Uma Dutt Paliwal Prop., Panipat V. Addl. CIT, Panipat

ITA 4626/DEL/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6751 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 26-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 19-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Opportunity of being heard; Fair market value; Valuation report; Commercial expediency
• Section: 50C; 54; 37; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4626/DEL/2011 AY: 20 08-09 UMA DUTT PALIWAL, VS ADDL. CIT, PROP. PALIWAL HOME FURNISHING, KARNAL. PANIPAT. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURJEET SINGH, CA RESPONDENT BY : SHRI O.P.MEENA, SR. DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THE PRESENT APPEAL IS PREFERRED BY THE ASSESSEE AGA INST THE ORDER PASSED BY THE LD. CIT(A), KARNAL WHEREIN THOU GH HIS IMPUGNED ORDER DATED 17.08.2011, HE HAS CONFIRMED T HE FOLLOWING ADDITIONS:- I) RS. 54,477/- PERTAINING TO INTEREST U/S 36(1)(III) OF INCOME TAX ACT, 1961 II) RS. 21,132/- BEING 1/5 TH OF TELEPHONE EXPENSES III) RS. 20,32,177/- BEING ALLEGED SHORT TERM CAPITAL GA INS U/S 50C OF THE INCOME TAX ACT, 1961. I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 2 2. AS FAR AS THE ISSUE OF DISALLOWANCE OF RS.54,477 /- ON ACCOUNT OF INTEREST FREE LOANS/ADVANCES IS CONCERNE D, IT IS SEEN THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER NOTED THAT THERE WAS A DEBIT BALANCE OF RS. 4.50 LA CS IN THE NAME OF M/S VICTORY ENTERPRISES. THERE WERE NUMEROUS DE BITS IN THE FORM OF CASH AND CHEQUES IN THIS ACCOUNT BUT THERE WAS NO TRADE DEALING/BUSINESS TRANSACTION WITH THE SAID CONCERN. THE ASSESSING OFFICER ALSO NOTED THAT THERE WAS AN OPEN ING DEBIT BALANCE OF RS. 1.00 LAKH IN THE NAME OF PANIPAT COL LEGE OF TEXTILE TECH. PVT. LTD., WITH WHOM AGAIN THERE WAS NO BUSIN ESS DEALING. THE ASSESSEE HAD CLAIMED EXPENSES OF RS. 11,42,875/ - IN RESPECT OF BANK INTEREST, HOWEVER, NO INTEREST HAD BEEN CHA RGED BY THE ASSESSEE FROM THESE TWO CONCERNS ON THE AMOUNTS ADV ANCED TO THEM. THE ASSESSING OFFICER DISALLOWED A SUM OF RS . 54,477/- BEING INTEREST CALCULATED @12% ON INTEREST FREE ADV ANCES. 3. ON APPEAL, THE LD. CIT (A) WHILE UPHOLDING THE D ISALLOWANCE HELD THAT THE ASSESSEE COULD NOT SUBSTANTIATE THAT THE SUM OF RS. 1.00 LAKH WAS PAID TO PANIPAT COLLEGE OF TEXTILE TE CH. PVT. LTD. FOR BUSINESS PURPOSES. REGARDING THE LOAN OF RS. 4.5 L AKHS TO M/S VICTORY ENTERPRISES, THE LD. CIT (A) OBSERVED THAT NO EVIDENCE WAS BROUGHT ON RECORD TO PROVE THAT THE CAPITAL OF THE PROPRIETOR I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 3 WAS AVAILABLE FOR MAKING THE SAID INTEREST FREE LOA N. HERE ALSO THE ASSESSEE, AS PER THE LD. CIT (A), COULD NOT SUB STANTIATE HIS CLAIM THAT THE INTEREST FREE ADVANCE WAS FOR THE PU RPOSES OF THE BUSINESS OF THE ASSESSEE. SUPPORTING HIS GROUND OF APPEAL RELATING TO THE DISALLOWANCE OF INTEREST, THE LD. A R SUBMITTED THAT AS FAR AS THE LOAN TO PANIPAT COLLEGE OF TEXTILE TE CH. PVT. LTD. WAS CONCERNED, IT WAS AN INVESTMENT IN THE SHARES OF TH E COMPANY WHICH WAS FORMED BY A GROUP OF TEXTILE EXPORTERS WI TH THE OBJECT OF PROVIDING BACHELORS DEGREE IN TEXTILE ENGINEERI NG. SINCE THE ASSESSEE IS A MANUFACTURER AND EXPORTER OF HOME FUR NISHINGS, DURRIES AND MATS, THE INVESTMENT WAS VERY MUCH FOR COMMERCIAL EXPEDIENCY AND HENCE THE DISALLOWANCE OF PRO-RATA I NTEREST WAS NOT LEGALLY TENABLE. HE ALSO DREW OUR ATTENTION TO PAGES 17 AND 18 OF THE PAPER BOOK WHICH CONTAIN COPY OF THE BALA NCE SHEET AND THE PROFIT/LOSS ACCOUNT TO SUBSTANTIATE HIS STAND T HAT SURPLUS FUNDS WERE AVAILABLE WITH THE ASSESSEE FOR MAKING T HE INTEREST FREE ADVANCE OF RS. 4.50 LACS TO M/S VICTORY ENTERP RISES. HE ALSO RELIED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF MUNJAL SALES CORPORATION VS CIT 298 ITR 298 (S.C.). 4. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, STRONGLY SUPPORTED THE ASSESSING OFFICERS ORDER AN D THAT OF THE I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 4 LD. CIT (A). AFTER GOING THROUGH THE RELEVANT RECO RDS AND HEARING THE RIVAL CONTENTIONS ON THIS ISSUE, IT IS SEEN THA T THE MAIN REASON FOR DISALLOWANCE OF PRO-RATE INTEREST BY THE LOWER AUTHORITIES HAS BEEN THAT AS PER THEM THERE WAS A FAILURE ON THE PA RT OF THE ASSESSEE TO PROVE THAT THE ADVANCES WERE MADE FOR C OMMERCIAL EXPEDIENCY. THE LD. CIT (A) ALSO DID NOT ACCEPT TH E CONTENTION OF THE ASSESSEE THAT HE HAD SUFFICIENT FUNDS AT HIS DI SPOSAL TO ADVANCE THE AMOUNT WITHOUT TAKING RECOURSE TO BORRO WINGS. AS FAR AS THE ISSUE OF THE