Tribunal rules AO must consider assessee's disclosed sale consideration, not DVO's valuation.

The Tribunal found that the AO was not justified in substituting the sale consideration with the DVO's valuation as the difference was less than 10%. Valuation being an estimation, the Tribunal set aside the CIT(A)'s order and directed the AO to consider the sale consideration of Rs. 19 lakhs as disclosed by the assessee. The appeal by the assessee was allowed.

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Issues Involved:
1. Applicability of Section 50C(1) of the IT Act, 1961.
2. Valuation of property for capital gains calculation.
3. Difference between sale consideration and valuation by DVO.
4. Right to challenge DVO's valuation under Section 50C(2).

Detailed Analysis:

1. Applicability of Section 50C(1) of the IT Act, 1961:
The primary issue revolves around whether the provisions of Section 50C(1) are applicable to the assessee's case. The AO observed that the sale consideration shown by the assessee was Rs. 19 lakhs, whereas the stamp valuation authorities adopted a value of Rs. 28,73,000. The AO referred the matter to the Departmental Valuation Officer (DVO), who estimated the fair market value (FMV) at Rs. 20,55,000. The AO substituted this value for calculating capital gains, which was upheld by the CIT(A).

2. Valuation of Property for Capital Gains Calculation:
The assessee argued that the basement had no commercial value, had a lower height, was prone to waterlogging, was old, and was sold on an "as is where is" basis. The initial booking was done in 2001, and possession was given in 2003, with registration in 2004. Despite these arguments, the AO and CIT(A) maintained that the provisions of Section 50C(1) are unambiguous and the AO is bound to adopt the valuation by the stamp valuation authorities or the DVO.

3. Difference Between Sale Consideration and Valuation by DVO:
The assessee contended that the difference between the sale consideration (Rs. 19 lakhs) and the DVO's valuation (Rs. 20,55,000) was marginal (8.5%), within the tolerance limit of 15% as held by the Supreme Court in C.B. Gautam vs. Union of India. The assessee argued that the AO did not consider the objections properly and that the marginal difference should not justify an addition.

4. Right to Challenge DVO's Valuation under Section 50C(2):
The assessee's counsel argued that the assessee could challenge the DVO's valuation under Section 50C(2), and if barred from doing so, the provisions would become redundant. The Departmental Representative countered that once the DVO's valuation is adopted, the AO has no option but to accept it. The Tribunal noted that the valuation adopted by the DVO is subject to appeal and is not final. The difference between the sale consideration and the DVO's valuation was less than 10%, and courts and tribunals have consistently taken a liberal approach in such cases.

Conclusion:
The Tribunal found that the difference between the sale consideration and the DVO's valuation was less than 10%, and valuation is inherently a matter of estimation with some degree of difference. The Tribunal concluded that the AO was not justified in substituting the sale consideration with the DVO's valuation. The Tribunal set aside the CIT(A)'s order and directed the AO to take the sale consideration as Rs. 19 lakhs, as disclosed by the assessee. The appeal filed by the assessee was allowed.

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