2018 (9) TMI 343 - AT - Income Tax

Addition u/s. 50C - mandation on the part of the AO to refer the matter to the DVO - Held that - The matter be remitted to the file of the Assessing Officer for adjudication of the same de novo upon making reference to the DVO and to complete the assessment on the basis of the valuation so received from the DVO. We pass orders accordingly and direct the Assessing Officer to decide the matter afresh on the basis of the valuation to be made by the DVO by passing a speaking order in accordance with law upon giving a reasonable opportunity of hearing to the assessee. - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
- Confirmation of addition under Section 50C of the Income-tax Act
- Adoption of full value of sale consideration
- Referral to the Departmental Valuation Officer (DVO)

Confirmation of Addition under Section 50C:
The appeal was filed against the order confirming the addition of ?28,37,120 under Section 50C of the Income-tax Act. The assessee sold two plots at a lower sale consideration than the value adopted by the stamp valuation authority. The Assessing Officer concluded that the conditions under Section 50C were met, leading to the assessment of Short Term Capital Gain (STCG) at ?28,78,120. The assessee disputed this, claiming the sale consideration was in line with market rates. However, the contention was rejected. The Assessing Officer relied on the stamp valuation authority's assessment of ?41,68,800 for each plot, resulting in the addition to the total income of the assessee.

Adoption of Full Value of Sale Consideration:
The assessee contested the adoption of ?41,68,600 as the full value of sale consideration for each plot under Section 50C, which was higher than the actual sale consideration of ?27,50,000 per plot. The assessee argued that the valuation was not accurate and should have been referred to the DVO. The Co-ordinate Bench's judgments emphasized that even without a specific request from the assessee, the Assessing Officer must offer the option to refer the matter to the DVO under Section 50C(2). The failure to do so was a crucial oversight in this case, as highlighted by the judgments cited by the assessee's representative.

Referral to the Departmental Valuation Officer (DVO):
The Assessing Officer's failure to refer the matter to the DVO, despite the dispute over valuation, was a significant issue raised in the appeal. The Co-ordinate Bench's decisions and the legal position clarified that the Assessing Officer must provide the option to refer the valuation to the DVO, even without a specific request from the assessee. The failure to follow this procedure led to the appeal's success, with the Tribunal directing the Assessing Officer to reevaluate the matter de novo after obtaining the DVO's valuation. The judgment emphasized the importance of fair treatment and adherence to legal procedures in such cases.

In conclusion, the judgment highlighted the necessity of following proper procedures and providing fair treatment to taxpayers in valuation disputes under Section 50C of the Income-tax Act. The failure to refer the matter to the DVO and consider market rates appropriately resulted in the appeal being allowed for statistical purposes, with directions to reassess the matter in accordance with legal requirements.