Case Law Details
Prabha Anil Gandhi Vs ADIT (ITAT Mumbai)
Prabha Anil Gandhi vs. ADIT (ITAT Mumbai): ITAT rules on CPC’s jurisdiction, Section 50C adjustments, and processing under section 143(1).
The recent case of Prabha Anil Gandhi Vs. ADIT (ITAT Mumbai) brings to light an essential aspect regarding the jurisdiction of the Centralized Processing Centre (CPC) in making additions under section 50C of the Income Tax Act, 1961. The case pertains to the Assessment Year 2019-20, where the Assessing Officer (CPC) proposed an addition under section 50C during the processing of the return u/s. 143(1) of the Act.
Background of the Case:
Prabha Anil Gandhi, the assessee, filed her return of income for the A.Y. 2019-20, declaring Long Term Capital Gains of ₹3,22,370/-. The Assessing Officer, during the processing of the return u/s. 143(1), observed that the Long Term Capital Gains were computed at ₹53,22,370, and the assessee claimed exemption u/s. 54EC after depositing ₹50,00,000 in eligible bonds. The Assessing Officer, invoking section 50C, made an adjustment by taking the stamp duty valuation of ₹13,29,23,000 against the declared full value of consideration of ₹10 crores.
Contentions of the Assessee:
The assessee contended that the Assessing Officer (CPC) erred in applying section 50C during the processing u/s. 143(1) and that such an addition should be processed only under regular assessment u/s. 143(3).
Observations of the ITAT:
The ITAT, after considering the submissions, agreed with the assessee’s contention. It held that the proposed addition u/s. 50C is beyond the jurisdiction of the Assessing Officer (CPC) u/s. 143(1) and can only be processed under regular assessment u/s. 143(3) of the Act. The ITAT highlighted that section 143(1) pertains to the processing of returns, and adjustments such as those under section 50C should be made in the course of regular assessments where proper opportunities are given to the assessee.
The ITAT acknowledged that the issue under section 50C involves the adoption of stamp duty valuation in place of actual consideration, and it is a deeming provision. The assessee has certain rights to object, such as requesting a reference to the District Valuation Officer (DVO). The ITAT emphasized that the Centralized Processing Centre cannot make additions without providing a proper opportunity to the assessee, and this can only be done under regular assessment proceedings u/s. 143(3).
Conclusion:
In conclusion, the ITAT partly allowed the assessee’s appeal, emphasizing that additions under section 50C cannot be made during the processing of returns u/s. 143(1) by the CPC. The decision reinforces the procedural aspects and the proper forum for making adjustments involving deeming provisions like section 50C, ensuring that taxpayers are provided with adequate opportunities to present their case during regular assessment proceedings.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 16.03.2023 for the A.Y.2019-20.
2. Brief facts of the case are, assessee filed her return of income for the A.Y. 2019-20 on 14.07.2019. In her return of income, the assessee has declared income from Long Term Capital Gain of ₹.3,22,370/-. From the computation of the capital gains, the Assessing Officer [Centralized Processing Centre] observed that the Long Term Capital Gains have been computed at ₹.53,22,370/- and assessee has deposited ₹.50,00,000/- in eligible bonds and claimed exemption u/s. 54EC of Income-tax Act, 1961 (in short “Act”). Accordingly, order u/s. 143(1) was completed and long term capital gain of ₹.58,07,342/- in place of ₹.3,22,370/- was The above adjustment was made by the Assessing Officer (CPC) u/s. 50C of the Act by taking the stamp duty valuation of ₹.13,29,23,000/- against the full value of consideration of ₹.10 crores as declared by the assessee while computing the capital gains.
3. Aggrieved with the above order, assessee preferred an appeal before the Ld. CIT(A) and raised a ground “whether the Assessing Officer (CPC) was correct in applying provisions of section 50C in the instant case and making the addition as proposed u/s. 143(1) of the Act.” After considering the submissions of the assessee, Ld. CIT(A) dismissed the grounds raised by the assessee with the following observations: –
“5.2 The submission filed by the appellant has been considered. The appellant has admitted that full value of consideration as (both in cash and kind) as received by all co-owners is Rs. 13,29,23,000/-. The same amount has been determined by the Sub-Registrar as well as the Adjudicating Authority in Adjudication No. ADJ/M/761/2017 dated 06.06.2017
5.2.1 Further the appellant has stated that,
“1.12 I opted for, and have received, only cash consideration. I received 1/6th share of the total cash consideration received of Rs. 10,00,00,000 i.e. Rs. 1,66,62,997. I received only cash consideration because of my not being a resident of the said property as well as the fact that this was an understanding amongst all the co-owners for division of the total consideration received.
1.13 No area in the redeveloped building has been allotted to me. Hence the question of allotment of additional area does not arise. I have not purchased any additional area from the developer.”
