2021 (2) TMI 1024 - AT - Income Tax

Capital gain computation on sale of lands - difference in value determined by DVO and value declared by assessee - CIT(Appeals) directing the AO to substitute the value determined by DVO on reference u/s.50(2) as deemed value of consideration received on sale of land u/s.50C - AO mad addition solely on the basis of difference between the rate adopted by stamp valuation authority solely on the basis of sale consideration shown by the assessee and the value determined by the stamp valuation authority - HELD THAT - Difference between sale consideration and the value adopted by DVO is merely 9.11%, as it does not exceed 10%, fiction of section 50C of the Act will not came into play, therefore, capital gain will have to be computed with reference to actual sale consideration only. Hence, we direct the A.O. to delete the addition qua plot no.1. Addition with regard to plot no.2 - assessee vehemently submitted there was a 5 feet deep hole in the ground and a drainage next to the land, Slum cluster next to the plot, water of waste drainage was flooded in the said land and during the monsoon season part of the land remains water logged. All those factors are duly mentioned in clause 5 of the agreement to sale and that the market value of the land was less than the market value of surrounded land and was fixed keeping in view of such circumstances and relied upon the decision of Co-ordinate Bench in 2017 (4) TMI 1531 - ITAT AHMEDABAD 4 - Assessee before the ld.CIT(A) categorically pleaded that rate of land was determined on the basis of actual position of considering the various factors as illustrated in clause 5 of agreement to sale dated 29.03.2011. Valuation of DVO has not considered those factors as illustrated in para 5 of agreement to sale deed. Co-ordinate Bench in Shri Vinubhai V.Navadia Vs. DCIT, 2017 (4) TMI 1531 - ITAT AHMEDABAD while considering the various factors effecting the sale consideration granted 50% reduction in the deemed value of consideration in the basis of DVO Report. As assessee has brought on record that in second plot, there was a 5 feet deep hole in the ground and a drainage next to the land, Slum cluster next to the plot, water of waste drainage was flooded in the said land and during the monsoon season part of the land remains water logged and the market value of was fixed keeping in view of such circumstances. The Ld. CIT(A) has not examined those facts and simply accepted the report of the DVO. The report of the DVO is also based on certain estimation. Thus, keeping in all facts and circumstances of the preset case and the evidence available on record the assessee is allowed 6% of reduction in difference of sale consideration and value determined by the DVO. Therefore, we direct the AO to allow the deduction of 6% of difference on the actual sale consideration and the value determined by the DVO and compute the capital gain accordingly.- Appeal of assessee allowed.

Summary

Issues Involved:
1. Substitution of value determined by DVO under Section 50C.
2. Applicability of stamp duty valuation on the date of the agreement to sale.

Issue-wise Detailed Analysis:

1. Substitution of Value Determined by DVO under Section 50C:

The primary issue in this appeal is whether the Assessing Officer (AO) was correct in substituting the sale consideration with the value determined by the District Valuation Officer (DVO) under Section 50C of the Income Tax Act, 1961. The assessee argued that the difference between the sale consideration and the DVO's valuation was negligible and should not have been substituted. The AO made an addition of ?1,91,67,730/- to the capital gain based on the difference between the sale consideration shown in the sale deed and the value determined by the stamp valuation authority.

The CIT(A) directed the AO to adopt the rate suggested by the DVO and pass a rectification order under Section 154. The assessee contended that the sale consideration was mutually agreed upon by the parties and that the stamp duty valuation was only for the purpose of registration. The assessee also pointed out that the valuation by the DVO was close to the actual sale consideration.

2. Applicability of Stamp Duty Valuation on the Date of Agreement to Sale:

For the land situated at Saniya Hemand, the assessee argued that the stamp duty valuation should be applied based on the date of the agreement to sale (29.03.2011), which was lesser than the value determined by the DVO. The assessee had received part consideration by cheque on the date of the agreement, and various factors affecting the land's value were recorded in the agreement.

Judgment Analysis:

For Plot No. 1 (Moje Vankla, R.S. No. 24):

The Tribunal noted that the difference between the sale consideration and the DVO's valuation was 9.11%, which falls within the 10% tolerance range as per the amendment in Section 50C(1) by the Finance Act 2018. Citing the Mumbai Tribunal's decision in Maria Cheryl vs. ITO, the Tribunal held that the amendment is curative in nature and should apply retrospectively from 01.04.2003. Therefore, the AO was directed to delete the addition and compute the capital gain based on the actual sale consideration.

For Plot No. 2 (Moje Saniya Hemand, R.S. No. 56, 57/1 & 57/2):

The Tribunal acknowledged that the difference between the sale consideration and the DVO's valuation was 15.88%. The assessee had entered into an agreement to sale on 29.03.2011, and various factors affecting the land's value, such as a 5 feet deep hole, drainage issues, and waterlogging, were recorded in the agreement. The Tribunal noted that these factors were not considered by the DVO in his valuation.

Referring to the Ahmedabad Tribunal's decision in Vishnubhai V Navadia Vs DCIT, where a 50% relaxation was granted due to similar factors, the Tribunal allowed a 6% reduction in the difference between the sale consideration and the DVO's valuation. The AO was directed to compute the capital gain accordingly.

Conclusion:

The appeal was allowed, with the Tribunal directing the AO to delete the addition for Plot No. 1 and allow a 6% reduction for Plot No. 2 in the difference between the sale consideration and the DVO's valuation. The judgment emphasized the importance of considering all relevant factors affecting the land's value and the retrospective applicability of the amendment to Section 50C(1).