Where assessee objects before Assessing
Officer that value adopted by stamp valuation authority under section 50C(1)
exceeds fair market value of property on date of transfer, Assessing Officer
may either accept valuation of property on basis of report of approved valuer
filed by assessee or he may refer question
of valuation of capital asset to DVO
in accordance with section 55A
[2013] 38 taxmann.com 275 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax
v.
Chandra Narain Chaudhri
SUNIL AMBWANI AND Surya Prakash Kesarwani,
JJ.
IT Appeal No. 287 of 2011
AUGUST 29, 2013
Section 50C, read with section 55A, of the
Income-tax Act, 1961 - Capital gains - Full value of consideration in certain
cases, special provision for [Assessee's objections] - Assessment year 2005-06
- Whether whenever assessee claims/objects before Assessing Officer that value
adopted by stamp valuation authority under section 50C(1) exceeds fair market
value of property on date of transfer, Assessing Officer may either accept
valuation of property on basis of report of approved valuer filed by assessee
or he may refer question of valuation of capital asset to DVO in accordance
with section 55A and in all these events, he has to record valid reasons -
Held, yes - Assessee had sold a property in October, 2004 - He filed two
valuation reports, i.e., one for valuation as on 1-4-1981 at Rs. 3.90 lakhs and
other for valuation as on October, 2004 at Rs. 33.77 lakhs, and requested Assessing
Officer to accept valuation of property shown by him - Assessing Officer having
noticed that stamp valuation authority had fixed valuation of property at Rs.
78.48 lakhs did not accept valuation reports and applying provisions of section
50C(1) worked out capital gain on basis of valuation fixed by stamp valuation
authority - He did not record any finding on validity of claim/objection filed
by assessee - Whether in peculiar facts of case matter was to be remanded to
Assessing Officer to decide valuation of property in accordance with law -
Held, yes [Paras 14 and 15] [Matter remanded]
FACTS
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The assessee had sold a property in
October, 2004. He filed two valuation reports i.e. one for valuation as on
1-4-1981 at Rs. 3.90 lakhs and other for valuation as on October 2004 at Rs.
33.77 lakhs, and requested the Assessing Officer to accept the valuation of
the property shown by him.
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The Assessing Officer having noticed that
the stamp valuation authority had fixed valuation of property at Rs. 78.48
lakhs did not accept valuation reports submitted by the assessee and applying
the provisions of section 50C(1) worked out the capital gain on the basis of
valuation fixed by the stamp valuation authority.
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On appeal, the Commissioner (Appeals)
held that the Assessing Officer should have referred the matter to the
Departmental Valuation Officer [DVO], as in the instant case both the ingredients
of provisions of section 50C(2) were present, which made it necessary for the
Assessing Officer to refer such matter for valuation by the DVO in accordance
with provisions of section 55A, and the provisions of section 50C(2) were
essentially to be read in conjunction with the provisions of section 50C(1).
Since the assessee had furnished a report from approved valuer and had relied
on the same during the course of assessment proceedings, the value of the
property determined by the said approved valuer for the month of October,
2004 should be taken to be the sale consideration received by the assessee, i.e.,
Rs. 33.77 lakhs. Similarly the value taken by the approved valuer as on
1-4-1981 should be taken as a value for the purpose of arriving at the
indexed cost of acquisition. This was more so as the property under
consideration was very old and under tenancy from 1969 fetching a nominal
rent of Rs. 625 per month in the year of sale. He, therefore, computed the
capital gain adopting the sale consideration at Rs. 33.77 lakhs and the
indexed cost at Rs. 1.87 lakhs. Thus he partly allowed the appeal of the assessee.
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On cross appeals, the Tribunal did not
agree with the Commissioner (Appeals) that the provisions of section 50C(2)
were essentially be read in conjunction with the provisions of section
50C(1). It held that the value of the property as determined by the approved
valuer for the month of October, 2004 at Rs. 33.77 lakhs had to be taken as
the sale consideration. Similarly the value taken by the approved valuer as
on 1-4-1981 had to be taken into consideration for the purposes of arriving
at indexed cost of acquisition. It, therefore, dismissed the appeals.
