2024 (5) TMI 1097 - AT - Income Tax

Assessee wins appeal as authorities failed to refer disputed property valuation to DVO under section 50C(2)

The ITAT Kolkata allowed the assessee's appeal against addition under section 50C. The assessee claimed the fair market value was less than stamp duty ... Disapplication of deeming under section 50C where stamp duty value is disputed - reference to Valuation Officer under section 50C(2) - quasi-judicial duty of assessing authority to refer disputed valuation to DVO - rebuttable nature of deeming provision in section 50C - remand versus deletion where the AO fails to follow statutory procedureDisapplication of deeming under section 50C where stamp duty value is disputed - reference to Valuation Officer under section 50C(2) - quasi-judicial duty of assessing authority to refer disputed valuation to DVO - remand versus deletion where the AO fails to follow statutory procedure - Validity of addition under section 50C where assessee disputed stamp duty (circle) value and requested reference to the Departmental Valuation Officer (DVO), but AO and CIT(A) rejected the request without reasons. - HELD THAT: - The Tribunal found that the assessee from the outset contended that the stamp duty value exceeded the fair market value and sought reference to the DVO under section 50C(2). Both the AO and the CIT(A) rejected this plea summarily without assigning reasons or obtaining a DVO report. The Tribunal held that where an objection is raised that the stamp valuation exceeds fair market value, the Assessing Officer has a duty to apply his mind and, if appropriate, refer the matter to the Valuation Officer; the deeming provision in section 50C is rebuttable and cannot be mechanically applied. Reliance was placed on Coordinate Bench and High Court decisions that the Stamp Valuation Authority's circle rates do not necessarily reflect the fair market value and that the AO must follow the procedure prescribed by law. Having found that the authorities failed to follow the statutory procedure and gave cryptic orders without dealing with the assessee's contention or producing corroborative material to sustain the addition, the Tribunal concluded that the addition could not be sustained. The Tribunal further observed that remanding the matter merely to enable the department to fill lacunae would be inappropriate and, in the facts of this case, deletion rather than remand was warranted. [Paras 6, 7]Addition under section 50C set aside and deleted for failure of AO and CIT(A) to refer disputed valuation to DVO or to record reasons; appeal allowed.Final Conclusion: The Tribunal allowed the appeal, set aside and deleted the addition made under section 50C because the assessing authority and first appellate authority failed to follow the statutory mandate to refer the disputed stamp duty valuation to the Departmental Valuation Officer and did not record reasons; remand was declined and deletion was directed. Issues Involved:1. Condonation of delay.2. Addition u/s 50C of the Income Tax Act.3. Non-referral to Departmental Valuation Officer (DVO).Summary:Condonation of Delay:The appeal was time-barred by 389 days. A separate application for condonation of delay was filed, supported by an affidavit from the petitioner. Considering the submissions made in the affidavit, the delay in filing the appeal was condoned.Addition u/s 50C:The assessee was aggrieved by the CIT(A)'s confirmation of the addition made by the Assessing Officer (AO) of Rs. 17,82,513/- invoking the provisions of section 50C of the Income Tax Act. The AO noted that the assessee had shown consideration received on the sale of property at Rs. 45,00,000/-, while the stamp duty authority valued it at Rs. 62,82,513/-. The assessee contended that the stamp duty value was higher than the fair market value and requested a referral to the Departmental Valuation Officer (DVO), which the AO rejected.Non-referral to DVO:The assessee appealed to the CIT(A), reiterating the request for a DVO referral, which was again rejected without reason. The Tribunal noted that both lower authorities failed to act according to the statutory provisions of section 50C(2) and summarily rejected the assessee's plea without assigning any reason. The Tribunal referenced the decision in Hari Om Garg v. ITO and other relevant case laws, emphasizing that the AO has a bounden duty to refer the valuation to the DVO when the assessee disputes the stamp duty value.The Tribunal concluded that the addition made by the AO was not sustainable in law due to the failure to follow the prescribed procedure. It was held that the department cannot be allowed a second opportunity to rectify its shortcomings, and the addition was deleted. The appeal of the assessee was allowed.