Case Law Details
Jayashree Kothari Vs ITO (ITAT Hyderabad)
Sec. 50C(2) enables the Assessing Officer to make a reference to the Valuation Officer. Whenever a reference is made by the AO to the Valuation Officer, such reference has to be construed as a reference made under sec. 16A(1) of the Wealth-tax Act. We have also carefully gone through the provisions of sec. 16A(1) of the wealth-tax Act, which provides the circumstances under which a property has to be referred to the Valuation Officer. Sub-sec. (2) and other provisions of sec. 16A provide the manner in which the property has to be valued. When a reference to the Valuation Officer is to be construed as a reference under sec. 16A(1) of the Wealth-tax Act, the manner laid down under the Wealth-tax Act for the purpose of valuing immovable property has to be adopted. Even though the legislature has not specifically referred to the valuation provided in Schedule III of the Wealth-tax Act, there is ample indication in sec. 50C(2) of the Income-tax Act that the property has to be valued under the Wealth-tax Act since the reference was to be construed as a reference under sec. 16A(1) of the Wealth-tax Act. If the intention of the legislature was not to apply the provisions of the Wealth-tax Act for the purpose of valuation, then, in our opinion, there was no need for any reference about the provisions of the Wealth-tax Act in sub-sec. (2) of sec. 50C of the Income-tax Act. Therefore, in our opinion, the manner laid down under the Wealth-tax Act has to be followed for the purpose of ascertaining the notional value of the property for the purpose of computing capital gain as provided under sec. 50C of the Income-tax Act.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)–2, Hyderabad, dated 23-11-2016, for the AY. 2012-13.
2. Brief facts of the case are that the assessee is an individual, deriving share income from the partnership firm Bhagwan & Co. She did not derive taxable income for any of the assessment years. During the previous year relevant to the assessment year under consideration, the assessee alongwith another sold immovable property vide Sale Deed No.454/2012 and derived sale consideration of Rs.16 Lakhs to her share.
The capital gain arising on the sale of property worked out to Rs. 2,26,250/- and including the share income from partnership of Rs. 6,316/-, the total income for the year under consideration is Rs. 2,32,566/- which is below the taxable limit. Therefore, the assessee did not file the return of income for the assessment year under consideration. The Assessing Officer issued a notice u/s. 148 of the Income Tax Act [Act] on 03-02-2015 on the ground that the Long Term Capital Gain arising out of the said sale transaction escaped assessment. According to the Assessing Officer, the provisions of Section 50C of the Act are applicable and the sale consideration is to be adopted as per the market value fixed by the Sub Registrar of Rs. 36,29,850/-. The assessee submitted a detailed explanation before the Assessing Officer stating the disadvantages of the property under consideration and pleaded that the provisions of Section 50C of the Act have no application to the facts of her case. The Assessing officer did not consider the submissions made and passed an order u/s. 143(3) r.w.s. 147 of the Act determining the total income at Rs. 22,62,566/- including Long Term Capital Gain of Rs. 22,56,250/-. Aggrieved with the order of the Assessing Officer, assessee preferred an appeal before the Ld.CIT(A).
3. The ld. CIT(A) confirmed the order of AO by observing that the assessee failed to establish that the property sold by her was at Rs. 16,00,000/- as against the stamp duty value of Rs. 36,30,000/- and even during the appellate proceedings, the AR of the assessee has not rebutted the conclusions drawn by the AO with any cogent evidence.
4. Aggrieved, assessee is in appeal before us with the following grounds of appeal:
“1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous both on facts and in law.
2. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing Officer in initiating the proceedings u/s. 147 of the I.T Act for invoking the provisions of Sec.50C of the I.T.Act.
3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing officer in determining the sale consideration at Rs.36,30,000/- as against the actual sale consideration of Rs.16 lakhs.
4. The learned Commissioner of Income-Tax (Appeals) ought to have considered the detailed explanation submitted before him and ought to have directed the Assessing Officer to adopt the sale consideration at Rs.16 lakhs.