AMOUNT INVESTED IN PANIPAT COLLEGE OF TEXTILE TECH. PVT. LTD. IS CONCERNED, IT IS SEEN TH AT ALTHOUGH THE ASSESSEE HAS MADE A SUBMISSION BEFORE THE LD. CIT ( A) BUT HE HAS NOT SPECIFICALLY ADJUDICATED THE ISSUE AT HAND. THE ASSESSEE BEING A MANUFACTURER AND AN EXPORTER OF HOME FURNIS HINGS HAS INVESTED RS.1.00 LAC IN A COLLEGE BEING SET UP BY T HE TEXTILE EXPORTERS TO GIVE BACHELOR DEGREE IN TEXTILE ENGINE ERING. IF ONE APPLIES THE PRINCIPLES OF LAW ENUNCIATED BY THE HON 'BLE APEX COURT IN THE CASE OF S.A. BUILDERS LTD. VS CIT 288 ITR 1(S.C.) IT WILL BE SEEN THAT THE CASE OF THE ASSESSEE IS COVER ED BY THE RATIO OF THE JUDGMENT OF THE HON'BLE APEX COURT. AS PER THE HON'BLE APEX COURT, WHAT IS TO BE SEEN IS THE PURPOSE FOR W HICH THE MONEY IS UTILISED. IF THE MONEY IS UTILISED IN A W AY THAT MAKES I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 5 COMMERCIAL SENSE AND HELPS IN RUNNING THE BUSINESS OF THE ASSESSEE MORE EFFICIENTLY, THEN IT CAN BE SAID THAT THE INTEREST PAID IN RESPECT OF THE BORROWED MONEY HAS BEEN INCU RRED FOR THE PURPOSES OF COMMERCIAL EXPEDIENCY. MOREOVER, THE L D. AR HAS DEMONSTRATED THAT AS PER THE BALANCE SHEET, THE ASS ESSEE HAD A CAPITAL OF RS. 2.73 CRORES AND THE PROFIT FOR THE Y EAR WAS RS. 16.94 LACS. THESE FIGURES, IN OUR OPINION, WERE SU FFICIENT TO MEET THE INVESTMENT REQUIREMENTS AS WELL AS THE AMOUNT G IVEN AS ADVANCE TO M/S VICTORY ENTERPRISES. THESE FACTS WE RE BEFORE THE LD. CIT (A) ALSO BUT HE HAS NOT SPECIFICALLY DEALT WITH THEM IN THE IMPUGNED ORDER. THEREFORE, ON AN OVERALL VIEW OF T HE FACTS OF THE CASE AND THE JUDICIAL PRONOUNCEMENTS REFERRED TO AB OVE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS.54,477/- ON ACCOUNT OF INTEREST. HENCE THIS GROUND OF THE ASSE SSEES APPEAL IS ALLOWED. 5. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.2 1,132/- ON ACCOUNT OF 1/5 TH OF THE TELEPHONE EXPENSES BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). THE LD. A R SUBMITTED THAT ALL THE TELEPHONES WERE USED FOR BUSINESS PURP OSES ONLY. HOWEVER, THE ASSESSEE COULD NOT SUBMIT ANY EVIDENCE EITHER BEFORE THE ASSESSING OFFICER OR THE LD. CIT (A) TO JUSTIFY HIS I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 6 CONTENTION. HOWEVER, LOOKING INTO THE QUANTUM OF D ISALLOWANCE AS WELL AS A SPECIFIC PRAYER OF THE ASSESSEE THAT T HE QUANTUM OF DISALLOWANCE MAY BE FIXED AT 1/10 TH , WE FEEL THAT IT WOULD SERVE THE INTEREST OF JUSTICE IF THE DISALLOWANCE IS REST RICTED TO 1/10 TH OF THE TOTAL TELEPHONE EXPENSES. HENCE, THIS GROUND O F THE ASSESSEES APPEAL IS ALSO ALLOWED. 6. THE THIRD GROUND OF THE ASSESSEES APPEAL PER TAINS TO ADDITION OF RS.20,32,177/-. IT IS SEEN THAT THE AS SESSEE HAD DECLARED SHORT TERM CAPITAL GAINS OF RS.1,19,570/- ON ACCOUNT OF SALE OF LAND IN THE COMPUTATION OF HIS INCOME. DUR ING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED T O FURNISH THE DETAILS OF LAND SOLD. AS PER DETAILS SUBMITTED BY T HE ASSESSEE, A PLOT WHICH WAS PURCHASED ON 12.5.2006 FOR AN AMOUNT OF RS. 16,16,800/- WAS SOLD ON 21.8.2007 FOR RS. 19,20,000 /-. ON EXAMINATION OF THE SALE DEED OF THIS PLOT, THE AO N OTED THAT THE CIRCLE RATE OF THE PROPERTY WAS AT RS.39,52,177/-. THE ASSESSEE WAS, THEREFORE, ASKED TO SHOW CAUSE AS TO WHY THE S ALE VALUE OF THE PROPERTY SHOULD NOT BE TAKEN AT RS.39,52,177/- AS PER SECTION 50C OF THE ACT AGAINST RS. 19,20,000/- TAKE N BY HIM. THE REPLY OF THE ASSESSEE WAS CONSIDERED BY THE AO BUT THE SAME WAS I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 7 NOT FOUND TENABLE FOR THE REASONS DISCUSSED IN PA RAS 3.1 TO 3.8 OF THE ASSESSMENT ORDER, WHICH ARE REPRODUCE D BELOW:- 3.1 THE REPLY OF THE ASSESSEE AS DETAILED ABOVE H AS BEEN CONSIDERED. THE ASSESSEE TOOK HIS TIME TO FILE THE REPLY IN SPITE OF NUMBER OF OPPORTUNITIES AND THERE AFTER CAME WITH THE REPLY STATING THE DEAL OF PROPERTY W AS STARTED ON 18 TH JAN. 2007. HOWEVER IT WAS CONCLUDED IN THE MONTH OF AUG.2007. IT IS FURTHER MENTIONED THA T CIRCLE RATE OF LAND IN THE RELEVANT AREA WAS INCREA SED FROM RS. 1 700 TO RS.6000 W.E.F. 01.04.2007 CAUSING A SHARP INCREASE OF 253%. SINCE THE DEAL WAS STARTED IN JAN.2007, OUR SALE PRICE WAS REASONABLE QUA CIRCLE RATE IN THE MONTH OF JAN.2007. 