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Market Value of Property reduced due to Litigation and Defect in Title, Section 50C can’t be applied: ITAT [Read Order]

Market-Value - ITAT - Taxscan

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the provisions of section 50C of the Income Tax Act, 1961 cannot be applied in cases where the market value of the property is reduced due to the defect in the title of the property.

The Assessing Officer reopened the assessment against the assessees it was revealed that the sale consideration disclosed in the return of income towards the sale of her immovable property was lesser than the SRO value. There was litigation pending before the Court regarding the title of the subject property.

The Tribunal noted the fact that there was some litigation with respect to the property sold by the assessee.

“This fact is also not disputed by the Ld. Revenue Authorities. It is quite obvious that if the title of the immovable property is defective then the market value of the immovable property will be considerably reduced. In this situation, it would have been appropriate on the part of the Ld. AO to obtain a valuation report from the Ld. DVO in accordance with the provisions of section 50C of the Act as the assessee has challenged the same before him and thereafter adopted the value determined by the Ld. DVO for the purpose of computing the capital gains in the hands of the assessee,” the Tribunal said.

Allowing the plea of the assessee, the Tribunal observed that “in the present circumstances, I also do not find it appropriate to remit the matter back to the Ld. AO in order to obtain the valuation report from the Ld. DVO as it will cause great inconvenience to the assessee. Further, from the facts of the case, it is apparent that the sale value declared by the assessee is only 46% of the SRO value of Rs. 16,54,500/- (Rs. 7,56,250 X 100 / 16,54,500). Since the property sold by the assessee is a litigated property, I am of the considered view that the market value of the property cannot exceed the actual sale consideration received by the assessee of Rs. 7,56,250/-.”

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