The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that the Assessing Officer ( AO ) erred by not referring the land valuation to the Departmental Valuation Officer ( DVO ) under section 50C(2) of Income Tax Act,1961.
Mohammed Khalid Habib Parihar,the appellant-assessee,a proprietor of M/s Oath Infrastructure and engaged in the civil contractor business, filed his return of income for A.Y. 2013-14, declaring a total income of Rs. 1,07,98,960. His return was selected for scrutiny, and notices under sections 143(2) and 142(1) were issued.
Know How to Investigate Books of Accounts and Other Documents, Click Here
During the assessment, it was observed that the assessee had sold a jointly owned immovable property, with his 40% share amounting to Rs. 2,40,00,000. However, the Stamp Duty Authority valued the property at Rs. 7,40,65,970, making his share Rs. 2,85,86,388.
The AO raised a concern under section 50C of the Act regarding the undervaluation of Rs. 45,86,388. In response, the assessee argued that the property, gifted by the Government to a freedom fighter, carried a condition requiring 50% of proceeds to be deposited with the Government if sold.
Additionally, the land had been reserved as a garden plot, which affected the market value. The assessee maintained that the actual sale consideration of Rs. 6 crore was genuine.
The AO, in an order dated 01/03/2016, rejected the assessee’s claims for lack of evidence and added Rs. 45,86,388 to the assessee’s income as long-term capital gains under section 50C, based on the Stamp Valuation Authority’s deemed value of the land.
The Commissioner of Income Tax(Appeals)[CIT(A)], in the impugned order, noted that the assessee did not object to the Stamp Duty Authority’s valuation during the assessment and only requested a referral to the DVO during the appeal. The CIT(A) rejected this request, stating the assessee should have raised the issue earlier by providing a registered valuer’s report.
As the assessee failed to do so, the CIT(A) deemed there was no objection to the Stamp Duty Authority’s valuation and dismissed the appeal, upholding the AO’s addition under section 50C. The assessee aggrieved by the order appealed before the tribunal.
The Tribunal noted that the value adopted by the Stamp Duty Authority exceeded the property’s value at transfer and was not disputed in any appeal. Since both conditions under section 50C(2) were met, the bench determined that the AO erred by not referring the valuation to the DVO. The CIT(A) also incorrectly rejected the assessee’s request and upheld the AO’s addition.
Know How to Investigate Books of Accounts and Other Documents, Click Here
The two member bench comprising Sandeep Singh Karhail(Judicial Member) and Narendra Kumar Billaiya (Accountant Member) restored the issue to the AO for fresh adjudication after obtaining a DVO valuation, allowing the appeal for statistical purposes.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
