2019 (4) TMI 705 - AT - Income Tax

Reference to DVO - Determination of cost of acquisition - reference when value adopted by the assessee is on the higher than fair market value - Registered value vs fair market vale - computation of LTCG - whether reference u/s 55A could be made for determining the fair market value of the property as on 1.4.1981? - effect of amendment in 55A - HELD THAT - we find that the ITAT in the case of Shri Devendra Rasiklal Shah (supra) has considered judgment of Hon ble jurisdictional high Court in the case of Gauranginiben S. Shodhan 2008 (4) TMI 292 - GUJARAT HIGH COURT and has held that if the value declared by an assessee as on 1.4.1981 on the strength of registered valuer s report is more than the fair market value sought to be determined by the AO, then reference under section 55A for determining fair market value by the DVO cannot be sent. Both the assessee have declared cost of acquisition for the purpose of indexation as on 1.4.1981 more than the one determined by the DVO. Thus, the AO was not possessing any material which can suggest that the value declared by the assessee was less than the fair market value as on 1.4.1981. Therefore, it requires to be re-determined. In the above situation, he cannot make a reference under section 55A to the DVO, and if the reference cannot be made, then cognizance of that cannot be taken for determining long term capital gain assessable in the hands of both the appellants. In view of the above discussion, we allow this fold of grievance and direct the AO to accept long term capital gain disclosed by both the appellants on the basis of registered valuer s report. - Decided in favour of assessee.

Summary

Issues:
- Determination of long term capital gain assessable in the hands of the assessees on transfer of assets.

Analysis:
The judgment by the Appellate Tribunal ITAT Ahmedabad involved two appeals by assessees against the orders of the ld.CIT(A)-2, Vadodara, concerning the determination of long term capital gain on the transfer of assets for the assessment year 2009-10. The appellants, co-owners of a piece of land, sold it during the relevant accounting year. The primary grievance in both appeals was the calculation of long term capital gain. The assessees had declared the cost of acquisition for indexation as on 1.4.1981 higher than the value determined by the District Valuation Officer (DVO). The Assessing Officer (AO) referred to the DVO's valuation to compute long term capital gain, leading to the appeals.

Upon careful consideration, the Tribunal examined whether a reference under section 55A could be made to determine the fair market value of the property as on 1.4.1981. The assessees argued that if the value declared was higher than the fair market value, the AO should not have referred the matter to the DVO. They relied on precedents, including a judgment of the Hon'ble Gujarat High Court, to support their contention. The Tribunal, citing relevant legal provisions and previous decisions, emphasized that if the value declared by the assessees was in line with a registered valuer's estimate, the AO could not refer the matter to the DVO under section 55A.

Based on the analysis of the legal provisions and precedents, the Tribunal concluded that the AO's reference to the DVO for determining fair market value was not justified in this case. Since the assessees had declared a cost of acquisition higher than the DVO's valuation, the AO lacked grounds to refer the matter to the DVO. Therefore, the Tribunal allowed the appeals of the assessees and directed the AO to recompute the capital gain without considering the DVO's report. The judgment highlighted the importance of adhering to legal provisions and established precedents in determining long term capital gains in cases where the value declared by the assessees aligns with a registered valuer's estimate.

In summary, the judgment addressed the issue of determining long term capital gain on the transfer of assets, focusing on whether a reference to the DVO under section 55A was warranted when the value declared by the assessees was higher than the fair market value. The Tribunal's decision, guided by legal provisions and precedents, emphasized the significance of assessing compliance with the law and established principles in such matters.