5. The learned Commissioner of Income-Tax (Appeals) ought to have seen that the provisions of Sec.50C are applied and the sale Consideration was adopted at Rs.36,30,000/- without reference to the valuation cell and that therefore, the order of the Assessing Officer is not validly made.
6. The learned Commissioner of Income-Tax: (Appeals) erred in confirming the determination of the capital gain at Rs.22,56,250/- as against admitted capital gain of Rs.2,26,250/-.
7. Any other ground that may be urged at the time of hearing”.
5. Ground Nos. 1 & 7 are general in nature, hence, no need for adjudication. At the time of hearing, Ground No. 2 is not pressed, so the same is dismissed as not pressed.
6. AR submitted that assessee has sold the property at Rs. 16,00,000/- only and the same was brought to the notice of AO and the department does not have any information to prove that assessee has received more than the actual sale consideration. The AO has only relied on registered document and invoked section 50C. Even though assessee has brought to his knowledge various issues/discrepancies in the land and reasons for selling the land at Rs. 16 lakhs. He submitted that the AO should have referred the matter to the Valuation Officer as per section 50C(2). In this regard, Ld.AR relied on the following case law:
i. M/s. Amarsaria Constructions Vs. ITO in ITA No. 868/Hyd/2006, dt.08-08-2008;
7. Ld. DR submitted that the case law relied upon by the ld. AR of the assessee cannot be applied to the facts of case as the same are distinguishable and further argued that originally, the assessee has not filed any return of income. Upon issue of notice only, assessee has filed the return of income. Ld.DR further argued that even though there is a taxable income under the provisions of Section 50C of the Act, assessee did not file the return of income till such time the notices are issued.
8. In reply, Ld.AR contended that without considering the capital gains u/s. 50C, the income is below the taxable limit and assessee has no tax liability.
9. Considered the rival submissions and material on record.
The assessee worked out the capital gain arising on the sale of property at Rs. 2,26,250/- whereas the AO determined the long term capital gains at Rs. 22,56,250/- by invoking section 50C. , which was confirmed by the CIT(A). We notice that similar issue came up for consideration before the coordinate bench of this Tribunal in the case of M/s. Amarsaria Constructions (supra), on which reliance placed by the assessee, wherein it was held as under:
“7. Sec. 50C(2) enables the Assessing Officer to make a reference to the Valuation Officer. Whenever a reference is made by the AO to the Valuation Officer, such reference has to be construed as a reference made under sec. 16A(1) of the Wealth-tax Act. We have also carefully gone through the provisions of sec. 16A(1) of the wealth-tax Act, which provides the circumstances under which a property has to be referred to the Valuation Officer. Sub-sec. (2) and other provisions of sec. 16A provide the manner in which the property has to be valued. When a reference to the Valuation Officer is to be construed as a reference under sec. 16A(1) of the Wealth-tax Act, the manner laid down under the Wealth-tax Act for the purpose of valuing immovable property has to be adopted. Even though the legislature has not specifically referred to the valuation provided in Schedule III of the Wealth-tax Act, there is ample indication in sec. 50C(2) of the Income-tax Act that the property has to be valued under the Wealth-tax Act since the reference was to be construed as a reference under sec. 16A(1) of the Wealth-tax Act. If the intention of the legislature was not to apply the provisions of the Wealth-tax Act for the purpose of valuation, then, in our opinion, there was no need for any reference about the provisions of the Wealth-tax Act in sub-sec. (2) of sec. 50C of the Income-tax Act. Therefore, in our opinion, the manner laid down under the Wealth-tax Act has to be followed for the purpose of ascertaining the notional value of the property for the purpose of computing capital gain as provided under sec. 50C of the Income-tax Act”.
9.1. Respectfully following the above decision, we direct the AO to refer to the Valuation Officer to determine the fair market value u/s 50C(2). Accordingly determine the capital gain after giving proper opportunity of being heard to the assessee. Therefore, the impugned order is set aside and AO is directed to redo assessment de-novo.
10. In the result, appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 26th October, 2018
