Case Law Details
Chittu Bhawanji Narsey Vs ITO (ITAT Mumbai)
ITAT Mumbai applies Section 50C(3): Stamp Duty Value to Prevail over Higher DVO Valuation
Mumbai ITAT has granted relief to Assessee by deleting the addition made u/s 50C on account of adoption of higher DVO valuation. Assessee, along with co-owners, had sold a residential flat through an agreement executed in December 2010 & registered on 07.01.2011 for Rs 3.50 crore. While the stamp valuation authority valued the property at Rs 4.17 crore on the date of registration, Assessee argued that the agreement to sell had been finalised earlier, when the ready reckoner value was only Rs 3.21 crore. The Assessing Officer, after reference to the DVO as directed by the Tribunal in an earlier round, adopted the DVO’s valuation of Rs 4.13 crore as on 27.11.2010, & accordingly recomputed Assessee’s long-term capital gains. CIT(A) upheld this action.
Before the Tribunal, Assessee contended that u/s 50C(3), where the DVO’s valuation exceeds that of the stamp valuation authority, the lower stamp duty valuation must be taken as the deemed consideration. It was further pointed out that the Stamp Valuation Authority itself had determined the ready reckoner value of the property at Rs 3.21 crore when the documents were presented in November 2010, prior to the revision of reckoner rates effective 01.01.2011 which had inflated the valuation to Rs 4.17 crore. Assessee supported his stand with documentary evidence including registered agreements, ready reckoner extracts & judicial precedents.
Tribunal observed that the controversy was narrow, since the AO had accepted the date of presentation of documents to the stamp duty authority as 27.11.2010, & that both DVO & stamp duty valuations were available for the same date. As the DVO’s valuation was higher than that of the Stamp Valuation Authority, the clear mandate of section 50C(3) required adoption of the lower stamp duty value. Accordingly, Tribunal directed the AO to adopt Rs 3.21 crore as full value of consideration for the property & recompute capital gains on Assessee’s one-fourth share. In result, the appeal was allowed, with the Tribunal reiterating that when DVO valuation is higher than stamp duty valuation, it is the latter that must be taken into account u/s 50C(3).
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1.This appeal by assessee is directed against the order of Ld. CIT(A)/ADDL/JCIT(A)-3, Bengaluru dated 11.02.2025 for assessment year (AY) 2011-12. The assessee has raised following grounds of appeal:
”1. The Ld. Commissioner of Income Tax (Appeals) erred in confirming the actions of the Assessing Officer in making an addition of Rs. 15,97,000/- u/s 50C of the Income Tax Act, 1961 without appreciating the provisions stipulated in the section and ignoring the legal submissions made by the appellant.
2. The Ld. Commissioner of Income Tax (Appeals) erred in not following the order of the Hon’ble Income Tax Appellate Tribunal in its true spirit thereby violating judicial discipline.
3. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) failed to appreciate that the DVO has valued the fair market value of the property sold based on assumptions and ignoring the comparable received by DVO during the physical inspection as well as ignoring the objections raised by the appellants to the valuation before the DVO.
4. The appellant craves leave to add, amend, alter, or delete any of the above grounds of appeal.”
2. Brief facts of the case are that assessee is an individual, filed his return of income for A.Y. 2011-12 on 30.09.2011 declaring income of Rs. 18,37,920/-. The case was selected for scrutiny. During assessment, the assessing officer noted that assessee along with his three other family members, sold flat no. 101, Paavan JVPD, Mumbai vide agreement registered on 07.01.2011 for a consideration of Rs. 3.50 crore. The Stamp Valuation Authority valued the transaction of such sale at Rs. 4.17 crore. Finding difference vis-à-vis, the sale consideration shown by assessee and his co-owner and the value determined by Stamp Valuation Authority, the assessing officer was of the view that provisions of section 50C is applicable. On show-cause, the assessee and his co-owners, the assessee contended that he and all co-owners proposed to sale said flat in November-December, 2010. However, the agreement to sale was executed on 30.12.2010. The agreement was ultimately registered on 07.01.2011. The Stamp Valuation Authority valued the property for the purpose of registration as per ready reckoner rate as on 07.01.2011, whereas the agreement to sale was made in November / December, 2010. The assessing officer on the basis of difference in the value declared by the assessee and determined by Stamp Valuation Officer computed long term capital gain on 1/4thshare of assessee at Rs. 19,07,033/-.
