2014 (1) TMI 442 - AT - Income Tax

Reference to the valuation officer not made u/s 50C(2) of the Act - Value adopted by valuation authority exceeds the fair market value of the property Held that - Relying upon Meghraj Baid. Versus Income-Tax Officer. 2008 (2) TMI 476 - ITAT JODHPUR - The assessee has made a claim before the Assessing Officer that the value adopted or assessed by the stamp valuation authority was higher than the fair market value - it is also not the case whether the value adopted by the stamp valuation authority has ever been disputed by the assessee in any appeal or revision or otherwise as referred to in section 50C(2) of the Act - it was incumbent upon the Assessing Officer to refer the matter for valuation to a Valuation Officer has provided in sub-section 50C(2) of the Act - the view taken by the Assessing Officer as well as the Commissioner of Income Tax(A) is not correct - the Assessing Officer failed to refer the matter to the valuation officer u/s 50C(2) of the Act, it would be fit and proper to restore the matter back to the file of the Assessing Officer for a fresh adjudication after referring the matter to the Valuation Officer u/s 50C(2) of the Act Decided in favour of Assessee.

Summary

Issues Involved:
1. Addition of short term capital gain on sale of property.
2. Refusal to refer the matter to the Valuation Officer for fair market value determination.

Analysis:

Issue 1: Addition of short term capital gain on sale of property:
The appeal was filed against the order confirming an addition of Rs.11,55,000 as short term capital gain on the sale of property. The Assessing Officer calculated the capital gain based on the stamp duty paid on the property, resulting in an addition of Rs.13,53,250 to the total taxable income. The Commissioner of Income Tax(A) upheld this addition, stating the Assessing Officer's decision was correct under section 50C(1) of the Act. However, the Tribunal found that the Assessing Officer should have referred the matter to the Valuation Officer for fair market value determination before making the addition. The Tribunal directed a fresh adjudication by the Assessing Officer after referring the matter to the Valuation Officer, allowing both parties to present evidence and contentions.

Issue 2: Refusal to refer the matter to the Valuation Officer for fair market value determination:
The counsel of the assessee argued that the Assessing Officer should have referred the matter to the Valuation Officer as the stamp valuation authority's assessment exceeded the fair market value. The Tribunal noted that the assessee had claimed the circle rate was higher than the actual market value, as per section 50C(2) of the Act. Since the Assessing Officer failed to refer the matter to the Valuation Officer, the Tribunal decided to remand the case for fresh adjudication after the valuation reference. The Tribunal emphasized the importance of following the statutory provisions for fair market value determination and directed the Assessing Officer to provide a reasonable opportunity for the assessee to be heard during the reassessment.

In conclusion, the Tribunal allowed ground no. 3, directing the Assessing Officer to refer the matter to the Valuation Officer for fair market value determination. Ground no. 2 was dismissed as premature due to the restoration of the fair market value determination issue. The appeal was disposed of with directions for a fresh assessment based on the Valuation Officer's report, ensuring a well-reasoned order by the Assessing Officer.