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Income Tax Appellate Tribunal, DELHIBENCH ‘G’, NEW DELHI
Before: Dr. B. R. R. KumarSh. Yogesh Kumar US
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi dated 14.07.2022.
The assessee has raised the following grounds of appeal:- “1.1 That on the facts and circumstances of the case, the CIT(A) was not justified in not adjudicating the ground relating to arbitrary adjustment in the Intimation Order passed u/s 143(1)(a) of the Income Tax Act, 1961 as the proposed adjustment is beyond the scope of provisions of section 143(1)(a) of the Income Tax Act, 1961.
1.2 That the action of the Centralized Processing Centre (CPC), in making the adjustment of Rs. 1,81,34,400/- u/s 50C by adopting "Stamp Duty Valuation" as "Full Value of Consideration" without properly appreciating the provisions of section 50Cand in total disregard to the Valuation Report is illegal and unjustified.
2 Shankar Dayal HUF 1.3 That the genuineness of full value of sale consideration being not in dispute, it is not open to consider any adjustment without taking note of proviso to section 50C. 2.1 That on the facts and circumstances of the case, the CIT(A) was not justified in setting aside the issue back to the Assessing officer without properly appreciating the detailed written submissions & documents filed by the Appellant.
2.2 That action of the CIT(A) in not adjudicating the grounds of appeal raised by the Appellant and mechanically setting aside the matter back to the Assessing Officer for adjudication is against the scope of provisions of section 251(1)(a) of the Income Tax Act, 1961.
3.1 That even on merits, the claim of sales consideration being supported from valuation report obtained by the appellant, the impugned addition made without appreciating the actual consideration received for sale of property is arbitrary and misconceived.
3.2 That the transaction of sale of property being made at fair market value as determined by the certified valuer, the addition made by the CPC in terms of provisions of section 50C of the Act without making reference to DVO is illegal and not sustainable under law.
4 That orders passed by lower authorities are not justified on facts and same are bad in law.”
Brief facts:
The assessee filed return of income on 25.06.2019 declaring total income of Rs. 3,33,25,826/- and has claimed deduction of Rs. 50 lacs u/s 54EC of the Income Tax Act, 1961.
4. An intimation order u/s 143(1)(a) of the Income Tax Act, 1961 was passed on 02.12.2020 by the CPC wherein an adjustment of Rs.1,81,34,400/- u/s 50C was made by adopting "Stamp Duty Valuation" as "Full Value of Consideration" . Further, the CPC Bangalore has also disallowed the benefit of 3 Shankar Dayal HUF deduction of Rs. 50 lacs claimed by the Assessee of investment in RECL Bonds.
Facts of the case reveal that the Assessee had sold a property on 05.09.2018 for a sale consideration of Rs. 12,25,00,000/-; however the value adopted by stamp duty authority was Rs. 14,06,34,400/-. Further, the assessee has transacted this property sale transaction after getting the property valued form a registered valuer which has computed the fair market value as Rs. 11,73,02,000/- and the same being a distress sale is in close proximity to actual sale consideration of Rs. 12,25,00,000/-. The Assessee vide letter dated 17.10.2018 has requested to the Assessing Officer to refer the matter to the Valuation Cell for valuation of property, however no action was taken by the Assessing Officer.
6. The assessee has also filed a Rectification Application u/s 154 of the Act for rectification of mistakes in the intimation order passed u/s 143(1) of the Act and the same is still pending before the Assessing Officer. Without prejudice to the impugned adjustments made in the Intimation Order u/s 143(1) of the Act, the assessee has also deposited a challan dated 28.12.2020 amounting to Rs. 54,05,730/- as Income Tax.
The provisions Section 143(1) reads as under:
143. (1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely:— (a) the total income or loss shall be computed after making the following adjustments, namely:— (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure 97[or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under 98[section 10AA or under any of the provisions of Chapter VI-A under the heading C.—Deductions in respect of certain incomes", if] the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return:
Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode:
Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made:
Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018; (b) the tax, interest and fee, if any, shall be computed on the basis of the total income computed under clause (a);
5 Shankar Dayal HUF (c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax, interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under section 89, any relief allowable under an agreement under section 90 or section 90A, or any relief allowable under section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax , interest or fee; (d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and (e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee:
Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax, interest or fee is payable by, or no refund is due to, him:
Provided further that no intimation under this sub-section shall be sent after the expiry of 99[nine months] from the end of the financial year in which the return is made.
