2017 (3) TMI 1827 - AT - Income Tax

LTCG Computation under section 50C - Valuation of property - Additional capital gain made by invoking the provisions of section 50C - refer the matter before the DVO - value adopted by the DRO - HELD THAT - Before confronting the fair market value adopted by the SRO as higher the assessee has not directly approached the AO to refer the matter before the DVO to determine the fair market value but against the value adopted by the SRO the assessee has appealed before another authority i.e. District Revenue Officer (Stamps) Chennai. Against the value determined by the District Revenue Officer (Stamps) Chennai which was adopted as market value of the property by the SRO neither the Department nor the Tribunal can alter or modify the value. The dispute over the valuation of market value ended with Revenue authorities of the State Government. Therefore the value adopted by the DRO cannot be challenged before the Tribunal. After challenging the value determined by SRO before the DRO (STAMPS) for assessing the market value and paid the difference of stamp duty and got released the document on 16.08.2011 the assessee cannot confront the rate determined by the DRO before the Assessing Officer. Even though the Assessing Officer obtained DVO rates which is similar to the value determined by the DRO the Assessing Officer taken the difference in value of DRO and SRO for working out the long term capital gains and the actual difference was brought to tax. Under the above facts and circumstances we sustain the addition made by the Assessing Officer and confirmed by the ld. CIT(A) and thus the ground raised by the assessee is dismissed.

Summary

Issues Involved:
1. Application of Section 50C of the Income Tax Act, 1961
2. Valuation of property for capital gains calculation
3. Opportunity to challenge valuation under Section 50C
4. Reopening of assessment under Section 147

Issue-wise Detailed Analysis:

1. Application of Section 50C of the Income Tax Act, 1961:
The primary issue in this case is whether the provisions of Section 50C of the Income Tax Act, 1961, are applicable. The assessee argued that the provisions of Section 50C should not apply because there was no significant variation between the stated consideration and the guideline value. However, the Tribunal found that since the property sold was a capital asset, the provisions of Section 50C were applicable. The section mandates that if the sale consideration of a property is less than the value adopted by the Stamp Valuation Authority, the latter value should be deemed as the full value of consideration for capital gains purposes.

2. Valuation of property for capital gains calculation:
The valuation of the property was contested. The assessee sold the property for Rs. 2.80 crores at Rs. 400 per sq. ft., while the Stamp Valuation Authority valued it at Rs. 3,79,90,860 at Rs. 555 per sq. ft. The District Revenue Officer (Stamps), Chennai, confirmed the market value at Rs. 555 per sq. ft. The Assessing Officer referred the matter to the Valuation Officer, who also confirmed the value at Rs. 555 per sq. ft. The Tribunal upheld this valuation, noting that once the District Revenue Officer determined the market value, it could not be challenged before the Assessing Officer or referred to the Departmental Valuation Officer.

3. Opportunity to challenge valuation under Section 50C:
The assessee claimed that he was not given a proper opportunity to challenge the valuation. However, the Tribunal found that the Assessing Officer had provided the assessee with an opportunity to explain why Section 50C should not be invoked, and the assessee had filed objections. The Tribunal dismissed the claim that no proper opportunity was given after obtaining the valuation report from the valuation cell, stating it was factually incorrect.

4. Reopening of assessment under Section 147:
The assessee also challenged the reopening of the assessment under Section 147 of the Act. The Tribunal found that the Assessing Officer had valid reasons to believe that capital gains from the sale of the property had escaped assessment. The Tribunal upheld the reopening of the assessment, noting that all procedural requirements were followed, and the assessee was given ample opportunity to present his case.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, upholding the application of Section 50C, the valuation determined by the Stamp Valuation Authority, and the reopening of the assessment. The Tribunal emphasized that the value determined by the District Revenue Officer (Stamps) was final and could not be challenged before the Assessing Officer or the Tribunal. The appeal was dismissed, and the addition made by the Assessing Officer was sustained.