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On appeal to High Court:
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HELD
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Section 50C is a rule of evidence in
assessing the valuation of property for calculating the capital gain. The
deeming provision under section 50C(1) is rebuttable. It is well known that
an immovable property may have various attributes, charges, encumbrances, limitations
and conditions. In the instant case, it is stated that the property was under
the tenancy of father of the purchaser from 1969. Thus the assessee being
landlord of the property offered it for sale to the tenant, which could not
have attracted fair market value as a willing purchaser may have offered for
a property in vacant condition. The stamp valuation authority does not take
into consideration the attributes of the property for determining the fair
market value. He is required to value the property in accordance with the
circle rates fixed by the Collector. 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, any charge or legal
encumbrances. [Para 10]
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The question as to whether the assessee
filed any objections before the stamp valuation authority to dispute the
valuation or filed appeal or revision or made reference before any authority,
Court or the High Court under sub-section (2)(b) of section 50C is not of any
relevance, as the Assessing Officer himself observed that the assessee did
not dispute the stamp valuation before the stamp valuation authority. There
may be several reasons for the purchaser not to file such objection. A
purchaser may not go into litigation and pay stamp duty, as fixed by the
stamp valuation authority, which may be over and above the fair market value
of the property, as on the date of transfer, though the amount so determined
has not been actually received by owner of the property. Whenever the
assessee claims before the Assessing Officer that the value adopted or
assessed or assessable by the stamp valuation authority under sub-section (1)
of section 50C exceeds the fair market value of the property as on the date
of transfer, the Assessing Officer may refer the valuation of the capital
asset to the DVO and for that purpose the procedure prescribed under the
Wealth-tax Act is to be applied. In case of any such claim, the Assessing
Officer may rely on the report of registered valuer under section 55A and in
such case it will not be necessary for him to refer the matter to the DVO.
However, in any event, the Assessing Officer has to record sufficient
reasons. He has to record reasons for accepting the report of the approved
valuer submitted by the assessee along with his claim/objection under section
50C(2). If he does not accept the report, he has to record the reason for
referring the matter to the DVO. The reasons in either case must have nexus
with the objection/claim made by the assessee and the objection, which may be
raised by the department against the valuation determined in the report of
the approved valuer. [Para 11]
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In the instant case, the Commissioner
(Appeals) has correctly observed that the provisions of section 50C(2) are
essentially to be read in conjunction with the provisions of section 50C(1).
He also found that in the instant case both ingredients of provisions of
section 50C(2) are present, which made it necessary for the Assessing Officer
to refer the matter for valuation to DVO in accordance with provisions of
section 55A. The Tribunal committed serious error of law in finding that the
value of the property as determined by the approved valuer for the month of
October, 2004 at Rs. 33.77 lakhs has to be taken as the sale consideration
and similarly the value taken by the approved valuer as on 1-4-1981 has to be
taken for the purposes of arriving at indexed cost of acquisition. It failed
to consider that the Assessing Officer did not record any finding either on
the validity of the claim/objection filed by the assessee, nor did he record
any finding on the reports of the approved valuer submitted by the assessee.
[Para 12]
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Whenever objection is taken or claim is
made before the Assessing Officer that the value adopted or assessed or
assessable by the stamp valuation authority under sub-section (1) of section
50C exceeds the fair market value of the property on the date of transfer,
the Assessing Officer has to apply his mind on the validity of the objection
of the assessee. He may either accept the valuation of the property on the
basis of the report of the approved valuer filed by the assessee or invite
objection from the department and refer the question of valuation of the
capital asset to DVO in accordance with section 55A. In all these events, the
Assessing Officer has to record valid reasons, which are justifiable in law.
He is not required to adopt an evasive approach of applying deeming provision
without deciding the objection or to refer the matter to the DVO under
section 55A as a matter of course, without considering the report of approved
valuer submitted by the assessee. In all such cases, the reasons recorded by
the Assessing Officer may be questioned by the assessee or the department, as
the case may be. [Para 14]
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Therefore, the order of the Tribunal was
liable to be set aside. The matter required to be sent back to the Assessing
Officer to decide the valuation of the property in accordance with law. [Para
15]
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CASES REFERRED TO
CIT v. Smt. Raj Kumar Vimla Devi [2005] 279
ITR 360 (All.) (para 9).
A.N. Mahajan for the Appellant.
ORDER
1. We have heard Sri Bharat Ji Agrawal,
Senior Advocate, assisted by Sri Shambhu Chopra, for the appellant-revenue. Sri
Krishna Agarwal appears for the respondent-assessee.