3.2 THE ASSESSEE ALONG WITH THE REPLY FILED A PHOTOCOPY OF A SO CLAIMED IKRANAMA' BETWEEN THE ASSESSEE AND THE PURCHASERS. THOUGH THERE ARE THREE PURCHASERS BUT THE SO CLAIMED IKRAMAMA IS SIGNED BY ONLY ONE PERSON AND NOT BY ALL THE PURCHASERS. FURT HER THERE IS NO NAME & ADDRESS OF THE WITNESS ON THE SO CLAIMED IKRAMAMA. GENERALLY IN ALL SUCH IKRAMAMA OF THE PROPERTY DEALS THERE IS ALWAYS AN ADVANCE AMOUN T WITH THE CLAUSE THAT IF THE PURCHASER FAILS TO MAKE THE FULL PAYMENT AND TO GET THE DEAL REGISTERED BY A SP ECIFIC DATE THAN THE ADVANCE AMOUNT WILL BE FORFEITED AND IF THE SELLER FAILS TO HONOUR IKRAMAMA BUT WITHOUT AN ADVANCE THERE IS A MENTION OF PENALTY OF RS. 1 LAKH IN CASE OF CANCELLATION OF DEAL WHICH IS NOT ACCORDING TO THE GENERAL PRACTICE FOR SUCH DEALS. 3.3 THE CONSIDERATION PAYMENTS BY EACH OF THE THREE PURCHASER FOR EACH SHARE AND THE REGISTRY IN THE NA ME OF THREE PERSONS CLEARLY SHOW THAT THERE WERE THREE PURCHASERS AND THE SO CLAIMED IKRAMAMA SIGNED BY ONLY ONE PURCHASER HAS NO AUTHENTICITY. IN VIEW OF THE ABOVE IT IS EVIDENT THAT THE SO CLAIMED IKRAMAMA IS CONCOCTED AND AN AFTER THOUGHT OF THE ASSESSEE. EVE N OTHERWISE FOR THE PURPOSE OF SALE CONSIDERATION THE DATE OF EXECUTION OF THE SALE DEED IS RELEVANT AND NOT T HE DATE OF IKRAMAMA. AS SUCH THE CONTENTION OF THE I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 8 ASSESSEE THAT THE DEAL OF THE PROPERTY WAS STARTED ON 18 TH JAN. 2007 IS NOT ACCEPTABLE SPECIALLY WHEN THERE I S NO MENTION IN THE SALE DEED ABOUT THE SO CLAIMED IKRAMAMA DATED 18.01.2007. 7. BASED ON THIS REASONING, THE ASSESSING OFFICER T OOK THE VALUE OF SALES CONSIDERATION AT RS. 39,52,177/- FOR THE PURPOSES OF SECTION 50C OF THE ACT AS AGAINST RS. 19,20,000/ - DECLARED BY THE ASSESSEE AND AN ADDITION OF RS. 20,32,177/- WAS MADE UNDER THE HEAD CAPITAL GAIN. ON APPEAL, THE LD. CIT (A) CONFIRMED THE ADDITION. 8. LD. AR SUBMITTED THAT PLOT NO. 154 MEASUR ING 481.25 SQ. METERS AND BUILDING THEREON WAS SOLD FOR A CONSIDER ATION OF RS. 19,20,000/- VIDE SALE DEED DATED 21/08/2007 TO SH. PAWAN KUMAR, ASHISH KUMAR & GIRISH KUMAR. THE SALE CONSID ERATION WAS RECEIVED BY CHEQUE NO. 959006 DATED. 18.08.2007 , CH. NO. 235157 DATED 20.08.2007, AND CH. NO. 891885 DATED 2 0.08.2007 EACH AMOUNTING TO RS. 6,40,000/-. HE SUBMITTED THA T THE DEAL OF PROPERTY WAS STARTED ON 18 TH JANUARY, 2007. HOWEVER, IT WAS CONCLUDED IN THE MONTH OF AUGUST, 2007. IT IS FURTH ER MENTIONED THAT CIRCLE RATE OF LAND IN THE RELEVANT AREA WAS I NCREASED FROM RS. 1700 TO RS.6000 W.E.F. 01.04.2007 CAUSING A SHA RP INCREASE OF 253%. SINCE, THE DEAL WAS STARTED IN FEBRUARY 20 07; SALE I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 9 PRICE WAS REASONABLE QUA CIRCLE RATE IN THE MONTH O F FEBRUARY 2007. IT WAS FURTHER SUBMITTED THAT SALE CONSIDERAT ION WAS ONLY RS. 19,20,000/- AND THERE WAS NO CONSIDERATION OVER & ABOVE THE SALE PRICE MENTIONED IN THE SALE DEED. HENCE, THERE IS NO SUPPRESSION OF SALE CONSIDERATION AT OUR END. MOREO VER, THERE IS NO EVIDENCE TO PROVE THAT THE SALE CONSIDERATION WA S MORE THAN AS MENTIONED IN SALE DEED. HE FURTHER SUBMITTED THA T IT IS TO BE APPRECIATED THAT A STEEP HIKE IN CIRCLE RATE I.E. R S.1700 AS ON 31.03.2007 & RS.6000 AS ON APRIL 2007 CANNOT BE A B ASIS FOR INCREASING THE SALE CONSIDERATION. HE ALSO DREW OUR ATTENTION TO THE WRITTEN SUBMISSIONS MADE BEFORE THE AO AND THE LD. CIT (A). THESE SUBMISSIONS ARE BEING REPRODUCED HEREIN UNDER FOR A READY REFERENCE: 1. THE ADDITION SUGGESTED IS ERRONEOUS SINCE SECT ION 50-C MUST HAVE DIRECT NEXUS, ADDITIONALLY IT MUST EMERGE FROM THE PROVISIONS OF SECTION 45 BEING THE CHARGING SECTION WHICH CALLS FOR THE LEVY ON PROFIT AND GAINS ARRIVED / ACCRUED AND NOT THE STAMP VALUATION AUTHORITY'S VALUATION. 2. SECTION 50-C DOES NOT COMMENCE WITH THE NON OBSTINATE CLAUSE HENCE CANNOT BE CONSTRUED TO OPERA TE WITHOUT DUE OBEDIENCE AND CONFIRMATION WITH THE OTH ER PROVISIONS OF THE ACT THUS THE PROVISIONS OF SECTIO N 48 WHEREIN IS STIPULATED THE FULL VALUE OF CONSIDERATI ON ARISING / ACCRUING AS A RESULT OF THE 'TRANSFER' OF THE CAPITAL ASSET AND WHICH DOES NOT HAVE WITHIN ITSELF THE AMBIT FOR VALUATION OF THE VALUATION OFFICER FOR PU RPOSE OF STAMP DUTY. I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 10 3. PERTINENTLY THE PROVISION OF SECTION 50-C IS O NLY 'A MEASURE' FOR COMPUTATION OF THE TAX WHICH CANNOT DETERMINE AND REGULATE BY RELATING BACK TO THE CHAR GING SECTION 45' REVERSE WAYS AND BY FALLING REVERSE WAY S WITH THE SCOPE OF COMPUTATION OF TAX CHARGEABLE U/S 4 AND 5 OF THE ACT. EVEN THE SAID SUGGESTION TO HAVE BEEN RENDERED PRESUPPOSES THE LEVY FACTUALLY AND ACTUALL Y NEVER IN EXISTENCE AND NEITHER EMERGING OUT OF THE TRANSACTIONS BETWEEN THE TWO CONTRACTING PARTIES. 