2010 (5) TMI 511 - AT - Income Tax

Reference u/s 50C(2) of the Income-tax Act, 1961 - the assessee had, in the relevant previous year, sold a property by a deed registered on May 4, 2006 - Held that - Failure of the Assessing Officer to refer valuation to the Valuation Officer definitely prejudiced the assessee to its detriment and also took away from it, a valuable right vested in it under the statute. - Matter remanded back to AO with direction.

Summary

Issues Involved:
1. Whether the Commissioner of Income-tax (Appeals) erred in upholding the Assessing Officer's rejection of the assessee's plea for reference to the Departmental Valuation Officer under section 50C(2) of the Income-tax Act, 1961.
2. Whether the valuation by the Special Deputy Collector (Stamps) should be considered as the fair market value for computing capital gains.
3. Whether the assessee's right to request a reference to the Departmental Valuation Officer under section 50C(2) was unjustly denied.

Detailed Analysis:

Issue 1: Rejection of Plea for Reference to Departmental Valuation Officer
The assessee contended that the Commissioner of Income-tax (Appeals) erred in upholding the Assessing Officer's decision to reject the plea for a reference to the Departmental Valuation Officer under section 50C(2) of the Income-tax Act, 1961. The assessee argued that this reference was imperative when disputing the valuation of the Special Deputy Collector (Stamps) as not being the fair market value. The Tribunal noted that the Assessing Officer had discretion in making such a reference but failed to exercise it appropriately. The Tribunal concluded that the failure to refer the valuation to the Departmental Valuation Officer prejudiced the assessee and deprived it of a statutory right.

Issue 2: Valuation by Special Deputy Collector (Stamps)
The Tribunal examined whether the valuation by the Special Deputy Collector (Stamps) should be considered as the fair market value for computing capital gains. The Assessing Officer had adopted the guideline value fixed by the Special Deputy Collector (Stamps) as the full value of consideration received on transfer of the property. The Tribunal observed that the Special Deputy Collector (Stamps) is the sole authority under the Indian Stamp Act for fixing the market value and that this valuation should not preclude the assessee from requesting a reference to the Departmental Valuation Officer under section 50C(2) of the Income-tax Act.

Issue 3: Right to Request Reference to Departmental Valuation Officer
The Tribunal considered whether the assessee's right to request a reference to the Departmental Valuation Officer under section 50C(2) was unjustly denied. The Tribunal referred to the case of Meghraj Baid v. ITO, where it was held that if the Assessing Officer does not agree with the assessee's explanation regarding the lower consideration disclosed, the matter should be referred to the Departmental Valuation Officer. The Tribunal emphasized that the safeguards provided under sub-sections (2) and (3) of section 50C are in addition to those under the Stamp Act, and thus, the assessee's request for such a reference should have been honored.

Conclusion:
The Tribunal set aside the orders of the authorities below and remitted the matter back to the Assessing Officer with a direction to refer the valuation of the property to the Departmental Valuation Officer in accordance with section 50C(2) of the Income-tax Act. The Tribunal concluded that the failure to make this reference had prejudiced the assessee and deprived it of a valuable statutory right.

Judgment:
The appeal of the assessee was allowed for statistical purposes, and the Assessing Officer was directed to refer the valuation of the property to the Departmental Valuation Officer and proceed in accordance with the statute.

Pronouncement:
The order was pronounced in the open court on May 26, 2010.