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Facts
The assessee sold three properties for a sum lower than the stamp duty valuation. The Assessing Officer (AO), without waiting for the valuation reports requested by the assessee, added the difference between the sale consideration and the stamp duty valuation to the assessee's income under Section 50C of the Income Tax Act. The CIT(A) upheld this addition.
Held
The Tribunal found that the CIT(A)'s observation regarding the valuation reports was not specific and lacked reasoning. The Tribunal noted that the valuation reports were exhaustive and considered various factors. Therefore, the Tribunal restored the matter to the AO for re-examination of the valuation reports and to pass a speaking order after giving the assessee an opportunity of hearing.
Key Issues
Whether the CIT(A) erred in upholding the addition made by the AO under Section 50C without properly considering the departmental valuation reports.
Sections Cited
50C, 143(1), 143(2), 142(1), 270A, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH
(Assessment Year : 2018–19) Owais Alimohamed Vs. Income Tax Officer, Machhiwala Ward 20(1)(1), 801B Fine Touch Aayakar Bhavan, Opp Baby Garden Churchgate, Agripada Mumbai-400020. Mumbai Central Mumbai-400008. PAN/GIR No. AUCPM0269R (Appellant) .. (Respondent) Assessee by Shri. Rakesh Milwani Revenue by Shri. H.M. Bhatt (SR. DR.) Date of Hearing 04/06/2024 Date of Pronouncement 30/08/2024 आदेश / O R D E R PER SUNIL KUMAR SINGH (J.M): 1. This appeal has been preferred against the impugned order dated 12.12.2023 passed in Appeal no. NFAC/2017- 18/10049067 by the Ld. Commissioner of Income– tax(Appeals)/ National Faceless Appeal Centre (NFAC) [hereinafter referred to as the “CIT(A)”] u/s. 250 of the Income- tax Act, 1961 [hereinafter referred to as "Act"] for the Assessment year [A.Y.] 2018-19, wherein learned CIT(A) has dismissed assessee’s appeal, upholding the addition of Rs. Owais Alimohamed Machhiwala 3,30,88,000/- u/s. 50C of the Act made by the learned AO vide assessment order dated 26.04.2021.
The brief facts related to the appeal state that the appellant assessee e-filed his return of income for the A.Y. 2018-19, declaring total income of Rs. 2,98,570/-. The return was processed u/s. 143(1) of the Act on 26.01.2019, accepting the aforesaid returned income. The case was subsequently selected for limited scrutiny for infringement of section 50(C)/43CA on the basis of information received, pointing for tax evasion. It was noticed that during the year under consideration, the appellant assessee sold three properties at a value below stamp duty valuation. Statutory notices u/s. 143(2) r/w section 142(1) of the Act were issued and served upon the assessee. Assessee responded and furnished required information along with three sale deeds relating to the three properties. The matter was referred by learned assessing officer for valuation of the properties to the valuation officer at the request of the assessee. However, learned AO, without waiting for the submissions of the valuation reports, added Rs. 3,30,88,000/- u/s. 50C of the Act in the assessee’s total income as income from other sources. Penalty proceeding u/s. 270A of the Act for under reporting of income were also initiated separately.
Aggrieved by the assessment order dated 26.04.2021, assessee preferred an appeal before learned CIT(A). During the proceedings before the first appellate authority, three valuation reports, each dated 28.07.2022 were produced on behalf of the Departmental Valuation Officer (DVO), depicting the value of three properties as shown in the table below.
S Address of the Date of Transacti Value of Differenc Values l Property Transaction on the e ascertain /Sale deed Amount Property between ed by the in Rs. as per Sub- a&b Income Registrar Tax in Rs. departme nt (a) (b) valuation officer /dated 1 Cadastral Survey No.310 13.09.2017 1620000 1,11,12,000 94,92,000 18,96,650/ of Byculla Division.6, dt. Bhusrath Building , 15th Kamathipura Lane, 28.07.2022 Mumbai Central, Mumbai-400008.
2 C s no.311, Land with 26.03.2018 1560000 1,22,34,000 1,06,74,00 24,94,000/ structure, Husab Manji 0 dt. Irani Building No. 10, 15th Kamathipura Lane, 28.07.2022 Shankarrao Puppala Road, Mumbai Central, Mumbai-400008.
C s no.308, Land with 1,29,22,00 33,30,570/ 3 26.03.2018 1800000 1,47,22,000 structure, Husab Manji 0 dt. Irani Building No. 4, 15th Kamathipura Lane, 28.07.2022 Mumbai Central, Mumbai-400008.
Total 49,80,000 3,80,68,000 3,30,88,00 0 Learned CIT(A) rejected the valuation reports and dismissed assessee’s first appeal.
The appellant assessee has filed this second appeal before the tribunal on the ground that learned CIT(A) has erred in ignoring the departmental valuation reports and the objection of the assessee against the cost of acquisition of the properties, while affirming the computation of capital gains Owais Alimohamed Machhiwala u/s. 50C of the Act made by the assessing officer vide assessment order dated 26.04.2021.
In response to the notice issued by the tribunal, learned DR appeared and participated in the proceedings.
We have perused the records and heard learned representatives for both the parties.
Learned representative for the assessee has argued at par with the grounds of appeal as stated above. Prayed to set aside the impugned order and to adopt the value computed by the departmental valuation officer.
8. Learned representative for the department has supported the impugned order.
9. We have carefully gone through the material available on record. Perusal of the assessment order discloses that at the request of the assessee, learned AO referred the matter for valuation of the three properties in question to the departmental valuation officer. However, learned AO, instead of ensuring timely procurement of the same, completed the assessment without the inclusion of the three departmental valuation reports. The valuation reports of properties were submitted before the first appellate authority. However, learned CIT(A) observed that the valuation officer has not given any solid and substantial reasoning for such a low valuation of the properties and dismissed assessee’s appeal.
10. We notice that separate valuation report for each property is a part of the assessee’s paper book at pages from 141 to 176. The departmental valuation officer has prepared these Owais Alimohamed Machhiwala reports after inspection of the properties on the spot on 30.05.2022. Some of the reasons stated in the valuation reports are that the buildings are 75 years old and in the dilapidated condition and mainly used for residential/rented out on monthly rental basis. The floor are uneven and in poor condition. There are common bathrooms and common toilets. It is also stated that the location, adversely affects its value. Other anticipated adverse effects during redevelopment in due course of time has also been taken into account by the departmental valuation officer. Each of the report is very exhaustive, indicating at such a low valuation. The observation of learned CIT(A) is not specific but general in nature. The impugned order is not based on the causes and effects relatable to any logical deduction. In such a scenario, we are of the consistent view that the matter be re-examined by learned assessing officer in light of the valuation reports afresh. The matter is, thus restored back to the file of learned assessing officer who shall examine the three valuation reports and after affording an opportunity of hearing to the assessee, shall pass speaking order afresh on merit. The appeal is liable to be allowed accordingly.
In the result, the appeal is allowed for statistical purpose. The impugned order dated 12.12.2023 and assessment order dated 26.04.2021 are set aside. Order pronounced on 30.08.2024.