2019 (6) TMI 551 - HC - Income Tax

Capital gain computation - FMV determination - whether this was the fair market value of the property at the time of sale? - HELD THAT - The issue ultimately boils down to whether a prudent seller dealing at arms length with a prudent buyer in ordinary market conditions, in relation to a property similarly situated in the same area, would have got, about ₹ 30 lakhs only by its sale or a much higher price determined to be ₹ 72 lakhs or so by the valuation officer. We are of the opinion that more evidence is to be produced and considered for coming to the conclusion. For this reason, we set aside that part of the order of the learned Tribunal dealing with the valuation u/s 50C and the matter back to it to consider the valuation aspect in accordance with law by a reasoned order within one year from the date of communication of this order. It will be open to the Tribunal to refer the matter to the departmental Valuation Officer for a fresh valuation upon considering the evidence adduced by the parties.

Summary

Issues involved: Valuation dispute under Section 50C of the Income Tax Act, 1961.

Analysis:
- The appeal raised concerns regarding the valuation of a property by departmental officers under Section 50C(2) of the Income Tax Act, 1961. The appellant contended that the valuation confirmed by the Tribunal was erroneous and sought a review under Section 260A of the Act.

- The Court examined the impugned order of the Tribunal and acknowledged that while it was not deemed perverse, the departmental Valuer's approach to the property valuation was questionable. The appellant argued that due to interference by a political party, the property was sold below its actual value at around ?30 lakhs, contrary to the Revenue's valuation of approximately ?72 lakhs.

- The central issue revolved around determining whether the declared price of ?30 lakhs or the valuation officer's assessment of ?72 lakhs represented the "fair market value" of the property at the time of sale. This required an evaluation of how a prudent seller and buyer would have transacted under normal market conditions for a property in a similar location.

- The Court concluded that additional evidence was necessary to reach a definitive conclusion on the property's valuation. Consequently, the Tribunal's order regarding the valuation under Section 50C was set aside, and the matter was remanded back to the Tribunal for a reevaluation within one year, allowing the consideration of further evidence presented by the parties.

- The Tribunal was granted the authority to engage the departmental Valuation Officer for a fresh assessment post-evaluation of the evidence. The judgment resolved the appeal (ITAT No. 300 of 2016) and the stay application (GA No. 2222 of 2016) by setting out these directives for the reevaluation process.