Masud Ahmed Qureshi,, Jalna vs Assessee

"1. On the facts and circumstances of the case and in law, the Hon'ble CIT (Appeal), Aurangabad has erred in confirming the value adopted by the A.O. U/s.50 C to the tune of Rs.4768571/-.

2. On the facts and circumstances of the case and in law, the A.O. has . adopted the value of Rs.4768571/- in spite of the fact that the Assessee has raised objection that value determined by revenue authority is excessive, which the Hon'ble CIT (Appeal) has erred in confirming the same.

3. The appellant craves to leave, to add, amend or alter any ground of appeal."

2 3. Facts of the case, in brief, are that as per the

information available on record, the AO noted that the

assessee had purchased agricultural land situated at Survey

No.270, Mantha By-pass for Rs.4,10,000/- on 30-10-2000

which he sold for Rs.5 lakhs on 08-05-2007. On verification

of the aforesaid sale deed, it was noticed that the market value

of the said property for the purpose of stamp duty was

Rs.60,80,000/-. However, the assessee challenged the

valuation before the Collector of Stamps, Jalna by making an

adjudication application and accordingly, the Collector of

Stamps, Jalna determined the market value of the land for

stamp duty purposes at Rs.53,25,000/- u/s.32(b) of the

Bombay Stamp Act, 1958 read with Article 25(b) of Schedule-I

of Bombay Stamp Act, 1958. The AO further noted that the

assessee has not filed his return of income declaring capital

gain on sale of the said land. Therefore, the AO issued notice

u/s.148 of the I.T. Act. In response to the said notice the

assessee filed return of income on 13-10-2011 declaring total

income of Rs.2,33,300/-. Subsequently, the assessee filed a

revised return along with the revised computation on 31-12-

2012 declaring total income of Rs.1,11,047/- and agricultural

income of Rs.1,01,047/-.

4. During the course of assessment proceedings the AO

noted that the assessee had computed the long term capital

gain in the original return at Rs.1,21,996/- by disclosing as

under :

3

INCOME FROM LONG TERM CAPITAL GAIN Sale of items as per list enclosed 53,25,000 Less: (Cost of Acquisition etc.) 5,56,429 Indexation cost of Acquisition Indexation cost of improvement 46,11,575 Cost of Transfer 35,000 52,03,004 Less : Exemptions u/s.54B, 54D/54G etc.) NIL 1,21,996 Exemption u/s.54F

However, in the revised return, the long term capital was

declared at Nil. The AO in the assessment after considering

the indexed cost of acquisition at Rs.5,56,429/- determined

the long term capital gain at Rs.47,68,571/-. Similarly, he

also determined the income from house property at

Rs.4,45,200/- as against Rs.1,11,300/- declared by the

assessee. Accordingly, the AO determined the total income of

the assessee at Rs.52,13,771/-, i.e. (Capital gain -

Rs.47,68,571 + Hose property income - Rs.4,45,200).

5. Before CIT(A) the assessee challenged the determination

of capital gain at Rs.47,68,571/- as against Rs.1,21,996/-

claimed by the assessee in the return filed in response to

notice u/s.148. The cost of improvement claimed at

Rs.46,11,578/- and Rs.35,000/- towards cost of transfer was

withdrawn before the CIT(A) on the ground that due to

mistake of the person who prepared the return of income such

claim was made. However, the assessee challenged the

action of the AO in not allowing sufficient time to produce the

valuation report of the property during assessment

proceedings.

6. However, the Ld.CIT(A) rejected the above contention of

the assessee on the ground that despite having sufficient time

the assessee did not produce valuation of the property either 4

during assessment proceedings or before him during appellate

proceedings. He accordingly held that the long term capital

gain determined by the AO at Rs.47,68,571/- is justified.

7. Aggrieved with such order of the CIT(A) the assessee is

in appeal before us.

8. The Ld. Counsel for the assessee submitted that as

against the sale price of Rs.5 lakhs received by the assessee

the stamp valuation authority has determined the value of the

property for stamp duty purpose at Rs.60,80,000/- which was

subsequently reduced to Rs.53,25,000/-. He submitted that

although the assessee had not straight away asked the AO or

the CIT(A) to refer the matter to the DVO for valuation of the

property, however, it was categorically stated that although an

amount of Rs.53,25,000/- was taken due to the deeming

provision of section 50C, however, no such amount was

received by the assessee from the value of the said land. The

Ld. Counsel for the assessee drew the attention of the Bench

to the following submission made before the AO which the AO

himself has incorporated at page 6 of his order and which

reads as under :

"Regarding the value adopted at Rs. 53,25,000/- by the person by whom the return is prepared it is submitted that the said amount figure was considered due to the deeming provisions of section 50C of the Income-tax Act, 1961. However, no such amount is received by me or the value of said land, as per market value was not to the extent of Rs. 53,25,000/- on the date of sale of this property. In Jalna area the value adopted by the stamp duty authority are based on as per square foot area which are not is any was adopted in the case of land which is agriculture land and which is not Non agricultural land."

