2021 (9) TMI 14 - AT - Income Tax

Capital gain computation - value determined by the stamp duty authorities in terms of Section 50C(1) - justification of value shown in the registered document by obtaining a valuation report from the registered value - difference in consideration received for transfer of property is less than value adopted or assessed (or assessable) by any authority of a State Government for the purpose of payment of stamp duty - Location disadvantage - HELD THAT - When assessee objected the value adopted or assessed by the stamp duty authority with certain reasons, then it is the duty of the AO to refer the valuation of the property to the departmental valuation officer in terms of Section 50C(2) - In this case, although the assessee has requested for reference to departmental valuation officer u/s. 50C(2) of the Act, before the AO as well as the CIT(A), both authorities have failed to comply with the requirement of law - We are of the considered view that the AO as well as the CIT(A) have erred in computing LTCG by taking value fixed by the State Government authority for payment of stamp duty, even though the assessee has filed his objection for taking such valuation, contrary to provisions of Section 50C(2). Matter remanded back to AO with directions.

Summary

Issues:
1. Dispute over adoption of alleged value under section 50C of the Income Tax Act.
2. Failure to refer the matter to the valuation cell under section 50C(2) before completion of assessment proceedings.
3. Allegations of delayed disposal of appeal and ignoring jurisdictional High Court decision.
4. Discrepancy in market value of impugned property and adoption of stamp duty value.
5. Failure to comply with mandatory law under section 50C(2) for valuation of property.

Issue 1: Dispute over Alleged Value Adoption under Section 50C:
The appellant contested the addition of ?84,87,500 by the AO based on the stamp duty value for a property sold, arguing that the market value was lower due to limited access and location specifics. The AO adopted the higher stamp duty value, leading to the dispute. The CIT(A) upheld the addition, noting the AO's reliance on the District Revenue Officer's value. The appellant's argument for a reference to the valuation officer under Section 50C(2) was disregarded. The Tribunal found the AO and CIT(A) erred in not referring the valuation to the departmental valuation officer as requested by the appellant, leading to the appeal being allowed for reconsideration.

Issue 2: Failure to Refer Matter to Valuation Cell under Section 50C(2):
The appellant raised concerns over the failure to refer the valuation to the departmental valuation officer as per Section 50C(2) before completing the assessment. Both the AO and CIT(A) did not comply with this requirement, despite the appellant's objections and requests. The Tribunal directed the AO to reconsider the valuation issue and refer it to the valuation officer, highlighting the non-compliance with the statutory provision.

Issue 3: Allegations of Delayed Disposal and Ignoring High Court Decision:
The appellant criticized the delayed disposal of the appeal and accused the CIT(A) of disregarding a jurisdictional High Court decision on mandatory reference to the valuation cell under Section 50C(2). The Tribunal did not directly address the delay but focused on the failure to adhere to the statutory provisions for valuation, leading to the appeal being allowed for statistical purposes.

Issue 4: Discrepancy in Market Value and Stamp Duty Value:
The appellant argued that the stamp duty value did not reflect the true market value of the property due to specific location factors and access limitations. Despite the appellant's justifications and valuation report, the AO adopted the stamp duty value, resulting in a discrepancy. The Tribunal emphasized the need for proper valuation in line with the appellant's objections, directing a reassessment of the issue.

Issue 5: Failure to Comply with Section 50C(2) for Valuation:
The Tribunal highlighted the failure of the AO and CIT(A) to refer the valuation issue to the departmental valuation officer as requested by the appellant under Section 50C(2). This non-compliance with the statutory provision led to the appeal being set aside for reconsideration, emphasizing the importance of following the prescribed procedures for property valuation in such cases.

This detailed analysis of the judgment addresses the key issues raised by the appellant regarding the valuation of the property under Section 50C of the Income Tax Act and the subsequent failure to refer the matter to the valuation officer as required by law. The Tribunal's decision to set aside the appeal for reconsideration underscores the significance of proper valuation procedures and compliance with statutory provisions in such tax assessment cases.