Valuation of Sale Consideration shall be made after seeking Valuation Report from Valuation Officer as per Section 50C of Income Tax Act: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the valuation of the sale consideration shall be made after seeking the valuation report from the valuation officer as per Section 50C of the Income Tax Act, 1961.

The assessee is a company and is engaged in the business of printing and publication of newspapers. The assessee e-filed its return of income declaring a loss of Rs. 2,92,75,265 under normal provisions of the Income Tax Act and a loss of Rs. 2,74,09,801 under Section 115 JB of the Income Tax Act.

During the assessment proceedings, it was observed that the assessee has sold a piece of land for Rs. 2,75,00,000, whose valuation was for the purpose of payment of stamp duty was Rs. 4,99,99,000. The assessee submitted that the said property is an open land of about 8 ¼ guntas and is landlocked having no direct access. It was further submitted that the said land is subjected to litigation before the Bombay High Court in the suit seeking relief against the assessee which is at the pre-admission stage.

The Assessing Officer did not agree with the submissions of the assessee and held that the claim of the assessee does not fit the requirements specified in Section 50C(2) of the Income Tax Act. Accordingly, the value determined by the stamp duty authority of Rs. 4,99,99,000 was considered as full value of consideration of the property under Section 48 of the Income Tax Act.

The Authorised Representative submitted that the assessee’s prayer for referring the matter for valuation to the Valuation Officer was rejected by the Assessing Officer despite the fact that both the conditions of the said section are fulfilled in the present case. However, the Revenue rejected the submissions of the assessee on the basis that its claim does not fit the requirement specified in Section 50C(2) of the Income Tax Act.

The Two-member bench comprising of Prashant Maharishi (Accountant member) and Sandeep Singh Karhail (Judicial member) held that it cannot be disputed that the value adopted by the Stamp Duty Authority exceeds the value of the property on the date of the transfer and the value so adopted is also not in dispute in any appeal, revision, or reference before any authority, court or the High Court.

The Assessing Officer accepted that in the suit pending before the High Court, only the ownership of the land is in dispute and not the valuation of the land. Thus, when both the conditions of Section 50C(2) of the Income Tax Act are fulfilled in the present case.

The bench found no basis in the findings of the Assessing Officer, which have been upheld by the Commissioner of Income Tax (Appeal) [CIT(A)], in adopting the value of Rs. 4,99,99,000 as deemed sale consideration without referring the valuation of the land to the Valuation Officer as per the provisions of Section 50C of the Income Tax Act. Therefore, the issue was restored back to the file of the Assessing officer for de novo adjudication after seeking a valuation report from the Valuation Officer as per the provisions of Section 50C of the Income Tax Act. The impugned order was set aside and the appeal of the assessee was allowed.

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