2016 (7) TMI 1321 - AT - Income Tax

Reference u/s.55A made to the DVO - Held that - The fair market value as on 01-04-1981 claimed by the assessee on the basis of the registered valuer s report was more than the fair market value sought to be adopted by the AO, therefore, no reference could have been made by the AO u/s.55A of the Act to the DVO. In view of the above discussion, set aside the order of the CIT(A) and direct the AO to delete the addition - Decided in favour of assessee.

Summary

Issues:
1. Determination of long term capital gains on the sale of property.
2. Validity of AO's reference to DVO for fair market value determination.
3. Interpretation of Section 55A of the Income Tax Act.

Analysis:
1. The appeal concerned the assessment of long term capital gains on the sale of a property by the assessee. The AO noted discrepancies in the sale consideration reported by the assessee compared to stamp valuation authorities. The DVO determined the fair market value, leading to the computation of long term capital gains. The CIT(A) upheld the AO's decision, resulting in the appeal.

2. The primary contention was the validity of the AO's reference to the DVO under Section 55A of the Income Tax Act. The assessee argued that since the value declared was higher than the fair market value, the reference was not justified. Citing precedents, including the decision of the Hon'ble Bombay High Court in a similar case, it was established that such a reference could only be made if the declared value was less than the fair market value.

3. The interpretation of Section 55A was crucial in determining the AO's authority to refer the matter to the DVO. The Hon'ble Bombay High Court's rulings clarified that the reference to the DVO was permissible only when the declared value was lower than the fair market value. The court emphasized that retrospective application of the amended provision was not applicable in this case, reinforcing the limitations on the AO's discretion in making such references.

4. Ultimately, based on the legal precedents and the specific circumstances of the case, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition of long term capital gains. The decision highlighted the importance of adhering to statutory provisions and judicial interpretations in determining tax liabilities, ensuring fair treatment for taxpayers.

5. The judgment underscored the significance of legal principles and precedents in tax assessments, providing clarity on the interpretation of relevant provisions of the Income Tax Act. By upholding the assessee's appeal, the Tribunal reaffirmed the importance of adherence to established legal standards in tax matters, safeguarding the rights of taxpayers in the assessment process.