Case Law Details
ITO Vs Ketaben Janakbhai Patel (ITAT Ahmedabad)
ITAT Ahmedabad held that it is mandatory for the AO to refer the valuation to the DVO if the assessee objects to the adoption of the stamp duty value and claims that the value adopted exceeds the fair market value.
Facts- A plot of land was purchased jointly by the assessee at a purchase price of Rs. 8,15,000/-. The said plot was sold by the assessee for a consideration of Rs. 2,15,00,000/-. The Assessee’s share was of 60%. AO ascertained from the Stamp Valuation Authorities that as per prevailing jantri/circle rates, the value of the property was Rs.4,98,83,550/- against declared consideration amount of Rs. 2, 15,00,000/- in the conveyance deed. Therefore, provisions of Section50C of the Act were applicable in the case of the assessee. AO, taking into consideration the assessee’s contentions held that the said plot of land was defective and the land was also a disputed land, and also agreed with the submission of the assessee to the effect that the valuation done by the Stamp Valuation Authority(SVA) / (Jantri Value)was more than the fair market value and therefore, the matter was referred to the DVO for valuation. The DVO valued the land at Rs.3,17,86,000/-, against the Jantri/Circle rate of Rs. 4,98,83,550/-, which was taken into consideration by the then AO and accordingly addition of Rs. 1,82,33,314/- was made on account of LTCG on the basis of valuation done by DVO. CIT(A) upheld the order of AO.
Conclusion- Held that once the assessee objects to the value of property proposed to be adopted by the Assessing Officer, then the assessing officer is duly bound to refer the matter to the DVO in terms of Section 50C(2) of the Act. In the instant case, the assessee had submitted that there were serious infirmities in the title to the property and hence the Jantri value adopted by the Stamp Valuation Authorities did not represent the correct value of the property sold by the assessee during the impugned year under consideration. Therefore, when the assessee had raised a specific objection as to the value of the property adopted by the Stamp Valuation Authorities, on the ground that the title itself to the impugned property under consideration was defective, then, in our considered view, Ld. CIT(Appeals) has correctly held that the matter was required to be referred to the file of DVO.
Held that it is mandatory for the AO to refer the valuation to the DVO if the assessee objects to the adoption of the stamp duty value and claims that the value adopted exceeds the fair market value.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The appeal filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals)-10, (in short “Ld. CIT(A)”), Ahmedabad under Section 143(3) r.w.s. 147 of the Act, vide order dated 29.11.2019 passed for Assessment Year 2012-13.
2. The Department has taken the following grounds of appeal:
“1. The CIT(A) has erred in law and in facts and in circumstances of the case by deleting the addition of Rs.1,82,33,314/- being LTCG which was also confirmed by the CIT(A)-10, Ahmedabad.
2. The CIT(A) has erred in law and in facts and in circumstances of the appellant’s plea for accepting the taxing of Long Term Capital Gain in A. V. 2011-12 instead of A. V. 2012-13.
3. It is, therefore, prayed that the order of ld. CIT(A) may be set aside and that of the Assessing Officer be restored.”
