Once Safe Harbour Rule Of 5% Is Held As Applicable, No Addition Can Be Made By Invoking Sec 50C, Reiterates Kolkata ITAT
On finding that CIT(A) was justified in adopting the valuation given by the DVO and has rightly considered the safe harbour rule of 5% as per third proviso to section 50C of the Income Tax Act, 1961, the Kolkata ITAT upheld the CIT(A)'s decision to delete the addition made under the head of “Capital gains”.The Bench of the ITAT comprising of Sanjay Garg (Judicial Member) and Manish...
On finding that CIT(A) was justified in adopting the valuation given by the DVO and has rightly considered the safe harbour rule of 5% as per third proviso to section 50C of the Income Tax Act, 1961, the Kolkata ITAT upheld the CIT(A)'s decision to delete the addition made under the head of “Capital gains”.
The Bench of the ITAT comprising of Sanjay Garg (Judicial Member) and Manish Borad (Accountant Member) reiterated while agreeing with the CIT(A)'s observation that, “once the safe harbour rule of 5% is held to be applicable in appellant's case, no addition could be made by invoking the provisions of section 50C. Consequently, assessee's computation in respect of capital, gains would be acceptable and consequently there will be no occasion to disturb the WDV in respect of buildings. This would also imply that depreciation worked out as per remaining WDV in the depreciation chart would be same as declared by the assessee. Hence, addition in respect of excess claim of depreciation is not sustainable.” (Para 7)
As per the brief facts of the case, the Assessee's return was selected for scrutiny, wherein AO completed the assessment after disallowing the claim of loss from Dollar trading amounting to Rs.1,54,38,794/-, disallowance on account of difference of capital gain u/s. 50C at Rs.15,08,720/-. Income assessed at Rs.54,73,369/- under normal provisions and at Rs.46,09,966/- under sec. 115JB.
The Bench noted that the assessee is the one fourth owner of the property and, therefore, the difference in the value of stamp valuation authority and disclosed in the sale deed amounted to Rs.47,76,958/- (1/4th share) and after giving benefit of indexed cost and considering the excess depreciation wrongly claimed, AO held that there is a short fall in the capital gain offered to tax by Rs.15,08,720/-.
The Bench further noted that when the matter was carried in appeal before the First Appellate Authority, assessee got relief as CIT(A) after considering the valuation report of the DVO and also considering the safe harbour rule of 5% as per the 3rd proviso to section 50C allowed in favour of the assessee.
The Bench observed that the Department is failed to controvert the finding of the CIT(A) by placing any contrary material on record and, therefore, since the Departmental Valuation officer's report (DVO) was not received before the conclusion of assessment proceeding, the AO adopted the valuation as per the stamp valuation authority.
Therefore, on finding no interference is required to be called in the finding of CIT(A), ITAT dismissed the revenue's appeal.
Counsel for Appellant/Department: Raman Garg
Counsel for Respondent/Taxpayer: Siddharth Agarwal
Case Title: DCIT verses Delight Suppliers Pvt. Ltd.
Case Number: I.T.A. No.285/KOL/2023