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Facts
The assessee, an individual and proprietor, sold a jointly owned immovable property in which he had a 40% share. The sale consideration received was Rs. 2,40,00,000, while the Stamp Duty Authority's valuation was Rs. 7,40,65,970. The Assessing Officer (AO) treated the Stamp Duty Authority's valuation as the sale consideration under Section 50C, adding Rs. 45,86,388 to the assessee's income.
Held
The Tribunal held that both conditions for invoking Section 50C(2) were met, as the Stamp Duty Authority's value exceeded the actual sale consideration and was not disputed in any appeal or reference. Therefore, the AO erred in not referring the valuation to the DVO, and the CIT(A) erred in rejecting the assessee's request for DVO valuation.
Key Issues
Whether the Assessing Officer erred in not referring the valuation of the property to the DVO under Section 50C when the Stamp Duty Authority's valuation exceeded the actual sale consideration.
Sections Cited
50C, 143(2), 142(1), 16A, 23A, 24, 34AA, 35, 37, 50C(2)
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI. NARENDRA KUMAR BILLAIYA & SHRI. SANDEEP SINGH KARHAIL
Date of Hearing – 19/08/2024 Date of Order – 10/09/2024 O R D E R PER SANDEEP SINGH KARHAIL, J.M.
The present appeal has been filed by the assessee challenging the impugned order dated 30/04/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2013-14.
In its appeal, the assessee has raised the following grounds:
– “GROUND I On the facts and circumstances of the case, and in Law, CIT(A) NFAC erred in confirming addition of Rs. 45,86,388/- u/s 50C towards the difference in stamp
1. Mohammed Khalid Habib Parihar; A.Y.2013-14 duty value vis-à-vis sale consideration of Immovable property sold during the year. On the facts and circumstances of the case and in law the CIT and AO failed to appreciate the fact that: a) The land has garden reservation and could not be sold at the normal market price. b) The CITA denied the assessee's request for DVO valuation stating that the Stamp duty value are considering all the ifs and buts. c) CITA failed to appreciate that the stamp duty values are indicative value for a large area or locality and not for a specific plot of land. The appellant therefore prays that addition of Rs. 45,86,388/- u/s 50C towards the difference in stamp duty value vis-à-vis sale consideration of immovable property sold during the year may please be deleted. GROUND II (without prejudice to GROUND 1) On the facts and circumstances of the case, and in Law, CIT(A) NFAC erred in confirming addition of Rs. 45,86,388/- u/s 50C based on the amount received by the Assessee, rather than calculating on the Share of the Assessee as per agreement. The appellant therefore prays that addition u/s 50C may please be restricted to the 1/7 share of the Assessee in the sales. GROUND II On the facts and circumstances of the case, and in Law, CIT(A) NFAC erred in confirming the disallowance of Rs. 2,40,000/- pertaining to brokerage paid towards immovable property sold during the year ignoring the fact that the Party wise details of brokerage expenses paid alongwith the receipts were submitted during the assessment proceedings with a comment that the brokers to be "not very literate" to handle transfer of property. The appellant therefore prays that disallowance of Rs. 2,40,000/- pertaining to brokerage paid towards immovable property sold during the year may please be deleted.”
The main grievance of the assessee is against the adoption of the value of land as determined by the Stamp Duty Authority, without referring the valuation to a Valuation Officer under section 50C of the Act.
The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and proprietor of M/s Oath Infrastructure. The assessee is engaged in the civil contractor business. For Mohammed Khalid Habib Parihar; A.Y.2013-14 the year under consideration, the assessee filed its return of income on 29/03/2014 declaring a total income of Rs. 1,07,98,960. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) as well as section 142(1) of the Act were issued and served on the assessee. In response to the aforesaid notices, the assessee attended the proceedings and submitted a copy of the balance sheet and profit and loss account along with a copy of the computation of income filed for the year under consideration. Upon perusal of the computation of income filed by the assessee as well as the capital account for the financial year 2012-13, it was observed that the assessee has sold a jointly owned immovable property. As per the assessee in the said property, he had a 40% share. It was further noticed that the assessee has received a sum of Rs. 2,40,00,000 as the sale consideration. Accordingly, during the assessment proceedings, the assessee was asked to furnish a copy of the purchase and sale deed of the aforementioned property along with the calculation of capital gain. On examination of the agreement of sale, it was noticed that the market value of the property sold by the assessee was ascertained by the Stamp Duty Authority at Rs. 7,40,65,970, whereas the sale consideration of the said property is shown at Rs. 6 crore. Since the assessee claimed to have a 40% share in the ownership of the property, accordingly the sale consideration to the share of the assessee comes to Rs.2,85,86,388. However, the assessee has taken the sale value at Rs.2,40,00,000. Since there was an under- valuation of the sale consideration by an amount of Rs.45,86,388, considering the provisions of section 50C of the Act, the assessee was asked to show 3 Mohammed Khalid Habib Parihar; A.Y.2013-14 cause as to why the valuation as per Stamp Duty Authority should not be taken as a consideration for computation of long term capital gain as per the provisions of section 50C of the Act and difference should not be added to its income under section 50C of the Act. In response thereto, the assessee submitted that the said land was originally gifted by the Government to a freedom fighter to enable him to earn his livelihood by carrying out agricultural activity on the land. While gifting the land condition was put that if the land sold then 50% of the proceeds be deposited with the Government. It was further submitted that the land was subsequently reserved as a garden plot by the Government and therefore due to these complications, the assessee could not sell the land at normal market price. The assessee submitted that he wanted to sell the land desperately as he required the funds and since he received a maximum of Rs. 6 crores, he and his co-owners decided to sell the same. Accordingly, the assessee prayed that the sale consideration of Rs.6 crore realised by the assessee and his co-owners was genuine and should be considered as a sale consideration to calculate the long-term capital gains.