2. This Income Tax Appeal under Section
260-A of the Income Tax Act 1961 (the Act) is directed against the judgement
and order dated 10.05.2011, passed by the Income Tax Appellate Tribunal,
Allahabad Bench, Allahabad in ITAT No. 304/Alld/2010, relating to Assessment
Year 2005-06. The department has preferred the appeal, on the following
questions of law.-
"1.
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Whether on the facts and in the
circumstances of the case, the Tribunal is justified in law in confirming the
order of the CIT (A) determining the value of the capital assets at
rs.33,77,186/- and indexed cost of acquisition at Rs.18,72,000/- as against
Rs.78,48,000/- and Rs.14,97,072/- as respectively taken by the AO by ignoring
the fact that property is in the main market of Civil Lines and is meant for
commercial use and that the assessee had not disputed the Stamp Duty
valuation?
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2.
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Whether the AO rightly adopted the market
value of the land as per the Stamp Duty valuation which the assessee has
never objected to, for working out the long term capital gain u/s 50-C of the
Act?"
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3. After having heard the learned counsel
for the parties and perusing the orders passed by the AO, CIT (A) and ITAT, we
find that appropriate question, which should have been framed for consideration
is as to whether if the assessee claims before the AO that the value adopted or
assessed or assessable by Stamp Valuation Authority under sub-section (1) of
Section 50C of the Act exceeds the fair market value of the property as on the
date of transfer, the Assessing Officer should refer the valuation of the
capital asset to a Valuation Officer under Section 50 C (2) of the Act; and
whether in the facts and circumstances, if the assessee has filed a report of
the approved valuer under Section 12-A of the Wealth Tax Act 1957, and to which
no objection was filed by the Income-tax Department at any stage, it is necessary
for the AO to refer the valuation of the capital assets to the Valuation
Officer under Section 50C(2) of the Act?
4. In the present case, the assessee did
not disclose the capital gain in his return. In proceedings under Section 143
(2) of the Act, the assessee was required to give reply in which he disclosed
the sale of capital asset viz., property No. 153/33-A M.G. Marg, Allahabad at
Rs.25,00,000/- for which he also filed a report of the approved valuer. The
revenue asserted that the purchaser had paid stamp duty on the valuation of the
property fixed by the stamp valuation authority appointed by the State
Government, according to which, the valuation of the property was
Rs.78,48,000/-. The capital gain was accordingly worked out on the basis of
valuation fixed by the stamp valuation authority under Section 50 C (2) of the
Act.
5. The AO referred to the objections filed
by the assessee in his reply dated 16.12.2009 and 18.12.2009, and the request
of the assessee to accept the valuation shown by him in his reply dated
8.12.2009, on the basis of indexation of the value of property, on the ground
that the building was under the tenancy of Sri Om Prakash Jaiswal - the father
of the purchaser since 1967. The assessee filed two valuation report - one for
valuation as on 1.4.1981 at Rs.3,90,280/-, and the other for valuation as in
October 2004 at Rs.33,77,186/-. The AO did not accept the report of the
approved valuer submitted by the assessee as fair market value and found that
the value adopted by the stamp duty authority has to be taken as fair market
value as on October 2004, and accordingly computed the long term capital gain.
6. In appeal before the CIT (A), the
assessee submitted additional evidence under Rule 46-A on 13.08.2010, wherein
he submitted another valuation report dated 3.12.2009, from the same approved
valuer suggesting that the actual distress sale value of the property is
Rs,17,30,713/- as against the valuation of the property inclusive of land and
building at Rs.33,77,185/- The additional evidence was sent to the AO for
comments. The AO submitted his comments vide his letter dated 26.08.2010,
observing that the assessee attended the assessment proceeding through his
counsel/authorized representative on 3.12.2009, 8.12.2009 and 16.12.2009 and 18.12.2009,
but the said the valuation report dated 3.12.2009 was never furnished before
him and therefore the additional evidence may not be accepted at this stage.
The CIT (A) thus rejected the additional evidence. The CIT (A) thereafter
relied on Section 50 C of the Act and held as follows.
"5.1 From the provisions of the said
section it is seen that the following elements are essential before any valid
addition can be made under the said section, as also endorsed by various Courts
of law.
5.1.1 It is mandatory on the part of the AO
to make reference to Valuation Officer as per provisions of section 50C where
the assessee contended that valuation as done by Stamp Valuation Authority is
not acceptable to him. The decision of the AO was not correct where he held
that reference to Valuation Officer is optional since the assessee had not
objected to value adopted by the State Valuation Authority, there was no need
to refer matter to the Valuation Officer [ Kalpataru Industries Vs. ITO ITAT
No. 5540/Mum/07 decided on 24.08.2009.