4. THE INTENT AND SCOPE OF THE PROVISIONS IS TOWA RDS CHECKING AND WORKING THE TAX EVASION AS DISCERNIBLE FROM CONFISCATORY MEASURE DECLINING THE BENEFITS EMERGING OUT OF IT WHICH WILL NOT BE AVAILABLE SINC E THE EXCESS/DIFFERENTIAL UNAVAILABLE FOR SET OFF UNDER T HE PROVISIONS OF SECTION 54 TO 54ED WHICH IS BEING SAI D SO SINCE THE INCOME TAX ACT, 1961 IS AN 'INTEGRATED CO DE' AND HAS TO BE READ IN TOTALITY. 5. THE SECTION IS MERELY SUBSTITUTING THE 'VALUATI ON OF THE STAMP VALUATION AUTHORITY' WITHIN THE WORDS OF THE ACT 'TOTAL INCOME' RESULTING ALTERING THE SUBJECT M ATTER OF THE INCOME TAX ACT ITSELF WHERE IN THE CHARGEABILIT Y RATES AND HEADS IMPACTED TOO ARE UNSPECIFIED FOR TH E YEAR CONCERNED. MORE SO THE CHARGEABILITY IS OF THE NET OF THE INCOME TAX WHEREBY TANGENT TO IT THE WHOLE AMOUNT IS BEING DEEMED ACCRUED/ARISING WHICH RENDERS ERRONEOUS APPLICATION OF LAW. 6. THE CONCEPT OF 'TOTAL INCOME' IS ALTERCATED WI TH THE VALUATION OF STAMP VALUATION AUTHORITY, HENCE CUTS THROUGH THE ISSUE. 7. THE VALUATION UNDER DIFFERENT STATUE IS BEING INTERPOLATED UNDER THE FISCAL STATUE WITHOUT EVEN T HERE BEING ANY CONCLUSION OF THE ASSESSMENT PRESCRIBED UNDER CHAPTER XIV OF THE ACT. 8. EVEN THE MARKET VALUE/ STAMP DUTY ARE DISCERNI BLE CONCEPTS WITHIN THEMSELVES AND IMPACTING THE STAMP I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 11 DUTY AFFIXING UPON THE INSTRUMENT OF TRANSFER WHICH DO NOT CONNOTE THE CONSIDERATION RECEIVED AND HENCE TH E CHARGEABILITY IS MISCONCEIVED. 9. U/S 50C (2) EXPLANATION 2 THE WORD CONTAINED ARE 'ASSESSABLENOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER LAWTHE WORD NOTWITHSTANDING R.W. ANY OTHER LAW RENDERS SUPPORT TO THE MAIN PROVISIONS OF THE ACT AND DOESN'T CONTROL THE PROVISION. THE PROVISION DOES NOT EXPLAIN /CONSIDER S THE ANOMALY WITHIN THE LAW SUCH THAT TO RENDER A RELIAN CE BLINDLY ON VALUE ADOPTION. 10. U/S 50C(2) THE RIGHTS OF ASSESSES AND DUTY OF REVENUE ARE PRESCRIBED WHEREIN THE PROVISION COMMENCES AS 'WITHOUT PREJUDICE TO THE WHERE ' MEANING THEREBY THE PROVISION IS AN ISOLATED CODE WHEREIN THE MATTER SHALL CAN BE REFERRED TO THE VALUATION OFFICER 'WHERE THE VALUE ADOPTED/ASSESSED , UNDISPUTED WHICH PRESENTLY IS BEING PRAYED TO BE INVOKED BEFORE DETERMINING THE CONDITIONS AND TOO CONSIDERING THE LOGISTICS RELATABLE TO THE PLACE AN D TIMING OF PROPERTY UNDER VALUATION. 9. LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. BEFORE PROCEEDING TO ADJUDICATE THE ISSUE AT HA ND, IT WILL BE WORTHWHILE TO RECAPITULATE THE LEGISLATIVE INTENT B EHIND THE INTRODUCTION OF SECTION 50C AND ALSO GO THROUGH THE PROVISIONS OF SECTION 50C. SECTION 50C WAS INTRODUCED IN THE INCO ME-TAX ACT, 1961 BY THE FINANCE ACT, 2002 WITH EFFECT FROM 1-4- 2003 FOR SUBSTITUTING VALUATION DONE FOR STAMP VALUATION PUR POSES AS FULL I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 12 VALUE OF CONSIDERATION IN PLACE OF APPARENT CONSIDE RATION SHOWN BY THE TRANSFEROR OF CAPITAL ASSET, BEING LAND OR B UILDING AND, ACCORDINGLY, CALCULATING CAPITAL GAINS UNDER SECTIO N 48. BY THE EXPLANATORY NOTES TO THE AMENDMENT IT WAS CLARIFIED THAT - (1) SECTION 50C IS A SPECIAL PROVISION FOR DETERMINING THE FULL VALUE OF CONSIDERATION IN CASE S OF TRANSFER OF IMMOVABLE PROPERTY, BEING LAND OR BUILD ING OR BOTH; (2) SECTION 50C PROVIDES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING A S A RESULT OF TRANSFER OF LAND OR BUILDING OR BOTH IS L ESS THAN THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITIES FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF TRANSFER, THEN VALUE SO ADOPTED OR ASSESSED BY THEM SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION; (3) IT IS ALSO PROVIDED THAT WHERE THE ASSESSEE CLAIMS THAT THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES IS MORE THAN THE FAIR MARKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER AND HE HAS NOT I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 13 DISPUTED THIS VALUE BEFORE THE APPELLATE AUTHORITIE S OR THE COURT UNDER STAMP DUTY ACT THEN THE ASSESSING OFFICER MAY REFER THE VALUATION OF SUCH PROPERTY UN DER TRANSFER TO THE VALUATION OFFICER IN ACCORDANCE WIT H SECTION 55AOF THE INCOME-TAX ACT, 1961. IF THE FAIR MARKET VALUE SO DETERMINED BY THE VALUATION OFFICER IS LESS THAN THE VALUE ADOPTED FOR STAMP DUTY PURPOSES THE ASSESSING OFFICER MAY TAKE SUCH FAIR MARKET VAL UE TO BE THE FULL VALUE OF CONSIDERATION. ON THE OTHER HAND, IF THE FAIR MARKET VALUE DETERMINED BY THE VALUATION OFFICER IS MORE THAN THE VALUE ADOPTED OR ASSESSED FOR STAMP DUTY PURPOSES THE ASSESSING OFFICER SHALL ADOPT SUCH FAIR MARKET VALUE DETERMIN ED BY THE STAMP VALUATION