2020 (6) TMI 667 - AT - Income Tax

Tribunal Allows Assessee's Appeal on Property Valuation under Income Tax Act

The Tribunal partly allowed the Assessee's appeal by considering the District Valuation Officer's lower valuation for determining the full value of ... LTCG - valuation of the property to the DVO - AO was of the view that the capital gain had to be computed by substituting the fullm value of consideration received on transfer by the value adopted by the state government for the purpose of stamp duty - HELD THAT:- Purchaser of the property filed a letter before the Inspector General of Registration and Controller of Stamps, would not be sufficient to conclude that the value adopted for the purpose of stamp duty by the registering authorities had been disputed in an appeal revision before an authority as contemplated under Sec.50C(2)(b) of the Act. Apart from the above the AO made reference to the DVO before conclusion of the Assessment proceedings i.e., before 28.12.2018 on which date he passed the order of assessment. The letter of the purchaser of the property to the Inspector General of Registration and Controller of Stamps is dated 26.2.2019 which is after the date of reference to DVO by the AO. Thus as on the date on which the AO referred the question of valuation of the property to the DVO, there was no bar in terms of Sec.50C(2)(b) of the Act. Therefore, we are of the view that the valuation report given by the DVO cannot be ignored. Since the DVO himself valued the property which is less than the value adopted for the purpose of stamp duty and registration, the same should be adopted for the purpose of determining the full value of consideration received on transfer of capital asset for computing LTCG as laid down in Sec.50C(3) - Appeal of the assessee is partly allowed. Issues:1. Computation of long term capital gains based on stamp duty valuation under sec.50C of the Income Tax Act, 1961.2. Validity of reference to District Valuation Officer (DVO) for property valuation.3. Dispute regarding valuation of property for stamp duty purposes.4. Adjudication on the action of the Assessing Officer (AO) in not adopting DVO's valuation for computing long term capital gains.Issue 1: Computation of long term capital gains based on stamp duty valuation under sec.50C of the Income Tax Act, 1961:The Assessee, an individual, sold a property and received a sum of Rs. 1.30 Crores as per the sale deed, while the stamp duty value was Rs. 2,09,10,000/-. The AO computed long term capital gains (LTCG) by substituting the stamp duty value due to sec.50C of the Act. The Assessee contended that the DVO's valuation of Rs. 1,59,31,000/- should be adopted for LTCG computation. The Tribunal held that the DVO's valuation, being lower than the stamp duty value, should be considered under sec.50C(3) for determining the full value of consideration received on transfer, thereby partly allowing the Assessee's appeal.Issue 2: Validity of reference to District Valuation Officer (DVO) for property valuation:The AO made a reference to the DVO for property valuation before the assessment order, which was subject to review based on the DVO's report. The Assessee argued that the DVO's valuation was excessive and did not consider crucial factors. The Tribunal noted that the reference to the DVO was valid as the stamp duty valuation had not been disputed before relevant authorities, allowing the DVO's valuation to be considered for LTCG computation.Issue 3: Dispute regarding valuation of property for stamp duty purposes:The Assessee raised objections to the stamp duty valuation, supported by a registered valuer's report and the purchaser disputing the valuation to the Inspector General of Registration. However, the ld. CIT(A) found no merit in these contentions as the stamp duty valuation dispute was not formally raised before the appropriate authorities, leading to the rejection of the Assessee's arguments.Issue 4: Adjudication on the action of the Assessing Officer (AO) in not adopting DVO's valuation for computing long term capital gains:The Tribunal analyzed the AO's decision not to adopt the DVO's valuation for LTCG computation. It emphasized that the mere dispute by the purchaser with the stamp duty valuation was insufficient to disregard the DVO's valuation. As the reference to the DVO was made before the dispute arose, the Tribunal held that the DVO's lower valuation should be accepted for computing LTCG, in accordance with sec.50C(3) of the Act.This judgment highlights the importance of adhering to the provisions of sec.50C of the Income Tax Act, 1961 in determining the full value of consideration for capital gains tax purposes. It clarifies the significance of valid references to the DVO and the impact of disputes on stamp duty valuations in the assessment process. The Tribunal's decision underscores the need for consistency and adherence to statutory provisions in tax assessments to ensure fair and accurate computation of capital gains.