M/S SKY ORGANICS PVT. LTD.,F-42, SHRINATH TOWERS, CENTRAL SPINE, VIDHYADHAR NAGAR, JAIPUR vs. ITO, WARD-4(2), , JAIPUR

ORDER PER: SANDEEP GOSAIN, JM The assessee has filed an appeal against the order of the ld. CIT(A) dated 02-05-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2014-15 wherein the assessee has raised following solitary ground of appeal.

‘’The Ld. CIT(A), NEAC has erred on facts and in law in confirming the addition of Rs.15,54,832/-on account of long term capital gain on sale of property by taking the sales consideration u/s 50C at Rs.1,01,50,085/- as against Rs.86,02,250/- claimed by the assessee by incorrectly holding that assessee has not stated as to why it has not adopted DLC value assessed by sub-registrar for the purpose of calculating LTCG as per provisions of section SOC and without referring the matter to DVO.’’ 2.1 Apropos solitary ground of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:- ‘’Decision: I have gone through the above submissions of the Appellant and have considered the facts and evidence on record. The appellant filed return of income declaring total income of Rs.68,72,210/- on 03.02.2015. There was a belief of escapement of income and notice u/s 148 was issued to the appellant on 22.03.2017. The appellant filed its return of income electronically on 03.10.2017 declaring total income of Rs. 73,27,310/- Subsequently notices u/s 142(1), 143(2) were issued. In response to this, A/R Shri K.C. Joshi, C.A. attended the proceedings and filed written submissions. The appellant has declared LTCG of Rs.73,48,238/-. The Ld.AO stated that the appellant has deliberately concealed income even by adopting registry value for calculation of LTCG. The actual LTCG works out to Rs. 88,96,073/- as per provisions of sec.50C. Thus the appellant has concealed the LTCG to the extent of Rs. 20,09,931/-. Since, the appellant has concealed the particulars of its income and furnished inaccurate particulars to this extent penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 were initiated. Being aggrieved by the same the appellant has preferred instant appeal. The Ld.AO noticed that the appellant company has purchased land from Smt. Bharo Devi on 26.12.2006 at 'Deesa', Patwar Area- Anuppura (Jahota). District Amer, which was converted for industrial use. That land was sold by splitting into plots and during the year under consideration 5 plots were sold for Rs. 86,02,250/-. The Sub Registrar adopted the value of these 5 plots at Rs. 1,01,50,085/- and accordingly charged stamp duty. The appellant in its original return filed on 03.02.2015, adopted the sale price at Rs. 80,52,250/-, indexed cost of acquisition at Rs. 11,59,108/- and worked out the capital gain at Rs. 68,93,142/-. In the return filed in response to notice u/s 148, the appellant adopted the sale price at Rs. 86.02.250/- and worked out the capital gain at Rs. 73,48,238/- The Sub Registrar adopted the price at Rs. 1,01,50,085/- and charged stamp duty, which was duly paid. The case attracts provisions of section 50C which were introduced by the Finance Act, 2002 w.e.f. 1-4-2003. The appellant did not file reply on the issue as to why the provisions of section 50C may not be implied. Instead, it filed the brief facts of the case. The appellant has not filed any reply regarding non-adoption of rates on which stamp duty was charged for adoption as sale price. A/R has filed a return reply stating therein that the land was sold lower than DLC rate due to certain. circumstances as the land was in such a location that it could not fetch the DLC rate. However, it was not stated that as to why he has not adopted DLC value as assessed by sub-registrar for the purpose of calculating LTCG as per provisions of sections 50C. The sections mandated adoption of sale value as assessed by Registrar for the purpose of charging Capital Gain. During the course of appellate proceedings the appellant has stated that the stamping authorities are so much bound to value & charge duties as per area/block of area, where as in realty, the real valuation differs from the specified DLC rate. Once the A.O. or Appealate authority agrees and /or about to agree that the properties have not fetched the DLC rate because of THIS or THAT reason, section 50C may not be applied sympathically as decided in ITAT no. 823(JAIPUR) 2013 dated 27/07/2016 in SITA BAI vs ITO.

