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Facts
The assessee sold a residential property for Rs. 77,50,000/- and calculated Long Term Capital Gains based on this actual sale consideration. The CPC, however, adopted the stamp duty value of Rs. 90,43,000/- as deemed consideration, leading to an addition.
Held
The Tribunal found merit in the assessee's argument, particularly regarding the property's disadvantages affecting its value. Although the valuation report was not filed before the Ld. CIT(A), the Tribunal acknowledged this oversight.
Key Issues
Whether the stamp duty valuation, instead of the actual sale consideration, should be adopted for calculating Long Term Capital Gains, especially when the property has location disadvantages.
Sections Cited
143(1), 55A, 234A, 234B, 234C, 50C
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Income Tax Appellate Tribunal, SMC-‘B’ BENCH : BANGALORE
Before: SMT. BEENA PILLAI & SHRI LAXMI PRASAD SAHU
ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal arises out of order dated 19.01.2024 passed by Ld.CIT(A) -1, for A.Y. 2019-20 on following grounds of appeal: “The Appellant objects to the Intimation passed u/s. 143(1) on the following grounds in so far as it is prejudicial to the Appellant as it is opposed to law and circumstances of the case:-
1. The CIT (A) was not correct in confirming the stamp duty value adopted by CPC to the extent of Rs.90,43,000/- as deemed consideration instead of actual sale consideration Page 2 of Appellant of Rs. 77,50,000/- for calculation of Long Term Capital Gain.
2. The CIT (A) and CPC have not appreciated the fact that the property was sold for lesser price in view of disadvantage of location and accessibility to road and has not obtained stamp duty valuation from appropriate stamp authorities, before concluding the Capital Gain calculation.
3. The CIT (A) and CPC have erred in not referring the matter for determination of Fair Market Value to the Valuation officer according to provisions u/s 55A of the I.T. Act and proceeding to compute the Long Term Capital Gains adopting alleged guidance value as deemed consideration as the Appellant has clearly mentioned that the he has obtained the Valuation report dated 20.11.2020 from the Registered Valuer.
4. The Appellant objects the levy Interest u/s. 234A B and C consequent to above addition.
The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal Wherefore on the above grounds and on such other grounds the Appellant prays the Appellate Authority to set aside the Assessment order and may pass such other as the Appellate Authority deems fit.”
Brief facts of the case are as under: 2.1 The assessee is an individual resident and working in a private company as a salary employee. The assessee filed his return of income for the year on 31.12.2019 u/s 139(4) within due date allowed. The total income declared was Rs.33,16,700/- after claiming deduction under chapter VIA to the extent of Rs. 1,75,0000/-.
2.2 The total income declared in the Return of income of Rs.33,16,790/- is consisting of income From Salary, House
Page 3 of Long Term Capital Gain on sale of property to the extent of Rs.1,44,253/- 2.3 During the year, the assessee had sold residential property to the extent of Rs.77,50,000/- on 20.04.2019. Accordingly, the purchaser deducted TDS of Rs. 77,500/- (percentage on consideration paid) and the same is reflected in 26AS statement.
2.4 The Return of income filed by the Assessee for the year under consideration processed u/s.143(1). The CPC issued proposal notice dt 03.08.2020 for adjustment u/s. 143(1)(a) of the Act, as there was inconsistency in the amounts /Totals entered in schedule CG OR Taxpayer is claiming deductions u/s 54 which are more than the amount allowable as per the respective sections and proposed for making an addition of Rs.11,48,747/-.
2.5 In response to notice by CPC, the assessee filed response submitting the facts that needs consideration and calculation of Long-Term Capital Gain as under: “I have adopted actual consideration received on sale of property, as per Registered Sale Deed, for calculation of Long-Term Capital Gain. The Purchaser has also confirmed in the Sale Deed that she has paid a consideration to the extent of Rs. 77,50,000/-. The TCS amount by the purchaser is also Rs. 77,500/- and the brokerage paid by us for the transaction is also Rs. 77,500/, Therefore, the consideration amount of Rs.77,50,000/- was the amount adopted in the computation of Long-Term Capital Gains. However, the Stamp Duty and Registration Fees paid by the purchaser is based on the Guidance Value stipulated by the City Corporation (BBMP) for entire ward/area. The project which houses the property has been plagued with inordinate delays throughout the construction period and has disadvantages in location and accessibility and hence does not have a favourable value vis-a-vis other projects in Page 4 of the same ward/area. As per Valuation Report obtained from Registered Valuer, we adopted the sale consideration received for calculation of Capital Gains. As the Seller, I have incurred a loss on the sale due to the consideration being lower than the indexed value of the property. Over and above that if I am expected to pay LTCG on the notional profit based on Guidance Value, I do not think it is a fair demand on an individual who has an extremely good track record as an honest taxpayer.” 2.6 However, the CPC did not appreciate the facts that the property was plagued with inordinate delays throughout the construction period and had disadvantages in location and accessibility and hence does not have a favourable value vis-a-vis other projects in the same ward/area.
2.7 The CPC while passing intimation u/s. 143(1) based on the stamp duty & registration fees paid by the purchaser and made addition by adopting the sale consideration at Rs. 90,43,000/- as against 77,50,000/-.
2.8 The Ld.AR submitted that the assessee obtained valuation report from the registered valuer dated 20.11.2020, wherein, the valuer clearly mentioned the disadvantage of the locality of the property due to which the price of the property cannot be considered as Rs. 90,43,000/-. It is submitted that, this fact was brought to the notice of Ld.CIT(A) in the submissions made. However, due to oversight the said valuation report dated 20.11.2020 could not be attached to the e-portal.
2.9 The Ld.AR further submitted that the assessee sold the property for a sum of Rs.77,50,000/- and the same is offered for tax and claimed TDS deducted by the purchaser. The difference
Page 5 of 12.46%, which is slightly higher than margin of variation provided u/s. 50C of 10%. He thus prayed for the due consideration of the valuation report.
On the contrary, the Ld.DR relied on the orders passed by authorities below. We find force in the argument advanced by the Ld.AR based on the records placed before us. Admittedly, the valuation report was not filed before the Ld.CIT(A).
In the interest of justice, we remand this issue to the Ld.AO to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee in accordance with law. Accordingly, the grounds of appeal raised by assessee stands partly allowed for statistical purposes. In the result, the appeal filed by the assessee stands partly allowed for statistical purposes. Order pronounced in the open court on 24th June, 2024.