Disallowance u/s 50C can not be made by CPC by adjustment u/s 143(1) as it infringes statutory right of objection provided in section 50C – ITAT
ABCAUS Case Law Citation:
ABCAUS 3745 (2023) (05) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming not adjudicating the ground relating to disallowance u/s 50C by way of arbitrary adjustment in the Intimation Order passed u/s 143(1)(a) of the Income Tax Act, 1961 (the Act) as the proposed adjustment was beyond the scope of provisions of section 143(1)(a).
The assessee was a resident individual. He filed return of income claiming deduction u/s 54EC of the Act. An intimation order u/s 143(1)(a) of the Act was passed by the CPC wherein an adjustment u/s 50C was made being the difference between the declared sale consideration and the value determined by the stamp valuation authority for the stamp duty purpose by adopting “Stamp Duty Valuation” as “Full Value of Consideration”. Further, the CPC Bangalore also disallowed the benefit of deduction claimed by the Assessee of investment in RECL Bonds.
According to the assessee, he had transacted this property sale transaction after getting the property valued form a registered valuer and the same being a distress sale was in close proximity to actual sale consideration.
The Assessee had requested to the Assessing Officer to refer the matter to the Valuation Cell for valuation of property, however no action was taken by the Assessing Officer.
The assessee had also filed a Rectification Application u/s 154 of the Act for rectification of mistakes in the intimation order passed u/s 143(1) of the Act and the same was still pending before the Assessing Officer.
The Tribunal noted that an appeal involving the similar issue was adjudicated by the Co-ordinate Bench of the ITAT.
In the said appeal, the ITAT held that such adjustment cannot be made under section 143(1)(a) of the Act because, at the stage of processing of return u/s 143(1)(a), the assessee does not get an opportunity to object, as per section 50C(2) of the Act.
The Co-ordinate Bench opined that on a conjoint reading of section 143(1)(a)(ii) along with Explanation it is clear that the addition under section 50C(1) cannot be in the nature of incorrect claim as provided in Explanation to section 143(1)(a)(ii) of the Act.
The Coordinate Bench further observed that though, sub-section (1) of section 50C provides for substituting the stamp duty value as deemed sale consideration in place of the declared sale consideration, however, sub-section (2) carves out an exception by providing that the assessee can object to the stamp duty value. The Coordinate Bench opined that by making an adjustment of the nature contemplated under subsection (1) to section 50C, that too, by CPC, the Department took away a valuable statutory right given to the assessee to object to the value determined by stamp valuation authority.
Following the judgment of the Co-ordinate Bench, the ITAT held that the provision for adhering to principles of natural justice u/s 50C(2) has not been observed while making adjustments u/s 143(1)(a) of the Act and hence, the action of the revenue was not sustainable
Accordingly, the appeal was allowed in favour of the assessee.
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