Facts of the Case

The assessee, Laljibhai Parshottambhai Gaudani, filed his return of income for Assessment Year 2012-13 declaring income of ₹22,44,370. The assessment was reopened under Section 147 on the basis of information that the assessee sold a plot of land on 08.07.2011 for a consideration of ₹14,59,860, whereas the stamp duty (Jantri) value was ₹59,90,320. The Assessing Officer invoked Section 50C and made an addition of ₹45,30,460. The assessment was completed under Section 143(3) read with Section 147 on 08.11.2019 determining total income at ₹72,68,740.

The assessee’s appeal before the CIT(A), NFAC was partly allowed. Aggrieved, the assessee preferred an appeal before the Tribunal with a delay of 180 days, which was explained on medical grounds as the assessee was a senior citizen suffering from liver dysfunction and his wife was bed-ridden. The delay was condoned.

Issues Involved

Whether the assessee was entitled to adopt stamp duty value as on an alleged earlier agreement date under the proviso to Section 50C(1), whether addition under Section 50C could be sustained without referring the matter to the Valuation Officer when fair market value was disputed, and whether principles of natural justice were followed.

Petitioner’s Arguments

The assessee contended that an agreement to sell was entered into in Financial Year 2004-05 and that the first payment of ₹5,85,000 was received by cheque on 03.10.2004. It was argued that in terms of the proviso to Section 50C(1), stamp duty value as on the date of agreement should be adopted. Alternatively, it was contended that the stamp duty value adopted by the Assessing Officer was excessive and higher than the fair market value, and therefore the matter ought to have been referred to the Valuation Officer under Section 50C(2).

Respondent’s Arguments

The Revenue submitted that no agreement dated 03.10.2004 was produced by the assessee. It was argued that the property had been leased for 30 years under a registered lease deed dated 31.01.2002, which was cancelled only on 08.07.2011, and therefore no sale agreement could have been executed in 2004. The Revenue contended that the payment received in 2004 could have been lease rental or advance and not sale consideration.

Court Order / Findings

The ITAT Ahmedabad observed that the assessee failed to produce any agreement to sell dated 03.10.2004 fixing the consideration. Mere receipt of payment on that date could not establish existence of an agreement. Considering the subsistence of a registered lease till 08.07.2011, the Tribunal rejected the assessee’s claim to adopt stamp duty value as on the alleged earlier agreement date.

However, the Tribunal noted that the assessee had disputed the stamp duty value as being higher than the fair market value. The Tribunal held that in such circumstances, the Assessing Officer ought to have referred the matter to the Valuation Officer under Section 50C(2). In the interest of justice, the Tribunal set aside the issue and directed the Assessing Officer to obtain a valuation report from the DVO and recompute capital gains under Section 50C after granting opportunity of hearing to the assessee.

Important Clarification

The Tribunal clarified that the benefit of the proviso to Section 50C(1) can be availed only when an agreement fixing consideration is duly proved. However, where the assessee disputes the stamp duty value as exceeding fair market value, reference to the Valuation Officer under Section 50C(2) becomes mandatory.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The issue of addition under Section 50C was remanded to the Assessing Officer with directions to refer the property to the Valuation Officer and recompute capital gains in accordance with law after providing due opportunity to the assessee.

Link to Download Order-Source Link- https://www.mytaxexpert.co.in/uploads/1769062720_LALJIBHAIPARSHOTTAMBHAIGAUDANIAHMEDABADVS.THEDY.CITCIRCLE311AHEMDABAD.pdf

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