Case Analysis of ITA No.1024/Del/2022: Appeal Against Assessment Order under Section 50C

Understanding the ITA No.1024/Del/2022 Decision: An Appeal Against Income Tax Assessment Order

In a significant judgment by the Income Tax Appellate Tribunal, Delhi Bench ‘SMC’, the case of Inder Jeet Malik vs. ADIT Central Circle-71(1), pertaining to the assessment year 2019-20, has set a noteworthy precedent regarding the interpretation and application of Section 50C of the Income-tax Act, 1961.

Background of the Case

The appellant, Sh. Inder Jeet Malik, challenged the order dated 15.11.2021 by the National Faceless Appeal Centre (NFAC), Delhi, which pertained to the addition made under section 50C by the Assessing officer, CPC. The core issue revolved around whether the addition made under Section 50C(1) can be categorized as an ‘incorrect claim’ warranting adjustment under section 143(1)(a)(ii) of the Act during the processing of the return of income at the Centralized Processing Center (CPC).

Arguments Raised

The appellant raised several grounds challenging the correctness, jurisdiction, and procedural aspects of the addition made under Section 50C. Among the notable objections were the contention that the sale consideration being less than the stamp duty value does not constitute an ‘incorrect claim’ under section 143(1)(a)(ii) leading to an adjustment to the returned income. Furthermore, it was argued that Section 50C of the Act was inapplicably applied to the facts of the case and, in any event, required referral to a valuation officer.

Tribunal’s Decision

The tribunal, led by Shri Saktijit Dey, embarked on a detailed analysis of the legal provisions and their applicability to the case at hand. After a thorough examination of the submissions and the legal framework, the tribunal concluded that the addition made under Section 50C(1) by the CPC, essentially a deeming provision, could not preclude the invocation of subsection (2) and (3) of the same section which provides for a potential objection by the assessee and a consequential referral to the Department Valuation Officer (DVO).

It was emphatically held that such an adjustment by the CPC strips the assessee of a valuable statutory right without offering an opportunity to object, which is intrinsic to Section 50C(2). Thus, the addition made under Section 143(1)(a)(ii) was deemed unsustainable, leading to its deletion.

Implications of the Judgment

This landmark ruling brings to light the nuanced interpretation of provisions related to adjustments during the processing of income tax returns. It underscores the importance of adhering to procedural fairness and rights of the assessee, especially in the backdrop of faceless assessments. This decision not only paves the way for a more judicious application of Section 50C but also emphasizes the crucial aspect of providing an opportunity for the assessee to contest the valuation determined by the stamp authority.

Conclusion

The appeal by Inder Jeet Malik stands allowed, marking a crucial point of reference for similar cases in the future. This case highlights the interplay between procedural requirements and substantive rights, underscoring the tribunal’s pivotal role in safeguarding the latter against the rigid application of law in income tax assessments.

Case Analysis of ITA No.1024/Del/2022: Appeal Against Assessment Order under Section 50C