KETAN LALITBHAI PATEL,SURAT vs. THE INCOME TAX OFFICER, WARD-2(3)(2), SURAT

आदेश /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. This appeal filed by the assessee is directed against the

order of Learned Commissioner of Income-tax (Appeals)-I, Surat

[in short “the CIT(A)”] dated 31.03.2016 pertaining to Assessment

Year 2012-13, which in turn has arisen from the order dated

24.02.2015 passed by the Income Tax Officer, Ward 2(3)(2) Surat

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(in short “the AO” ) under section 143 (3) of Income Tax Act,1961

( in short ‘the Act’).

action of the AO in making addition of Rs. 16,84,349 on account

of capital gains under section 50C of the Act.

authorities are that the assessee has sold an agricultural land for

sale consideration of Rs. 18,66,601 which was valued at Rs.

35,50,950 by stamp duty valuation. In original return of income ,

the assessee has shown sale consideration at Rs. 28,11,989 and

claimed, cost of acquisition at Rs. 13,51,483, cost of

improvement at Rs. 15,01,400, expenditure on transfer at Rs.

7,250 and thus, shown short-term capital loss at Rs. 48,144.

However, during the course of assessment proceedings, the

assessee has filed revised return on 05.02.2015 claiming that

property sold in question was acquired on 11.04.2005 by way of

irrevocable Power of Attorney and said property was sold on

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07.07.2011 for total consideration of Rs. 1,20,05,000 jointly with

7 co-owners in which assessee share is worked out at Rs.

11,65,000. Thus, the short-term capital gains shown is actually

long-term capital gain as period of purchase and sale exceeded 3

years. The assessee further claimed that cost of improvement

shown at Rs. 15,01,400 is actually investment in acquisition of

new property at Rs. 11,65,000 purchased on 19.10.2011 at land

at Karvada village and made a claim of deduction under section

54B of the Act. However, the AO did not accept the revised

claim as revised return was filed late, hence, it was not found

acceptable in the light of decision of Hon`ble Supreme Court in

the case of Goetze (India) Ltd. v CIT [2006] 284 ITR 323 (SC).

However, in appeal the CIT (A) has accepted the claim of long-

term capital gain and deduction under section 54B as claimed in

revised return and directed the AO to consider sale consideration

at Rs. 35,50,950 as per stamp duty valuation, cost of acquisition

at Rs. 3,74,650 and allow indexation with effect from 11.04.2005

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and deduction of Rs. 12,35,600 under section 54B and compute

long-term capital gain accordingly. The learned counsel for the

assessee submitted that the CIT (A) has erred in not referring the

property sold for DVO for determination of fair market value as

the assessee has made a request before the AO as well as during

the course of appellate proceedings, vide letter dated

18.12.2015. The CIT (A) in para 6.2 of his order observed that the

assessee has not made request for reference to DVO during

assessment proceedings as required under section 50C(2)(a) of

the Act. Therefore, the claim of the assessee was denied.

Tribunal. The learned counsel for the assessee submitted that

the observation made in para 6.2 of appellate order is not

correct as the assessee has made claim for reference to DVO

during assessment proceedings. The learned counsel for the

assessee filed a copy letter dtd. 09.02.2015 by which the

assessee has made a request to the AO to refer the property for

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valuation to DVO as the property was sold at market rate and

value determined by stamp duty as on date of transfer was

higher than the market value. Therefore, it was urged upon us

that the issue of determination of fair market value be set-aside

to the AO without disturbing the other findings of ld. CIT (A)

regarding transfer date, long-term capital gain claim and

deduction under section 54B of the Act.

authorities.

relevant material on record. We find that the assessee has shown

the actual sale consideration of Rs. 18,66,601 as against stamp

duty valuation at Rs. 35,50,950. Thus, there is difference in

actual sale consideration , fair market value and stamp duty

valuation of the property sold for which the assessee has made a

request before the AO during the course of assessment

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proceedings vide letter dated 09.02.2015. We may refer the

relevant provisions of section 50C which are 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 [or assessable] 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 86[or assessable] shall, for the purposes of section 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-section (1), where— (a) the assessee claims before any Assessing Officer that the value adopted or assessed [or assessable] by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer; (b) the value so adopted or assessed [or assessable] by the stamp valuation authority under sub-section (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 Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the

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provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub- sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modi-fications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.

[Explanation 1].—For the purposes of this section, "Valuation Officer" shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). [Explanation 2.—For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.] (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed [or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed [or assessable] by such authority shall be

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taken as the full value of the consideration received or accruing as a result of the transfer.] 7. From a reading of the provisions of section 50C(2), it is clearly mandated that when an assessee challenge or object to the Assessing Officer adopting the guideline value of the property for stamp duty purposes in place of the stated consideration in the sale deed for the purposes of computing LTCG, then the Assessing Officer ought to refer the property for valuation to the Valuation Officer of the Income Tax Department. In the instant case, it is seen that the assessee’s objection, to the Assessing Officer’s adoption of the stamp duty valuation at Rs. 35,50,950 in place of the stated consideration of Rs. 18,66,601 in the sale deed, were rejected by the CIT (A) as no objection was claimed to have raised before the AO. We are, therefore, of the view that in accordance with the provisions of section 50C(2)(a), the AO should have made a reference to the Valuation Officer of the Income Tax Department for valuation of the said property. The provisions of section 50C(3), then come into play stipulating the circumstances and manner for adopting the value of the property (i.e. guideline value or as per valuation report) in computing the

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LTCG. The AO in not complying with the express provisions of section 50C(2)(a) of the Act of making a reference to the Valuation Officer for valuation of the property and the learned CIT(A) is not directing him to do so when the matter was in appeal, in our opinion, have by such action denied the assessee his right to have the property valued by the Valuation Officer of the Income Tax Department where is stamp duty valuation is much higher than the declared fair market value by the assessee. We are of the considered opinion that this action by the Assessing Officer is violative of the provisions of section 50C(2) of the Act. Since this goes to the very root of the matter in the instant case, we, in the interest of justice and equity remit the issue for limited purpose only for determination of fair market value as to be determined by the DVO as on date of transfer for computation of long-term capital gain on sale of property by the assessee as on 07.07.2011 to the file of the Assessing Officer for taking the consideration by making a reference to the Valuation Officer of the Income Tax Department to value the said property and to compute the LTCG after receipt of the Valuation Report of the said property. We

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may make it clear that the other findings on the issue under consideration of ld. CIT (A) will remain intact. 8. Ground no. 2 relating to not allowing expenses of Rs. 16,250 of the share of the assessee being fees and brokerage expenses of Rs. 1,30,000 has not been pressed before us hence, it is dismissed as not pressed. 9. In the result, the appeal of the assessee is partly allowed

for the term indicated above and partly allowed for

statistical purpose.

18.04.2018

Sd/- Sd/- (सी.एम.गग�) (ओ.पी.मीना) ( C.M. GARG) (O.P.MEENA) �याियक सद�य लेखा सद�य JUDICIAL MEMBER ACCOUNTANT MEMBER सुरत/ Surat: �दनांक /Dated : 18th April, 2018/opm Copy sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat