2005 (9) TMI 251 - AT - Income Tax

Summary

Issues Involved:
1. Assessment of Rs. 22,70,450 as deemed gift under section 4(1)(a) of the Gift-tax Act.
2. Consideration of sale price as per sale deed versus stamp duty values.
3. Requirement for reference to Valuation Officer for property valuation.

Issue-wise Detailed Analysis:

1. Assessment of Rs. 22,70,450 as Deemed Gift:
The primary issue is whether the assessment of Rs. 22,70,450 as a deemed gift under section 4(1)(a) of the Gift-tax Act was justified. The Assessing Officer (AO) concluded that the properties were transferred for inadequate consideration based on the difference between the sale price in the registered sale deeds and the market value fixed by the Sub-Registrar for stamp duty purposes. Consequently, the AO invoked the provisions of section 4(1)(a) of the Gift-tax Act and levied gift-tax. The assessee contended that the sale consideration was the prevailing market value and that the purchasers were unrelated parties.

2. Consideration of Sale Price as per Sale Deed versus Stamp Duty Values:
The assessee argued that the stamp duty values adopted by the Sub-Registrar were not reflective of the actual market value due to factors such as the land's location in an interior, water-logged area. The AO, however, used the stamp duty values to determine the market value, which the assessee challenged, citing various precedents where it was held that the stamp duty values should not be used as the sole basis for determining market value for tax purposes. The Tribunal referenced several cases, including:
- Kodisetty Suryanarayana v. GTO: The value fixed by registration authorities for stamp duty purposes was not considered a true and fair market value.
- Smt. Achla Tikku: The absence of material indicating that the transaction was not bona fide meant no deemed gift was assessable.
- Vinod Kumar Hissaria: The value taken by the Sub-Registrar for stamp duty purposes could not be used to work out a deemed gift.

3. Requirement for Reference to Valuation Officer:
The assessee argued that the AO should have referred the valuation to the Valuation Officer as mandated by law. The Tribunal supported this view, citing several decisions, including:
- L.K. Kasliwal v. GTO: The AO must refer the valuation to the Valuation Officer, and failure to do so implies acceptance of the declared value.
- Rani Bai v. GTO: It is mandatory for the AO to refer the valuation to the Valuation Cell in cases of deemed gifts.
The Tribunal concluded that the AO's failure to refer the valuation to the Valuation Officer was a significant procedural lapse, rendering the assessment invalid.

Conclusion:
The Tribunal upheld the contentions of the assessee, emphasizing that the value placed by the Sub-Registrar for stamp duty purposes could not be used as the basis for determining the market value of the property for tax purposes without additional evidence or a reference to the Valuation Cell. The Tribunal also noted that the AO did not address the assessee's specific claims regarding the depressed value due to water logging and distance from the road. Consequently, the Tribunal set aside the orders of the lower authorities and allowed the appeal of the assessee, granting relief as prayed.