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2025 (5) TMI 189 - AT - Income TaxLTCG - Addition u/s 50C - HELD THAT - As already come on record that the stamp/circular value of the assessee s relevant capital asset was Rs. 92, 96, 400/- as against the actual price of property at Rs. 2.10 crores disclosed in his capital gain computation and that determined by the Valuation Officer of Rs. 2, 14, 26, 562/-; respectively. Once the assessee has already declared his long-term capital gains with much more the stamp/circle value section 50C itself does not apply since the same gets attracted only an instance of the actual sale price coming to be less than the stamp/circle rates. We thus delete the impugned section 50C addition of Rs. 4, 26, 562/- in very terms. Cost of acquisition issue for the purpose of granting indexation benefit to the assessee - There is no dispute that he had filed his registered valuer report dated 27.11.2019 stating the same to be Rs. 20.15 lakhs as on 01.04.2001 as against that ascertained by Valuation Officer-III Delhi in his report dated 14.09.2023 amounting to Rs. 12, 45, 498/-; respectively. As per different valuation reports have arrived at different cost(s) of acquisition; we are of the considered view that some irregularity in both of them on such a purely subjective issue could not be per se ruled out. We accordingly are of the considered view in the larger interest of just that a lump sum cost of acquisition amounting to Rs. 18 lakhs only in given facts would be just and proper with a rider that the same shall not be treated as a precedent. Necessary computation shall follow as per law.
The core legal questions considered by the Tribunal in this appeal pertain primarily to the determination of capital gains arising from the sale of a residential property and the correct valuation and computation of the cost of acquisition and sale consideration under the Income-tax Act, 1961. The issues can be enumerated as follows:
1. Whether the addition under section 50C of the Income-tax Act, 1961, made by the Assessing Officer and upheld by the Dispute Resolution Panel (DRP) regarding the difference between the fair market value and the actual sale consideration is justified, given that the actual sale consideration exceeds the stamp duty/circle rate. 2. Whether the valuation of the property as on 01.04.2001 for the purpose of computing indexed cost of acquisition should be based on the report of the Valuation Officer under section 142A or the registered valuer's report under section 55A, and which valuation methodology is appropriate. 3. The correctness of the application of plinth area rate indices by the Valuation Officer to pare down the circle rate value from 01.10.2007 to 01.04.2001, as opposed to the application of the Cost Inflation Index (CII) by the registered valuer. 4. The appropriate cost of acquisition to be adopted for the purpose of granting indexation benefit, in light of conflicting valuation reports submitted by the assessee and the Valuation Officer. Issue 1: Validity of Addition Under Section 50C on Sale Consideration The relevant legal framework is section 50C of the Income-tax Act, which provides that where the consideration received on transfer of a capital asset is less than the value adopted or assessed by any authority for stamp duty purposes, the value so adopted or assessed shall be deemed to be the full value of consideration for computing capital gains. The Tribunal noted that the actual sale consideration declared by the assessee was Rs. 2.10 crores, which was significantly higher than the stamp duty/circle rate of Rs. 92,96,400/-. The Valuation Officer's report indicated a fair market value of Rs. 2,14,26,652/-, marginally higher than the sale consideration. The Assessing Officer and DRP had made an addition of Rs. 4,26,562/- under section 50C, based on the difference between the valuation officer's fair market value and the actual sale consideration. In interpreting section 50C, the Tribunal relied on authoritative precedents including the Apex Court's decision which clarified that "full value of consideration" means the price bargained for by the parties and is not necessarily the market value. The Delhi High Court's ruling was also cited, affirming that the full value of consideration refers to the actual consideration received and not the market value. Applying this legal principle, the Tribunal held that section 50C is triggered only when the actual sale consideration is less than the stamp duty value. Since the assessee's declared consideration exceeded the stamp duty value, the addition under section 50C was unwarranted and was accordingly deleted. This analysis effectively treats the statutory protection under section 50C as a floor mechanism to prevent undervaluation, but not as a basis to increase consideration when the declared price is already above the stamp duty value. Issue 2 & 3: Valuation Date and Methodology for Cost of Acquisition Section 48 and related provisions govern the computation of capital gains, including the deduction of indexed cost of acquisition. The cost of acquisition must be determined as at the date of acquisition, here 01.04.2001, and indexed using the Cost Inflation Index (CII). The assessee submitted a registered valuer's report dated 27.11.2019 valuing the property at Rs. 20,15,000 as on 01.04.2001, whereas the Valuation Officer's report dated 14.09.2022 valued it at Rs. 12,45,498. The Valuation Officer had applied plinth area rate indices notified by CPWD to the circle rate as on 01.10.2007 to estimate the value as on 01.04.2001. The Tribunal examined the appropriateness of the valuation methodology and the statutory provisions invoked. The assessee contended that the valuation should be under section 55A by a registered valuer, not under section 142A by the Valuation Officer, and that the Cost Inflation Index should be applied rather than plinth area rate indices. The Tribunal observed that both valuation reports are subjective and differ significantly, indicating potential irregularities. It noted that the valuation by the Valuation Officer was based on a method that may not align with the statutory framework for cost inflation indexing. While the Tribunal did not explicitly rule on the statutory correctness of the valuation method, it implicitly favored the registered valuer's approach aligned with the Cost Inflation Index methodology over the Valuation Officer's plinth area rate adjustment. Issue 4: Appropriate Cost of Acquisition for Indexation Given the conflicting valuations, the Tribunal exercised its discretion to fix a lump sum cost of acquisition at Rs. 18,00,000 for the purpose of granting indexation benefits. This figure lies between the two valuations submitted and was adopted as a just and proper amount in the facts of the case, with the rider that it should not be treated as a precedent. The Tribunal thereby balanced the competing valuations and avoided rigid adherence to either figure, acknowledging the subjective nature of property valuation and the need for equitable resolution. Significant Holdings and Core Principles The Tribunal held, verbatim, that "once the assessee has already declared his long-term capital gains with much more the stamp/circle value, section 50C itself does not apply since the same gets attracted only an instance of the actual sale price coming to be less than the stamp/circle rates." This principle clarifies the limited scope of section 50C additions. Further, the Tribunal established that in cases of conflicting valuation reports for cost of acquisition, a pragmatic approach involving an intermediate lump sum figure can be adopted to ensure fairness and avoid protracted disputes. The Tribunal's final determinations were:
No other grounds were pressed or decided upon.
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