INCOME TAX ACT, 1961

Section 50C

Capital gains - Determination of FMV by CIT(A) with regard to sale of land - Reference to DVO -

Assessee sold a piece of land with ACC shed and admitted the capital gains and taken the sale consideration at Rs. 32,70,000 as against the value of Rs. 62,73,500 adopted by the Stamp Duty Authorities (SRO). AO invoked the provisions of section 50C and directed the assessee as to explain as to why the value of Sub-Registrar Office should not be considered for computing the capital gains, against the sale consideration admitted by the assessee. Assessee submitted the explanation stating that the land in question was situated in industrial area and the market value is determined by State Industrial Infrastructure Corporation for which the assessee sold the property, therefore, argued that SRO value was inapplicable in his case. Held: Assessee has objected for adoption of SRO value which AO had also accepted and did not adopt SRO value for computing the capital gains. However, AO adopted the fair market value that was determined by the DVO for the assessment year 2009-10. In the circumstances AO ought to have referred the valuation to DVO as provided in sub-section (2) of section 50C or made the enquiries with the State Industrial Infrastructure Corporation. AO, instead blindly adopted the value decided by the DVO for the assessment year 2009-10. AO ought to have referred the valuation of property to the DVO for the assessment year 2008-09 also separately and taken the value so decided by DVO for the purpose of capital gains. CIT(A) had determined the fair market value after giving some reduction for annual increase and the department did not bring any material to show that the market value of the land in the assessment year was more than the value determined by CIT(A). Therefore, action of AO was not justified.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2008-09

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