it is a very settled position that the power of ITAT in setting aside cannot be exercised so as to allow Assessing Officer to cover up the deficiency in its case.
When Assessee claims before 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, the Assessing Officer should referre the valuation of the capital asset to a valuation officer instead of adopting the value taken by the state authority for the purpose of stamp duty.
1. The relevant facts as per the assessment order are that the assessee computed long term capital gain treating the fair market value as consideration received on the transfer of the property. The Assessing Officer asked the assessee as to why the fair market value may not he taken, as taken by the authority of State Government for the purpose of payment of stamp duty, as per the provisions of section 50C of the I. T. Act. The explanation of the assessee that the sale was subject to several distressing circumstances and hence, the value adopted for the purposes of stamp valuation does not at all reflect the fair market value of the land was not accepted by the Assessing Officer. The Assessing Officer also not accepted the request of the assessee for making a reference to the valuation officer under the provisions of sub section (2) to 50C. The Assessing Officer instead took the fair market value of the land in question as per value determined by the state authority for the purpose of stamp duty and capital gain was worked out accordingly. The Id. CIT held the assessment in question on the issue as not valid in the eyes of law. The Id. CIT (Appeals) has accordingly annulled the same.
2. In support of the ground, the Id. Sr. DR has basically placed reliance on the assessment order. He submitted that the Assessing Officer has followed the procedure laid down under section 50C of the Act. He submitted that if any irregularity of procedure is there in the assessment order, the same may be set aside to the file of the Assessing Officer to pass fresh assessment order on the issue after following the prescribed procedure under the provisions of the Income Tax Act, 1961.
3. The Id. AR, on the other hand, tried to justify the first appellate order with submission that when the assessee had explained before the Assessing Officer that the value adopted by the stamp valuation authority under sub section (2) exceeds the fair market value of the property on the date of transfer, the Assessing Officer, as requested by the assessee, should have referred the valuation of the of the Act. He submitted that the impugned land being the subject matter of sale subject to several distressing circumstances as a result of which the market value of said land can certainly not be compared with that of any normal land. The said land as submitted before the authorities below was inter alia, subject to the following distressing circumstances :-
” i. The impugned land is situated in river side and is covered on three sides by the river;
ii. The land is fully covered by over flow of dirty rainy water which has led to creation of high land mounds;
iii. The aforesaid facts have been confirmed by way of an affidavit from lekhpal on behalf of the State government before the Allahabad High Court in the suit of ceiling pertaining to the said land;
iv. The position of land is non-symmetrical;
v. Further the land is an Alluvial land i.e. infertile land on a river bed;
vi. Land has been subject to continuous litigation under the UP Imposition of Ceilings on Land Holdings Act, 1960;
vii. In view of the above circumstances the land was sold to the purchase with the condition that if in future the purchaser has to vacate the land due to any order of the Court or any other legal proceeding even then the assessee will not be required to refund the sale price received. This has led to a further reduction in the sale price. Land impugned land is situated in river side and is covered on three sides by the river;Online GST Certification Course by TaxGuru & MSME- Click here to Join
Apart from the above the assessee has submitted certificates from various independent purchasers as noted in pages 18-21 of CIT CA) order in the case of co-owner of property who had sold his share of land. The said certificates clearly provide that a lesser sale consideration has been paid in view of the foregoing reasons;
In view of the above categorical reasons the assessee has submitted before the Assessing Officer to compute the capital gains from sale of land on the basis of actual sale consideration only and not on the basis of consideration as per the stamp valuation. “
4. The Id. AR submitted that a submission in detail was filed before the Assessing Officer in Hindi, a portion of which has been reproduced by the Assessing Officer at page No. 2 of the assessment order, The Id AR has referred page Nos. 1 to 6 of the paper book i.e. copies of true translation in English of the submission made before the Assessing Officer in Hindi and true translated copy of statement of land ceiling case pertaining to assessee to support the submission of the assessee that the I as sold in distress.
5. The Id. AR submitted that assessee has seriously disputed the value adopted for the purposes of stamp valuation before the Assessing Officer, which does not at all reflect the fair market value of the impugned land in view of several distressing circumstances mentioned above. In spite of the same the Assessing Officer mechanically computed sale consideration on the basis of stamp valuation without making a necessary reference to the valuation officer as required under the provisions of sub section (2) to section 50C on the facts and circumstances of the case. The Id. CIT (Appeals) was thus justified in holding the assessment on the issue as nun and void. He contended that when an authority under the provisions of law is required to exercise powers or to do an act in a particular manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner. In support he has placed reliance on the following decisions : –
(i) Dr. Shashi Kant Garg Vs. CIT,
285 ITR 158 (AIL)
(ii) CIT Vs. Anjum M. H. Ghaswala & Others,
252 ITR 1 (SC)
(iii) DCIT Vs. Mahi Valley Hotel and Resorts
287 ITR 360 (Guj)
6. The Id. AR pointed out that the value so adopted by the stamp valuation authority had not been disputed by the assessee in any appeal or revision or no reference has been made before any other authority, court or the High Court,
7. On the request of the Departmental Representative that the matter may be set aside to the file of the Assessing Officer for referring the case to the Valuation Officer, the Id. AR submitted that it is a very settled position that the power of ITAT in setting aside cannot be exercised so as to allow Assessing Officer to cover up the deficiency in its case. In support he placed reliance on the renewing decisions :-
(i) ITO Vs. Pawan Kumar Gupta,
ITA. 4690/Del/2009 dated 14.6.2010;
(ii) DCIT Vs. Rohtash ]Projects Ltd. (2006)
73 ITD 125 (Del.) (TM);
100 ITD 113 (TM) (Lucknow);
(iv) Raj Kumar Jain Vs. ACIT
5O ITD 1 (TM) (AIL);
8. On the very perusal of the provisions laid down under section 50C of the Act, we fully concur with the finding of the Id. CIT (Appeals) that when the assessee in the present case had claimed before 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, the Assessing Officer should have referred the valuation of the capital asset to a valuation officer instead of adopting the value taken by the state authority for the purpose of stamp duty. The very purpose of the legislature behind the provisions laid down under sub section (2) to section 50C of the Act is that a valuation officer is an expert of the subject for such valuation and is certainly in a better position than the Assessing Officer to determine the valuation. Thus, non-compliance of the provisions laid down under sub section (2) by the Assessing Officer cannot be held valid and justified. The Hon’ble jurisdictional High Court of Allahabad in the case of Shashi Kant Garg (supra) has been pleased to hold that it is well settled that if under the provisions of the Act an authority is required to exercise powers or to do an act in a particular manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner. Similar view has been expressed by the other decision cited by the Id. AR in this regard hereinabove. The first appellate order on the issue is thus upheld. The grounds are accordingly rejected