2015 (9) TMI 1402 - AT - Income Tax

Fair market value - CIT(A) adopting the fair market value of the land as on 1.4.1981 @ of ₹ 76/- per sq. meter as against ₹ 105/- per sq. meter determined by the Valuer for assessing capital gain on transfer of inherited land - Held that - As required on the part of the AO to make a reference to the valuation officer under section 55A of the Act in order to ascertain the fair market value of the asset because Valuation Officer is a person of technical knowledge for the purpose of such valuation. In the present case no such reference was made by the AO to approach the valuation officer. We, therefore, find it appropriate to give cognizance to various rates as referred to above in such a way so as to cover the rates for the purpose of valuation given by Sub-Registrar, Daman to the AO, rates given by Sub-Registrar, Daman to the assessee as well as the rate given by the govt. approved valuer. We, therefore, decide to apply the average of three rates i.e. minimum rate given by Sub- Registrar, Daman at ₹ 33, maximum rate given by Sub-Registrar, Daman and the rate given by the govt. approved valuer at ₹ 108/-. The average rate will work out at ₹ 102/- per sq.meter (Rs.33 ₹ 165 ₹ 108 ₹ 306/3 ₹ 102/-). In the circumstances, we direct the AO to adopt the fair market value of the asset as on 1.4.1981 at ₹ 102/- only. - Decided partly in favour of assessee

Summary

Issues Involved:
1. Determination of the fair market value (FMV) of land as on 1.4.1981 for calculating long-term capital gains.
2. Validity of the different rates provided by the Sub-Registrar and the Government Approved Valuer.
3. Application of section 55A of the I.T. Act for referring the matter to a Valuation Officer.

Issue-wise Detailed Analysis:

1. Determination of the Fair Market Value (FMV) of Land as on 1.4.1981:
The primary issue revolves around the appropriate FMV of the land as on 1.4.1981 for calculating long-term capital gains. The assessee declared a loss from long-term capital gains using a valuation of Rs. 165/- per sq. meter, supported by a certificate from the Sub-Registrar, Daman. The Assessing Officer (AO), however, used an average rate of Rs. 43/- per sq. meter based on information from the Sub-Registrar, leading to a significant addition to the assessee's income.

2. Validity of Different Rates Provided by the Sub-Registrar and the Government Approved Valuer:
The case presented conflicting valuations:
- The Sub-Registrar, Daman, provided rates between Rs. 33/- to Rs. 53/- per sq. meter in response to the AO's query.
- The assessee submitted a certificate from the Sub-Registrar, Daman, indicating a rate of Rs. 165/- per sq. meter.
- A Government Approved Valuer, Parekh & Associates, reported a rate of Rs. 108/- per sq. meter.

The CIT(A) attempted to find a middle ground by averaging the rates provided by the AO and the Government Approved Valuer, arriving at Rs. 76/- per sq. meter. However, the Tribunal noted that the rates provided by the Sub-Registrar varied significantly and lacked consistency.

3. Application of Section 55A of the I.T. Act for Referring the Matter to a Valuation Officer:
The Tribunal observed that the AO did not refer the matter to a Valuation Officer under section 55A of the Act, which would have been appropriate given the technical nature of the valuation. The Tribunal emphasized the importance of obtaining a valuation from a technical expert, especially when there are significant discrepancies in the reported values.

Tribunal's Decision:
The Tribunal decided to average the three rates provided: the minimum rate by the Sub-Registrar (Rs. 33/-), the maximum rate by the Sub-Registrar (Rs. 165/-), and the rate by the Government Approved Valuer (Rs. 108/-). This resulted in an average rate of Rs. 102/- per sq. meter. The Tribunal directed the AO to adopt this rate for calculating the FMV as on 1.4.1981.

Conclusion:
The appeals of both the assessee and the revenue were partly allowed. The Tribunal's decision to adopt an average rate of Rs. 102/- per sq. meter was based on a balanced consideration of all the available valuations, ensuring a fair and just determination of the FMV for the purpose of calculating long-term capital gains. This approach addressed the inconsistencies in the reported values and emphasized the need for technical expertise in valuation matters.