IT APPEAL NOS. 4379 (DELHI) OF 2009 AND 2373 (DELHI) OF 2012
[ASSESSMENT YEAR 2006-07]

I.C. SUDHIR, JUDICIAL MEMBER 
AND B.C. MEENA, ACCOUNTANT MEMBER

Salil Aggarwal and Shailesh Gupta for the Appellant. 
Smt. Renuka Jain Gupta for the Respondent.

ORDER

ITA No. 4379/D/2009
I.C. Sudhir, Judicial Member - The assessee has questioned first appellate order on the following grounds :—

"1.2 The learned Commissioner of Income Tax (Appeal) has erred in taking the value of property at Rs. 64,10,000/- u/s 50C of the Income-tax Act, 1961 without appreciating the evidences explanation and details furnished during the appellate proceeding.

1.3 The learned commissioner of Income Tax (Appeal) has erred in not taking in to account circle rate which is Rs. 24,00,000/- and has taken the rate adopted by the parties at Rs. 64,10,000/-.

1.4 The learned Commissioner of Income Tax (Appeal) has not considered the fact that the value adopted by the assessing officer Rs. 64,10,000/- is not the circle rate adopted by the stamp duty authority but the higher amount of valuation agreed between the parties for paying stamp duty though the property was actually sold for Rs. 10,00,000/-

1.5 The learned Commissioner of Income Tax (Appeal) while passing the order has not appreciated the fact in the same period certain other land were sold by some other parties in the same vicinity where by the actual sales consideration was even less than the amount actually received by the assessee of Rs. 10,00,000/-."

2. We have heard and considered the arguments advanced by the parties in view of the orders of the authorities below, material available on record and the decisions relied upon.

3. The facts in brief are that the assessee a proprietor of a dairy concern had sold immovable property situated in the industrial area at Abadanpur in Distt. Bareily for a sale consideration of Rs. 10 lac (two deeds of Rs. 8 lac and Rs. 2 lac) as against the fair market value of Rs. 64,10,000/- shown in aggregate in two registration deeds for stamp purposes. The AO invoking the provisions of section 50C of the Act completed the assessment u/s 143(3) of the Act on 28.12.2008 at Rs. 57,54,670/-. This action of the AO was upheld by the Ld. CIT(A) on the basis besides others that no proper claim before the AO has been filed stating that the value adopted or assessed by the stamp valuation authority exceeds the fair market value.

4. In support of the grounds the Ld. AR submitted that in such a situation and facts of the case when the assessee had disputed before the AO the value adopted by the stamp valuation authority was not the fair market value of the property at the time of the transaction, it was mandatory on the part of the AO to refer the valuation of the said property u/s 50C (2) of the Act. In this regard he referred the contents of last page of the assessment order wherein the AO had mentioned that the section 50C (2) uses the word "may" or not "shall" refer the matter to the valuation officer defined u/s 2® of the Wealth Tax Act 1957. The AO has further mentioned that sufficient evidence was not produced before her to enable her to make reference to the valuation sale under clause 50C(2)(b) of the Act. In support the Ld. AR referred following decisions :—

5. The Ld. Sr. DR tried to justify the action of the authorities below on the issue. She submitted that u/s 50C (2) it is discretionary on the part of the AO to refer the mater to the Valuation Officer considering the facts and circumstances of the case. She submitted further that the decisions relied upon by the Ld. DR having distinguishable facts are not helpful to the assessee. She also referred contents of page No. 8 of para No. 4 of the first appellate order to support her contention that no such issue for reference the valuation of the property u/s 50©(2) to the valuation Officer was raised. She submitted further that it is the satisfaction of the AO to refer the valuation of the property u/s 50C(2) of the Act to the valuation officer if certain conditions are fulfilled. Ld. Sr. DR pointed out further that the circle rate prevailing in that area was Rs. 24 lacs per hectare whereas the assessee had sold 0.967 hectares. She submitted further that assessee did not challenge the valuation adopted by the stamp authority before the prescribed appellate authority. In this regard she referred the provisions laid down u/s 50C(2) (b) of the Act.

6. Having gone through the decisions relied upon by the Ld. AR we find that it is now an established proposition of law that where an assessee had claimed before the AO that value of land and building assessed by stamp valuation authority exceeded fair market value of property , then in terms of section 50C(2) (a) the AO ought to have referred matter to valuation officer instead of straightaway deeming the value adopted by the stamp valuation authority as full value of consideration. Similar are the facts in the cited case of Pune bench in the matter of K.K. Nag Ltd. (supra) wherein the AO applying provisions of section 50C, adopted stamp duty value of land and building as total sale consideration for the purpose of computing the capital gain. The assessee raised the objection that since it had claimed that the value assessed by the stamp valuation authority exceeded the fair market value, the AO ought to have referred the matter to the valuation officer to ascertain the valuation. For a ready reference the matter travel to the Tribunal and 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 land or building or both is less than the value adopted by an 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 such transfer. The said provisions of sub-section (1) of section 50C are further circumscribed by sub-section (2) of section 50C. In terms of clause (a) of sub-section (2) of section 50C, it is provided that where an assessee claims before the Assessing Officer that the value adopted or assessed by the Stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer, then the Assessing Officer may refer valuation of the capital asset to the Valuation Officer. In instant case, factually it is evident that the assessee had claimed 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 deeming 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 part of the Assessing Officer to refer the matter to the Valuation Officer, is quite untenable. The discretion 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 creation of an additional tax liability on the assessee and, therefore, notwithstanding the presence of the expression 'may' in section 50C (2)(a), the Assessing Officer in this case ought to have referred the matter 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 Assessing Officer is to be directed to adopt the course mentioned in section 50C(2)(a) and thereafter, proceed to determine capital gain on sale of land and building. "

