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Income Tax Appellate Tribunal, AHMEDABAD - BENCH ‘D’
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
Assessee is in appeal before the Tribunal against order of ld.CIT(A)-4, Ahmedabad dated 12.1.2017 passed for the Asstt.Year 2011-12.
Grievance of the assessee is that the ld.CIT(A) has erred in confirming the addition of Rs.2,55,000/- in the sale of property for the purpose of computing the capital gain.
ITA No.697/Ahd/2017 2 3. Brief facts of the case are that the assessee has sold a property for a consideration of Rs.1.00 crore. The Sub-Registrar, Panvel, Maharashtra determined the value of the property for the purpose of charging stamp duty at Rs.1,49,31,000/-. The ld.AO confronted the assessee as to why sale consideration of the property for the purpose of computing capital gain ought not to be deemed equivalent to the amount on which stamp duty charged by Sub-Registrar, as provided in section 50C of the Act. The assessee contended that it has sold property for Rs.1 crore only which is real price of the property, and therefore, reference under section 50C(2) be sent to the DVO for determining fair market value of the property. Somehow, this reference was not made by the AO, but the ld.CIT(A) has called for remand report, wherein reference was made to DVO who determined fair market value of the property at Rs.1,02,55,000/-. Thus, actual difference boiled down to Rs.2.55 lakhs. The ld.CIT(A) has accepted DVO’s report and confirmed addition to the extent of Rs.2,55,000/- instead of Rs.49,31,000/- made by the AO. In other words, capital gain arisen to the assessee on sale of property was determined by taking full sale consideration at Rs.1,02,55,000/- as against Rs.1,49,31,000/- adopted by the AO. Dissatisfied with this action of the ld.CIT(A), assessee is in appeal before the Tribunal.
The stand of the assessee is that once a reference under section 50C(2) is being made to the DVO, he was required to determine fair market value of the property on the date of sale. His view point is estimated one and element of guess work is always involved in the value determined by the DVO. Since the variation between the actual sale consideration received by the assessee and the one determined by the DVO is only Rs.2,55,000/-, which is just 2.55%, then such variation cannot be added to the income of the assessee, because the addition is being made under deeming fiction and if variation is less than 10%, then that has to be ignored. Long term capital gain ought to be
ITA No.697/Ahd/2017 3 determined by considering full sale consideration equivalent to the one the assessee has disclosed i.e. Rs.1 crore. For buttressing his contention, the ld.counsel for the assessee relied upon the order of the ITAT, Pune Bench in the case of Rahul Construction Vs. DCIT, ITA No.1543/PN/2007. Copy of this order of the Tribunal is placed on record.
On the other hand, the ld.DR contended that there was no choice for the ld.CIT(A) except to adopt the consideration determined by the DVO. He made reference to section 50C(2) and contended that once stamp duty valuation authority has determined a higher value of the property for the purpose of charging stamp duty, then such higher value deserves to be deemed as full consideration. This higher value has been replaced by the DVO at a little lower figure, hence that has to be accepted.
We have duly considered rival contentions and gone through the record carefully. We find that identical aspect has been considered by the ITAT Pune Bench. The relevant discussion made by the Tribunal is worth to note. It reads as under:
“We have considered the rival submissions made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee received an amount of Rs. 19,00,000 as sale consideration on account of sale of basement Nos. 2 and 3 at Rahul Chambers. There is also no dispute to the fact that the stamp valuation authorities have adopted the value at Rs. 28,73,000 for the purpose of stamp duty. There is also no dispute to the fact that on being objected by the assessee for substitution of the same figure under s. 50C(2) of the Act, the AO referred the matter to the DVO who determined the FMV of the property on the date of sale at Rs. 20,55,000. We find that the learned CIT(A) upheld the action of the AO in substituting the value determined by the DVO on the ground that the assessee has not objected to the valuation either before the DVO or before the AO or even before him. Further, according to him, as per the provisions of s.
