Income Tax Appellate Tribunal - Chennai
D.Vanaja Devi, Chennai vs Assessee on 14 June, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
I.T.A. No. 1653/Mds/2011
Assessment Year : 2008-09
Smt. D. Vanaja Devi, The Assistant Commissioner
No.26, Thilakar Street, of Income Tax,
R.S. Puram, Coimbatore-641 002. v. Circle II,
Coimbatore.
PAN : ABVPV5399M
(Appellant)
(Respondent)
Appellant by : Shri S. Sridhar, Advocate
Respondent by : Shri K.E.B. Rengarajan,
Junior Standing Counsel
Date of Hearing : 14.06.2012
Date of Pronouncement : 28.06.2012
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by the assessee, its grievance, raised through points 1 to 13, is that for computation of her long term capital gains, reference to Valuation Officer requested, relying on Section 50C of Income-tax Act, 1961 (in short 'the Act'), was not allowed. As per the assessee, Assessing Officer had proceeded to compute the long term capital gains considering the value fixed by authority for registration of stamp duty, for the fair market value, ignoring the plea for reference. 2 I.T.A. No. 1653/Mds/11
2. Short facts apropos are that assessee, an individual, had filed a return for the impugned assessment year declaring an income of ` 74,22,050/-. During the course of assessment proceedings, Assessing Officer sought details of the capital gains computed by the assessee. Assessee, alongwith two others, had sold a piece of land measuring 2.16 acres for a sum of ` 5,40,00,000/- to one Shri M. Sivaprakash, who acted as power of agent of one Shri M. Charles. As per the A.O., the value fixed by the Joint-I, Sub-Registrar, Coimbatore, was ` 6,48,00,000/- for this property. Assessee had also on the very same day sold another piece of land measuring 56 cents in Coimbatore South, for a sum of ` 1,40,00,000/- to the same person. Value for this transaction was fixed by Sub-Registrar as 1,68,00,000/-. Assessing Officer put the assessee on notice that these transactions attracted the rigours Section 50C of the Act and he was therefore obliged to consider the value adopted by stamp authorities to be the fair market value, for the purpose of computing the capital gains. Assessee requested the Assessing Officer to refer the properties for valuation to the Departmental Valuation Officer for ascertaining fair market value. However, the Assessing Officer was of the opinion that such a reference could not be made since a reference was made by the purchaser of the property to registration authority to ascertain the value of the properties transferred. As per the 3 I.T.A. No. 1653/Mds/11 A.O., the provisions of Section 47-A of Stamp Act having been invoked by the purchaser, requiring the District Collector to determine the fair market value of the properties, assessee's right to claim a reference to the Departmental Valuation Officer stood ousted. He, therefore, completed the assessment considering the value fixed by the stamp authorities to be the full value of consideration for the purpose of computing capital gains.
3. In her appeal before CIT(Appeals), assessee took the same contentions as taken before the A.O. However, the CIT(Appeals) was not impressed. According to him, the matter regarding valuation for stamp duty was referred to District Collector and once a reference was made, assessee could no more claim a reference to Departmental Valuation Officer for the purpose of fixing the fair value. Though the assessee relied on the decision of co-ordinate Bench of this Tribunal in the case of B.N. Properties Holdings (P) Ltd. v. ACIT (2010) 6 ITR (Trib) 1 (Chennai), CIT(Appeals) was of the opinion that in assessee's case here, the market value itself was determined by the District Collector on a reference. Therefore, the decision of Assessing Officer to consider the value fixed for stamp purposes, as the fair consideration was upheld. He thus confirmed the order of Assessing Officer.
4 I.T.A. No. 1653/Mds/11
4. Now before us, learned A.R., strongly assailing the orders of authorities below, submitted that failure of Assessing Officer to refer to the Valuation Officer prejudiced the assessee to her detriment. According to him, District Collector was a Special Deputy Collector (Stamps) (SDCS) authorized only for fixing the value of the property for stamp purposes and this procedure when adopted, could not be considered as a reference which took away the right of the assessee to request for a departmental valuation by the DVO.
5. Per contra, learned D.R. strongly supported the orders of authorities below.
6. We have perused the orders and heard the rival submissions. There is no dispute that purchaser of the property had objected to the guideline value and this objection was referred to Special Deputy Collector of Stamps (SDCS) for fixing the guideline value. There is also no dispute that assessee, during the course of assessment, requested the Assessing Officer to refer the valuation to the Departmental Valuation Officer. As per the Revenue, assessee could not claim reference for valuation of such property to valuation cell of the Department due to the reason that at purchaser's behest, the valuation was referred to SDCS who had fixed the guideline value. We find that in the case of B.N. Properties Holdings (P) Ltd. (supra), this Tribunal was 5 I.T.A. No. 1653/Mds/11 seized of a very similar issue. There the question was whether assessee could claim a reference to the Departmental Valuation Officer when SDCS had fixed the guideline value based on a request from the purchaser of the property. After analyzing the relevant clauses of the Tamil Nadu Stamp (Prevention or Undervaluation of Instruments) Rules, 1968 as also Section 50C of the Act, it was held as under at paras 7 to 10:-
"7. We have heard the rival submissions and perused the orders. The contention of the Department is that property was initially valued by the registration authority at Rs. 1,46,43,635 and the purchaser having objected to this value, the matter was referred to the SDCS who fixed the guideline value at Rs. 1,28,03,500. Therefore, according to the Revenue, the assessee could not claim a reference of valuation of such property to the valuation cell of the Department. On the other hand, the assessee's grievance is that the value as fixed by the SDCS was not on a reference as specified in cl. (b) of sub-s. (2) of s. 5OC of the Act. According to him, the SDCS was the sole authority under the Stamp Act authorised for fixing market value. In other words, according to the assessee, such fixation of market value by the SDCS did not take away its right to require reference to the DVO. To solve this riddle, it is necessary to look into sub-s. (2) of s. 5OC of the Act which reads as under:
"(2) Without prejudice to the provisions of sub-s. (1), where-
(a) the assessee claims before any AO that the value adopted or assessed (or assessed or assessable) by the stamp valuation authority under sub-so (1) exceeds the fair market value of the property as on the date of transfer;
(b) the value so adopted or assessed (or assessed or assessable) by the stamp valuation authority under sub-so (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, Court or the High Court, the AO may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-ss. (2), (3), (4), (5) and (6) of s. 16A, cl. (i) of sub-so (1) and sub-ss. (6) and (7) of s. 23A, sub-so (5) of s. 24, s. 34AA, s. 35 and s. 37 of the WT Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the AO under sub-so (1) of s. 16A of that Act."6 I.T.A. No. 1653/Mds/11
8. When the constitutional value of s. 5OC was questioned, the Hon'ble jurisdictional High Court in the case of K.R. Palanisamy & Ors. vs. Union of India & Ors. (2008) 219 CTR (Mad) 323 : (2008) 13 DTR (Mad) 121 : (2008) 306 ITR 61 (Mad), while upholding the validity of said section, held as under
at paras 29 to 33 of its order (p. 77) :
"29. Every safeguard has been provided under the provisions of the Stamp Act to the petitioner to establish before the authorities as to the real value for which the capital asset has been transferred. As per the provision of s. 47A of the Stamp Act, if the registering authority has reason to believe that the market value of the property, which is the subject-matter of transfer, has not been truly set forth in the instrument, he would after registering such instrument, refer the same to the Collector for determination of the market value of such property. On receipt of the reference, the Collector shall, after giving the parties a reasonable opportunity of being heard and after holding an enquiry in such manner as may be prescribed by rules made under the Stamp Act determine the market value of the property.
30. Rule 4 of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968, provides the procedure on receipt of reference of the instrument under s. 47A. As per r. 4, on receipt of a reference under sub-so (1) of s. 47A, from a registering officer, the Collector shall issue a notice in Form I, to every person by whom, and to every person in whose favour the instrument has been executed, informing him of the receipt of the reference and asking him to submit to him his representations, if any, in writing to show that the market value of the property has been truly set forth in the instrument, and also to produce all evidence that he has in support of his representation, within 21 days from the date of service of the notice. Further, if necessary the Collector may record a statement from persons to whom a notice under sub-r. (1) has been issued, which included the assessee, the transferor. The Collector may even inspect the property after due notice to the parties concerned. After considering the representations, received from the person to whom notice under sub-r. (1) has been issued, and after examining the records and evidence before him, the Collector would pass an order in writing provisionally determining the market value of the properties and the duty payable thereon. Rule 5 of the rules provides for principles for determination of market value, which has been already extracted supra.
31. After so arriving at the provisional market value, the Collector shall communicate the copy of his order provisionally determining the market value of the properties, to all the persons and further call upon the parties to lodge their objections, if any, to such determination of the market value within a specified time. The Collector shall also hear the parties on their objections on a specified date. Thereafter the Collector would consider the representations in writing and those urged at the time of hearing and evidence available with him and pass an order within three months from the date of first notice determining the market value of the properties and the duty payable on the instrument and communicate the order so passed.
32. As per sub-so (5) of s. 47A, any person aggrieved by an order of the 7 I.T.A. No. 1653/Mds/11 Collector may appeal to the chief controlling Revenue authority. As against the appellate order, a remedy of further appeal is also available under sub-so (10) of s. 47A to the High Court.
