ITAT directs re-examination of long-term capital gain addition under Section 50C

The Appellate Tribunal ITAT Hyderabad allowed the appeals for A.Y. 2009-10, directing the Assessing Officer to re-examine the long term capital gain addition under Section 50C of the Income Tax Act, 1961. The Tribunal emphasized the mandatory nature of the Departmental Valuation Officer (DVO) reference in Section 50C proceedings, even if not requested by the assessee. The Assessing Officer was instructed to consider title disputes and distressing factors in the asset sale, and the assessees were given the opportunity to present arguments. The appeals were treated as allowed for statistical purposes.

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Issues:
Appeals for A.Y. 2009-10 arising from CIT(A)'s order involving proceedings u/s. 143(3) r.ws. 147 of the Income Tax Act, 1961. Challenge to long term capital gain addition under Section 50C of the Act without DVO reference.

Analysis:
The appeals before the Appellate Tribunal ITAT Hyderabad for the assessment year 2009-10 stemmed from the CIT(A)-1, Hyderabad's order dated 25-02-2019. The primary issue revolved around the correctness of the lower authorities' action of adding long term capital gains amounting to Rs. 1,05,00,892 each to the assessees after invoking Section 50C of the Income Tax Act, 1961. This addition was made based on the stamp rate of the capital asset transferred by the assessees, which was considerably lower, as per the provisions of Section 50C.

During the proceedings, it was noted that neither of the lower authorities had made any statutory reference to the Departmental Valuation Officer (DVO) under Section 50C(2) of the Act. The Revenue contended that the assessees had not requested such a reference during the assessment, but the Tribunal referred to a decision of the Hon'ble Calcutta High Court in Sunil Kumar Agarwal Vs. CIT [(2014) 372 ITR 83] (Cal), emphasizing the mandatory nature of the DVO reference in Section 50C proceedings, even if not raised by the assessee.

In light of the above, the Tribunal directed the Assessing Officer to re-examine the issue of long term capital gain addition, considering the title dispute and other distressing factors involved in the capital asset's sale. The Tribunal instructed the Assessing Officer to make the necessary reference to the DVO as per the legal requirements. The assessees were granted the liberty to present all factual and legal arguments during the subsequent proceedings.

Consequently, the appeals of the assessees were treated as allowed for statistical purposes, and a copy of the order was directed to be placed in the respective case files. The order was pronounced in the open court on 4th February 2021 by S.S. Godara, Member (J) of the Appellate Tribunal ITAT Hyderabad.

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