DILIP V MOHINDRA,MUMBAI vs. ITO WD 19(1)(3), MUMBAI

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ITA 5846/MUM/2014Status: DisposedITAT Mumbai14 December 2016AY 2007-0810 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the authorities below erred in not referring the matter to the District Valuation Officer (DVO), especially when the assessee disputed the value determined by the stamp valuation authority. The Tribunal noted that the assessee had claimed the fair market value (FMV) was much lower than the stamp valuation and had even filed a sworn affidavit before the CIT(A) to this effect. The Tribunal relied on the decision of the Hon'ble Calcutta High Court in Sunil Kumar Agarwal, which held that in cases where the assessee disputes the stamp duty valuation, the AO should, in fairness, offer the assessee an option to have the valuation made by the departmental valuation officer. The Tribunal found that the legislature intended for the machinery provided under Section 50C(2) to be used to ensure fair treatment to the taxpayer. Therefore, the Tribunal set aside the order of the CIT(A) and restored the issue back to the file of the AO for fresh adjudication after referring the matter to the DVO and affording the assessee a fair and reasonable opportunity. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, Dilip V Mohindra, appealed against the order of the CIT(A)-22, Mumbai, for Assessment Year 2007-08. The dispute concerns the adoption of the Stamp Valuation Authority's value for calculating capital gains on the sale of a plot at Bandra. The assessee declared a sale consideration of Rs. 1,00,00,000/- (his 1/3 share) and calculated taxable long-term capital gain after deductions. The Assessing Officer (AO) noted the stamp duty value was Rs. 3,84,00,000/- and, after issuing a show cause notice which the assessee did not adequately respond to, substituted this value for calculating capital gains. This resulted in a significantly higher taxable capital gain. The CIT(A) upheld the AO's order, relying on Section 50C of the Income Tax Act, 1961, and a Madras High Court decision.

What were the issues?

1. Whether the Assessing Officer was justified in adopting the value of the property as per the Stamp Valuation Authorities for the purpose of Section 50C of the Income Tax Act, 1961, without referring the matter to the Valuation Officer under Section 50C(2) of the Act, when the assessee disputed the stamp duty value as the fair market value? Assessee's Contention: The assessee argued that the lower authorities erred by not referring the matter to the Valuation Officer under Section 50C(2) before substituting the stamp value as the consideration for calculating capital gains. The assessee claimed the fair market value was much lower than the stamp valuation. The assessee also filed a sworn affidavit before the CIT(A) disputing the stamp valuation. Revenue's Contention: The revenue, through the AO and CIT(A), contended that Section 50C(1) mandates the adoption of the stamp duty value as the full value of consideration if it exceeds the actual sale consideration. The CIT(A) noted that the assessee did not make a specific request to refer the matter to the District Valuation Officer at the time of assessment and thus failed to avail the opportunity provided under Section 50C(2). The CIT(A) relied on the decision in Ambattur Clothing Company Ltd.

Which sections of the Income-tax Act were involved?

Section 50C,Section 50C(1),Section 50C(2),Section 143(1),Section 143(3),Section 142(1),Section 54,Section 48

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI MAHAVIR SINGH, JM & SHRI RAJESH KUMAR, AM

For Respondent: Shri Shivaji Gnade
Hearing: 2.11.2016Pronounced: 14.12.2016

O R D E R PER RAJESH KUMAR, AM Appeal by the assessee is directed against the order dated 17.2.2014 passed by the ld. CIT(A)-22, Mumbai for the assessment year 2007-08. 2. Only issue raised in all these grounds of appeal

pertains to upholding the order of the AO by the ld. CIT(A) qua adopting the value of the property as per Stamp Valuation Authorities for the purpose of section 50C of the Income Tax Act, 1961 by ignoring the fact that the lower authorities have not referred the matter to the Valuation Officer under section 50C(2) of the Act before 2 substituting the stamp value as per stamp valuation authority as consideration for the purpose of calculating the capital gain.

3. Facts of the case are that the assessee filed his return of income on 3.7.2007 declaring total income of Rs.2,23,680/-. The return was processed under section 143(1) of the Act. Thereafter the case of the assessee was selected for scrutiny and the notices under section 143(2) and 142(1) were sent to the assessee and duly served upon him. During the course of assessment proceedings, the AO found that the assessee has shown Long Term Capital Gain of Rs.1,33,450/- on sale of Plot at Bandra on a sale consideration of Rs.3,00,00,000/- which was purchased on 14.8.1953 in co-ownership and the assessee’s share was 1/3rd. The value of the said flat as on 1.4.1981 was Rs.9,24,250/- as per the register valuer report which was indexed and capital gains was calculated as under : Date of sale 24.11.2006 Total sale consideration as per agreement Rs.1,00,00,000 [1/3rd share] Date of purchase of flat 14.8.1953 Value of plot as on 1.4.1981 Rs.9,24,250= 1/3rd share Rs.3,08,083 Index cost of the plot of land 3,08,083 x 519 Rs.15,98,950 100 Long term capital gain Rs.84,01,050 Less deduction u/s 54 Rs.82,67,600 Taxable long term capital gain Rs.1,33,450/- The assessee claimed deduction under section 54 of the Act to the tune of Rs.82,67,600/- and offered remaining capital gain of Rs.1,33,450/- to tax. The 3 AO during the course of assessment proceedings noted that the value of the said property as per stamp valuation authority was Rs.3,84,00,000/- and accordingly issued show cause notice to the assessee as to why the value of the property should not be taken as per the value as per

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