Addition made by AO Without Considering Section 55A of Income Tax Act: ITAT Directs Re-adjudication [Read Order]

The New Delhi bench of the Income Tax Appellate Tribunal (ITAT) directed the assessing officer to re-adjudicate the addition made without considering section 55A of the Income Tax Act,1961. 

Satya Dharma Hotels Pvt. Ltd, the appellant assessee was a company engaged in the business of running a hotel on rent. The assessing officer made an addition to the income of the assessee and held that the value of the circle rate has to be deemed as consideration received for the computation of capital gain. 

The assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the addition made by the assessee. 

P.C Yadav, Shivam Garg, and Raghav Sharma, the counsels for the assessee contended that the assessing officer without allowing further opportunity to the assessee framed the assessment order by making the addition of the circle rate adopted by stamp valuation authority ignoring the relevant provisions including subsection (2) of section 50C of the Income Tax Act. 

Vipul Kashyap, the counsel for the revenue relied on the decisions made by the lower authorities and contended that the addition made by the assessing officer was as per the law and sustainable. 

The bench observed that the assessee was submitting the cause of the difference between actual sale consideration and circle rate adopted by the stamp valuation authority then the assessing officer was under obligation to refer the matter to the departmental valuator(DVO) for determination of fair market value as on the date of transfer of capital asset but the Assessing Officer proceeded to make addition treating the entire value as per circle rate without referring the matter for valuation.  The two-member bench comprising Chandra Mohan Garg (Judicial) and M. Balaganesh, (Accountant) directed the assessing officer to re-adjudicate the matter without being influenced by the earlier orders while allowing the appeal filed by the assessee.

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