Facts of the Case

The assessee filed a return declaring income of ₹4,78,720. The case was selected for limited scrutiny to examine capital gains on sale of property.

During the year, the assessee sold agricultural land for ₹5,00,000, whereas the stamp duty valuation adopted by government authorities was ₹15,78,000. The Assessing Officer invoked Section 50C and computed long-term capital gain based on the higher stamp duty value, resulting in an addition of ₹14,61,600.

The CIT(A) partly confirmed the addition but directed correction of indexed cost calculation. The assessee appealed before the Tribunal.

Issues Involved

  1. Whether stamp duty value can be adopted as deemed sale consideration under Section 50C despite objection by the assessee.
  2. Whether the Assessing Officer was required to refer the valuation to the DVO under Section 50C(2).
  3. Whether comparable sale instances produced by the assessee should have been considered.

Petitioner’s (Assessee’s) Arguments

  • The actual market value of the land was significantly lower than the stamp duty valuation.
  • Comparable sale deeds of nearby properties during the same period were submitted to substantiate the declared sale consideration.
  • The Assessing Officer ignored these evidences.
  • Despite disputing the stamp duty value, the matter was not referred to the DVO as mandated by Section 50C(2).
  • The addition was therefore arbitrary and contrary to law.

 Respondent’s (Department’s) Arguments

  • Since the stamp duty valuation exceeded the declared consideration, Section 50C was rightly invoked.
  • The addition represented the difference between declared consideration and deemed value under the statute.
  • The orders of the lower authorities were justified.

 Court Order / Findings (ITAT)

  • The assessee had produced comparable sale deeds of properties in the same vicinity and period.
  • Both the Assessing Officer and CIT(A) failed to examine these evidences.
  • When the assessee disputes the stamp duty valuation, Section 50C(2) requires reference to the Departmental Valuation Officer.
  • Non-reference to the DVO despite specific objection was improper.

Accordingly:

  • The orders of the lower authorities were set aside.
  • The matter was restored to the Assessing Officer for fresh (denovo) assessment.
  • The Assessing Officer was directed to verify comparable sales and, if necessary, obtain valuation from the DVO.
  • Adequate opportunity of hearing must be provided to the assessee.

 Important Clarification

  • Adoption of stamp duty value is not automatic where the assessee disputes such valuation.
  • Reference to the DVO under Section 50C(2) is a crucial safeguard to determine fair market value.
  • Comparable sale instances are relevant evidence and must be examined.
  • Failure to follow due procedure warrants remand for fresh adjudication.

Link to download the order   https://itat.gov.in/public/files/upload/1679314395-Ajay%20Kumar%20Gupta%20Pdf.pdf

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