Section 50C not applicable If Assessee is Buyer of Property: ITAT [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the provisions of section 50C of the Income Tax Act, 1961 will not be applicable if the assessee is the buyer of the property and not the seller.

The Assessee, an individual, purchased two properties during the year. During the proceedings, the Assessing Officer found a huge difference in the purchase price and circle rate and asked the assessee to explain with evidence as to how the properties were purchased at such a lower value as against the higher circle rate.

The AO further referred the matter to DVO and based on the report, he made an assessment under section, 1961.

Before the authorities, the assessee had filed sale deeds of properties in a similar vicinity at about the same time which were also sold at a price below the circle rate. The assessee submitted that the provisions of section 50C are not applicable in the present case as the assessee is the buyer of the property and not seller of the property. According to the assessee, the provision of section 50C is applicable only in the hands of the seller of the land or building or both and not in the hands of the buyer of the property. Similarly, it was contended that the provisions of section 56 (2) (vii) (b) of the Income Tax Act are also not applicable to the assessee since these provisions were introduced by the finance bill 2013 w.e.f. 01.04.2014 whereas the assessment year involved in the assessment year 2011-12.

While considering the second appeal, the Tribunal held that “In the present case since the assessee is a buyer of the property and not the seller of the property, therefore, the provisions of section 50C are not applicable. Similarly, the assessment year involved is 2011-12 and, therefore, the provisions of section i.e. 56 (2)(vii) (b), which were introduced by finance bill 2013 w.e.f. 01.04.2014 are also not applicable. As per the said amendment if the immovable properties are purchased /received for inadequate consideration, i.e. less than stamp duty value by Rs.50,000/- or more, then the difference between the stamp duty value and inadequate consideration shall be taxable in the hands of the individual or HUF as income from other sources.”