Whether if property is sold under duress at lesser value as it was under litigation, provisions of Sec 50C cannot be mechanically applied to tax capital gains - YES: ITAT

THE issue before the Bench is - Whether if property is sold under duress at lesser value as it was under litigation, provisions of Sec 50C cannot be mechanically applied to tax capital gains. YES is the answer.

Facts of the case

The assessee is a non-resident individual, who filed his return of income electronically declaring total income at Rs. NIL. The return was selected for scrutiny assessment and, accordingly, statutory notices were issued and served upon the assessee. During the course of assessment proceedings, AO found that the assessee had sold immovable property admeasuring 1200 sq. mtr. situated at Betalbatim, described in the Land Registration Office of Salcete under No. 35121 of New Series, not enrolled in the Land Revenue Office but surveyed under No. 96/1 of Betalbatim Village on 11/10/2010 for Rs.20,00,000/-. The said property was purchased on 03/01/2001 for Rs. 10,00,000/-. AO further observed that the value adopted by the Sub-Registrar for stamp duty purpose was Rs. 44.25 Lac. whereas assessee had shown sale consideration at Rs. 20 Lac.

Assessee was asked to explain why value adopted for stamp duty purpose should not be adopted as sale consideration for computation of capital gains. The assessee had replied that it had sold the property for Rs. 20,00,000/- only. The valuation of the property for the purpose of stamp duty was taken at Rs. 44,25,000/- however it had received a sum of only Rs. 20,00,000/-. The property under question was under litigation and hence sold at lesser value as the assessee was in urgent need of funds. AO had not accepted the submission of the assessee and proceeded to compute LTCG by taking the stamp duty value as the full sale consideration.

On appeal, the CIT(A) was convinced that no permanent structure of any kind can be erected on the impugned land. The AO had not considered the circumstances relating to the land and had mechanically applied the provisions of sec 50C. CIT(A) finally concluded by holding that AO was not justified in mechanically applying the provisions of sec. 50C and accordingly, directed AO to delete the additions made.

Having heard the matter, the Tribunal held that,

++ the assessee has shown sale consideration from the sale of impugned property, whose stamp duty value was much higher. It is also undisputed fact that the assessee had sold the property under duress. It is also an undisputed fact that the bungalow erected on the impugned land was demolished by the local authorities. Such facts lead to only one conclusion that the stamp duty valuation is not done considering these related factors. In our considered opinion, the matter should have been referred to the District Valuation Officer (DVO) to value the property after considering all the related facts in the impugned land. In the interest of justice and fair play, we therefore, restore this issue to the file of the Assessing Officer. The Assessing Officer is directed to refer the matter to the DVO mentioning the special character of the impugned property and decide the issue afresh after giving reasonable and fair opportunity of being heard to the assessee. In the result, appeal filed by the Revenue is treated as allowed for statistical purpose.