2010 (3) TMI 1123 - AT - Income Tax

Summary

Issues Involved:
1. Computation of capital gain on account of sale of agricultural land.
2. Application of section 50C of the Income-tax Act, 1961.
3. Valuation of property by the departmental valuation cell.

Summary:

Issue 1: Computation of Capital Gain on Sale of Agricultural Land
The assessees, husband and wife, sold agricultural land measuring 51 cents in Sowripalayam Village for Rs. 34 lakhs. The Assessing Officer noted that the stamp valuation authority had fixed the market value at Rs. 1,00,06,200/-. The assessees argued that the guideline value as per the Tamil Nadu Registration Department was Rs. 21,52,000/- per acre, and thus the sale price of Rs. 34 lakhs was reasonable. They also provided evidence of a nearby land sale at a lower price and requested the Assessing Officer to refer the matter to the valuation authority.

Issue 2: Application of Section 50C of the Income-tax Act, 1961
The Assessing Officer applied section 50C of the Act, which mandates considering the value adopted by the stamp valuation authority for stamp duty purposes as the sale consideration. Consequently, the capital gain was reworked based on the higher value of Rs. 1,00,06,200/-, resulting in a significant increase in capital gains.

Issue 3: Valuation of Property by the Departmental Valuation Cell
The assessees requested a valuation by the departmental valuation cell, which declined, stating that they did not estimate the value of agricultural land. The assessees then provided a registered valuer's report valuing the property at Rs. 15,30,000/-. The CIT(A) upheld the Assessing Officer's decision, emphasizing the mandatory nature of section 50C(1).

Tribunal's Findings:
The Tribunal noted that as per section 50C(2), if the assessee claims that the stamp valuation exceeds the fair market value, the Assessing Officer must refer the valuation to a valuation officer. The valuation officer is obligated to estimate the value and provide a report. The Tribunal found that the departmental valuer's refusal to value the property was a failure to carry out a statutory duty. The Assessing Officer, having made the reference, could not rely solely on section 50C(1) without considering the valuation officer's estimate.

Conclusion:
The Tribunal directed the Assessing Officer to refer the matter back to the valuation officer for a proper valuation of the property as on the date of sale. The valuation officer must provide an estimate, and the Assessing Officer should proceed with the assessment of capital gains based on this valuation. The appeals were allowed for statistical purposes with these directions.