AMIT BAJAJ ADVOCATE

In this case during the relevant assessment year, the assessee sold certain property and disclosed sale consideration in the sale deed for her half share at Rs. 20 lakhs and computed long-term capital gains at nil by taking indexed cost of acquisition at Rs. 30.81 lakhs. The Assessing Officer noticed from the sale deed that the stamp valuation of the property was at Rs. 1.3 crores. The Assessing Officer adopted valuation by Stamp Duty Authorities and computed the long-term capital gain at Rs. 50.70 lakhs. On appeal, the Commissioner (Appeals) referred the matter to the DVO for ascertaining the fair market value of the said property. The Commissioner (Appeals) directed the Assessing Officer to adopt the value as per DVO's report for the purpose of computing the capital gains. The DVO valued the property at Rs. 30.87 lakhs.

S.K. Malakar for the Appellant. A.K. Tulsiyan for the Respondent.

Mahavir Singh, Judicial Member - This appeal by revenue is arising out of the order of CIT(A)-XII, Kolkata in Appeal No. 514/XII/42(1)/07-08 vide order dated 07.12.2009. The assessment was framed by ITO, Ward-42(1), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2005-06 vide his order dated 12.12.2007.

2. The only issue in this appeal of revenue is against the order of CIT(A) in directing the Assessing Officer to adopt, the fair market value of the property sold, as determined by DVO instead of value assessed by Stamp Valuation Authority and adopted by Assessing Officer. For this, the revenue has raised only following effective ground:

3. The brief facts leading to the above issue are that the assessee is co-owner, to the extent of ½ share, of property at 76, Cotton Street, Kolkata-7 (covered area of 4265 sft. at the ground floor, 3785 sft. at the first floor and 3000 sft. at the second floor containing 8 cottahs 2 chittaks 22 sft. as per sale deed) and the same was sold by the assessee during the year under consideration and disclosed sale consideration in the sale deed for her half share at Rs. 20 lacs and computed Long Term Capital Gains (hereinafter referred to as 'the LTCG') at nil by taking indexed cost of acquisition at Rs. 30,81,600/. The assessee contended that she has filed valuation report of the said property as on 1.4.1981 and the fair market value as on the date was at Rs. 6.42 lacs. On that basis, the assessee computed the fair market value as on 1.4.1981 and indexed cost was calculated at Rs. 30,81,600/-. The Assessing Officer during the course of assessment proceedings, noticed from the sale deed registered with the Registration Authority that the stamp valuation of the property is at Rs. 1,32,22,327/-, whereas the assessee has disclosed her half share of sale consideration at Rs. 20 lacs. The Assessing Officer required the assessee to explain as to why the LTCG be not taken as per the valuation of Stamp Valuation Authority by invoking the provisions of section 50C of the Act. The assessee replied that the sale price of the property in the sale deed has been declared at Rs. 20 lacs and indexed cost was calculated at Rs. 30,81,600/- thereby resulting into nil LTCG. But the Assessing Officer computed the Long Term Capital Gain as under:

Aggrieved, assessee preferred appeal before the CIT(A).

4. Before CIT(A), the assessee filed written submissions, which are reproduced in the order of CITA, wherein the assessee has stated that the assessee became owner of her half share, of this 100 year old house property, by virtue of a partition suit in the matter of assessee's mother Late Sushama Bala Law. According to her, this property was situated in a narrow lane and fully tenanted property with encroachment and sub-tenants. She stated that eviction suit was also pending since 1982 i.e. Suit No. 831 of 1982 and 2168 of 2000. She stated that notional rent at Rs. 12,000/- p.a. was also deposited by the tenants in the Court as against the property tax of Rs. 23,296/- p.a. According to her, this property was loss making proposition and further no buyers were forthcoming to buy a 100 year old property, which is under litigation and tenanted. She contended that the Stamp Duty Authorities valued the property, which is much more than fair market value of the property as on the date of transfer. She stated that sale deed of this property was signed, executed and submitted before the Sub-Registrar on 15.10.2004 and the requisite stamp duty, as per law, was affixed and paid but received the sale consideration as declared at Rs. 20 lacs for her half share. Subsequently on 31.12.2006 i.e. more than two years after the sale was completed, the stamp duty was assessed at a very high figure, as per rates prevailing at that time and the assessee was not even a party to that sale, which had been completed long before the assessment of stamp duty. Finally, she stated that this property was assessed for payment of stamp duty on 31.12.2006, whereas it was sold by the assessee on 15.10.2004 and return of income for the Assessment Year 2005-06, i.e. the relevant assessment year, was filed on 28.7.2005. In view of these facts, she stated that the value finally adopted by stamp duty authorities could not be said to have been the fair market value or the sale consideration received by the assessee for the sale of the property as on that date. The CIT(A), as requested by assessee, referred the matter to the Assessing Officer for remand report and the Assessing Officer vide remand report dated 25.3.2008 stated, the relevant extract of the remand report as extracted by the CIT(A), is being again reproduced for the sake of clarity.

