The case ITA 12/DEL/2019 involved the appellant Narendra Kumar Singh from New Delhi, contesting against the Assistant Commissioner of Income Tax (ACIT), Central Circle-15, New Delhi. The appeal pertained to the assessment year 2013-14 and was filed on January 1, 2019. The final order was pronounced on April 12, 2019.
Narendra Kumar Singh, the appellant, had filed an appeal against the assessment order passed by the ACIT, Central Circle-15, New Delhi, for the assessment year 2013-14. The appeal was directed against the order of the Learned Commissioner of Income Tax (Appeals) [CIT(A)]-XXVI, New Delhi, dated October 5, 2018. The primary contention in the appeal was related to certain additions made under Section 50C of the Income Tax Act, 1961.
The appeal was heard by a bench comprising Shri Bhavnesh Saini, Judicial Member, and Shri O.P. Kant, Accountant Member, of the Delhi “E” Bench of the Income Tax Appellate Tribunal (ITAT). The appellant was represented by Advocates S/shri I.P. Bansal and Vivek Bansal, while the respondent was represented by Senior Departmental Representative (DR) Smt. Rinku Singh.
The appellant, Narendra Kumar Singh, filed a return of income declaring a total income of Rs. 18,98,510/-, which included salary, profits from trading in agarbattis, papads, and badies, and capital gains from the sale of properties. During the assessment, the ACIT noted that out of the 14 properties sold by the appellant, 9 flats were sold below the value prescribed by the Stamp Valuation Authority (SVA) of the relevant State government. The ACIT applied the provisions of Section 50C of the Act, resulting in an addition of Rs. 50,61,000/- to the appellant’s income.
The appellant’s counsel argued that the activity of selling properties was in the nature of business, and thus the gains should be taxed under the head “profits and gains of business” rather than “capital gains.” The counsel further argued that Section 50C should not apply to business income and that the ACIT should have referred the matter to the District Valuation Officer (DVO) for a fair market valuation of the properties.
The Senior DR argued that the appellant had declared the properties as capital assets and had not shown them as business assets in any of the previous years. The properties were sold several years after purchase, and no books of accounts were maintained for the sale of properties. The DR contended that the appellant’s claim was inconsistent with the facts and that the ACIT was correct in applying Section 50C of the Act.
The ITAT, after considering the submissions and reviewing the evidence, upheld the order of the CIT(A) and dismissed the appeal. The Tribunal observed that the appellant had consistently shown the properties as capital assets and had declared gains under the head “capital gains” in the return of income. The Tribunal also noted that the appellant had not made any request for a reference to the DVO during the assessment proceedings.
The final order in ITA 12/DEL/2019 was pronounced on April 12, 2019, with the appeal dismissed. The Tribunal upheld the applicability of Section 50C, confirming the addition of Rs. 50,61,000/- to the appellant’s income. This case underscores the importance of correctly classifying assets and the application of Section 50C in computing capital gains.
The Income Tax Appellate Tribunal’s order was as follows:
This appeal by the assessee is directed against the order dated 05/10/2018 passed by the Ld. Commissioner of Income Tax (Appeals)-XXVI, New Delhi for assessment year 2013-14, raising the following grounds:
The appellant contested the addition of Rs. 50,61,000/- upheld by the CIT(A). The appellant argued that the provisions of Section 50C of the Act were erroneously applied as the nature of gains was from the business of developing property for earning income, and Section 50C(1) should not apply to gains from business.
Without prejudice to the above, the appellant contended that the addition was contrary to Section 50C(2)(a) since the fair market value of the property as on the date of transfer exceeded the value adopted by the Stamp Valuation Authority (SVA).
The appellant also contested the chargeability of interest under sections 234B, 234C, and 234D of the Act.
Considering the submissions and evidence, the Tribunal upheld the order of the CIT(A) and dismissed the appeal. The Tribunal observed that the appellant had consistently shown the properties as capital assets and had declared gains under the head “capital gains” in the return of income. The Tribunal also noted that the appellant had not made any request for a reference to the DVO during the assessment proceedings.
The Tribunal rejected the appellant’s claim that the activity of selling properties was a business activity as the properties were held as capital assets for several years and were not shown as stock-in-trade. The Tribunal held that the provisions of Section 50C were rightly applied by the ACIT as the sale consideration was less than the value adopted by the SVA. The Tribunal found no error in the CIT(A)’s decision, which upheld the addition made by the ACIT under Section 50C.
In view of the above, the appeal is dismissed. Order pronounced in the open court on April 12, 2019.
Sd/-
(BHAVNESH SAINI)
JUDICIAL MEMBERSd/-
(O.P. KANT)
ACCOUNTANT MEMBER
This case highlights the application of Section 50C in computing capital gains and the importance of correctly classifying assets in tax returns.
Appeal Dismissal under Section 50C: Narendra Kumar Singh vs. ACIT – ITA 12/DEL/2019
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