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2017 (1) TMI 116 - AT - Income TaxCalculation of capital gain - determining the FMV - Adoption of value of the property as per Stamp Valuation Authorities for the purpose of section 50C - lower authorities have not referred the matter to the Valuation Officer before substituting the stamp value as per stamp valuation authority as consideration for the purpose of calculating the capital gain - Held that - From the facts and ratio laid down by Hon ble High Court in the case of Sunil Kumar Agarwal 2014 (6) TMI 13 - CALCUTTA HIGH COURT if the assessee disputes the value as per stamp valuation authority to be substituted in place of sales consideration for the purpose of calculation of capital gain , then the AO should refer the capital asset to valuation Officer to determine the full value of the consideration received or accruing as a result of transfer of capital asset u/s 50C(2) of the Act. In the instant case before us the assessee is disputing the substitution of stamp valuation as per stamp valuation authority as FMV for the purpose of calculation of capital gain and the matter of determining the FMV should be referred to the DVO. Hence, in the present case, we are inclined to set aside the order of the CIT(A) and restore the issue back to the file of the AO for fresh adjudication of the issue of long term capital gain arising out of sale of plot after referring the matter to DVO and hearing the assessee by affording a fair and reasonable opportunity. The appeal of the assessee is allowed for statistical purposes.
Issues Involved:
1. Adoption of property value as per Stamp Valuation Authorities under Section 50C of the Income Tax Act, 1961. 2. Failure to refer the matter to the Valuation Officer under Section 50C(2) before substituting the stamp value for calculating capital gains. Issue-wise Detailed Analysis: 1. Adoption of Property Value as per Stamp Valuation Authorities under Section 50C: The primary issue in the appeal is the adoption of the property value as per the Stamp Valuation Authorities for the purpose of Section 50C of the Income Tax Act, 1961. The assessee filed a return of income declaring a total income of ?2,23,680/-. During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had shown Long Term Capital Gain (LTCG) on the sale of a plot, with a sale consideration of ?3,00,00,000/-. However, the value of the property as per the Stamp Valuation Authority was ?3,84,00,000/-. The AO issued a show cause notice to the assessee, who failed to provide a satisfactory explanation. Consequently, the AO substituted the value as per the Stamp Valuation Authorities, resulting in an enhanced taxable long term capital gain of ?29,33,450/-. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, citing that the assessee did not make a specific request to refer the matter to the District Valuation Officer (DVO) during the assessment. 2. Failure to Refer the Matter to the Valuation Officer under Section 50C(2): The assessee contended that the AO's action of substituting the stamp value without referring the matter to the DVO was in contravention of Section 50C(2) of the Act. The CIT(A) dismissed the appeal, stating that the assessee did not avail the opportunity provided under Section 50C(2) and relied on the decision of the Madras High Court in Ambattur Clothing Company Ltd, which supported the AO's action. The assessee argued that the valuation report from the registered valuer, which valued the property at ?17.77 lakhs, was ignored. The assessee also referred to a decision by the Calcutta High Court in Sunil Kumar Agarwal v. CIT, which emphasized the necessity of referring the matter to the DVO if the assessee disputes the stamp valuation. Tribunal's Findings: The Tribunal considered the rival contentions and the material on record. It noted that the assessee had disputed the substitution of the stamp valuation authority's value and had even filed a sworn affidavit affirming the same. The Tribunal found that the authorities below erred in not referring the matter to the DVO, especially when the assessee claimed that the Fair Market Value (FMV) was much lower than the stamp valuation. The Tribunal relied on the Calcutta High Court's decision in Sunil Kumar Agarwal, which held that the AO should refer the capital asset to the Valuation Officer for determining the FMV if the assessee disputes the stamp valuation. Conclusion: The Tribunal set aside the order of the CIT(A) and restored the issue to the file of the AO for fresh adjudication. The AO was directed to refer the matter to the DVO and determine the FMV of the property for calculating the capital gains, after affording the assessee a fair and reasonable opportunity. The appeal of the assessee was allowed for statistical purposes. Order Pronouncement: The order was pronounced in the Open Court on 14.12.2016.
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