Adjustment under Section 50C of the Act is not possible in processing of return under section 143(1) of the Income Tax Act, 1961 – ITAT
In a recent judgment, ITAT Guwahati has held that adjustment under Section 50C of the Income Tax Act, 1961 is not possible within the provisions of section 143(1) of the Act. Section 50C of the Act cannot be mechanically applied at the stage of processing of return of income under Section 143(1) of the Act
ABCAUS Case Law Citation:
4434 (2025) (02) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming enhancement of capital gain vide adjustment made in intimation under Section 143(1) of the Act by the CPC Bangaluru.
Before the CIT(A), the assessee contended that adjustment under section 50C of the Act is not permissible u/s 143(1) of the Act.
The CIT(A) observed that section 143(1) prescribes limited adjustment on the basis of details filled in by the assessee in the return of income. The impugned amount contended by the appellant was computed on the basis of amount mentioned by appellant in respective column.
The CIT(A) further observed that the provisions of section 143(1) doesn’t envisages to go into the details of verification of prevalent fair market value etc. On verification of records, it was noticed that CPC, Bangalore had adopted figure in computation on the basis of details furnished and the specific requirement as mentioned in the respective column i.e 1a(i) to a(iii) of the Return of Income already reproduced above.
Therefore, the CIT(A) held that the contention of appellant was not correct and hence not acceptable. Also, he noted that during the course of appellate proceedings nothing additional details other then what was stated in statement of facts/submission had been brought on records to suggest that the action of CPC, Bangalore was incorrect.
Before the Tribunal, the assessee contended that the CIT (A) had misread and misunderstood the provision of section 143(1) of the Act, in as much as, the section does not empower the AO to take substantial decision in enhancing the income under the garb of adjustment u/s 143(1) of the Act.
It was further submitted that the CIT(A) failed to appreciate that the value adopted by the appellant was a fair market value on the basis of various valuation reports and the Govt, circulars and notification.
Thus, it was contended that the processing mandated under Section 143(1) of the Act is limited in scope and cannot cover issues which are debatable. It was stated that while the sale consideration was considerably below the value as per the circle rate (stamp duty valuation), section 50C of the act provides for a mechanism to assess capital gains liability at a higher level than what is disclosed by any assessee in case the stamp duty valuation is higher than the actual sale consideration. It was stated that in the same section of the Act, if the sale consideration is less than the stamp value then there is a provision for referring the same to a Valuation Officer. It was stated that there was, therefore, scope for any assessee to legally claim capital gains at a lesser quantum than the prevailing stamp duty valuation.
The Tribunal observed that it is evident that section 143(1) of the Act, in its present shape, is a self contained code. The said section specifically mentions what all can be done within its purview. A parallel reading of section 50C of the Act reveals that it does not prescribe for an automatic enhancement of capital gain the moment any sale consideration is less than the stamp duty valuation.
The Tribunal further observed that in section 50C of the Act there is a mechanism for escaping its rigours through a reference made to a Valuation Officer. A combined reading of the two sections reveals that section 50C of the Act cannot be mechanically applied at the stage of processing of return of income under Section 143(1) of the Act. To this extent, any adjustment under Section 50C of the Act is not possible at the stage of processing under Section 143(1) of the Act.
The Tribunal further pointed out that while the Income Tax Department has an option to assess the capital gains at a higher quantum under Section 50C of the Act through proceedings like under Section 147 etc, the assessee on the other hand, will not have any recourse to remedy provided, of reference to a Valuation Officer, in the proviso to section 50C of the Act in case such enhancement is done under Section 143(1) of the Act.
Therefore, the Tribunal held that adjustment under Section 50C of the Act is not possible within the provisions of section 143(1) of the Act.
Accordingly, the enhancement so made by the AO, CPC was directed to be deleted.
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