7. The Delhi Bench of the Tribunal in the above cited case of Smt. Manju Rani Jain (supra) has expressed a similar view wherein the action of Ld. CIT(A) has been upheld. The Ld. CIT(A) on finding that AO had worked out capital gain by adopting market value of property for stamp duty purposes, had directed AO to refer properties to valuation sale of the department for purpose of valuation of properties and thereafter to adopt valuation for working out the capital gains in view of the provisions of section 50C(2) of the Act. Similar are the facts of the present case before us wherein before the AO the assessee had claimed that value of land and building assessed by stamp valuation authority exceeded fair market value of property but the AO had denied the reference u/s 50C to the Valuation Officer with this finding "also, it is held there is no need to refer the matter to departmental valuation officer as stipulated in section 50C(2). The section 50C(s) uses the word May and not shall refer the matter to the valuation officer defined u/s 2® of the W.T. Act 1957. Sufficient evidence has not been produced before the undersigned to enable her to make reference to the valuation cell under clause 50C(2)(b)." The Ld. CIT(A) has upheld this action of the AO. Thus the point made out by the revenue was that it is only discretion on the part of the AO to refer the matter to the valuation officer to which we in view of the provisions laid down u/s 50(c) of the Act do not concur with. The Pune Bench of the Tribunal in the case of K.K. Nag Ltd.(supra) after detailed discussion of the provisions laid down u/s 50C of the Act has held that the discretion granted in such a situation is required to use in a judicious manner. Section 50C is a deeming provision and ostensibly involve creation of an additional tax liability on the assessee and, therefore, notwithstanding the presence of the expression 'may' in section 50C(2)(a), the AO in this case ought to have referred the matter to the valuation officer for ascertaining the value of the capital asset in question. The order of the Commissioner (Appeals) was thus held to be set aside and the AO was directed to adopt the course mentioned in section 50C(2)(a) and thereafter proceed to determine capital gain on sale of land and building. Respectfully following this decision of Pune Bench on an identical issue under almost similar facts, we while setting aside the orders of the authorities below on the issue direct the AO to adopt the course mentioned in section 50C(2)(a) and thereafter, proceed to determine capital gain on sale of the properties in question after affording opportunity of being heard to the assessee. The grounds are thus allowed for statistical purposes.

8. In the result appeal is allowed for statistical purposes.
ITA No. 2373/D/2012
9. The revenue has questioned first appellate order whereby the Ld. CIT(A) has deleted the penalty levied u/s 271(1)(c) of the Act at Rs. 12.29.909/- imposed by the AO on the addition of Rs. 54,60,000/- on account of capital gains.

10. Heard the parties and orders of the authorities as well as suggestions have been gone through.

11. Ld. Sr. DR has tried to justify the order passed by the AO u/s 271(1)(c) of the Act with this submission that there was deliberate action on the part of the assessee to lower the incidence of tax while paying stamp duty on a higher sale consideration to in getting the property registered at a lower value. The Ld. AR on the other hand placed reliance on the first appellate order with this submission that relevant facts relating to the claimed capital gain was disclosed fully and truly on the basis of which only the AO had worked out the addition and had levied penalty in question u/s 271(1)(c) relied upon before the Ld. CIT(A) including the decision of Hon'ble Supreme Court in the case of CIT v.Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322.

12. Considering the above submissions we fully concur with the finding of the Ld. CIT(A) in the present case that the valuation of property for stamp duty purposes was rebuttable issue hence in order to prove concealment or furnishing of inaccurate particulars, AO had to establish that "on money" had changed hands or that substantial evidence / material was available to prove that the assessee had filed inaccurate particulars of income. It is an established proposition of law that before invocation of penal provisions laid down u/s 271(1)(c) of the Act, the AO had to establish beyond doubt that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee while claiming the turned down relief resulting in the above addition on the basis of which penal proceedings have been initiated. Also because the addition on which penalty in question has been imposed has been set aside in the above appeal to the file of the AO for fresh consideration in view of the provisions laid down u/s 50C of the Act, the present penalty does not stand. The ground is thus rejected.

13. In the result appeal is dismissed.

14. The appeal preferred by assessee is allowed for statistical purposes and that by the revenue is dismissed.