Brij Mohini Behl, New Delhi vs Assessee

This appeal, at the instance of the assessee, is directed against the

order of the CIT (A)-V, New Delhi dated 13.08.2012. The relevant

assessment year is 2008-09.

2. The assessee has raised seven grounds in her memorandum of

appeal. However, the crux of the issue is whether the Income-tax

authorities were justified in adopting the circle rate u/s 50C instead of 2 ITA No.2278/Del./2013

documented price in sale deed for the purposes of capital gains

computation

3. Briefly stated, the facts of the case are as follows. The assessee is an

individual who had transferred a plot of land vide sale deed dated

03.04.2007. The declared consideration in the sale deed was

Rs.23,00,000/-. In the return of income filed, while computing the capital

gains the cost of land was declared at Rs.22,35,087/-, which included the

cost of improvement of Rs.1,29,805/-. The short term capital gains of

Rs.64,913/- was declared. However, the stamp valuation authority adopted

the value of the land at Rs.57,58,750/- for the purposes of payment of

stamp duty. In the course of assessment proceedings, the Assessing

Officer confronted the assessee as to why section 50C should not be

invoked in her case. The assessee submitted before the Assessing Officer

that the fair market value of the impugned property was below the circle

rates and hence, the sale deed price ought to be taken for computation of

capital gains. It was further submitted that the contract for sale was

executed much prior to the date of transfer and the circle rates of the land

in the area were changed from 01.04.2007 onwards from Rs.10,00,000/- to

Rs.22,00,000/- per acre. The Assessing Officer completed the assessment

rejecting the objections raised by the assessee and adopted the value of

land at Rs.57,58,750/-. Thus, the short term capital gains was computed at

Rs.35,53,663/-, 3 ITA No.2278/Del./2013

4. Aggrieved, the assessee preferred an appeal before the first appellate

authority. Before first appellate authority, the assessee filed an application

under Rule 46A of the Income-tax Rules, 1962 requesting for admission of

additional evidence for the reason that the assessee could not produce the

same in the course of assessment proceedings, since Assessing Officer

completed the assessment without granting assessee proper opportunity to

present her case. The additional evidences sought to be placed on record

were that (i) affidavit of the assessee that the contract of sale for the

impugned land was entered much prior to 01.04.2007; and (ii) valuation

report issued by Captain Suresh Dutt & Associates. The CIT (A) did not

accept the additional evidences. The reasoning of the CIT (A) was that the

undated valuation report was made on 31.03.2007 i.e. much prior to

passing of the assessment order (assessment order was passed on

30.11.2010) and there was no reason for the assessee, not producing the

valuation report, during the course of assessment. The CIT (A) rejected

the contentions of the assessee and dismissed the appeal. The relevant

finding of the CIT (A) reads as follows:-

" The appellant's case does not falls under any of the conditions mentioned under rule 46A. Therefore the application made by the appellant is rejected. It is reiterated that the valuation as per the undated valuation report was made on 31.3.2007, and the assessment order u/s 143(3) was passed on 30.11.2010; the AO had raised the query on 15.9.2010 and the appellant has submitted its reply on 25.11.2010 before the AO; the appellant had sufficient opportunity to produce the valuation report and the affidavit 4 ITA No.2278/Del./2013

before the AO. In view of the aforesaid, the action of the AO in working out the short term capital gain at Rs.35,53,663/- is confirmed and the appeal is dismissed."

5. Aggrieved, the assessee is in appeal before us.

6. Ld. Counsel for the assessee reiterated the submissions made before

the income-tax authorities. It was further submitted that u/s 50C(2) of the

Act, if the assessee claims that the fair market value or the sale deed price

is below the circle rate, then it is mandatory for the Assessing Officer to

refer the impugned property for valuation to the DVO. For the above

proposition, the ld. AR relied on the order of the Tribunal in the case of

Sarwan Kumar vs. ITO, Ward 26 (3), New Delhi reported in 150 ITD 289.

It was further submitted that the assessee has furnished her objections

before the assessing authority and Assessing Officer had completed the

assessment in haste without giving an opportunity to the assessee to put

forward her case.

7. Ld. DR strongly supported the orders of the income-tax authorities.

It was submitted that the assessee has filed a false affidavit and has

concocted the valuation report sought to be filed as additional evidence

before the first appellate authority.

8. We have heard rival submissions and perused the material on record.

The Tribunal in the case of Sarwan Kumar vs. ITO (supra) have held

where an assessee had claimed before the Assessing Officer that the value

of land and building assessed by the stamp duty valuation authority 5 ITA No.2278/Del./2013

exceeds the fair market value of the property, then in terms of section

50C(2)(a), the Assessing Officer ought to have referred the matter to the

valuation officer instead of straightway deeming value adopted by the

stamp duty valuation authority as the full value of the consideration. The

Tribunal, after considering the precedents on the subject, had held as

follows :-

"6. Having gone through the decisions relied upon by the Ld. AR we find that it is now an established proposition of law that where an assessee had claimed before the AO that value of land and building assessed by stamp valuation authority exceeded fair market value of property , then in terms of section 50C(2) (a) the AO ought to have referred matter to valuation officer instead of straightaway deeming the value adopted by the stamp valuation authority as full ITA Nos. 4379/Del/09 & 2373/Del/2012 5 value of consideration. Similar are the facts in the cited case of Pune bench in the matter of K.K. Nag Ltd. vs. ACIT (supra) wherein the AO applying provisions of section 50C, adopted stamp duty value of land and building as total sale consideration for the purpose of computing the capital gain. The assessee raised the objection that since it had claimed that the value assessed by the stamp valuation authority exceeded the fair market value, the AO ought to have referred the matter to the valuation officer to ascertain the valuation. For a ready reference the matter travel to the Tribunal and the Tribunal has held as under :-

