2017 (6) TMI 542 - AT - Income Tax

Capital gain computation - revenue treating the fair market value as consideration received on the transfer of the property - applicability of provisions of 50C - Held that - When the assessee in the present case had claimed before Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub section (1) exceeds the fair market value of the property as on the date of transfer, the Assessing Officer should have referred the valuation of the capital asset to a valuation officer instead of adopting the value taken by the state authority for the purpose of stamp duty. The very purpose of the Legislature behind the provisions laid down under sub section (2) to section 50C of the Act is that a valuation officer is an expert of the subject for such valuation and is certainly in a better position than the Assessing Officer to determine the valuation. Thus, non-compliance of the provisions laid down under sub section (2) by the Assessing Officer cannot be held valid and justified. As in the case of Shashi Kant Garg (2005 (8) TMI 81 - ALLAHABAD High Court) has been pleased to hold that it is well settled that if under the provisions of the Act an authority is required to exercise powers or to do an act in a particular manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner. - Decided against revenue.

Summary

Issues:
1. Validity of first appellate order annulling the order passed by the Assessing Officer.
2. Interpretation of section 50C regarding full value of consideration.
3. Requirement of referring the case to Valuation Officer under section 50C 2(a) of the Income Tax Act, 1961.

Analysis:

Issue 1:
The Revenue challenged the first appellate order that annulled the Assessing Officer's order. The Assessing Officer computed long term capital gain based on fair market value, as per section 50C of the Income Tax Act. However, the assessee argued that distressing circumstances affected the property's value, which was not accepted by the Assessing Officer. The Commissioner of Income Tax (Appeals) accepted the assessee's explanation, annulling the assessment. The Senior Departmental Representative argued that the Assessing Officer followed the procedure under section 50C. On the other hand, the Authorized Representative justified the first appellate order, emphasizing the need for a valuation officer's involvement when fair market value differs from stamp valuation. The Authorized Representative provided detailed evidence supporting the distressing circumstances affecting the property's value.

Issue 2:
The provisions of section 50C were analyzed in detail. The Tribunal concurred with the Commissioner of Income Tax (Appeals) that the Assessing Officer should have referred the valuation to a valuation officer when the fair market value differed from stamp valuation. Non-compliance with section 50C(2) by the Assessing Officer was deemed invalid. Legal precedents were cited to support the requirement of exercising powers or acts in a specified manner under the law. The Tribunal upheld the first appellate order annulling the assessment based on these grounds.

Issue 3:
The Tribunal emphasized the importance of complying with section 50C(2), which mandates referring the valuation to a valuation officer when necessary. The Tribunal highlighted that the valuation officer's expertise is crucial in determining property valuation accurately. Citing legal precedents, the Tribunal rejected the Revenue's grounds and dismissed the appeal, upholding the first appellate order.

In conclusion, the Tribunal dismissed the appeal, affirming the first appellate order annulling the assessment due to non-compliance with the provisions of section 50C regarding valuation of property for capital gains calculation.