"THAT if there is deficiency of 10% in consideration vs a vis to the DLC rate it should be considered sympathetically and no addition should be made in the income declared by the assessee" JOHN FLOWER (INDIA) PVT LTD vs DCIT (ITAT MUMBAI) passed on January 25,2017 published on July 24, 2017. "In Honest Group of Hotels (P) Ltd vs CIT(2002)177CTR(J&K) 232 it was held that when the margin between the value as given by Assessee and the departmental valuer was less than 10%, the difference is likely to be ignored and the addition made by A.O. can't sustained. As the matter pertains to section 50C the provisions of section 50C of the IT Act, 1961, are reproduced:- "50C. Special provision for full value of consideration in certain cases.- (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such : transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer." Thus, section 50 C of the Income-tax Act, 1961 provides that where the consideration received or accruing as a result of the transfer of land or building or both is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains shall be computed accordingly. In the present case the Sub Registrar has adopted the final face value at Rs. 1,01.50,085/- and thus, the sale value is required to be adopted at Rs. Rs. 1,01,50,085/-. The actual LTCG works out to Rs. 88,96,073/- as per provisions of sec.50C.

The appellant has not submitted anything regarding non- adoption of rates on which stamp duty was charged for adoption as sale price. Appellant just stated that the land was sold lower than DLC rate due to certain circumstances as the land was in such a location that it could not fetch the DLC rate. However, it was not stated that as to why he has not adopted DLC value as assessed by sub-registrar for the purpose of calculating LTCG as per provisions of sections 50C. In view of the above, these ground of appeal are, accordingly, dismissed and the addition made by the Ld. AO on this account is, hereby, confirmed.

6. In the result, the appeal is dismissed. In the result, the appeal is decided as above.’’ 2.2 During the course of hearing, the ld. AR of the assessee filed the following written submission with the prayer that the addition confirmed by the ld. CIT(A) should be directed to be deleted or alternatively the AO should be directed to refer the matter to DVO to determine the FMV of the Plot sold before invoking Section 50C of the Act. ‘’1. The assessee filed the return on 03.12.2015 declaring income of Rs.68,72,210/- on account of income from long term capital gain. In response to notice u/s 148 return was filed on 03.10.2017 declaring total income of Rs 73,27,310/- on account of income from long term capital gain.

2. In course of assessment proceedings AO observed that for stamp duty purpose the value of land sold has been adopted at Rs.1,01,50,085/- and therefore proposed to make addition for difference of Rs.20,97,886/-. The assessee filed detailed explanation stating the reasons for sale of land below the value adopted by sub-registrar which is reproduced it I'd of the assessment order. The AO, however, held that assessee has not brought any concrete evidence on record to justify its claim. Accordingly he made addition u/s 50C on account long term capital gain of Rs 20,09,931/- with reference to the long term capital gain declared in the original return of income.

3. The Id. CITA), NFAC after reproducing the assessment order and the submission of assessee at Pg 2-10 of the order, at Page 12 held that assessee has not submitted anything regarding non adoption of rates on which stamp duty was charged for adoption of sale price. Accordingly it confirmed the addition made by AO.

