Section 50C valuation adjusted for distress sale; reassessment ordered to fix fair market value and recompute capital gains.

Circle-rate valuation under Section 50C can be displaced where the recorded consideration does not reflect true market value due to exceptional circumstances; the Tribunal held that evidence of a compelled sale to an occupying tenant and part payment by account payee cheques in April 2012 established a distress sale, warranting substitution by fair market value. The matter is remanded to the Assessing Officer to determine fair market value as of the agreement date, after affording the assessee a reasonable opportunity of being heard, and to recompute long term capital gains accordingly (appeal partly allowed).

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Issues: Whether the value adopted under section 50C of the Income-tax Act, 1961 (circle/stamp valuation) should be substituted by the fair market value determined having regard to distress sale circumstances and whether the matter should be remanded to the Assessing Officer for fresh valuation in light of the assessee's claim of distress sale.

Analysis: The facts show the property was sold while possession remained with a tenant despite an eviction order, leading to a compelled sale to the tenant at a price significantly below the circle rate. Under the statutory framework of Section 50C and Section 50(2) of the Income-tax Act, 1961, circle/stamp duty valuation can be adopted for computation of capital gains but substitution by actual fair market value is permissible where the sale consideration does not reflect market value due to exceptional circumstances. Evidence admitted on appeal supports that the sale occurred under compulsion and involved part payment by account payee cheques in April 2012. Given these circumstances, the valuation must be determined having regard to the distress nature of the transaction and the date of agreement in April 2012. The assessing authority is required to reassess the fair market value after providing the assessee reasonable opportunity of being heard and then compute long-term capital gain accordingly.

Conclusion: The appeal is partly allowed in favour of the assessee by setting aside the confirmation of addition under section 50C and directing the Assessing Officer to determine and, if appropriate, substitute the fair market value as on April 2012 taking into account that the sale was a distress sale, and to recompute long-term capital gains after affording the assessee reasonable opportunity of hearing.

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