2018 (1) TMI 859 - AT - Income Tax

Tribunal rules AO cannot substitute sale consideration with fair market value. Section 50C inapplicable. Actual sale consideration used.

The Tribunal partially allowed the appeal, ruling that the Assessing Officer was unjustified in substituting the sale consideration with the fair market ... Computation of capital gain - substitute the fair market value in place of the full value of consideration received/accrued - applicability of section 50C - Held that:- Provisions of section 50C are not applicable in the case of the assessee as the capital asset involved here was not land or building but it is a right to purchase a building (shop). Further, the Revenue Authorities has also not brought on record whether the transfer of the property was registered with the Stamp Valuation Authority. Since in the case provisions of section 50C are not applicable, the provisions of section 48 of the Act would be applicable and as observed by us in earlier paras that full value consideration received cannot be substituted by the fair market value determined by the DVO as held in the various decisions cited above, we set aside the finding of the lower authorities on the issue in dispute and delete the addition made by the Assessing Officer. - Decided in favour of assessee. Issues Involved:1. Denial of admission of additional evidence.2. Addition of Rs. 1,15,44,888/- due to the difference in property valuation.Issue-wise Detailed Analysis:1. Denial of Admission of Additional Evidence:The appellant did not press this ground before the Tribunal, and thus, it was dismissed as infructuous.2. Addition of Rs. 1,15,44,888/- Due to Difference in Property Valuation:The primary issue revolved around whether the Assessing Officer (AO) was justified in replacing the 'full value of sale consideration' with the 'fair market value of the property' for computing capital gains. The assessee declared a capital loss on the sale of a property, which was purchased for Rs. 2,44,00,000/- and sold for Rs. 2,50,00,000/-. The AO referred the matter to the Valuation Officer, who assessed the market value at Rs. 3,91,53,000/-. Consequently, the AO computed the capital gain based on this valuation, resulting in an addition of Rs. 1,15,44,888/-.The Tribunal examined the legal provisions under Section 48 and Section 50C of the Income-tax Act, 1961. The assessee argued that the full value consideration received should be taken as Rs. 2,50,00,000/- and not the fair market value determined by the Valuation Officer. The Tribunal noted that as per Section 48, the capital gain should be computed based on the actual sale consideration received. It was highlighted that the provisions of Section 50C, which allow for the substitution of sale consideration with the value adopted by the stamp valuation authority, were not applicable in this case since the property was not registered with the stamp valuation authority.The Tribunal referred to several judicial precedents, including:- CIT Vs. Smt. Nilofer I Singh: The Delhi High Court held that in a sale simplicitor, the full value consideration is the sale price, and there is no necessity for computing the fair market value.- Dev Kumar Jain Vs. ITO: The Delhi High Court reiterated that the actual sale consideration could not be substituted by the value determined by the DVO.- CIT Vs. Gauranginiben S. Shodhan INDL: The Gujarat High Court held that reference to DVO for ascertaining the fair market value is redundant.The Tribunal concluded that the AO was not justified in replacing the sale consideration with the fair market value determined by the Valuation Officer. It was also noted that Section 50C was not applicable as the property was not registered with the stamp valuation authority, and the amendment to include 'assessable value' was effective only from 01/10/2009.Conclusion:The Tribunal allowed the appeal partly, deleting the addition made by the AO and holding that the full value consideration received by the assessee could not be replaced by the fair market value determined by the Valuation Officer. The decision was pronounced in the open court on 16th January 2018.