2023 (10) TMI 1540 - AT - Income Tax

Adjustment under s.50C for stamp duty valuation cannot be effected by CPC under s.143(1); requires opportunity under s.143(3).

Prabha Anil Gandhi Versus ADIT, Karnataka

ITAT, Mumbai held that adjustment under s.50C relating to adoption of stamp duty valuation cannot be effected by the Centralized Processing Centre under ... LTCG computation - adjustment was made u/s. 50C - adjustment u/s. 143(1) - taking the stamp duty valuation against the full value of consideration as declared by the assessee while computing the capital gains - HELD THAT:- After considering the findings of the Ld.CIT(A) and submissions of the assessee we are in agreement that the proposed addition u/s. 50C is beyond the mandate u/s. 143(1) and the same can be processed only u/s. 143(3) of the Act. Considering the fact that the issue involved in Section 50C is adoption of stamp duty valuation in place of actual consideration. It is deeming provision wherein assessee, the other party has certain rights to object like request for referring the case to DVO. The Centralized Processing Centre cannot make addition without giving proper opportunity to the assessee, it is possible only u/s.143(3). Therefore, for the overall justice, we were inclined to remit this issue back to the file of the jurisdictional Assessing Officer. ISSUES PRESENTED AND CONSIDERED 1. Whether an adjustment invoking section 50C of the Income-tax Act can be made in the summary processing under section 143(1) by the Centralized Processing Centre (CPC), or whether such adjustment falls beyond the mandate of section 143(1) and must be processed only in a regular assessment under section 143(3) (after issuance of notice under section 143(2)). 2. Whether, in the case of a sale of a co-owned immovable property, the deeming operation of section 50C is to be applied qua property (i.e., to total consideration determined by stamp valuation authority and then prorated among co-owners) or qua owner (i.e., individually to each co-owner based on consideration actually received by that co-owner), and whether section 50C is inapplicable where aggregate consideration received by all co-owners equals or exceeds the stamp duty valuation even though individual co-owners received unequal shares. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Competence to invoke section 50C in assessment under section 143(1) Legal framework: Section 143(1) permits processing of returned income and adjustment of 'any incorrect claim, if such incorrect claim is apparent from any information in Return.' Section 143(2) and 143(3) deal with issuance of notice and making a regular assessment. Section 50C is a deeming provision which substitutes stamp duty valuation for full value of consideration for computation of capital gains and confers procedural rights (e.g., request for DVO reference) and opportunities for objection. Precedent treatment: No specific precedent was invoked in the judgment; the Tribunal considered statutory scheme and requirements of procedural fairness inherent in section 50C adjustments. Interpretation and reasoning: The Tribunal held that the subject-matter of section 50C involves adoption of stamp duty valuation in place of actual consideration and is a deeming provision that affects capital gains computation but also triggers entitlement of the assessee to procedural safeguards (such as objection and DVO referral). Such decision-making is not suitably resolved on the basis of summary scrutiny under section 143(1) because CPC processing lacks the opportunity to provide adequate notice and to afford the assessee the statutory remedies and objections attendant to section 50C adjustments. The Tribunal observed that CPC acted on information available and proposed additions under section 50C, but that such proposal is 'beyond the mandate u/s. 143(1)' and ought to be processed under section 143(3) where the Assessing Officer can issue notice under section 143(2) and conduct full-fledged enquiry respecting limitation constraints. Ratio vs. Obiter: Ratio - An adjustment under section 50C cannot be finalized by summary processing under section 143(1) and should be processed in a regular assessment under section 143(3) (following notice under section 143(2)) to enable procedural rights and proper adjudication. Obiter - Observations about CPC's inability to give opportunity and the deeming provision nature of section 50C serve as supporting reasoning but reinforce the central ratio. Conclusion: The Tribunal concluded that the proposed addition under section 50C made by CPC in the course of section 143(1) processing was beyond the statutory mandate of section 143(1) and remitted the issue to the file of the jurisdictional Assessing Officer for action under section 143(3), subject to initiation under section 143(2) within limitation. Issue 2 - Applicability of section 50C in co-ownership situations: qua property or qua owner Legal framework: Section 50C substitutes stamp duty valuation for 'full value of the consideration received or accruing as a result of the transfer' of an immovable property. The statutory text contemplates a comparison between consideration and stamp valuation for determining capital gains, but does not expressly prescribe whether the deeming applies collectively to the property or individually to each co-owner's share when property is co-owned and consideration is divided. Precedent treatment: The judgment does not cite or apply any binding authorities regarding the per-owner versus per-property application; the Tribunal reviewed the facts and submissions of the parties and the admissions in the return. Interpretation and reasoning: The Tribunal noted that the Commissioner of Income Tax (Appeals) had held that the assessee herself admitted that the full value of consideration (cash and kind) received by all co-owners was the stamp authority figure and that the assessee received only a 1/6th cash share of the declared aggregate consideration. The CIT(A) reasoned that the assessee should have adopted 1/6th of the stamp duty valuation (i.e., the aggregate stamp valuation prorated to her share) rather than 1/6th of the lower declared sale consideration. The Tribunal, however, did not finally decide the substantive point on the per-owner versus per-property application because it remitted the matter to the jurisdictional AO for fresh adjudication under section 143(3). The Tribunal recognized that section 50C is a deeming provision and that, where co-ownership and mixed consideration (cash and allotment of area) exist, factual and procedural aspects (including rights to object and DVO reference) require full adjudication rather than summary processing. Ratio vs. Obiter: Obiter - While the CIT(A) concluded that section 50C applies such that each co-owner should adopt the prorated stamp duty valuation, the Tribunal did not crystallize that conclusion as its own ratio because it remitted the issue for regular assessment. The Tribunal's central legal holding is procedural (Issue 1); the per-owner/per-property treatment remains to be examined and decided by the Assessing Officer in the regular assessment process. Conclusion: The question whether section 50C is to be applied qua property or qua owner remains to be adjudicated in proceedings under section 143(3); the Tribunal declined to finally rule on that substantive issue on the record before it and remitted the matter for proper enquiry and adjudication by the jurisdictional Assessing Officer, allowing the Assessing Officer to avail statutory remedies subject to limitation. Interrelation and practical directions The Tribunal linked the two issues: because section 50C adjustments engage substantive and procedural rights (including potential referral to DVO and objections by parties), they should not be finalized in CPC summary processing under section 143(1). Consequently, any dispute regarding apportionment of stamp duty valuation among co-owners (qua property vs. qua owner) must be examined in the regular assessment under section 143(3) after issuance of notice under section 143(2), and the Assessing Officer may proceed with such remedies within limitation constraints. Disposition The appeal was partly allowed by remitting the section 50C adjustment to the file of the jurisdictional Assessing Officer for adjudication under section 143(3) (after notice under section 143(2) as required), without finally deciding the substantive question of per-owner versus per-property application of section 50C on the present record.