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TMI Blog2010 (11) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... e value adopted, assessed or assessable by the stamp valuation authority under sub-section (1), the value so estimated under sub-section (2) shall be binding on the Assessing Officer and the assessment shall be made accordingly. In our considered opinion both the authorities below erred in taking shelter of the provisions of sub-section (3) of section 50C in disregarding the value determined by the DVO. DVO determined fair market value at ₹ 46.48 lakhs, which is lower than the value for the purpose of stamp duty at ₹ 1.18 crore - As per the provisions of section 50C(2), the capital gain is required to be computed by considering the fair market value of the property at ₹ 46,48,781 as the full value of the consideration received or accruing to the assessee as a result of the transfer of capital asset - In the result, the appeal is partly allowed for statistical purposes. - ITA NO. 178/MUM/2009 - - - Dated:- 4-11-2010 - R.S. PADVEKAR JUDICIAL MEMBER J, R.S. SYAL ACCOUNTANT MEMBER J, Appellant by : Shri Hiro Rai Respondent by : Shri S.K.Mahapatra ORDER Per R.S. Syal, Accountant Member : This appeal by the assessee emanates from the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of Stilt plus 12 upper floors. As per the Construction contract each member was required to pay construction cost at the rate of Rs. 1200 per sq. ft. and further Rs. 1500 per sq.ft. towards purchase cost of TDR. Penalty/escalation cost was determined as payable at the rate of Rs.400 in case of delay for each six months. It was explained that as the assessee did not have money to pay to the contractor and further the property was purchased with borrowed funds in the preceding year, it was decided to sell the same on "as is where is" basis for a total consideration of Rs. 35 lakhs. It was mutually agreed by the assessee with the purchaser that the latter will be responsible for paying construction cost and TDR cost to the contractor and/or any other charges payable to the society. The assessee also explained that on the relevant date when the property was sold, the old building was demolished and only the plinth was laid for the purpose of construction of new building. In the light of these facts it was put forth before the A.O. that the provisions of section 50C were not applicable. Without prejudice to this main argument, the assessee requested the AO to refer the matter to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant material on record. There is no dispute on the fact that the assessee purchased flat in the immediately preceding year for a total consideration of Rs. 30 lakhs. After demolition, the assessee sold her right in the flat in this year for a total consideration of Rs. 35.00 lacs. Admittedly the stamp value of the said flat on the date of transfer was Rs. 1.18 crores. The entire controversy revolves around the determination of the full value of consideration as a result of transfer of the right in the flat. 7. Section 48 contains the mode of computation of the income under the head Capital gains'. It provides that the capital gains shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, ( i ) the expenditure incurred wholly and exclusively in connection with such transfer, ( ii ) the cost of acquisition of the asset and ( iii ) the cost of improvement, if any. Section 50C which has been inserted by the Finance Act, 2002 with effect from 1.4.2003 contains a special provision for the determination of full value of consideration in certain cases. Sub-section (1) provides that where the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions ( 6 ) and ( 7 ) of section 23A, sub-section ( 5 ) of section24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 ( 27 of 1957 ) , shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section ( 1 ) of section 16A of the Act. Explanation. - For the purposes of this section, "Valuation Officer" shall have the same meaning as in case ( 4 ) of section 2 of the Wealth-tax Act, 1957 ( 27 of 1957 ) . 10. It is apparent from a bare perusal of the above provision that the directive of sub-section (1) of section 50C is not absolute. The mechanism for redressal of grievance by the assessee in a case where such stamp valuation is on a higher side, has been enshrined in sub-section (2) of section 50C. As per this provision where the assessee claims before the Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, the A.O. may refer the valuation of the capital asset to a Valuation Officer and where any such refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (2) For the purpose of estimating the value of any asset in pursuance of a reference under sub-section ( 1 ) , the Valuation Officer may serve on the assessee a notice requiring him to produce or cause to be produced on a date specified in the notice such accounts, records or other documents as the Valuation Officer may require. (3) Where the Valuation Officer is of opinion that the value of the asset has been correctly declared in the return made by the assessee under section 14 or section 15, he shall pass an order in writing to that effect and send a copy of his order to the [Assessing Officer] and to the assessee. (4) Where the Valuation Officer is of opinion that the value of the asset is