2008 (11) TMI 300 - AT - Income Tax

Tribunal Upholds AO's Use of Stamp Valuation for Capital Gains, Rejects Assessee's Appeal for Lower Sale Consideration.

Mohd. Shoib. Versus Deputy Commissioner Of Income-Tax.

The Tribunal dismissed the assessee's appeal, affirming the Assessing Officer's (AO) decision to adopt the Stamp Valuation Authority (SVA) valuation for ... Capital Gains - valuation u/s 50C - substitution of valuation as per stamp valuation authority (SVA) in place of sale consideration shown by the assessee and worked out capital gains. Assessee contended that without referring the matter to the DVO and considering the market value of the land, the AO could not have adopted the valuation as per SVA. HELD THAT:- Once s. 45 comes into operation as a result of transfer of capital asset resulting into profits and gains the question of determining net consideration for the purposes of computing capital gains arise thereafter. This is provided in s. 48. It enables the AO to reduce expenditure incurred wholly and exclusively in connection with transfer of capital asset, cost of acquisition of the asset and cost of any improvement thereto while computing capital gains from the full value of consideration received or accruing to the assessee as a result of transfer. This full value of consideration is deemed to be the valuation done by SVA in case declared sale consideration is less than valuation made by SVA. Sec. 50C thus creates a legal fiction and its effect has to be given to the extent fiction is created but not more. Also, we notice that s. 54F has been placed subsequently to ss. 45, 48 and 50C clearly indicating that legislature intended to apply the provisions of s. 54F and alike sections subsequent to application of ss. 45, 48 and 50C unless so expressly provided in subsequent sections. There is no reason to take a different view than what is expressed in Jitendra Mohan Saxena's case [2007 (7) TMI 361 - ITAT LUCKNOW-B]. In the present case, sale consideration shown by the assessee in respect of four plots as mentioned above is less than the valuation done by Stamp Valuation Officer and there is no claim by the assessee before the AO that such valuation by SVA is less (sic-more) than the fair market value of the plots under transfer, the AO has no option but to adopt the valuation made by SVA as full value of consideration in place of sale consideration shown by the assessee and calculate chargeable capital gains accordingly. As a result, we do not find any reason to interfere in the order of the CIT(A) and the same is, therefore, confirmed. In the result, the appeal filed by the assessee is dismissed. Issues Involved:1. Applicability of Section 50C(1) of the IT Act, 1961.2. Requirement for reference to the District Valuation Officer (DVO) under Section 50C(2).3. Acceptance of sale consideration for plots sold.4. Adoption of valuation by Stamp Valuation Authority (SVA) over sale consideration.5. Computation of capital gains.6. Composite basis of capital gain computation.7. Interpretation and application of Section 50C(1).8. Legal implications of Section 50C(1) and related provisions.Detailed Analysis:1. Applicability of Section 50C(1) of the IT Act, 1961:The primary issue is whether the authorities erred in invoking Section 50C(1), which substitutes the sale consideration with the value determined by the Stamp Valuation Authority (SVA) if the former is less. The assessee argued that Section 50C(1) was not applicable to their case and that the addition made under this section should be deleted.2. Requirement for Reference to the DVO under Section 50C(2):The assessee contended that the authorities should have referred the matter to the DVO to ascertain the market value of the land. They argued that the word 'may' in Section 50C(2) implies a mandatory duty of the Assessing Officer (AO) to make such a reference. The Tribunal clarified that the word 'may' provides discretion to the AO, and the AO is not bound to refer the matter to the DVO unless the assessee makes a specific claim that the market value is less than the SVA valuation and provides supporting material.3. Acceptance of Sale Consideration for Plots Sold:The assessee claimed that the authorities erred in not accepting the sale consideration of Rs. 1.47 crores for seven plots, arguing that plots on the main road fetched higher prices than those at the back. The Tribunal noted that out of the seven plots, the sale consideration for four plots was lower than the SVA valuation, leading to the AO's substitution of the sale consideration with the SVA valuation.4. Adoption of Valuation by SVA Over Sale Consideration:The Tribunal upheld the AO's decision to adopt the SVA valuation for the four plots where the sale consideration was lower. The Tribunal emphasized that the AO is mandated to adopt the SVA valuation as per Section 50C(1) unless the assessee requests a reference to the DVO and provides material to support their claim.5. Computation of Capital Gains:The authorities computed the capital gains based on the SVA valuation, resulting in a higher capital gain than declared by the assessee. The Tribunal confirmed this computation, stating that the AO correctly applied Section 50C(1) to substitute the sale consideration with the SVA valuation.6. Composite Basis of Capital Gain Computation:The assessee argued that the capital gain should be computed on a composite basis, taking the entire land as one piece rather than plot-wise. The Tribunal did not find merit in this argument, as the plots were sold individually, and the computation was done accordingly.7. Interpretation and Application of Section 50C(1):The Tribunal provided a detailed interpretation of Section 50C(1) and (2), emphasizing that the AO is not bound to refer every case to the DVO unless the assessee makes a specific claim and provides supporting material. The Tribunal also clarified that the word 'may' in Section 50C(2) indicates discretion, not compulsion.8. Legal Implications of Section 50C(1) and Related Provisions:The Tribunal addressed the legal implications of Section 50C(1), stating that it creates a legal fiction to substitute the sale consideration with the SVA valuation to prevent the understatement of sale consideration. The Tribunal rejected the argument that Section 50C(1) could not be invoked if the assessee had claimed exemption under Section 54F, explaining that Section 45 (charging section) remains intact and applicable.Conclusion:The Tribunal dismissed the appeal filed by the assessee, confirming the AO's decision to adopt the SVA valuation for the four plots and compute the capital gains accordingly. The Tribunal provided a comprehensive interpretation of Sections 50C(1) and (2), emphasizing the discretionary nature of the AO's duty to refer the matter to the DVO and the legal fiction created by Section 50C(1) to prevent the understatement of sale consideration.