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2014 (9) TMI 1200 - AT - Income TaxCapital gain computation - reference of mater to DVO - assessee has adopted the value of the land as on 01-04-1981 - whether AO has power to refer the matter to the DVO for determination of the fair market value when the fair market value adopted by the assessee is more than the fair market value determined by the DVO? - HELD THAT - As relying on M/S. PUJA PRINTS 2014 (1) TMI 764 - BOMBAY HIGH COURT AO has no power to refer the matter u/s.55A for determining the fair market value of the property. Once the reference u/s.55A is held as not in accordance with law, the further exercise as done by the Ld.CIT(A) becomes academic in nature. We accordingly allow the grounds raised by the assessee in the appeal and dismiss the grounds raised by the Revenue.
Issues Involved:
1. Validity of the reference made by the Assessing Officer to the District Valuation Officer (DVO) under Section 55A of the Income Tax Act. 2. Determination of the fair market value (FMV) of the land as on 01-04-1981. 3. Legality of the valuation report of the DVO and its reliance by the Assessing Officer and CIT(A). 4. Correctness of the valuation adopted by the approved valuer as against the DVO's valuation. Detailed Analysis: 1. Validity of the Reference to DVO under Section 55A: The primary issue was whether the Assessing Officer (AO) had the authority to refer the valuation of the land to the DVO under Section 55A of the Income Tax Act. The assessee argued that the AO can only make such a reference if the value claimed by the assessee is less than its fair market value. The assessee had adopted a fair market value of Rs. 22,85,000/- based on a registered valuer's report, whereas the DVO valued it at Rs. 12,18,000/-. The CIT(A) acknowledged conflicting decisions on this issue but followed the Pune Bench of the Tribunal's decision in the case of Smt. Krishnabai Tingre Vs. ITO, holding that the reference made by the AO under Section 55A was not valid. The Tribunal upheld this view, citing the jurisdictional High Court's decision in CIT Vs. Puja Prints, which stated that reference to the DVO can only be made if the value claimed by the assessee is less than its fair market value. 2. Determination of the Fair Market Value as on 01-04-1981: The AO had adopted the DVO's valuation of Rs. 12,18,000/- for computing long-term capital gains, while the assessee's registered valuer had estimated the value at Rs. 22,85,000/-. The CIT(A), despite holding the reference to the DVO as invalid, considered the DVO's report as a piece of evidence and adopted a different valuation method. The CIT(A) used the stamp duty reckoner rates and other parameters to determine the FMV at Rs. 15,22,500/- per hectare, resulting in an indexed cost of acquisition of Rs. 83,88,975/-. 3. Legality and Reliance on the DVO's Valuation Report: The assessee challenged the reliance on the DVO's report, arguing that the AO proceeded despite factual errors in the DVO's valuation. The CIT(A) held that even if the reference was invalid, the DVO's report remained relevant evidence. The Tribunal, however, ruled that once the reference under Section 55A is held invalid, any further exercise based on the DVO's report becomes academic. The Tribunal emphasized that the AO had no power to refer the matter to the DVO if the value adopted by the assessee was not less than the fair market value. 4. Correctness of the Valuation Adopted by the Approved Valuer: The Tribunal noted that the CIT(A) did not find any significant defect in the valuation made by the approved valuer. The assessee argued that various methods of valuation could yield different results, and the CIT(A) erroneously relied on a method beneficial to the revenue. The Tribunal agreed with the assessee that the AO's reference to the DVO was not justified and that the valuation by the registered valuer should be accepted as fair and reasonable. Conclusion: The Tribunal allowed the appeal filed by the assessee and dismissed the appeal filed by the Revenue. It held that the AO had no power to refer the matter to the DVO under Section 55A when the value adopted by the assessee was not less than the fair market value. Consequently, the valuation adopted by the registered valuer was accepted, and the grounds raised by the Revenue were dismissed. The Tribunal's decision was pronounced in the open court on 10-09-2014.
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