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2018 (8) TMI 1867 - AT - Income TaxCapital gain computation - adoption of Fair Market Value as on 01.04.1981 - reference made under section 55A to DVO - HELD THAT - It transpires that the issue of adoption of fair market value as on 01.04.1981 and whether the same can be adopted at value lesser than the value declared by the assessee, while computing Income from Capital Gains, has been deliberated upon by the Hon ble Bombay High Court in CIT Vs. Puja Prints 2014 (1) TMI 764 - BOMBAY HIGH COURT The reference to the Departmental Valuation Officer by the Assessing Officer is unsustainable because the case of assessee is clearly covered u/s 55A(a) - This is for the reason that Section 55A(b)of the Act very clearly states that it would apply in any other case i.e. a case not covered by Section 55A(a) of the Act. The year under appeal before the Tribunal is assessment year 2010-11 and in case the same simile is applied to the facts of the present case, the Assessing Officer is not empowered to adopt the fair market value of the said property at ₹ 10,000/- per acre. Accordingly, we reverse the order of CIT(A) in this regard and direct him to adopt the fair market value as on 01.04.1981 as declared by the assessee. Deduction u/s 54F - HELD THAT - In case the fair market value adopted at a figure shown by the assessee, then in case it is necessary to adjudicate the claim of deduction under section 54F of the Act, the Assessing Officer may provide reasonable opportunity of hearing to the assessee in this regard to furnish complete information and thereby decide the said issue. The grounds of appeal raised by the assessee are thus, allowed as indicated above.
Issues Involved:
1. Adoption of Fair Market Value (FMV) as on 01.04.1981 for computing Capital Gains. 2. Non-referral to the Valuation Officer for determining FMV. 3. Deduction under Section 54F of the Income-tax Act, 1961. 4. Cancellation/reduction of interest charged under Section 234B. Detailed Analysis: 1. Adoption of Fair Market Value (FMV) as on 01.04.1981 for computing Capital Gains: The primary issue in both appeals is the adoption of FMV as on 01.04.1981 while computing income from capital gains. The assessee contended that the FMV should be based on the registered valuer's report, which was not accepted by the Assessing Officer (AO). Instead, the AO adopted a value of ?10,000 per acre based on a sale instance of a nearby area. This decision was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. 2. Non-referral to the Valuation Officer for determining FMV: The assessee argued that the AO erred in not referring the matter to the Valuation Officer to determine the FMV as on 01.04.1981. The Tribunal referred to the judgment of the Hon’ble Bombay High Court in CIT Vs. Puja Prints (2014) 360 ITR 697 (Bom), which held that a reference to the Departmental Valuation Officer (DVO) under Section 55A of the Act can only be made if the value adopted by the assessee is less than the FMV. Since the value declared by the assessee was higher than the FMV, the AO's action was not justified. 3. Deduction under Section 54F of the Income-tax Act, 1961: The assessee also claimed a deduction under Section 54F of the Act, which was denied by the AO and upheld by the CIT(A). The Tribunal directed that if the FMV is adopted as declared by the assessee, the AO should provide a reasonable opportunity for the assessee to furnish complete information regarding the deduction under Section 54F and decide the issue accordingly. 4. Cancellation/reduction of interest charged under Section 234B: The assessee sought cancellation or reduction of interest charged under Section 234B. However, the Tribunal's order did not specifically address this issue, focusing instead on the primary issues of FMV and deduction under Section 54F. Conclusion: The Tribunal reversed the orders of the CIT(A) and directed the adoption of the FMV as on 01.04.1981 as declared by the assessee. It also instructed the AO to provide an opportunity for the assessee to furnish information regarding the deduction under Section 54F. The appeals were allowed, and the Tribunal emphasized the legal precedent set by the Bombay High Court in CIT Vs. Puja Prints, which restricts the AO from referring to the DVO if the value declared by the assessee is higher than the FMV. Order Pronounced: The order was pronounced on the 28th day of August, 2018.
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