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2011 (4) TMI 868 - AT - Income TaxReference to DVO - Applicability of section 55A - whether AO bears a power to refer any other case if he is of the opinion that fair market value of assets exceeds the value shown - Held that - Understanding the expression full value of consideration (section 48) does not have the same meaning and cannot be used in place of fair market value (section 55A). Section 48 do not prescribe that the capital gain is to be computed on the fair market value of a capital asset but it only prescribes to charge capital gain on the consideration received therefore section 55A cannot be used for the purpose of computation of capital gain under section 48 of I.T. Act. There is no clause of substitution while computing the capital gain under section 48 and the gain has to be computed on the basis of the full value of the consideration . If the AO is of the opinion that valuation of the capital asset is required but such reference can be made only to ascertain the fair market value therefore the applicability of section 55A(b)(ii) is also limited one - section 55A cannot give any assistance to compute the capital gain under section 48 of the I.T. Act. AO is empowered to refer for valuation of a capital asset under specific circumstances as prescribed under this section provision of section 50C where he has found that the consideration received is less than the stamp duty. Whereas in the present appeal there is a finding on facts that the consideration is not less than the stamp duty. Admitted factual position is that the Jantri rate as per the Stamp Duty Authority was at Rs. 4, 500 and Rs. 7, 000 per sq.meter respectively for the Plot Nos.161/1 & 181/1 whereas the assessee had sold them @ Rs. 41, 860 per sq.mtr. Therefore the AO was not empowered to refer to DVO because as per section 50C(2) the AO may refer the valuation of a capital asset where assessee claims before AO that the value adopted by the Stamp Valuation Authority exceeds the fair market value of the property as on the date of transfer - in favour of assessee.
Issues Involved:
1. Applicability of Section 55A of the I.T. Act. 2. Legality of the reference made to the DVO under Section 55A. 3. Deletion of the addition of Rs. 62,34,459 by the CIT(A). Detailed Analysis: 1. Applicability of Section 55A of the I.T. Act: The Revenue argued that the Assessing Officer (AO) referred the property valuation to the Departmental Valuation Officer (DVO) under Section 55A(b)(ii) of the I.T. Act, contending that the fair market value of the asset exceeded the value shown by the assessee. The CIT(A), however, held that Section 55A is applicable only in specific cases, such as those covered by Sections 45(1A), 45(2), and 45(4) of the I.T. Act, and not for general cases of capital gains computation. The Tribunal supported the CIT(A)'s view, emphasizing that Section 55A is intended to ascertain the fair market value of a capital asset for specific purposes and not for substituting the full value of consideration received in capital gains computations under Section 48. 2. Legality of the Reference Made to the DVO Under Section 55A: The CIT(A) questioned the legality of the reference made to the DVO under Section 55A, arguing that the AO's action was not justified. The Tribunal agreed, stating that Section 55A is meant to ascertain the fair market value of a capital asset, but it cannot be used to substitute the full value of consideration received for the purpose of capital gains computation under Section 48. The Tribunal cited the Delhi High Court's ruling in Smt. Nilofer I. Singh's case, which clarified that the full value of consideration refers to the actual sale price received and not the fair market value. Consequently, the Tribunal concluded that the AO's reference to the DVO was not legally sustainable. 3. Deletion of the Addition of Rs. 62,34,459 by the CIT(A): The AO had added Rs. 62,34,459 to the assessee's income based on the DVO's valuation report, which estimated the property value at Rs. 45,000 per sq. meter, higher than the sale consideration shown by the assessee. The CIT(A) deleted this addition, reasoning that the sale consideration disclosed was higher than the stamp duty value, and thus, the provisions of Section 50C were not applicable. The Tribunal upheld the CIT(A)'s decision, noting that the 'jantri rate' (stamp duty authority's rate) was significantly lower than the sale consideration disclosed by the assessee. Therefore, the AO was not justified in substituting the sale consideration with the DVO's valuation. The Tribunal also noted that the AO did not specifically invoke Section 50C, further supporting the CIT(A)'s decision to delete the addition. Conclusion: The Tribunal dismissed all the appeals of the Revenue, affirming the CIT(A)'s decision. The key points included the limited applicability of Section 55A for ascertaining fair market value, the inappropriateness of using Section 55A to substitute the full value of consideration in capital gains computations, and the correctness of deleting the addition made by the AO based on the DVO's valuation. The Tribunal emphasized that the sale consideration disclosed by the assessee was higher than the stamp duty value, making the AO's reference to the DVO and the consequential addition legally unsustainable.
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