Sunil Kumar Agarwal vs. CIT (Calcutta High Court)

S. 50C: If the stamp duty valuation is higher than the consideration received, the AO must refer the valuation to the DVO even if there is no request by the assessee

The assessee sold a piece of land for Rs.10 lakhs and offered capital gains. However, the AO, CIT(A) & Tribunal held that as the market value of the land was assessed by the District Sub Registrar at Rs.35 lakhs for stamp duty purposes, which was duly paid by the buyer, the consideration had to be taken at that figure u/s 50C. On appeal by the assessee to the High Court HELD allowing the appeal:

No inference can be made that the assessee has accepted the price fixed by the District Sub Registrar for stamp duty purposes as the fair market value of the property because the assessee has nothing to do in the matter. Stamp duty is payable by the purchaser & it is for the purchaser to either accept it or dispute it. The assessee could not, on the basis of the price fixed by the Sub-Registrar, have claimed anything more than the agreed consideration of a sum of Rs.10 lakhs which, according to the assessee, was the highest prevailing market price. It would follow automatically that his case was that the fair market value of the property could not be Rs.35 lakhs as assessed by the District Sub Registrar. In a case of this nature the AO should, in fairness, have given an option to the assessee to have the valuation made by the Departmental Valuation Officer (DVO) contemplated u/s 50C. As a matter of course, in all such cases the AO should give an option to the assessee to have the valuation made by the DVO. The valuation by the DVO is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer, the AO, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law.