Calcutta High Court
The assessee had a piece of land which he had sold for Rs. 10 Lakhs and invested the sale proceeds in the bonds specified under Section 54EC.However, the market value of the land as assessed by the District Sub Registrar was Rs. 35 lakhs for the purpose of stamp duty which was undisputedly duly paid by the buyer. The AO computed the capital gains based on the stamp duty so computed by the District Sub Registrar. The CIT (A) upheld the order of the assessingofficer. However, on appeal by the assessee to the High Court,it was concluded that the Stamp duty is payable by the buyer & it is for the buyer to either accept it or dispute it. The assessee could not, on the basis of the price fixed by the Sub-Registrar, have claimed anything more than the agreed consideration of a sum of Rs.10 lakhs which, according to the assessee, was the highest prevailing market price. It therefore impliesthat the fair market value of the property could not be Rs.35 lakhs as assessed by the District Sub Registrar. In a case of this nature the AO should, in fairness, have given an option to the assessee to have the valuation made by the Departmental Valuation Officer (DVO) contemplated u/s 50C in terms of natural justice. As a matter of course, in all such cases the AO should give an option to the assessee to have the valuation made by the DVO even when the assessee didn’t request for the same. Also, it was concluded that it wasn’t the intention of the legislature on the basis of the valuation made by the District Sub Registrar for the purpose of stamp duty. On the contrary, the intent of the legislature is to provide fair treatment to the tax payer.
Sunil Kumar Agarwal .... Petitioner Vs. Commissioner of Income Tax- Siliguri....... Respondent
Sections addressed:- Section 50 C of the Income Tax Act’1961.
IN THE HIGH COURT AT CALCUTTA
GA No. 3686 of 2013
ITAT No. 221 of 2013
SUNIL KUMAR AGARWAL
COMMISSIONER OF INCOME TAX - SILIGURI
The Hon'ble JUSTICE GIRISH CHANDRA GUPTA
The Hon'ble JUSTICE DEBANGSU BASAK
Date: 13th March, 2014.
Appellant by: Mr J. P. Khaitan, Senior Advocate with Mr Sanjoy Bhowmick & Mr C.S. Das, Advocates
Respondent by: Ms A. Ghutghutia, Advocate
Facts of the case:
The Assessee has come up with an appeal against a Tribunal order dated 1 August 2013.The facts and circumstances of the case are that an assessee sold a piece of land at a sum of Rs.10 lakhs by 2 several deeds of conveyance and thereafter invested the sale proceeds in bonds specified under Section 54EC of the Income Tax, and claimed the deduction.
The market value of the land was, however, assessed by the District Sub Registrar at a sum of Rs.35 lakhs, which was duly paid by the purchaser of the land. The AO, in the above circumstances, adopted the valuation made by the District Sub Registrar and computed the long term capital gain on that basis.
The CIT (A) upheld the order of the assessing officer. An appeal preferred by the assessee was dismissed by the learned Tribunal on account of the fact that the assessee himself didn’t point out any reason for reference to the D.V.O in respect of the provisions of Section 50 C of the Act. Therefore, it can be concluded that the assessee does not dispute the valuation of the property by the stamp duty authority at Rs. 35 Lakhs. Therefore, the same value can be adopted for the application of Section 50 C. The tribunal also agreed with the view of CIT (A) that Section 54F can’t be read along with Section 54 EC and hence the appeal of the assessee wasn’t allowed.
However, on appeal with the High Court, the learned Senior Advocate appearing for the appellant assessee challenged the valuation made by the AO and submitted that the case of the assessee, the price offered and paid by the purchaser is the highest prevailing price in the market which can also be concluded as the fair market value of the property. The AO should have acted fair and referred the matter to the valuation officer so contemplated under Section 50 C. As a resultant of such high value taken by the AO, the assessee has an impact of losing both the property and the money value thereof.
The decision made is as under:-
“In a case of this nature the assessing officer should, in fairness, have given an option to the assessee to have the valuation made by the departmental valuation officer contemplated under Section 50C. As a matter of course, in all such cases the assessing officer should give an option to the assessee to have the valuation made by the departmental valuation officer.
For the aforesaid reasons, we are of the opinion that the valuation by the departmental valuation officer, contemplated under Section 50C, is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer is made by the learned advocate representing the assessee, who may not have been properly instructed in law, the assessing officer, discharging a quasi-judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law. For the aforesaid reasons, the order under challenge is set aside.
The impugned order including orders passed by the CIT (A)and the assessing officer are all set aside. The matter is remanded to the assessing officer. He shall refer the matter to the departmental valuation officer in accordance with law. After such valuation is made, the assessment shall be made de novo in accordance with law.”
Summary: In case the stamp duty valuation is higher than the consideration received by the assessee, then the AO is not authorized to compute the capital gain based on such higher stamp duty valuation and should refer the case to the valuation offer as mentioned under Section 50 C whether or not the assessee makes a request for the same.
Full Judgement file attached.