In case the stamp duty valuation is higher than the consideration received by the assessee, then is the AO authorized to compute the capital gain based on such higher stamp duty valuation?

Last updated: 25 June 2014

Court :
Calcutta High Court

Brief :
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.

Citation :
Sunil Kumar Agarwal .... Petitioner Vs. Commissioner of Income Tax- Siliguri....... Respondent