TMI Blog2007 (7) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... haser and given effect to by only adopting the area and space as existing on the date of the sale as per sale deed. Therefore, we do not find any material which would substantiate the argument of the assessee. The next objection of the assessee is that the AO has not given any importance to the quality of construction. The sale deed showed that construction was simple and it was six years old before being sold. However, we do not find any material to show that valuation made by the DVO was anyway adversely affected because of this factor or that he has not taken these factors into account while valuing the property u/s 50C(2). Another objection was that the AO has not given any credence to the report of the Government approved valuer, whose report was made the basis for determination of sale price and the property was sold accordingly as per sale deed. In our considered view, this objection has no merit because what has to be compared as per s. 50C(3) is the DVO's report and stamp duty valuation and nothing else. For the purposes of invoking s. 50C(1) what is to be compared is the sale consideration as shown by the assessee and the valuation shown by stamp valuation autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and reply dt. 23rd March, 2005 wherein valuation done as on 5th Feb., 2005 while taking into account the rates of construction at more than Rs. 4,600 per sq. mtr. on July, 2002. Wherein the report of the Government approved valuer was done before the date of sale and was fairly detailed and evenly matched with the rates of CPWD quotation. (4) Because the learned CIT(A), Bareilly was more biased with the Revenue aspect and language of the s. 50C of the IT Act, 1961 more than the determination of the correct fair market value as on the date of sale i.e. July, 2002 to come to the correct conclusion that the sale price at Rs. 21,50,000 was correctly shown and not the hypothetical value as per stamp duty paid for Rs. 37,51,480 for deriving the capital gains and tax thereon. (5) Because the learned CIT(A) Bareilly took no notice of the order of the AO wherein the order itself speaks of the deformities that the valuation report of the DVO contains. while he negates all the reports and documentary evidences and submissions so made before him. (6) Because the learned CIT(A) Bareilly erred in not taking into consideration the words of Justice Hand quoted by the Supreme Court in CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per rates prescribed by the District Magistrate for stamp duty purposes was determined at Rs. 37,51,480. The stamp duty on the sale transaction was charged on this value being based on circle rate. The capital gains was worked out by the assessee on the basis of sale price taken at Rs. 21,50,000. The AO, however, sought to adopt the circle rate by which valuation was determined at Rs. 37,51,480 as per s. 50C of the IT Act, which was inserted by the Finance Act, 2002 w.e.f. 1st April, 2003 i.e. asst. yr. 2003-04. He accordingly charged additional long-term capital gains of Rs. 16,01,480. As the assessment was earlier completed under s. 143(1) on the returned income of Rs. 2,33,680, the AO issued notice under s. 148 to charge additional capital gains worked out on the basis of stamp duty valuation. The assessee relied on before the AO on various decisions as under: (1) CIT vs. Bhupender Singh Atwal (1983) 32 CTR (Cal) 3 : (1983) 140 ITR 928 (Cal); (2) Mrs. Nirmal Laxminarayan Grover vs. Appropriate Authority (1997) 139 CTR (Bom) 40 : (1997) 223 ITR 572 (Bom); (3) Bhola Nath Majumdar vs. ITO Ors. (1997) 137 CTR (Gau) 198 : (1996) 221 ITR 608 (Gau). In addition to this, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of s. 50C of the IT Act are mandatory in nature and the AO has rightly applied the same in the case of the assessee. In this background of the case I see no reason to interfere with the action of the AO in applying the provisions of s. 50C of the IT Act. Hence the long-term capital gain as worked out by the AO is upheld. The grounds of appeal as raised by the assessee fail." 6. Before us, the learned Authorised Representative for the assessee submitted that provisions of s. 50C introduced w.e.f. 1st April, 2003 related to the deemed income which never accrues to the assessee either in the present or in the future and he has to pay tax on it without earning income. This charge is against the very basis of tax structure as a whole and invades on the right to earn income which is against the fundamental right of having property. He submitted that income-tax incidence on income which has neither accrued or will accrue, received or will be received, itself is a violation of constitutional right and deeming provisions are invalid. He further submitted that circle rates adopted are much higher than the actual sale consideration and vary with upward trend without any justification an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he valuation of the property made by the State authorities for stamp duty purposes. Further this is a specific provision and will override all other provisions relating to computation of capital gains wherein the sale consideration as shown by the assessee is to be adopted. 8. We have considered the rival submissions and perused the material on record. In this regard, it will be relevant to refer to s. 50C, which is as under: "50C(1) Special provision for full value of consideration in certain cases.-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 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 shall, for the purposes of s. 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-s. (1), where- (a) the assessee claims before any AO that the value adopted or assessed by the stamp v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly under s. 48 of the IT Act. 37.3 It is further provided that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer, and he has not disputed the value so adopted or assessed in any appeal or revision or reference before any authority or Court, the AO may refer the valuation of the relevant asset to a Valuation Officer in accordance with s. 55A of the IT Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the AO may take such fair market value to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purposes, the AO shall not adopt such fair market value and shall take the full value of consideration to be the value adopted or assessed for stamp duty purposes. 37.4 This amendment will take effect from 1st April, 2003 and will, accordingly, apply in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. 10. We do not find any infirmity in the action taken by the authorities below and the learned Authorised Representative has also not been able to point out any error. The argument of the learned Authorised Representative has been that the DVO had not considered the post-purchase construction made by the purchaser but we notice that the DVO had actually considered such construction by the purchaser and given effect to by only adopting the area and space as existing on the date of the sale as per sale deed. Therefore, we do not find any material which would substantiate the argument of the assessee. The next objection of the assessee is that the AO has not given any importance to the quality of construction. The sale deed showed that construction was simple and it was six years old before being sold. 11. However, we do not find any material to show that valuation made by the DVO was anyway adversely affected because of this factor or that he has not taken these factors into account while valuing the property under s. 50C(2). 12. The next objection of the assessee is that the DVO had inspected the property in February, 2005 whereas deed of sale is of July, 2002. Again thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act to deem a particular amount as income of the assessee then by virtue of such a fiction that amount shall be income of the assessee unless a discretion is provided to the AO to consider otherwise. Secs. 68, 69, 69A, 69B and 69C are deeming provisions where either credit entry or investment or expenditure for which no explanation is furnished or the explanation furnished is found unsatisfactory can be deemed to be the income of the assessee. The legislature have thought it proper to substitute valuation by stamp valuation authority as sale consideration for sale consideration recorded in the sale deed. The explanation while introducing this provision clearly indicates that the intention was to plug tax evasion resulting from under statement of sale consideration. 19. The last argument of the learned Authorised Representative was that the word "shall" has been used in s. 50C, but there is also discretion with the AO. We are afraid we do not find any scope of any discretion to adopt or not to adopt the valuation made by stamp valuation authorities. The word "shall" has always been used as mandatory. It is substantive provision and therefore, it could not be said that when ..... X X X X Extracts X X X X X X X X Extracts X X X X
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