5.1.2 Clauses (a) & (b) of sub-section
(2) of section 50C are continuation to each other and therefore, conditions
laid down in both the clauses are required to be satisfied together-AO has to
refer the valuation to the DVO for determing the fair market value if the
property under transfer is less than valuation made by the State Valuation
Authority and further that he has not disputed the valuation by the State
Valuation Authority before Appellate Authorities under Stamp Duty Act [Mohd.
Shoib v. DCIT [2009] 29 DTR 306 (Lko-B).
5.1.3 In a case where the AO applied
provisions of section 50C(1) and came to a conclusion that the value of sale
consideration had to be taken at a value as per the sale deed of Sub-Registrar
but the matter was not referred to the DVO, it was held that the matter should
have been referred to the DVO for getting its market rate established as on
date of sale to arrive at a correct sale consideration. [2008] 23 SOT
25 (Jodh.) (URO)/Meghraj Baid v. ITO/114 TTJ 841
(Jodh).
5.1.4 If an assessee objects to stamp duty
valuation, the assessing officer is duty bound to refer the matter to the
Valuation Officer - [2009] 34 SOT
57 (Mum)- Ajmal Fragrances & Fashions (P) Ltd. v. C.I.T.
5.2 Considering the judgments above and
also considering the judgment in the case of CIT v. Chandani Bhochar [2010] 323
ITR 510 (P&H) as well as the judgment of the Hon'ble Allahabad
High Court in the case of CIT vs. Smt. Raj Kumar Vimla Devi [2005]279 ITR
360 (Alld.), I am of the firm view that the stand taken by the AO
that the value adopted by the Stamp Duty Authority alone is taken to be the
fair market value as on October, 2004 is not correct since he should have
referred the matter in assessment to the DVO as in the present case, both the
ingredients of provisions of section 50C(2) are present which compels the AO to
refer such matter for valuation by DVO in accordance with provisions of section
55A of the I.T. Act, 1961 and the said provisions of section 50C(2) are
essentially to be read in conjunction with the provisions of section 50C(1) of
the I.T. Act. However, considering the fact that the assessee has furnished a
report from Approved Valuer and has relied on the same during the course of
assessment proceedings, the value of the Capital Asset as determined by the
said Approved Valuer for the month of October, 2004 should be taken to be the
Sale Consideration received by the assessee i.e. Rs.33,77,186/-. Similarly, the
value taken by the Approved Valuer as on 01.04.1981 should be taken as a value
for the purpose of arriving at the indexed Cost of Acquisition. This is more so
as the property under consideration was very old and under tenancy since 1969
fetching a nominal rent of Rs.625 per month ( approx.), in the year of sale and
since the assessee could not vacate the property even after a legal battle, had
to sell the property to the son of the tenant.
5.3 Therefore, the Capital Gains of the
appellant is computed as below for the purpose of assessment :
Sale Consideration Received
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Rs.33,77,186/
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Less : Indexed Cost 3.9 lakh X 480/100
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Rs.18,72,000/
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Long Term Capital Gain
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Rs.15,05,186/
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5.4 The Long Term Capital Gains is to be
taxed @20% based on the computation as above.
6. So far as the Additional Ground taken by
the appellant regarding charge of interest is concerned, the same has not been
pressed by the appellant during the course of appellate proceedings. In any
case charge of interest is mandatory and consequential to the proceedings under
consideration. Therefore, this additional ground of appeal is hereby dismissed.
In result, the appeal is partly
allowed".
7. The Appeal filed by the revenue and the
cross appeal filed by the assessee were dismissed by the ITAT vide its order
dated 10.05.2011. The ITAT did not agree with the reasoning adopted by the CIT
(A) and held that provisions of Section 50C(2) of the Act are essentially be
read in conjunction with the provisions of Section 50C(1) of the Act, and that
in the facts and circumstances of the case, the value of capital asset as
determined by the approved valuer for the month of October 2004 at
Rs.33,77186/- has to be taken as the sale consideration and similarly the value
taken by the approved valuer as at 1.4.1981 has to be taken into consideration
for the purposes of arriving at indexed cost of acquisition. The ITAT did not
find any infirmity in the order of CIT (A) and dismissed the appeal filed by
the revenue.
8. In order to appreciate the question
raised in this appeal, it is necessary to quote the provisions of Section 50C
of the Act.