AUTHORITIES AS FULL VALUE OF CONSIDERATION AND HE SHALL NOT ADOPT THE VALUATION DONE BY THE VALUATION OFFICER AS FULL VALUE CONSIDERATION; (4) THE INSERTION OF SECTION 50C IS MADE EFFECTIVE FROM 1-4-2003 AND, ACCORDINGLY, WOULD BE APPLICABLE FOR THE ASSESSMENT YEAR 2003-04 AND THE SUBSEQUENT YEARS. I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 14 EARLIER THERE USED TO BE A PROVISION IN SECTION 52 OF THE INCOME-TAX ACT, 1961 WHICH ENABLED THE ASSESSIN G OFFICER TO REFER THE PROPERTY UNDER TRANSFER TO THE VALUATION OFFICER FOR DETERMINING MARKET VALUE. HOWEVER, IN K.P. VARGHESE VS. ITO (1981) 131 ITR 59 7 (SUPREME COURT), IT WAS HELD THAT SECTION 52(2) CAN NOT BE APPLIED TO GENUINE TRANSACTION UNLESS THERE ARE EVIDENCES TO SHOW THAT CONSIDERATION DECLARED IN TH E SALE DEED IS UNDERSTATED. IN OTHER WORDS UNLESS THE REVENUE WAS ABLE TO SHOW THAT SOMETHING OVER AND ABOVE THE SALE CONSIDERATION HAD PASSED HANDS BETWEEN THE TRANSFEREE AND THE TRANSFEROR, SECTION 52(2) COULD NOT BE INVOKED. IT BECAME ALMOST A HERCULEAN TASK FOR THE ASSESSING OFFICER TO COLLECT EVIDENCE TO SHOW THE EXCHANGE OF ADDITIONAL MONEY F OR CONSIDERATION WAS OTHER THAN APPARENT SALE CONSIDERATION. ACCORDINGLY, IT WAS CONSIDERED TO IN SERT A DEEMING PROVISION BY WAY OF SECTION 50C FOR SUBSTITUTING APPARENT SALE CONSIDERATION BY VALUATI ON DONE BY SVA SUBJECT TO CERTAIN CONDITIONS. I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 15 SECTION 50C OF THE I.T. ACT 50C. SPECIAL PROVISION FOR FULL VALUE OF CONSIDERA TION IN CERTAIN CASES: (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITA L ASSET, BEING LAND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER I N THIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUT Y IN RESPECT OF SUCH TRANSFER THE VALUE SO ADOPTED OR ASSESSED OR ASSESSED OR ASSESSABLE SHALL, FOR THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VA LUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESU LT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB- SECTION (1), WHERE - A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFICER THAT THE VALUE ADOPTED OR ASSESSED OR ASSES SED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY UNDE R SUB-SECTION (1) EXCEEDS THE FAIR MARKET VALUE OF TH E PROPERTY AS ON THE DATE OF TRANSFER; B) THE VALUE SO ADOPTED OR ASSESSED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT BEEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MADE BEFORE ANY I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 16 OTHER AUTHORITY, COURT OR THE HIGH COURT, THE ASSES SING OFFICER MAY REFER THE VALUATION OF THE CAPITAL ASSE T TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE, THE PROVISIONS OF SUBSECTIONS (2), (3), (4), (5) AND (6) OF SECTION 16A, CLAUSE (I) OF SUB-SECTION (1) A ND SUB- SECTIONS (6) AND (7) OF SECTION 23A, SUBSECTION (5) OF SECTION 24, SECTION 34AA, SECTION 35 AND SECTION 37 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957), SHALL, WITH NECESSARY MODIFICATIONS APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESSING OFFICER UNDER SUBSECTION (1) OF SE CTION 16AOF THAT ACT. EXPLANATION1. - FOR THE PURPOSES OF THIS SECTION VALUATION OFFICER SHALL HAVE THE SAME MEANING AS IN CLAUSE (R) OF SECTION 2 OF THE WEALTH-TAX ACT, 1957 (27 OF 1957). EXPLANATION 2 - FOR THE PURPOSES OF THIS SECTION, T HE EXPRESSION ASSESSABLE MEANS THE PRICE WHICH THE STAMP VALUATION AUTHORITY WOULD HAVE, NOTWITHSTANDI NG ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE, ADOPTED OR ASSESSED IF IT WERE REFERRED TO SUCH AUTHORITY FOR THE PURPOSES OF THE PAYMENT OF STAMP DUTY. (3) SUBJECT TO THE PROVISIONS CONTAINED IN SUB-SEC TION (2), WHERE THE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY REFERRED TO IN SUB-SECTION (1), THE I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 17 VALUE SO ADOPTED OR ASSESSED BY SUCH AUTHORITY SHAL L BE TAKEN AS THE FULL VALUE OF THE CONSIDERATION REC EIVED OR ACCRUING AS A RESULT OF THE TRANSFER. 