2010 (6) TMI 450 - AT - Income Tax

Tribunal upholds Section 50C application for property sale; remands short-term capital loss issue for reassessment

The Tribunal upheld the Assessing Officer's invocation of Section 50C of the Income-tax Act, 1961, in a case involving the adoption of a higher sale ... Section 50C - Addition without making reference to valuation Cell - The AO adopted the sale consideration at Rs. 1,03,32,000 in place of Rs. 65 lakhs declared by the assessee and determined the LTCH at Rs. 55,86,250 - Held that: the legislative scheme of section 52(2) which is omitted with effect from 1-4-1988 from the Act and section 50C is totally different. The golden rule of interpretation of statute is to go with the plain meaning of the words used by the Legislature. - Assessing Officer has rightly invoked the provisions of section 50C with due authority of law. Nothing has been brought before us to show that the assessee claimed before the Assessing Officer that the value adopted by the Stamp Valuation authority was more than the FMV of the said property and there is no reason to make reference to the Valuation Officer. – Decided in favor of Revenue. Short term capital loss - The Assessing Officer has not accepted the explanation of the assessee and; accordingly held that it was sham transaction and to get benefit of the short-term capital loss, it was made off market transaction and not routed through the BSE - Held that: the additional evidences filed by the assessee are relevant to the issue in respect of the Short Term Capital loss of shares of M/s. Suryadeep Salt Pvt. Ltd. The assessee could not produce the same before the lower authorities. In the interest of justice matter remitted back. Issues Involved:1. Invocation of Section 50C of the Income-tax Act, 1961.2. Non-acceptance of Short-Term Capital Loss on the sale of equity shares.Issue-wise Detailed Analysis:1. Invocation of Section 50C of the Income-tax Act, 1961:The assessee challenged the Assessing Officer's decision to invoke Section 50C and adopt the sale consideration of a residential property at Rs. 1,03,32,000 instead of the declared Rs. 65 lakhs. The property was originally received as a gift from the assessee's husband. The Fair Market Value (FMV) as of 1-4-1981 was determined at Rs. 10.25 lakhs per a Registered Valuer's report. The discrepancy arose because the Stamp Duty Authority valued the property at Rs. 1,03,32,000 for registration purposes. The Assessing Officer invoked Section 50C, leading to a Long Term Capital Gain calculation of Rs. 55,86,250 after indexation.The assessee argued that Section 50C was similar to the omitted Section 52(2) and referenced the Supreme Court decision in K.P. Varghese v. ITO [1981] 131 ITR 5971, asserting that no additional consideration was received beyond the declared amount. The Department Representative (DR) countered that Section 50C and Section 52(2) had different legislative intents, with Section 50C serving as a deeming provision to curb black money.The Tribunal concluded that Section 50C and Section 52(2) had distinct legislative schemes. The Tribunal emphasized that the plain language of Section 50C did not require the Revenue to prove understatement of consideration, unlike Section 52(2). The Tribunal upheld the Assessing Officer's invocation of Section 50C, confirming the order of the CIT(A) and dismissing the assessee's ground on this issue.2. Non-acceptance of Short-Term Capital Loss on the Sale of Equity Shares:The assessee claimed a short-term capital loss of Rs. 13,64,302 on the sale of shares in Suryadeep Salt Pvt. Ltd., purchased on 2-1-2004 and sold on 26-3-2004. The Assessing Officer questioned the legitimacy of the transaction, noting the shares were credited in the D-MAT account on 25-3-2004, suggesting a potential sham transaction aimed at claiming short-term capital loss. The CIT(A) directed the Assessing Officer to obtain the market rate of shares as of 25-3-2004 and recalculate the short-term capital gain.The Tribunal admitted additional evidence submitted by the assessee, including Demat statements and Stock Exchange quotations, which were not produced before the lower authorities. The Tribunal remanded the issue back to the Assessing Officer for fresh adjudication, directing the consideration of additional evidence and allowing the assessee a reasonable opportunity to be heard.Conclusion:The appeal was partly allowed for statistical purposes, with the Tribunal upholding the invocation of Section 50C and remanding the issue of short-term capital loss back to the Assessing Officer for re-evaluation.