"50C. 'Special provision for full
value of consideration in certain cases.— (1) Where the consideration received
or accruing as a result of the transfer by an assessee of a capital asset,
being land or building or both, is less than the value adopted or assessed or
assessable by any authority of a State Government (hereafter in this section
referred to as the "stamp valuation authority") for the purpose of
payment of stamp duty in respect of such transfer, the value so adopted or
assessed or assessable shall, for the purposes of section 48, be deemed to be
the full value of the consideration received or accruing as a result of such
transfer.
(2) Without prejudice to the provisions of
sub-section (1), where—
(a)
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the assessee claims before any 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;
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(b)
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the value so adopted or assessed or
assessable by the stamp valuation authority under sub-section (1) has not
been disputed in any appeal or revision or no reference has been made before
any other authority, court or the High Court,
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the Assessing Officer may refer the
valuation of the capital asset to a Valuation Officer and where any such
reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of
section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of
section 23A, sub-section (5) of section 24, section 34AA, section 35 and
section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary
modi-fications, 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 that Act.
Explanation 1.—For the purposes of this
section, "Valuation Officer" shall have the same meaning as in clause
(r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).
Explanation 2.—For the purposes of this
section, the expression "assessable" means the price which the stamp
valuation authority would have, notwithstanding anything to the contrary
contained in any other law for the time being in force, adopted or assessed, if
it were referred to such authority for the purposes of the payment of stamp
duty.
(3) Subject to the provisions contained in
sub-section (2), where the value ascertained under sub-section (2) exceeds the
value adopted or assessed or assessable by the stamp valuation authority
referred to in sub-section (1), the value so adopted or assessed or assessable
by such authority shall be taken as the full value of the consideration
received or accruing as a result of the transfer.'
9. This Court had an occasion to consider
the provisions of Section 50 C of the Income Tax Act 1961, inserted by the
Finance Act 2002, w.e.f. 1.4.2003, in CIT v. Smt. Raj Kumari Vimla Devi [2005] 279
ITR 360 (All), in which it was held as follows:—
"The apex court in the case of Jawajee
Nagnatham v. Revenue Divisional Officer[1994] 4SCC 595 has held that the Basic
Valuation Register prepared and maintained for the purpose of collecting stamp
duty cannot form the foundation to determine the market value mentioned
thereunder in instruments brought for registration. Equally it would not be a
basis to determine the market value under Section 23 of the Land Acquisition
Act, of the lands acquired in that area or town or the locality or the taluk, etc.
This Court in the case of Dinesh Kumar
Mittal v. ITO [1992] 193
ITR 770 ; [1991] UPTC 1209 has held that we cannot recognise any
rule of law to the effect that the value determined for the purpose of stamp
duty is the actual consideration passing between the parties to a sale. The
actual consideration may be more or may be less. What is the actual
consideration that passed between the parties is a question of fact to be
determined in each case, having regard to the facts and circumstances of that
case.
It may be mentioned here that to overcome
this difficulty for the purposes of bringing to tax on capital gain, Parliament
has inserted Section 50-C of the Income-tax Act, 1961, by the Finance Act,
2002, with effect from April 1, 2003, wherein it has been provided that the
value adopted or assessed by any authority of a State Government for the
purpose of payment of stamp duty in respect of land or building or both shall
for the purposes of Section 48 be deemed to be the full value of the
consideration received or accruing as a result of such transfer. There was no
such provision applicable during the relevant period, therefore, the value of
assets by the stamp valuation authority cannot be treated as full market value
for the purposes of imposition of tax.
In this view of the matter, we are of the
considered opinion that the rules framed under the Stamp Act cannot be pressed
into service for determining the market value of the property and, therefore,
there is no deemed gift in the present case. We, accordingly answer both the
questions referred to us in the affirmative, i.e., in favour of the assessee
and against the Revenue. There shall be no order as to costs."
10. Section 50-C of the Act is a rule of
evidence in assessing the valuation of property for calculating the capital
gain. The deeming provision under Section 50C(1) of the Act is rebuttable. It
is well known that an immovable property may have various attributes, charges,
encumbrances, limitations and conditions. In the present case, it is stated
that the property was under the tenancy of father of the purchaser since 1969
and thus the assessee being landlord of the property, offered it for sale to
the tenant, which could not have attracted fair market value, as a willing
purchaser may have offered for a property in vacant condition. The Stamp
Valuation Authority does not take into consideration the attributes of the
property for determining the fair market value in the condition the property is
a offered for sale and is purchased. He is required to value the property in
accordance with the circle rates fixed by the Collector. 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 it occupation by tenant, any
charge or legal encumbrances.
