2026 (2) TMI 1048 - AT - Income Tax

Valuation procedure under stamp duty rules requires DVO reference; remand ordered for re-computation and verification of deductions.

Tribunal remitted assessments to the Assessing Officer to enforce the statutory valuation procedure where stamp-duty/market values were applied, directing ... Capital gain computation - cancellation of transactions - reference to DVO u/s 50C(2) - HELD THAT:- The Tribunal found that the assessee had disclosed the three transactions in the return filed in response to notice under section 148 and had explained that the actual sale consideration recorded in registered sale-deeds and declared in the return reflected the amounts received, with the properties being sold at lower prices due to litigation. The AO, however, assessed on the basis of Stamps Authority valuations without making any reference to the Departmental Valuation Officer and without applying the mechanism under section 50C(2)/(3). the Tribunal remitted tge following issues to the file of AO for a fresh adjudication: (i) The issues relating to the transactions at S.No. 2, 4 & 5 are restored to the file of the AO with a direction to make a reference to the DVO and re-compute taxable capital gains in accordance with provisions of section 50C(2)/(3) after affording reasonable opportunity of being heard to the assessee. (ii) The issues relating to the transactions at S.No. 1 & 3 are restored to the file of the AO for fresh adjudication after examining the evidences relating to cancellation of transactions to be filed by the assessee. In case the AO is not satisfied with the claim of cancellation or in the event of non-furnishing of such evidences, the AO shall make a reference to DVO and re-compute the capital gains in accordance with provisions of section 50C(2)/(3) after affording reasonable opportunity of being heard to the assessee. (iii) We further direct the AO to allow the cost of acquisition/improvement, as admissible u/s 48 r.w.s. 55(1)/(2) of the Act after carrying out necessary exercise and after verification of details and documents to be furnished by the assessee. Issues: (i) Whether the taxable capital gains assessed by treating stamp-duty/market values as income for transactions at Sl. Nos. 2, 4 & 5 should be re-determined by making a reference to the Departmental Valuation Officer under section 50C(2)/(3) of the Income-tax Act, 1961; (ii) Whether the transactions at Sl. Nos. 1 & 3, which the assessee claims were cancelled, require remand to the Assessing Officer for examination of cancellation evidence and, if not accepted, reference to the DVO under section 50C(2)/(3); (iii) Whether the Assessing Officer must allow deduction of cost of acquisition and cost of improvement in computing capital gains under sections 45(1), 48 and 55(1)/(2) of the Income-tax Act, 1961.Issue (i): Whether the assessments for transactions at Sl. Nos. 2, 4 & 5 should be re-computed after making a reference to the Departmental Valuation Officer under section 50C(2)/(3).Analysis: The Tribunal considered that the assessee had declared the actual sale consideration in the return and had explained that the properties were sold at lower amounts due to litigation; the Assessing Officer had applied stamp-duty/market values without making a DVO reference or applying the proviso mechanism in section 50C(2)/(3). The Tribunal noted precedents and the availability of the procedure under section 50C(2)/(3) to dispute stamp duty valuation through an officer's valuation and found merit in remitting the matter to enable the AO to follow the statutory process and afford the assessee an opportunity to be heard.Conclusion: Transactions at Sl. Nos. 2, 4 & 5 are remitted to the file of the Assessing Officer with a direction to make a reference to the Departmental Valuation Officer and re-compute taxable capital gains in accordance with section 50C(2)/(3) after affording the assessee a reasonable opportunity of being heard.Issue (ii): Whether the claimed cancellation of transactions at Sl. Nos. 1 & 3 requires fresh adjudication and, if not established, referral to the DVO under section 50C(2)/(3).Analysis: The Tribunal recorded the assessee's assertion that the transactions were cancelled and that cancellation documents exist but are not presently on record; the Assessing Officer had treated stamp-duty values as taxable without examining cancellation evidence. The Tribunal found it appropriate to remit the matter to the AO to examine cancellation evidence; as a fallback, if cancellation is not established, the AO must follow section 50C(2)/(3) procedure including reference to the DVO and afford opportunity to the assessee.Conclusion: Transactions at Sl. Nos. 1 & 3 are remitted to the Assessing Officer for fresh adjudication on cancellation evidence; if cancellation is not established or evidence is not furnished, the AO shall refer the matter to the Departmental Valuation Officer and re-compute capital gains in accordance with section 50C(2)/(3) after affording the assessee a reasonable opportunity of being heard.Issue (iii): Whether the Assessing Officer must allow deduction for cost of acquisition and cost of improvement in computing capital gains under sections 45(1), 48 and 55(1)/(2).Analysis: The Tribunal observed that the AO taxed sale consideration without allowing any deduction for cost of acquisition or improvement; the assessee offered to file requisite details and documents. The Tribunal directed the AO to verify documents and allow admissible deductions in accordance with the statutory provisions governing computation of capital gains.Conclusion: The Assessing Officer is directed to allow deduction for cost of acquisition and cost of improvement as admissible under section 48 read with sections 55(1) and 55(2) after necessary verification of details and documents furnished by the assessee.Final Conclusion: The Tribunal remitted the contested issues to the Assessing Officer for fresh adjudication limited to (a) reference to the Departmental Valuation Officer under section 50C(2)/(3) where applicable, (b) examination of alleged cancellation evidence for specified transactions with a fallback to DVO reference if cancellation is not established, and (c) verification and allowance of admissible cost deductions under sections 48 and 55(1)/(2); the appeal is disposed of by remand while preserving the assessee's right to produce evidence and the AO's duty to follow statutory procedure.Ratio Decidendi: Where the Assessing Officer applies stamp-duty/market values under section 50C, he must follow the statutory mechanism in section 50C(2)/(3) including reference to the Departmental Valuation Officer when disputed, and the AO must allow admissible deductions for cost of acquisition and improvement under section 48 read with sections 55(1)/(2) after verification of evidence.