2015 (3) TMI 1065 - AT - Income Tax

Addition on account of Long Term Capital Gain (LTCG) on sale of open land on the basis of DVOs report - Held that - AO is directed to delete the addition as Hon ble Gujarat High Court decision HIABEN JAYANTILAL SHAH Versus INCOME-TAX OFFICER AND ANOTHER 2008 (4) TMI 292 - GUJARAT HIGH COURT is directly applicable in the appellant s wherein held AO could not have formed any opinion as to existence of difference between the value of the asset as claimed by the assessee and the fair market value reference can be made only when AO records opinion that value had been underestimated by assessee - S. 55A could not have been resorted to by the AO - reference to valuation officer is quashed and set aside The value of the property was declared as per Registered valuer s report by the appellant and the value estimated by the DVO was less than that declared by the appellant. - Decided against revenue

Summary

Issues:
1. Valuation of property for Long Term Capital Gain (LTCG) on sale of land.

Analysis:
The appeal filed by the Revenue was against the order of CIT(A)-XV, Ahmedabad dated 20.12.2010 for A.Y. 2007-08. The dispute revolved around the valuation of a plot of land sold by the Assessee for the purpose of calculating Long Term Capital Gain (LTCG). The Assessee had considered the value of the land as on 1.04.1981 to determine the cost of acquisition. The Assessing Officer (A.O) disagreed with the valuation done by a registered valuer, who had applied a premium of 65% based on the proximity of the plot to S.G. Highway. The A.O referred the matter to the Departmental Valuation Officer (DVO), who valued the property significantly lower than the registered valuer. Consequently, the A.O made an addition to the Assessee's income based on the DVO's valuation. The Assessee appealed to the CIT(A), who relied on the provisions of section 55A and relevant case laws to delete the addition, emphasizing that the DVO's valuation was lower than the Assessee's declared value.

The CIT(A) based the decision on the Hon'ble Gujarat High Court's judgment in the case of Hiraben Jayantilal Shah vs. ITO, where it was held that if the DVO's estimated value is lower than the fair market value declared by the Assessee, section 55A cannot be applied. The CIT(A) directed the A.O to delete the addition, citing the applicability of the High Court's decision. The Revenue appealed this decision before the Appellate Tribunal (ITAT Ahmedabad).

During the hearing before the ITAT, the Revenue relied on the A.O's order, while the Assessee's representative reiterated the arguments made before the CIT(A) and supported the decision. The ITAT observed that the CIT(A) had correctly applied the High Court's decision, and since the Revenue failed to provide any contrary binding decision or challenge the CIT(A)'s findings, the ITAT dismissed the Revenue's appeal. The ITAT upheld the CIT(A)'s order, emphasizing that the High Court's decision was directly applicable to the Assessee's case, and there was no reason to interfere with the CIT(A)'s decision.

In conclusion, the ITAT dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition to the Assessee's income based on the valuation of the property for Long Term Capital Gain. The judgment highlighted the importance of adhering to valuation principles and relevant legal precedents in determining capital gains on property transactions.