11. ON A PERUSAL OF THE PROVISIONS OF SECTION 50C, THE BASIC INGREDIENTS OF THE PROVISIONS EMERGE AS UNDER : -THERE SHOULD BE A TRANSFER OF CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH; -THERE SHOULD BE A TRANSFER OF SUCH CAPITAL ASSET BY WAY OF REGISTRATION WITH THE STAMP DUTY AUTHORITIES; -STAMP DUTY IS SOUGHT TO BE IMPOSED BY THE STAMP VALUATION AUTHORITIES AT CERTAIN VALUE OF THE CAPIT AL ASSET WHICH IS DIFFERENT THAN THE SALE CONSIDERATION SHOW N IN THE DOCUMENTS OF TRANSFER SOUGHT TO BE REGISTERED; -WHERE VALUATION DONE BY THE STAMP VALUATION AUTHOR ITIES FOR LEVYING STAMP DUTY IS LESS THAN THE SALE CONSID ERATION SHOWN BY THE ASSESSEE IN THE SALE DEED SECTION 50C CANNOT BE INVOKED; I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 18 -WHERE VALUATION DONE BY THE STAMP VALUATION AUTHORITIES FOR LEVYING STAMP DUTY IS MORE THAN THE SALE CONSIDERATION SHOWN BY THE TRANSFEROR IN THE SALE D EED THEN SUCH HIGHER VALUATION WILL BE CONSIDERED AS FU LL VALUE OF CONSIDERATION AND, ACCORDINGLY, SUCH FULL VALUE OF CONSIDERATION BEING VALUATION DONE BY THE STAMP VALUATION AUTHORITIES WILL BE SUBSTITUTED FOR APPAR ENT CONSIDERATION; -THE CAPITAL GAINS UNDER SECTION 48 SHALL BE COMPU TED ACCORDINGLY ON THE BASIS OF SUCH HIGHER FULL VALUE OF CONSIDERATION AND NOT ON THE BASIS OF APPARENT CONSIDERATION SHOWN IN THE SALE DEED; -IF THE ASSESSEE, BEING TRANSFEROR, CLAIMS BEFORE THE ASSESSING OFFICER THAT FAIR MARKET VALUE OF THE PRO PERTY UNDER TRANSFER IS LESS THAN THE VALUATION DONE BY T HE STAMP VALUATION AUTHORITIES THEN THE ASSESSING OFFI CER MAY REFER THE PROPERTY TO THE VALUATION OFFICER FOR DETERMINING ITS FAIR MARKET VALUE AS ON THE DATE OF THE TRANSFER; -SUCH REFERENCE WOULD BE MADE IN ACCORDANCE WITH I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 19 SECTION 55A; -ON RECEIPT OF VALUATION REPORT FROM THE VALUATION OFFICER, THE ASSESSING OFFICER HAS TO COMPARE THE FAIR MARKE T VALUE AS DETERMINED BY THE VALUATION OFFICER WITH THE VAL UATION DONE BY THE STAMP VALUATION AUTHORITIES UNDER THE S TAMP DUTY ACT AND WITH THE APPARENT SALE CONSIDERATION S HOWN BY THE ASSESSEE IN THE SALE DEED; -WHERE VALUATION DONE BY THE VALUATION OFFICER IS MORE THAN THE VALUATION DONE BY THE STAMP VALUATION AUTHORITIES (SVA) THEN VALUATION DONE BY THE SVA WO ULD BE TAKEN AS FULL VALUE OF CONSIDERATION AND CAPITAL GAINS WILL BE CALCULATED ACCORDINGLY; -IF VALUATION DONE BY THE VALUATION OFFICER IS LES S THAN THE VALUATION DONE BY THE SVA THEN VALUATION DONE BY TH E VALUATION OFFICER WOULD BE ADOPTED AS FULL VALUE OF CONSIDERATION AS AGAINST THE APPARENT CONSIDERATION SHOWN BY THE ASSESSEE OR THE VALUATION DONE BY THE SVA AND CAPITAL GAINS BE CALCULATED ACCORDINGLY; -IF VALUATION DONE BY THE VALUATION OFFICER IS LES S THAN THE VALUATION DONE BY THE SVA AS WELL AS SALE CONSIDERA TION I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 20 SHOWN BY THE ASSESSEE IN THE SALE DEED THEN APPAREN T CONSIDERATION SHOWN IN THE SALE DEED WOULD ALONE BE ACCEPTED AS FULL VALUE OF CONSIDERATION AND CAPITAL GAINS BE CALCULATED ACCORDINGLY, I.E. AS SHOWN BY THE ASSESS EE; -WITH EFFECTFROM1.10.2009, APPLICABLE FOR THE ASSES SMENT YEAR 2010-11 THE FINANCE ACT, 2009 (NO.2) HAS ENABL ED THE ASSESSING OFFICER TO FIND OUT STAMP DUTY VALUE ASSESSABLE BY THE SVA IN CASES WHERE AGREEMENTS TO SALE WERE EXECUTED, CONSIDERATION CHANGED HANDS AND POSSESSION OF THE PROPERTY WAS HANDED OVER TO THE B UYER BUT WITHOUT GETTING THE TRANSFER REGISTERED WITH TH E SVA. IN SUCH SITUATION THE STAMP DUTY VALUATION ASSESSAB LE WOULD ALSO BE TREATED AS FULL VALUE OF CONSIDERATIO N; -USE OF THE WORD SHALL IN SECTION 50C MAKES IT MANDATORY FOR THE ASSESSING OFFICER TO ADOPT THE VA LUATION DONE BY THE SVA IN PLACE OF APPARENT CONSIDERATION, IF NECESSARY CONDITIONS UNDER SECTION 50C ARE SATISFIE D. THE ASSESSING OFFICER HAS NO DISCRETION. 12. THE DISPUTE IN THE PRESENT CASE HAS ARISEN BECA USE THE I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 21 ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HAVE DO UBTED THE VERACITY OF THE IKRARNAMA OR THE AGREEMENT ON THE GROUND THAT THE SAME IS SIGNED BY ONLY ONE PERSON WHEREAS THE LA ND HAS BEEN FINALLY SOLD TO THREE PARTIES. THE ASSESSING OFFIC ERS OBJECTION IS ALSO ON THE ISSUE THAT THE AGREEMENT DOES NOT MEN TION ANY ADVANCE AMOUNT AT THE TIME OF THE SIGNING OF THE AGREEMENT. YET ANOTHER OBJECTION IS THAT THE SALE DEED EXECUTED IN JULY 2001 DOES NOT MAKE ANY REFERENCE TO THE AGREEMENT. THUS , AS PER THE ASSESSING OFFICER, AND AS CONFIRMED BY THE LD. CIT (A), THE AGREEMENT WAS BOGUS AND AN AFTERTHOUGHT. HOWEVER, B OTH THE AO AND THE LD. CIT (A), WHILE ADOPTING THE VALUE AS PE R THE STAMP VALUATION AOTHORITY HAVE SOMEHOW OVERLOOKED THE PRO VISIONS OF SECTION 50C (2) WHICH REQUIRES THAT THE AO SHOULD R EFER THE ISSUE OF VALUATION TO THE DVO WHERE THE ASSESSEE HAS RAIS ED A SPECIFIC OBJECTION/PLEA TO THE EFFECT. THEREFORE, WITHOUT GO ING INTO THE ALLEGATION OF THE DEPARTMENT REGARDING THE KRARNAMA BEING BOGUS, IF THE FACTS OF THE CASE ARE EXAMINED IN THE LIGHT OF THE LEGAL