2018 (4) TMI 792 - AT - Income Tax

Calculation of long term capital gain u/s. 50C - estimation of value by DVO - Held that - The object of the valuation by the Stamp Valuation Authority is to secure revenue on such sale and not to determine the true correct and fair market value on which it may be purchased by a willing purchaser subject to and taking into consideration its situation condition and other attributes such as its occupation by tenant. This was not done by the DVO. For the determination of the value u/s 50C it is incumbent on the AO to make reference for valuation to the DVO and the DVO s valuation is to be considered for the purposes of section 48. This in the case at hand has not come about as discussed and so recourse to section 50C(1) of the Act is not as per law. Accordingly as also requested by the assessee the matter is remitted to the file of the AO to be decided afresh in accordance with law in view of the provisions of the complete section 50C. For this purpose on reference being made to him by the AO the DVO shall take into consideration apropos the application or otherwise of the rent capitalization method.

Summary

Issues:
1. Calculation of long term capital gain under section 50C
2. Confirmation of order by CIT (Appeal)-1
3. Valuation of property for stamp purposes
4. Allegations of forceful agreement signing and property sale
5. Assessment under sections 148/143(3) and 147
6. Compliance with section 50C requirements

Issue 1: Calculation of long term capital gain under section 50C
The Assessing Officer (AO) calculated long-term capital gain under section 50C for the sale of a residential property. The AO assessed the gain at ?32,86,722 based on the stamp value of ?42,83,000 and the sale consideration of ?12,00,000. The total income was assessed at ?33,31,720. The CIT (A) affirmed this assessment, stating that the AO correctly adopted the market value as per Stamp Duty valuation for calculating the gain under section 50C.

Issue 2: Confirmation of order by CIT (Appeal)-1
The CIT (A) dismissed the assessee's appeal, noting that the AO had referred the property valuation to the departmental valuation officer under section 50C(2) but the DVO returned the matter due to lack of information from the assessee. The CIT (A) found that the appellant failed to prove that the property's rate was lower than the circle rate for stamp duty valuation. The grounds taken by the appellant were thus dismissed.

Issue 3: Valuation of property for stamp purposes
The assessee sold a property to a tenant for ?12,00,000, while the stamp value was ?42,83,000. The AO referred the valuation to the DVO, who returned it due to insufficient information. The appellant argued that the property's value was affected by the tenant's long-term occupation and low rent. The Tribunal found that the DVO did not consider these aspects, leading to an incorrect valuation under section 50C.

Issue 4: Allegations of forceful agreement signing and property sale
The appellant claimed that other individuals forced the sale of the property at a nominal price, leading to a forceful agreement signing. However, after discussing with the tenant, the property was sold for ?12,00,000. The Tribunal considered the circumstances and found the valuation by the AO to be excessive due to the unique situation surrounding the sale.

Issue 5: Assessment under sections 148/143(3) and 147
The AO issued a notice under section 148 for the assessment year 2007-08 based on information received. The assessment was completed under section 143(3) with a total income of ?33,31,720. The appellant challenged the assessment under sections 148 and 147, arguing it was wrong, illegal, and bad in law. The Tribunal remitted the matter to the AO for fresh consideration in accordance with law.

Issue 6: Compliance with section 50C requirements
The Tribunal found that the AO did not comply with the requirements of section 50C for property valuation. The DVO returned the reference due to lack of cooperation from the assessee, but the Tribunal determined that the information provided was sufficient. The Tribunal ordered a fresh assessment in line with the provisions of section 50C, emphasizing the need for proper valuation by the DVO.

This detailed analysis of the judgment covers all the issues involved, providing a comprehensive overview of the legal aspects and decisions made by the Tribunal.