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2018 (7) TMI 940 - AT - Income TaxLong term capital gains on sale of immovable property - fair market value adopted by the A.O. as per the provisions of section 50C - Non reference to DVO - Held that - In case of dispute, the assessee is free to approach the stamp valuation authority. In case the assessee did not dispute in any appeal or revision or no reference has been made before any High Court, and objects before the AO for adopting the SRO value for capital gains as per section 50C, the A.O. may refer the valuation of the capital asset to valuation officer and the value determined by the valuation authority shall be taken as full value for the purpose of capital gains. In the instant case, the assessee has not disputed the valuation made by the stamp valuation authorities for the purpose of stamp duties but objected for adoption of the same for capital gains. The assessee explained that SRO value was not disputed because of payment of stamp duty by the buyer. The assessee also did not request the AO for making reference to the Departmental valuation officer (DVO) for valuing the property. Assessee brought on record regarding the non exclusion of tenants share and complexities involved in sale of the property and for getting the lesser rate - AO should have referred to the Departmental Valuation cell for valuing the property as provided in section 50C(2). Since the AO has ignored the objections of the assessee and failed to refer the valuation of property to the DVO, we are of the opinion that the case should be remitted back to the file of the A.O. to make reference to the DVO to determine the fair market value of the property for the purpose of computation of capital gains - Appeals filed by the revenue are allowed for statistical purposes.
Issues Involved:
1. Fair market value adoption under Section 50C of the Income Tax Act, 1961. 2. Assessment of long-term capital gains on the sale of immovable property. 3. Reference to the Departmental Valuation Officer (DVO) for property valuation. Issue-wise Detailed Analysis: 1. Fair Market Value Adoption under Section 50C: The primary issue in these appeals is the fair market value adopted by the Assessing Officer (A.O.) under Section 50C of the Income Tax Act, 1961, for computing long-term capital gains on the sale of immovable property. The property in question, located in Nahur village, Mumbai, was sold by the assessee and co-owners for ?12.00 crores, with the assessee’s 1/4th share being ?3.00 crores. However, the Stamp Valuation Authority valued the property at ?21,69,07,000/-, making the assessee’s share ?5,42,26,750/-. The A.O. adopted this higher valuation, leading to a dispute. 2. Assessment of Long-Term Capital Gains: The A.O. assessed the long-term capital gains based on the higher valuation determined by the Stamp Valuation Authority, resulting in an additional tax liability for the assessee. The assessee argued that the property was leased out, had no approach road, was marked for government acquisition, and was under Railway buffer reserve systems, all of which contributed to a lower market price. Despite these arguments, the A.O. did not accept the assessee’s explanation and proceeded with the higher valuation for tax purposes. 3. Reference to the Departmental Valuation Officer (DVO): The assessee contended that the A.O. should have referred the valuation to the DVO as provided by sub-section 2 of Section 50C of the Act, especially since the valuation by the Stamp Valuation Authority was contested. The Commissioner of Income Tax (Appeals) [CIT(A)] observed that the A.O. should have made this reference given the objections raised by the assessee. The CIT(A) allowed the appeal in favor of the assessee, noting that the A.O. failed to refer the valuation to the DVO, which was a procedural lapse. Tribunal’s Findings: The Tribunal examined the facts and found that the A.O. did not consider the complexities involved in the property sale, such as the lease and the area occupied by tenants. The Tribunal emphasized that Section 50C(2) of the Act mandates a reference to the DVO if the assessee disputes the valuation adopted by the Stamp Valuation Authority. The Tribunal noted that the CIT(A) relied on case laws that were not directly applicable to the present case, as they pertained to unexplained investments and deemed gifts, not the assessment of capital gains under Section 50C. Conclusion: The Tribunal set aside the CIT(A)’s order and remitted the matter back to the A.O. for fresh adjudication. The A.O. was directed to refer the property valuation to the DVO and determine the fair market value for computing capital gains. The Tribunal also allowed the revenue’s appeals and the assessee’s cross objections for statistical purposes, permitting the assessee to raise any other relevant grounds before the A.O. Pronouncement: The above order was pronounced in the open court on 11th July 2018.
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