ITA No.697/Ahd/2017 4 50C, the AO is bound to take the valuation as per the stamp valuation authorities and he is not empowered to go beyond the valuation made by the stamp valuation authorities. However, since the AO has already adopted the FMV determined by the DVO he upheld the action of the AO. It is the submission of the learned counsel for the assessee that the assessee can challenge the valuation determined by the DVO as per the provisions of s. 50C(2) of the Act. However, according to the learned Departmental Representative once the matter is referred to the DVO and the value determined by the DVO is less than the value adopted by the stamp valuation authorities, the AO has no other option but to adopt the value so determined by the DVO. We find the provisions of s. 50C read as under : "50C. (1) 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 valuation authority under sub-s. (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed by the stamp valuation authority under sub-s. (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, Court or the High Court, the AO may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-ss. (2), (3), (4), (5) and (6) of s. 16A, cl. (i) of sub-s. (1) a sub-ss. (6) and (7) of s. 23A, subs. (5) of s. 24, s. 34AA, s. 35 and s. 37 of the WT Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the AO under sub-s. (1) of s. 16A of that Act. Explanation : For the purposes of this section, ‘Valuation Officer’ shall have the same meaning as in cl. (r) of s. 2 of the WT Act, 1957 (27 of 1957). (3) Subject to the provisions contained in subs. (2), where the value ascertained under sub-s. (2) exceeds the value adopted or assessed by the stamp valuation authority referred to in sub-s. (1), the value so adopted or assessed by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer." A bare reading of the above provisions shows that as per the provisions of s. 50C(1) the value adopted by the stamp valuation authorities in respect of transfer of a capital asset shall be deemed to be the full value of consideration
ITA No.697/Ahd/2017 5 received or accruing as a result of transfer if such value is more than the value of consideration received by the assessee. As per the provisions of sub-s. (2) of the said section if the assessee claims before the AO that such valuation by the stamp valuation authorities under sub-s. (1) exceeds the FMV of the property as on the date of transfer the AO may refer the valuation of the capital asset to the DVO. As per the said sub-section where any such reference is made the various provisions of WT Act as mentioned in sub-s. (2) referred above shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the AO under sub-s. (1) of s. 16A of the WT Act. We find the provisions of s. 16A of the WT Act deal with reference to the Valuation Officer by the AO. Similarly s. 23A(1)(i) inter alia confers right of appeal to the CIT(A) to any person objecting to any order of the DVO under s. 35 having the effect of enhancing the valuation of any asset or refusing to allow the claim made by the assessee under the said section. We find the provisions of s. 23A(6) and s. 23A(7) and s. 24(5) of the WT Act read as under : "23A(6) If the valuation of any asset is objected to in any appeal under cl. (a) or cl. (i) of sub-s. (1) the CWT(A) shall,— (a) in case where such valuation has been made by a Valuation Officer under s. 16A, give such Valuation Officer an opportunity of being heard; (b) in any other case on request being made in this behalf by the AO, give an opportunity of being heard to any Valuation Officer nominated for the purpose by the AO." (a) at the hearing of an appeal, allow an appellant to go into any ground of appeal not specified in the grounds of appeal; (b) before disposing of any appeal, make such further enquiry as he thinks fit or cause further enquiry to be made by the AO or, as the case may be, by the Valuation Officer." "23A(7). The CWT(A) may, "24(5) The Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and any such orders may include an order enhancing the assessment or penalty : Provided that if the valuation of any asset is objected to, the Tribunal shall,— (a) in a case where such valuation has been made by Valuation Officer under s. 16A, also give such Valuation Officer an opportunity of being heard; (b) in any other case, on a request being made in this behalf by the AO, give an opportunity of being heard also to any Valuation Officer nominated for the purpose by the AO : Provided further that no order enhancing an assessment or penalty shall be made unless the person affected thereby has been given a reasonable opportunity of showing cause against such enhancement." A combined reading of the above provisions shows that the valuation adopted by the DVO is subject to appeal and the same is not final. In the instant case we find that as against the value of Rs. 28,73,000 adopted by the stamp valuation authorities, the
ITA No.697/Ahd/2017 6 DVO has determined the FMV on the date of transfer at Rs.20,55,000. This itself shows that there is wide variation between the two values. Further, the value adopted by the DVO is also based on some estimate. We find that the difference between the sale consideration shown by the assessee at Rs. 19,00,000 and the FMV determined by the DVO at Rs. 20,55,000 is only Rs.1,55,000 which is less than 10 per cent. The Courts and Tribunals are consistently taking a liberal approach in favour of the assessee where the difference between the value adopted by the assessee and the value adopted by the DVO is less than 10 per cent.”
In the above judgment, Tribunal was of the opinion that once FMV was to be determined by the DVO under section 50C(2) of the Act, then he has to follow procedure contemplated under the Wealth-tax Act. His opinion was not final, but subject to appeal. His opinion is an estimated guess work determining the value of a property at a particular point of time. If variation between FMV claimed by the assessee vis-à-vis determined by the DVO is less than 10%, then there is no need to accept FMV determined by the DVO. Value disclosed by the assessee could also be stated to be true value representing FMV. In such situation no addition ought to be made. In the present case, variation is only 2.55% which is less than 10%. Thus FMV adopted by the assessee in the sale deed itself does not require to be replaced, with the help of deeming fiction under section 50C(2) of the Act. We allow this ground of appeal and delete addition of Rs.2,55,000/- from the full sale consideration for the purpose of computing capital gain in the hands of the assessee. Appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the Court on 15th January, 2019 at Ahmedabad.
Sd/- Sd/- (WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 15/01/2019