2018 (4) TMI 1519 - AT - Income Tax

Addition u/s. 69 - difference in the actual sale value and circle rate for stamp duty purposes on sale of five immovable properties and circle rate for stamp duty purposes on sale of five immovable properties - absence of reference to DVO - Held that - Because section 50C(2) read with clause c of section 56(vii)(b) inter alia provides that where the assessee claims before any AO that the value adopted or assessed or assessable by stamp valuation authority under sub section 1 of section 50C exceeds the fair market value of the property, the AO have to refer the valuation of capital asset to the Valuation Officer, which in this case has not been done by the AO. Once the assessee makes a request for reference to DVO, it is necessary to refer the matter to DVO as per 3rd proviso to sec.56 (2) (vii) r/w sec.5OC (2). In the absence of reference to DVO, the declared value cannot be disturbed. Hence, in the interest of justice, we set aside the issue in dispute to the AO with the directions to refer the matter to the DVO for valuation and DVO should allow full opportunity of hearing to the assessee, as per law and submit the Report to the AO. Thereafter, the AO shall decide the matter in dispute afresh, after considering the Report of the DVO and give adequate opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Addition of ?3,04,99,400 under section 69 for difference in actual sale value and circle rate for stamp duty purposes.
2. Absence of reference to DVO for valuation despite specific request.
3. Discrepancy in declared sale consideration and FMV adopted by AO.

Issue 1: Addition under section 69:
The assessee appealed against the Order passed by the Ld. CIT(A) regarding the addition of ?3,04,99,400 under section 69 for the variance between the actual sale value and the circle rate for stamp duty purposes. The AO made the addition during assessment, which was confirmed by the Ld. CIT(A). The assessee argued that the declared sale consideration of ?4,27,12,600 for all five properties was the real FMV, contrary to the FMV adopted by the AO at ?7,32,12,000. The Tribunal noted that the matter was not referred to DVO despite the assessee's specific request, which is required under the law. The Tribunal set aside the issue to the AO with directions to refer the matter to the DVO for valuation and to decide the matter afresh after considering the DVO's report.

Issue 2: Absence of reference to DVO:
The assessee contended that there was an absence of reference to the DVO for valuation despite a specific request made during assessment proceedings. The Ld. CIT(A) and AO did not refer the matter to the DVO, stating that it was not mandatory. However, the Tribunal held that once the assessee requests a reference to the DVO, it is necessary to do so as per the law. The Tribunal relied on legal provisions requiring the AO to refer the valuation of the capital asset to the Valuation Officer if the fair market value claimed by the assessee differs from the value assessed by the stamp valuation authority. The Tribunal directed the AO to refer the matter to the DVO for valuation and decide the matter afresh after considering the DVO's report.

Issue 3: Discrepancy in declared sale consideration:
The assessee argued that the actual purchase consideration was ?4,27,12,600 as per registered purchase deeds, signed before the Registrar. The AO, however, added ?3,04,99,400 based on the difference between the actual purchase consideration and the circle rate for stamp duty purposes. The Tribunal found that the matter should have been referred to the DVO as per legal requirements. Therefore, the Tribunal set aside the issue to the AO for proper valuation by the DVO and a fresh decision.

In conclusion, the appeal filed by the assessee was allowed for statistical purposes, and the Tribunal directed the AO to refer the matter to the DVO for valuation and decide the issues afresh in accordance with the law.