2024 (12) TMI 1350 - HC - Income Tax

Validity of orders passed u/s 264 - Addition u/s 56(2)(vii)(b)(ii) - value adopted for the purposes of payment of stamp duty value - Relevance and application of Section 50C(2) - differential value exceeds Rs. 50, 000/- - HELD THAT - In this case admittedly the value declared in the Sale Deed was Rs. 72, 00, 000/-. The value adopted by the SRO was Rs. 97, 69, 000/-. Thus the differential value exceeds Rs. 50, 000/-. Therefore the present case is covered by Section 56(2)(vii)(b)(ii) of the IT Act as extracted in the above tabular column. Thus the value adopted for assessment of the stamp duty by the SRO at Rs. 97, 69, 000/- has to be adopted for the purpose of computation of Income of the petitioner. If the value is disputed on the grounds mentioned in sub-section (2) of section 50C the Assessing Officer may refer the valuation of such property to a Valuation Officer and the provisions of Section 50C and sub-section (15) of Section 155 shall as far as may be apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections. It is clear that if the valuation is disputed the conditions stipulated in sub-clause (a) (b) to sub-section 2 to Section 50C will apply. Therefore impugned orders rejecting the request of the respective petitioners for revising the orders is unsustainable and therefore the same warrants interference. AO has to therefore refer the valuation of the property viz. capital asset under proviso to sub-clause (vii)(c) to sub-section 2 to Section 56 to the Valuation Officer. Merely because the Authorized Representative of the petitioner did not raise any objection before the Assessment Order dated 30.11.2017 was passed ipso facto would not mean that reference under sub-clause (vii)(c) to sub-section 2 to Section 56 of the IT Act would be barred. Even if no objections was raised before the Assessing Officer prior to the assessment order being passed the assessee would still be entitled to raise such objections both before the Revisional Authority u/s 264 of the IT Act or before the Appellate Commissioner u/s 246A of the IT Act as these proceedings are continuation of the original assessment proceedings. The impugned orders are liable to be quashed and the cases are remitted back to the 2nd respondent to re-do the exercise under first proviso to sub-clause (vii)(c) to sub-section 2 to Section 56 of the IT Act read with sub-section 2 to Section 50C of the IT Act.

Issues Involved:
1. Application of Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961.
2. Relevance and application of Section 50C(2) of the Income Tax Act.
3. Validity of the assessment based on the guideline value of immovable property.
4. Rights of the assessee to dispute the valuation under the Income Tax Act.
5. Role of the Authorized Representative's acceptance in the assessment proceedings.

Detailed Analysis:

1. Application of Section 56(2)(vii)(b)(ii) of the Income Tax Act, 1961:
The core issue revolves around the application of Section 56(2)(vii)(b)(ii), which pertains to the taxability of income from immovable property transactions where the consideration is less than the stamp duty value by more than Rs. 50,000. The court observed that the petitioners purchased a property for Rs. 72,00,000, whereas the stamp duty value was Rs. 97,69,000. The differential value was added to the income of the petitioners under this section. The court noted that the section aims to curb the generation and use of unaccounted money in property transactions.

2. Relevance and Application of Section 50C(2) of the Income Tax Act:
Section 50C deals with the valuation of capital assets for stamp duty purposes. The petitioners argued that the Assessing Officer (AO) should have referred the valuation to the Valuation Officer as per Section 50C(2) since the stamp duty value exceeded the fair market value. The court highlighted that Section 50C(1) is applicable to sellers, and for buyers, Section 56 is relevant. However, the court acknowledged the ambiguity in the law and emphasized the need for the AO to refer the valuation to a Valuation Officer if disputed by the assessee, as per the first proviso to sub-clause (vii)(c) of Section 56(2).

3. Validity of the Assessment Based on the Guideline Value of Immovable Property:
The petitioners contended that the AO's reliance solely on the guideline value was improper. The court referred to a precedent where it was held that the guideline value is only a prima facie rate and not the final word on market value. The court reiterated that undue emphasis on guideline value without considering the actual market value could lead to incorrect assessments.

4. Rights of the Assessee to Dispute the Valuation under the Income Tax Act:
The court emphasized that the assessee has the right to dispute the valuation of immovable property under the first proviso to sub-clause (vii)(c) of Section 56(2), which allows the AO to refer the matter to a Valuation Officer. This right exists even if no objection was raised during the original assessment proceedings, and can be pursued in revision or appeal as these are continuations of the original proceedings.

5. Role of the Authorized Representative's Acceptance in the Assessment Proceedings:
The court noted that the acceptance of the addition by the Authorized Representative during the assessment proceedings does not preclude the assessee from disputing the valuation later. The court held that mere acceptance by the Authorized Representative does not bar the assessee from seeking a reference to a Valuation Officer under the relevant provisions.

Conclusion:
The court concluded that the impugned orders rejecting the revision petitions were unsustainable. It directed the AO to refer the valuation of the property to a Valuation Officer as per the provisions of the Income Tax Act. The cases were remitted back to the AO for re-assessment, with instructions to complete the process expeditiously within six months. The writ petitions were disposed of with these observations, and no costs were imposed.

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