"Section 50C prescribes for adoption of full value of consideration in certain cases. It is provided that where the consideration received or accrued as a result of the transfer of a capital asset being land or building or both is less than the value adopted by an authority of the State Government for the purposes of payment of stamp duty in respect of such transfer, then the value so adopted by the State Government authority shall be deemed to be the full value of consideration received or accruing as a result of such 6 ITA No.2278/Del./2013

transfer. The said provisions of sub-section (1) of section 50C are further circumscribed by sub-section (2) of section 50C. In terms of clause (a) of sub-section (2) of section 50C, it is provided that where an assessee claims before the Assessing Officer that the value adopted or assessed by the Stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, then the Assessing Officer may refer valuation of the capital asset to the Valuation Officer. In instant case, factually it is evident that the assessee had claimed in the return of income itself that the value adopted by the stamp valuation authority exceeded the fair market value as on the date of transfer as provided in section 50C(2)(a). Under these circumstances, the Assessing Officer ought to have referred the matter to the Valuation Officer instead of straightaway deeming the value adopted by the stamp valuation authority as the full value of consideration. The point made out by the revenue that it is only discretionary on the part of the Assessing Officer to refer the matter to the Valuation Officer, is quite untenable. The discretion vested in the Assessing Officer in such a situation is required to be used in a judicious manner. Section 50C is a deeming provision and ostensibly involve creation of an additional tax liability on the assessee and, therefore, notwithstanding the presence of the expression 'may' in section 50C (2)(a), the Assessing Officer in this case ought to have referred the matter to the Valuation Officer for ascertaining the value of the capital asset in question. Therefore, the order of the Commissioner (Appeals) is to be set aside and the Assessing Officer is to be directed to adopt the course mentioned in section 50C(2)(a) and thereafter, proceed to determine capital gain on sale of land and building."

7. The Delhi Bench of the Tribunal in the above cited case of ITO vs. Smt. Manju Rani Jain (supra) has expressed a similar view wherein the action of Ld. CIT(A) has been upheld. The Ld. CIT(A) on finding that AO had worked out capital gain by adopting market value of property for stamp duty purposes, had directed AO to refer properties to valuation sale of the department for purpose of valuation of 7 ITA No.2278/Del./2013

properties and thereafter to adopt valuation for working out the capital gains in view of the provisions of section 50C(2) of the Act. Similar are the facts of the present case before us wherein before the AO the assessee had claimed that value of land and building assessed by stamp valuation authority exceeded fair market value of property but the AO had denied the reference u/s 50C to the Valuation Officer with this finding "also, it is held there is no need to refer the matter to departmental valuation officer as stipulated in section 50C(2). The section 50C(s) uses the word May and not shall refer the matter to the valuation officer defined u/s 2® of the W.T. Act 1957. Sufficient evidence has not been produced before the undersigned to enable her to make reference to the valuation cell under clause 50C(2)(b)." The Ld. CIT(A) has upheld this action of the AO. Thus the point made out by the revenue was that it is only discretion on the part of the AO to refer the matter to the valuation officer to which we in view of the provisions laid down u/s 50(c) of the Act do not concur with. The Pune Bench of the Tribunal in the case of K.K. Nag Ltd. vs. ACIT (supra) after detailed discussion of the provisions laid down u/s 50C of the Act has held that the discretion granted in such a situation is required to use in a judicious manner. Section 50C is a deeming provision and ostensibly involve creation of an additional tax liability on the assessee and, therefore, notwithstanding the presence of the expression 'may' in section 50C(2)(a), the AO in this case ought to have referred the matter to the valuation officer for ascertaining the value of the capital asset in question. The order of the Commissioner (Appeals) was thus held to be set aside and the AO was directed to adopt the course mentioned in section 50C(2)(a) and thereafter proceed to determine capital gain on sale of land and building. Respectfully following this decision of Pune Bench on an identical issue under almost similar facts, we while setting aside the orders of the authorities below on the issue direct the AO to adopt the course mentioned in section 50C(2)(a) and thereafter, proceed to determine capital gain on sale of the properties in question after affording opportunity of being heard to the assessee. The grounds are thus allowed for statistical purposes."

8 ITA No.2278/Del./2013

9. In the instant case, the assessee had raised a plea that the fair market

value of the impugned property is below the circle rate. Moreover, we find

that the assessee had taken up a specific ground before the CIT (A) that the

impugned property sold ought to have been referred for valuation since the

fair market value was less than the circle rate. In the instant case, since

specific claim was raised by the assessee as regards fair market value being

less than the circle rate, going by the dictum laid down by the Tribunal in

the case of Sarwan Kumar vs. ITO (supra), the Assessing Officer ought to

have referred the matter to the DVO for valuation of the impugned

property. Therefore, this issue is restored to Assessing Officer for the

purpose of referring the impugned property for valuation u/s 50C(2) of the

Act and thereafter proceed to determine the capital gains on the property in

question. It is ordered accordingly.

10. In the result, the appeal filed by the assessee is allowed for statistical

purposes.

Order pronounced in open court on this 20th day of April, 2015.

Sd/- sd/- (T.S. KAPOOR) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated the 20th day of April, 2015 TS 9 ITA No.2278/Del./2013

Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-V, New Delhi 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.