ANIL MURLIDHAR DESHMUKH,,NASHIK vs. INCOME-TAX OFFICER, WARD - 3(2),, NASHIK

आदेश / ORDER

PER R.S. SYAL, VP : This appeal by the assessee emanates from the order passed by the CIT(A)-1, Nashik on 01.05.2017 in relation to the assessment year 2013-14.

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section 50C of the Income Tax Act, 1961 ( hereinafter referred to as ‘the

Act’).

on 23.11.2012 situated in Nashik Municipal limits at S. No.726/1-B

through a registered Sale Deed for a sale consideration of

Rs.42,00,000/-. The Assessing Officer (AO) observed that since the

stamp value of the said property was Rs.56,19,000/-, the provisions of

section 50C of the Act were attracted. The assessee objected to the

stamp valuation and requested the AO to make a reference to the

District Valuation Officer (DVO) for ascertaining fair market value of the

property. The DVO determined the fair market value of the property at

Rs.46,96,400/- after considering the assessee’s objections. The AO

computed capital gain by adopting full value of consideration at

Rs.46,96,400/- on the basis of DVO’s report instead of the actual sale

consideration of Rs.42,00,000/- shown by the assessee. This resulted

into an addition of Rs.4,96,400/-, which was confirmed by the ld.

CIT(A). The assessee is aggrieved by the said addition.

on record. It is not disputed that the stamp value of the plot sold by

assessee was Rs.56,19,000/- as against declared sale consideration of

Rs.42,00,000/- and the DVO determined fair market value at

Rs.46,96,400/-, which constitutes the basis for the instant addition.

The ld. AR stated that the ld. CIT(A) went wrong by relying on the

decision of the Mumbai Bench of the Tribunal in Smt. Bharti Jayesh

Sangnai (2011) 128 ITD 0345 (Mum) in holding that the report of the

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DVO is binding on the AO. He submitted that this report should not

have been taken into consideration and the declared sale value ought to

have been adopted as the full value of consideration. This was objected

to by the ld. DR, who relied on the impugned order on this score.

Report of the DVO is binding on the AO in terms of sub-section (3) of section 50C of the Act, which mandates that : `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 taken as

the full value of the consideration received or accruing as a result of the

transfer’. The ld. CIT(A) has rightly referred to the judgment of the

Hon’ble Allahabad High Court in CIT VS. Dr. Indra Swaroop Bhatnagar

(2012) 349 ITR 210 in which case also the similar proposition has been

reiterated by holding that : `it is crystal clear that generally, when the

A.O. has obtained the D.V.O. Report then the same is binding’. It is

thus clear that the report of the DVO is binding on the AO, unless the

assessee shows some glaring mistakes in such valuation. I, therefore,

uphold the stand taken by the ld. CIT(A), in principle, on this score.

report of the DVO. Firstly, the ld. AR submitted that the DVO

considered three sale instances with varying rates of Rs.10900/-,

Rs.15614/- and Rs.15714/- per square metre respectively, but

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determined the fair market value of the property at Rs.18,808/- p.s.m.

It was submitted that the DVO should have restricted himself to the

rates as per the sale instances rather than increasing the fair market

value of the property beyond such rates. This was opposed by the ld.

DR.

apparent from sale instances noted by the DVO on page 38 of the paper

book that these sales took place on 18.07.2011, 31.03.2011 and

19.03.2011 respectively. As against such dates, the assessee sold its

property on 23.11.2012. The DVO has simply increased the fair market

value of the sale instances considering the time lag, location, shape and

size etc. of the property. Such an objection was taken by assessee

before the DVO, who rightly dealt with the same vide para 8.2 of his

report by mentioning that he arrived at the fair market value as on the

date of valuation as per valuation guidelines issued by DIT and

considering other relevant factors. In my considered opinion, sale

instances noted by a DVO can only be a starting point for determining

the fair market value of any property, which need necessary

modifications depending on the peculiar facts and circumstances of the

property which has to be valued. All the relevant factors, such as, time

lag, location, shape and size of the property and future potential etc.

need to be considered before determining the fair market value of the

property as on the date of sale. Considering the totality of facts and

circumstances of the instant case, I am satisfied that the DVO was

correct in determining fair market value of the property in his

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calculation after taking into account the cumulative effect of all the

germane factors.

was small in size and not in proper shape and hence reduction should

have been carried out. In the considered opinion of this Tribunal, if the

size of a plot is small, it is natural that its fair market value will be

higher because of the potentiality of its easy sale. This objection raised

by assessee has also been dealt with by the DVO in a cumulative way,

in para 8.2 of his report, when he estimated the value by considering

the `time lag, location, shape, size and future potential’ of the plot. This

objection, thus, does not stand any further legal scrutiny.

respect of the property sold and hence, fair market value of the property

should have been scaled down. In my considered opinion, this factor

has not been correctly projected by the assessee in as much as the

litigation was prevalent at the time of purchase of the property by the

assessee, which got settled there and then. There is reference to some

litigation after the instant sale of property also. Since no litigation was

pending as on the date of sale, there can be no relevance of any future

litigation in the valuation of property. The DVO has rightly noted this

fact in para 8.2 of his report while dealing with the objection (1) of the

assessee. There is no force in this contention as well, which is hereby

repelled.

