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Facts
The assessee sold an immovable property and declared capital gains based on the actual sale consideration. The AO treated the stamp duty value as the sale consideration and made additions, also treating a portion as business income. The CIT(A) upheld these additions.
Held
The Tribunal found that the District Valuation Officer's (DVO) report, which valued the property lower than the stamp duty value but still considered for the actual sale consideration, was not properly discussed by the lower authorities. The Tribunal noted that 110% of the actual sale consideration was higher than the DVO's valuation, making additions under Section 50C unsustainable.
Key Issues
Whether the addition of capital gains and business income based on stamp duty value instead of actual consideration and DVO's report is justified under Section 50C.
Sections Cited
143(3), 147, 148, 50C, 55(2)(b)(ii)
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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI RAJ KUMAR CHAUHAN, JM
PER PRASHANT MAHARISHI, AM: 1.
is filed by Mr. Narendra Shankar Gavand (The assessee/appellant) for Assessment Year 2010 – 11 against the appellate order passed by the National faceless appeal Centre Delhi (the learned CIT – A) dated 9/1/2024 wherein the appeal filed by the assessee against the assessment order passed under section 143 (3) read with section 147 of The Income Tax Act 1961 (the act) on 16/12/2017 by The Income Tax Officer, Ward 3 (1), Thane (the learned AO) was dismissed and therefore assessee is aggrieved and is in appeal before us. 2. Assessee has raised following grounds of appeal before us: “1. The Hon. CIT(A) erred in upholding the addition of Rs. 15,25,568/-, made by the Id AO, as business income of the appellant, on account of application of section 50C of the I. Tax Act 1961, failing to follow the valuation determined by the District Valuation Officer (DVO) in respect of the same transaction of sale of share in revisionary interest in a plot of land at Bhandup (W), Mumbai
2. The Hon. CIT(A) erred in upholding the addition of Rs.60,72,250/- made by the ld AO, as long term capital gains, considering the wrongly determined sale consideration amount on sale of share in revisionary interest in a plot of land at Bhandup (W), Mumbai, to be income of the appellant liable for tax, without granting appropriate deduction for indexed cost of acquisition of such rights, as per provisions of section 55(2)(b)(ii) of the I.T. Act, 1961 and incorrectly dismissing the specific ground of appeal no. 3 raised before the Hon. CIT(A) as general/consequential in nature.
3. The appellant craves leave to add, alter, amend, delete and/or vary any of the above grounds of appeal/relief claimed at any time before the decision of the appeal.”
Brief facts of the case shows that assessee has filed return of income for Assessment Year 2010 – 11 on 12/4/2017 at a total income of Rs. 169,350/–. The revised return was also filed at Rs. 371,630/–.
Therefore, the entire share in the hands of the assessee is Rs. 6,072,250/– same was treated as a long-term capital gain earned by the assessee. Accordingly, the income of the assessee was assessed at Rs. 7,636,457/– as per the assessment order passed under section 143 (3) of the act dated 4/12/2017.
The assessee aggrieved with the same contested it before the learned CIT – A, wherein it was submitted that even the learned district valuation officer has determined the value of the above property in the case of his brother at Rs. 28,070,000/–. Despite the above fact, the learned CIT – A confirmed the action of the learned assessing officer. The learned CIT – A noted that the learned assessing officer has passed the order after the report of the district valuation officer but did not discuss the finding of the report. Although the report was called in the case of the brother of the assessee, the learned CIT appeal on examination of the report of the DVO found certain anomalies in the same and therefore he also rejected the report of the DVO. It was held by the learned CIT – A that the report of the DVO is not acceptable and therefore the confirmed the entire addition of Rs. 15,25,568/– and Rs. 6,072,250/–. Accordingly, the appeal of the assessee was dismissed.
The assessee is aggrieved with the same and is in appeal before us. The learned authorised representative submitted a paper book containing 36 pages and written submission. The same was reiterated before us.
The learned Departmental Representative submitted the orders of the learned lower authorities.
We find that assessee along with his 2 brothers and mothers held 25.625% ownership share in a plot of land admeasuring 13,337 m² at Bhandup, Mumbai wherein the share of the assessee was 6.40%. The above land was leased to one company which was running its own factory. As per the registered agreement dated 1/9/2009 the above property was sold to that company for a lump-sum consideration of Rs. 270 lakhs. As on the date of the registration of the sale agreement the stamp duty value of the above property was Rs. 50,837,000. As the assessee has received the actual sale consideration of Rs. 270 lakhs, it computed the cost of acquisition of the above property at Rs. 1043,39,408/- computed long-term capital loss of 7,73,39,408/- and submitted that the share of the assessee is 6.40% thereof amounting to a long- term capital loss of Rs. 19,319,384/-. 13. Meanwhile in the case of the brother of the assessee, the report of the DVO was called for which was furnished on 31/05/2017 which is placed at page number 26 of the paper book. The fair market value of the property was determined by the DVO at Rs. 28,070,000/-. Despite the above fact, neither the AO nor the learned CIT – A accepted the same. We find that when the property is valued by the district valuation officer, he is an expert, neither the learned AO nor the learned CIT – A has any right to reject the same so far as the computation of capital gain under section 50 C is required to be determined. We also find that the actual sale consideration shown by the assessee is Rs. 270 lakhs whereas the deemed consideration determined by the district valuation officer is of Rs. 28,070,000/–. Thus, there is a difference of Rs. 1,070,000/- in the valuation adopted by the learned district valuation officer and actual sale consideration. We find that hundred and 10% of the actual sale consideration would be higher than the amount of the valuation adopted by the district valuation officer. Therefore, even otherwise, no addition could have been made under the provisions of section 50C of the act. Accordingly, we direct the learned assessing officer to delete the addition made of Rs. 1,525,568/– as well as of Rs. 6,072,250/–. Accordingly, both the grounds of the appeal are allowed.
In the result appeal filed by the assessee is allowed.
Order pronounced in the open court on 08/10/2024.
Sd/- Sd/- Sd/- Sd/- (RAJ KUMAR CHAUHAN) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 08.10.2024 Dragon Copy of the Order forwarded to : The Appellant, The Respondent, The CIT, The DR ITAT & Guard File BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai