2015 (12) TMI 610 - AT - Income Tax

Taxing of capital gain by invoking the provisions of section 50C on the sales of property - Held that - This is the second round of proceedings passed in pursuance of direction given by the Tribunal, wherein it was directed that the Assessing Officer will process the assessee s claim u/s 50C(2)(a) and referred the matter to the DVO for ascertaining the fair market value. In pursuance thereof, the assessing officer had made the reference to the DVO who has valued the property at a higher value at ₹ 23,27,000/- as against the stamp duty valuation of ₹ 20,06,500/-. Section 50C is a deeming provision where fair market value has to be deemed at the value adopted by the stamp valuation authority. However, such a deeming provision will not apply, if the assessee claims that the value adopted or assessed by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer. In case of such a claim, Assessing Officer has to refer the matter to the Valuation Cell and in such cases, the Assessing Officer is bound by such a valuation. Here in this case, since value adopted by the DVO is more than the stamp valuation, therefore, the Assessing Officer had rightly adopted the FMV as per the stamp valuation authority. To wriggle out from such a situation here in this case, the assessee should have rebutted the entire DVO s report before the CIT(A) by evidence and proper material as to how and why the DVO s report cannot be relied upon and the assessee s sale value is actually the fair market value. Here such an exercise has not been done by the assessee. Accordingly, the order of the CIT(A) confirming the fair market value as per section 50C is affirmed. - Decided against assessee.

Summary

Issues:
Challenging taxing of capital gain under section 50C on property sales.

Analysis:
The appeal was filed against the order passed by CIT(A)-III, Mumbai for the assessment year 2004-05, where the assessee contested the taxing of capital gain by invoking section 50C on property sales. The original assessment was made under section 143(3) in 2006, determining long-term capital gains at a value different from the sale amount mentioned in the sale deed. The Tribunal directed the Assessing Officer to refer the matter to the Departmental Valuation Officer (DVO) under section 50C(2)(a) and compute the capital gains as per law. The Tribunal emphasized that if the stamp duty value exceeds the fair market value claimed by the assessee, the matter should be referred to the DVO for valuation. The Assessing Officer referred the matter to the DVO, who valued the property higher than the stamp value. The assessee argued that the DVO's valuation should not be accepted as it was done after the sale, and the property was not in existence at the time of valuation. However, the Assessing Officer upheld the DVO's valuation as per the Tribunal's direction, leading to the adoption of the fair market value as per stamp duty valuation.

The CIT(A) confirmed the addition, stating that the Assessing Officer must follow the Tribunal's direction. The appellant relied on a High Court decision to argue against adopting the stamp duty value without positive evidence. The Tribunal noted that this was the second round of proceedings following its direction to refer the matter to the DVO. Since the DVO's valuation exceeded the stamp valuation, the Assessing Officer correctly adopted the stamp duty value as the fair market value. The Tribunal emphasized that the deeming provision of section 50C does not apply when the stamp valuation exceeds the fair market value claimed by the assessee. The appellant failed to provide evidence to rebut the DVO's report before the CIT(A), leading to the confirmation of the fair market value as per section 50C. Consequently, the appeal was dismissed, affirming the CIT(A)'s order.

In conclusion, the Tribunal upheld the Assessing Officer's adoption of the stamp duty value as the fair market value under section 50C, emphasizing the importance of providing evidence to challenge the DVO's valuation. The decision highlighted the procedural requirements and the Assessing Officer's obligation to follow statutory provisions and tribunal directions in computing capital gains on property sales.