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2012 (1) TMI 229 - AT - Income TaxChallenge the valuation determined by the DVO as per the provisions of s. 50C(2) - business of construction activities/promoters - sale consideration of basement Nos. 2 and 3 as - valuation of the stamp by Departmental Valuation Officer (DVO) - fair market value (FMV) of the property - calculating the capital gain - HELD THAT - In the instant case we find that as against the value of ₹ 28,73,000 adopted by the stamp valuation authorities, the DVO has determined the FMV on the date of transfer at ₹ 20,55,000. This itself shows that there is wide variation between the two values. Further, the value adopted by the DVO is also based on some estimate. We find that the difference between the sale consideration shown by the assessee at ₹ 19,00,000 and the FMV determined by the DVO at ₹ 20,55,000 is only ₹ 1,55,000 which is less than 10 per cent. The Courts and Tribunals are consistently taking a liberal approach in favour of the assessee where the difference between the value adopted by the assessee and the value adopted by the DVO is less than 10 per cent. Since the difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference is bound to occur, we are of the considered opinion that the AO in the instant case is not justified in substituting the sale consideration at ₹ 20,55,000 as against the actual sale consideration of ₹ 19,00,000 disclosed by the assessee. We, therefore, set aside the order of the CIT(A) and direct the AO to take ₹ 19,00,000 only as the sale consideration of the property. The grounds raised by the assessee are accordingly allowed. In the result, the appeal filed by the assessee is allowed.
Issues Involved:
1. Applicability of Section 50C(1) of the IT Act, 1961. 2. Valuation of property for capital gains calculation. 3. Difference between sale consideration and valuation by DVO. 4. Right to challenge DVO's valuation under Section 50C(2). Detailed Analysis: 1. Applicability of Section 50C(1) of the IT Act, 1961: The primary issue revolves around whether the provisions of Section 50C(1) are applicable to the assessee's case. The AO observed that the sale consideration shown by the assessee was Rs. 19 lakhs, whereas the stamp valuation authorities adopted a value of Rs. 28,73,000. The AO referred the matter to the Departmental Valuation Officer (DVO), who estimated the fair market value (FMV) at Rs. 20,55,000. The AO substituted this value for calculating capital gains, which was upheld by the CIT(A). 2. Valuation of Property for Capital Gains Calculation: The assessee argued that the basement had no commercial value, had a lower height, was prone to waterlogging, was old, and was sold on an "as is where is" basis. The initial booking was done in 2001, and possession was given in 2003, with registration in 2004. Despite these arguments, the AO and CIT(A) maintained that the provisions of Section 50C(1) are unambiguous and the AO is bound to adopt the valuation by the stamp valuation authorities or the DVO. 3. Difference Between Sale Consideration and Valuation by DVO: The assessee contended that the difference between the sale consideration (Rs. 19 lakhs) and the DVO's valuation (Rs. 20,55,000) was marginal (8.5%), within the tolerance limit of 15% as held by the Supreme Court in C.B. Gautam vs. Union of India. The assessee argued that the AO did not consider the objections properly and that the marginal difference should not justify an addition. 4. Right to Challenge DVO's Valuation under Section 50C(2): The assessee's counsel argued that the assessee could challenge the DVO's valuation under Section 50C(2), and if barred from doing so, the provisions would become redundant. The Departmental Representative countered that once the DVO's valuation is adopted, the AO has no option but to accept it. The Tribunal noted that the valuation adopted by the DVO is subject to appeal and is not final. The difference between the sale consideration and the DVO's valuation was less than 10%, and courts and tribunals have consistently taken a liberal approach in such cases. Conclusion: The Tribunal found that the difference between the sale consideration and the DVO's valuation was less than 10%, and valuation is inherently a matter of estimation with some degree of difference. The Tribunal concluded that the AO was not justified in substituting the sale consideration with the DVO's valuation. The Tribunal set aside the CIT(A)'s order and directed the AO to take the sale consideration as Rs. 19 lakhs, as disclosed by the assessee. The appeal filed by the assessee was allowed.
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