2015 (12) TMI 131 - AT - Income Tax

Adoption of fair market value of capital asset as on 1.4.1981 and also adoption of value u/s.50C(2)for computation of capital gains - Held that - In this case, the AO adopted the fair market value of the land as on 1.4.1981 at ₹ 30,000/- per ground as against ₹ 3 lakhs adopted by the assessee, on the basis of valuation of Sub- Registrar s office, which was not put before the assessee for comments. Further, the AO adopted the sale consideration at the guideline value of ₹ 2,82,18,792/- as against the value admitted by the assessee as per sale deed at ₹ 1,20,00,000/-, though the assessee objected the same by producing the valuation report from the Registered Valuer. In our opinion, objection expressed by the assessee is to be considered in proper perspective. Whenever the AO places reliance on the valuation report received by the DVO, the same should be communicated to the assessee for her comments and decided thereupon. The assessee before us pointed out that there are certain discrepancies in the valuation report, which is detrimental to the interest of the assessee and it is appropriate to call for the comments and details from the assessee. Therefore, we are of the opinion that it is appropriate to remit the issue to the file of the AO. Regarding fair market value of the property as on 1.4.1981, the AO shall find comparable cases, which shall be at the vicinity of the property. Accordingly, we remit the entire issue to the file of the AO for fresh consideration after giving adequate opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Adoption of fair market value of capital asset as on 1.4.1981.
2. Adoption of value u/s.50C(2) of the Act for computation of capital gains.

Issue 1: Adoption of fair market value of capital asset as on 1.4.1981

The assessee admitted nil income under the head capital gain but the AO found discrepancies in the valuation adopted by the assessee. The AO fixed the cost of land sold at a lower value based on guideline value from the Sub-Registrar, leading to a higher capital gain assessment invoking sec.50C of the Act. The CIT(Appeals) observed that the AO did not interfere with the market value adopted by the assessee but disagreed with the assessee's valuation method. The CIT(Appeals) held that the AO's adoption of the guideline value was fair and no disturbance in the cost of asset sold was required. However, the appellate tribunal found discrepancies in the valuation report and remitted the issue back to the AO for fresh consideration after giving the assessee an opportunity to be heard.

Issue 2: Adoption of value u/s.50C(2) of the Act for computation of capital gains

The CIT(Appeals) noted that the assessee did not dispute the value assessed by the stamp valuation authority during the assessment proceedings. The CIT(Appeals) held that the first condition for invoking sec.50C(2) was not satisfied by the assessee as no claim was made before the AO. The Valuation Officer estimated the value higher than the claim made by the assessee, and the CIT(Appeals) upheld the stamp valuation authority's value for computing capital gains. The appellate tribunal supported the CIT(Appeals) decision and allowed the appeal for statistical purposes, remitting the issue back to the AO for fresh consideration.

In conclusion, the appellate tribunal found discrepancies in the valuation adopted by the assessee and the AO, leading to a remittance of the issues back to the AO for fresh consideration. The tribunal emphasized providing the assessee with adequate opportunities to be heard and considered in the valuation process.