5. Further, the CIT(A) referred this matter to the DVO for ascertaining the fair market value of the said property. The Assessing Officer obtained report from the DVO and submitted through JCIT to CIT(A). The assessee submitted no objection for adoption of value as determined by DVO vide report No. 1876/DVO/ITD/09-10/507 dt 18.11.09. The DVO value the property at Rs. 30,87,675/- and the CIT(A) after considering the provisions of section 50C of the Act, directed Assessing Officer as under :

Aggrieved, revenue came in appeal before Tribunal.

6. Before us, the Ld. DR Shri S.K. Malakar stated that provision of section 50C sub-section (2) of the Act is very clear and the Assessing Officer may refer or may not refer, it is his discretion and it is not a mandatory provision. He stated that 'may' not be read as 'shall'. Accordingly, he argued that the stamp valuation as adopted by the Assessing Officer is right value of the property and that should be upheld.

7. On the other hand, the Ld. Counsel for the assessee Sri A.K. Tulsiyan relied on the order of CIT(A) and stated that the CIT(A) has directed the AO to adopt the fair market value of the property as determined by DVO in terms of section 50C of the Act. He accordingly, supported the order of CIT(A).

8. We have heard rival contentions and gone through facts and circumstances of the case. Here, the admitted fact is that the property was sold and the stamp valuation of the property was at Rs. 1,32,22,327/- and assessee's half share comes to Rs. 66,11,163.50. The assessee has declared the sale consideration recorded in the sale deed at Rs. 20 lacs for her half share. It is an admitted fact that the matter was referred to DVO by the CIT(A) as required by the assessee and the DVO valued the fair market value of this property at Rs.30,87,675/- and in view of this, the CIT(A) directed the Assessing Officer to compute LTCG on the basis of fair market value estimated by the DVO. Now, we have to find out whether the action of the CIT(A) is correct in referring the matter to the DVO for valuing the fair market value of the property under reference or not. And further, whether it is mandatory for the Assessing Officer to refer the property for valuation, for adopting the fair market value for the purpose of computation of LTCG or it is discretionary on the part of the Assessing Officer. For this, we have to go through the provisions of section 50C as it is. The relevant provision of section 50C reads as under:

9. We find that from the above provision of section 50C of the Act, as introduced by the Finance Act, 2002 w.e.f. 1.4.2003, by virtue of which a special provision for determining the full value of consideration in cases of transfer of immovable property is introduced. As per this provision, in case the consideration declared to be received or accruing as a result of transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains shall be charged accordingly u/s. 48 of the Act. This position is in view of sub-section 50C(1) of the Act. Sub-section (2) provides that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer and he has not disputed the value so adopted or assessed in any appeal or revision or reference before any authority, the Assessing Officer may refer the valuation of the relevant asset to a Valuation Officer in accordance with section 55A of the Act. If the fair market value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the Assessing Officer has to take such fair market value to be the full value of consideration but if the fair market value so determined by the DVO is more than the value adopted or assessed by stamp duty Authorities for the purposes of collection of stamp duties, the Assessing Officer shall not adopt such fair market value but shall take full value of consideration to be the value adopted or assessed for the purposes of stamp duty. In our view, in the present case, the CIT(A) has referred the matter to the DVO for ascertaining the fair market value, who ascertained the fair market value at Rs. 30,87,675/- as against the value adopted by Stamp Duty Authorities at Rs. 1,33,22,222/-. In our view, in view of the provisions of sub-section (2) of section 50C, fair market value as assessed by the DVO is lower than the value adopted by Stamp Duty Authorities for collecting stamp duty and the value so adopted by DVO has to be adopted by the Assessing Officer for the purpose of computation of LTCG. We find no fault in the order of CIT(A) and accordingly, we confirm the same. This issue of the revenue's appeal is dismissed.

10. In the result, the appeal of the revenue is dismissed.