2022 (7) TMI 1304 - AT - Income Tax

Capital gain computation - Adoption of the Stamp Duty Valuation as full value consideration as per section 50C - AO has made an addition u/s 50C to the short term capital gain by adopting the Stamp Duty Valuation as full value consideration as against the sale consideration shown by the assessee - HELD THAT - It is a matter of fact that the Stamp Duty authority has valued the property in question at Rs. 16, 88, 000/- on 27th February 2015 and then within a period of one month 10% of the said land was valued by the Stamp Duty authority at Rs. 28, 05, 000/- which shows that there is a steep hike in the valuation for the purpose of Stamp Duty and that too within a period of one month. Thus such an enhancement / increase in the Stamp Duty Valuation is possible only when some abnormal or inordinary event happened. All these facts explained by the assessee before the Assessing Officer which lead to the fair inference that the assessee has seriously objected to the adoption of Stamp Duty Valuation as full value consideration in terms of section 50C(2) of the Income Tax Act and consequently the AO is duty bound to refer the valuation of the property in question to the DVO for determination of fair market value of the property. Only after getting the fair market value determined by the DVO the Assessing Officer ought to have computed the capital gain and consequential addition if any. Thus the impugned order is set aside and the matter is remanded to the record of the Assessing Officer to redo computation of the capital gain after referring valuation of the property to the DVO for determination of the fair market value as per section 50C(2) of the Income Tax Act. Needless to say the assessee be given an appropriate opportunity of hearing before passing the fresh order. Appeal of the assessee is allowed for statistical purposes

Summary

Issues:
Assessment framed u/s 143(3) on income, Addition of long term capital gain, Invocation of section 50C, Consideration of valuation report, Failure to appreciate actual sale consideration.

Analysis:

1. The appeal was against the CIT(A)'s order for the assessment year 2015-16. The assessee, an individual, declared total income of Rs. 3,51,670/-, which was scrutinized for capital gain/loss on property sale. The Assessing Officer proposed full value consideration under section 50C due to variance between sale consideration and stamp duty value. The assessee's explanation was rejected, leading to an addition of Rs. 26,90,000/- to total income, contested unsuccessfully before CIT(A).

2. The assessee contended that objection to stamp duty valuation adoption was raised during assessment, requiring referral to DVO under section 50C(2). Purchase price was Rs. 16,00,000/-, with only 10% sold for Rs. 2,00,000/-. The valuation report indicated property value at Rs. 2,61,000/-. Citing precedents like Raj Kumari Agarwal vs. DCIT, the assessee argued against the unjustified addition.

3. The DR argued that as no request was made to refer valuation to DVO, the Assessing Officer rightly used stamp duty valuation. The Tribunal considered the transaction timeline, stamp duty valuation hike, and the assessee's objections. Referring to legal precedents, it emphasized the necessity to determine fair market value through DVO, remanding the matter to the Assessing Officer for fresh assessment.

4. The Tribunal, aligning with past decisions, set aside the impugned order, instructing reassessment after valuation by DVO. The assessee was granted a hearing opportunity before the new assessment. The appeal was allowed for statistical purposes, emphasizing adherence to section 50C provisions and fair market value determination.

This detailed analysis of the legal judgment highlights the issues involved, the arguments presented by both parties, the Tribunal's considerations, and the final decision rendered, ensuring a comprehensive understanding of the case.