Case Number: ITA 141/DEL/2019
Appellant: AKG Consultants Pvt. Ltd., Kanpur
Respondent: ACIT, Central Circle-8, New Delhi
Assessment Year: 2012-13
Result: 2012-13
Case Filed on: 2019-01-09
Order Type: Final Tribunal Order
Date of Order: 2022-04-11
Pronounced on: 2022-04-11
This case involves AKG Consultants Pvt. Ltd. (the appellant) challenging the application of Section 50C of the Income Tax Act by the Assessing Officer (AO) and subsequently upheld by the Commissioner of Income Tax (Appeals)-25, New Delhi. The primary contention revolves around the valuation of a property sold by the appellant and the discrepancy between the sale consideration and the stamp duty valuation.
AKG Consultants Pvt. Ltd., a Private Limited Company, filed its return of income on 01.10.2013, declaring a total income of Rs. 1,04,81,220/-. During the assessment proceedings, it was noted that the appellant had sold an office space at Chintels House, Lucknow, for Rs. 67,20,000/-, reporting a capital gain of Rs. 54,95,102/-. However, the stamp duty value of the property was assessed at Rs. 1,00,37,183/-, significantly higher than the declared sale value.
The appellant argued that the property was sold at a lower price due to distress sale conditions prevailing in the market. The appellant also contended that the AO should have referred the matter to the Departmental Valuation Officer (DVO) for a fair market valuation as per Section 50C(2) of the Income Tax Act, given the discrepancy between the sale consideration and the stamp duty valuation.
During the assessment proceedings, the appellant had requested the AO to refer the matter to the DVO, which was documented in their letter. The appellant relied on various judicial precedents, including the decision of the Hon’ble Madras High Court in S. Muthuraja vs. CIT, Coimbatore, which mandated such referrals in cases of valuation disputes.
The AO rejected the appellant’s arguments, asserting that the property could not have been sold at a price significantly lower than the stamp duty valuation without an ulterior motive. The AO proceeded to compute the capital gains based on the stamp duty value, resulting in an addition of Rs. 33,18,001/- to the appellant’s income.
The CIT (A) upheld the AO’s decision, noting that the appellant did not seek a reference to the DVO during the assessment proceedings. The CIT (A) emphasized that the appellant’s failure to address the valuation issue at the appropriate stage could not be remedied at the appellate stage. The CIT (A) deemed the AO’s action within the legal framework and dismissed the appeal.
The Income Tax Appellate Tribunal (ITAT) carefully examined the arguments and the documentary evidence presented. The Tribunal noted that the appellant had indeed requested a referral to the DVO during the assessment proceedings, which the AO ignored. Citing several judicial precedents, the Tribunal emphasized that the AO is obligated to refer the matter to the DVO when the assessee disputes the stamp duty valuation.
The Tribunal concluded that the AO’s failure to refer the matter to the DVO was a significant oversight, especially given the appellant’s explicit request. The ITAT remanded the case back to the AO with instructions to refer the property valuation to the DVO and reassess the fair market value. This referral is crucial to ensure a fair and just determination of capital gains.
The case of AKG Consultants Pvt. Ltd. vs ACIT highlights the critical importance of adhering to statutory provisions and judicial precedents in tax assessments, particularly concerning property valuations under Section 50C. The Tribunal’s decision underscores the necessity for tax authorities to thoroughly consider and address all relevant contentions and procedural requests raised by the assessee during the assessment process.
Order Pronounced: 11th April, 2022
Members: R.K. Panda (Accountant Member) and N.K. Choudhary (Judicial Member)
AKG Consultants Pvt. Ltd. vs ACIT: Dispute Over Section 50C Application for AY 2012-13
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