TMI Blog2011 (4) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... section 55A cannot give any assistance to compute the capital gain under section 48 of the I.T. Act. AO is empowered to refer for valuation of a capital asset under specific circumstances as prescribed under this section provision of section 50C where he has found that the consideration received is less than the stamp duty. Whereas in the present appeal there is a finding on facts that the consideration is not less than the stamp duty. Admitted factual position is that the "Jantri' rate as per the 'Stamp Duty Authority' was at Rs. 4,500 and Rs. 7,000 per sq.meter respectively for the Plot Nos.161/1 & 181/1, whereas the assessee had sold them @ Rs. 41,860 per sq.mtr. Therefore the AO was not empowered to refer to DVO because as per section 50C(2) the AO may refer the valuation of a capital asset where assessee claims before AO that the value adopted by the Stamp Valuation Authority exceeds the fair market value of the property as on the date of transfer - in favour of assessee. - IT APPEAL NOS. 3132 TO 3138, 3139 (AHD.) OF 2009 - - - Dated:- 8-4-2011 - MUKUL KR. SHRAWAT, A.N. PAHUJA, JJ. A.C. Shah for the Appellant. K. Madhusudan for the Respondent. ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onths the rate per meter could never be increased from Rs. 22,800 to Rs. 45,000. 2. The assessee has shown rate of selling price Rs. 41860 per meter i.e. the rate consideration. All the expenses are borned by purchaser. If these expenses are considered i.e. stamp duty, transfer fee, reg. fee etc. it contra value for Rs. 2000 per meter and thus sale value is as good as Rs. 43860. 3. The sale price of both land property is taken at Rs. 45000 and survey No.996 of land is not on the main cross road. 4. Price is also the highest in the period. Also assessee is also not interested in taking black money as all the consideration amount is invested in Bonds for exemption from Capital Gain. 5. Till date there is no objection from stamp duty department. 6. The valuation officer should value the property before 36 months." 2.1 However, the A.O. was not convinced and it was held that the Valuation Officer had given the Valuation report on the basis of the information collected and he had no alternative but to proceed as per the Valuation report to determine the capital gain. The relevant computation of the capital gain is as follows:- "Income under the head LTCG fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the sale consideration as per the assessee was less than 15% therefore, as per rule 111AA the conditions for reference to Valuation Officer was not satisfied. Third point raised by the assessee was in connection to section 50C(3) for the proposition that the 'jantri rate' has to be followed and to be considered as full value of consideration. It was also demonstrated before Ld. CIT(A) that the difference between the rate adopted by the DVO and the sale price as mentioned in the sale deed was actually less than 7% computed as under:- "5.2. The difference between the rate adopted by DVO and the sale price is actually less than 7% and therefore the question of any addition does not arise as can be seen from below :- F.P. No.181/ F.P. No.161/1 Value as per DVO report Rs. 45,000 per Sq.mtr. Less : 15% thereof Rs. 6,750 Rs. 38,250 Sale price as per Sale Deed Rs. 41,860 From the above, it may please be seen that after deducting 15% it comes to only Rs. 38,250 whereas the deed is for Rs. 41,860. In fact, the difference is Rs. 45,000 - Rs. 41,860 = Rs. 3,140 which is hardly 7% t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. Act. He has discussed one by one all these three sections which we shall take up herein below. In short the Ld. CIT (A) has opined that section 142A has limited scope for reference to Valuation cell i.e. for the purpose of estimating an investment as prescribed under sections 69 and 69B. Next, section 55A is in respect of ascertaining the fair market value for the purpose of determining the cost of acquisition under section 55(2)(b) of I.T. Act. Then he has discussed section 50C of I.T. Act and opined that reference is possible when sale consideration is less than the stamp duty fixed by "Stamp Valuation Authority." By placing reliance on the cited precedents, he has held that the AO's action of referring the matter to DVO for substituting the sale consideration was not legally sustainable. He has also opined that since the sale consideration as disclosed by the assessee being higher than the stamp value therefore, the AO. was not lawfully permitted to substitute the consideration for the purpose of computation of capital gain. In the result, the addition was deleted. Being aggrieved now the Revenue is before us. C. Revenue's Argument :- 6. From the side of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 50C and the consequential order so, is incorrect and erroneous. 3. Section 55A is a comprehensive section for making a reference to DVO for the purpose of working of 'capital gains' under the chapter IV-E (after omitting erstwhile section 52) and the AO can make a reference as provided in that section. In this case AO's reference is under clause (ii) of 55A(b). Further, section 50C is only limited to 'certain cases' as the title goes, where the AO wants to apply ' jantry rates' of stamp valuation authority and make assessment. The reference that the AO can make to DVO under section 50C is limited to special circumstances where the ' assessee claims that the jantry rate exceeds the fair market rate' as may be seen from the wording of sub-section (2) of section 50C. There was no such claim by the assessee before the AO in this case and there was no reference under this section in this case. Actually it is the AO's case to make a reference under section 55A(b)(ii) as mentioned in the order." 