Facts of the Case

The assessee filed his return declaring income including capital gains from sale of land. The case was selected for limited scrutiny due to mismatch between sale consideration reported in the return and value reported in AIR data.

The assessee sold a portion of land for ₹50,00,000 through a registered sale deed, whereas the stamp duty authority adopted a value of ₹1,11,60,000 for the same property. The Assessing Officer treated the stamp duty value as the full value of consideration under Section 50C and computed capital gains accordingly.

The assessee contended that he sold the land at ₹50,00,000 due to financial necessity and absence of higher offers, asserting that the stamp value did not reflect the true market value. Both the Assessing Officer and CIT(A) rejected the claim and did not refer the valuation dispute to the Departmental Valuation Officer (DVO).

Issues Involved

  1. Whether the Assessing Officer was justified in adopting stamp duty value under Section 50C without referring the matter to the DVO.
  2. Whether actual sale consideration should be accepted when it differs significantly from circle rate valuation.
  3. Whether non-reference to DVO renders the assessment unsustainable.

Petitioner’s Arguments (Assessee)

  • The actual sale consideration received was ₹50,00,000 through banking channels.
  • The stamp duty value was artificially high and did not reflect the fair market value.
  • Attempts to sell the property at higher value were unsuccessful.
  • The Assessing Officer should have referred the valuation dispute to the DVO under Section 50C(2).
  • Failure to do so violated statutory provisions and principles of fair assessment.

 Respondent’s Arguments (Revenue)

  • The assessee did not produce sufficient evidence to challenge the stamp duty valuation.
  • The stamp duty value adopted by the Sub-Registrar was correctly taken as full consideration under Section 50C.
  • Orders of the Assessing Officer and CIT(A) were justified.

Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the assessee had consistently disputed the stamp duty value adopted by the Sub-Registrar and claimed that it exceeded the fair market value of the property.

Section 50C(2) mandates that where such dispute is raised, the Assessing Officer should refer the valuation to the Departmental Valuation Officer. In the present case, both the Assessing Officer and the CIT(A) failed to do so.

The Tribunal held that the assessment based solely on stamp duty value without DVO reference was not sustainable. Accordingly, the matter was set aside and restored to the Assessing Officer for fresh assessment after obtaining valuation from the DVO.

The Assessing Officer was directed to provide adequate opportunity of hearing to the assessee during the remand proceedings. The appeal was allowed for statistical purposes.

Important Clarification

  • Reference to DVO under Section 50C(2) is mandatory when the assessee disputes stamp duty valuation.
  • Adoption of stamp value without such reference may invalidate the assessment.
  • All issues were kept open for fresh adjudication.
  • The remand does not express any opinion on merits of valuation.

Link to download the order -  https://itat.gov.in/public/files/upload/1694675461-ITA%20No.%2030%20Alld%202023%20Mohammad%20Nazim.pdf

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