2017 (8) TMI 1253 - AT - Income Tax

Computation of the long term capital gain by applying the provisions of sec. 50C - dual valuation reports one by Departmental Valuation Officer and other by Registered Valuer of Income Tax Department - determination of Fair Market Value - Held that - When the DVO s report has not taken into account vital facts, it cannot be a basis for substituting the stamp duty valuation fixed by the registration authority of the State Govt. It is open to the appellate authorities to examine both the valuation reports and come to a conclusion as to which report gives the fair market value of the property. The contention of the ld. DR that the valuation made by the DVO cannot be looked into or interfered with by the appellate authorities is not correct. The issue of determination of Fair Market Value is a finding of a fact and the report of the DVO is an opinion in arriving at this fact. The report of the DVO or the registered valuer is an expert opinion and it can be challenged and questioned by the parties before the authorities. When this DVO s report is proved as wrong, then it is open to the authorities to reject it and adopt other methods for arriving at the fair market value . Sub-sec.(3) of Sec.50C provides for adoption of the value ascertained under sub-sec. (2) as the full value of consideration. In the case on hand, on facts, the fair market value arrived at by the Registered Valuer and accepted by the ld. CIT(A) has not been controverted by the ld. DR. The order of the ld. CIT(A) is a reasoned order. Hence we uphold the same. - Decided against revenue

Issues Involved:
1. Computation of Long Term Capital Gain (LTCG)
2. Application of Section 50C of the Income Tax Act
3. Valuation of property by Departmental Valuation Officer (DVO) vs. Registered Valuer
4. Admissibility and consideration of additional evidence and materials
5. Powers and jurisdiction of the Commissioner of Income Tax (Appeals) [CIT(A)]

Issue-Wise Detailed Analysis:

1. Computation of Long Term Capital Gain (LTCG):
The primary issue in this case is the computation of LTCG by the Assessing Officer (AO) at ?83,38,733/- as opposed to ?17,70,015/- declared by the appellant. The AO invoked Section 50C of the Income Tax Act to determine the LTCG based on the stamp duty valuation of ?2,56,33,822/- for the entire plot, attributing ?85,44,607/- to the appellant's 1/3rd share. The appellant contested this valuation, providing a valuation report from a registered valuer, Mr. A.K. Dey, who valued the land at ?58,05,000/-.

2. Application of Section 50C of the Income Tax Act:
Section 50C was invoked by the AO to deem the stamp duty valuation as the full value of consideration for the purpose of capital gains. The AO referred the matter to the DVO, who valued the land at ?2,52,13,000/-. The appellant argued that the DVO's valuation did not consider several factors and documents, including the registered valuer's report. The Tribunal in the first round of appeal set aside the matter to the AO to reconsider the materials filed by the appellant.

3. Valuation of Property by DVO vs. Registered Valuer:
The CIT(A) considered various factors and evidences provided by the appellant, such as the geographical situation, the condition of the land, and the surrounding slum area, which depressed the land's value. The CIT(A) found that the DVO's valuation was based on the stamp duty valuation without considering the actual conditions affecting the property's market value. The CIT(A) accepted the registered valuer's report, which provided a detailed basis for the valuation at ?58,05,000/-.

4. Admissibility and Consideration of Additional Evidence and Materials:
The Tribunal noted that the AO did not consider the materials brought on record by the appellant, nor did the CIT(A) in the first round. The Tribunal directed the AO to redecide the issue after considering the various materials filed by the appellant. The CIT(A) in the second round of appeal reviewed these materials and found merit in the appellant's submissions, granting relief by accepting the registered valuer's report.

5. Powers and Jurisdiction of the CIT(A):
The Revenue argued that the CIT(A) did not have the expertise to determine the market value and should have referred the issue back to the DVO. However, the Tribunal held that the CIT(A) has the authority to examine both the DVO's and the registered valuer's reports and determine which is more realistic. The Tribunal upheld the CIT(A)'s decision, stating that the determination of "Fair Market Value" is a finding of fact and that the DVO's report can be challenged and questioned.

Conclusion:
The Tribunal found no infirmity in the CIT(A)'s order, which accepted the registered valuer's report over the DVO's valuation. The Tribunal emphasized that the CIT(A) provided a reasoned order, considering all relevant factors and evidences. Consequently, the appeal by the Revenue was dismissed, and the CIT(A)'s decision to grant relief to the appellant was upheld.

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