2011 (7) TMI 421 - AT - Income Tax

Valuation under section 142A - Determination of fair market value of the investment - It is a settled law that in a case where there is clash between two provision dealing with the same subject and in the same statute, the specific provisions will override the general provisions. Provisions of section 50C are specific provisions for determination of full value of consideration in respect land or building or both and therefore, they will override provisions of section 55A of the Act - It is clear that provisions of section 142A of the Act are applicable for valuation of investments - For the purpose of computation of capital gains, stamp duty valuation has to be taken as full value of the consideration - Therefore, the Assessing Officer was not justified in making reference to the valuation cell under section 142A of the Act as the reference is to be made for the purpose of determination of fair market value of the investment covered under section 69, 69A and 69B of the Act and not for the purpose of computation of capital gains u/s 48 of the Act. Addition of Rs. 24,98,600 on the basis of DVO s report - As per provisions of section 50C the full value of consideration in the absence of any material to show that under-hand money had been passed, has to be taken as per stamp valuation authority - Therefore, if the sale has been made at the rates prescribed by the stamp valuation authority, no addition can be made - However, if sale has been made at lower value than the value prescribed by stamp valuation authority for the purpose of stamp duty, the Assessing Officer will adopt the valuation as per Stamp Duty Act - Therefore, direct the Assessing Officer to adopt the full value of consideration, as per provisions of section 50C of the Act - Decided in favour of assessee.

Summary

Issues:
1. Correctness of making a reference to the valuation cell under section 142A of the Income-tax Act.
2. Validity of upholding the addition of Rs. 24,98,600 based on the DVO's report.

Issue 1: Making Reference to Valuation Cell under Section 142A:
The case involved an appeal regarding the Assessing Officer's reference to the DVO for valuation under section 142A of the Income-tax Act. The Assessing Officer had referred the matter to the DVO due to dissatisfaction with the declared sale consideration of a property. The CIT (Appeals) dismissed the contention that the reference was made under the wrong section, stating that the Assessing Officer had statutory power to refer to the valuation cell under various sections, including section 142A. The appellant argued that reference under section 142A was not justified for computing capital gains, as full value of consideration is essential under section 48. However, the Tribunal ruled that section 142A is for valuing investments, while stamp duty valuation is crucial for computing capital gains, indicating the Assessing Officer's error in referring under section 142A.

Issue 2: Addition Based on DVO's Report:
The second issue pertained to upholding the addition of Rs. 24,98,600 based on the DVO's report. The CIT (Appeals) supported the addition, noting that the DVO followed correct procedures and considered comparable properties for valuation. The appellant argued that the comparison property was not in the same location and that section 50C should apply, preventing additions without evidence of under-hand money. The Tribunal reiterated that capital gains are based on full value of consideration, not fair market value, as per section 48. It emphasized that without proof of under-hand money, the stamp valuation authority's rates determine the full value of consideration. Consequently, the Tribunal directed the Assessing Officer to adopt the full value of consideration as per section 50C, allowing the appeal.

This detailed analysis of the judgment from the Appellate Tribunal ITAT DELHI highlights the issues, arguments presented, and the Tribunal's conclusions on each aspect of the case.