2018 (9) TMI 343 - AT - Income Tax

Appeal succeeds due to Assessing Officer's failure to follow valuation procedures

Pranay N Vora Versus Income Tax Officer, Ward-1 (3), Bhavnagar

Pranay N Vora Versus Income Tax Officer, Ward-1 (3), Bhavnagar - TMI Issues:- Confirmation of addition under Section 50C of the Income-tax Act- Adoption of full value of sale consideration- Referral to the Departmental Valuation Officer (DVO)Confirmation of Addition under Section 50C:The appeal was filed against the order confirming the addition of Rs. 28,37,120 under Section 50C of the Income-tax Act. The assessee sold two plots at a lower sale consideration than the value adopted by the stamp valuation authority. The Assessing Officer concluded that the conditions under Section 50C were met, leading to the assessment of Short Term Capital Gain (STCG) at Rs. 28,78,120. The assessee disputed this, claiming the sale consideration was in line with market rates. However, the contention was rejected. The Assessing Officer relied on the stamp valuation authority's assessment of Rs. 41,68,800 for each plot, resulting in the addition to the total income of the assessee.Adoption of Full Value of Sale Consideration:The assessee contested the adoption of Rs. 41,68,600 as the full value of sale consideration for each plot under Section 50C, which was higher than the actual sale consideration of Rs. 27,50,000 per plot. The assessee argued that the valuation was not accurate and should have been referred to the DVO. The Co-ordinate Bench's judgments emphasized that even without a specific request from the assessee, the Assessing Officer must offer the option to refer the matter to the DVO under Section 50C(2). The failure to do so was a crucial oversight in this case, as highlighted by the judgments cited by the assessee's representative.Referral to the Departmental Valuation Officer (DVO):The Assessing Officer's failure to refer the matter to the DVO, despite the dispute over valuation, was a significant issue raised in the appeal. The Co-ordinate Bench's decisions and the legal position clarified that the Assessing Officer must provide the option to refer the valuation to the DVO, even without a specific request from the assessee. The failure to follow this procedure led to the appeal's success, with the Tribunal directing the Assessing Officer to reevaluate the matter de novo after obtaining the DVO's valuation. The judgment emphasized the importance of fair treatment and adherence to legal procedures in such cases.In conclusion, the judgment highlighted the necessity of following proper procedures and providing fair treatment to taxpayers in valuation disputes under Section 50C of the Income-tax Act. The failure to refer the matter to the DVO and consider market rates appropriately resulted in the appeal being allowed for statistical purposes, with directions to reassess the matter in accordance with legal requirements.