2021 (1) TMI 230 - AT - Income Tax

Tribunal remits matter for fresh valuation review & fair hearing to assessee

The Tribunal remitted the matter to the CIT(A) for a de novo consideration, directing a re-examination of the valuation objections and the applicability ... Long Term Capital Gain - Addition u/s 50C on the basis of the valuation done by the Departmental Valuation Officer - HELD THAT:- CIT appeals has elaborately addressed the various legal issues raised by the assessee. However, he has not dealt with the merits of the objections of the assessee that there were inherent defects/deficiencies in the said piece of land, due to which the assessee was contesting the valuation. It is not discernible whether the merits of various objections of the assessee to the deficiency in the said piece of land were considered by the DVO in his report. We find that it is necessary in the interest of justice that the various objections on merits of the valuation be dealt with by the learned CIT appeals by a speaking order. This is also noted that the said objections were not subject matter of consideration by the assessing officer also. In this regard, the learned CIT appeals while addressing the merits of the assessee objection should also give opportunity to the DVO if he chooses to consider the various objections of the assessee and examine how the same are dealt with by the DVO. In coming to the above proposition we draw support from the decision of honourable Supreme Court in the case of Kapurchand Shrimal [1968 (8) TMI 16 - SUPREME COURT] that it is the duty of the appellate authority to correct the errors in the order of the authority below and if necessary, remit the matter for reconsideration with or without direction unless prohibited by law. Whether the transfer of development right would come under the sweep of section 50 C?- There is no cogent submission by the learned counsel of the assessee as to how the decisions referred by learned CIT appeals including that from the honourable Supreme Court in the case of Sanjeev Lal [2014 (7) TMI 99 - SUPREME COURT]are not applicable. The decision referred by learned counsel of the assessee from honourable Bombay High Court in this regard was with reference to transfer of leasehold rights. In our considered opinion, when the issue is being remitted to the file of learned CIT appeals, the learned CIT appeals shall consider this aspect also afresh. He shall take into account the decisions referred by learned counsel of the assessee and learned counsel of the assessee shall also submit objections to the case laws referred by learned CIT appeals including that from the Supreme Court referred by him as above. The issue of transfer of development right, was never raised before the assessing officer and the claim of the assessee is also without filing the revised return of income. The learned CIT appeals shall consider this aspect also - Assessee appeal allowed for statistical purposes. Issues Involved:1. Applicability of Section 50C of the Income Tax Act, 1961.2. Consideration of development rights as capital assets under Section 50C.3. Valuation of the property and objections raised by the assessee.4. Aggregation of sale transactions for valuation purposes.Detailed Analysis:1. Applicability of Section 50C of the Income Tax Act, 1961:The primary issue was whether Section 50C applied to the sale of a plot of land where the sale consideration was less than the Stamp Duty valuation. The assessee argued that the land was ecologically sensitive, had restrictions on development, and was reserved for the Economically Weaker Section, which justified a lower sale price. However, the Assessing Officer (AO) applied Section 50C, substituting the sale consideration with the Stamp Duty value. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this, noting that Section 50C applies when the stated consideration is less than the Stamp Duty value, and the AO had correctly referred the valuation to the Departmental Valuation Officer (DVO). The Tribunal affirmed the CIT(A)'s decision, stating that the provisions of Section 50C were undeniably applicable to the sale of the third plot.2. Consideration of Development Rights as Capital Assets under Section 50C:The assessee contended that Section 50C did not apply as it was a transfer of development rights, not land. The CIT(A) rejected this, citing various judicial precedents, including decisions from the Bombay High Court and the Supreme Court, which held that development rights are considered capital assets and fall within the ambit of Section 50C. The Tribunal agreed, noting that the transfer of development rights is covered under Section 2(47) of the Act, which defines 'transfer' to include any transaction involving the possession of immovable property as specified in Section 53A of the Transfer of Property Act, 1882.3. Valuation of the Property and Objections Raised by the Assessee:The assessee raised several objections regarding the valuation of the property, arguing that the DVO's valuation did not consider the land's inherent defects, such as its ecological sensitivity and restrictions on development. The Tribunal noted that the CIT(A) had not addressed these objections on merits and directed the CIT(A) to re-examine the objections and the DVO's valuation report. The Tribunal emphasized that the CIT(A) should give the DVO an opportunity to consider the objections and issue a speaking order addressing the merits of the valuation.4. Aggregation of Sale Transactions for Valuation Purposes:The assessee argued that the three sale transactions should be considered as part of a composite sale transaction, and the combined sale consideration exceeded the combined Stamp Duty valuation. The CIT(A) rejected this, stating that the sales were independent transactions and should be evaluated separately. The Tribunal upheld this view, noting that the sales were structured as per the voluntary will of the parties and should be treated as separate transactions for the purposes of Section 50C.Conclusion:The Tribunal remitted the matter to the CIT(A) for a de novo consideration, directing the CIT(A) to address the merits of the assessee's objections to the valuation and to consider the applicability of Section 50C to the transfer of development rights afresh. The CIT(A) was also instructed to provide the assessee with an adequate opportunity to be heard and to issue a speaking order addressing all relevant issues. The appeal was allowed for statistical purposes, and the order was pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962.