KRISHNADEVI U. SHARMA,MUMBAI vs. ITO 20(1) 4, MUMBAI

This appeal by the assessee is arising out of the order of CIT (A)-36, Mumbai in appeal No. CIT (A)-31/IT-190/ITO-20(1)(4)/13-14 dated 29-12-14. The Assessment was framed by ITO ward 20(1)(4), Mumbai for the AY 2011-12 vide order dated 03-03-2014 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

“2. On the facts and circumstances of case, the learned CIT (A) erred in not referring the matter to the Departmental Valuation Officer as per the provisions u/s 50C(2) of the Act. 3. On the facts and circumstances of the case, the CIT (A) further erred in law and on the facts is not considering the fair market value on the date of agreement to be the cost of acquisition of the capital asset transferred during the year.

4. On the facts and circumstances case, the learned CIT (A) erred in law and on facts in confirming the order of the Assessing Officer in computing the Capital gains as per the provisions of Section 50C of the Act by taking the Sale consideration at Rs.1,07,22,000/- instead of Rs. 60,00,000/- received by the Appellant against the sale of Shop.

5. On the facts and circumstances, the learned CIT (A) further erred in confirming the Action of the AO in not allowing the expenditure incurred of Rs. 14.0 lacs in relation to the cost of the improvement of the shop by the Appellant.”

“5.1.2. The second contention of the appellant is that the valuation of the property should be referred to the DVO. A similar issue was considered in the decision rendered in the case of shared Dinesh Photographer Vs. ITO (43 SOT 452), wherein the Tribunal adjudicated on a case where the assessee had declared sale consideration o immovable property at Rs. 65,00,0000/- and the value determined by the registering authority was 1,03,32,000/-. The AO had adopted the stamp value for computation of capital gains. The assessee challenged the same stating that the AO erred in doing so without referring the matter to the DVO. The Tribunal upheld the application of section 50C in view of the fact that there was nothing on record to show that the assessee had claimed before the AO that the value adopted by the stamp valuation authority was higher than the FMV and therefore, there was no reason for the AO to make such a reference.

5.1.3 In the decision of the Madras High Court rendered in the case of Ambattur Clothing Co. Ltd. Vs ACIT reported at 326 ITR 245, the Hon’ble High Court held that once the assessee had not availed of the opportunity provided under sub-sections (2) a& (3) of Section 50C in addition to the opportunity provided under the Stamp Act, the assessee could not challenge the adoption of the Stamp value as sale consideration. 5.1.4 In the present case, the sale consideration as per agreement dated 26/11/2010 was Rs. 60,00,000/- which was far lower than the stamp duty valuation determined at Rs. 1,07,22,000/- In view of the provisions of Section 50C(1) reproduced above, the action of the AO in taking the stamp duty valuation as the full sale consideration being in consonance with the law, is upheld. On the issue of reference to DVO, it is seen that the appellant has not sought reference for valuation before the AO. Accordingly in light of the above cited decisions the appellant cannot now make a claim for reference to DVO and the ground raised by the appellant is dismissed.” The assessee also claimed the cost of improvement in regard to expenditure incurred in the relation improvement of the shop.

Stamp Valuation Authority i.e., the rate assessed by the Sub-Registrar is challenged by the assessee, then the matter has to be referred to DVO for ascertaining the full value of consideration for assessing long term capital gain under section 50C of the Act in terms of the decision of the Hon'ble Calcutta High Court in the case of Sunil Kumar Agarwal, supra. In the case of Sunil Kumar Agarwal, Hon'ble Calcutta High Court held as under:-

"We have considered the rival submissions advanced by the learned advocates appearing for the parties. The submission of Ms. Ghutghutia that the requirement of clauses a) and (b) of sub-Section 2 of Section 50C has not been met by the assessee, can hardly be accepted. The requirement of clause (b) of sub-Section 2 of Section 50C was evidently met. The only question is whether the requirement of clause (b) of sub- Section 2 of Section 50C was evidently met. The only question is whether the requirement of clause (a) of sub-Section 2 of Section 50C was met by the assessee. We have already set out hereinabove the recital appearing in the Deeds of Conveyance upon which the assessee was relying. Presumably, the case of the assessee was that price offered by the buyer was the highest prevailing price in the market. If this is his case then it is difficult to accept the proposition that the assessee had accepted that the price fixed by the District Sub Registrar was the fair market value of the property. No such inference can be made as against the assessee because he had nothing to do in the matter. Stamp duty was payable by the purchaser. It was for the purchaser to either accept it or dispute it. The assessee could not, on the basis of the price fixed by the Sub-Registrar, have claimed anything more than the agreed consideration of a sum of Rs.10 lacs which, according to the assessee, was the highest prevailing market price. It would follow automatically that his case was that the fair market value of the property could not be Rs.35 lacs as assessed by the District Sub Registrar. In a case of this nature the assessing officer should, in fairness, have given an option to the assessee to have the valuation made by the departmental valuation officer contemplated under Section 50C. As a matter of course, in all such cases the assessing officer should give an option to the assessee to have the valuation made by the departmental valuation officer. For the aforesaid reasons, we are of the opinion that the valuation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation

District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi judicial function, has the bounden duty to act fairly S.P.Nos.103&104/Kol/2014 & IITA Nos.1643 & 1644/Kol/2014 Shri Nirmal Chand Soni & Shri Sushil Chand Soni Assessment Year: 2007-08 and to give a fair treatment by giving him an option to follow the course provided by law."

Order pronounced in the open court on 04-11-2016.