2018 (9) TMI 1310 - AT - Income Tax

Tribunal orders re-examination of STCG addition, emphasizes fair market value evidence and assessee's participation

The Tribunal directed the CIT(A) to re-examine the issue of Short-Term Capital Gain (STCG) addition under Section 50C after obtaining a valuation report ... Short Term Capital Gain addition applying provisions of Section 50C - FMV determination - calculating the sale consideration of the industrial land sold by the assessee on the basis of the value adopted by the stamp valuation authorities - Held that:- Direct the CIT(A) to adjudicate this issue afresh after procuring the valuation report from the Departmental Valuation Officer about the fair market value of the impugned industrial land situated at Bhagirathpura Industrial area, Indore as on the date of sale and also after appreciating the documents which are related to the unauthorized possession of the industrial land owned by the assessee and the litigation carried between the assessee and other parties. Needless to say that a proper opportunity of being heard should be given to the assessee to furnish necessary documents and details of the property to the Departmental Valuation Officer as well as Ld.CIT(A). Ground of appeal of the assessee is allowed for statistical purposes. Issues Involved:1. Addition of Short-Term Capital Gain (STCG) under Section 50C of the Income Tax Act.2. Non-referral to the Departmental Valuation Officer (DVO) for valuation of the disputed property.Detailed Analysis:1. Addition of Short-Term Capital Gain (STCG) under Section 50C of the Income Tax Act:The primary issue raised by the assessee pertains to the addition of Rs. 78,04,301 as Short Term Capital Gain (STCG) computed by the Assessing Officer (A.O.) under Section 50C of the Income Tax Act. The A.O. applied the stamp valuation authority's value for the sale of industrial land, which the assessee contended was sold at a lower price due to disputes and encroachments.The assessee argued that the land was a business asset and that the provisions of Section 50C should not apply. However, the A.O. determined that the land was a capital asset and not part of the stock in trade, thus invoking Section 50C. The CIT(A) upheld this addition, stating that the land was indeed a capital asset and the value adopted by the stamp valuation authority was not disputed by the assessee.2. Non-referral to the Departmental Valuation Officer (DVO) for valuation of the disputed property:The assessee objected to the valuation adopted by the A.O. and contended that the matter should have been referred to the Departmental Valuation Officer (DVO) for an accurate valuation of the disputed property. The A.O. did not make this referral, and the CIT(A), despite having co-terminus powers with the A.O., also did not refer the matter to the DVO.The Tribunal observed that the A.O. should have referred the matter to the DVO when the value adopted by the stamp valuation authority was challenged by the assessee. The Tribunal cited a similar case, Sadhana Sharma Vs. ITO-2(4), Indore, where it was directed that the CIT(A) should examine additional evidence and make due reference to the DVO for valuation.Tribunal's Decision:The Tribunal directed the CIT(A) to adjudicate the issue afresh after obtaining a valuation report from the DVO regarding the fair market value of the disputed industrial land. The Tribunal emphasized that the CIT(A) should consider the documents related to the unauthorized possession and litigation of the land. The Tribunal also instructed that a proper opportunity should be given to the assessee to furnish necessary documents and details to the DVO and the CIT(A).Conclusion:The appeal was allowed for statistical purposes, with the Tribunal directing the CIT(A) to re-examine the issue of STCG addition under Section 50C after procuring a valuation report from the DVO and considering the additional evidence provided by the assessee.