3. The brief facts of the case are that a plot of land was purchased jointly by the assessee at a purchase price of Rs. 8,15,000/-. The purchase deed was registered on 19.12.2006. The said plot was sold by the assessee for a consideration of Rs. 2,15,00,000/- along-with two other persons. Stamp duty of Rs.24,44,500/- was paid on such transaction. The Assessee’s share was of 60%. The conveyance deed was executed on 03.03.20 12. The assessee filed return of income for A.Y. 2012-13 on 28.09.2012 declaring total income at Rs. 11,33,490/- wherein LTCG on sale of this land was not offered to tax. The case of the assessee was selected for scrutiny assessment under Section 143(3) of the Act. The Ld. Assessing Officer ascertained from the Stamp Valuation Authorities that as per prevailing jantri/circle rates, the value of the property was Rs.4,98,83,550/- against declared consideration amount of Rs.2, 15,00,000/- in the conveyance deed. Therefore, provisions of Section50C of the Act were applicable in the case of the assessee. The Ld. Assessing Officer, taking into consideration the assessee’s contentions held that the said plot of land was defective and the land was also a disputed land, and also agreed with the submission of the assessee to the effect that the valuation done by the Stamp Valuation Authority(SVA) / (Jantri Value)was more than the fair market value and therefore, the matter was referred to the DVO for valuation. The DVO valued the land at Rs.3,17,86,000/-, against the Jantri/Circle rate of Rs. 4,98,83,550/-, which was taken into consideration by the then AO and accordingly addition of Rs. 1,82,33,314/- was made on account of LTCG on the basis of valuation done by DVO. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). The Ld. CIT(A) vide Order dated 10.08.2016 upheld the order of AO and dismissed the appeal of the assessee. Aggrieved, the assessee filed appeal before the ITAT. The ITAT, Ahmedabad also dismissed the appeal filed by the assessee vide Order dated 18.11.2019 in ITA No: 2634/AHD/20 16 as asses see did not pursue the appeal before Hon’ble ITAT.
4. Later, the Ld. Assessing Officer observed that in the case of one of the co-owners, i.e. Girishbhai Prahladbhai Patel (whose share in the property was 20%), he did not seek valuation from DVO during his assessment proceedings. The A.O. of the co-owner of the property, in assessment proceedings of the company-owner, opted for taking sale value of property at Rs.4,98,83,550/- as determined by the Stamp Duty Authorities i.e. Assessing Officer took the Jantri Value of property as sale consideration. Therefore, the Ld. A.O. of the assessee, Kantaben Patel initiated re-assessment proceedings on the basis of findings by the Assessing Officer in the case of co-owner that a sum of Rs. 1,08,58,530/- [60% of difference of Rs. 1,80,97,550/- (Rs.4,98,83,550/- minus Rs.3, 17,86,000/-)] has escaped the assessment in the hands of the assessee by adopting the Jantri value of such property. The AO vide assessment order passed under Section. 143(3) r.w.s. 147 dated 19.11.2018 made addition considering the value of property at Rs.4,98,83,550/- i.e. by taking the jantri value of such property as determined by the Stamp Valuation Authority (the assessee’s share was Rs.2,99,30,130/-). This, addition was challenged by the assessee before the CIT(A).
5. The Ld. CIT(A) allowed the appeal of the assessee with the following observations:
“It is understood that the appellant raised objections to the Stamp Duty Valuation and the AO failed to send the matter for valuation to DVO as per provisions of section 50C(2). To my mind the AO overburdened himself with avoidable responsibility by not sending the issue for expert opinion to the DVO as per specific provisions of sub section 2 of section 50C of IT Act, 1961. There have been serious objections by the appellant to the valuation by stamp valuation authority. There were inherent infirmities in the title etc. This knowledge of AO, therefore, the provisions u/s. 50C(2) were required to be invoked. The AO has adopted path of least resistance and got over-swayed by the assessment order issued in the case of co-owner Shri Girishbhai P. Patel. The minimum additional effort required was to send the matter for valuation to the DVO u/s. 5 5A. It is well settled law either for A. Y. 2011-12 or A. Y. 2012-1 3 that the reference to DVO u/s. 55A has to be made in case the appellant disputes the rate prescribed in the Jantri value. In view of above facts and the ratio laid down by various High Courts and ITATs the contention raised by the appellant is found to be correct.”
6. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals), deleting the additions made by the assessing officer. In our considered view, Ld. CIT(Appeals) has taken a correct legal view that when the assessee had objected to taking the Jantri value as adopted by the Stamp valuation officer, the correct course of action by the assessing officer should have been to refer the matter to the DVO for his expert opinion on the matter, as per the specific provisions of sub Section 2 of Section 50C of the Act. The Ld. CIT(Appeals) in our view has correctly observed that there have been serious objections by the assessee to the valuation adopted by the Stamp Valuation Authority and the Jantri value as adopted by the assessing officer did not represent the correct sale value of such property, since there were certain inherent infirmities in the title to the property, which effectively reduced the sale value of such property. This was within the knowledge of the assessing officer and therefore on these facts, the assessing officer should have referred the matter to the DVO in terms of Section 50C(2) of the Act. Section 50C of the Income Tax Act, 1961, deals with the determination of the value of a capital asset for calculating capital gains. Section 50C(2) provides that if the consideration received on the transfer of a capital asset is less than the value assessed or assessable by any authority of a state government (commonly the stamp duty value), then the value so assessed or assessable will be considered the full value of consideration for computing capital gains. Section 50C(2) gives an option to the taxpayer to dispute the stamp duty value assessed by the State Authority. The taxpayer can request the Assessing Officer (AO) to refer the valuation to a Departmental Valuation Officer (DVO) if the taxpayer claims that the value assessed by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer. In the case of PCIT v. Ravjibhai Nagjibhai Thesia76 taxmann.com 76 (Gujarat), the High Court held that Assessing Officer is required to compute capital gain taking value given by Valuation Officer under Section50C, even though it is lesser than value adopted by stamp valuation Authority. In the case of Dr. Indra Swaroop Bhatnagar 30 taxmann.com 293 (Allahabad), the High Court held that where assessee had sold a property and Assessing Officer after rejecting valuation of property submitted by assessee referred matter to DVO to obtain fair market value, valuation done by DVO was binding on Assessing Officer. In the case of Chandra Narain Chaudhri 38 taxmann.com 275 (Allahabad), the High Court held that where assessee objects before Assessing Officer that value adopted by stamp valuation authority under Section 50C(1) exceeds fair market value of property on date of transfer, Assessing Officer may either accept valuation of property on basis of report of approved valuer filed by assessee or he may refer question of valuation of capital asset to DVO in accordance with Section 55A of the Act. In the case of K.K. Nag Ltd. v. Income Tax Officer (2012) 22 taxmann.com 26 (Pune Tribunal), the assessee sold a property, and the sale consideration was less than the stamp duty value. The assessee requested a referral to the DVO, which was not initially entertained by the AO. The ITAT held that if the assessee makes a request under Section 50C(2), the AO is duty-bound to refer the matter to the DVO. The AO cannot ignore such a request. In the case of Smt. Indira Bai v. Income Tax Officer (2012) 18 ITR (Trib) 103 (Hyd) the assessee objected to the adoption of the stamp duty value for capital gains computation and requested a referral to the DVO. The ITAT held that the AO should refer the valuation of the property to the DVO when the assessee objects to the stamp duty value. The valuation by the DVO should be considered for computing capital gains. In the case of Madhukumar N. (HUF) v. DCIT (2012) 50 SOT 393 (Bang) the assessee sold a property, and the sale consideration was less than the stamp duty value. The assessee claimed that the stamp duty value exceeded the fair market value and requested a referral to the DVO. The ITAT held that it is mandatory for the AO to refer the valuation to the DVO if the assessee objects to the adoption of the stamp duty value and claims that the value adopted exceeds the fair market value.
7. Accordingly, in view of the facts of the present case and the judicial precedents on the subject which have laid down that once the assessee objects to the value of property proposed to be adopted by the Assessing Officer, then the assessing officer is duly bound to refer the matter to the DVO in terms of Section 50C(2) of the Act. In the instant case, the assessee had submitted that there were serious infirmities in the title to the property and hence the Jantri value adopted by the Stamp Valuation Authorities did not represent the correct value of the property sold by the assessee during the impugned year under consideration. Therefore, when the assessee had raised a specific objection as to the value of the property adopted by the Stamp Valuation Authorities, on the ground that the title itself to the impugned property under consideration was defective, then, in our considered view, Ld. CIT(Appeals) has correctly held that the matter was required to be referred to the file of DVO. Accordingly, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference.
8. In the result, the appeal of the Department is dismissed.
This Order pronounced in Open Court on 07/08/2024
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