2017 (12) TMI 1889 - AT - Income Tax

LTCG - invoking Section 50C - lower authorities have gone by the reduced jantri price for the purpose of invoking Section 50C of the Act so as to make the impugned long term capital gains addition , also accepted by CIT(A) - HELD THAT - No reason to concur with the above extracted findings as the impugned addition u/s. 50C(2) of the Act mandates reference to the DVO in case an assessee contests the jantri price in question to be higher than fair market value of the relevant capital asset. As Sunil Kumar Agarwal case 2014 (6) TMI 13 - CALCUTTA HIGH COURT it holds that such a reference is mandatory even if an assessee does not make any such prayer. We therefore accept assessee s sole substantive grievance for statistical purposes and remit the issue back to the Assessing Officer to proceed afresh as per law u/s. 50C(2) of the Act by making reference to the DVO. Assessee s appeal is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the Assessing Officer (AO) was correct in adopting the reduced jantri price determined by the Collector, Stamp Duty Valuation Division, as the sale consideration for the purpose of invoking Section 50C of the Income Tax Act, 1961.
• Whether the AO was required to refer the matter to the District Valuation Officer (DVO) under Section 50C(2) when the assessee contested the jantri price as being higher than the fair market value of the capital asset.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Adoption of Reduced Jantri Price

• Relevant Legal Framework and Precedents: Section 50C of the Income Tax Act, 1961, provides that if the consideration received on the transfer of a capital asset is less than the value adopted for stamp duty purposes, the stamp duty value shall be deemed to be the full value of the consideration. However, if the assessee disputes the stamp duty value, the AO may refer the valuation to the DVO.
• Court's Interpretation and Reasoning: The CIT(A) upheld the AO's decision to adopt the reduced jantri price determined by the Collector, Stamp Duty Valuation Division, as the sale consideration. The CIT(A) reasoned that since the market value was already reduced by a higher authority, there was no need for further reference to the DVO.
• Key Evidence and Findings: The market value of the land was initially higher as per the jantri rate, but after an appeal, it was substantially reduced by the Collector, Stamp Duty Valuation Division.
• Application of Law to Facts: The CIT(A) applied Section 50C by considering the reduced jantri price as the deemed sale consideration, concluding that the AO was correct in doing so.
• Treatment of Competing Arguments: The assessee argued that the reduced jantri price was still higher than the fair market value, necessitating a reference to the DVO. The CIT(A) dismissed this argument, stating that the market value had already been substantially reduced.
• Conclusions: The CIT(A) concluded that the AO correctly adopted the reduced jantri price, and no further relief was warranted for the assessee.

Issue 2: Requirement of Reference to DVO

• Relevant Legal Framework and Precedents: Section 50C(2) mandates that if an assessee contests the stamp duty value, the AO must refer the valuation to the DVO. The Calcutta High Court's judgment in Sunil Kumar Agarwal vs. CIT established that such a reference is mandatory even without a specific request from the assessee.
• Court's Interpretation and Reasoning: The Tribunal disagreed with the CIT(A)'s findings, emphasizing that a reference to the DVO is mandatory under Section 50C(2) when the assessee disputes the jantri price.
• Key Evidence and Findings: The Tribunal noted that both lower authorities relied on the reduced jantri price without referring the matter to the DVO, despite the assessee's contestation.
• Application of Law to Facts: The Tribunal applied the legal precedent from Sunil Kumar Agarwal vs. CIT, determining that the AO should have referred the valuation to the DVO.
• Treatment of Competing Arguments: The Tribunal acknowledged the CIT(A)'s reasoning but found it inconsistent with the mandatory requirement for DVO reference under Section 50C(2).
• Conclusions: The Tribunal concluded that the AO's failure to refer the matter to the DVO was a procedural lapse, warranting a remand for fresh proceedings.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "Hon'ble Calcutta high court's judgment in (2015) 372 ITR 83 (Cal.) Sunil Kumar Agarwal vs. CIT holds that such a reference is mandatory even if an assessee does not make any such prayer."
• Core Principles Established: The Tribunal reinforced the principle that under Section 50C(2), a reference to the DVO is mandatory when the assessee disputes the stamp duty value, regardless of any prior reduction by other authorities.
• Final Determinations on Each Issue: The Tribunal allowed the assessee's appeal for statistical purposes, remanding the matter back to the AO to proceed afresh as per law by making a reference to the DVO.

The Tribunal's decision underscores the importance of adhering to procedural mandates under Section 50C(2) and ensures that the assessee's right to contest the stamp duty value is protected through a proper valuation process.