DIFFERENCE UPTO 10% BETWEEN THE VALUE AS GIVEN BY THE APPELLANT AND THE DEPARTMENTAL VALUER: WHETHER CAN BE IGNORED FOR THE PURPOSES OF SECTION 50C
Section 50C of the Income Tax act, 1961(herein referred to as ‘the Act’) has been inserted in the Act by the Finance Act, 2002, w.e.f. 1-4-2003. This section is causing hardships, in many cases, to the assessees since its inception. Many appeals are arising in respect of this section.
Recently, in Sita Bai Khetan vs. ITO [ITA No. 826/JP/2013, decided on 27/07/2016], one of the question raised was whether in the facts and circumstances of the case and in law the ld. CIT (A) has erred in confirming the action of the ld. AO in applying the provisions of Section 50C of the Act and adopting the sale consideration at Rs. 6,12,70,120/- against the actual sale consideration of Rs. 6,00,00,000/- and the action of the ld. CIT (A) was illegal, unjustified, arbitrary and against the facts of the case and the sale consideration be taken at Rs. 6,00,00,000/- for computing the Capital Gains.
Facts In Brief Relating To The Above Issue:
The appellant filed return of income on 30.07.2010 declaring total income of Rs. 1,61,66,940/-. The case of the assessee was picked up for scrutiny assessment and the assessment under section 143(3) of the Act was framed vide order dated 28th February, 2013. While framing the assessment, the AO made addition on account of Long Term Capital Gain and income from other sources. He computed the total income at Rs. 2,51,28,890/-. The assessee aggrieved by this order, preferred an appeal before ld. CIT (A), who after considering the submissions partly allowed the appeal of the assessee.
With regard to adopting the sale consideration at Rs 6,12,70,120/- against the actual sale consideration of Rs. 6,00,00,000/- adopted by the appellant, the ld. Counsel for the appellant submitted that the difference between the sale consideration of the property as per registered Sale Deed as against the value adopted by the Stamp Valuation Authority was Rs. 12,70,120/- i.e. 2.11%. Since the difference was within the tolerable limits, which was 15% of variation, as recognized by the Hon’ble Supreme Court in the case of C.B. Gautam vs. Union of India (1993) 199 ITR 530, no addition should be made. This decision had been followed by the Coordinate Bench in the case of Rahul construction vs. DCIT in ITA No. 1543/PN/2007 (2010) 38 DTR (Pune Trib.).
On the contrary, the ld. D/R opposed the submissions of the appellant on this issue.
Decision In Brief In Respect Of Above Ground:
After hearing the rival contentions and the materials available on record, the ld. Members of the ITAT took into account the decision of the Hon’ble Coordinate Bench in ITA No. 1543/PN/2007 in the case of Rahul Construction vs. DCIT (supra) which has held as under :-
“We find that the Pune Bench of the Tribunal in the case of Asstt. CIT vs. Harpreet Hotels (P) Ltd. vide ITA Nos. 1156-1160/Pn/2000 and relied on by the learned counsel for the appellant had dismissed the appeal filed by the Revenue where the CIT (A) had deleted the unexplained investment in house construction on the ground that the difference between the figure shown by the appellant and the figure of the DVO is hardly 10 per cent. Similarly, we find that the Pune Bench of the Tribunal in the case of ITO vs. Kaaddu learned counsel for the appellant following the decision of the J&K High Court in the case of Honest Group of Hotels (P) Ltd. vs. CIT (2002) 177 CTR (J&K) 232 had held that when the margin between the value as given by the appellant and the Departmental valuer was less than 10 per cent, the difference is liable to be ignored and the addition made by the AO cannot be sustained.
Since in the instant case such difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference is bound to occur, we are of the considered opinion that the AO in the instant case is not justified in substituting the sale consideration at Rs. 20,55,000/- as against the actual sale consideration of Rs. 19,00,000 disclosed by the appellant. We, therefore, set aside the order of the CIT (A) and direct the AO to take Rs. 19,00,000/- only as the sale consideration of the property. The grounds raised by the appellant are accordingly allowed.”
Following the decision of the Hon’ble Coordinate Bench, as above, the ld. Members of the ITAT directed the AO to adopt the value as declared by the appellant as the difference between the valuation adopted by the Stamp Valuation Authority and declared by the appellant was less than 10%.
Depending upon facts & circumstances of the case, the above decision of the Jaipur ITAT may help an assessee facing problems in respect of the topic.