SANGEETA VIJAY KUMAR,MUMBAI vs. ACIT 25(2), MUMBAI

In the memorandum of appeal, the assessee has raised four grounds. Ground no. 4 being general in nature does not require any specific adjudication. Ground nos. 1 and 2 are not pressed by the assessee, hence these grounds are dismissed as not pressed. Therefore, the only ground which survives for consideration is ground no. 3, which reads as under: ‘3. CIT(A) further erred in making the enhancement of income by Rs.10,04,072/- by accepting valuation made by DVO without considering the provisions of Sec 50C(3).’

(A.Y. 2010-11) Smt. Sangeeta Vijay Kumar vs. ACIT 3. As could be seen, the issue arising for consideration as per ground no. 3 is, in a case where the valuation determined by the Departmental Valuation Officer (DVO) is more than the value assessed by the Stamp Valuation Authority (SVA), in terms of section 50C(3), which value is to be adopted for the purpose of computing capital gain.

Briefly stated, during the relevant previous year, i.e., on 08.4.2009, the assessee sold a flat for a declared sale consideration of Rs.36 lacs. After reducing the cost of acquisition of Rs.30,92,000/-, he offered an amount of Rs.5,08,000/- as short term capital gain (STCG). In the course of assessment proceedings, the A.O. noticing that the valuation of the property for stamp duty purpose has been determined by SVA at Rs.47,77,928/-, called upon the assessee to explain why the value determined by the SVA should not be adopted as the deemed sale consideration of the property for the purpose of capital gain. Objecting to the adoption of SVA valuation., assessee requested to refer the valuation to the DVO. Though, the A.O. made a reference to the DVO to determine the value of the property, however, as the assessment was getting time barred, without waiting for the DVO’s report, the A.O. proceeded to complete the assessment by computing capital gain adopting the value determined by the SVA in terms of section 50C(1) of the Act. This resulted in determination of STCG at Rs.16,85,928/-. Being aggrieved of the addition so made by the A.O., the assessee preferred an appeal before the ld. CIT(A).

The ld. CIT(A) noticing that in the meanwhile DVO has submitted his report, determining the value of the property at Rs.57,82,000/-, directed the A.O. to recompute the STCG by adopting the value of the property as determined by DVO at Rs.57,82,000/-, as against the valuation of the SVA at Rs.47,77,928/-.

The ld. AR objecting to the aforesaid direction of the ld. CIT(A) submitted, as per the provision of section 50C(3), in a case where the value determined by the DVO is more than the value assessed by SVA, the valuation made by the SVA has to be (A.Y. 2010-11) Smt. Sangeeta Vijay Kumar vs. ACIT adopted. Per contra, the ld. DR submitted, since the assessee in terms of section 50C(2) has requested for referring the valuation to the DVO, the value determined by the DVO has to be adopted as per section 50C(3) of the Act.

We have considered the submissions of the parties and perused the materials on record with reference to the provisions contained u/s. 50C of the Act. On a careful reading of section 50C, it is noticed that as per sub-section (1), in a case where the value adopted or assessed or assessable by the SVA for stamp duty purpose at the time of transfer of an immovable property is more than the value/sale consideration declared by the assessee, the value assessed or adopted by the stamp valuation authority shall be deemed to be the full value of the consideration received or accruing as a result of such transfer. However, sub-section (2) provides an exception by affording an opportunity to the assessee to object to the value of the SVA. In case such an objection is made by the assessee, then as per the mandate of sub-section (2), the A.O. has to refer the valuation of the property to the Departmental Valuation Officer. Once the DVO submits valuation report determining the value of the property, then the A.O. has to proceed in terms of sub section (3) of section 50C. For convenience sub-section (3) is extracted here-under: ‘Special provision for full value of consideration in certain cases. 50C (1) ………………… (2) ……………… (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 taken as the full value of the consideration received or accruing as a result of the transfer.’ 8. On a careful analysis of the provision contained under sub-section (3), it is to be noted that where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the SVA as referred to in sub-section (1), the (A.Y. 2010-11) Smt. Sangeeta Vijay Kumar vs. ACIT value so adopted or assessed or assessable by such authority shall be taken as a full value or consideration received or accruing as a result of the transfer. If we give a schematic interpretation to the provisions of sec. 50C, it emerges that the value as referred to under sub-section (2) is valuation by the DVO. Whereas, the value adopted or assessed or assessable by the SVA as referred to in sub section (1) would mean the valuation made by the SVA. Therefore, if the valuation of the DVO exceeds the valuation of the SVA, in such a situation the value adopted by SVA has to be taken as the value of consideration received or accruing. The expression ‘value so adopted or assessed or assessable by such authority’ as appears in concluding part of sub section (3), if read in conjunction with sub-section (1) of section 50C would leave no room for doubt that the said expression, and, more particularly the expression ‘such authority’ referred to therein would mean the SVA. Therefore, as per the plain reading of sub-section (3) of section 50C, in a case where the value determined by the DVO is more than the value assessed by the SVA, the value adopted by the SVA shall be deemed to be the full value or consideration received by the assessee.

Reading of the provision of sec.50C as whole would demonstrate, as per sub- section (1), normally, the value assessed or assessable by the SVA for stamp duty purpose if exceeds the recorded sale consideration, the value determined for stamp duty purpose shall be deemed to be the sale consideration received by the assessee for computing capital gain. The exception provided under sub-section (2) comes into play, only if, assessee objects to the valuation of SVA during the assessment proceeding. Thus, it is very much clear that the reference to DVO is for the benefit of the assessee. Therefore, in case the value determined by DVO is less than the stamp duty valuation by SVA, the A.O. under sub-section (3) is empowered to adopt the value determined by DVO. On the contrary, if value determined by DVO is more than the stamp duty valuation by SVA, the A.O. has to adopt the value determined by the SVA. Assessee certainly cannot be put to a worse position for objecting to the value determined by the SVA. In our considered view, this is the correct interpretation of the statutory provision and also brings out the true legislative intent in enacting the (A.Y. 2010-11) Smt. Sangeeta Vijay Kumar vs. ACIT provision of section 50C. Thus, in view of the aforesaid, we hold that as the valuation made by the SVA at Rs.47,77,928/- is less than the value determined by the DVO at Rs.57,82,000/-, the A.O. is directed to recompute STCG by adopting the value of Rs.47,77,928/- as assessed by the SVA, in terms of section 50C(3) of the Act. Ground raised