3. Aggrieved by the action of assessing officer, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee requested to adopt the ready reckoner rate as on 31.12.2010 as proposal of sale was made on 27.11.2010. The assessee also made submission that matter may be referred to Departmental Valuation Officer (DVO) for ascertaining the fair market value as per section 50C(2). The submission of assessee was not accepted and ld. CIT(A) confirmed the action of assessing officer. The assessee approached the Tribunal wherein matter was restored back to the file of assessing officer with the direction for making reference to DVO for ascertaining fair market value. The matter was referred to DVO vide reference dated 06.07.2018 for ascertaining value of asset as on 27.11.2010 (wrongly mentioned as 27.11.2018). The DVO submitted his valuation report dated 19.12.2018 wherein, the DVO estimated fair market value as on 27.11.2010 at Rs. 4.13 crore. The assessing officer on the basis of report of DVO computed capital gain of Rs. 18,05,479/- on the share of assessee. Again, feeling aggrieved by the action of assessing officer, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee reiterated all his submissions as made earlier either before assessing officer or ld. CIT(A) in first round of assessment and /appeal. The assessee also stated that assessee along with other co-owners agreed to sale the residential flat to Hitesh P Ruparelia for a consideration of Rs. 3.50 crore. The buyer approached the State Bank of India for Home loan on 24.10.2010. The loan was sanctioned on 16.12.2010. On the advice of State Bank of India, the buyer insisted that co-owners registered the redevelopment agreement for said flat which was presented to Stamp Valuation Authority on 27.10.2010 for adjudication. On 29.11.2010, the Stamp Valuation Authority ascertained the ready reckoner value of said flat at Rs. 3.21 crore. The redevelopment agreement dated 29.12.2010 was registered on 30.12.2010. Pursuant to such agreement finalise and executed on 29.12.2010 a post dated cheque of Rs. 12,50,000/- for assessee share was handed over by the purchaser and ultimately the agreement to sale was registered on 07.01.2011. In the meantime, the ready reckoner rate was revised. The ready reckoner rate in Mumbai was increased from 10 to 40%. The rate in Vile Pare (West) for residential land was Rs. 1,07,800/- per square meter as on 31.12.2010, and was raised to Rs. 1,45,500/- per square meter as on 01.01.2011. Thus, the ready reckoner rate was increased by 34.97%. The relevant evidence was furnished. The assessee ascertained that as result of revision ready reckoner rate determined on 30.12.2010 which was Rs. 3.21 crore, was revised to 4.17 crore as on 07.01.2011 i.e. when sale agreement was ultimately registered in the office of Sub-Registrar. The assessee also explained the fact that matter was restored to the file of assessing officer for obtaining report of DVO. In set aside proceeding, the assessing officer agreed with the contention that fair market value of property as on 27.11.2010 to be determined by DVO. The DVO conducted physical inspection of property for ascertaining / remaining fair market value as on 27.11.2010. The assessing officer relied on three sale instances varying the market value of such comparable from Rs. 1,36,814/- to Rs. 1,62,279/- per square meter. However, while estimating the value, he adopted rate of Rs. 1,88,950/- per square meter and estimated the value at Rs. 4,13,88,000/-. On the basis of which the assessing officer recomputed capital gain. The assessee stated that Tribunal restored the matter to assessing officer on two issues (i) to ascertain the date of presentation of documents to stamp duty authority for valuation and (ii) to make reference to DVO to ascertain the value of asset as on the date of said presentation. Undisputed fact is that agreement was presented before stamp duty authority on 27.11.2010. Such fact was accepted by assessing officer and he sought valuation from DVO as on 27.11.2010. The DVO also estimated the value as on 27.11.2010. The value as per stamp duty authority on 27.11.2010 is Rs. 3.21 crore, which has to be considered for determining full value of consideration under section 50C. The assessee also prayed for benefit of first proviso of section 50C on the basis of various decisions of higher courts. The ld. CIT(A) after considering the submission of assessee and referring the report of DVO concurred with the finding of assessing officer in adopting the value as suggested by DVO at Rs. 4.13 crore. Further, aggrieved the assessee has filed present appeal before Tribunal.
