2023 (5) TMI 836 - AT - Income Tax

Capital gain - computation of income on account of sale of a house property with the help of section 50C - FMV determination - HELD THAT:- When capital gain is to be computed u/s 48 then full value of the consideration received or accruing as a result of the transfer by an assessee of a capital asset being land or building or both, is less than the value adopted or assessed by any authority of a State Government for charging the stamp duty, then such valuation determined by such State Government would be deemed to be the full value of consideration.

The moment assessee pointed out that it has sold the property within 3.5 months and it cannot fetch the price as deemed by the AO on the strength of stamp duty valuation, AO should have referred it to the Valuation Cell.

CIT(Appeals) has erred in observing that since the assessee has not asked the AO to refer the valuation of this property to the Valuation Cell, therefore, there was no necessity at the end of the AO to determine the fair market value u/s 50C(2) of the Income Tax Act.

Quasi judicial authorities are being respected not on account of their power to legalise the injustice on technical ground but because they are capable of removing injustice and is expected to do so. Once the fact was brought to the notice of ld. AO that this property was purchased for a sum of Rs.2.38 crores and it is actually being sold after three & half months for Rs.2.80 crores, then before deeming its sale value at Rs.3,90,00,000/-, AO ought to have applied his mind and ought to have got its value determined by the DVO.

We set aside both the impugned orders and remit this issue to the file of ld. Assessing Officer for re-adjudication. AO is directed to call for a valuation report under sub-clause (2) of section 50C for determining the fair market value of the property on the date of transfer. AO is also directed to decide the claim of the assessee whether the gain is to be assessed as a capital gain or a business income. Appeal of the assessee is treated as allowed for statistical purposes.