higher than the value declared in the return made by the assessee under section 14 or, section 15, or where the asset is not disclosed; or the value of the asset is not declared in such return or where no such return has been made, the Valuation Officer shall serve a notice on the assessee intimating the value which he proposes to estimate and giving the assessee an opportunity to state, on a date to be specified in the notice, his objections either in person or in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the opinion that the value of asset is higher than that declared in the return and then call for objections of the assessee. Sub-section (5) provides that the Valuation Officer shall estimate the value of the asset considering the evidence produced by the assessee before him and then send a copy of his order to the A.O. as well as the assessee. It can be noticed that the Valuation Officer can pass order either under sub-section (3) where he agrees with the value returned by the assessee or under sub-section (5) where he is not so satisfied. In the later case, he shall pass order determining the value in the light of material and evidence before him after allowing an opportunity to the assessee. Sub-section (6) of section 16A, which is material for our purpose, provides that on the receipt of order under sub-section (3) or sub-section (5) from the Valuation Officer, the Assessing Officer shall, so far as valuation of asset in question is concerned, "proceed to complete the assessment in conformity with the estimate of the Valuation Officer". Sub-section (6) provides in unequivocal terms that the Assessing Officer shall complete the assessment in conformity with the estimate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g words :- "Under sub-section ( 6 ) of section 16A, the WTO has no option but to pass an order in conformity with the valuation report submitted by the Valuation Officer. Even if the assessee succeeds in cross-examination in establishing that the valuation report is incorrect, it will not be open to the WTO to disregard the estimate of the valuation given by the Valuation Officer in his report. " 15. In light of the above discussion, it is vivid that the report of the DVO is binding on the AO and the latter has no authority to sit over the judgment of the former. It is beyond our comprehension as to how the AO can refuse to accept the report of DVO. When the legislature has carved out specific provisions necessitating the creation of explicit wing to deal with the matter of valuation of capital assets with the tacit understanding that it is not the cup of tea of the A.O.s, it is but natural for the assessing authorities to recognize and accept this fact. Albeit the AO has every right to question the veracity of the report of the Registered Valuer, but he cannot doubt the work done by the DVO. If the AO is allowed to find faults with the report of DVO and consequently ig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50C. Once we read the mandate of sub-section (6) of section 16A in sub-section (2) to section 50C, there remains no doubt whatsoever that the report of DVO is binding on the Assessing Officer. 18. Now we espouse the contention made by the learned Departmental Representative accentuating that sub-section (3) of section 50C contains a provision authorizing the Assessing Officer to depart from the valuation report. It is noted that the Assessing Officer has also relied on sub-section (3) of section 50C in canvassing the view that the report of DVO is not binding on him. At this juncture it would be relevant to take note of the provisions of sub-section (3) of section 50C as under:- " ( 3 ) Subject to the provisions contained in sub-section ( 2 ) , where the value ascertained under sub-section ( 2 ) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-section ( 1 ) , the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. " 19. From the above provision it can be noticed that where the value ascertained in sub-section (2), that is, the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been dispensed with. It is only where the value under sub-section (2) is higher than the value under sub-section (1) that the provisions of sub-section (3) shall come into play. Only in such a situation the command of sub-section (3) is activated to take no notice of the value as determined by the DVO. But for that, the directive of sub-section (2) is applicable in all other cases. In a converse situation, viz. , where the value under sub-section (2) is lower than the value under sub-section (1), the provisions of sub-section (3) of section 50C have not been made applicable to. The natural corollary which, therefore, follows is that if the value determined by the DVO under sub-section (2) is lower than that of the value adopted, assessed or assessable by the stamp valuation authority under sub-section (1), the value so estimated under sub-section (2) shall be binding on the Assessing Officer and the assessment shall be made accordingly. In our considered opinion both the authorities below erred in taking shelter of the provisions of sub-section (3) of section 50C in disregarding the value determined by the DVO. 21. Coming back to the facts of the instant case we find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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