4. We have heard the rival submissions of both the parties and have gone through the orders of lower authorities carefully. The ld. Authorised Representative (AR) of the assessee submits that she has very limited prayer before the bench. The ld. AR of the assessee submits that report of departmental valuation officer (DVO), binding on assessing officer, however, same is not binding on appellate authorities. Moreover, when reference is made to DVO and the valuation of DVO exceeds the stamp duty value, then the stamp duty value should be considered as full value of consideration as per sub-section (3) of section 50C and in case the value determined by stamp valuation authority on 27.11.2010 is accepted, the matter will end here. The valuation report of stamp valuation authority is filed at page no. 32 to 49 of paper book wherein the value of property was determined at Rs. 3,21,43,500/-. The copy of ready reckoner rate as on 27.11.2010 is also filed at page no. 51 to 53 of paper book. In alternative and without submission, the ld. AR will referring para 5.1.8 of ld. CIT(A) would submit that DVO has relied on three sale instances of the same locality, average of rupees comes to Rs. 1.49 lacs per square meter. However, the DVO has adopted rate at Rs. 1,88,900/- per square meter in arbitrary manner that the estimation of DVO is not correct. To support her submission, the ld. AR of the assessee relied upon the following decision:
> Bharat Hari Singhania vs Commissioner of Wealth Tax (1994) 73 Taxman 3 (SC)
> CIT vs Prabhu Steel Industries Ltd. (2013) 36 taxmann.com 393 (Bom HC)
> Jagannathan Sailaja Chitta vs ITO (2019) 104 taxmann.com 131 (Mad HC)
> Suresh C. Mehta vs ITO (2013) 35 taxmann.com 230 (Mumbai Trib)
> ACIT vs MIL Industries Ltd. (2013) 33 taxmann.com 120 (Chennai Trib).
5. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the order of ld. Assessing Officer / ld. CIT(A). The ld. Sr. DR for the revenue submits that once the matter was referred to DVO as per the direction of Tribunal, the lower authorities have no option except to adopt the value suggested by DVO. While hearing submission, we confronted the provisions of section 50C(3) which prescribed that in case valuation of DVO exceeds the stamp duty valuation authority then the stamp duty valuation should be considered as full value of consideration. The ld. Sr. DR still remained on his word.
6. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws referred and relied by ld. AR of the assessee before ld. CIT(A). Considering the overall facts of the present case, in our view a very short controversy is left for our consideration. We find that assessing officer while making reference to DVO obtained the report of DVO about fair market value of asset as on 27.11.2010. Admittedly, the value as suggested by DVO is more than the value determined by Stamp Valuation Authority that is at the time of presentation agreement to sale before Stamp Valuation Authority. We find that assessee has placed on record certified copy of registered agreement presented on 29.11.2010 wherein the ready reckoner rate was worked out at Rs. 3.21 crore. Such working is also supported by the ready reckoner rate which is available at page no. 51 to 53 of paper book. Such fact was not countered by ld. Sr. DR for the revenue. Thus, once assessing officer accepted the contention of assessee for seeking estimation of value from DVO as on 27.11.2010 and in case the estimation of DVO is more than the value of his Stamp Valuation Authority, as per section 50C(3), the assessing officer was required to accept full value of consideration as per value determined by Stamp Valuation Authority. Thus, we direct the assessing officer to adopt Rs. 3,21,43,500/- and re-compute the capital gain on 1/4th share of assessee. In the result, the grounds of appeal of assessee are allowed.
7. In the result, the appeal of the assessee is allowed for statistical purpose.
Order was pronounced in the open Court on 18/08/2025.
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