ITAT ‘H’ Bench, Mumbai
Before S. V. Mehrotra (AM) and
P. Madhavi Devi (JM)
ITA No. 5540/Mum/2007
A.Y. : 2005-06. Decided on : 24-8-2009
Counsel for assessee/revenue : K. Shivram/
Pradip Hedaoo
S. 50C in the event of the assessee contending that
valuation as done by Stamp Valuation Authority is not acceptable to him and
asking the Assessing Officer to make a reference to the Valuation Officer, it
is mandatory on the part of the Assessing Officer to make such a reference
notwithstanding that the assessee has not filed an appeal against such
valuation.
Per P. Madhavi Devi :
Facts :
The assessee, a partnership firm, filed its return of
income declaring total income of Rs.1,75,108. The assessee had sold its
factory premises for a consideration of Rs.15,05,000 and had shown profit on
sale of factory premises amounting to Rs.10,94,721. The market value of the
factory premises as per stamp valuation authorities was Rs.43,98,500. The
assessee drew the attention of the AO to the observations of the Bombay High
Court while admitting the petition filed by Practicing Valuers Association
and Others v. State of Maharashtra, (Writ Petition No. 2027 of 2001) and
contended that the valuation given in the stamp duty ready reckoner cannot be
universally accepted. It was also submitted that it had not preferred an
appeal against the valuation as done by Stamp Valuation Authorities since the
purchaser had already paid stamp duty. However, the assessee requested the AO
to make a reference to the valuation cell of the Department as per the
provisions of S. 50C. The AO held that the reference to the valuation officer
is optional and since the assessee had not objected to the value adopted by
the stamp valuation authority there was no need to refer the matter to the
valuation officer. He, accordingly, adopted the value of the property at
Rs.43,98,500 and computed short term capital gain at Rs.35,89,503.
The CIT(A) confirmed the order passed by the AO.
Aggrieved, the assessee preferred an appeal to the Tribunal
where it mainly argued that the matter be sent back to the file of the AO with
a direction to refer the same to the valuation officer for valuing the
property at market rate. It was also pointed out that the assessee was not the
owner of the land but was only a lessee and capital gain has arisen on
transfer of leasehold rights. It was also contended that in the case of
assignment of rights after obtaining necessary permission, S. 50C is not
applicable.
Held :
The assessee had transferred leasehold rights and had
itself offered capital gain on the same. S. 50C is a special provision for
determining full value of consideration in certain cases. The assessee while
making the claim before the AO has to satisfy him that the valuation adopted
by the stamp valuation authority is not based on sound criteria. In such a
case, the AO is bound to refer the matter to the DVO for arriving at the fair
market value of the property. The assessee had vide its letter filed with the
AO relied upon two decisions to the effect that the valuation given in the
stamp duty ready reckoner cannot be universally adopted. In such cases, it is
necessary for the AO to refer the matter to the DVO. The Tribunal has in
ITO v. Smt. Manju Rani Jain, 24 SOT 24 (Del.) and Mehraj Baid v. ITO,
(2008) 23 SOT 25 (Jodh.) held that the word ‘may’ used in S. 50C should be
read as ‘should’ and the AO has no discretion but to refer the matter to the
DVO for the valuation of the property. The Tribunal remanded the issue to the
file of the AO with a direction to refer the valuation of the property to the
DVO and determine the value in accordance with law.
The assessee’s appeal was allowed.