PROVISIONS, IT IS SEEN THAT AS PER SECTION 50 C(2)(B) OF THE ACT, IF THE ASSESSEE, BEING TRANSFEROR, CLAIMS BEFORE TH E ASSESSING OFFICER THAT THE FAIR MARKET VALUE OF THE PROPERTY UNDER TRANSFER IS LESS THAN THE VALUATION DONE BY THE STAMP VALUATION AUTHORITIES, I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 22 THEN THE ASSESSING OFFICER MAY REFER THE PROPERTY T O THE VALUATION OFFICER FOR DETERMINING THE FAIR MARKET VALUE AS ON THE DATE OF TRANSFER. THE CONDITIONS FOR MAKING REFERENCE U/S 55A OF THE ACT ARE THAT (1) VALUATION DONE BY THE STAMP VALUATION AUTHORITY IS MORE THAN THE APPARENT SALE CONSIDERATION; (2) THE ASSESSEE MAKES A CLAIM BEFORE THE ASSESSING OFFICER THAT FAI R MARKET VALUE OF THE PROPERTY UNDER TRANSFER IS LESS THAN THE VAL UATION DONE BY STAMP VALUATION AUTHORITY. IF THESE TWO CONDITIONS ARE SATISFIED, THE ASSESSING OFFICER IS BOUND TO MAKE A REFERENCE TO THE VALUATION OFFICER. A PERUSAL OF THE SUBMISSIONS DA TED 28.10.2010 FILED BEFORE THE ASSESSING OFFICER SHOWS THAT IN PARA (J) OF THE REPLY, THE AR OF THE ASSESSEE HAS SUBMIT TED AS UNDER:- (J) U/S 50C(2) THE RIGHTS OF THE ASSESSEE AN DUTY OF REVENUE ARE PRESCRIBED WHEREIN THE PROVISION COMMENCES AS WITHOUT PREJUDICE TO THE..WHERE.MEANING THEREBY THE PROVISION IS AN ISOLATED CODE WHEREIN THE MATTER CAN BE REFERRED TO THE VALUATION OFFICER WHERE THE VALUE ADOPTED/ASSESSED , UNDISPUTED WHICH PRESENTLY IS BEING PRAYED TO BE INVOKED BEFORE DETERMINING THE CONDITIONS AND CONSIDERING THE LOGISTICS RELATABLE TO THE PLACE AN D TIMING OF THE PROPERTY UNDER VALUATION. 13. THIS SUBMISSION OF THE ASSESSEE, THOUGH NOT EXP RESSED WITH CRYSTAL CLARITY, IS A SPECIFIC REQUEST FOR MAKING A REFERENCE TO THE VALUATION OFFICER. BOTH THE ASSESSING OFFICER AS W ELL AS THE LD. I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 23 CIT (A) HAVE NOT SPECIFICALLY GIVEN THEIR FINDING O N THE ISSUE BUT THE SAME WAS PLEADED BEFORE US DURING THE COURSE OF HEARING OF THIS APPEAL. IT HAS BEEN HELD BY THE MUMBAI BENCH OF ITAT IN KALPATARU INDUSTRIES VS ITO IN I.T.A. NO. 5540/MUM/ 07 THAT IT IS MANDATORY ON THE PART OF THE ASSESSING OFFICER TO M AKE REFERENCE TO VALUATION OFFICER AS PER PROVISIONS OF SECTION 5 0C WHERE THE ASSESSEE CONTENDED THAT VALUATION AS DONE BY STAMP VALUATION AUTHORITY WAS NOT ACCEPTABLE TO HIM. SIMILARLY, IT WAS HELD BY LUCKNOW B BENCH OF THE ITAT IN MOHD. SHOAIB VS DC IT 29 DTR 306 THAT CLAUSES (A) AND (B) OF SUB-SECTION (2) OF SECTION 50C ARE IN CONTINUATION TO EACH OTHER AND THEREFORE, CONDIT IONS LAID DOWN IN BOTH THE CLAUSES ARE REQUIRED TO BE SATISFIED TO GETHER. THE ASSESSING OFFICER HAS TO REFER THE VALUATION TO THE DVO FOR DETERMINING THE FAIR MARKET VALUE IF THE PROPERTY U NDER TRANSFER IS LESS THAN VALUATION MADE BY THE STAMP VALUATION AUTHORITY AND FURTHER THAT HE HAS NOT DISPUTED THE ADDITION B EFORE APPELLATE AUTHORITIES UNDER STAMP DUTY ACT. AGAIN THE MUMBAI BENCH OF THE ITAT HAS HELD IN AJMAL FRAGRANCES & FA SHIONS (P) LTD. VS CIT 34 SOT 57 (MUM) THAT IF THE ASSESSEE OB JECTS TO THE STAMP DUTY VALUATION, THE ASSESSING OFFICER IS BOUN D TO REFER THE MATTER TO THE VALUATION OFFICER. A SIMILAR VIEW WA S TAKEN BY THE I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 24 G BENCH OF ITAT DELHI IN THE CASE OF SARWAN KUMAR VS ITO IN I.T.A. NO. 4379/DEL/2009. ON GOING THROUGH ALL THE SE JUDICIAL PRECEDENTS WE FIND THAT IT IS NOW AN ESTABLISHED PR OPOSITION OF LAW THAT WHERE AN ASSESSEE HAD CLAIMED BEFORE THE A O THAT VALUE OF LAND AND BUILDING ASSESSED BY STAMP VALUATION AU THORITY EXCEEDED FAIR MARKET VALUE OF PROPERTY, THEN IN TER MS OF SECTION 50C (2) (A) THE AO OUGHT TO HAVE REFERRED THE MATTE R TO VALUATION OFFICER INSTEAD OF STRAIGHTAWAY DEEMING THE VALUE A DOPTED BY THE STAMP VALUATION AUTHORITY AS FULL VALUE OF CONSIDER ATION. SIMILAR ARE THE FACTS IN THE CITED CASE OF PUNE BENCH IN TH E MATTER OF K.K. NAG LTD. VS. ACIT (52 SOT 381 PUNE) WHEREIN THE AO APPLYING PROVISIONS OF SECTION 50C, ADOPTED STAMP DUTY VALUE OF LAND AND BUILDING AS TOTAL SALE CONSIDERATION FOR THE PURPOS E OF COMPUTING THE CAPITAL GAIN. THE ASSESSEE RAISED THE OBJECTION THAT SINCE IT HAD CLAIMED THAT THE VALUE ASSESSED BY THE STAMP VA LUATION AUTHORITY EXCEEDED THE FAIR MARKET VALUE, THE AO OU GHT TO HAVE REFERRED THE MATTER TO THE VALUATION OFFICER TO ASC ERTAIN THE VALUATION. THE TRIBUNAL HAS HELD AS UNDER :- SECTION 50C PRESCRIBES FOR ADOPTION OF FULL VALUE OF CONSIDERATION IN CERTAIN CASES. IT IS PROVIDED THAT WHERE THE CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF THE