2019 (7) TMI 1961 - AT - Income Tax

Capital gain - valuation of FMV as on 01.04.1981 - CIT rejecting Government Approved Valuer report for computing fair market value as on 01.04.1981 @ 250 per sq. meter for the land situated at Village Karadva and @ 200 for the land situated at Sania Kande Surat by adopting rim Reverse Index Method and by adopting against the same the fair market value @ 30 per sq. meter for both lands - HELD THAT - We find that the Government Registered Valuer has considered the rate of land at village Karadva @250 per sq. meter and for land at village Sania Kande @200 per sq. meter as against which the DVO has adopted the rate @ 14.18 and 5.59 per sq. meter respectively. Whereas Ld. CIT (A) has considered the rate for both land @ 30 per sq. meter. Considering the variation in three authorities and considering the facts of the case we are of the considered opinion that it would be fair reasonable and logic if the average rate of adopted by the Government Registered Valuer of the assessee and DVO and Ld. CIT (A) is considered for average valuation of FMV as on 01.04.1981 considering the ratio laid down in the case of the case Vijay Kumar M Shah 2009 (2) TMI 501 - ITAT MUMBAI as cited both Ld. CIT (A) as well as the learned counsel for the assessee. Accordingly the arriving rate comes to Rs.99.95 rounded to Rs. 100 per sq. meter i.e. 250 200 30 for both land under consideration. Accordingly the AO is directed to worked out long-term capital gain by taking arrive rate @ 100 as FMV as on 01.04.1981 for both impugned the land under consideration. In view of this matter Ground No. 1 to 4 of the appeal are therefore partly allowed.

Summary

Issues:
1. Rejection of Government Approved Valuer report for fair market value computation.
2. Discrepancy in fair market value determination for land sales.
3. Denial of deduction under section 54F of the Act.
4. Validity of reference under section 55A.
5. Disagreement on fair market value assessment between the assessee and tax authorities.

1. Rejection of Government Approved Valuer report:
The appeal contested the rejection of the Government Approved Valuer report for computing fair market value. The assessee adopted values of 250 and 200 per sq. meter for two lands, while the DVO valued them at 14.18 and 5.59 per sq. meter. The AO denied the claim of deduction under section 54F and made an addition as long-term capital gain. The CIT (A) rejected both valuations, opting for an average rate of 30 per sq. meter. The Tribunal considered the variations and directed the AO to use an average rate of 100 per sq. meter for both lands, partly allowing the appeal.

2. Discrepancy in fair market value determination:
The dispute involved discrepancies in fair market value determination for land sales. The assessee's valuation differed significantly from the DVO's valuation, leading to the denial of the deduction under section 54F. The CIT (A) rejected both valuations and settled on a different rate, which was further adjusted by the Tribunal based on a balanced average rate.

3. Denial of deduction under section 54F of the Act:
The AO denied the deduction under section 54F, citing incomplete details and disregarding beneficial valuation data. The assessee argued for the acceptance of the Government Registered Valuer report and challenged the AO's reference to the DVO. The Tribunal considered legal precedents and directed the AO to calculate long-term capital gain based on an average valuation rate.

4. Validity of reference under section 55A:
The issue of the validity of the reference under section 55A was raised, questioning the AO's power to make a reference when the assessee had already furnished a valuation report. The Tribunal analyzed the relevant legal provisions and held that the AO's reference was invalid in this case, emphasizing the importance of considering valuation reports provided by the assessee.

5. Disagreement on fair market value assessment:
The disagreement on fair market value assessment between the assessee and tax authorities revolved around the method of valuation and the rates applied. The Tribunal reconciled the variations in valuations by adopting an average rate, considering the principles laid down in previous cases and directing the AO to calculate long-term capital gain based on the revised valuation.

This comprehensive analysis of the judgment highlights the key legal issues, arguments presented, decisions made by the authorities, and the final resolution by the Tribunal.