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determined by the DVO and the sale consideration is only 10.57%. It

was urged that such a difference should be ignored. For this

proposition, he relied on an order passed by Pune Bench of the

Tribunal in the case of Rahul Constructions Vs. Deputy Commissioner of

Income Tax (2010) 38 DTR 0019 (Pune). This argument was opposed by

ld. DR who relied on an order of the Kolkata Bench of the Tribunal in

Heilgers Development & Construction Co. (P) Ltd. Vs. Deputy

Commissioner of Income Tax, Central Circle-II, Kolkata, (2013) 32

taxmann.com 147 (Kolkata-Trib.), in which it has been held that in the

absence of any tolerance band prescribed in section 50C, where

difference in stamp duty value and stated sale consideration was less

than 15 per cent of stamp duty value, section 50C could be invoked.

available on record. Section 50C of the Act is special provision which

has been inserted for determining the full value of consideration in

certain cases. Relevant part of section 50C(1) reads as under :-

Special provision for full value of consideration in certain cases. 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 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 : ….

where the consideration received or accruing as a result of the transfer

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by an assessee of a plot etc. is less than the value adopted etc. by

stamp duty authority, the value so adopted etc. shall be deemed to be

the full value of the consideration. It is thus discernible that section

50C is a deeming provision and it is a settled legal position that a

deeming provision must be extended to its logical conclusion. The

Hon'ble jurisdictional High Court in the case of CIT Vs. Lokmat

Newspapers P. Ltd. reported in (2010) 322 ITR 43 (Bombay) has held

that: “Once a deeming fiction is created by law, it must be given full

and free effect, of course, in relation to the ambit within which it is

intended to operate”.

50C(1) is that it is a deeming provision which substitutes the declared

sale consideration with the stamp value, when the former is less than

the later. This provision deems the stamp value as full value of

consideration in the given situation without any embargo, unless the

case is covered under sub-section (2), which I will shortly advert to.

Nowhere in the provision, there is any mention of ignoring the stamp

value if the difference in stamp value and the sale consideration

received is less than a particular percentage. Second thing, which is

worth noting is that the legislature has intended and made its view

clear with full force, which becomes manifest from the use of the word

`shall’ in the deeming provision. Once there is a compulsory command

of deeming the stamp value as the full value of consideration, the

moment it is more than the actual sale consideration, the provision gets

triggered at that stage itself. One cannot claim that this substitution

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will be made effective only if the difference between the actual sale

consideration and stamp value is more than a particular percentage,

which position is plainly absent in the provision. Once some difference

is found in the stamp value and the sale consideration on a positive

side, section 50C gets activated and the deeming fiction has to come to

give logical conclusion to its prescription. There can be no question of

searching for any rationality or equity in a deeming provision. One

cannot artificially read certain limitations in a deeming provision, which

the law has not spelt out.

section (2) of section 50C, which runs as under : -

(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 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 modifications, 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.

section (1), which implies that an assessee can claim before the

Assessing Officer that the value adopted or assessed by the stamp

valuation authority under sub-section (1) exceeds the fair market value

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of the property. When such an objection is taken, it becomes

mandatory on the part of the Assessing Officer to make a reference to

DVO, who, in turn, has to determine the fair market value of the

property after entertaining objections from the side of the assessee.

Then sub-section (3) of section 50C comes into play, which states that

where the value ascertained under sub-section (2) exceeds the value

adopted etc. by the stamp valuation authority, the value so adopted etc.

by such an authority shall be taken as the full value of the consideration

received or accruing as a result of the transfer. In other words, if the

value determined by the DVO is less than the stamp value, as is the

case under consideration, then the lower value so determined by the

DVO shall be deemed as the full value of consideration.

provision and provides for substituting the sale consideration with the

stamp value or the value as determined by the DVO, as the case may

be, as the full value of consideration for the purpose of calculating

capital gains, there can be no warrant for ignoring the stamp

value/value determined by the DVO etc. in case the difference between

the actual sale consideration and the stamp value/value determined by

the DVO is less than a certain specified percentage. Invariably, the

stamp value or the value determined by the DVO etc. will have to be

substituted with the sale consideration as the full value of

consideration, even if the later is a rupee less than the former.

all fairness, scaled down the fair market value of the plot at

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Rs.46,96,400/- as against stamp value of Rs.56,19,000/- after taking into consideration the cumulative effect of all the relevant factors and entertaining the objections taken by ld. AR. In view of foregoing facts, I

am of the considered opinion that the argument of the ld. AR to the effect of ignoring the value determined by the DVO and taking the actual sale consideration as full value of consideration, when the former

is more than the later, deserves to be and is hereby jettisoned. I, ergo, uphold the impugned order.

In the result, appeal of the assessee is dismissed. 18.

Order pronounced on 13th day of December, 2018.

Sd/- R.S. SYAL उपा�य� /VICE-PRESIDENT पुणे / Pune; �दनांक / Dated : 13th December, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeal)-1, Nashik. 4. The Pr. CIT-1, Nashik. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.

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Date 1 Draft dictated on 12.12.2018 Sr. PS/PS 2 Draft placed before author 12.12.2018 Sr. PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order

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