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2019 (7) TMI 1573 - AT - Income TaxCapital gain computation - Relying upon the value adopted by the DVO - valuation of the property u/s 50C - addition on account of long term capital gain on the differential value - lower authorities adopting the total price of the property at ₹ 3,58,96,520/- as against actual sales consideration of ₹ 1,27,72,600/- shown by the assessee appellant - contention raised by the ld. AR is that DVO has solely relied on the DLC rate for evaluating fair market value - HELD THAT - DVO has taken the DLC rate as determined by the stamp duty authority and in terms of determining the comparable sale instances, has put the onus entirely on the assessee. On her part, the assessee has submitted two comparable sale instances. Where such comparable sale instances are not accepted by the DVO, in our view, the DVO should specify the reasons as to why such comparable sale instances are not found acceptable and further, the DVO should independently carry out the necessary investigation and find comparable sale instances. Alternatively, where comparable sale instances are not available inspite of best efforts put in by the DVO, in our view, he should consider specific adjustments to the DLC rate as the DLC rate is more like a guideline rate laid down by the stamp duty authority and may not in all situations consider the specific of a particular property in terms of location, size, shape, frontage, connectivity etc. or consider exploring other valuation methodology so specified as may be applicable in the facts of the present case. We therefore find that where the DVO has finally adopted the DLC value which at first instance has been disputed by the assessee, the whole purpose of reference of matter u/s 50C(2) has not been correctly appreciated by the DVO. Reliance solely on the DLC value of the land by the DVO is not appropriate and the DVO should have considered and adopted other valuation methods which are more appropriate and elaborately discussed in the guidelines laid down by the Income Tax Department for valuation of immovable properties. In this regard, our reference was drawn to development method which can be adopted (as stated in the Department s valuation guidelines) in situations where the comparable sales of large tracts of land are not available but sales of small plots are available and secondly, where the land is ripe for use for building purposes and it possesses necessary potential for urban use. I Fact pattern of the present case and even as per the findings of the DVO that comparable sale instances are not available and that the property is very big residential converted land and has good potential for group housing which can fetch the best value of the property, the development method seems to be more appropriate rather than land and building method as presently adopted, however, we find that there is nothing on record to suggest that the DVO has even examined the feasibility of carrying out the necessary exercise for applying such valuation methodology as so specified in the guidelines laid down by the Department itself. Report of the DVO is binding on the Assessing Officer, however, the same is not binding and can be challenged before the appellate authorities. The law is very clear on this aspect as can be seen from the provisions of section 23A of the Wealth Tax Act which have been incorporated with necessary modification in section 50C of the Act. Also found force in the other contentions of the ld. AR regarding the fact that no concession has been given for the IOC pipe line which is passing from centre of the land on which no construction activity is possible. The DVO having acknowledged the fact that the IOC pipe line is passing through the land, in our view, he should have provided adequate adjustment while determining the value of the land. We have not dealt with other contentions so raised by the ld AR as we are of the considered view that the matter requires a fresh examination by the DVO in light of what we have discussed above. The assessee shall be at liberty to raise these contentions before the DVO. We are setting aside the matter to the file of the Assessing Officer who shall call for a fresh report from the DVO taking into consideration the aforesaid discussion and after providing reasonable opportunity to the assessee. The assessee is also directed to co-operate in the proceedings and furnish necessary information/documentation as called for by the AO/DVO so that the proceedings can be completed in a timely manner. In the result, the ground no. 1 is partly allowed for statistical purposes.
Issues Involved:
1. Invocation of Section 50C of the Income-tax Act, 1961. 2. Reliance on the value adopted by the District Valuation Officer (DVO). 3. Disallowance of deduction under Section 54F. 4. Disallowance of deduction under Section 54B. Issue-wise Detailed Analysis: 1. Invocation of Section 50C of the Income-tax Act, 1961: The assessee sold immovable properties and reported a sale consideration significantly lower than the value determined by the stamp duty authority. The Assessing Officer (AO) invoked Section 50C, which mandates the adoption of the stamp duty value for computing capital gains. The assessee challenged this valuation, leading to a reference to the DVO under Section 50C(2). The DVO's valuation was close to the stamp duty authority's value, resulting in a substantial addition to the assessee's income. The Tribunal found that the DVO relied solely on the District Level Committee (DLC) rates without considering the specific attributes of the property, which defeated the purpose of Section 50C(2). 2. Reliance on the value adopted by the District Valuation Officer (DVO): The assessee argued that the DVO's valuation was arbitrary, excessive, and did not reflect the fair market value (FMV). The DVO used the DLC rates as the basis for valuation, which the assessee contended was inappropriate for undeveloped land. The Tribunal noted that the DVO should have considered other valuation methods, such as the development method, which is more suitable for large tracts of undeveloped land. The Tribunal also highlighted that the DVO did not adequately address the assessee's objections and failed to provide specific reasons for rejecting comparable sale instances provided by the assessee. The Tribunal emphasized that the DVO's report is not binding on appellate authorities and should be critically examined. 3. Disallowance of deduction under Section 54F: The AO disallowed the deduction claimed under Section 54F in the revised computation of income. The Tribunal did not delve deeply into this issue as it set aside the matter of property valuation under Section 50C to the AO. Consequently, the issue of deduction under Section 54F was also remanded to the AO for fresh consideration, contingent on the revised valuation. 4. Disallowance of deduction under Section 54B: Similar to the deduction under Section 54F, the AO disallowed the deduction claimed under Section 54B. The Tribunal followed the same approach, setting aside the issue to the AO for reconsideration in light of the fresh valuation to be obtained from the DVO. Conclusion: The Tribunal set aside the matter to the AO for a fresh report from the DVO, considering the detailed discussions and objections raised by the assessee. The AO was directed to provide a reasonable opportunity to the assessee and complete the proceedings timely. The issues relating to deductions under Sections 54F and 54B were also remanded to the AO for fresh consideration. The appeal was partly allowed for statistical purposes.
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