Tribunal directs AO to reconsider long-term capital gain computation & deduction claim.

The Tribunal allowed the appeal for statistical purposes, directing the AO to recompute the long-term capital gain without invoking Section 50C and to reconsider the claim for deduction under Section 54, providing the assessee with an adequate opportunity of being heard.

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Issues Involved:
1. Validity of the order passed by the CIT(A).
2. Applicability of the provisions of Section 50C.
3. Confirmation of addition of Rs. 86,50,710/- under Section 50C.
4. Non-reference to District Valuation Officer (DVO) despite request.
5. Denial of exemption under Section 54 for investment in new residential property.

Issue-Wise Detailed Analysis:

Validity of the Order Passed by the CIT(A):
The appellant challenged the order passed by the CIT(A) as being "bad both in the eyes of law and on facts." This was a general ground and not specifically addressed in detail.

Applicability of the Provisions of Section 50C:
The appellant argued that the CIT(A) erred in upholding the invoking of the provisions of Section 50C, which were not applicable to the facts of the case. The Assessing Officer (AO) had invoked Section 50C based on the circle rate being higher than the sale consideration recorded in the sale deed. The appellant contended that the circle rate was for vacant buildings, whereas the buildings sold were occupied by tenants. This contention was rejected by the AO, who relied on the judgment of the Hon’ble Madras High Court in Ambattur Clothing Co. Ltd. Vs Assistant Commissioner of Income-Tax.

Confirmation of Addition of Rs. 86,50,710/- Under Section 50C:
The AO made an addition of Rs. 86,50,710/- under Section 50C for long-term capital gain on the sale of the property. The CIT(A) upheld this addition. The appellant argued that the properties were sold at the prevailing market price as per the Valuation Report of the Registered Valuer and that the AO did not make a reference to the DVO despite a specific request.

Non-Reference to District Valuation Officer (DVO) Despite Request:
The appellant requested the AO to refer the valuation of the properties to the DVO, which was denied. The Tribunal found that under Section 50C(2), it is mandatory for the AO to refer the property for valuation to the DVO if the assessee disputes the valuation by the stamp valuation authority. The Tribunal cited the decision of the Coordinate bench in the case of M/s Aditya Narain Verma (HUF), which supported the appellant's contention. The Tribunal concluded that the AO was barred from invoking Section 50C without referring to the DVO and directed the AO to compute the long-term capital gain based on the sale consideration declared by the assessee.

Denial of Exemption Under Section 54 for Investment in New Residential Property:
The appellant claimed a deduction under Section 54 for payments made towards investment in a residential flat. The AO denied this claim on two grounds: the return was filed under Section 139(4) (after the due date), and the deduction was claimed through a letter rather than a revised return. The AO also noted that the agreement for the new property was not registered, and the possession letter was not issued. The CIT(A) upheld the AO's decision, stating that the assessee did not fulfill the conditions of Section 54.

The Tribunal, however, noted that the CIT(A) is not barred from admitting any claim if it is in accordance with the law. The Tribunal referenced the case of CIT Vs Rajesh Jalan, where it was held that a claim under Section 54 can be made in a return filed under Section 139(4). The Tribunal also considered the substantial payments made by the assessee towards the purchase of the flat, which indicated de-facto ownership. The Tribunal restored the issue to the AO for reconsideration, directing that the claim should be allowed if the assessee satisfies all conditions under Section 54.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the AO to recompute the long-term capital gain without invoking Section 50C and to reconsider the claim for deduction under Section 54, providing the assessee with an adequate opportunity of being heard. The order was pronounced in the Open Court on 24th February 2020.

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