He submitted that before CIT(A) also the assessee has stated

that the AO did not give any opportunity to produce the 5

valuation of the property to the assessee so as to justify the

addition.

9. Referring to the decision of the Pune Bench of the

Tribunal in the case of K.K. Nag Ltd. Vs. Addl.CIT reported in

52 SOT 381 the Ld. Counsel for the assessee submitted that

the Tribunal in the said decision has held that although

section 50C is a deeming provision and ostensibly involved in

creation of an additional tax liability on the assessee,

notwithstanding the persons of the expression "may" in

section 50C(2)(a), the AO ought to refer the matter to the

valuation officer for ascertaining the value of the capital asset.

He accordingly submitted that in the interest of justice the

matter may be restored to the file of the AO with a direction to

refer the matter to the DVO and accordingly recompute the

capital gain.

10. The Ld. Departmental Representative on the other hand

heavily relied on the order of the CIT(A). He submitted that

nowhere the assessee has asked the AO or the CIT(A) to refer

the matter to the DVO for determining the market value of the

property stating that the stamp duty valuation is more than

the market value, therefore, the order of the CIT(A) should be

upheld.

11. We have considered the rival arguments made by both

the sides, perused the orders of the Assessing Officer and the

CIT(A) and the Paper Book filed on behalf of the assessee. We

have also considered the various decisions cited before us.

There is no dispute to the fact that in the instant case as

against the sale consideration of Rs.5 lakhs declared by the 6

assessee for the sale of the land in question, the stamp duty

authorities determined the market value of the property for

stamp duty purposes at Rs.53,25,000/- and the assessee has

taken the same as per provisions of section 50C for the

purpose of computation of capital gain. It is the case of the

Ld. Counsel for the assessee that although he has not

categorically requested the AO to refer the matter to the DVO

as per the provisions of section 50C(2), however, it was

categorically stated before the AO that assessee has received

only Rs.5 lakhs and the value of the land as per market value

was not to the extent of Rs.53,25,000/- on the date of sale of

this property. It was also stated before the AO that in Jalna

area the value adopted by the stamp duty authority are based

on sq.ft. area basis. Even before the CIT(A) also the assessee

has made similar arguments. Therefore, under these

circumstances the question that arises is as to whether the

AO should have referred the matter to the DVO for

determination of the fair market value of the property on the

date of transfer when the assessee claims before him that the

market value of the property is not to the extent of the value

adopted or assessed by the stamp valuation authority.

12. We find under somewhat similar circumstances the

Pune Bench of the Tribunal in the case of K.K.Nag Ltd.

(Supra) has observed as under :

"5. We have carefully considered the rival stands and find that the plea of the assessee is quite justified. Section 50C of the Act prescribes for adoption of full value of consideration in certain cases. It is provided that where the consideration received or accruing 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 7

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 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 this 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) of the Act. In our view, 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, in our view, is quite untenable. The discretion vested in the Assessing Officer, in our considered opinion, in such a situation is required to be used in a judicious manner. Section 50C of the Act 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), in our view, 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, in this view of the matter without going into further merits of the dispute, we set aside the order of the Commissioner of Income-tax (Appeals) and direct the Assessing Officer to adopt the course mentioned in section 50C(2)(a) of the Act and thereafter proceed to determine capital gain on sale of land and building. Needless to mention, the Assessing Officer shall give a reasonable opportunity of being heard to the assessee in this regard and adjudicate the issue afresh. Thus, on this Ground the assessee succeeds for statistical purposes."

13. Since in the instant case the assessee had submitted

before the AO that neither he has received an amount of

Rs.53,25,000/- nor the market value of the property is

Rs.53,25,000/-, therefore, following the decision of the Pune

Bench of the Tribunal cited (Supra), we are of the considered

opinion that the AO should have referred the matter to the

DVO for determining the fair market value of the property on

the date of transfer. We therefore restore this issue to the file 8

of the AO with a direction to refer the matter to the DVO for

determining the fair market value on the date of transfer of

the property and compute the capital gain on the basis of

such report of the DVO. Needless to say the AO shall decide

the issue in accordance with law after giving due opportunity

of being heard to the assessee. We hold and direct

accordingly. The grounds raised by the assessee are

accordingly allowed for statistical purposes.

14. In the result, the appeal filed by the assessee is allowed

for statistical purposes.

Pronounced in the open court on 12-06-2015.

Sd/- Sd/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER

satish Pune Dated: 12th June, 2015

Copy of the order forwarded to :

1. Assessee 2. Department 3. CIT(A), Aurangabad 4. CIT, Aurangabad 5. The D.R, "B" Pune Bench 6. Guard File

By order

// True Copy // Senior Private Secretary ITAT, Pune Benches, Pune