Saktijit Dey, Judicial Member - The assessee has filed this appeal for assessment year 2006-07 against order dated 31.5.2011 of ld CIT(A)-Rajahmundry, in the matter of assessment under section 143(3) r.w.s. 263 of the Act, on the following grounds:
| "1. |
The ITO had wrongly levied interest u/s.234B of the Act without appreciating The fact that in the peculiar circumstances stated in section 50C, the correct tax liability cannot be estimated by the appellant. |
2. |
The ITO had wrongly levied interest u/s.234B of the Act though there is no infringement on the part of the appellant u/s.208 to 210." |
2. The assessee has also filed additional ground, which reads as under:
"The CIT(A) erred in law in holding that the AO was justified as per the provisions of Section 50C of the Act in adopting the value of Rs.2,67,59,000 as per DVO as the consideration in the place of actual consideration of Rs.2,11,68,000 received by the appellant."
3. Briefly stated the relevant facts are like this. The assessee firm had sold a site alongwith building on 14.11.2005 for a consideration of Rs.2,11,68,000. Originally, the assessment was completed under section 143(3) of the Act, wherein, while calculating the capital gains, the AO had not applied provisions of section 50C. However, the CIT set aside the order of the AO vide his order under section 263 and directed the AO to do denovo assessment on the ground that the assessee has received more consideration as per the valuation made by the Stamp Valuation Authority for stamp duty than what is stated in the sale deed. During the denovo assessment proceedings, the AO noticed that as per the sale deed the assessee had sold a property bearing Door No.19-1-106, Vallabhai Street, Kakinada on 14.11.2005 for a consideration of Rs.2,11,68,000/-. Whereas the registering authority, i.e., Joint Sub-Registrar Kakinada adopted the value of the property at Rs.3,27,66,000 for the purpose of stamp duty. Since, the valuation made by the stamp valuation authority for stamp duty purpose was more than the consideration mentioned in the sale deed; the AO was of the view that valuation made by the Stamp valuation authority has to be considered as pec sec.50C for computing the capital gain. The assessee, however, objected to it and requested the AO to refer valuation to the DVO. Therefore, in terms with section 50C(2), the AO referred the matter to the DVO to determine the value of the property, who has arrived at the market value of the property at Rs.2,67,59,000/-. On the basis of the valuation made by the DVO, the AO has completed the assessment under section 143(3) r.w.263 of the Act, inter alia, adopting Rs.2,67,59,000 as the value of the property for the purpose of provisions of section 50C of the Act and computed capital gain accordingly by levying tax at Rs.18,96,028/- inclusive of interest under section 234B and 234C of the Act. Aggrieved of such order of the AO, the assessee preferred appeal before the CIT(A).
4. Before the CIT(A), it was contended that section 50C is a deeming provision under which, the tax liability should be arrived at in strict and well defined manner. It was contended that since the valuation report had made it clear that the value of the property is not equal to what was adopted for stamp duty, the very basis on which the assessment is annulled no longer exists. Hence, it was urged that the sale consideration received by the assessee should be adopted for calculation of capital gains. The CIT(A) after considering the assessee's submission held that in the original assessment since the AO did not adopt the value as per the provisions of section 50C, the CIT under section 263 annulled the assessment and directed the AO to make denovo assessment and against this order of the CIT, assessee did not file appeal before the appropriate forum, which shows that the assessee has accepted the action of the CIT and pursuant to the order of the CIT, the AO has referred to the Valuation Officer and on the basis of valuation made by the Valuation officer, the AO has rightly adopted the value of the property at Rs..2,67,59, 000 for the purpose of section 50C of the Act. Hence, the CIT(A) upheld the action of the AO. The CIT(A) also confirmed the levy of interest under section 234B of the Act Hence, this appeal by the assessee.
5. Firstly, we will deal with the additional ground raised by the assessee since it involves a pure legal issue without requiring investigation into new facts. Since, it can be decided on the basis of facts on record, we admit the additional ground and proceed to decide the same.
