Computation of LTCG by taking Stamp Duty Value as Sales Consideration: ITAT Directs to comply Section 50C(2) of Income Tax Act [Read Order]

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) directed the Assessing Officer to comply with the mandatory provisions of Section 50C(2) of the Income Tax Act, 1961 before adopting the stamp duty value as the full value of consideration for computing long-term capital gains.

During the relevant assessment year, the assessee sold an immovable property and declared long-term capital gains by adopting the actual sale consideration and indexed cost of acquisition. However, the Assessing Officer invoked Section 50C of the IncomeTax Act and substituted the sale consideration with the stamp duty value. Consequently, long-term capital gains were recomputed and an addition was made in the assessment completed under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act.

The Commissioner of Income Tax (Appeals) upheld the assessment order. Aggrieved by the decision, the assessee preferred an appeal before the Tribunal.

The assessee contended that the Assessing Officer erred in substituting the actual sale consideration with the stamp duty value without complying with the mandatory provisions of Section 50C(2) of the Income Tax Act. It was further argued that the matter ought to have been referred to the Departmental Valuation Officer (DVO) for determination of the fair market value of the property.

The Revenue submitted that the assessee had neither appeared during the assessment proceedings nor disputed the valuation adopted by the stamp valuation authority. Therefore, according to the Revenue, the Assessing Officer was justified in invoking Section 50C of the Income Tax Act and adopting the stamp duty value for computing capital gains.

The Tribunal of Laxmi Prasad Sahu, Accountant Member and Yogesh Kumar U.S., Judicial Member observed that although the Assessing Officer had adopted the stamp duty value as the full value of consideration, no reference was made to the Departmental Valuation Officer as contemplated under Section 50C(2) of the Income Tax Act.

“Thus, without commenting on the merits of the case and considering the above facts and circumstances, we remand the matter to the file of the Assessing Officer with a direction to the Assessing Officer to comply with the mandatory provisions of section 50C(2) of the Act and after obtaining the DVO's report, decide the matter in accordance with law. Needless to say, the assessee shall be provided with an opportunity of being heard” the Bench noted.

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