The Delhi High Court condemned act of Principal Commissioner of Income Tax (PCIT) in rubber stamping attempt of the Assessing Officer (AO) to reopen assessment and observed that the value fixed by the stamp valuation authority, which is the circle rate, should be taken as the full value of the consideration while calculating capital gains.
The petitioner in the present matter is Sh. Manujendra Shah.
Dr. Rakesh Gupta, counsel for the petitioner, says that the reassessment proceedings have been triggered without due application of mind by the Assessing Officer (AO) and that even the authority granting approval has not applied its mind as to whether the AO had sufficient material available with him to form a belief that income which was otherwise chargeable to tax had escaped assessment.
The record disclosed that the petitioner had calculated his capital gains while filing Return of Income (ROI) by taking the circle rate concerning the six parcels of land sold by him and then arrived at the cumulative value, which, as indicated above amounted to Rs. 20,26,60,280/-.
The AO seems to have missed this crucial aspect and adverted to the fact that provisions of Section 50C of the Income Tax Act would be applicable in the instant case. A plain reading of the Section 50C of the Income Tax Act would show that when consideration is received by an assessee which is less than the value adopted by any authority of the state government, for the purposes of payment of stamp duty in respect of such like transfers, the value so adopted or assessable, for the purposes of Section 48 of the Income Tax Act, is deemed to be the full value of consideration accrued as result of such transaction.
A Division Bench of the Delhi High Court comprising observed that “In other words, the value fixed by the stamp valuation authority, which is the circle rate, should be taken as the full value of the consideration while calculating capital gains.”
“There has been complete nonapplication of mind by the AO, both with regard to the provision which was applicable in the instant case and also insofar as his failure to secure the material that was available with the DCIT in arriving at the market value of the land as on 01.04.1981, which, as noticed above, forms the basis of the cost of acquisition” the Bench said.
The Court concluded by noting that the PCIT i.e., the authority granting approval for reopening the reassessment proceedings, did not do better. PCIT, in fact, rubber-stamped the attempt of the AO to reopen the assessment.
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