2017 (12) TMI 736 - AT - Income Tax

Applicability of section 50C - valuation made by the Departmental Valuation Officer - assessee sold property for ₹ 45 lakhs and stamp duty value of the property is ₹ 60.54 lakhs thereby, as the assessee is having 1/3 share only addition in the hand of the assessee of ₹ 5.18 lakhs is confirmed - assessee has contested that the stamp duty rates cannot be applied in the case of assessee as in the same vicinity and sector the plots of the same area have been transferred even for lesser consideration. Held that - Stamp duty is payable by the purchaser & it is for the purchaser to either accept it or dispute it. The assessee could not, on the basis of the price fixed by the Sub-Registrar, have claimed anything more than the agreed consideration of a sum of ₹ 10 lakhs which, according to the assessee, was the highest prevailing market price. It would follow automatically that his case was that the fair market value of the property could not be ₹ 35 lakhs as assessed by the District Sub Registrar. In a case of this nature the AO should, in fairness, have given an option to the assessee to have the valuation made by the Departmental Valuation Officer (DVO) contemplated u/ s 50C. Therefore as a matter of course, in all such cases the AO should give an option to the assessee to have the valuation made by the DVO. The valuation by the DVO 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 was made 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. For the reasons set out above, and with the observations as above, we remit the matter to the file of the AO for recomputation of taxable capital gains. The AO shall decide the matter afresh in accordance with the law, by way of a speaking order and after giving due and fair opportunity of hearing to the assessee. The AO shall also require the DVO to submit valuation report in terms of above provisions of the law. - Appeal of the assessee is allowed for statistical purposes

Summary

Issues Involved:
1. Applicability of Section 50C of the Income Tax Act.
2. Correctness of the valuation adopted by the Stamp Valuation Authority.
3. Requirement for referral to the Valuation Officer.
4. Consistency in tax treatment among co-owners.
5. Initiation of penalty proceedings under Section 271(1)(c).

Detailed Analysis:

1. Applicability of Section 50C of the Income Tax Act:
The primary issue in this appeal was whether the provisions of Section 50C of the Income Tax Act were correctly applied. The assessee sold a property for ?45 lakhs, while the stamp duty valuation was ?60.54 lakhs. The authorities added ?5.18 lakhs to the assessee's capital gain based on the stamp duty valuation, as the assessee held a 1/3 share in the property. The Tribunal noted that Section 50C is a deeming provision introduced to ensure correct capital gains tax collection and is applicable when there is a discrepancy between the sale consideration and the stamp duty valuation.

2. Correctness of the Valuation Adopted by the Stamp Valuation Authority:
The assessee argued that the actual sale consideration of ?45 lakhs should be accepted over the stamp duty valuation of ?60.54 lakhs. The authorities maintained that the stamp duty value should be considered for capital gains computation. The Tribunal observed that the assessee contended the stamp duty valuation was arbitrary and provided evidence that similar plots in the vicinity were sold for lesser amounts. However, the lower authorities did not address these objections adequately.

3. Requirement for Referral to the Valuation Officer:
The Tribunal emphasized that under Section 50C(2), if an assessee objects to the stamp duty valuation, the Assessing Officer (AO) should refer the matter to the Valuation Officer. The Tribunal cited the case of Sunil Kumar Aggarwal vs. CIT, where it was held that the AO should offer the assessee the option to get the property valued by the Departmental Valuation Officer (DVO) to avoid any miscarriage of justice. The Tribunal found that the AO failed to refer the valuation to the DVO despite the assessee's objections, which was a procedural lapse.

4. Consistency in Tax Treatment Among Co-owners:
The assessee pointed out that no action was taken against the other two co-owners of the property, arguing for consistency in tax treatment. The Tribunal acknowledged this point but focused more on the procedural fairness and the necessity of referring the valuation to the DVO.

5. Initiation of Penalty Proceedings under Section 271(1)(c):
The AO had initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income. The Tribunal did not delve deeply into this issue, as the primary focus was on the correct computation of capital gains and the procedural fairness in handling the valuation dispute.

Conclusion:
The Tribunal concluded that the AO should have referred the valuation dispute to the DVO as per the provisions of Section 50C(2). The case was remitted back to the AO for fresh computation of taxable capital gains, with instructions to obtain a valuation report from the DVO. The appeal was allowed for statistical purposes, ensuring that the AO follows the correct procedure and provides a fair opportunity for the assessee to present their case.

Order:
The appeal of the assessee was allowed for statistical purposes, and the matter was remitted back to the AO for a fresh decision in accordance with the law, ensuring procedural fairness and adherence to the provisions of Section 50C(2).