Full Value of Consideration or Cost of Investment cannot be Substituted by Fair Market Value Except within Purview of Section 50 C of Income Tax Act: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) observed that full value of consideration or cost of investment cannot be substituted by fair market value except within purview of Section 50 C of the Income Tax Act, 1961

The counsel for the assessee S.B. Gupta  argued that All property purchase and sale transactions in the assessment years involved in the present appeals exceeded the circle rate, and sections 69B and 56(I)(vi)/(vii) of the Income Tax Act, 1961, along with Section 45 and 50C of the Income Tax Act, 1961, did not allow for substituting consideration higher than the circle rate, and (viii) assessments made under Section 153A of the Income Tax Act, 1961 for the Assessment Years 2005-06 and 2006-07

The counsel for the revenue  P. N. Barnwal argued that the Assessing Officer ( AO ) duly evaluated the market value of different properties, comparing it with the applicable circle rates and identifying discrepancies. Consequently, the AO made additions based on the disparity between circle rates used for stamp duty payment to the State Government and the actual market rates. Moreover, relying on the Assessment Order's findings, the counsel sought to overturn the Commissioner of Income Tax ( Appeals ) [CIT (A)]'s decision.

The two member bench of the tribunal comprising Shamim Yahaya ( Accountant member ) and Yogesh Kumar U.S ( Judicial member ) observed that the agreed consideration stated in the sale documents or any other instrument should be considered as the "full value of consideration" or "cost of investment". Substitution of the fair market value is only permissible in cases falling within the scope of Section 50C and Section 56(l)(vi)/(vii), of the Income Tax Act, 1961 where the circle rate exceeds the recorded transaction value. However, in this instance, the consideration in registered conveyance deeds consistently exceeds the circle rate valuation.

The bench concluded that the consideration stated in the sale documents or any other instrument should stand as the "full value of consideration" or "cost of investment." Exceptions to this rule occur only under Section  50C of the Income Tax Act, 1961 and Section 56(l)(vi)/(vii), of the Income Tax Act, 1961 wherein the circle rate of a property may replace the recorded transaction value if the former exceeds the latter. However, in this scenario, the consideration in registered conveyance deeds consistently surpasses the circle rate valuation.

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