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2014 (1) TMI 857 - AT - Income TaxReference u/s 55A of the Act made to DVO for valuation - Assessee contended that the valuation to be made as the cost in the hands of previous owner Scope of post amended Section 55A of the Act Held that - In order to maintain consistency, the AO ought not to have referred the matter to the Valuation Officer without verifying as to what was the stand taken by the Revenue in the case of other co-owners - the AO nowhere stated as to whether he has made any investigation with regard to the other co- owners cases - the assessee s case is supported by Registered Valuer s report - The AO cannot be treated as an expert in the field of valuation and though it may not be necessary for him to give detailed account of the reasons for coming to the conclusion that it is a fit case for reference to the Valuation Officer but he ought to have appreciated that in the case of a jointly held asset singling out one co-owner without even bothering as to what has happened in other co-owners cases would definitely lead to arbitrariness - rule of consistency ought to have been followed by the AO - no action has been taken in the hands of the other co-owners, it is not a fit case for reference to the Valuation Officer - Decided in favour of Assessee.
Issues:
1. Computation of long term capital gains on the sale of a flat. 2. Determination of fair market value for cost indexation. 3. Reference to the Valuation Officer under section 55A of the Act. 4. Consistency in treatment of co-owners in joint property sale. Issue 1: Computation of long term capital gains on the sale of a flat: The appeal was against the order passed by the CIT(A)-11, Mumbai regarding the assessment year 2007-08. The assessee declared taxable long term capital gains on the sale of a flat in Khar. The original purchase price in 1975 was Rs. 49,980, and it was sold by the heirs for Rs. 46,00,000. The AO referred the matter to the DVO to ascertain the cost of the asset under section 55A of the Act. The AO completed the assessment by taking the indexed cost of acquisition at Rs. 56,025 and ¼ of the share of the assessee at Rs. 11,66,576. Issue 2: Determination of fair market value for cost indexation: The assessee contended that the value as on 01.04.1981 should be considered for cost indexation. The CIT(A) directed the AO to recompute the cost based on the DVO's report, which valued the flat at Rs. 1.95 lakhs as of 01.04.1981. The assessee challenged this direction, arguing that no action was taken against the other co-owners, and thus, there was no case for making an addition. The AO's decision to refer the matter to the Valuation Officer without considering the treatment of other co-owners was deemed arbitrary. Issue 3: Reference to the Valuation Officer under section 55A of the Act: The AO referred the matter to the Valuation Officer under section 55A of the Act, claiming it was necessary due to the variance between the sale value and fair market value. The assessee argued that the AO's decision lacked consistency as no action was taken against the other co-owners. The Tribunal held that the AO should have verified the treatment of other co-owners before referring the matter to the Valuation Officer, emphasizing the importance of maintaining consistency in such cases. Issue 4: Consistency in treatment of co-owners in joint property sale: The Tribunal highlighted the need for consistency in treating co-owners in jointly held assets. It was noted that no action was taken against the other co-owners, and the AO's decision to refer the matter to the Valuation Officer without considering the treatment of other co-owners was considered arbitrary. The Tribunal ruled in favor of the assessee, emphasizing the importance of following the rule of consistency in such cases. In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the significance of maintaining consistency in the treatment of co-owners in jointly held assets and highlighting the importance of verifying the treatment of other co-owners before referring a matter to the Valuation Officer under section 55A of the Act.
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