2014 (10) TMI 710 - AT - Income Tax

Reference made u/s 55A - Transaction of immovable property against the actual deed of conveyance Adoption of FMV as on 01.04.1981 - Computation of LTCG Held that - The long term capital gains arising out of transaction of this property will be assessed in AY 2006-07 and not in AY 2005-06 - following the decision in Commissioner of Income-tax Versus Umedbhai International P. Ltd. 2010 (2) TMI 631 - Calcutta High Court - once the assessee has filed approved valuer s report which is in the case of the assessee is dated 18.10.2006 valuing the property as on 01.04.1981 at 24, 03, 838/- is final - No further reference u/s. 55A can be made for estimating the fair market value of the property for determining the value as on 01.04.1981 unless and until the AO forms an opinion that value shown by the assessee was less than fair market value Decided against revenue. Reference made to DVO u/s 50C(2) - Whether the value adopted by the AO based on deemed value determined on the basis of circle rates by stamp valuation authority at 1, 16, 58, 995/- is to be taken for the purpose of computation of long term capital gain or the property is to be referred to DVO for determining the fair market value in term of section 50C of the Act Held that - Following the decision in Sunil Kumar Agarwal Versus Commissioner of Income Tax Siliguri 2014 (6) TMI 13 - CALCUTTA HIGH COURT - the value of the property estimated by DVO as on the date of sale is to be taken as the final consideration for the purpose of computation of Long Term Capital Gains u/s. 50C of the Act - The assessee sold the property for a total consideration of 25 lacs during the relevant financial year relevant to this assessment year - The AO as well as CIT(A) has taken the value as adopted by Sub-registrar based on circle rate for assessing the long term capital gain arising out of sale of the above property - the value of the property estimated by DVO as on the date of sale is to be taken as the final consideration for the purpose of computation of Long Term Capital Gains u/s. 50C(2) of the Act the AO is directed to refer the matter to DVO u/s 50C(2) of the Act and also allow opportunity of being heard to the assessee Decided in favour of assessee.

Summary

Issues Involved:
1. Timing of the transaction for the sale of immovable property.
2. Valuation for the purpose of computing long-term capital gains.
3. Condonation of delay in filing the cross-objection by the assessee.
4. Legitimacy of the reference to the Departmental Valuation Officer (DVO) for determining the fair market value as on 01.04.1981.
5. Adoption of deemed sale consideration based on stamp valuation authority's assessment.

Detailed Analysis:

1. Timing of the Transaction for the Sale of Immovable Property:
The primary issue was determining whether the transaction took place in FY 2004-05 (AY 2005-06) or FY 2005-06 (AY 2006-07). The property was sold by a registered conveyance deed dated 22.07.2005, which falls in FY 2005-06, relevant to AY 2006-07. Despite the agreement for sale being dated 24.03.2005 and part payments being received in FY 2004-05, the actual transfer and final payment occurred in FY 2005-06. The Tribunal upheld that the long-term capital gains should be assessed in AY 2006-07, aligning with the revenue's contention.

2. Valuation for the Purpose of Computing Long-Term Capital Gains:
The valuation of the property for computing long-term capital gains was contested. The assessee provided a registered valuer's report valuing the property as on 01.04.1981 at Rs. 24,03,838/-, which was used for indexation. The AO referred the matter to the DVO, who valued it at Rs. 11,92,295. The Tribunal referred to the jurisdictional High Court's decision in CIT Vs. Umedbhai International (P) Ltd., which stated that a reference to the DVO under section 55A of the Act could not be made unless the AO formed an opinion that the value shown by the assessee was less than the fair market value. Since the AO did not form such an opinion, the Tribunal held that the value provided by the assessee's registered valuer should be accepted.

3. Condonation of Delay in Filing the Cross-Objection by the Assessee:
The assessee's cross-objection was time-barred by 564 days. The assessee filed a condonation petition, stating that the cross-objection was filed as per the direction of the Bench during the hearing. The Tribunal condoned the delay, noting that the issue was legal and had been raised before the CIT(A), who had adjudicated against the assessee.

4. Legitimacy of the Reference to the DVO for Determining the Fair Market Value as on 01.04.1981:
The Tribunal held that the reference to the DVO for determining the fair market value as on 01.04.1981 was not legitimate. The Tribunal cited the jurisdictional High Court's decision, which required the AO to form an opinion that the value shown by the assessee was less than the fair market value before making such a reference. Since no such opinion was formed, the DVO's valuation was not accepted, and the value provided by the assessee's registered valuer was upheld.

5. Adoption of Deemed Sale Consideration Based on Stamp Valuation Authority's Assessment:
The AO adopted the deemed sale consideration at Rs. 1,16,58,995 based on the stamp valuation authority's assessment. The Tribunal referred to the jurisdictional High Court's decision in Sunil Kumar Agarwal Vs. CIT, which stated that the AO should give the assessee an option to have the valuation made by the DVO under section 50C(2) of the Act. The Tribunal directed the AO to refer the matter to the DVO for estimating the fair market value of the property as on the date of sale and to allow the assessee an opportunity to represent before the DVO.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's cross-objection for statistical purposes, directing the AO to refer the matter to the DVO for fresh adjudication in line with the principles laid down by the jurisdictional High Court. The order was pronounced in the open court on 27.10.2014.