Unrelated Section 50C Addition Cannot Survive Failed Reopening Ground: ITAT Ahmedabad

Archana Hitesh Somani Vs ITO (ITAT Ahmedabad)

Addition on an issue unconnected with recorded reasons cannot survive once the very addition forming the basis of reopening stands deleted: Ahmedabad ITAT

Summary: The Ahmedabad Bench of the Income Tax Appellate Tribunal has held that where the addition forming the very basis of reopening is deleted and the Revenue accepts such deletion, an addition made on an entirely different issue, which did not form part of the recorded reasons, cannot independently survive.

Applying the jurisdictional Gujarat High Court decision in CIT v. Mohmed Juned Dadani, the Tribunal deleted the addition of ₹8.49 lakh under Section 50C relating to the sale of shops.

Reopening based on sale of land below stamp-duty value

The assessee filed her return for AY 2012-13 declaring a total income of ₹4.85 lakh.

The assessment was subsequently reopened on the basis of information that the assessee, as a co-owner, had sold a property for ₹8.10 crore, whereas its stamp-duty value was approximately ₹27.18 crore.

The recorded reason for reopening was, therefore, the alleged escapement of capital gains arising from the difference between the declared sale consideration of the land and its stamp-duty valuation.

In the reassessment completed under Section 143(3) read with Section 147, the AO made an addition of ₹4.89 crore under Section 50C in respect of the long-term capital gain arising from the sale of land.