2013 (5) TMI 500 - AT - Income Tax

Quantum of capital gains being taxed - whether CIT (A) erred in confirming the reduction of the FMV as on 01.04.1981 as against the certified FMV adopted by the appellant - addition confirmed by invoking the provisions of section 50C - Held that - As seen from the letter dated 02.05.2009 assessee had objected to the adoption of the District Valuation Officer s report for revising the assessment under section 155 but agreed for adopting the report on sale consideration subject to non levy of interest or penalty. Therefore, the DR s objection on assessee accepting the valuation as on 01.04.1981 is not correct. Assessee has rightly contested the same. As submitted by the learned Counsel, AO lacks jurisdiction for referring the FMV under section 55A wherein the Valuation determined by the DVO is less than the FMV declared by assessee. See Smt. Sarla N. Sakraney v. ITO 2010 (7) TMI 832 - ITAT MUMBAI & HIABEN JAYANTILAL SHAH Versus INCOME-TAX OFFICER AND ANOTHER 2008 (4) TMI 292 - GUJARAT HIGH COURT wherein held reference by the Assessing Officer to the DVO under section 55A for valuation of FMV of the property as on 1-4-1981 is not valid for the reasons that FMV declared by the assessee as per Government registered valuer s report was more than the FMV as estimated by the DVO. Since determination of the FMV as on 1-4-1981 was based on the report of the DVO, the same is held to be invalid. Consequently, estimation of the FMV of the property as on 1-4-1981 as made by the assessee is directed to be accepted - In favour of assessee.

Summary

Issues:
- Appeal against orders of CIT (A) regarding taxation of capital gains
- Dispute over fair market value (FMV) of property in Thane
- Assessment based on valuation reports and DVO's assessment
- Jurisdiction of AO to refer valuation under section 55A
- Contention regarding FMV as on 01.04.1981

Analysis:

The judgment involves an appeal against the orders of the CIT (A) regarding the taxation of capital gains, specifically focusing on the fair market value (FMV) of a property in Thane. The assessee, along with co-owners, transferred development rights to a construction company for a certain amount. Dispute arose when the stamp duty valuation authorities valued the property significantly higher than the assessee's valuation. The AO referred the FMV issue to the Departmental Valuation Officer (DVO) for assessment. The CIT (A) upheld the AO's decision based on the DVO's report, leading to the assessee raising grounds of appeal.

The key contention revolved around the jurisdiction of the AO to refer the valuation under section 55A, especially when the DVO's assessment was lower than the FMV declared by the assessee. The assessee argued that the AO lacked jurisdiction to refer the valuation under section 55A based on the variance in FMV. Citing relevant case laws, the assessee challenged the validity of the reference to the DVO and emphasized the discrepancy between the valuations.

In a detailed analysis, the Tribunal considered the arguments presented by both parties. Referring to precedents and relevant legal provisions, the Tribunal concluded that the reference by the AO to the DVO under section 55A for the valuation of FMV as on 01.04.1981 was not valid due to the higher FMV declared by the assessee. Consequently, the Tribunal directed the AO to adopt the FMV as declared by the assessee and rework the capital gains calculation accordingly, allowing necessary indexation.

In the final verdict, the Tribunal partly allowed the appeal filed by the assessee, emphasizing the importance of adhering to the correct valuation principles and ensuring fair treatment in tax assessments. The judgment highlighted the significance of following established legal precedents and upholding the rights of taxpayers in valuation disputes, ultimately providing clarity on the jurisdiction of the AO in such matters.

This comprehensive analysis of the judgment showcases the intricate legal arguments, the application of relevant case laws, and the final decision rendered by the Tribunal, emphasizing the importance of fair valuation practices in tax assessments.