4. It is submitted that as per section 50C where the consideration received as a result of transfer of a capital asset being land or building or both is less than the value adopted by stamp authorities for the purpose of payment of stamp duty, the value so adopted shall be deemed to be full value of consideration received or accruing as a result of such transfer. However sub-section (2) of section SOC provides that where assessee claims before the AO that vahic. adopted by stamp valuation authorities exceeds the fair market value of the property. AO may refer the valuation of the capital asset to a valuation officer. In the present case assessee claimed before the AO that the value adopted by stamp valuation authorities exceeds the fair market value of the property by giving as much as nine reasons as reproduced at 1' 4 of the assessment order. Thus when assessee objected to the value adopted by stamp valuation authorities, it was incumbent upon the AO to refer the matter to DVO to determine the FMV of the property. Without referring the matter to DVO to determine the FMV of land, the addition made is illegal & bad in law. Reliance in this connection is placed on the following cases ACIT VS. Tarun Agarwal (2019) 175 DTR 299 (Agra) (Trib.) AO while making addition under sec. 500 by adopting stamp duty valuation as full value of consideration having not considered the objection filed by assessee nor having referred the matter to DVO under see, 500 (2) nor there being any allegation that assessee had received anything over and above the stated consideration. CIT(A) was justified in deleting the addition made by AO Department cannot be allowed a second inning by sending the matter back to AO enabling it to fill the lacunae and shortcomings and putting the assessee virtually to face a restrial for no fault of him. Dr. Sanjay Chobey (HUF) VS. ACTT (2018) 169 DTR 35 (Agra) (Trib.) AO adopted fair market value of the property at circle rate as against the actual sale consideration and did not make a reference to the DVO although assessee made a written request to the AO to refer the same to the DVO, Further, the contention of the assessee that the property was located in suburban and undeveloped area lacking basic amenities and that it could not fetch higher price as it was sold by way of distress sale is found to be correct. It was statutory duty laid down upon the AO to obtain the valuation report by referring the matter to the DVO which he did not abide. AO has not found any adverse material evidence to indicate that assessee has received any excess money over and above the sale consideration shown in the return. Reference under sec. 50C(2) is mandatory and the AO having failed to follow the provisions of the Act, he should not be given one more chance to refer the matter to the DVO. ITO VS. Estate of Maharaja Karni Singh of Bikaner (2018) 166 DTR 29 (Jodh.) (Trib.) Sec. 50CC) provides two remedies at the option of assessee, in that, he can either file appeal against the stamp value or seek reference to the valuation cell. It is well settled that the principles of natural justice shall be presumed to be necessary unless there exists a statutory interdict. Therefore, denial of request or objection of the assessee against the value adopted by the stamp valuation authority by the AO is against the spirit of sec. 50C. It is not optional for the AO to make reference to DVO. Right of the assessee under sec. 50C is a statutory right. In the instant case, enhanced valuation of the property was made by stamp valuation authority and matter was taken in appeal where it is still pending. AO was requested to refer to matter to DVO who denied the request which is not justified. AO should have referred the matter to the DVO under sub-sec. (2) of sec. 50C. CIT(A) was justified in deleting the addition on account of capital gain. ITO VS. Aditya Narain Verma (IIUF) (2017) 154 DTR 62 (Del.) (Trib.) Assessee having claimed before the AO that the value of land assessed by stamp valuation authority exceeds the fair market value of the property as on the date of transfer, action of AO in taking the FMV of land as determined by State Government authority for the purpose of stamp duty and working out the capital gains accordingly without complying with the provisions of sub-sec. (2) of sec. 50C was not valid. CIT(A) was therefore justified in quashing and annulling the order of AO. Anil Kumar Jain Vs. ITO (2013) 143 TTD 659 (Del.) (Trib.) Assessee carned STCG on sale of property and made a claim before AO that the value adopted or assessed by the stamp valuation authority exceeds the FMV of the property Value adopted by stamp valuation authority had not ever been disputed by assessee in any appeal or revision or otherwise to any other authority or Court as referred to in sec 50C(2)(b). It was held that it was incumbent upon the AO to refer the matter for valuation to a Valuation Officer as provided in sec. 50C(2). 5 . It is submitted that in case order of AO is not held to be illegal & bad in law, he be directed to refer the matter to DVO to determine the IMV of the plot sold before invoking section 50C of the Act as held in the following cases: S. Muthuraja Vs. CTT (2014) 369 FTR 483 (Mad.) (HC) Assessee having objected to AO adopting sale consideration adopted for purposes of stamp duty, matter remanded to AO to work out capital gains by invoking s. 50C(2).

