2018 (5) TMI 1723 - AT - Income Tax

Determination of fair market value u/s 50C(2) - capital gain computation - obligation to refer the matter to the Valuation Officer to ascertain the fair market value of the property - Held that - If the assessee has made a specific claim before the AO to get the fair market value ascertain from the valuation authority, then AO is under legal obligation to call for the valuation report failing which assessment order is not valid and justified. See ITO vs. M/s Aditya Narian Verma (HUF) 2017 (6) TMI 542 - ITAT DELHI - Decided in favor of assessee.

Summary

Issues:
1. Whether the Assessing Officer was legally obliged to refer the matter to the valuation authority to ascertain the fair market value of the property under section 50C of the Income Tax Act, 1961?

Analysis:
The appellant, Assistant Commissioner of Income-tax, challenged the order passed by Ld. CIT(A)-XXIV, New Delhi, seeking to set aside the impugned order dated 01.10.2014 for Assessment Year 2011-12. The grounds of appeal included the deletion of addition made by the AO invoking section 50C of the Act, failure to consider the timing of the request for property valuation, and reserving the right to amend the appeal grounds. The AO noticed that the assessee sold a property undervalued in the sale deed, leading to a discrepancy in the sale consideration. The AO made an addition on account of long-term capital gain without referring the matter to the Valuation Officer as requested by the assessee.

During the proceedings, the Ld. CIT(A) deleted the addition made by the AO, prompting the Revenue to appeal before the Tribunal. The Tribunal analyzed the facts, noting the difference between the sale consideration and stamp duty valuation. The key issue was whether the AO was obligated to refer the matter to the valuation authority to determine the fair market value. The Tribunal referred to section 50C(2) of the Act, which mandates the AO to call for a valuation report if the assessee requests it. Failure to do so renders the assessment order invalid.

Citing a previous Tribunal decision in a similar case, the Tribunal emphasized that non-compliance with the provisions of section 50C(2) by the Assessing Officer cannot be justified. Relying on legal precedents, the Tribunal upheld the Ld. CIT(A)'s decision to delete the addition. The Tribunal found no illegality or perversity in the Ld. CIT(A)'s order and dismissed the Revenue's appeal. The judgment highlighted the importance of following legal procedures and ensuring fair valuation practices in determining capital gains under the Income Tax Act, 1961.