2014 (6) TMI 13 - HC - Income Tax

Reference made to valuation officer u/s 50C(2) of the Act Claim of exemption u/s 54EC of the Act - Sale consideration received is fully invested in bonds notified - Held that - The valuation by the departmental valuation officer, contemplated u/s 50C, is required to avoid miscarriage of justice - The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty - The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer - There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused - Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the AO, discharging a quasi-judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law thus, the order is set aside and the matter is remitted back to the AO for fresh adjudication Decided in favour of Assessee.

Summary

Issues:
1. Challenge to the judgment dismissing the appeal by the assessee.
2. Interpretation of the provisions of the Income Tax Act regarding capital gain exemption.

Issue 1: Challenge to the judgment dismissing the appeal by the assessee
The assessee raised questions of law challenging the Tribunal's decision, primarily questioning the misdirection in law regarding the reliance on deeds of conveyance for disputing stamp value under section 50C of the Income Tax Act. The assessee argued that the valuation by the District Sub Registrar did not reflect the highest prevailing market price, as indicated in the deeds of conveyance. The Tribunal upheld the assessing officer's valuation based on the stamp valuation authority, rejecting the assessee's claims. The appellant contended that there was a miscarriage of justice as the valuation should have been referred to a valuation officer as per Section 50C. The High Court agreed, emphasizing the need for fair treatment and the option for the assessee to have the valuation made by the departmental valuation officer to avoid injustice.

Issue 2: Interpretation of the provisions of the Income Tax Act regarding capital gain exemption
The assessee sold land and reinvested the proceeds in bonds, claiming deduction under Section 54EC of the Income Tax Act. The assessing officer computed the capital gain based on the valuation by the District Sub Registrar, which was upheld by the CIT(A) and the Tribunal. The High Court analyzed the deeds of conveyance, where the assessee asserted that the buyer's offer represented the highest prevailing market price, contradicting the District Sub Registrar's valuation. The Court emphasized that the assessee's acceptance of the stamp valuation for duty payment did not equate to accepting it as the fair market value. It highlighted the legislative intent to provide fair treatment to taxpayers by allowing valuation by the departmental valuation officer under Section 50C. The Court set aside the impugned order, remanding the matter to the assessing officer for valuation by the departmental valuation officer and a fresh assessment in accordance with the law.

In conclusion, the High Court's judgment addressed the challenges raised by the assessee regarding valuation discrepancies and the interpretation of provisions for capital gain exemption under the Income Tax Act. The Court emphasized fair treatment, the need for proper valuation procedures, and the legislative intent to prevent injustice in tax assessments.