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R.S. Syal, A.M.

1. This appeal by the assessee is directed against the order passed by the CIT(A) on 21st Jan., 2006 in relation to asst. yr. 2003-04.

2. The only issue raised in this appeal is against the sustenance of addition of Rs. 1,07,122 on account of long-term capital gain.

3. Briefly stated, the facts of this case, as recorded in the assessment order are that the assessee transferred plot No. 180, measuring 311.11 sq. yds. situated at Goverdhan Nagar, Tonk Road, Sanganer, Jaipur, through an agreement dt. 30th Nov., 2002 for a consideration of Rs. 36,000. The said plot was purchased on 7th Nov., 1993 for Rs. 18,770 from Vikas Bhawan Nirman Sahakari Samiti Ltd., Jaipur. On transfer of capital asset, long-term capital gain was shown at Rs. 1,614. The AO observed that the fair market value of the capital asset seemed to be much higher as against that shown by the assessee through agreement dt. 30th Nov., 2002. He referred the matter to the Asstt. Valuation Officer under Section 55A who estimated the value of the said plot at Rs. 1,43,122 as against sale consideration shown by the assessee at Rs. 36,000. The differential amount of Rs. 1,07,122 was added. In the first appeal, the assessee made various submissions including the inapplicability of Section 50C to the facts of the case. The learned CIT(A) did not accept the assessee's contention on merits and held that the value adopted by the Valuation Officer appeared reasonable and there was no reason to deviate from the same. Resultantly the addition was sustained.

4. I have heard the rival submissions and persued the relevant material on record. The learned Authorised Representative has vehemently argued that Section 50C is not applicable to this case as the sale was made through agreement without getting it registered. It is further noted that this contention was also raised before the learned CIT(A) who has recorded the assessee's submission on this count in the impugned order but had not adjudicated upon this aspect. At this juncture, it would be relevant to consider the relevant provision, which runs as under:

6. It was with the view to overcome such a settled legal position that the legislature inserted Section 50C w.e.f. 1st April, 2003. After the addition of this new section in the statute book, the earlier legal position qua the transfer of land or building or both is no more a good law inasmuch as the value adopted or assessed by any authority of State Government for the purpose of payment of stamp duty in respect of such transfer has to be considered as full value of consideration received as a result of transfer and capital gain has to be computed accordingly. The rigour of sub-s. (1) of Section 50C has been toned down by Sub-section (2), the relevant portion of which provides that:

The net effect of Section 50C is that the value adopted or assessed by the authorities of the State Government for the purpose of payment of stamp duty shall be considered as full value of consideration and if the assessee disputes it to be higher, the procedure prescribed would follow and the lower of such finally assessed value or as determined by the Valuation Officer would be taken as full value of consideration.

7. A deeming provision has been enshrined in Section 50C by virtue of which a legal fiction has been created for assuming the value adopted or assessed by any authority of State Government as the full value of sale consideration received in respect of such transfer. A legal fiction has been created only in respect of the cases where the consideration received by the assessee is less than the value adopted or assessed by the stamp valuation authority of the State Government for the purpose of payment of stamp duty "in respect of such transfer". It is a trite law that the legal fiction cannot be extended beyond the purpose for which it is enacted. Section 50C embodies the legal fiction by which the value assessed by the stamp duty authorities is considered as the full value of consideration for the property transferred. It does not go beyond the cases in which the subject transferred property has not become the subject-matter of registration and the question of valuation for stamp duty purposes has not arisen. By no stretch of imagination, the legal fiction confined to restricted operation can be widened to include within its sweep all the cases where "such property" has not been valued by the State authorities for stamp duty purposes. The Hon'ble Supreme Court in the case of CIT v. Amarchand N. Shroff has held that "legal fiction are only for a definite purpose and they are limited to the purpose for which they are created and should not be extended beyond the legitimate field". Similar view has been reiterated by the Hon'ble Summit Court in the case of CIT v. Mother India Refrigeration Industries (P) Ltd. . Thus, what is relevant for the attractability of Section 50C, is that the property which is under transfer from the assessee to another person should have been assessed at a higher value for stamp valuation purpose than that received or accruing to the assessee. The value adopted or assessed by the stamp valuation authorities has to be of the very same property, which is the subject-matter of transfer. The language of this section provides in unambiguous terms that the value adopted or assessed by the stamp valuation authority has to be substituted with the sale consideration of the "such property". But for Section 50C, there is absolutely no warrant for replacing the value adopted by the stamp valuation authority with the actual sale consideration for the purposes of computing capital gain. Thus it is clear that the property in respect of which valuation is made for purposes of stamp duty must be the very same property, which is the subject-matter of transfer for calculating capital gain by invoking the provisions of this section. It is wholly irrelevant to consider the assessed value of another property for stamp duty purposes as full value of consideration by making reference to the Valuation Officer under Section 55A. Unless the property transferred has been registered by sale deed and for that purpose the value has been assessed and stamp duty has been paid by the parties, Section 50C cannot come into operation. In such a situation, the position existing prior to Section 50C would apply and the onus would be upon the Revenue to establish that sale consideration declared by the assessee was understated with some clinching evidence. The relevant judgments discussed above viz., K.P. Varghese (supra) and Shivakami Co. (P) Ltd. (supra) would come into operation and govern the determination of full value of consideration.