Sunil Kumar Agarwal Vs. CIT (2014) 112 DTR 164 (Cal.) (HC) In view of submission of assessee that the buyer of plot offered him the highest price prevailing in the market. AO should have made reference to DVO u/s 50C(2) instead of straightaway adopting the valuation fixed by the stamp valuation authority. Even in a case where no such prayer is made, the AO discharging a quasi-judicial function has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law. Mansukhlal Ghelabhai Doshi Vs. ACIT (2015) 153 ITD 220 (Rajkot) (Trib.) AO made addition to taxable income of assessee on account of short term capital gain arising out of sale of property. As per registration authority, market value adopted to collect stamp duty in respect of this property was higher whereas assessee had shown a lower sale price. CIT(A) confirmed addition. It was observed that assessee clearly objected before AO against adoption of stamp duty valuation. Therefore, it was duty of AO to refer valuation of property to Valuation Cell of Income-tax department. Having not done so, matter was to he remitted to file of AO with direction to AO to refer property to Valuation Cell of Income tax department for purpose of valuation of property and, thereafter, adopt valuation for working out capital gains. Raj Kumari Agarwal Vs. DCIT (2014) 150 ITD 597 (Agra) (Trib.) Where assessee had claimed that actual market value of land is less than stamp duty valuation adopted by AO, it was incumbent upon AO to refer valuation of said land to DVO If the same had not been done, matter is to be remitted back to AO for fresh adjudication. In view of above, addition confirmed by L.d. CIT(A) be directed to be deleted or alternatively AO be directed to refer the matter to DVO to determine the FMV of the plot sold before invoking section 50C of the Act.’’ 2.3 On the other hand, the ld. DR supported the order of the ld. CIT(A). 2.4 We have heard both the parties and perused the materials available in record. Brief facts of the case are that the assessee filed the return on 03.12.2015 declaring income of Rs.68.72.210 on account of income from long term capital gain. In response to notice u/s 148, return was filed electronically on 03.10.2017 declaring total income of Rs 73,27,310/- on account of income from long term capital gain. During the course of assessment proceedings, the AO observed that for stamp duty purpose the value of land sold has been adopted at Rs.1,01,50,085/- and therefore proposed to make addition for difference of Rs.20,97,886/-. The assessee filed detailed explanation stating the reasons for sale of land below the value adopted by sub-registrar which is reproduced at page 3-4 of the assessment order. The AO, however, held that assessee has not brought any concrete evidence on record to justify its claim. Accordingly, he made addition u/s 50C on account long term capital gain of Rs 20,09,931/- with reference to the long term capital gain declared in the original return of income. In first appeal, the ld. CIT(A) has confirmed the action of the AO by observing as under:- ‘’The Section 50C of the Income Tax Act provides that where the consideration received or accruing as a result of the transfer of land or building or both is less than the value adopted or assessed by any authority of a State Govt. for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains shall be computed accordingly. In the present case, the Sub-Registrar has adopted the final face value at Rs.1,01,50,085/- and thus the sale value is required to be adopted at Rs.1,01,50,085/-. The actual LTCG works out to Rs.88,96,073/- as per provisions of Sec 50C. The appellant has not submitted anything regarding non- adoption of rates on which stamp duty was charged for adoption as sale price. Appellant just stated that the land was sold lower than DLC rate due to certain circumstances as the land was in such a location that it could not fetch the DLC rate. However, was not stated that as to why he has not adopted DLC value as assessed by Sub-Registrar for the purpose of calculating LTCG as per provisions of Section 50C. In view of the above, these ground of appeal are accordingly dismissed and the addition made by the ld. AO on this account is, hereby confirmed.’’ The Bench noted from the order of the ld. CIT(A) wherein the assessee stated that the land was sold lower than DLC rate due to certain circumstances as the land was in such a location that it could not fetch the DLC rate but it has not mentioned as to why DLC Rate was not adopted as assessed by the Sub-Registrar for the purpose of calculating LTCG as per provisions of Section 50C of the Act. It is also noted from the submission of the ld. AR of the assessee wherein he requested either to delete the addition confirmed by the ld. CIT(A) or direct the AO to refer the matter to DVO to determine the FMV on the plot sold before invoking the section 50C of the Act. In this view of the matter, the Bench restores the issue to the file of the AO with the direction to refer the matter to the DVO to determine the fair market value of the plot and allow the relief to the assessee in accordance with law but by providing adequate opportunity of being heard to the assessee. Thus the appeal of the assessee is allowed for statistical puposes. 4.0 In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 27 /09/2023.

Sd/- Sd/- ¼jkBksMdeys'kt;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Rathod Kamlesh Jayantbhai) (Sandeep Gosain) ys[kklnL;@Accountant Member U;kf;dlnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 27 /09/2023 *Mishra आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- M/s. SKY Organics (P) Ltd., Jaipur 2. izR;FkhZ@ The Respondent- The ITO, Ward 4(2), Jaipur 3. vk;djvk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZQkbZy@ Guard File (ITA No.392/JP/2023) vkns'kkuqlkj@ By order,

सहायकपंजीकार@Aेेजज. त्महपेजतंत