11. The question as to whether the assessee
filed any objections before the Stamp Valuation Authority to dispute the
valuation, or filed appeal or revision or made reference before any authority,
court or the High Court under sub section (2)(b) of Section 50C of the Act is
not of any relevance in this case, as the AO himself observed that the assessee
did not dispute the stamp valuation before the Stamp Valuation Authority. There
may be several reasons for the purchaser not to file such objection. A
purchaser may not go into litigation, and pay stamp duty, as fixed by the Stamp
Valuation Authority, which may be over and above the fair market value of the
property, as on the date of transfer, though the amount so determined has not
been actually received by owner of the property. Whenever the assessee claims
before the Assessing Officer that the value adopted or assessed or assessable
by the Stamp Valuation Authority under sub section (1) of Section 50-C exceeds
the fair market value of the property as on the date of transfer, the Assessing
Officer may refer the valuation of the capital asset to a Departmental
Valuation Officer (DVO) and for that purpose, the procedure prescribed under
the Wealth Tax Act are to be applied. In case of any such claim, the AO may
rely on the report of registered valuer under Section 55-A of the Act and in
such case it will not be necessary for him to refer the matter to the DVO.
However, in any event, the AO has to record sufficient reasons. He has to
record reasons for accepting the report of the approved valuer submitted by the
assessee along with his claim/objection under Section 50C(2) of the Act. If he
does not accept the report, he has to record the reason for referring the matter
to the DVO. The reasons in either case must have nexus with the objection/claim
made by the assessee and the objection, which may be raised by the department
against the valuation determined in the report of the approved valuer.
12. In the present case, we find that CIT
(A) has correctly observed in his order that the provisions of Section 50C(2)
are essentially to be read in conjunction with the provisions of Section 50C(1)
of the Act. He also found that in the present case both ingredients of
provisions of Section 50C(2) are present, which made it necessary for the AO to
refer the matter for valuation to DVO in accordance with provisions of Section
55-A of the Income Tax Act. The ITAT in allowing the appeal committed serious
error of law in finding that in such circumstances and facts of the case, the
value of the capital asset as determined by the approved valuer for the month
of October 2004 at Rs. 33,77,186/- has to be taken as the sale consideration
and similarly the value taken by the approved valuer as on 1.4.1981 has to be
taken for the purposes of arriving at indexed cost of acquisition. The ITAT
failed to consider that the AO did not record any finding either on the
validity of the claim/objection filed by the assessee nor did he record any
finding on the sufficiency of valuation of the approved valuer submitted by the
assessee.
13. In the present case, the assessee has
submitted three different valuation reports of the approved valuer. The first
report was based on the valuation as on 1.4.1981; the second report was based
on the valuation as on October 2004 and the third report by the same approved
valuer was based on distress sale value of the property. The third valuation
report was prepared during the proceedings before AO. The assessee however did
not choose it to file the same before AO in remand proceedings, and filed it as
an additional evidence in appeal, which was rejected by the CIT (A) after
considering the report of AO on remand.
14. We are of the view that whenever
objection is taken or claim is made before AO, that the value adopted or
assessed or assessabe by the Stamp Valuation Authority under sub-section (1) of
Section 50-C exceeds the fair market value of the property on the date of
transfer, the AO has to apply his mind on the validity of the objection of he
assessee. He may either accept the valuation of the property on the basis of
the report of the approved valuer filed by the assessee, or invite objection
from the department and refer the question of valuation of the capital asset to
DVO in accordance with Section 55-A of the Act. In all these events, the AO has
to record valid reasons, which are justifiable in law. He is not required to
adopt an evasive approach of applying deeming provision without deciding the
objection or to refer the matter to the DVO under Section 55-A of the Act as a
matter of course, without considering the report of approved valuer submitted
by the assessee. In all such cases, the reasons recorded by the AO may be
questioned by the assessee or the department as the case may be.
15. The questions of law, as framed in the
memo of appeal, are decided in favour of the revenue and against the assessee.
The order of ITAT dated 10.05.2011, is set aside. The matter is remanded to AO,
to decide the valuation of the capital asset in accordance with law as
explained by us in this judgement.
16. The Income Tax Appeal is allowed.
[2013] 38 taxmann.com 275 (Allahabad)
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