2014 (2) TMI 834 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision on Capital Gain Addition

The Tribunal dismissed the Revenue's appeal and affirmed the CIT(A)'s decision to delete the addition to the long term capital gain. It emphasized the ... Adoption of amount as valuation of the second property – Valuation of property u/s 50C(2) of the Act - The AO has not considered and appreciated the provisions of section 50C of the Act in its correct perspective - the value adopted or assessed by any authority of a state government for the purpose of payment of stamp in respect of land or building or both, shall for the purpose of section 48 be deemed to be the full value of the consideration received or accruing as a result of transfer - The value adopted by stamp duty authority does not ipso facto become the real consideration or deemed consideration in the absence of any other cogent reason - the assessee had disputed the value adopted by the stamp duty authority, therefore, provisions of section 50C(1) are not applicable at the time of filing of return deduction or at the time assessment of income by the AO - the construction was got done by assessee's father and not by him - the construction was completed earlier but official permission was granted in that area was granted later on by clearance of the issue related to permission of construction in the area situated nearby lakes in Udaipur – the order of the CIT(A) upheld – Decided against Revenue. Issues:Challenge to valuation of property for computation of long term capital gain under section 50C(1) of the Income-tax Act, 1961.Analysis:The appeal pertains to the challenge against the order of the CIT(A) regarding the computation of long term capital gain for the assessment year 2008-09. The primary issue raised in this appeal revolves around the valuation of a house property sold by the assessee, where the share of the assessee was 1/3rd in two separate registries. The registrar valued the properties for stamp duty purposes, which was contested by the assessee. The assessee voluntarily calculated long term capital gain based on the registrar's valuation for one property, but disputed the valuation for the second property. The AO, without referring the matter to the DVO as requested by the assessee, invoked section 50C(1) and made additions to the declared long term capital gain. However, the CIT(A) deleted the addition, stating that section 50C(1) did not apply due to the AO's failure to refer the matter to the DVO and ignoring section 50C(2).The Tribunal observed that the AO did not consider the provisions of section 50C of the Act correctly. Section 50C deems the value adopted for stamp duty purposes as the full value of consideration, but this does not automatically become the fair market value if disputed by the assessee. The Tribunal noted that the AO failed to appreciate the dispute raised by the assessee regarding the valuation and did not refer the matter to the DVO, which was crucial. The Tribunal emphasized that until the disputed value is resolved, it cannot be adopted as the fair market value. Additionally, the Tribunal considered the construction completion date discrepancy, where the AO relied on permission granted as per the sale deed, but the assessee provided evidence that construction was completed earlier. The Tribunal accepted the CIT(A)'s findings based on these discrepancies and upheld the deletion of the addition to the long term capital gain.In conclusion, the Tribunal dismissed the appeal of the Revenue, affirming the decision of the CIT(A) to delete the addition to the long term capital gain. The Tribunal highlighted the importance of correctly applying the provisions of section 50C and considering disputes raised by the assessee regarding property valuation, along with the significance of referring matters to the DVO when necessary. The Tribunal's decision was based on a thorough analysis of the facts and legal provisions involved in the case, ultimately upholding the assessee's contentions and rejecting the Revenue's appeal.