TRANSFER OF A CAPITAL ASSET BEING LAN D OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED BY AN I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 25 AUTHORITY OF THE STATE GOVERNMENT FOR THE PURPOSES OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THEN THE VALUE SO ADOPTED BY THE STATE GOVERNMENT AUTHORITY SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF S UCH TRANSFER. THE SAID PROVISIONS OF SUB-SECTION (1) OF SECTION 50C ARE FURTHER CIRCUMSCRIBED BY SUB-SECTIO N (2) OF SECTION 50C. IN TERMS OF CLAUSE (A) OF SUB-S ECTION (2) OF SECTION 50C, IT IS PROVIDED THAT WHERE AN ASSESSEE CLAIMS BEFORE THE ASSESSING OFFICER THAT T HE VALUE ADOPTED OR ASSESSED BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) EXCEEDS THE FAIR MA RKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER, T HEN THE ASSESSING OFFICER MAY REFER VALUATION OF THE CA PITAL ASSET TO THE VALUATION OFFICER. IN INSTANT CASE, FACTUALLY IT IS EVIDENT THAT THE ASSESSEE HAD CLAIM ED IN THE RETURN OF INCOME ITSELF THAT THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY EXCEEDED THE FAIR MARKET VALUE AS ON THE DATE OF TRANSFER AS PROVIDED IN SECTION 50C(2)(A). UNDER THESE CIRCUMSTANCES, THE ASSESSING OFFICER OUGHT TO HAVE REFERRED THE MATTER TO THE VALUATION OFFICER INSTEAD OF STRAIGHTAWAY DEEMI NG THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY AS THE FULL VALUE OF CONSIDERATION. THE POINT MADE OUT BY THE REVENUE THAT IT IS ONLY DISCRETIONARY ON THE PA RT OF THE ASSESSING OFFICER TO REFER THE MATTER TO THE VALUATION OFFICER, IS QUITE UNTENABLE. THE DISCRETI ON VESTED IN THE ASSESSING OFFICER IN SUCH A SITUATION IS REQUIRED TO BE USED IN A JUDICIOUS MANNER. SECTION 50C IS A DEEMING PROVISION AND OSTENSIBLY INVOLVE CREAT ION OF AN ADDITIONAL TAX LIABILITY ON THE ASSESSEE AND, THEREFORE, NOTWITHSTANDING THE PRESENCE OF THE EXPRESSION MAY IN SECTION 50C (2)(A), THE ASSESSI NG OFFICER IN THIS CASE OUGHT TO HAVE REFERRED THE MAT TER TO THE VALUATION OFFICER FOR ASCERTAINING THE VALUE OF THE CAPITAL ASSET IN QUESTION. THEREFORE, THE ORDER OF THE COMMISSIONER (APPEALS) IS TO BE SET ASIDE AND THE I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 26 ASSESSING OFFICER IS TO BE DIRECTED TO ADOPT THE CO URSE MENTIONED IN SECTION 50C(2)(A) AND THEREAFTER, PROC EED TO DETERMINE CAPITAL GAIN ON SALE OF LAND AND BUILDING. 14. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. SMT. MANJU RANI JAIN (SUPRA) HAS EXPRESSED A SIMILAR VIE W WHEREIN THE ACTION OF LD. CIT (A) HAS BEEN UPHELD. THE LD. CIT (A) ON FINDING THAT AO HAD WORKED OUT CAPITAL GAIN BY ADOP TING MARKET VALUE OF PROPERTY FOR STAMP DUTY PURPOSES, HAD DIRE CTED AO TO REFER PROPERTIES TO VALUATION SALE OF THE DEPARTMEN T FOR PURPOSE OF VALUATION OF PROPERTIES AND THEREAFTER TO ADOPT VAL UATION FOR WORKING OUT THE CAPITAL GAINS IN VIEW OF THE PROVIS IONS OF SECTION 50C(2) OF THE ACT. THE PUNE BENCH OF THE TRIBUNAL I N THE CASE OF K.K. NAG LTD. VS. ACIT (SUPRA) AFTER DETAILED DISCU SSION OF THE PROVISIONS LAID DOWN U/S 50C OF THE ACT HAS HELD TH AT THE DISCRETION GRANTED IN SUCH A SITUATION IS REQUIRED TO USE IN A JUDICIOUS MANNER. SECTION 50C IS A DEEMING PROVISIO N AND OSTENSIBLY INVOLVES CREATION OF AN ADDITIONAL TAX L IABILITY ON THE ASSESSEE AND, THEREFORE, NOTWITHSTANDING THE PRESEN CE OF THE EXPRESSION MAY IN SECTION 50C (2)(A), THE AO IN T HIS CASE OUGHT TO HAVE REFERRED THE MATTER TO THE VALUATION OFFICE R FOR ASCERTAINING THE VALUE OF THE CAPITAL ASSET IN QUES TION. THE ORDER OF THE COMMISSIONER (APPEALS) WAS THUS HELD TO BE S ET ASIDE AND I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 27 THE AO WAS DIRECTED TO ADOPT THE COURSE MENTIONED I N SECTION 50C (2)(A) AND THEREAFTER PROCEED TO DETERMINE CAPI TAL GAIN ON SALE OF LAND AND BUILDING. 15. RESPECTFULLY FOLLOWING THE RATIO OF DECISIONS A S ABOVE, WE, WHILE SETTING ASIDE THE ORDERS OF THE AUTHORITIES B ELOW ON THE ISSUE, DIRECT THE AO TO ADOPT THE COURSE MENTIONED IN SECTION 50C(2)(A) AND THEREAFTER, PROCEED TO DETERMINE CAPI TAL GAIN ON SALE OF THE PROPERTIES IN QUESTION AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUND IS THUS ALL OWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLO WED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23 RD FEB. 2016. SD/- SD/- (J. SUDHAKAR REDDY) (SUDHANSHU SRIVAS TAVA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 23 RD OF FEBRUARY, 2016 GS I.T.A. NO. 4626/DEL/2011 ASSESSMENT YEAR 2008-09 28 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER ASSTT. REGISTRAR