Fresh property valuation ordered in capital gains case under s.50C(2), 55A with reconsideration of s.54EC deduction

ITAT Kolkata set aside the order of CIT(A) in a capital gains dispute involving valuation of property under s.50C(2) r.w.s. 55A and denial of deduction u/s 54EC. The Tribunal held that, as the assessee had disputed the stamp duty valuation and had no earlier effective opportunity to seek a DVO reference, fairness required a fresh adjudication. ITAT directed that CIT(A) either himself obtain a valuation from the DVO or direct the AO to do so, and then re-decide the appeal in accordance with law. The assessee's appeal was allowed for statistical purposes.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, in computing long term capital gains under section 50C where the assessee disputes adoption of stamp duty valuation as full value of consideration, the matter is required to be referred to the Departmental Valuation Officer under section 50C(2) read with section 55A.

1.2 Whether, in the circumstances of the case, the appellate authority (first appellate stage) or the Assessing Officer should be directed to obtain a valuation report from the DVO and decide the appeal thereafter, in conformity with principles of natural justice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Reference to DVO under section 50C(2) r.w.s. 55A and remand to appellate authority / AO

(a) Legal framework (as discussed)

2.1 The Tribunal noted the assessee's reliance on section 50C(2) read with section 55A of the Act, under which, when the value adopted by the stamp valuation authority exceeds the consideration declared by the assessee and such valuation is disputed, the property may be referred to the Departmental Valuation Officer for determination of value for purposes of computing capital gains.

(b) Interpretation and reasoning

2.2 The Tribunal recorded that the assessee was disputing the valuation of the property adopted for the purposes of section 50C and was seeking reference to the DVO. It was observed that, at the stage of processing the return under section 143(1), there was no occasion for the assessee to make such a request for DVO reference.

2.3 The Tribunal further observed that, although opportunities were available before the first appellate authority, all such opportunities were not availed by the assessee. Despite this, to be fair to both the assessee and the revenue, the Tribunal considered it appropriate that the valuation issue be examined after obtaining a DVO report.

2.4 The Tribunal therefore held that the order of the appellate authority could not be sustained without first obtaining an independent valuation of the transferred property by the DVO where the assessee had specifically disputed the adoption of stamp duty valuation as sale consideration.

(c) Conclusions

2.5 The Tribunal set aside the order of the first appellate authority with a direction that the said authority should either itself refer the property to the DVO or direct the Assessing Officer to refer the valuation of the property to the DVO.

2.6 The Tribunal directed that the appeal be decided afresh by the first appellate authority after considering the DVO's valuation report and in accordance with law.

2.7 Consequently, the appeal was treated as partly allowed for statistical purposes, with the capital gains computation under section 50C to be revisited after the DVO's report.

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