2014 (1) TMI 1625 - AT - Income Tax

Valuation of property u/s 50C - determination of capital gain on sale of land and building -CIT(A) has taken in to account circle rate which is ₹ 24,00,000/- and not the rate adopted by the parties at ₹ 64,10,000/- - Held that - Section 50C is a deeming provision and ostensibly involve creation of an additional tax liability on the assessee and, therefore, notwithstanding the presence of the expression may in section 50C(2)(a), the AO in this case ought to have referred the matter to the valuation officer for ascertaining the value of the capital asset in question. The order of the Commissioner (Appeals) was thus held to be set aside and the AO was directed to adopt the course mentioned in section 50C(2)(a) and thereafter proceed to determine capital gain on sale of land and building. Respectfully following this decision of K.K. Nag Ltd. vs. ACIT 2012 (6) TMI 184 - ITAT PUNE on an identical issue under almost similar facts, we while setting aside the orders of the authorities below on the issue direct the AO to adopt the course mentioned in section 50C(2)(a) and thereafter, proceed to determine capital gain on sale of the properties in question after affording opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Penalty u/s 271(1)(C) - CIT(A) deleted the penalty - Held that - Valuation of property for stamp duty purposes was rebuttable issue hence in order to prove concealment or furnishing of inaccurate particulars, AO had to establish that on money had changed hands or that substantial evidence / material was available to prove that the assessee had filed inaccurate particulars of income. It is an established proposition of law that before invocation of penal provisions laid down u/s 271(1)(c) of the Act, the AO had to establish beyond doubt that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee while claiming the turned down relief resulting in the above addition on the basis of which penal proceedings have been initiated. Also because the addition on which penalty in question has been imposed has been set aside in the above appeal to the file of the AO for fresh consideration in view of the provisions laid down u/s 50C of the Act, the present penalty does not stand. - Decided against revenue.

Summary

Issues:
1. Valuation of property under section 50C of the Income Tax Act, 1961.
2. Referral to Valuation Officer under section 50C(2) of the Act.
3. Penalty under section 271(1)(c) of the Act.

Valuation of Property under Section 50C:
The case involved a dispute regarding the valuation of property for tax purposes under section 50C of the Income Tax Act, 1961. The appellant contested the assessment order that valued the property at Rs. 64,10,000, arguing that the actual sale consideration was Rs. 10,00,000. The appellant claimed that the Assessing Officer (AO) should have referred the valuation of the property to the Valuation Officer under section 50C(2) since the value adopted by the stamp valuation authority exceeded the fair market value. The appellant cited various judicial decisions to support this argument. The Tribunal agreed with the appellant, emphasizing that the AO should have referred the matter to the Valuation Officer instead of deeming the stamp valuation authority's value as the full consideration. The Tribunal set aside the lower authorities' orders and directed the AO to follow the provisions of section 50C(2)(a) to determine the capital gain accurately.

Referral to Valuation Officer under Section 50C(2) of the Act:
The Tribunal analyzed the requirement for the AO to refer the valuation of a property to the Valuation Officer under section 50C(2)(a) if the appellant claimed that the stamp valuation authority's value exceeded the fair market value. Citing precedents, the Tribunal emphasized that the AO's discretion to refer the matter to the Valuation Officer should be exercised judiciously. The Tribunal held that in cases where the stamp valuation authority's value is disputed, the AO must refer the valuation to the Valuation Officer to ascertain the property's true value. The Tribunal overturned the lower authorities' decisions and directed the AO to adopt the procedure outlined in section 50C(2)(a) for determining the capital gain on the property in question.

Penalty under Section 271(1)(c) of the Act:
The Tribunal addressed the penalty imposed under section 271(1)(c) of the Act on the addition of capital gains. The revenue argued that the penalty was justified due to the appellant's actions to lower the tax burden by declaring a lower value for stamp duty purposes. However, the Tribunal agreed with the CIT(A)'s decision to delete the penalty, stating that the AO must establish beyond doubt that there was concealment or furnishing of inaccurate particulars of income. Since the addition forming the basis of the penalty was set aside for fresh consideration due to valuation issues under section 50C, the Tribunal dismissed the penalty. The Tribunal upheld the CIT(A)'s finding that the penalty was not warranted in this case.

In conclusion, the Tribunal's judgment addressed the valuation of property under section 50C, the requirement to refer valuation matters to the Valuation Officer, and the penalty under section 271(1)(c) of the Act. The Tribunal emphasized the importance of accurately determining property values and establishing concealment or inaccurate particulars before imposing penalties, ultimately providing detailed guidance on these legal issues.