2016 (9) TMI 645 - HC - Income Tax

Applicability of provisions of Sec. 50C(2)(b) - valuation of Stamp Valuation Authority - Held that - Referring to the provisions of section 16A of the Wealth Tax Act, 1957 to the extent they are relevant for the present purpose, sub-section (1) of section 16A of the Wealth Tax Act provides for making reference to the Valuation Officer. Sub-sections (2) to (5) of section 16A provide for the mode and manner in which the value of an asset is to be estimated. Sub-section (6) of section 16A of the Wealth Tax Act provides that on receipt of an order under sub-section (3) or sub-section (5) from the Valuation Officer, the Assessing Officer shall, so far as valuation of the asset in question is concerned, proceed to complete the assessment in conformity with the estimate of the Valuation Officer. Accordingly, once a reference is made under section 50C of the Act to the Valuation Officer for valuation of the capital asset, the Assessing Officer is obliged to complete the assessment in conformity with the estimate made by the Valuation Officer pursuant to such reference made by him. In the facts of the present case, the Valuation Officer has estimated the value of the capital asset at a lower amount than the value adopted or assessed by the stamp valuation authority. In terms of sub-section (2) of section 50C of the Act, it is such valuation which is required to be taken into consideration for the purposes of assessment. In the light of the above discussion, while not agreeing fully with the reasoning adopted by the Commissioner (Appeals), in the facts and circumstances of this case, this court is in agreement with the final conclusion arrived at by the Commissioner (Appeals) as well as by the Tribunal.

Issues Involved:
1. Applicability of Section 50C(2)(b) of the Income Tax Act, 1961.
2. Validity of the reference to the Departmental Valuation Officer (DVO).
3. Determination of the value for computation of capital gains.
4. Jurisdiction of the Tribunal in addressing new questions of law.

Issue-wise Detailed Analysis:

1. Applicability of Section 50C(2)(b) of the Income Tax Act, 1961:
The primary issue revolves around whether the Income Tax Appellate Tribunal (ITAT) was correct in ignoring the provisions of Section 50C(2)(b) of the Act. According to the appellant (revenue), the Assessing Officer (AO) is not permitted to refer the valuation to a Valuation Officer if the valuation by the Stamp Valuation Authority is already disputed before a Revision Authority. The court examined Section 50C(2)(b), which stipulates that the AO can refer the valuation to a Valuation Officer only if the valuation by the Stamp Valuation Authority has not been disputed in any appeal or revision. It was admitted that the respondent (assessee) had indeed disputed the valuation before a higher authority, thereby raising the question of the legality of the reference to the DVO.

2. Validity of the Reference to the Departmental Valuation Officer (DVO):
Despite the dispute before the higher authority, the AO referred the matter to the DVO, who valued the property at ?24,15,000, significantly lower than the Stamp Valuation Authority's assessment of ?2,33,70,600. The AO, however, proceeded with the assessment without waiting for the DVO's report, treating the difference as undisclosed income. The Commissioner of Income Tax (Appeals) and the Tribunal both found that once a reference is made to the DVO, the AO must consider the DVO's valuation if it is lower than the Stamp Valuation Authority's valuation. The court upheld this view, noting that Section 50C mandates the AO to adopt the lower of the two valuations for the purpose of computing capital gains.

3. Determination of the Value for Computation of Capital Gains:
The court emphasized that Section 50C(2) of the Act requires the AO to complete the assessment in conformity with the DVO's estimate if a reference is made. In this case, the DVO's valuation of ?24,15,000 was lower than the Stamp Valuation Authority's valuation, and thus, per the Act's provisions, this lower value should be used for computing capital gains. The Tribunal concurred with the Commissioner (Appeals) that the AO could not disregard the DVO's valuation once a reference was made. The court agreed with this conclusion, reinforcing that the statutory mandate must be followed.

4. Jurisdiction of the Tribunal in Addressing New Questions of Law:
The court noted that the proposed question regarding the applicability of Section 50C(2)(b) was raised for the first time before it and was not addressed by the Tribunal. Consequently, the court held that this question did not arise from the Tribunal's order and thus could not be entertained. The court concluded that the Tribunal's order did not suffer from any legal infirmity and did not warrant interference.

Conclusion:
The appeal was dismissed, with the court affirming that the Tribunal correctly directed the AO to adopt the DVO's valuation as per the statutory requirements of Section 50C of the Income Tax Act. The court also clarified that new questions of law not raised before the Tribunal cannot be entertained at the appellate stage.

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