Explanation.—For the purposes of this sub-section,— (a) "an incorrect claim apparent from any information in the return" shall mean a claim, on the basis of an entry, in the return,— (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;
6 Shankar Dayal HUF (b) the acknowledgement of the return shall be deemed to be the intimation in a case where no sum is payable by, or refundable to, the assessee under clause (c), and where no adjustment has been made under clause (a).”
We find that an appeal involving the similar issue stands adjudicated by the Co-ordinate Bench of ITAT in the case of Sudesh Sachdev Vs. DCIT in vide order dated 16.11.2022. For the sake of ready reference, the entire order is reproduced in toto:
“2. In ground No. 1 and 2 the assessee challenged the addition made on account of enhancement of capital gain under section 50C of the Income Tax Act 1961.
3. Briefly the facts are, the assessee is a resident individual. For the assessment year under dispute, assessee filed his return of income on 22.08.2019 declaring income of Rs. 17,42,000/-. While processing the return of income filed by the assessee under section 143(1) of the Act, the Centralised Processing Centre (CPC) Bangalore found that in the year under consideration, the assessee had sold an immovable property. It was found that the stamp valuation authority determined the value of the property in excess of the declared sale consideration. Accordingly, invoking the provisions of section 50C(1) of the Income Tax Act, 1961, the CPC made adjustment of Rs. 5,07,000/- to the income of the assessee, being the difference between the declared sale consideration and the value determined by the stamp valuation authority for stamp duty purpose. Though, the assessee contested the aforesaid addition before learned Commissioner (Appeals) however the addition was sustained.
I have considered rival submissions and perused the material on record. Undisputedly, while processing the return of income filed by the assessee under section 143(1) of the Act, the addition has been made by way of adjustment applying the provision of section 50C(1) of the Act. Contesting the addition, the primary contention of the assessee before me is to the effect that the addition made under section 50C(1) of the Act cannot fall
7 Shankar Dayal HUF within the ambit of adjustment provided under section 143(1)(a) of the Act. On careful examination of section 143(1) of the Act, it is noticed that the following adjustments can be made while processing the return under the said provision:-
6. No doubt, in the present case adjustment has been made under sub- clause (ii) to section 143(1)(a). The expression “incorrect claim apparent from any information in the return has been explained under Explanation to section 143(1)(a) of the Act and reads as under:
“Explanation.—For the purposes of this sub-section,— (a) "an incorrect claim apparent from any information in the return shall mean a claim, on the basis of an entry, in the return,— (i) of an item, which is inconsistent with another entry of the same or some other item in such return; (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction;
5. On a conjoint reading of section 143(1)(a)(ii) along with Explanation it becomes very much clear that the addition under section 50C(1) cannot be in the nature of incorrect claim as provided in Explanation to section 143(1)(a)(ii) of the Act. This is so because, section 50C has to be read as a whole and cannot be restricted to sub-section (1) alone. It is fairly well settled, a deeming provision has to be taken to its logical end. Undoubtedly, section 50C is a deeming provision. Though, sub-section (1) of section 50C provides for substituting the stamp duty value as deemed sale consideration in place of the declared sale consideration, however, sub-section (2) carves out an exception by providing that if the assessee objects to the stamp duty value, the valuation has to be referred to the Department Valuation Officer (DVO) and in case the value determined by the DVO is lower than the stamp duty value, the value determined by DVO has to be considered for computing capital gain in terms with sub-section (3) of section 50C. Therefore, sub-section (1) to section 50C cannot be 8 Shankar Dayal HUF considered in isolation. By making an adjustment of the nature contemplated under subsection (1) to section 50C, that too, by CPC, the Department takes away a valuable statutory right given to the assessee to object to the value determined by stamp valuation authority.
Therefore, such type of adjustment, in my considered opinion, cannot be made under section 143(1)(a) of the Act. This is so because, at the stage of processing of return under section 143(1)(a), if such an adjustment is made, the assessee does not get an opportunity to object, as per section 50C(2) of the Act. More so, when conditions of the 1st and 2nd proviso to section 143(1)(a) are not complied. Therefore, I hold that the addition made by CPC under section 50C(1) of the Act by way of adjustment under section 143(1)(a)(ii) is unsustainable. Accordingly, I delete the addition.”
Hence, in the instant case, we hold that the provisions of Section 50C(2) as an inbuilt provision for adhering to principles of natural justice which has not been observed while making adjustments u/s 143(1)(a) of the Act and hence, the action of the revenue is not sustainable.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 17/05/2023.