2012 (4) TMI 216 - AT - Income Tax

Tribunal remands assessment due to lack of hearing, misapplication of law

The Tribunal held that the CIT(A) erred in deleting the addition without giving the AO a hearing and misapplying the High Court decision on Section 50C. ... Addition made on account of Unexplained investment in the property - Appeal by revenue that CIT(A) has erred in deleting the addition made by the AO by attracting the provisions of Section 50C of the Income-tax Act,1961, without giving any opportunity of being heard to the AO - assessee filed return claiming long term loss, on sale of property to be carried forward- AO stated that in respect of the Sale Deed there exists a difference of value adopted for the purpose of Stamp Duty adopted by the Sub Registrar and assessee - CIT(A) held that in the absence of any admissible evidence, valuation done by stamp duty authorities could not be taken as actual sale consideration and the value shown in the sale deed has to be accepted as held in the case of CIT v. Chandni Bhuchar 2010 (1) TMI 502 - Punjab and Haryana High Court – Held that:- the CIT(A) misapplied the ratio of the decision of the jurisdictional High Court, in the case of CIT v. Chandni Bhuchar, as the same has been rendered, in the context of a Purchaser, whereas the present appellant is a 'Seller', which squarely falls u/s 50C of the Act - the findings of the ld. CIT(A) are not legally and factually tenable - the deeming fiction created u/s 50C of the Act, for the purpose of Section 48 of the Act, regarding full value of consideration received or accrued to the seller, cannot be extended to the provisions of Section 69 of the Act, in the case of a purchaser - the issue is restored to the file of the AO, to frame the assessment afresh, after obtaining the valuation report - the provision of Section 50C(2) of the Act, stipulates necessary conditions, for the purpose of making a reference to the Valuation Officer, by the AO - appeal of the revenue allowed. Issues Involved:1. Applicability of Section 50C of the Income-tax Act, 1961.2. Deletion of addition by CIT(A) without giving the AO an opportunity to be heard.3. Admission of additional evidence by CIT(A) without providing an opportunity to the AO.4. Misapplication of the jurisdictional High Court's decision in the case of Chandni Bhuchar.Issue-wise Detailed Analysis:1. Applicability of Section 50C of the Income-tax Act, 1961:The core issue revolves around the applicability of Section 50C, which deals with the adoption of the value assessed by the stamp valuation authority as the deemed full value of consideration for the computation of capital gains. The assessee declared a sale consideration of Rs. 25 lacs for a property, whereas the stamp valuation authority assessed it at Rs. 44 lacs. The CIT(A) deleted the addition made by the AO, relying on the jurisdictional High Court's decision in CIT v. Chandni Bhuchar. However, the Tribunal noted that the High Court's decision pertained to a purchaser, whereas Section 50C specifically applies to sellers. The Tribunal emphasized that Section 50C creates a legal fiction for sellers to curb black money in real estate transactions. The Tribunal concluded that the CIT(A) misapplied the High Court's decision as it was not relevant to the seller's context under Section 50C.2. Deletion of Addition by CIT(A) without Giving the AO an Opportunity to be Heard:The Revenue contended that the CIT(A) erred in deciding the appeal without giving the AO an opportunity to be heard, despite the AO indicating a desire to be present at the hearing. The Tribunal acknowledged this procedural lapse and highlighted the importance of providing the AO with an opportunity to present their case, especially when additional evidence is admitted.3. Admission of Additional Evidence by CIT(A) without Providing an Opportunity to the AO:The CIT(A) admitted additional evidence, such as legal notices, without giving the AO an opportunity to examine or respond to this evidence. The Tribunal noted that this procedural irregularity undermined the principles of natural justice. The Tribunal emphasized that the AO should have been given a chance to review and comment on the additional evidence before the CIT(A) made a decision.4. Misapplication of the Jurisdictional High Court's Decision in the Case of Chandni Bhuchar:The Tribunal critically analyzed the CIT(A)'s reliance on the High Court's decision in CIT v. Chandni Bhuchar, clarifying that the decision was rendered in the context of a purchaser and not a seller. The Tribunal reiterated that Section 50C specifically applies to sellers and creates a legal fiction for adopting the stamp valuation authority's assessment as the full value of consideration. The Tribunal underscored that the CIT(A) misapplied the High Court's decision, which was not relevant to the facts of the present case involving a seller.Conclusion:The Tribunal found that the CIT(A) erred in deleting the addition made by the AO without giving the AO an opportunity to be heard and without properly considering the applicability of Section 50C. The Tribunal restored the issue to the AO to frame the assessment afresh after obtaining the valuation report from the District Valuation Officer (DVO). The AO was directed to provide the assessee with a proper opportunity to present their case, and the assessee was instructed to cooperate effectively in the assessment process. The appeal of the Revenue was allowed for statistical purposes.