6. Ld A.R. opening his arguments on the additional ground submitted that the provisions contained in section 50C(1) of the Act is a deeming fiction. Ld A.R. submitted that admittedly, in the case of the assessee, the objection was raised with regard to valuation of stamp valuation authority in terms of sub-section(2) of the Act and the matter was referred to the DVO by the AO. The DVO determined the market value of the property at Rs.2,67,59,000/- which is less than the value adopted by the stamp valuation authority at Rs.3,27,66,000/-. Ld A.R. therefore, submitted that since subsection (3) of Section 50C of the Act only provides for adoption of value of the stamp valuation authority in a case where the market value determined by the DVO exceeds the value adopted by the stamp valuation authority, in such a situation, the AO cannot adopt the market value determined by the DVO as it is less than the value adopted by the Stamp Valuation authority. Ld A.R. submitted that since sub section (3) of Section 50C does not provide for adopting such valuation determined by the DVO, the AO has to except the value mentioned in the sale deed by the assessee. To buttress such contention ld AR drew our attention to provisions contained in section 52(2) of the Act, which has been omitted w.e.f. 1.4.1988. It was thus the contention of the assessee that since assessee has objected to valuation made by stamp valuation authority and matter was referred to the DVO and the market value determined by the DVO is less than the value adopted by SVA, then the only course of action open before the AO is to accept the value shown by the assessee in the sale deed.
7. On the other hand, ld D.R. contended that once the assessee objects to the valuation made by the SVA by taking recourse to sub-section(2) of Section 50C, the matter has to be referred to the DVO by the AO. As per sub-section(3) of Sec 50C, if the market value determined by the DVO is more than the value adopted by the SVA for stamp duty purpose, then the value adopted by the SVA has to be accepted. In any other case, the value determined by the DVO has to be adopted as it is binding on the AO. In support of such contention, Id D.R. relied upon the following decisions:
| (i) |
CIT v. Dr. Indra Swaroop Bhatnagar [2012] 349 ITR 210/[2013] 213 Taxman 52/30 taxmann.com 293 (All.) |
(ii) |
Gouli Mahadevappa v ITO [2013] 356 ITR 90/215 Taxman 145/33 taxmann.com 47 (Kar) |
8. We have heard the rival contentions' and perused the materials' on record. We have also carefully applied our mind to the decisions placed before us. The undisputed fuels are that in the registered sale deed, the assessee has shown the value of the properly at Rs.2,11,68,000/-. The registering authority of the State Government, however- has determined the value of the property for stamp duty purposes at Rs.3,27,66,0000/- it is also a fact on record that during the assessment proceedings, assessee had objected to such valuation made by the SVA and requested for referring the matter to DVO for purpose of valuation of the property, which was acceded to by the AO. The DVO admittedly has determined the market value of the property at Rs.2,67,59,000, which was adopted by the AO for the purpose of computation of capital gain. It is the contention of the assessee that since as per sub-section (3) of Section 50C, which speaks of adoption of valuation determined by the stamp valuation authority in a case where the value determined by the DVO exceeds the value adopted by the SVA, therefore, the AO could not have considered the market value determined by the DVO and should have accepted the value shown by the assessee in the sale deed. Before going into the merits of such contention of the assessee, let us examine the provisions contained in section 50C of the Act, which was introduced to the statute w.e.f. 1.4.2003 by the Finance Act, 2002.
"Section 50C: (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a state Government (hereinafter in this section referred to as the 'stamp valuation authority) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer."
9. A plain reading of the aforesaid provision makes it clear that as per sub section(1) of section 50C, in a case, where the consideration received as a result of transfer by the assessee to a capital asset being land or building, is less than the value adopted or assessed by the SVA for the purpose of stamp duty, then such value shall be deemed to be the full value of the consideration received or accruing as a result of such transfer. As can be seen from the language employed in the aforesaid section, it is a deeming provision. However, sub-section(2) of Section 50C carves out an exception by providing that in a case where the assessee objects to the valuation made by the SVA and request for referring the matter for valuation to the DVO, then the AO has to refer the valuation to the DVO Sub-section (3) of Section 50 provides that if the market value determined by the DVO exceeds the value adopted or assessed by the SVA, then the value adopted or assessed by the SVA shall be taken as the full value or consideration received or accruing as a result of the transfer. The CBDT issued a circular vide Circular No.8/2002 dated 27.8.2002 explaining the import of section 50C of the Act. The relevant portion from the circular reported in 258 ITR (St) 13 is reproduced hereunder:
'"37. Computation of capital gains in real estate transactions: 37.1 The Finance Act, 2002 has inserted a new section 50C in the Income tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property.
