Section 50C — AO is bound to apply the valuation given by DVO in the valuation report.
Facts:
The assessee purchased a flat for Rs.30,00,000 on 22-10-2003. This property was then sold on 29- 9-2004 for a total consideration of Rs.35,00,000. The stamp duty valuation of the said flat was Rs.1,18,07,180. The assessee was asked to show cause as to why the provisions of section 50C should not be applied. The assessee explained that the value of the property sold within a period of less than one year could not be expected to be as high as 1.18 crore. Further, the building was an old one and in dilapidated condition. The members of the society had resolved to construct a new building by demolishing the old one. Accordingly, the construction contract was entered with builders. As per the contract, the members were to pay certain amounts towards the construction cost and purchase of TDR. Since the assessee did not have money, she sold the flat to a third party with an agreement that the purchaser shall pay the construction cost and purchase cost of TDR to the builder. Further, the assessee explained that when the flat was sold, the building was already demolished and only the plinth was laid for the purpose of construction of new building.
Without prejudice to this main argument, the assessee also requested the Assessing Officer to refer the matter to the Valuation Officer. The DVO valued the said flat at Rs.46.48 lakh. The AO did not concur with the view of DVO as according to him the valuation done by the DVO was very low and further no deduction was required towards TDR. Further, according to the AO, section 50C(2) and section 16A of the Wealth-tax Act, 1957 do not bind the AO to follow the valuation done by the DVO.
Held:
Sub-section (2) of section 50C states that “……..where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A of wealth tax shall apply, with necessary modifications.
Sub-section (6) of section 16A of the Wealth-tax Act states that on receipt of order from the Valuation Officer, the Assessing Officer shall “proceed to complete the assessment in conformity with the estimate of the Valuation Officer”. Hence the AO has no option but to go by the estimate of the Valuation Officer.
The DVOs are experts in the matter of valuation by virtue of special qualification held by them in this field. The AO cannot ignore the report of the DVO.
The words used in sub-section (2) of section 50C that where reference is made to the DVO the provisions of sub-section (6) of section 16A of the Wealth-tax Act shall apply with necessary modifications. The ambit of expression ‘with necessary modifications’ implies striking out the inapplicable fractions of the provision which align strictly with the specifics of the Wealth-tax Act. This will not enable the AO to completely disregard the valuation report by the DVO.
