Proposed Addition made u/s 50C Income Tax Act in respect of LTCG can be processed only u/s 143(3) of I.T Act: ITAT restored issue back to AO [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench, held that the proposed addition made under Section 50C of the Income Tax Act, 1961, concerning Long-Term Capital Gain, could only be processed under Section 143(3) of the Income Tax Act, 1961.

The assessee, Prabha Anil Gandhi, declared income from Long-Term Capital Gain as ₹3,22,370 in the return of income. However, the Assessing Officer observed that the Long-Term Capital Gains were computed at ₹53,22,370, and the assessee had deposited ₹50,00,000 in eligible bonds, claiming an exemption under Section 54EC of the Income-tax Act. Subsequently, an order under Section 143(1) of the Income Tax Act was completed, determining long-term capital gains at ₹58,07,342 instead of ₹3,22,370.

The Assessing Officer (CPC) made an adjustment under Section 50C of the Income Tax Act by considering the stamp duty valuation of ₹13,29,23,000 against the declared full value of consideration of ₹10 crores while computing the capital gains.

The assessee, dissatisfied with the order, filed an appeal before the CIT(A), which was dismissed. Consequently, the assessee filed a second appeal before the tribunal.

Ashok Patil, Counsel for the assessee, argued that the proposed addition made by the Assessing Officer under Section 50C of the Income Tax Act is beyond his jurisdiction under Section 143(1) of the Income Tax Act. He highlighted the provisions of Section 143(1) and contended that the proposed adjustment could only be made in regular assessment under Section 143(3) and not under Section 143(1) of the Income Tax Act.

H.M. Bhatt, Counsel for Revenue, supported the decision of the lower authorities.

During the appeal proceedings, the tribunal observed that the proposed addition under Section 50C of the Income Tax Act exceeds the mandate under Section 143(1) of the Income Tax Act and can only be processed under Section 143(3) of the Income Tax Act. Thus, the Centralized Processing Centre cannot make an addition without providing a proper opportunity to the assessee, which is only possible under Section 143(3) of the Income Tax Act.

After reviewing the facts and records, the two-member bench of S. Rifaur Rahman (Accountant Member) and Kuldip Singh (Judicial Member) remitted this issue back to the file of the jurisdictional Assessing Officer.

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