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2013 (10) TMI 521 - AT - Income TaxDetermination of Cost of Acquisition of the Plot - Assessment of Long Term Capital Gain - Lack of Adequate Opportunity by the Valuation Officer - Held that - The DVO had prepared the draft report on 18.12.2009 and vide notice dated 18.12.2009 had fixed the hearing of the case on 28.12.2009 - Assessee had submitted that notice had been received by him on 26.12.2009 which was Saturday followed by two public holidays i.e. Sunday on 27.12.2009 and Muharram on 28.12.2009 - It was thus clear that the DVO had fixed the hearing of the appeal on a public holiday - There was nothing on record to show that assessee had been provided any further opportunity by the DVO as the order had been passed on 30th December 2009 - The DVO had also not considered the value of terrace admeasuring about 600 sq. ft. - The assessee could also provide further material in support of the higher market value if the opportunity had been provided to it which had been done by the DVO - AO had completed the assessment only on the basis of draft valuation report as on the date of order the formal valuation report had not been received by AO - Therefore, in our view the valuation of the property was required to be made a fresh after allowing proper opportunity of hearing to assessee by the DVO - the order of CIT (A) was set aside and the matter was restored to the AO for passing a fresh order after obtaining fresh report from the DVO after hearing assessee. Reference u/s 55A - Whether in the absence of mandatory recording of satisfaction by the AO, there was no justification for making reference u/s 55A - Held that - There was nothing in the section 55A which debars AO from making reference under clause (b) even when registered valuer report had been filed - In cases where registered valuer report had been filed reference under clause (a) of section 55A can be made if the AO finds the valuation lower than the market value - In any other case, clause (b) was applicable - Therefore, it was clear that clause (b) applies in situations where either no registered valuer report had been filed or if the registered valuer report had been filed but the valued determined was higher than the market value - Thus in case the AO was of the opinion that the value as per the registered valuer was higher than the market value, he could make reference u/s 55A (b) (ii) Following ACC Ltd. Versus District Valuation Officer 2012 (5) TMI 505 - DELHI HIGH COURT - the reference made by AO to DVO on the facts of the case was justified and order of CIT (A) on this point was therefore upheld Decided in favour of Assessee.
Issues Involved:
1. Assessment of long-term capital gain based on the valuation report. 2. Adequate opportunity of hearing by the valuation officer. 3. Justification for making reference under section 55A without mandatory recording of satisfaction by the Assessing Officer (AO). Issue-wise Detailed Analysis: 1. Assessment of Long-Term Capital Gain Based on the Valuation Report: The assessee sold a plot for Rs. 1.50 crore and computed the long-term capital gain using the market value as on 1.4.1981, based on a registered valuer's report valuing the property at Rs. 7,61,475/-. The AO referred the valuation to the District Valuation Officer (DVO), who valued it at Rs. 2,72,447/-. Consequently, the AO computed the long-term capital gain at Rs. 1,24,51,210/- and, after deductions, the taxable gain was Rs. 47,94,019/-. The assessee contested this, arguing that the DVO's valuation was unjustified and did not consider the terrace value. The CIT (A) upheld the AO's decision, leading to the present appeal. 2. Adequate Opportunity of Hearing by the Valuation Officer: The assessee argued that the DVO did not provide adequate opportunity for hearing. The DVO issued a notice on 18.12.2009, received by the assessee on 26.12.2009, with the hearing fixed on 28.12.2009, a public holiday. The DVO passed the order on 30.12.2009 without further hearing. The Tribunal found merit in this claim, noting that the DVO fixed the hearing on a public holiday and did not provide further opportunity. The Tribunal directed the AO to obtain a fresh report from the DVO after giving the assessee a proper hearing. 3. Justification for Making Reference Under Section 55A Without Mandatory Recording of Satisfaction by the AO: The assessee contended that the AO did not record satisfaction regarding the market value before referring to the DVO, making the reference invalid. The Tribunal noted that the legal issue of whether the AO could make a reference under section 55A even if the registered valuer's report was higher than the market value was supported by the Gujarat High Court's decision in ACC Ltd. v. DVO. The Tribunal held that the reference by the AO was justified under section 55A(b)(ii), as the AO can make such a reference if the registered valuer's report is higher than the market value. The Tribunal also noted that even if the reference was invalid, the valuation report could still be used in the income tax proceedings, supported by the Supreme Court's decision in Pooran Mal v. Director of Inspection. Conclusion: The Tribunal upheld the AO's reference to the DVO under section 55A(b)(ii) and found that the valuation report could be used in the assessment. However, it recognized the lack of adequate hearing opportunity by the DVO and directed the AO to obtain a fresh valuation report after providing the assessee a proper hearing. The additional ground raised by the assessee regarding the AO's failure to record satisfaction was dismissed as it was not supported by facts on record. The appeal was allowed for statistical purposes, and the matter was remanded to the AO for a fresh order.
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