2014 (1) TMI 239 - AT - Income Tax

Valuation of property - Held that - As per section 50C(2) of the Act - Where the assessee claims that the value adopted or assessee for stamp duty purposes exceeds the Fair Market Value (FMV) of the property as on the date of transfer, and he has not disputed value so adopted or assessed in any other appeal or provision or reference before any authority or Court, the Assessing Officer may refer the valuation of the relevant asset to a Valuation Officer in accordance with Section 55A of the Income-tax Act - The assessee clearly objected before the Assessing Officer against the adoption of stamp duty valuation - It was duty of the Assessing Officer to refer valuation of the property to the Valuation Cell of the Income-tax Department - The issue was restored to the file of the Assessing Officer with the direction that the Assessing Officer to refer the property to the Valuation Cell of the Income-tax Department for the purpose of valuation of property and, thereafter, adopt the valuation for working out capital gains.

Summary

Issues:
- Discrepancy in valuation of property for computing capital gains
- Application of Section 50C of the Income-tax Act
- Whether valuation of property should be referred to Valuation Officer

Analysis:

Issue 1: Discrepancy in valuation of property for computing capital gains
The Assessing Officer made an addition to the assessee's income on account of Short Term Capital Gains arising from the sale of a property, based on the difference between the sale price declared by the assessee and the market value adopted for stamp duty purposes. The ld. CIT(A) upheld this addition, stating that the variation was not significant enough to warrant a valuation by the D.V.O. The assessee contended that the actual consideration received should have been accepted or the valuation should have been referred to the Valuation Officer under Section 50C(2) of the Income-tax Act.

Issue 2: Application of Section 50C of the Income-tax Act
Section 50C of the Income-tax Act provides a special provision for determining the full value of consideration in cases of transfer of immovable property. It deems the value adopted for stamp duty purposes as the full value of consideration if it exceeds the declared consideration. If the assessee disputes this valuation and it has not been contested elsewhere, the Assessing Officer may refer the valuation to a Valuation Officer. The section also specifies the procedure for determining the full value of consideration based on the Valuation Officer's assessment.

Issue 3: Whether valuation of property should be referred to Valuation Officer
In this case, the assessee objected to the stamp duty valuation before the Assessing Officer, indicating a need for valuation by the Valuation Cell of the Income-tax Department. The Tribunal held that the Assessing Officer should have referred the property for valuation as per Section 50C(2) of the Act. Therefore, the impugned order of the ld. CIT(A) was set aside, and the issue was remanded to the Assessing Officer for proper valuation and computation of capital gains.

In conclusion, the Tribunal allowed all three appeals of the assessee for statistical purposes, emphasizing the importance of following the procedures outlined in Section 50C of the Income-tax Act for determining the full value of consideration in cases involving the transfer of immovable property.