DVO Report of Co-Owner must be considered before Assessment U/s 50C: ITAT Ahmedabad

Niket Ravibhai Patel Vs DCIT (ITAT Ahmedabad)

Assessee is an individual filed his Return of Income for AY 2013-14 at Rs.10,98,540/-. During the year consideration, assessee along with other co-owners sold two immovable properties for a consideration of Rs.1,20,60,000/- and Rs.1,85,40,000/-. Assessee’s share in both the properties is 5%, accordingly the assessee shown his share as Rs.6,03,000/- and Rs.9,27,000/- on sale of the immovable properties in his Return of Income. AO found that the stamp duty value of the above-mentioned properties were Rs.3,34,40,600/- and Rs.5,14,78,100/- respectively. A show cause notice was issued to the asssessee to explain that why assessee’s share should not be determined at Rs.16,72,030/- and Rs.25,73,905/- u/s 50C.

It was submitted before AO by assessee that he sold agricultural lands and offered the consideration for taxation.  When possession of land was given on 04.12.2-12, it was agricultural in nature and it was converted into Non-Agricultural land vide Collector’s order dated 26-12-2012 and the Sale Deed was registered on 25-02-2013. Since nature of land was agricultural on the date of handling over the possession hence no question of invoking provision of section 50C arises. AO rejected the above contention and made addition of Rs. 27,15,935/- u/s 50C.

Aggrieved from the above, assessee filed appeal before CIT (A) and submitted that that in other Co-owner’s case, AO referred the matter to District Valuation Officer. Hence, same value should be adopted in his case too. But CIT (A) dismissed the appeal and confirmed the addition made by AO.

On further appeal before ITAT, it was submitted by assessee that DVO made valuation of the properties at Rs.1,93,11,000/- and Rs.1,25,44,000/-  in the case of a Co-owner on the basis of which AO determined difference in value at Rs.65,18,244/- u/s. 50C. Similar valuation is to be adopted in the case of assessee whose share is 5% in the above properties.

On the other hand, revenue supported the order of lower authorities.

Finally, ITAT concluded that AO has not referred the case to DVO for determining the value u/s. 50C in case of the assessee whereas case was referred to DVO in the case of Co-owner (whose holding 12% share) and he determined the value to two lands and submitted his report before AO. This valuation report was not there before the AO while passing the assessment order. However, when the same placed before CIT(A), he ought to have considered the DVO’s report as well as the assessment order passed in the case of co-owner but failed to consider the same.

ITAT set-aside orders passed by lower authorities and directed afresh assessment.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

This appeal is filed by the Assessee as against the appellate order dated 28.05.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2013-14.

2. Brief facts of the case is that the assessee is an individual filed his Return of Income for the Asst. Yea 2013-14 declaring total income of Rs.10,98,540/-. The return was taken for scrutiny assessment as low capital gains shown comparison to the sale consideration received on sale immovable properties. The assessee along with other co-owners sold two immovable properties on 26-02-2013 measuring 9038 Sq. Mt. and 13913 Sq. Mt. for a consideration of Rs.1,20,60,000/- and Rs.1,85,40,000/-. Assessee’s share in both the properties is 5%, accordingly the assessee shown his share as Rs.6,03,000/- and Rs.9,27,000/- on sale of the immovable properties in his Return of Income. However the stamp duty value of the above mentioned properties were Rs.3,34,40,600/- and Rs.5,14,78,100/- respectively. Accordingly the A.O. issued a show cause notice as to why not assessee’s share to be determined at Rs.16,72,030/- and Rs.25,73,905/- respectively as per the provisions of Section 50C of the Act.

2.1. In reply, the assessee submitted that he sold agricultural lands and offered the consideration for taxation. However the buyer insisted convertion into Non-Agricultural land, thereby the difference in the Jantri value. However when the possession of the properties were given on 04-12-2012, the land was agricultural in nature and converted into Non-Agricultural land vide Collector’s order dated 26-12­2012 and the Sale Deed was registered on 25-02-2013. Since on the date of handing over of possession of land, being agricultural in nature, the value as mentioned in the Banakhat is to be taken into consideration and no question of invoking provisions of Section 50C in the above transaction. The Ld. A.O. rejected the above contention and thereby made addition of Rs. 27,15,935/- as per the provisions of Section 50C of the and demanded tax thereon.

3. Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A) and contended that in other Co-owner’s case, the respective Assessing Officer referred the matter to District Valuation Officer. Hence that value is to be adopted in assessee’s case being other Co-owner. However this submission was not considered by Ld. CIT(A) and confirmed the addition of Rs.27,15,935/- made by the A.O. and dismissed the appeal filed by the assessee.

4. Aggrieve against the appellate order, assessee is in appeal before us raising the following Grounds of Appeal:

1. The Ld. CIT(A) has erred in law and in facts in not granting proper opportunity of being heard and passing the order without considering the submission of the appellant. The order so passed is prayed to be quashed and set aside.

2. The Ld. CIT(A) has erred in law and in facts in passing the order by considering the submission of the appellant partially. The Ld. CIT(A) ought to have considered and adjudicate the appeal by considering the submission of the appellant in full.

3. The Ld. CIT(A) has erred in law and in facts in confirming the action of the Ld. AO in making the addition on account of difference in the value of the stamp duty valuation and the actual amount of Sale Consideration of Rs. 27,15,935/-. The addition so made / confirmed without considering the objections raised by the appellant before the Ld. AO and Ld. CIT(A) is bad in law and is prayed to be deleted.

4. The Ld. CIT(A) ought to have considered the valuation report obtained from the Ld. DVO In the case of the Co-owner of the Property in question which is submitted during the course of appellate proceedings and thereby the Ld. CIT(A) should have deleted the addition made in the case of the appellant.

5. Your appellant craves liberty to add, alter, amend substitute or withdraw any of the grounds of appeal hereinabove contained.

5. Ld. Counsel appearing for the assessee submitted a Paper Book running to 116 pages wherein valuation made by the District Valuation Officer the above properties at Rs.1,93,11,000/- and Rs.1,25,44,000/- respectively in the case of a Co-owner Shri Ravibhai Kanjibhai Patel. Based on this Valuation Report, the Assessing Officer determined difference in value at Rs.65,18,244/-u/s. 50C. Similar valuation is to be adopted in the case of assessee whose share is 5% in the above properties. Further Ld. Counsel relied upon decisions of the Tribunal when Fair Market Value of land determined by DVO was within 10% of purchase price, showing no significant difference from purchase consideration, no addition under section 56(2)(x) was warranted in such cases. Thus Ld. Counsel pleaded to allow the appeal.

6. Per contra The Ld. Sr. D.R. appearing for the Revenue supported the order passed by the Lower Authorities.

7. Heard rival submissions. We have given our thoughtful consideration and perused the materials available on record. It is seen from the records in the case of the assessee, the A.O. has not referred the case to District Valuation Officer for determining the value u/s. 50C of the Act. Whereas in the case of Co-owner namely Shri Ravibhai Kanjibhai Patel (whose holding 12% share) the case was referred to DVO and he determined the value of above two lands vide his Valuation Report dated 18-04-2016 as follows:

12.0 VALUATION:

Having considered the evidences produced by the assessee and having taken into consideration all relevant material gathered by the undersigned, the Fair Market Value of the property as under is considered just fair and reasonable.

8. This valuation report was not there before the A.O. while passing the assessment order. However, when the same placed before Ld. CIT(A), he ought to have considered the DVO’s report as well as the assessment order passed in the case of Co-owner, but failed to consider the same. Therefore in the interest of justice, the orders passed by the Lower Authorities are hereby set aside with a direction to consider the valuation report dated 18-04-2016 made by DVO and pass fresh assessment order in accordance with the provisions of law and by giving reasonable opportunity of hearing to the assessee.

9. In the result, the appeal filed by the Assessee is allowed for statistical purpose.

Order pronounced in the open court on 10 -12-2024