2016 (6) TMI 36 - AT - Income Tax

Non referring the valuation of the property sold during the year to the D.V.O for determining its true value for the purpose of computation of capital gain as per the provision of section 50C(1) and (2) - Held that - AR submitted that the market value of the impugned property is less than what is assumed by the authorities below. Ld. AR contended that the impugned land was agricultural when sold by the assessee and it was only later on that it was converted to residential. Moreover Ld. AR stated that the land was under dispute and civil litigation was in progress. Documents in support of his contention were placed before us as additional evidence alongwith an application under Rule 29 of the Income Tax Appellate Tribunal Rules 1963 seeking admission of the same for the reason that the documents came into possession of the assessee only after the passing of the appellate order. It is amply clear from the above that the assessee has been challenging the adoption of stamp duty value as consideration for the purpose of calculation capital gains from the sale of land all along. In view of the same and in the interest of justice we consider it fit to restore the matter back to the file of the AO for reconsidering the claim of the assesee challenging the stamp duty valuation and further direct the AO to refer the matter to the D.V.O as prescribed under section 50C(2) of the Act. We direct that the assessee be given full opportunity to adduce all evidence in support of its contention and after giving adequate opportunity of hearing the matter be decided in accordance with law. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Treatment of land as residential instead of agricultural.
2. Adoption of stamp duty valuation as deemed full consideration.
3. Non-referral to the District Valuation Officer (D.V.O) for fair market value determination.
4. Applicability of Section 50C(1) and 50C(2) of the Income Tax Act, 1961.
5. Allowability of deduction under Section 54F of the Income Tax Act, 1961.
6. Consideration of cost of improvement and investment in a new residential house.
7. Adequate opportunity of being heard during assessment proceedings.

Detailed Analysis:

1. Treatment of Land as Residential Instead of Agricultural:
The assessee contested the classification of the land as residential rather than agricultural. The CIT(A) upheld the AO's classification based on the stamp duty valuation and other evidences. The Tribunal noted that the assessee had provided substantial evidence, including a valuation report and records from Nagar Nigam Jhansi, indicating the land's agricultural status. The Tribunal directed the AO to reconsider the classification and refer the matter to the D.V.O. for a fair market value assessment.

2. Adoption of Stamp Duty Valuation as Deemed Full Consideration:
The AO substituted the sale consideration of ?19,60,000 with the stamp duty valuation of ?60,40,000 for calculating capital gains, as per Section 50C(1). The Tribunal observed that the assessee had not accepted this substitution and had provided evidence suggesting a lower market value. The Tribunal directed the AO to refer the valuation to the D.V.O. under Section 50C(2) and reconsider the adoption of stamp duty valuation.

3. Non-referral to the D.V.O for Fair Market Value Determination:
The assessee argued that the AO failed to refer the valuation to the D.V.O. despite the assessee's challenge to the stamp duty valuation. The Tribunal agreed, noting that the assessee had consistently disputed the valuation and provided supporting evidence. The Tribunal directed the AO to refer the matter to the D.V.O. for fair market value determination as per Section 50C(2).

4. Applicability of Section 50C(1) and 50C(2) of the Income Tax Act, 1961:
The Tribunal emphasized the provisions of Section 50C(1) and (2), which mandate the referral to the D.V.O. if the assessee disputes the stamp duty valuation. The Tribunal found that the AO had not given adequate opportunity to the assessee to present their case and directed the AO to follow the procedure outlined in Section 50C(2).

5. Allowability of Deduction under Section 54F of the Income Tax Act, 1961:
The assessee's claim for deduction under Section 54F was partially allowed by the CIT(A) to the extent of ?4,59,216, subject to verification. The Tribunal noted that this issue was consequential to the determination of the correct sale consideration and directed the AO to re-adjudicate the deduction claim after deciding on the valuation issue.

6. Consideration of Cost of Improvement and Investment in a New Residential House:
The assessee claimed costs of improvement and investment in a new residential house, which were not fully considered by the AO. The Tribunal directed the AO to reconsider these claims in light of the revised valuation and provide the assessee with an opportunity to present evidence.

7. Adequate Opportunity of Being Heard During Assessment Proceedings:
The assessee contended that they were not given a reasonable opportunity to be heard, as the assessment order was passed within a week of raising the issue. The Tribunal agreed that adequate opportunity was not provided and directed the AO to give the assessee a fair chance to present their case during the reassessment.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the AO to reconsider the valuation of the property by referring it to the D.V.O., re-evaluate the classification of the land, and reassess the deductions claimed under Section 54F. The AO was instructed to provide the assessee with adequate opportunity to present evidence and arguments, ensuring a fair and just determination in accordance with the law.