2013 (9) TMI 153 - AT - Income Tax

Valuation u/s 50C - determined by the Stamp Valuation Authority is higher than the sale consideration declared by the assessee. - Held that - There is no merits in assessee s claim of undue hardships being caused to the taxpayers unless a tolerance band is read into the provisions of the section 50C and unless suitable adjustments are required to be made for long time gap between the date of agreement and actual sales. When a provision for tolerance band is not prescribed in the statute, it cannot be open to us to read the same into the statutory provisions of section 50 C- no matter howsoever desirable such a provision be, even if that be so. - Decision in the case of Smt. Tarulata Shyam v. CIT 1977 (4) TMI 3 - SUPREME Court followed. The safeguard built in section 50C does envisage a situation that whenever assessee claims that the fair market value of the property is less than the stamp duty valuation of the property, a reference can be made to the Departmental Valuation Officer and all these issues relating to valuation of the property - either on the issue of allowing a reasonable margin for market variations, or on the issue of making adjustments for agreements having been entered long ago, can be taken up, before the Departmental Valuation Officer and, therefore, subsequent appellate forums as well. The inherent flexibility in this course of action come to the rescue of the assessee particularly in the case of marginal differences but then instead of the assessee decided to question very application of Section 50C something which we find to be devoid of legally sustainable merits - Decided against assessee.

Summary

Issues Involved:
1. Whether the Assessing Officer (AO) correctly adopted the stamp duty valuation as the full value of consideration for computing capital gains under Section 50C of the Income-tax Act, 1961.
2. Whether a tolerance band should be considered for minor differences between the sale consideration and stamp duty valuation.
3. Whether the substantial time gap between the date of agreement and the date of conveyance affects the applicability of Section 50C.

Issue-wise Detailed Analysis:

1. Adoption of Stamp Duty Valuation for Capital Gains Computation:
The core issue revolves around the AO adopting the stamp duty valuation as the full value of consideration for computing capital gains, as per Section 50C of the Income-tax Act, 1961. The AO observed that the sale consideration declared by the assessee was lower than the stamp duty valuation. Consequently, the AO invoked Section 50C, which mandates that if the sale consideration is less than the value adopted by the stamp valuation authority, the latter should be deemed as the full value of consideration for capital gains computation. The Commissioner of Income Tax (Appeals) upheld this decision, emphasizing that Section 50C(1) is clear and unambiguous, leaving no discretion to the AO. The CIT(A) noted that the cases cited by the appellant were factually different and not applicable to the present case.

2. Tolerance Band for Minor Differences:
The appellant argued that a tolerance band should be considered for minor differences between the sale consideration and the stamp duty valuation, citing the Supreme Court's decision in C.B. Gautam v. Union of India, which recognized a tolerance limit for pre-emptive purchase of property under Chapter XXC. The appellant contended that a similar tolerance should apply to Section 50C, as minor differences could be due to several factors and do not necessarily indicate tax evasion. However, the Tribunal rejected this argument, stating that when a provision for tolerance band is not prescribed in the statute, it cannot be read into the statutory provisions. The Tribunal emphasized that its duty is to interpret the law as it exists, and any perceived gaps in the legislation can only be remedied by legislative action, not judicial interpretation.

3. Time Gap Between Agreement and Conveyance:
The appellant also contended that the substantial time gap between the date of agreement and the date of conveyance should affect the applicability of Section 50C, as property values at two materially different points in time cannot be compared. The Tribunal dismissed this argument, noting that Section 50C includes safeguards that allow the assessee to claim that the fair market value is less than the stamp duty valuation, in which case a reference can be made to the Departmental Valuation Officer. The Tribunal found that the inherent flexibility in this process addresses concerns related to market variations and time gaps, and the appellant's decision to question the very application of Section 50C was devoid of legally sustainable merits.

Conclusion:
The Tribunal upheld the AO's decision to adopt the stamp duty valuation as the full value of consideration for computing capital gains under Section 50C. It rejected the appellant's arguments for a tolerance band and adjustments for time gaps, emphasizing that such provisions are not prescribed in the statute and any perceived gaps must be addressed through legislative action. The appeal was dismissed, affirming the correctness of the AO's and CIT(A)'s actions.