The Pune Bench of Income Tax Appeal Appellate Tribunal (ITAT) held that where the stamp value of the immovable property is disputed by the assessee and where the assessee asserts that the stamp value is excessive on the ground mentioned in Section 50C(2) of Income Tax Act,1961, the Assessing Officer (AO) may refer the valuation of such property to the Departmental Valuation Officer (DVO).
The assessee Bhausaheb Sopanrao Bhoir was selected on the basis of AIR information about the assessee having made ‘large investment in property as compared to total income’. He purchased a piece of land for a consideration of Rs.1.85 crore.
During the scrutiny assessment, the AO noted that the assessee simultaneously entered into agreements to purchase and sell the same property to Mr. Ravindra N. Sakla, with the terms of those agreements specifying that Mr. Sakla paid a portion of the purchase price to the assessee’s sellers.
The assessee submitted that the purchase was not complete, when he was called upon to explain as to why the provisions of Section 56(2)(vii)(b) of the Income tax Act be not invoked in respect of the difference between the stamp value and declared consideration in sale.
The AO observed that after the purchase of land, the assessee entered into an agreement to sell the same and hence the assessee’s claim that the purchase was not complete, was wrong.
The AO invoked the provisions of Section 56(2)(vii)(b) of the Income Tax Act and added the difference between circle rate of the Income Tax Act (ITA) and the declared consideration Rs.1.85 crore. An appeal was preferred to Commissioner of Income Tax Appeal [CIT-(A)].
The assessee raised the issue before the CIT (A) about the excessive stamp value of the property and hence the necessity to make a reference to the Department Valuation Officer (DVO). The additional ground raised before the CIT(A) in this regard has remained undisposed off. Thus, the appeal was filed before the ITAT.
The ITAT Bench comprising of Shri R.S. Syal, Vice President and Shri Partha Sarathi Chaudhury, Judicial Member observed that the AO computed capital gain at the gross value of stamp value without allowing any deduction towards cost of acquisition and cost of improvement.
The Section 48 of the Income Tax Act clearly provides the mechanism for computation of capital gain. Thus, the AO shall also grant deduction towards cost of acquisition etc. of the asset.
The bench directed to set aside the impugned order and the matter was remitted back to the file of the AO for making a reference to the Departmental Valuation Officer (DVO) for determining the value of the property afresh.
Thereafter, the computation of the capital gain will be done by the AO after allowing a reasonable opportunity of hearing to the assessee.
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