2017 (5) TMI 1151 - AT - Income Tax

Capital gain computation - whether the fair market value of the property can be substituted in place of full value of consideration in section 48? - Held that - Full value of consideration mentioned in section 48 of the Act may be replaced by the value assessed or adopted by the stamp value authorities or fair market value only if section 50C of the Act applies in this case and which depends on the fact whether the sale transaction was registered by the stamp valuation authorities. If the property in question has been sold through registered sale deed and the value adopted or assessed by the stamp valuation authority is higher than the value declared by the assessee in the return of income, the provisions of Section 50C of the Act are clearly applicable. If the sale transaction in question is not registered with stamp value authorities, then full value of consideration has to be accepted as declared by the assessee following the decision in the case of Quark Media House (India) Pvt. Ltd. (2017 (1) TMI 1290 - PUNJAB AND HARYANA HIGH COURT). Since this issue has not been properly verified by the learned CIT(A) while holding that the provisions of Section 50C of the Act are not applicable in the case, we feel it appropriate to restore the issue to the file of the Assessing Officer to examine the issue afresh. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Comparability of properties for valuation.
2. Ownership and share of property.
3. Proximity of properties.
4. Relevance of the Valuation Officer's report.
5. Conditions for acceptance of valuation reports.
6. Judicial precedents on valuation reports.
7. Comparable sales and estimation of property value.

Issue-wise Detailed Analysis:

1. Comparability of Properties for Valuation:
The appellant claimed that the plot of land No. A-2/204, Paschim Vihar, Delhi, was not comparable to the first floor of house No. 37, Punjabi Bagh (West), New Delhi. The lower authorities failed to appreciate the differences in ownership and location specifics, which affected the valuation.

2. Ownership and Share of Property:
The appellant argued that the one-third share of the first floor of house No. 37, Punjabi Bagh (West) belonged to him, while the remaining two-thirds belonged to his wife. The long-term capital loss for the wife's share was accepted by the Department, but the appellant's share was disputed.

3. Proximity of Properties:
The appellant contended that the properties in question were three kilometers apart, affecting their comparability and valuation.

4. Relevance of the Valuation Officer's Report:
The appellant challenged the relevance of the Valuation Officer's report, arguing that it was not pertinent for determining the value of the first floor of house No. 37, Punjabi Bagh (West).

5. Conditions for Acceptance of Valuation Reports:
The appellant emphasized that unless the properties were similar in situation, location, shape, size, emplacement, and utilities, the valuation report should not be accepted.

6. Judicial Precedents on Valuation Reports:
The appellant cited several High Court judgments, including Mani Singh Avtar Singh Vs IAC and others, where valuation reports not based on comparable properties were quashed. The appellant argued that similar principles should apply in this case.

7. Comparable Sales and Estimation of Property Value:
The appellant highlighted a comparable sale of the ground floor along with the first mezzanine room of house No. 64/4, Punjabi Bagh (West), New Delhi, for ?10 lakhs. The CIT(A) assumed a value of ?20,000 per sq. m. for the land and estimated the construction cost without a valid basis. The appellant disputed the estimated value of ?50,86,326 against the sale consideration of ?22 lakhs.

Tribunal's Analysis and Decision:
The Tribunal examined whether the "fair market value of the property" could be substituted for the "full value of consideration" under Section 48 of the Act. The Tribunal noted that Section 50C of the Act, introduced w.e.f. 01.04.2003, allows for such substitution if the consideration received is less than the value adopted or assessed by the stamp valuation authority. The Tribunal observed that the Assessing Officer did not invoke Section 50C and referred the matter to the Valuation Officer without following the procedures under Section 50C(2).

The Tribunal referred to the decision of the Hon’ble High Court of Punjab & Haryana in Quark Media House India (P.) Ltd., which held that without evidence of additional consideration, the reference to the DVO under Section 55A was without jurisdiction. The Tribunal found that the CIT(A) did not properly verify the applicability of Section 50C, as there was ambiguity regarding the circle rates prior to 18.07.2007.

The Tribunal concluded that if the property was sold through a registered sale deed and the stamp valuation authority's value was higher than the declared value, Section 50C would apply. If not registered, the declared value should be accepted. The Tribunal restored the issue to the Assessing Officer for verification and fresh decision.

Conclusion:
The appeal was allowed for statistical purposes, and the decision was pronounced on 19th May 2017.