2011 (5) TMI 207 - AT - Income Tax

Tribunal Upholds DVO Valuation for Capital Gains

Mrs. Nandita Khosla Versus Income-tax Officer 12(1) (1), Mumbai

The Tribunal confirmed the applicability of Section 50(C) of the Income Tax Act, where the sale consideration was lower than the stamp duty valuation. It ... Sale consideration - Valuation of the capital asset(binding)to a Valuation Officer - Sale consideration was less than the value determined for stamp duty purposes, then such cases have to be referred to the DVO - Obviously, in such cases the sale consideration which has been deemed to be the value adopted for stamp duty purposes as per the main provision, would be the value adopted by the DVO - Therefore, set aside the order of the ld. CIT(A) and direct the Assessing Officer to adopt the sale consideration at the value determined by the DVO. Sale consideration - Since facts are identical because these two assessees' are also 1/3rd shareholders of the same property sold by Mrs. Nandita Khosla whose case has been adjudicated - Hence, set aside the orders of the ld. CIT(A) in these cases also and direct the Assessing Officer to adopt the sale consideration at the value determined by the DVO. Issues Involved:1. Applicability of Section 50(C) of the Income Tax Act.2. Valuation of property for the purpose of determining capital gains.3. Consideration of the Valuation Officer's (DVO) report.4. Rectification under Section 154 of the Income Tax Act.Issue-wise Detailed Analysis:1. Applicability of Section 50(C) of the Income Tax Act:The primary issue raised was whether Section 50(C) was applicable in the case where the sale consideration of the property was less than the value adopted by the Stamp Valuation Authorities. The Tribunal confirmed that Section 50(C) was indeed applicable since the sale consideration was lower than the stamp duty valuation. This section mandates that the value adopted for stamp duty purposes be deemed as the full value of the consideration for the purpose of calculating capital gains.2. Valuation of Property for Determining Capital Gains:The assessee argued that the valuation as per the District Valuation Officer (DVO) was excessive. The Assessing Officer had adopted the stamp duty value of Rs. 2,80,14,000 as the sale consideration, while the assessee's registered valuer had valued the property at Rs. 1,65,64,000. The DVO later valued the property at Rs. 2,39,32,000. The Tribunal noted that the DVO's valuation should be considered as the deemed sale consideration, as per Section 50(C)(2).3. Consideration of the Valuation Officer's (DVO) Report:The Tribunal emphasized that once the matter is referred to the DVO, the valuation given by the DVO must be adopted as the deemed consideration. The Tribunal found that the DVO had considered relevant instances and provided a reasonable valuation. The Tribunal rejected the valuation by the approved valuer as it was based on carpet area, which is not the correct basis for such valuations.4. Rectification under Section 154 of the Income Tax Act:The assessee had filed a request for rectification under Section 154 to consider the DVO's valuation, but no rectification order was passed. The Tribunal highlighted that the DVO's report, although received later, should have been considered. The Tribunal directed the Assessing Officer to adopt the sale consideration as determined by the DVO, thereby setting aside the CIT(A)'s order which had not considered the DVO's report due to its late receipt.Conclusion:The Tribunal allowed the appeals partly, directing the Assessing Officer to adopt the sale consideration at the value determined by the DVO, thereby ensuring the correct application of Section 50(C) and appropriate consideration of the DVO's valuation report. The Tribunal's decision underscores the importance of referring valuation disputes to the DVO and adhering to the valuations provided by the DVO in such cases.