Selling property below circle rate

According to Sec 50C of Income Tax Act, 1961, if an assessee transfer a capital asset being Land or Building or both at a value less than the value adopted or assessed  by Stamp Valuation Authority for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the Sale Consideration of the Capital Asset.

The transfer of land or building being stock in trade is dealt by Section 43CA. 

The buyer will be at loss if he/she agrees to buy (makes agreement of) at a value below the Stamp Duty Value because of the operation of Section 56(2)(x)(b). According to the said section if the stamp duty value exceeds the purchase consideration by more than Rs.50,000 then, the difference between the Stamp Duty Value and the Purchase Consideration will be treated as Income From Other Sources.

Section 43 CA has been reproduced below:

(1) Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than capital asset), being land or building or both, is less than the value adopted or assessed or assessable by any authority of state government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of computing profit and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

In case market price of the property is less than stamp duty value-sub section (2) of section 43CA

The sale consideration agreed between the parties at the time of entering into sale agreement is generally higher than the prevailing stamp duty value of the property applicable as on the date of sale agreement but in case of certain genuine cases, where market price is less than the stamp duty value of the property, sub section (2) of Sec 43CA takes care of the situation wherein provision has been made to make representation to the Assessing Officer for referring the matter to the valuation officer to determine the fair market value of the property. Sub section (2) of section 43CA states as under:-

(2) The provisions of sub section (2) and sub section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub section (1)

Refer:  43ca-tax-implications-on-builders-and-real-estate-developers

[TS-525-ITAT-2013(MUMBAI)-O] : Applicability of sec. 43CA before April 2014 : ITAT rejects application of stamp value u/s 50C / sec 43CA to business assets before April 2014 - No addition warranted for assessee, a builder / developer, qua difference in stamp value and actual sale consideration of flats sold; Applying sec50C to substitutestamp value not applicable in case of business income; Parallel provision for business income, i.e., Sec 43CA applicable only from April 1, 2014; Also rejects CIT(A)'s application of Sec 56(2)(vii)(b)(ii) which is in context of 'Income from other sources'.

[TS-5698-ITAT-2016(AHMEDABAD)-O] : Transfer of 'rights in land': Relinquishment of rights in land not land or building; sec.50C inapplicable - ITAT allows assessee’s appeal for AY 2006-07, holds that deeming provisions of sec.50C shall not be applicable to transfer of rights in land by the assessee “which cannot be equated to land or building or both”; Revenue had adopted stamp duty value of registered sale deed as full value of consideration in terms of sec.50C, and had thus re-computed capital gains; Observes that sec. 50C is a deeming provision and extends only to land or building or both, thus rules that “deeming provision can be applied only in respect of the situation specifically given and, hence, cannot go beyond the explicit mandate of the section”

Also refer::: https://indiankanoon.org/search/?formInput=Section%2043CA

Thank you Sir, for your kind pusual.

I have purchased the disputed property in Rs 7500000/- whereas the cicle rate of that disputed property is Rs 20300000/- now the assessing officer has been issued the show cause notice regarding addition of Rs 1.28 cr & willing to tax under sec 56(2)(VII) under the head income form other sources. 

Sir in this regard I have need case laws related with above said fact.  

Under Section 50C when stamp duty valuation of a property is higher than apparent sale consideration shown in the instrument of transfer then onus to prove that fair market value of the property is lower than such valuation by the SVA is on the assessee who can reasonably discharge this onus by submitting necessary material before the Assessing Officer, such as valuation by an approved valuer. Thereafter onus shifts to the Assessing Officer to show that material submitted by the assessee about fair market value of the property is false or not reliable.(Ravi Kant v.ITO(2007)110 TTJ Delhi 297).

 Failure by the AO to refer the valuation of the capital asset to a valuation officer instead of adopting the value taken by the stamp duty authorities is a fatal error and the assessment order has to be annulled. The matter cannot be set aside to the AO for a second chance. The power of the ITAT to set aside cannot be exercised so as to allow the AO to cover up the deficiencies in his case