CIT vs. Chandra Narain Chaudhri (Allahabad High Court)

S. 50-C: Extent to which reliance can be placed by AO on stamp duty valuation explained The assessee sold property for Rs. 25 lakhs. The AO held that as the property was valued by the stamp valuation officer at Rs. 78.48 lakhs and as the purchaser had paid stamp duty on that basis, the capital gain had to be worked out on that basis applying s. 50C(2). The assessee claimed that the property was tenanted and produced valuation reports to justify the sale consideration. On appeal by the assessee the CIT(A) held that the AO ought to have referred the matter to the DVO and directed him to adopt the value arrived at by an approved valuer. This was approved by the Tribunal. On appeal by the department to the High Court, HELD: (i) S. 50-C is a rule of evidence in assessing the valuation of property for calculating capital gains and is rebuttable. It is well known that an immovable property may have various attributes, charges, encumbrances, limitations and conditions. The Stamp Valuation Authority does not take into consideration the attributes of the property for determining the fair market value and determines the value in accordance with the circle rates fixed by the Collector. The object of valuation by the Stamp Valuation Authority is to secure revenue on such sale and not to determine the true, correct and fair market value for which it may be purchased by a willing purchaser subject to and taking into consideration its situation, condition and other attributes such as it occupation by tenant, any charge or legal encumbrances; (ii) If the assessee raises an objection that the value assessed by the stamp valuation authority u/s 50-C (1) exceeds the fair market value of the property on the date of transfer, the AO has to apply his mind on the validity of the objection and may either accept the valuation of the property on the basis of the report of the approved valuer filed by the assessee or invite refer the valuation of the capital asset to the DVO in accordance with s. 55-A. In all these events, the AO has to record valid reasons, which are justifiable in law. He is not supposed to adopt an evasive approach of applying the deeming provision without deciding the objection or referring the matter to the DVO u/s 55-A as a matter of course without considering the report of the approved valuer submitted by the assessee.