37.2 It provides that where the consideration declared to be received or accruing as a result of the transfer of the land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration and capital gains .shall be computed accordingly under section 48 of the Income tax Act.
37.3 It is further provided that where the assessee claims Mint the value adopted or assessed for stamp duty purposes exceeds the fair market value: of the property as on the date of transfer, and he has not disputed the value so adopted or assessed in any appeal or revision or reference before any authority or court, the AO may refer the valuation of the relevant asset to a Valuation Officer in accordance with section 55A of the Income tax Act. If the fair value determined by the Valuation Officer is less than the value adopted for stamp duty purposes, the AO may take such fair market value to be the full value of consideration. However, if the fair market value determined by the Valuation Officer is more than the value adopted or assessed for stamp duty purpose, the AO shall not adopt such fair market value and shall take the full value of consideration to be the value adopted or assessed for stamp duty purposes, (emphasis bys us)
37.4 This amendment will take effect from 1st April, 2003 and will accordingly, apply in relation to the assessment year 2003-04 and subsequent years."
10. A plain reading of the aforesaid circular, more specifically para 37.3 makes it abundantly clear that if the fair market value determined is less than the value adopted for the stamp duty purpose, the AO may take such fair value to be full value of consideration. Therefore, the provisions contained in section 50C (3) r.w. explanatory notes of the Board vide circular No. 8/2002 (supra) would be sufficient to indicate that where in a case the fair market value determined by the DVO, on a reference made by the AO in sub-section (2) of the said section is less than the value adopted or assessed by the SVA then such fair market value determined by the DVO is to be treated by the AO as full value of consideration received by the assessee for the purpose of computing capital gain. In our view, the provisions of section 50C r.w. explanatory note does not leave room for any ambiguity with regard to the issue in dispute since the AO in the present case has adopted the value determined by the DVO which is less than the value adopted or assessed by the SVA for stamp duty purpose. Even otherwise also, it is well settled principle of law that once a reference is made to the valuation officer, the valuation report submitted by the DVO is binding on the AO. The Hon'ble Allahabad High Court in the case of Dr. Indra Swaroop Bhatnagar (supra), while considering the identical issue has held as under:
'It may be mentioned that the section was inserted by the Finance Act, 2002, with effect from April 1, 2003, and is applicable to the assessee's case for the assessment year under consideration, i.e., 2003-04, The section was introduced with a view to tackle unaccounted income by the practice of understatement of consideration in acquisition of property. The Central Board of Direct Taxes Circular No. 8 of 2002, dated August 27, 2002, explains that (page 39 of 258 ITR (St.)):
"The Finance Act, 2002, has inserted the new section 50C in the Income-tax Act to make a special provision for determining the full value of consideration in cases of transfer of immovable property."
It provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed accordingly under section 48 of the Income-tax Act.
It is further provided that where the assessee claims that the value adopted or assessed for stamp duty purposes exceeds the fair market value of the property as on the date of transfer, the Assessing Officer may refer the valuation of the relevant asset to a Valuation Officer in accordance with section 55A of the Income-tax Act.
The above preposition of law has been upheld in the case of CWT v. Dr.H. Rahman [1991] 189 ITR 307 (All) while interpreting the provision of section 50C. In this section the provisions of the Wealth-tax Act are applicable. This Hon'ble court observed that (page 308):
"A reading of the sub-section shows that the Wealth-tax Officer has no option but to proceed to complete the assessment in conformity with the assessment of the Valuation Officer in so far as the valuation of the asset in question is concerned. This is also the view taken by a Division Bench of this court in M.C. Khunnah v. Union of India [1979] 118 ITR 414 (All)."
