2017 (4) TMI 810 - AT - Income Tax

Enhancement of Income - calculation of long-term capital gain i.e. deduction u/s. 54 - reference to DVO - Held that - The assessee had sold his inherited property in which she had a 12.5% share is a coparcener of Hindu Undivided Family (HUF),that all the coparceners of HUF decided to develop the property and the development agreement was entered with the developer, that the assessee had shown his long-term capital gain at ₹ 19.26 lakhs in his return of income, that the original assessment was revised by the AO, as per the direction of the CIT, passed u/s. 263 of the Act, that in the order passed u/s.143(3)r.w.s. 263, the AO enhanced the income of the assessee,that he did not consider the claim made by the assessee during the course of assessment proceedings towards deduction u/s.54 of the Act,that the FAA confirmed the order of the AO and made further additions. We find that the entire plot of land was not handed over by the HUF to the developer,that the FAA had adopted wrong figures in the Tables for enhancing the income of the assessee,that the assessee had objected to the valuation of stamp duty authorities,that the matter was not referred to the DVO,that the assessee had challenged the original order of the AO before the FAA,that the then FAA had decided the issue in favour of the assessee,that during the assessment/appellate proceedings,challenging the order passed u/s.143(3)r.w.s.263 the order of the then FAA was not considered,that one of the grounds raised the assessee before the FAA remained unadjudicated.In our opinion,in these circumstances,the matter should be restored back to the file of the FAA for fresh adjudication,in the interest of justice. Appeal filed by the assessee stands partly allowed.

Issues:
1. Additional grounds of appeal regarding transfer of development rights and taxability.
2. Revision of assessment by AO under section 263 based on valuation discrepancies.
3. Disallowance of deduction under section 54 of the Act by AO and FAA.
4. Discrepancies in valuation and consideration of property leading to enhanced income determination.
5. Dispute over valuation figures and failure to refer the matter to the District Valuation Officer (DVO).
6. Incomplete adjudication of claims and grounds raised by the assessee before the FAA.

Issue 1: Additional Grounds of Appeal
The assessee filed an appeal challenging the CIT (A)'s order, seeking to admit additional grounds related to the transfer of development rights and taxability. The ITAT admitted the additional ground, noting it as a pure legal issue not requiring factual investigation, thus allowing the assessee to raise the issue.

Issue 2: Revision of Assessment under Section 263
The AO completed the original assessment under section 143(3) but was directed by the CIT under section 263 to revise it due to valuation discrepancies. The CIT observed that the stamp duty valuation of the property was higher than the consideration shown by the assessee, leading to an enhanced income determination by the AO under section 263.

Issue 3: Disallowance of Deduction under Section 54
The FAA disallowed the claim for deduction under section 54 of the Act, as the assessee did not claim it in the original return and failed to provide sufficient explanation during the appellate proceedings, resulting in the claim being deemed unacceptable due to the absence of cost incurred towards new residential property.

Issue 4: Valuation Discrepancies and Enhanced Income Determination
The FAA confirmed the AO's order, making further additions to the income of the assessee based on valuation discrepancies and the full consideration received. The ITAT found that the entire plot of land was not handed over to the developer, and discrepancies in valuation figures were noted, leading to the decision to restore the matter back to the FAA for fresh adjudication.

Issue 5: Failure to Refer Matter to DVO and Dispute Over Valuation Figures
During the hearing, it was highlighted that the matter was not referred to the District Valuation Officer (DVO) despite valuation disputes. The ITAT noted discrepancies in valuation figures and the incomplete adjudication of claims, directing the FAA to re-examine the issue after providing a reasonable opportunity of hearing to the assessee.

Issue 6: Incomplete Adjudication of Claims
The ITAT concluded that the matter should be sent back to the FAA for fresh adjudication in the interest of justice, as certain grounds raised by the assessee remained unadjudicated. The effective ground of appeal was decided in favor of the assessee, resulting in the partial allowance of the appeal.

This detailed analysis covers the various issues involved in the legal judgment delivered by the ITAT Mumbai, addressing the challenges faced by the assessee regarding valuation discrepancies, taxability, and deduction claims, ultimately leading to a partial allowance of the appeal.

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