2018 (5) TMI 944 - AT - Income Tax

Long term capital gain - FMV determination - property occupied by tenants - AO referred the matter to the valuation cell for determining the fair market value as on the date of sale - as contented fair market value of the property was not more that the value reflected in the sale deed - Held that - The property deed itself it is mentioned that it is occupied with tenants and more so it is proved since court cases are going on against them as per Rent Control Act, which is also evident in the order of the ld. CIT(A). CIT(A) has stated that valuation by the DVO is correct whereas that adopted by the authorized valuer is arbitrarily done. No evidence or any material on record, which highlight these facts. The order of the CIT(A) is not at all a speaking order and written submissions put forth by the assessee before him pointing out main three objections are not at all dealt with by the ld. CIT(A) in his order. As examined DVO s report we find that he has also not dealt with the issue as to why benefit should not be given to the assessee when KDA itself takes away some portion of the property for road widening. The DVO has also not pointed out that property already being occupied by tenants and court cases are going on, what could be the impact of valuation of such property. Whether it could be more than what is stated in the sale deed. These things have not been clearly dealt with by the DVO. DVO has simply applied circle rate available and made report. The Income Tax legislation being a welfare legislation has always tried to protect a bona-fide assessee and here is a case where sale deed value is declared and independent valuation done by the authorized valuer, but we find that the subordinate authorities have not categorically dealt with the submissions of the assessee nor has brought out any material on record to support as to why DVO s report should be taken into consideration. Set aside the order of the ld. CIT(A) and direct deletion of addition - Decided in favour of assessee.

Summary

Issues:
Appeals by different assessees, common facts, fair market value determination, re-assessment proceedings under section 147/148, valuation disputes, DVO's report, validity of proceedings under section 147/148, approval valuer's report, objections by assessee, court cases involving tenants, impact of road widening, valuation discrepancies, speaking order requirement, protection of bona-fide assessee.

Analysis:
The judgment involves three appeals by separate assessees, consolidated due to common facts and similar issues. The primary issue revolves around the determination of fair market value in the context of re-assessment proceedings initiated under section 147/148 of the Act. The Assessing Officer disputed the fair market value of a property sold by an HUF, leading to valuation discrepancies between the sale deed value and the valuation officer's assessment. The DVO's report supported the Assessing Officer's valuation, prompting the ld. CIT(A) to uphold the addition made based on the higher valuation.

Regarding the objections raised by the assessee, they highlighted various factors affecting the property's value, such as tenancy issues, court cases with tenants, and the impact of road widening. The approved valuer's report favored the assessee's position, emphasizing a lower fair market value compared to the valuation officer's assessment. However, the ld. CIT(A) dismissed the appeal, citing the validity of the re-assessment proceedings and questioning the approved valuer's valuation methodology.

Upon review, the Appellate Tribunal found that the ld. CIT(A) failed to address the key objections raised by the assessee adequately. The Tribunal noted discrepancies in the ld. CIT(A)'s order, particularly regarding the property's occupancy status and encumbrances. The Tribunal emphasized the need for a speaking order and highlighted the lack of consideration given to the impact of tenancy and road widening on the property's valuation. Ultimately, the Tribunal set aside the ld. CIT(A)'s order, directing the deletion of the addition and allowing the appeal of the assessee.

In conclusion, the Tribunal allowed all the appeals, emphasizing the importance of addressing objections raised by the assessee, providing a speaking order, and considering all relevant factors impacting property valuation. The judgment underscores the need to protect bona-fide assessees and ensure a fair and comprehensive assessment process in valuation disputes.