AO Must Follow Mandate Of Sec 50C If Values Adopted By Stamp Value Authorities Exceeds FMV Of Property: Mumbai ITAT

The Bench of the ITAT comprising of Prashant Maharishi (Judicial Member) and Sandeep Singh Karhail (Accountant Member) observed that, “According to the provision under section 50(C)(2), if the Assessee objects before the AO that the values were adopted by the stamp value authorities exceeds the fair market value of the property, the AO is duty bound to refer the value to the valuation officer.” (Para 8)

As per the brief facts of the case, the assessee has sold the property whose sale consideration value is different from the market value. The AO invoked the provision of Section 50 C whereby the full value of the consideration was to be used for computation of capital gain by deeming the sales value by the stamp duty rates. Before the AO, the assessee objected the same. The claim of the assessee that though it is situated in the specified area but it is used for agricultural activities and the stamp duty rates are random rates. The assessee also objected that the surrounding area does not have any facilities compared to urban area and therefore, stamp duty rates cannot be considered as deemed consideration. The AO rejected the contentions of the assessee stating that the land is an agricultural land as it is situated within the specified limit and he also rejected the conditions that the stamp duty is paid at the random rates. The AO was of the view that these steps of rectification of stamp duty rates should have been corrected during the registration period only. Therefore, he invoked the provision of Section 50C and computed the long-term capital gain and passed an assessment order u/s 143(3) r.w.s. 147.

The Bench noted that AO invoked the provision of Section 50C whereby the full value of the consideration was to be used for computation of capital gain by deeming the sales value by the stamp duty rates.

The Bench observed that the assessee claimed that though it is situated in the specified area but it is used for agricultural activities and the stamp duty rates are random rates.

The Bench further observed that the values adopted by the stamp value authorities exceeds the fair market value of the property.

The Bench also observed that instead of following the mandate of section 50(c)(2), the AO has computed the capital gain by adopting the stamp duty value. This is not in accordance with the provision of law.

Therefore, on finding error in computation of value, the ITAT allowed the assessee's appeal for statistical purposes.

Counsel for Appellant/Taxpayer: Apurva Hire

Counsel for Respondent/Department: Mahita Nair

Case Title: Rakhmabai Mhatre verses Income Tax Officer

Case Number: ITA No.2613/Mum/2023

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