circle rate. The Lid. A.O. could have referred the matter to DVO u/s. 50C (2) of the Income Tax Act as requested by the appellant during the course of assessment proceedings.
6. The Lrd. Assessing officer has also not considered the purchase value of the property, indexation and calculation worked by the appellant.
7. The Lrd. Assessing officer has grievously erred in law in charging interest and initiating penalty proceedings u/s. 271(1) (c) stating that assessee has not correctly disclosed the capital gain hence penalty was initiated for filing inaccurate particulars of income.
8. The appellant craves leave to add, alter or amend any of the grounds of appeal either before or at the time of hearing of the appeal. PRAYER: It is therefore prayed that,
1. It is therefore prayed that assessment order passed by the Ld. ITO may kindly be reverse addition made as long term capital gain of Rs.22,02,858/- (u/s. 50C of the IT Act).
2. Ex-parte best judgment assessment order passed u/s. 143 r.w.s. 147 of the Income Tax Act deserves to be quashed and set aside.
3. Reopening of the assessment may please be held as time barred and without jurisdiction.
4. Original return of income filed by the appellant may kindly be accepted. 5. Return of income filed in response to notice u/s. 148 may please considered. 6. Long term capital gain u/s. S0C may please be allowed as exempt income. 7. Addition of Rs. 22,02,858- may please be deleted.
8. Penalty initiated for concealment of particulars of income u/s.271(1)(c) may please be dropped.
9. Stay against recovery may please be granted.
10. Any other which may deemed fit and proper may please be given to the appellant.
4 6. During the course of hearing, the learned Authorised Representative reiterated the factual background and emphasised that the sale of property was to a community trust, and hence the sale was at a value lower than the prevailing market rate. The AR referred to the assessee’s oral request before the AO to refer the matter to the DVO as per section 50C(2) of the Act. It was contended that the AO failed to discharge the statutory duty under section 50C(2) upon receiving the objection from the assessee. It was also argued that the CIT(A), instead of deciding the matter on merits, merely faulted the assessee for not filing documentary evidence of objection, despite the written submissions being on record.
The learned Departmental Representative did not raise any objection to the proposal of remanding the matter for reference to DVO in accordance with law.
We have carefully perused the orders of the lower authorities and considered the submissions of both sides. The core issue under dispute is the addition of Rs. 22,02,858/- made under section 50C of the Act by adopting the stamp duty value as deemed consideration without reference to the Departmental Valuation Officer, despite the assessee’s objection.
Section 50C(2) of the Act provides that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value and has not been received, and the assessee objects to such valuation, the AO may refer the valuation of the capital asset to a Valuation Officer.
In the present case, the assessee had placed on record his oral submissions during the assessment proceedings requesting for reference to DVO. This aspect is also part of the assessee’s written Statement of 5 Facts and was reiterated before us. The CIT(A), in paragraph 5.3 of the impugned order, has acknowledged that the assessee claimed to have objected to the stamp duty valuation, but concluded against the assessee merely on the ground that no supporting documentary evidence was produced. However, the appellate authority failed to deal with the merits of such objection or direct the AO to make factual verification.
It is well-settled law that once the assessee raises objection to the adoption of stamp duty valuation, it is obligatory for the AO to refer the matter to the DVO before proceeding to invoke section 50C(1). In the facts and circumstances of the case, and particularly considering the sale of property to a charitable community trust at lesser than market value, we find it appropriate to restore the matter to the file of the Assessing Officer with a specific direction to refer the valuation to the DVO under section 50C(2) and decide the matter afresh in accordance with law.
In view of the foregoing discussion, we deem it fit and proper to set aside the orders of the lower authorities in so far as they relate to the addition under section 50C, and restore the matter to the file of the Assessing Officer with a direction to:
- Refer the property valuation to the DVO under section 50C(2) of the Act; - Recompute the capital gain based on the valuation so obtained. - Grant reasonable opportunity to the assessee for furnishing necessary evidence and explanation.
The Assessing Officer shall pass a fresh order after carrying out the above directions and in accordance with law.
In the result, the appeal is allowed for statistical purposes.
Order pronounced in the Court on 6th May, 2025 at Ahmedabad.