33. Sub-ss. (2) and (3) of s. 5OC provide further safeguard to the assessee, in the sense that if the assessee claims before the AO that the value adopted by the stamp duty authorities exceeds the fair market value and the value so adopted or assessed for the purpose of stamp duty has not been disputed in any appeal or revision before any authority, the AO could refer the valuation of the capital asset to the DVO. On such reference, if the value determined by the Valuation Officer is more than the value adopted or assessed by the stamp duty authority, the AO shall adopt the market value as determined by the stamp duty authority. Thus, a complete full proof safeguard has been given to the assessee to establish before the authorities concerned the real value. Thus, what is stated in s. 5OC as a real value cannot be regarded as a notional or artificial value and such real value is determinable only after hearing the assessee as per the statutory provisions stated supra. There is no indication either in the provisions of s. 5OC of the IT Act or s. 47A of the Stamp Act or Rules made thereunder about the adoption of the guideline value. Hence, the contention that s. 5OC is arbitrary and violative of art. 14 cannot be accepted. Incidentally, we can refer the recent judgment of the Supreme Court in the case of the Government of Andhra Pradesh vs. Smt. P. Laxmi Devi (2008) 4 SCC 720, in which even the onerous condition of deposit of fifty per cent, of the deficit duty for filing the appeal to "'the Collector is also upheld."
9. Thus it can be seen that the constitutional validity of s. 5OC of the Act was upheld after noting the various safeguards available to an aggrieved person regarding valuation of a property under the Indian Stamp Act as well as the IT Act. At para 33, the Hon'ble jurisdictional High Court has specifically held that sub-ss. (2) and (3) of s. 5OC are further safeguards given to the assessee. Thus the safeguards given at sub-ss. (2) and (3) of s. 5OC of the Act are in addition to the safeguards under the Stamp Act. Therefore, we are unable to appreciate the stand of the Revenue that once a valuation has been made by the SDCS, there can be no further reference to the Departmental valuer even when the assessee specifically disputed the value fixed by the stamp valuation authority. The learned Authorised Representative has rightly pointed out that, except the Collector, no authority of the Registration Department can fix the market value and stamp duty payable in respect of an instrument, as held by the Hon'ble jurisdictional High Court in the case of RI. Rev. Lawrence vs. State of Tamil Nadu (1998) 1 CTC 334. As long as the proper authority for valuation under the Stamp Act is the SDCS, we cannot say that such a valuation made by the said authority on a reference by the Registrar is equivalent to a "reference, appeal or revision made by an assessee before any other authority or High Court" as mentioned in cl. (b) of sub-so (2) of s. 5OC of the Act. There is no dispute that the assessee had objected to the adoption of the value as fixed by the SDCS as the full value of consideration received on transfer and requested the AO for a reference to the DVO. In the case of Meghraj Baid vs. ITO (supra), the Jodhpur Bench of this Tribunal has held at para 4 of its order as under:
8 I.T.A. No. 1653/Mds/11
"4. After examining the provision extracted hereinabove in its letters and spirit, we are of the opinion that in case the AO does not agree with the explanation of the assessee with regard to lower consideration disclosed by him then he should refer the matter to the DVO for getting its market rate established as on date of the sale to arrive at the correct sale consideration. If this provision is read in the sense that if the AO is not satisfied with the explanation of the assessee then he 'may' or 'may not' send the matter for valuation to the DVO then in that case this provision would be rendered redundant. The word 'may' used in this sub-section signifies that in case the learned AO is not satisfied with the explanation of the assessee, he 'should' refer the matter to the DVO for the mentioned purpose. The learned Authorised Representative has relied on the decision of the Hon'ble Supreme Court rendered in the case of Ashok Leyland Ltd. vs. Union of India (1997) 105 STC 152 wherein it has been held that the deeming provisions are rebuttable one. We have examined the entire facts of this case in the light of the provisions and precedents relied on before us. In our considered opinion the befitting reply of all the queries arose in our minds as well as raised by the parties is that the matter should be restored back to the file of the learned AO with a direction that he shall refer this matter of valuation in the light of sub-s. (2) of s. 5OC to the DVO for determining the consideration of this plot sold by the assessee under s. 5OC of the Act. The other connected grounds are also relate to this main ground. Therefore, the entire appeal is restored back to the file of the AO with the direction that he would do as directed above and also give an opportunity of hearing to the assessee as per law."
10. Thus the failure of the AO to refer valuation to the Valuation Officer definitely prejudiced the assessee to its detriment and also took away from it, a valuable right vested in it under the statute. Therefore, we set aside the orders of the authorities below and remit the matter back to the AO with a direction to him for referring the valuation of the property to the Valuation Officer in accordance with sub-s. (2) of s. 50C of the Act, and thereafter for proceeding in accordance with the edict of the statute." Here also, we are of the opinion that there was failure of the Assessing Officer which prejudiced the assessee to its detriment and took away a valuable right vested in her. We, therefore, set aside the orders of authorities below and remit the matter back to A.O. with direction to refer the valuation of the property to Departmental Valuation Officer and thereafter proceed in accordance with law.
9 I.T.A. No. 1653/Mds/11
7. In the result, appeal filed by the assessee is allowed for statistical purposes.
The order was pronounced in the Court on Thursday, the 28th of June, 2012, at Chennai.
sd/- sd/-
(Challa Nagendra Prasad) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 28th June, 2012.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) CIT(A)-I, Coimbatore
(4) CIT-I, Coimbatore
(5) D.R.
(6) Guard file