The Assessing Officer (“AO”) vide order dated 01/03/2016 passed under section 143(3) read with section 147 of the Act did not agree with the submissions of the assessee and held that the assessee has not furnished any evidence in support of its contention. The AO held that the valuation adopted by the Stamp Valuation Authority is not an autocratic decision and is based on well scientific and logical mechanism. Accordingly, by considering the price determined by the Stamp Valuation Authority as a deemed value of the land,
The learned CIT(A), vide impugned order, noted that the assessee during the assessment proceedings did not object to the valuation done by the Stamp Duty Authority, but simply on mere inference, claimed that there was a low price for the impugned land in the market and oppose the computation of long term capital gains based on stamp duty value under section 50C of the Act. It was further held that only during the appellate proceedings, the assessee requested to refer the case to the Departmental Valuation Officer (“DVO”). The learned CIT(A) held that the request made by the assessee for the valuation of the impugned land by the DVO is unacceptable and without any reasonable ground on the basis that the assessee should have availed this opportunity while presenting the case before the AO during the assessment proceedings by filing the valuation report from a registered valuer to contest the issue of higher valuation of the land by the Stamp Duty Authority. It was held that since the assessee has failed to do so, it means that the assessee has no objection to the Stamp Duty Authority’s valuation. The learned CIT(A) further held that the request for fresh valuation of the impugned land by the DVO at this juncture is absolutely baseless as the assessee has changed his viewpoint on the market value of the impugned land at the time of sale during the appeal proceedings. Accordingly, the learned CIT(A) dismissed the appeal filed by the assessee
We have considered the submissions of both sides and perused the material available on record. In the present case, it is undisputed that the assessee was a joint owner of an immovable property, wherein he had 40% share, and thus received a sale consideration of Rs. 2,40,00,000. It is evident from the record that the market value of the property sold by the assessee along with the other co-owners as ascertained by the Stamp Duty Authority was Rs.7,40,65,970, whereas the sale consideration of the said property was shown at Rs. 6 crore. Accordingly, the differential amount as per the share of the assessee, i.e. Rs.45,86,388, was added to the total income of the assessee under section 50C of the Act. We find that during the assessment proceedings the assessee even though did not specifically request the AO to refer the valuation to the DVO, however, submitted that there were certain encumbrances for the transfer of the land because, at the time of gifting of the land, the condition was imposed by the Government that 50% of the proceeds be deposited with the Government. Further, it was submitted that the land was reserved as a garden plot by the Government. Therefore, due to these complications, the assessee could not sell the land at the normal market price. Subsequently, when it received the maximum offer of Rs.6 crore he and his co-owners decided to sell the land. It is evident from the record that when the request for reference for valuation by the DVO was made before the learned CIT(A), the said request was rejected on the basis that the assessee Mohammed Khalid Habib Parihar; A.Y.2013-14 did not avail this opportunity while presenting its case before the AO during the assessment proceedings. It is a settled legal position that the power and authority of the learned CIT(A) is co-terminus with the Assessing Officer. Even apart from the aforesaid settled legal position, it is evident from the record that in his response to the show cause notice the assessee specifically objected to considering the value of the said property at Rs.7,14,65,970 as determined by the Stamp Duty Authority. In this regard, it is relevant to note the provisions of section 50C(2) of the Act, which reads 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) oSf 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.”
Mohammed Khalid Habib Parihar; A.Y.2013-14 8. In the present case, it cannot be disputed that the value adopted by the Stamp Duty Authority exceeds the value of the property on the date of the transfer and the value so adopted is also not in dispute in any appeal, revision, or reference before any authority, court or the High Court. Thus, when both the conditions of section 50C(2) of the Act are fulfilled in the present case, we are of the considered view that the AO erred in not referring the valuation of the land to the DVO. Further, the impugned order suffers from the same vice as the learned CIT(A) rejected a specific request in this regard by the assessee and upheld the addition by considering the valuation of the land by the Stamp Duty Authority as the deemed sale consideration as per the provision section 50C of the Act. Accordingly, in view of the facts and circumstances as noted above, we deem it appropriate to restore this issue to the file of jurisdictional AO for de novo adjudication after seeking a valuation report from the DVO as per the provisions of section 50C of the Act. Since this issue is restored to the file of the AO for consideration afresh, accordingly all the other issues raised in the present appeal are kept open and the impugned order is set aside. As a result, the grounds raised by the assessee are allowed for statistical purposes.