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2017 (9) TMI 176 - AT - Income TaxComputation of Capital Gains- Jurisdiction of AO in completing assessment both under sections 50C and 55A - reference to DVO - adoption of value - valuation procedure i.e. Department Valuation or Fair market Value - Held that - Bombay High Court in the case of CIT Vs. Daulal Mohta (HUF) 2008 (9) TMI 890 - BOMBAY HIGH COURT has held that reference to DVO can only be made in a case where value of asset shown by the assessee is less than its fair market value of the land. Following the same parity of reasoning, we hold that no reference can be made under section 55A of the Act in order to value the cost of acquisition of property as on 01.04.1981 at a figure lesser than the value declared by the assessee. Accordingly, the order of CIT(A) is reversed in this regard. The Valuation Officer has adopted the value of property at about ₹ 93 lakhs as against the value declared by assessee at ₹ 87 lakhs and the value so worked out by the Valuation Officer is less than 10% and hence, value shown by the assessee merits to be applied. Assessing Officer was not justified in substituting the value determined by the DVO for the sale consideration disclosed by the assessee. Accordingly, the Assessing Officer is directed to take the value declared by the assessee at ₹ 87 lakhs in order to work out the income from capital gains. - Decided in favour of assessee.
Issues Involved:
1. Addition of ?26,67,922 on account of capital gain on the sale of property. 2. Determination of sale consideration of the property sold by the assessee. 3. Determination of the cost of acquisition of the property. 4. Jurisdiction and validity of the District Valuation Officer's (DVO) report. Detailed Analysis: 1. Addition of ?26,67,922 on account of capital gain on the sale of property: The CIT(A) upheld the addition made by the Assessing Officer (AO) of ?26,67,922 on account of capital gain. The AO had adopted the stamp duty valuation of ?1,07,31,000 as the sale consideration, which was higher than the ?87,21,000 declared by the assessee. The Tribunal found that the valuation by the DVO, Bhopal, which directed the AO to adopt the stamp duty valuation, was beyond jurisdiction and invalid. The Tribunal directed the AO to adopt the sale consideration declared by the assessee at ?87,21,000, thereby nullifying the addition. 2. Determination of sale consideration of the property sold by the assessee: The AO adopted the stamp duty valuation of ?1,07,31,000 as the sale consideration under section 50C of the Income-tax Act. The assessee contended that the property was under litigation, which affected its market value. The Tribunal noted that the Valuation Officer, Nagpur, had estimated the fair market value at ?93,00,096, which was less than 10% higher than the declared value of ?87,21,000. The Tribunal held that the difference being less than 10%, the value declared by the assessee should be adopted. 3. Determination of the cost of acquisition of the property: The AO had adopted the cost of acquisition of the property at ?3,31,512 as determined by the Valuation Officer, Nagpur, under section 55A of the Act, against the assessee's claim of ?4,61,538. The Tribunal referred to the Bombay High Court's judgment in CIT Vs. Puja Prints, which held that a reference to the Valuation Officer under section 55A can only be made if the value declared by the assessee is less than the fair market value. Since the value declared by the assessee was higher, the reference under section 55A was invalid. Consequently, the Tribunal directed the AO to adopt the cost of acquisition as declared by the assessee. 4. Jurisdiction and validity of the District Valuation Officer's (DVO) report: The assessee raised an additional ground challenging the jurisdiction of the DVO, Bhopal, who directed the AO to adopt the stamp duty valuation. The Tribunal examined the legal provisions and found that the DVO did not have supervisory powers over the Valuation Officer, Nagpur. The DVO's intervention was beyond his jurisdiction and invalid. The Tribunal emphasized that the valuation process must be completed by the officer to whom the reference was initially made, and any subsequent interference by another officer without jurisdiction is not permissible. Conclusion: The Tribunal allowed the appeal of the assessee, directing the AO to adopt the sale consideration and cost of acquisition as declared by the assessee. The additional ground regarding the jurisdiction of the DVO was upheld, rendering the DVO's report invalid. The Tribunal's decision emphasized adherence to legal provisions and proper jurisdiction in valuation matters.
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