In view of the above discussions and by considering the totality of the facts and circumstances of the case, it is crystal clear that generally, when Assessing Officer has obtained the D.V.O. report then the same is binding. Therefore, we find no reason to interfere with the impugned order passed by the Tribunal, it is hereby upheld with the reasons mentioned therein.'
11. The Hon'ble Karnataka High Court in the case of Gouli Mahadevappa (supra), also expressed similar view by observing as under:
"Section 50C(1) is a deeming provision wherein the registration value fixed by the State Government under the Stamp Act is deemed to be considered as the full value consideration. Section 500(2), however, permits the assessee to contend before the assessing authority that the registration value fixed by the State under the Stamp Act is excessive and does not correspond with the fair market value of the property as on the date of the transfer and that the assessee should not have challenged the levy of stamp duty under the Stamp Act as being excessive and disproportionate to the Inn market value of the property before the authorities under the Stamp Act or file any appeal, revision or reference to any court or High Court against such order. In which event the assessing authority would refer the matter to the Valuation Officer to assess the fair market value of the property, keeping in view all the relevant consideration including the registration value fixed by the State. Sub-section (3) provides that the fair market value fixed by the Valuation Officer is in excess of the registration value, then the registration value should be considered for levy of the capital gains tax. If the Valuation Officer finds that the value of the property is less than the registration value, then, accordingly, the assessing authority should levy capital gains tax on the basis of market value stated by the Valuation Officer. (emphasis supplied by us).
12. Therefore, in view of the clear statutory provision and the ratio laid down by Hon'ble Allahabad High Court in the case of Dr. Indra Swaroop Bhatnagar (supra) and Hon'ble Karnataka High Court in the case of Gouli Mahadevappa (supra), we do not find any merit in the contention of the assessee. The AO having adopted the fair market value determined by the DVO, which is less than the value adopted by the SVA for stamp duty purpose, there cannot be any grievance on the part of the assessee in this regard. That besides, it is evident and obvious from the record that assessee is challenging the adoption of value determined by the DVO on legal grounds. Neither the assessee has contested correctness of the valuation made nor has brought any contrary material to prove that the mode and method of fair market value determined by the DVO is more than the actual fair market value. So far as the contention of the assessee with regard to section 52(2) of the Act is concerned, in our view, it is no1 relevant for determination of the issue at hand since the said provision has already been deleted from the statute book w.e.f. 1.4.1998 by the Finance Act, 1987 In the aforesaid view of the matter, we do not find any reason to interfere with the order passed by the CIT(A) and, accordingly, the additional ground raised by the assessee is dismissed.
13. So far as grounds relating to chargeability of interest under section 234B of the -Act are concerned, we have heard the parties on this issue. Ld A.R. relied upon the decision of Hon'ble Bombay High Court in the case of Prime Securities Ltd. v. Asstt. CIT (Investigation) [2011] 333 ITR 464 [2012] 20 taxmann.com 757 (Bom) and contended that since the assessee could not foresee what income is going to be assessed on the date he paid the advance tax, interest should not have been charged under section 234B of the Act. Ld D.R. on the other hand relying on the decision of Hon'ble Karnataka High Court in the case of Gouli Mahadevappa (supra) submitted that as held by the Karnataka High Court, interest under section 234B is mandatory, which the assessee cannot avoid. After considering the submissions of the parties in the light of the ratio laid down in the decisions relied upon, we are of the view that no relief can be granted to the assessee in this regard. As can be seen from the registered sale deed, a copy of which is placed at page 1 of PB, it was executed on 14.11.2005. Therefore, assessee was very much aware of the value adopted by the registering authority for stamp duty purpose. Therefore, assessee cannot take a plea that it had not been foreseeing what income is going to be assessed by the AO in view of the clear provisions of section 50C of the Act. That besides, as held by the Hon'ble Karnataka High Court, interest under section 234B of the Act being mandatory, assessee cannot avoid it. In the aforesaid view of the matter, we are not inclined to accept the grounds in this regard, which are accordingly, dismissed.
14. In the result, appeal filed by the assessee is dismissed.