7. Ld. D.R. has therefore, emphasized that since the first appellate authority has wrongly assumed that the provisions of section 50C were the basis of assessment, therefore, ground r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. He has also emphasized that Ld. CIT(A) has correctly held that the 'jantri rate' were lower than the rate on which the sale deed was executed therefore, even the provisions of section 50C were not applicable. The Ld. A.R. has further submitted that even on merits the Valuation Report was incorrect because the comparable instances of an adjacent plot of land was ignored by the DVO. A copy of the Valuation Report has also been placed to demonstrate that an arbitrary rate of Rs. 45,000 was applied by the DVO without considering the material evidence given by the assessee. The fair market value as determined by the DVO was neither reasonable nor fair considering the prevailing market situation of that time. Case laws cited were in the case of CIT v. Smt. Nilofer I. Singh [2009] 309 ITR 233/176 Taxman 252 (Delhi), in the case of Dev Kumar Jain v. ITO [2009] 309 ITR 240/180 Taxman 110 (Delhi) and in the case of CIT v. Umedbhai International (P.) Ltd. [2011] 330 ITR 506 (Cal.). E. CONCLUSION :- 9. We have heard both the sides at some length and also carefully perused the orders of the authorities below in the light of short compilation filed before us as also the case laws cite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of this case. 9.2 Now, we shall deal with the provisions of section 55A of the I. T. Act, as contested by Mr. Madhusudan before us. The language of the section reads as follows:- Section 55A. "With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer- (a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is less than its fair market value ; (b) in any other case, if the Assessing Officer is of opinion : (i) that the fair market value of the asset exceeds the value of the assets as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do, and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5), and (6) of section 16A, clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out that in section 45(1A), as well, there is a mention of fair market value but it is in respect of profits and gains to be received from an insurer on account of damage or destruction due to natural calamity, flood, earthquake etc., On the basis of these arguments a conclusion can be drawn that since the language in section 55A do not refer "value of consideration' but only used the wordings 'fair market value' then its applicability for the purpose of reference to a valuation officer has to be exercised within that limited area, so the scope is also confined to determine the fair market value of a capital asset only. The outcome of this discussion thus, leads to a conclusion that even if the AO has called for a report to determine the fair market value of a capital asset but considering the language of section 48 of the I.T. Act, the same cannot be substitute the "full value of the consideration". In fact, this issue had come up before the Hon'ble Delhi High Court in the case of Smt. Nilofer I. Singh (supra), wherein it was dealt with in the following manner:- "When a sale of property takes place, the capital gains arising out of such a transfer has to be computed by taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not have the same meaning and cannot be used in place of " fair market value" (section 55A). To elaborate this point, section 48 do not prescribe that the capital gain is to be computed on the fair market value of a capital asset, but it only prescribes to charge capital gain on the consideration received, therefore, section 55A cannot be used for the purpose of computation of capital gain under section 48 of I.T. Act. Even further, we elaborate that section 55A is meant only to ascertain the fair market value of a capital asset but not meant to determine the full value of the consideration received as a result of the transfer therefore section 55A has its own limitation for its operation. The Hon'ble Delhi High Court had taken into consideration the language of both the sections and thereupon given a verdict that the events under which a reference to a Valuation Officer can be made is like the once acquiring in section 45(4) or section 45(1A) of I.T. Act. The Court has concluded that since section 48 do not prescribe the determination of capital gain on "Fair Market Value", hence out of the ambits of reference prescribe under section 55A of the Act. In the light of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed to be applied in each such case merely on the sweet will of the AO. We can, therefore, hold that if a reference can be made to ascertain the fair market value of a property, then wherever this phrase i.e. "to determine the fair market value of the property" is used there only the recourse of section 55A is possible. In this context, few decisions, namely Jitendra Mohan Saxena (supra), and the decision Punjab Poly Jute Corpn. (supra) can also be cited. It was ruled that the scope of section 50C of the Act is in respect of arriving at the full value of consideration if it is lower than the stamp duty value, then the AO is justified to make a reference under section 55A to DVO. In other words, we can thus hold that for the purposes of the computation of capital gain under section 48, a reference can be made to DVO only in a situation as prescribed under section 50C of the Act and not otherwise. In the light of the above discussion, we hereby dismiss ground No.2 of the Revenue. 14. In this regard, we have also examined the provisions of section 142A of the I.T. Act titled as "Estimate by Valuation Officer in certain cases". This section prescribes that for the purpose for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion can be drawn that even the provisions of section 142A of the Act, do not subscribe to substitute the full value of consideration for the purpose of capital gain under section 48 of the Act. 15. Before we part with, we may like to refer that in the case of Punjab Poly Jute Corpn. (supra) the Respected Co-ordinate Bench has opined that where a property is registered at a particular rate, which was adopted for registration purpose, then there was no question of replacing the valuation adopted by the stamp valuation authority with the value determined by the Departmental Valuation Officer for the purpose of computing the capital gain. Since the stamp valuation authority had accepted the consideration declared by the assessee in the sale deed, there was no question of once again referring the matter to the Departmental Valuation Officer. Our attention has also been brought on an another decision of Hon'ble Delhi High Court in the case of Dev Kumar Jain (supra) wherein it was observed that a combined reading of section 55A and section 48 shows that when a sale of property takes place the capital gains arising out of such a transfer has to be computed by looking at the full v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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