2014 (7) TMI 384 - AT - Income Tax

Determination of Fair market value of property Computation of capital gain -Sale consideration u/s 50C(2) - cost of acquisition as on 01.04.81 - value taken for wealth-tax purposes can be followed for capital gains purposes or not - Held that - The decision in Mrs. Indira Bai. Versus Income-Tax Officer 1992 (5) TMI 77 - ITAT MADRAS-A followed - There was an admission regarding the value of the property leading to an estoppel - an admission is a statement which suggest any inference as to fact in issue by a person having an interest in the subject matter - the determination of the value for the wealth-tax purposes was a matter of routine without reference to the complete data available - the wealth-tax is a repetitive tax, and the valuation need not be accurate - in the case of self-occupied house properties which do not earn any income, the value is generally kept low even by the department as can be seen from the provisions of rule 1BB - tax on capital gains is a one-time tax on the difference between the consideration received and the market value as on 1.1.1964 - the assessee was not estopped from contending that the value taken for wealth-tax purposes need not be followed for capital gains purposes, that value taken for wealth tax purposes could be considered to be the only one piece of evidence which could be contradicted by the assessee by producing further data for a more accurate determination of the market value. The report given for the Wealth tax purposes need not be considered for the Income tax purposes, particularly for computation of capital gains - this aspect was not before AO at the time of completing the assessment - the assessee filed additional evidence in the form of order in the case of Pankaj. P. Shah , accepting assessee valuation in the subsequent order passed after CIT(A) order and also two valuation reports of the department dated 19.04.90 valuing property as on 31.03.87 to 31.03.88 - These valuation reports of the department along with the Wealth tax report of Shri Umrigar are to be considered viz-a-viz the report of Shri Ganjawala - The assessee s objection on adopting report of Shri Umrigar for the purpose of capital gains also required detailed examination of the AO, as CIT(A) took upon himself without giving opportunity to the AO. The issue of adoption of value u/s 50C was referred to the AO by the CIT(A), this issue also required to be set aside to the file of AO thus, both issue of sale consideration u/s 50C(2) and cost of acquisition as on 01.04.81 for computing of capital gains should be examined by AO afresh thus, the matter is remitted back to the AO for fresh adjudication Decided in favour of Revenue.

Summary

Issues involved:
1. Determination of fair market value of property as on 01.04.1981 for computing capital gain.
2. Relevance of valuation reports obtained for wealth tax purposes.
3. Dispute over adoption of valuation report for capital gains tax calculation.

Issue 1: Determination of fair market value:
The appeals and cross-objections revolved around the fair market value of a property as on 01.04.1981 for assessing capital gains. The co-owners had conflicting valuation reports, with one valuing the property at Rs. 43,10,000 and the other at Rs. 8,08,000. The DVO valued it at Rs. 29,62,000. The CIT(A) directed the AO to adopt the higher valuation based on a registered valuer's report, referencing a similar ITAT decision in another co-owner's case. The Tribunal remitted the matter back to the AO for a fresh examination considering all valuation reports and relevant precedents, aiming for uniformity in decision-making.

Issue 2: Relevance of wealth tax valuation reports:
A valuation report obtained for wealth tax purposes valued the property at Rs. 8,08,000, leading to a reopening of assessments. The CIT(A) dismissed the challenge to the reopening, stating it was infructuous. The Tribunal emphasized that the wealth tax valuation was not directly relevant to the capital gains tax calculation. It cited a case law to highlight that valuations for different tax purposes could vary based on factors like property usage and market conditions. The Tribunal directed a detailed examination of all valuation reports by the AO to ensure accurate computation of capital gains.

Issue 3: Dispute over adoption of valuation report:
The parties disputed the adoption of a specific valuation report for computing capital gains. The Tribunal emphasized the importance of considering all relevant valuation reports and precedents to arrive at a fair market value. It highlighted the need for AO's detailed examination and the opportunity for the assessee to present additional evidence. The Tribunal remitted the matter back to the AO for a comprehensive review, ensuring adherence to ITAT decisions and principles laid down for valuation in similar cases.

This judgment delves into the complexities of determining fair market value for capital gains tax purposes, emphasizing the need for thorough examination of valuation reports and adherence to legal precedents. The Tribunal's decision to remit the matter back to the AO reflects the importance of consistency and accuracy in assessing property values for tax calculations.