Kamlesh Kumar Kewlani, Faizabad vs Assessee

Kamlesh Kumar Kewlani v. The Income Tax Officer L/H of Late Smt. Saraswati Devi Faizabad Reidganj, Faizabad TAN/PAN:ABPP95724J (Appellant) (Respondent)

Appellant by: Shri. K. R. Rastogi, C.A. Respondent by: Shri. C. P. Singh, D.R. Date of hearing: 12 11 2014 Date of pronouncement: 16 01 2015

ORDER

PER SUNIL KUMAR YADAV:

This appeal is preferred by the assessee against the order of the ld. CIT(A), inter alia, on the following grounds:-

1. The Ld. C. I. T. (Appeals) erred on facts and in Law in not directing to Ld. A. O. for referring the Valuation of the land to the Valuation Officer, since Appellant had computed Capital Gain on Sale amount for his share, stated in the Registered Sale Deed, instead of Value for Stamp duty purposes which is much higher than sale amount.

2. The Ld. C. I. T. (Appeals) did not appreciated that total value of Land as per Stamp Valuation Authority was Rs.53,53,000/- of which appellant share is Rs.10,70,600/- and appellant had computed Capital Gain as per Sale Consideration hence reference should be made to Valuation Officer.

3. The Valuation as per Stamp Valuation Authority adopted by Ld. :-2-:

A. O. for Capital Gain Purpose is highly excessive, as compared to market value / sale consideration.

2. During the course of pendency of appeal, the assessee has moved an application raising the additional grounds, which are as under:-

1. That in response to notice u/s 148 of the I. T. Act. Reply with copy of return originally filed on 29 July 2006 with enclosure, submitted on 24.11.2011. Thus, earlier notice dt. 08.08.2011 issued u/s 143(2) of I. T. Act could not be treated as valid for the purpose of reassessment.

2. That after filing the copy of the return originally filed along with annexure on 24.11.2011, no notice u/s 143(2) of I. T. Act has been issued afresh, hence in absence of notice u/s 143(2) of I. T. Act after 24.11.2011, the reassessment made u/s 147/143(3) of I. T. Act is invalid.

3. During the course of hearing of the appeal, the ld. counsel for the assessee has opted not to press for admission of the additional grounds.

Accordingly, the additional grounds raised by the assessee are rejected being not admitted.

4. Now the solitary issue is with regard to the reference of valuation of the land to the Valuation Officer to estimate the fair market value in order to determine the correct capital gain.

5. In this regard, the ld. counsel for the assessee has submitted that the assessee had sold the agricultural land for Rs.25 lakhs as per sale deed dated 29.6.2005; whereas the land was valued as per Stamp Valuation Authorities at Rs.53,53,000/- and capital gain was accordingly paid.

6. The assessee preferred an appeal before the ld. CIT(A) with the submission that where the assessee has offered lesser sale consideration than the valuation adopted by the Stamp Valuation Authority, the Assessing :-3-:

Officer ought to have made a reference to the DVO to determine the fair market value of the land. Since reference was not made to the DVO to determine the fair market value of the land, the order of the Assessing Officer be set aside with a direction to compute the capital gain after obtaining the DVO's report. The ld. CIT(A) re-examined the issue and being not convinced with the explanations of the assessee, he confirmed the order of the Assessing Officer. While doing so, the ld. CIT(A) has categorically observed that before the Assessing Officer assessee has taken a plea that assessee has sold agricultural land and therefore capital gain cannot be computed, as the agricultural land is not a capital asset; whereas the Assessing Officer has made out a case that the land is within 8 KM of the Municipal limit, therefore, capital gain is to be computed.

7. Aggrieved, the assessee has preferred an appeal before the Tribunal and reiterated his contentions. The ld. counsel for the assessee has further contended that during the course of assessment proceedings, the assessee has raised a specific plea that the sale consideration of the land was at Rs.25 lakhs as per market value of the land, though the value for Stamp duty purpose was taken at Rs.53.53 lakhs. Once the assessee has disputed the market value of the land as well asl the value adopted by the Stamp Valuation Authority, the Assessing Officer should have made reference to the DVO to determine the market value of the land in order to compute the capital gain. Since the Assessing Officer has not acted in accordance with law, his order is to be set aside. The assessee has placed reliance upon the following judgments in support of his contentions:-

1. Sunil Kumar Agarwal vs. CIT, 47 taxmann.com 158 (Calcutta)

2. Sarwan Kumar vs. Income Tax Officer, New Delhi, 45 taxmann.com 16 (Delhi-Trib.) :-4-:

8. The ld. D.R., on the other hand, has contended that before the Assessing Officer the assessee has simply taken a plea that it is an agricultural land, therefore, not exigible to capital gain tax. He has not raised any contention with regard to the market value of the land.

9. Having carefully examined the orders of the lower authorities and the relevant provisions of the Act , we find that as per provisions of section 50C of the Act 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 or 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. Sub-section (2) of section 50C of the Act further states that before the Assessing Officer if the value adopted or assessed or assessable by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer; the Assessing Officer may refer valuation of the capital asset to the Valuation Officer. Therefore, before making reference to the DVO to determine the fair market value of the property, there should be contention of the assessee that value assessed by the Stamp Valuation Authority exceeds the fair market value of the property as on the date of transfer. If the assessee does not dispute the value assessed by the Stamp Valuation Authority for the purpose of transfer of the property, the Assessing Officer is not under any obligation to make reference to the DVO to determine the fair market value of the land. For the sake of reference, we extract the relevant provisions of section 50C of the Act as under:-

SECTION 50C:

:-5-:

(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 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 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.

(2) Without prejudice to the provisions of sub-section (1), where-

(a) the assessee claims before any Assessing Officer that the value adopted or assessed or assessed or assessable by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer ;

(b) the value so adopted or assessed or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.

10. Turning to the facts of the case, we find that before the Assessing Officer assessee has taken a plea that it had sold the agricultural land and :-6-:

since the agricultural land is not a capital asset within the definition of capital asset given in section 2(14) of the Act, capital gain cannot be computed as per provisions of section 48 of the Act. Nowhere the assessee has taken a plea before the Assessing Officer that the value assessed or adopted by the Valuation Officer is higher than the fair market value of the land. Under these circumstances, where the assessee has not disputed the adoption of fair market value to be the value assessed by the Stamp Valuation Authority for the purpose of stamp duty, the Assessing Officer was not under any obligation to make reference to the DVO to determine the fair market value of the land. We have also examined the judgments referred to by the assessee and we find that in all these cases, the valuation adopted by the Assessing Officer was disputed by the assessee. But in the instant case, the valuation adopted by the Assessing Officer was not disputed. He rather takes a plea that it was an agricultural land, hence not a capital asset and not exigible for capital gain. Therefore, we are of the view that in the instant case, the Assessing Officer was not under any obligation to make reference to the DVO and the valuation adopted by the Assessing Officer as per provisions of section 50C of the Act does not call for any interference. Therefore, we find no infirmity in the order of the ld. CIT(A) who has rightly upheld the assessment order.

11. In the result, appeal of the assessee is dismissed.

Order was pronounced in the open court on the date mentioned on the captioned page.

Sd/- Sd/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED:16th January, 2015 JJ:0801 :-7-:

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR Assistant Registrar