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2013 (9) TMI 646 - HC - Income TaxCapital Gains - valuation u/s 50C - Whether the value adopted or assessed or assessable by Stamp Valuation Authority under sub-section (1) of Section 50C of the Act exceeds the fair market value of the property as on the date of transfer, the Assessing Officer should refer the valuation of the capital asset to a Valuation Officer under Section 50 C (2) of the Act Held that - Relying upon the judgment in the case of CIT Vs. Chandani Bhochar 2010 (1) TMI 502 - Punjab and Haryana High Court , it is held that stand taken by the AO that the value adopted by the Stamp Duty Authority alone is taken to be the fair market value as on October, 2004 is not correct A.O. should have referred the matter in assessment to the DVO as both the ingredients of provisions of section 50C(2) are present which compels the AO to refer such matter for valuation by DVO in accordance with provisions of section 55A of the I.T. Act, 1961 and the said provisions of section 50C(2) are essentially to be read in conjunction with the provisions of section 50C(1) of the I.T. Act Appeal is partly allowed. Value adopted or assessed or assessabe by the Stamp Valuation Authority under sub-section (1) of Section 50-C exceeds the fair market value of the property on the date of transfer, the AO has to apply his mind on the validity of the objection of the assessee A.O. may either accept the valuation of the property on the basis of the report of the approved valuer filed by the assessee, or invite objection from the department and refer the question of valuation of the capital asset to DVO in accordance with Section 55-A of the Act. In all these events, the AO has to record valid reasons, which are justifiable in law. He is not required to adopt an evasive approach of applying deeming provision without deciding the objection or to refer the matter to the DVO under Section 55-A of the Act as a matter of course, without considering the report of approved valuer submitted by the assessee Decided in favor of Revenue.
Issues Involved:
1. Determination of the value of capital assets. 2. Adoption of market value by the Assessing Officer (AO) as per Stamp Duty valuation. 3. Mandatory reference to the Valuation Officer under Section 50C(2) of the Income Tax Act. 4. Validity of the approved valuer's report submitted by the assessee. 5. The necessity for the AO to record reasons for accepting or rejecting the valuation report. Detailed Analysis: 1. Determination of the Value of Capital Assets: The primary issue revolves around whether the Tribunal was justified in confirming the order of the CIT (A) which determined the value of the capital assets at Rs.33,77,186/- and the indexed cost of acquisition at Rs.18,72,000/- as opposed to the values taken by the AO (Rs.78,48,000/- and Rs.14,97,072/- respectively). The Tribunal and CIT (A) relied on the valuation report submitted by the approved valuer, which was not disputed by the Income-tax Department at any stage. 2. Adoption of Market Value by the AO as per Stamp Duty Valuation: The AO adopted the market value of the land as per the Stamp Duty valuation, which the assessee did not initially object to. The AO computed the long-term capital gain based on this valuation, asserting that the property was located in a prime commercial area and the assessee had not disputed the Stamp Duty valuation. 3. Mandatory Reference to the Valuation Officer under Section 50C(2): The Tribunal and CIT (A) emphasized that it is mandatory for the AO to refer the valuation of the capital asset to a Valuation Officer if the assessee contends that the valuation by the Stamp Valuation Authority exceeds the fair market value. The CIT (A) referenced several judgments to support this view, including Kalpataru Industries Vs. ITO and Ajmal Fragrances & Fashions (P) Ltd. V. C.I.T., which mandate that the AO must refer to the Valuation Officer if the assessee objects to the Stamp Duty valuation. 4. Validity of the Approved Valuer's Report Submitted by the Assessee: The assessee submitted multiple valuation reports from an approved valuer, which indicated a lower market value than the Stamp Duty valuation. The CIT (A) accepted the report of the approved valuer, determining the sale consideration and indexed cost of acquisition based on these reports. The Tribunal upheld this decision, stating that the provisions of Section 50C(2) should be read in conjunction with Section 50C(1). 5. The Necessity for the AO to Record Reasons for Accepting or Rejecting the Valuation Report: The judgment highlighted that the AO must record valid reasons when accepting or rejecting the valuation report submitted by the assessee. The AO should either accept the report of the approved valuer or refer the matter to the DVO, providing justifiable reasons for either action. The Tribunal and CIT (A) found that the AO failed to record sufficient reasons for not accepting the approved valuer's report and for not referring the matter to the DVO. Conclusion: The High Court set aside the order of the ITAT dated 10.05.2011, and remanded the matter to the AO to decide the valuation of the capital asset in accordance with the law. The court emphasized that the AO must either accept the valuation report submitted by the assessee or refer the matter to the DVO, recording valid reasons for either decision. The appeal filed by the revenue was allowed, and the questions of law were decided in favor of the revenue and against the assessee.
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