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Facts
The assessee sold a property for Rs. 42,00,000, but the stamp duty valuation was Rs. 60,75,000. The Assessing Officer (AO) made an addition of Rs. 18,75,000, representing the difference, for capital gains calculation. The assessee contended before the AO that the matter should have been referred to the Departmental Valuation Officer (DVO) under Section 50C(2) of the Income Tax Act, 1961.
Held
The tribunal held that it was mandatory for the AO to refer the property's valuation to the DVO under Section 50C(2) read with Section 55A of the Act, given that the assessee claimed the fair market value was less than the stamp duty valuation. The CIT(Appeals) erred by upholding the AO's decision, which was deemed arbitrary and bad in law for not making the mandatory reference.
Key Issues
Whether the Assessing Officer was bound to refer the property's valuation to the Departmental Valuation Officer (DVO) under Section 50C(2) read with Section 55A of the Income Tax Act, 1961, when the assessee disputes the stamp duty valuation being higher than the fair market value.
Sections Cited
Section 50C, Section 50C(2), Section 55A, Section 250(4), Section 250(6)
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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM
This appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 17.03.2025 for the assessment year 2013-14 as per the grounds of appeal on record.
2. The brief facts in this case are that the assessee had sold his property for Rs.42,00,000/- whereas market value of the said property was Rs.60,75,000/- and while calculating the capital gain on the sale of the property, the assessee had taken sale consideration at Rs.42,00,000/- . As per Section 50C of the Income Tax Act, 1961 (for short ‘the Act’), since market value of the property as on date Rs.60,75,000/-, therefore it was considered for working out the capital gain. The assessee had sold the land admeasuring 0.405 hectare located at Mathpuraina, Raipur through registered conveyance deed dated 27.08.2012 against aggregate consideration of Rs.42,00,000/-. The A.O made addition of Rs.18,75,000/- solely on account of difference between value adopted for stamp duty purpose and the sale consideration. In other words, the addition was made due to difference between the market value of the property and the value actually received by the assessee as sale consideration. The assessee had contended before the A.O that the matter should have been referred to the DVO as per Section 50C(2) of the Act.
That for the sake of completeness, the said provision is extracted as follows: “Special provision for full value of consideration in certain cases. 50C. (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 subsection (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 (1) 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."
The assessee further submitted that circle rate fixed by the Collector is not full proof for determination of the rate for the area concerned but it is just to give guidance to the registering authority to test prima facie whether the deed of conveyance has been properly executed. The assessee further placed his reliance on the decision of the ITAT, Raipur, SMC in the case of Shri Manoj Kumar Pandey Vs. ITO-2, and submitted that the A.O is duty bound as per Section 50C(2) r.w.s. 55A of the Act to refer matter to the DVO for determination of fair market value. That since in this case, the said exercise was not done by the A.O which vitiates the assessment itself resulting it void ab initio and liable to be quashed.
It is further observed that as per the order of the Ld. CIT(Appeals)/NFAC at Para 4.8, the said authority itself laid down the condition enumerated in Section 50C r.w.s. 55A of the Act and those conditions once fulfilled then only it enables the A.O to make reference to the DVO and the said conditions are viz. (i) valuation done by the SVA is more than apparent sale consideration; and (ii) the assessee makes a claim before the A.O that fair market value of the property under transfer is less than the valuation done by the SVA.
Admittedly, the facts clearly demonstrates that the value determined for the purpose of stamp duty was Rs.60,75,000/-, whereas the property was actually sold by the assessee at a consideration price of Rs.42,00,000/- which resulted in addition of Rs.18,75,000/- as difference between the aforesaid two amounts. Thus, it is ample clear that the fair market value as claimed by the assessee is lessor than the value of the property shown for the purpose of stamp duty and that the said value of property as per stamp duty was more than the actual sale consideration received by the assessee in this case. Therefore, as per the mandate of Section 50C and Section 55A of the Act, it was mandatory for the A.O to refer the matter to the DVO for determination of fair market value of the property.
That even otherwise also, in the case of registration of property there are several factors which causes difference between stamp duty value and the fair market value of the property. Therefore, in the interest of natural justice that these provisions have been enumerated in the Act to facilitate the grievance of the assessee in respect of any dispute that may arise with regard to the difference of such value i.e. difference between fair market value which actually is the sale consideration value received by the assessee and the value adopted by the registrar of the assurance i.e. SDV.
Therefore, in my considered view the Ld. CIT(Appeals)/NFAC made apparent mistake in arriving at the findings as recorded in its order since he himself writes the condition mandatory for making reference to the DVO as per the Act and the facts are also before him in the case of assessee which are in conformity with the condition laid down therein, therefore, to say that the A.O was correct in not referring the matter to the DVO is absolutely wrong findings of facts which renders the order of the Ld. CIT(Appeals)/NFAC arbitrary and bad in law. That also, the Ld. CIT(Appeals)/NFAC could have conducted enquiry regarding the said facts as per the mandate of Section 250(4) & (6) of the Act. The Ld. CIT(Appeals)/NFAC had also failed in this regard as well.
As per the aforesaid examination of facts and circumstances and provisions of the Act, I set aside the order of the Ld. CIT(Appeals)/NFAC and allow the grounds of appeal raised by the assessee.
In the result, appeal of the assessee is allowed. Order pronounced in open court on 26th day of June, 2025.