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2016 (11) TMI 744 - AT - Income TaxComputation of long term capital gains on sale of land - adoption of sale consideration as per Stamp Valuation Authority and also Fair Market Value of the property as on 01.04.1981 - Held that - Reference was made to the valuation officer in order to determine the fair market value as on 01.04.1981 on the pretext that the fair market value as declared by the assessee which was backed by Registered Valuer Report, was higher, which is not correct. The issue raised in the present appeal is squarely covered by the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Puja Prints (2014 (1) TMI 764 - BOMBAY HIGH COURT ) and following the same parity of reasoning, we find no merit in determination of Fair Market Value as on 01.04.1981 by the DVO than the value as declared by the assessee as on 01.04.1981 applied for determining the income from capital gains in the hands of assessee. Reversing the order of CIT(A), the additional ground of appeal raised by the assessee is allowed.
Issues Involved:
1. Computation of Long Term Capital Gain using Stamp Duty Valuation. 2. Opportunity to be heard by the DVO. 3. Consideration of disputed title of the property. 4. Adoption of Fair Market Value (FMV) as of 01.04.1981. 5. Jurisdictional validity of the reference to the Valuation Officer. Detailed Analysis: 1. Computation of Long Term Capital Gain using Stamp Duty Valuation: The primary issue is the confirmation of Long Term Capital Gain at ?1,61,39,390/- by taking Stamp Duty Valuation as the full value of consideration, against the Long Term Capital Loss of ?1,29,690/- returned by the assessee based on actual consideration. The assessee sold agricultural land for ?1,11,00,000/-, but the Stamp Valuation Authority valued it at ?1,99,57,350/-. The Assessing Officer (AO) referred the matter to the Departmental Valuation Officer (DVO), who determined the value at ?2,30,20,000/-. The AO recomputed the capital gains based on the Stamp Valuation Authority's value and the FMV as on 01.04.1981 at ?2,04,000/-, leading to a significant capital gain computation. 2. Opportunity to be heard by the DVO: The assessee argued that the DVO did not provide an opportunity to be heard regarding the valuation. The CIT(A) obtained a remand report from the AO, who included comments from the DVO. The DVO stated that the valuation was based on actual sale consideration and not on stamp valuation, and that the land was not agricultural despite being labeled as such. The CIT(A) upheld the AO's application of Section 50C(3) of the Act, confirming the capital gains calculation. 3. Consideration of disputed title of the property: The assessee contended that neither the Stamp Valuation Authority nor the DVO considered the disputed title of the property, which was sub judice. The sale deed mentioned that the property was free from encumbrances, but an MOU indicated otherwise. The CIT(A) did not find merit in this argument, and the valuation by the DVO was upheld without considering the dispute's impact on the property's market value. 4. Adoption of Fair Market Value (FMV) as of 01.04.1981: The assessee challenged the adoption of FMV as of 01.04.1981 based on the DVO's report, arguing that the reference to the Valuation Officer was without jurisdiction and invalid. The DVO valued the property at ?2,04,000/- as on 01.04.1981, whereas the assessee's Registered Valuer had estimated it at ?19,29,500/-. The Tribunal noted that under pre-amended Section 55A of the Act, a reference to the DVO could only be made if the AO believed the value claimed by the assessee was less than its market value. Since the assessee's declared value was higher, the reference was deemed unwarranted, aligning with the Bombay High Court's decision in CIT Vs. Puja Prints. 5. Jurisdictional validity of the reference to the Valuation Officer: The Tribunal examined whether the reference to the DVO for determining the FMV as on 01.04.1981 was valid. The Tribunal concluded that the reference was invalid as the AO could not refer the matter to the DVO under Section 55A when the declared value was higher than the DVO's valuation. This conclusion was based on the Bombay High Court's ruling in CIT Vs. Puja Prints, which emphasized that such references were not justified when the declared value exceeded the market value. Conclusion: The Tribunal allowed the appeal, setting aside the AO's and CIT(A)'s orders. The matter was remanded to the AO to obtain a fresh report from the DVO, ensuring the assessee is given a reasonable opportunity to present objections. The additional ground regarding the jurisdictional validity of the DVO's reference was also upheld, reversing the CIT(A)'s order and confirming the assessee's declared FMV as on 01.04.1981. The appeal was thus allowed, and the order was pronounced on 26th August 2016.
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