5.2.2 The fact that the appellant has received only 1/6th of cash component of consideration on Rs. 10,00,00,000/- whereas the admitted value of consideration by all co-owners was Rs.13,29,23,000/-. Thus the total consideration taken by the appellant for computation of Long Term Capital Gains is not only less than the full value of consideration as determined by the stamp duty Authority but also that admitted by the appellant. Thus, in the instant case the appellant should have taken 1/6th of Rs. 13,29,23,000/- the amount of consideration (both case and kind) for the purpose of capital gains.
5.2.3 Therefore in the instant case whether Section 50C of IT Act is applied or not, the full value of consideration of Rs10 Cr. as taken by the applicant is less than the actual consideration.
5.2.4 Even if the appellant has received less consideration and voluntarily relinquished her right in favour of the other co-owners, the provision of section 50C of Income Tax Act mandates that the appellant should have taken the full value of consideration as determined by the Stamps Duty Authority.
In view of the above, it is held that the appellant should have taken full value of consideration at Rs. 13,29,23,000/- in place of Rs. 10 Cr taken by her in computation of Long Term Capital Gains.
5.2.5 Thus the adjustment made by the AO(CPC) under the head of Long Term Capital Gains is hereby confirmed and 2nd ground of appeal is dismissed.
5.3.0. Vide the first ground of appeal the appellant has raised the issue that “An adjustment to total income or loss under section 143(1) cannot be made because of an addition u/s 50C of Income Tax Act.
5.3.1 In this regard it is relevant that section 143(1)(a)(ii) provides for the adjustment of “any incorrect claim, if such incorrect claim is apparent from any information in Return.”
5.3.2 From the perusal of Return of Income filed by the appellant it is observed that in column B1 (A)(ii) the appellant herself has reported the value of property as per Stamp Valuation Authority at Rs. 2,21,44,972/-.
5.3.3 But in column B1(a)(iii) she has disclosed that full value of consideration adopted as per 50C for purpose of capital gains has shown at Rs. 1,66,60,000/- only.
5.3.4. Thus the appellant’s claim for amount of full value of consideration u/s 50C is incorrect, and thus incorrect claim is apparent from information given by the appellant in ITR herself.
5.3.5 In view of the above, it is held that the AO (CPC) was well within his jurisdiction in making adjustments u/s 50C of IT Act.”
4. Aggrieved assessee preferred an appeal before us and raised following grounds in her appeal: –
“1. The learned AO has erred, and the Hon. CIT(A) has erred in confirming, that the consideration received/accruing to the appellant on sale of her share of rights in immovable property is purportedly less than the value adopted by the stamp valuation authority without appreciating the fact that an adjustment to total income or loss u/s 143(1) cannot be made because of an addition proposed u/s 50C.
2. The learned AO and the Hon. CIT(A) have erred in not appreciating the fact that when a property is co-owned by multiple owners the provisions of section 50C are to be applied qua property and not qua owner and if the consideration paid for the property is equal to or exceeding the market value as per the Stamp Duty authority, then even if the shares of the co-owners are not equal i. e., some of the co-owners receive lesser consideration than others but the total consideration of all the owners equals or exceeds the market value then the provisions of section 50C are not applicable.
3. The appellant craves leave to add/amend/alter any or all of the grounds of ap”
5. At the time of hearing, Ld. AR of the assessee submitted that the proposed addition made by the Assessing Officer u/s. 50C is beyond his jurisdiction u/s. 143(1) of the Act and he brought to our notice provisions of section 143(1) of the Act and submitted that the proposed adjustment can be made in regular assessment u/s. 143(3) and not u/s. 143(1) of the Act. He objected to the various findings given by the Ld.CIT(A) and prayed that the issue of adjustment made u/s. 143(1) of the Act is not proper and prayed that the assessment u/s. 143(1) be quashed.
6. On the other hand, Ld. DR relied on the orders of the lower
7. Considered the rival submissions and material placed on record, we observe that based on the information submitted by the assessee before Centralized Processing Centre and the Assessing Officer (CPC) has considered the various informations available on record and proposed the additions u/s. 50C of the Act. After considering the findings of the CIT(A) and submissions of the assessee we are in agreement that the proposed addition u/s. 50C is beyond the mandate u/s. 143(1) and the same can be processed only u/s. 143(3) of the Act. Considering the fact that the issue involved in Section 50C is adoption of stamp duty valuation in place of actual consideration. It is deeming provision wherein assessee, the other party has certain rights to object like request for referring the case to DVO. The Centralized Processing Centre cannot make addition without giving proper opportunity to the assessee, it is possible only u/s. 143(3) of the Act. Therefore, for the overall justice, we were inclined to remit this issue back to the file of the jurisdictional Assessing Officer. However, we are aware of the fact that in order to initiate the proceedings u/s. 143(3) of the Act the Assessing Officer has to initiate the proceedings u/s. 143(2) of the Act as per the limitation period. Assessing Officer may proceed with other remedies available on record.
8. In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 25th October, 2023
